SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

            X    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2000

                                       OR

              TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                          Commission File Number 1-8086

                        GENERAL DATACOMM INDUSTRIES, INC.
                        ---------------------------------

             (Exact name of registrant as specified in its charter)

           Delaware                                      06-0853856
-----------------------------------          ---------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

     Middlebury, Connecticut                          06762-1299
 ------------------------------------                 ----------
(Address of principal executive offices)              (Zip Code)

         Registrant's phone number, including area code: (203) 574-1118
                                                         --------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                            Yes  X                No
                            ---                   --

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date:

                                                  Number of Shares Outstanding
     Title of Each Class                               at March 31, 2000
 -------------------------------------            ----------------------------

   Common Stock, $.10 par value                         24,380,050
   Class B Stock, $.10 par value                         2,057,383

                 Total Number of Pages in this Document is 27.


<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES

                                      INDEX

                                                                          Page
                                                                          ----
Part I -- FINANCIAL INFORMATION

      Consolidated Balance Sheets -
      March 31, 2000 and September 30, 1999 ..............................  3

      Consolidated Statements of Operations and
      Accumulated Deficit - For the Three and
      Six Months Ended March 31, 2000 and 1999  ..........................  4

      Consolidated Statements of Cash Flows - For the
      Six Months Ended March 31, 2000 and 1999 ...........................  5

      Notes to Consolidated Financial Statements .........................  6

      Management's Discussion and Analysis of
      Financial Condition and Results of Operations ...................... 15


Part II -- OTHER INFORMATION

   Item 4.  Submission of Matters to a Vote of Security-Holders..........  26

   Item 6.  Exhibits and Reports on Form 8-K ............................  26



                                      - 2 -
<PAGE>
                          PART I. FINANCIAL INFORMATION


               GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


                                                 March 31,        September 30,
In thousands, except shares                        2000               1999
-------------------------------------------------------------------------------
ASSETS:                                          (Unaudited)
Current assets:
  Cash and cash equivalents                          $3,390            $3,790
   Accounts receivable, less allowance
     for doubtful receivables of $1,646
     in March and $1,375 in September                32,101            32,795
   Inventories                                       27,417            22,329
   Deferred income taxes                              1,748             1,578
   Other current assets                              10,740            12,624
-------------------------------------------------------------------------------
Total current assets                                 75,396            73,116
-------------------------------------------------------------------------------
Property, plant and equipment, net                   30,213            32,679
Capitalized software development costs, net          21,906            21,815
Other assets                                         14,521            12,764
-------------------------------------------------------------------------------
                                                   $142,036          $140,374
-------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
  Current portion of long-term debt                  $6,793           $4,533
  Accounts payable, trade                            18,381           18,669
  Accrued payroll and payroll-related costs           4,430            4,626
  Deferred income                                     5,806            6,082
  Other current liabilities                          15,535           16,449
-------------------------------------------------------------------------------
Total current liabilities                            50,945           50,359
-------------------------------------------------------------------------------
Long-term debt, less current portion                 57,594           64,532
Deferred income taxes                                 2,370            2,337
Other liabilities                                     1,297            1,053
-------------------------------------------------------------------------------
Total liabilities                                   112,206          118,281
-------------------------------------------------------------------------------
Commitments and contingent liabilities                   --               --
Stockholders' equity:
  Preferred stock, par value $1.00 per share,
   3,000,000 shares authorized; issued and
   outstanding: 800,000 shares of 9% cumulative
   convertible exchangeable preferred stock with a
   $20 million liquidation preference                  800               800
Class B stock, par value $.10 per share,
  10,000,000 shares authorized; issued and
  and outstanding: 2,057,383 in March and
  2,092,383 in September                               209               209
Common stock, par value $.10 per share,
  50,000,000 shares authorized; issued and
  outstanding: 24,573,476 in March and
  20,309,143 in September                            2,454             2,031
Capital in excess of par value                     174,552           151,706
Accumulated deficit                               (143,141)         (127,472)
Accumulated other comprehensive loss                (3,612)           (2,736)
Common stock held in treasury, at cost:
  193,426 shares in March and 330,382
  shares in September                               (1,432)           (2,445)
-------------------------------------------------------------------------------
Total stockholders' equity                          29,830            22,093
-------------------------------------------------------------------------------
                                                  $142,036          $140,374
-------------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial
statements.

                                     -3-

<PAGE>

               GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS AND
                               ACCUMULATED DEFICIT
                                   (Unaudited)
<TABLE>
<CAPTION>
<S>                                                <C>             <C>             <C>           <C>

                                                     Three Months Ended              Six Months Ended
                                                           March 31,                      March 31,
                                                    ----------------------          --------------------
In thousands, except per share data                   2000           1999             2000          1999
---------------------------------------------------------------------------------------------------------
   Revenues:
      Net product sales                            $29,060         $25,779         $64,422       $53,616
      Service revenue                               11,378          11,471          22,573        23,453
      Other revenue                                    949           1,527           1,972         4,127
                                                   -------         -------         -------        ------
                                                    41,387          38,777          88,967        81,196
   Cost of revenue:
      Cost of product sales                         15,276          13,068          33,656        27,458
      Cost of service revenue                        8,710           7,791          16,896        16,012
      Cost of other revenue                             49             124             137           609
                                                    ------          ------          ------        ------
                                                    24,035          20,983          50,689        44,079

   Gross Margin                                     17,352          17,794          38,278        37,117

   Amortization of capitalized
      software development costs                     2,993           3,010           5,993         6,172

   Operating Expenses:
      Selling, general and administrative           14,922          14,617          29,525        31,453
      Research and product development               5,034           7,135          10,206        14,821
      Restructuring of operations                       --              --             500         2,000
                                                    ------          ------          ------        ------
                                                    19,956          21,752          40,231        48,274

   Operating loss                                   (5,597)         (6,968)         (7,946)      (17,329)

   Other income (expense):
      Debt conversion expense                         (879)             --          (2,403)           --
      Gain on sale of assets                            --              --              --         9,001
      Interest, net                                 (2,063)         (1,536)         (4,075)       (3,198)
      Other, net                                       111             165             355           399
                                                    -------         -------         -------        ------
                                                    (2,831)         (1,371)         (6,123)        6,202

   Loss before income taxes                         (8,428)         (8,339)        (14,069)      (11,127)

   Income tax provision                                400             200             700           500
                                                    -------         -------        --------      --------
   Net loss                                        ($8,828)        ($8,539)       ($14,769)     ($11,627)
                                                   ========        ========       =========     =========
   Basic and diluted loss per share                 ($0.36)         ($0.41)         ($0.65)       ($0.58)
                                                   ========        ========       =========     =========
   Weighted average number of common and
    common equivalent shares outstanding            25,815          21,803          24,054        21,769
                                                   ========        ========       =========     =========

   Accumulated deficit at beginning of period    ($133,863)      ($106,604)      ($127,472)    ($103,066)
   Net loss                                         (8,828)         (8,539)        (14,769)      (11,627)
   Payment of preferred stock dividends               (450)           (450)           (900)         (900)
                                                 ----------       ---------      ----------    ----------
   Accumulated deficit at end of period          ($143,141)      ($115,593)      ($143,141)    ($115,593)
                                                 ==========      ==========      ==========    ==========
________________________

   The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                      - 4 -

<PAGE>


               GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


                                                  Increase (Decrease) in Cash
                                                     and Cash Equivalents
                                                  ----------------------------
                                                      Six Months Ended
                                                           March 31,
                                                  ----------------------------
In thousands                                             2000         1999
                                                  ----------------------------
Cash flows from operating activities:
  Net loss                                             ($14,769)     ($11,627)
  Adjustments to reconcile net loss to net cash
  provided by operating activities:
    Depreciation and amortization                        11,432        12,874
    Non-cash charge for debt conversion                   2,403            --
    Gain on sale of assets                                   --        (9,001)
    Changes in:
      Accounts receivable                                   288         5,993
      Inventories                                        (5,178)          386
      Accounts payable and accrued expenses                (974)        2,074
      Other net current assets                            1,231        (2,110)
      Other net long-term assets                         (3,111)          391
 ------------------------------------------------------------------------------
 Net cash used in operating activities                   (8,678)       (1,020)
 ------------------------------------------------------------------------------
 Cash flows from investing activities:
   Acquisition of property, plant and equipment, net     (2,438)       (4,892)
   Capitalized software development costs                (6,084)       (6,534)
   Proceeds from sale of assets, net                         --        12,013
-------------------------------------------------------------------------------
Net cash provided by (used in) investing activities      (8,522)          587
-------------------------------------------------------------------------------
Cash flows from financing activities:
  Revolver borrowings (repayments), net                  (1,477)        9,353
  Proceeds from notes and mortgages                      20,700           279
  Principal payments on notes and mortgages              (2,162)       (8,159)
  Proceeds from issuing common stock                        719           368
  Payment of preferred stock dividends                     (900)         (900)
-------------------------------------------------------------------------------
Net cash provided by financing activities                16,880           941
-------------------------------------------------------------------------------
Effect of exchange rates on cash                            (80)          (57)
-------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents       (400)          451
Cash and cash equivalents at beginning of period - (1)    3,790         3,757
-------------------------------------------------------------------------------
Cash and cash equivalents at end of period - (1)         $3,390        $4,208
===============================================================================

 (1) - The Corporation considers all highly liquid investments purchased with a
       maturity of three months or less to be cash equivalents.

The accompanying notes are an integral part of these consolidated financial
statements.

                                       -5-

<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1.         BASIS OF PRESENTATION

                In  the  opinion  of  management,   the  accompanying  unaudited
                consolidated   financial   statements  contain  all  adjustments
                necessary to fairly present the consolidated  financial position
                of General  DataComm  Industries,  Inc.  and  subsidiaries  (the
                "Corporation"   or  "Company")   as  of  March  31,  2000,   the
                consolidated  results of their  operations for the three and six
                months  ended March 31, 2000 and 1999,  and their cash flows for
                the six months ended March 31, 2000 and 1999.  Such  adjustments
                are  generally  of  a  normal   recurring   nature  and  include
                adjustments   to  certain   accruals   and  asset   reserves  to
                appropriate levels.

                The  preparation  of financial  statements  in  conformity  with
                accounting  principles  generally  accepted in the United States
                requires  management  to make  estimates  and  assumptions  that
                affect  the  reported  amounts  of assets  and  liabilities  and
                disclosure of contingent  assets and  liabilities at the date of
                the financial  statements  and the reported  amounts of revenues
                and expenses  during the  reporting  periods  presented.  Actual
                results  could differ from those  estimates.  In  addition,  the
                markets for the Company's  products are characterized by intense
                competition,  rapid technological development,  and frequent new
                product  introductions,  all of which  could  impact  the future
                value  of  the  Company's   inventories,   capitalized  software
                development costs, and certain other assets.

                The unaudited consolidated financial statements contained herein
                should be read in conjunction  with the  consolidated  financial
                statements  and related  notes  thereto filed with Form 10-K for
                the fiscal year ended September 30, 1999.

                Certain   reclassifications   were  made  to  the  prior  year's
                consolidated  financial  statements  to conform  to the  current
                year's presentation.

NOTE 2.         INVENTORIES

                Inventories consist of (in thousands):

                                March 31, 2000            September 30, 1999
                                --------------            ------------------

                Raw materials      $  6,113                    $  5,054
                Work-in-process       3,205                       1,732
                Finished goods       18,099                      15,543
                                   --------                    --------
                                   $ 27,417                    $ 22,329
                                   ========                    ========

                                      - 6 -
<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 3.         PROPERTY, PLANT AND EQUIPMENT

                Property, plant and equipment consists of (in thousands):

                                            March 31, 2000   September 30, 1999
                                            --------------   ------------------

                Land                            $   1,767       $   1,775
                Buildings and improvements         29,863          30,280
                Test equipment, fixtures
                  and field spares                 54,732          54,460
                Machinery and equipment            59,715          58,099
                                                 --------         -------
                                                  146,077         144,614
                Less: accumulated depreciation    115,864         111,935
                                                 --------         -------
                                                 $ 30,213        $ 32,679
                                                 ========         ========


NOTE 4.         CAPITALIZED SOFTWARE DEVELOPMENT COSTS

                The accumulated amortization of capitalized software development
                costs amounted to $14,668,000  and $18,065,000 at March 31, 2000
                and September 30, 1999, respectively. The reduction reflects the
                write-off of fully amortized  capitalized software in accordance
                with the Company's accounting policy.

NOTE 5.         LONG-TERM DEBT

                Long-term debt consists of (in thousands):

                                             March 31, 2000  September 30, 1999
                                             --------------  ------------------

                Revolving credit facility      $ 13,634          $ 15,111
                Notes payable                    37,871            18,543
                7 3/4% convertible senior
                  subordinated debentures         3,000            25,000
                Mortgages payable                 9,882            10,411
                                               --------          --------
                                                 64,387            69,065
                Less:  current portion            6,793             4,533
                                               --------          --------
                                               $ 57,594          $ 64,532
                                               ========          ========



                                      - 7 -
<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 5.         LONG-TERM DEBT (continued)

                Expansion of Credit Facility and Receipt of Proceeds

                On May 14, 1999,  the Company  entered  into a three-year  $40.0
                million  loan  and  security  agreement  with  Foothill  Capital
                Corporation  (the  "Loan  Agreement").  The Loan  Agreement  was
                comprised  of $15.0  million in term  loans and a $25.0  million
                (maximum value) revolving line of credit.  At any point in time,
                up to a maximum  of $3.0  million of the  outstanding  term loan
                balance is  convertible  into the  Company's  common  stock at a
                conversion price of $5.00 per share.

                On December 30, 1999, the Company  expanded its credit  facility
                to $70.0  million,  as compared to the  previous  $40.0  million
                agreement.  The $30.0  million  increase is comprised of a $20.0
                million term loan (proceeds received on December 31, 1999) and a
                $10.0 million  increase in the revolving  line of credit portion
                of the credit facility. The expansion results in a $70.0 million
                credit facility (New Loan Agreement)  comprised of $35.0 million
                in term loans and a $35.0 million (maximum value) revolving line
                of credit.

                In addition, a financial covenant of the previous Loan Agreement
                was modified to be less  restrictive  to the Company,  requiring
                that stockholders'  equity, as defined, must now equal or exceed
                $10.0 million, as compared to $18.1 million previously.

                The new $20.0 million term loan bears  interest at the higher of
                13.5% or the  prime  rate of  interest  plus  5.0% (on March 31,
                2000, the applicable  prime rate of interest was 9.0%),  payable
                monthly.  Commencing in March 2001, quarterly principal payments
                in the amount of $1.0 million become  payable,  and the new term
                loan is due and payable in full upon  termination  or expiration
                of the New Loan Agreement. At any point in time, up to a maximum
                of $4.0  million  of the  outstanding  new term loan  balance is
                convertible  into the  Company's  common  stock at a  conversion
                price of $9.00 per share.

                Under  the  revolving  line of  credit  portion  of the New Loan
                Agreement,  funds are advanced subject to satisfying a borrowing
                base formula  related to levels of certain  accounts  receivable
                and  inventories   and  the   satisfaction  of  other  financial
                covenants.  Under this formula,  at March 31, 2000,  the Company
                would have been able to borrow up to $31.5  million.  Borrowings
                outstanding on the line of credit  amounted to $13.6 million and
                $15.1  million  at  March  31,  2000  and  September  30,  1999,
                respectively.

                Most  assets  of the  Company,  including  accounts  receivable,
                inventories  and  property,  plant and  equipment are pledged as
                collateral under the New Loan

                                      - 8 -
<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 5.         LONG-TERM DEBT (continued)

                Agreement.  Interest  on  revolver  borrowings  is payable
                monthly at the  greater of prime plus  0.625%,  or 7.0% per
                annum.  The applicable prime rate was 9.0% at March 31, 2000.

                Conversion of Debentures into Equity

                In the six months  ended March 31,  2000,  $22.0  million of the
                $25.0 million in 7 3/4%  Convertible  Debentures  ("Debentures")
                outstanding  at  September  30,  1999  were  converted  into and
                exchanged  for  common  stock,   thereby  reducing   outstanding
                indebtedness    and   increasing    stockholders'    equity   by
                approximately $22.0 million and $21.2 million, respectively. The
                increase in  stockholders'  equity is comprised of approximately
                $24.4 million of equity  securities issued less non-cash charges
                of $2.4 million for debt conversion  expense  (discussed  below)
                and $0.8 million of deferred debenture offering costs which were
                charged to paid-in  capital.  Annual  interest  expense  savings
                resulting from the conversions will approximate $1.7 million.

                In various  separate,  unsolicited and negotiated  transactions,
                the Company  issued an aggregate  of 4,110,600  shares of common
                stock in  exchange  for the  $22.0  million  of  Debentures,  as
                compared  to  3,772,938   shares  issuable  under  the  original
                debenture conversion terms.  Issuance of the incremental 337,662
                shares  resulted in a non-cash  charge of $2.4  million for debt
                conversion expense in the six months ended March 31, 2000.

                After giving effect to these conversions, outstanding Debentures
                amounted to $3.0 million at March 31, 2000.

                Reference  is  made  to  the  Company's  consolidated  financial
                statements  and related  notes  thereto and exhibits  filed with
                Form 10-K for the year  ended  September  30,  1999 for  further
                disclosures  applicable to all (other) outstanding  indebtedness
                of the Corporation.

                                      - 9 -
<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 6.         RESTRUCTURING OF OPERATIONS

                On  September  30, 1999,  the Company  entered into an agreement
                with the Matco Electronics  Group, Inc. ("Matco") to outsource a
                substantial  portion  of  its  manufacturing  operations.   This
                strategic decision,  executed to reduce  manufacturing costs and
                more  effectively  focus the  Company  on  product  development,
                marketing and sales  activity,  resulted in the  elimination  of
                approximately 100 manufacturing  positions. The net loss for the
                six  months  ended  March  31,  2000  includes  a charge of $0.5
                million,  or $0.02  per  share,  primarily  for  post-employment
                benefits  under  the  Company's  severance  plan.  Most  of  the
                benefits were paid in the quarter ended March 31, 2000.

                In December 1998, the Company  restructured  its operations into
                three distinct business units to increase product line focus and
                move toward operating autonomy.  Two new business units resulted
                from the reorganization:  Broadband Systems Division and Network
                Access Division,  both of which  supplemented the existing VITAL
                Network  Services  business unit,  which was launched in October
                1997. The  reorganization  resulted in a workforce  reduction of
                approximately 200 persons. The net loss for the six months ended
                March 31, 1999 includes a charge of $2.0  million,  or $0.09 per
                share,   primarily  for   post-employment   benefits  under  the
                Company's severance plan; such costs were paid in fiscal 1999.

NOTE 7.         SALE OF TECHNOLOGY ALLIANCE GROUP  DIVISION

                On  December  30,  1998,  the  Company  sold the  assets  of its
                Technology Alliance Group ("TAG") division, which was identified
                as non-strategic to the reorganized business units referenced in
                Note 6  above.  TAG,  which  developed,  patented  and  licensed
                advanced  modem  and  access   technologies,   was   principally
                comprised of scientists and engineers and held rights to certain
                technologies  patented by the  division.  The sale resulted in a
                pre-tax gain of approximately $9.0 million,  or $0.41 per share,
                in the six-month  period ended March 31, 1999 and generated cash
                proceeds,  net of  expenses,  of  approximately  $12.0  million.
                Technology  licensing revenues from the TAG division amounted to
                $420,000  and  $1,115,000  in the three- and  six-month  periods
                ended  March 31,  1999,  respectively  (licensing  revenues  are
                reported  as  "Other  Revenue"  in  the  Company's  Consolidated
                Statements of Operations).

                                     - 10 -
<PAGE>

                       GENERAL DATACOMM INDUSTRIES, INC.
                               AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 8.         SEGMENT INFORMATION - INTERIM DISCLOSURES

                The Company  reorganized in December 1998, creating distinct and
                independently  managed  Strategic  Business  Units  ("SBUs") for
                specified  groups of products  and  services.  Each SBU has been
                identified as a reportable segment, as summarized below:

                  o Broadband Systems Division ("BSD")
                  o Network Access Division ("NAD")
                  o VITAL Network Services, L.L.C.
                  o DataComm Leasing Corporation

                The  accounting  policies of the  segments are the same as those
                described  in Note 1,  "Description  of Business  and Summary of
                Significant  Accounting Policies," in the Company's consolidated
                financial  statements  filed  with Form 10-K for the year  ended
                September 30, 1999, except for capitalized  software accounting.
                Such  costs  are  treated  as a period  expense  when  measuring
                divisional performance.

                The  Company  evaluates  the  performance  of its  segments  and
                resource   allocation  based  upon  operating   income,   before
                capitalized  software  accounting,   restructuring  charges  and
                executive level general  corporate costs (i.e.,  chief executive
                officer,  chief  operating  officer,  chief  financial  officer,
                corporate strategic planning,  investor relations,  etc.). There
                are no intersegment  revenues, and BSD and NAD recognize revenue
                for the sale of their product lines only (i.e.,  BSD  recognizes
                no revenue for the sale of NAD product and vice versa).

                For additional information,  including a description of the type
                of business  conducted by each  respective SBU, refer to Note 11
                in the Company's  consolidated  financial  statements filed with
                Form 10-K for the year ended September 30, 1999.

                The tables below present  financial  performance  information by
                reportable segment (in thousands):

                                     - 11 -
<PAGE>

                         GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 8.         SEGMENT INFORMATION - INTERIM DISCLOSURES (continued)

                                  Three Months Ended        Six Months Ended
                                       March 31,                 March 31,
                                  ------------------       -------------------
                                   2000       1999          2000         1999
                                  ------------------       -------------------
Revenue:
  Network Access Division         $14,479   $14,617        $32,407     $28,173
  Broadband Systems Division       14,607    11,216         32,057      26,332
  VITAL Network Services, L.L.C.   11,378    11,471         22,573      23,453
  DataComm Leasing Corporation        923     1,053          1,930       2,123
  Other                                --       420             --       1,115
                                  -------   -------        -------     -------

   Total                          $41,387   $38,777        $88,967     $81,196
                                  =======   =======        =======     =======

Operating Income (Loss):
  Network Access Division         $   962   $   609        $ 2,699     $(1,942)
  Broadband Systems Division       (6,510)   (9,778)       (10,469)    (17,153)
  VITAL Network Services, L.L.C.      259     1,734            855       3,426
  DataComm Leasing Corporation        751       807          1,501       1,563
  Other                                --       420             --         420
                                  -------   -------        -------      ------

   Total                          $(4,538)  $(6,208)       $(5,414)   $(13,686)
                                  ========  ========       ========   =========

Reconciliations of operating loss, as reported  above, to consolidated loss
before income taxes are summarized below:

Operating loss, per above         $(4,538)  $(6,208)       $(5,414)   $(13,686)
Capitalized software activity, net     91       179             91         362
General corporate expenses         (1,150)     (939)        (2,123)     (2,005)
Restructuring of operations            --        --           (500)     (2,000)
Debt conversion expense              (879)       --         (2,403)         --
Gain on sale of assets                 --        --             --       9,001
Other expense                      (1,952)   (1,371)        (3,720)     (2,799)
                                  --------  -------       ---------   ---------

Loss Before Income Taxes          $(8,428)  $(8,339)      $(14,069)   $(11,127)
                                  ========  ========      =========   =========


                                      -12-
<PAGE>

                         GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 9.         EARNINGS (LOSS) PER SHARE

                The  following  table  sets forth the  computation  of basic and
                diluted loss per share (in thousands, except per share amounts):


                                          Three Months Ended   Six Months Ended
                                               March 31,            March 31,
                                           2000        1999     2000      1999
                                          -----------------    ----------------
Numerator:
  Net loss                               $ (8,828) $(8,539)  $(14,769) $(11,627)
  Preferred stock dividends                  (450)    (450)      (900)     (900)
  Numerator for basic and diluted
    loss per share - loss applicable
    to common stockholders               $(9,278)  $(8,989)  $(15,669) $(12,527)
                                         ========  ========  ========= ========
Denominator:
  Denominator for basic and diluted
    loss per share - weighted
    average shares outstanding            25,815    21,803     24,054    21,769
                                         -------   -------    -------   -------
Basic and diluted loss per share         $ (0.36)  $ (0.41)  $  (0.65) $  (0.58)
                                         ========  ========  ========= ========

                The net loss  reported for the three months ended March 31, 2000
                includes a non-cash debt  conversion  charge of $0.9 million (or
                $0.03 per share). The net loss reported for the six months ended
                March 31, 2000  includes  restructuring  charges of $0.5 million
                (or $0.02 per share) and debt conversion charges of $2.4 million
                (or $0.10 per share).  The net loss  reported for the six months
                ended  March 31,  1999  includes  restructuring  charges of $2.0
                million  (or  $0.09 per  share)  and a gain on sale of assets of
                $9.0 million (or $0.41 per share).

                Outstanding  securities (not included in the above  computations
                because of their  dilutive  impact on  reported  loss per share)
                which could potentially  dilute earnings per share in the future
                include convertible debentures,  convertible preferred stock and
                employee stock options and warrants.  For additional  disclosure
                information,  including  conversion terms,  refer to Notes 7, 10
                and 12, respectively,  in the Company's  consolidated  financial
                statements filed with Form 10-K for the year ended September 30,
                1999. Weighted average employee stock options outstanding during
                the six  months  ended  March 31,  2000  approximated  4,024,000
                shares, of which 667,000 would not have been included in diluted
                earnings per share  calculations  for the six months ended March
                31, 2000 (if the Company  reported net income for the referenced
                period) because the effect would be antidilutive.

                                     - 13 -
<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 10.        COMPREHENSIVE INCOME (LOSS)

                The following table sets forth the computation of comprehensive
                loss:

                                   Three Months Ended       Six Months Ended
                                        March 31,                 March 31,
                                   ------------------      -------------------
                                     2000        1999         2000        1999
                                   ------------------      -------------------

Net loss                           $(8,828)  $(8,539)      $(14,769)  $(11,627)
Other comprehensive loss,
 net of tax:
   Foreign currency translation
   adjustments                        (385)     (251)          (876)      (664)
                                   --------  --------       ---------  --------
Comprehensive loss                 $(9,213)  $(8,790)      $(15,645)  $(12,291)
                                   ========  ========      =========  =========



                                     - 14 -
<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Summary Discussion

The Company continues to achieve operational performance improvement as compared
to the prior fiscal year.  Total  revenues for the three- and six-month  periods
ended March 31, 2000 reflect growth of approximately  7% and 10%,  respectively,
as  compared to the  corresponding  periods of fiscal  1999.  In  addition,  the
Company's  reported net loss,  excluding  unique one-time items, was narrowed to
$(11.9)  million for the six months  ended March 31, 2000 as compared to $(18.6)
million for the  corresponding  period of fiscal 1999,  an  improvement  of $6.7
million, or 36%.

Regarding current quarter  performance,  management  believes that, based on the
order rate and backlog, product revenues in the Broadband Systems Division would
have been  approximately  $3.0 million higher except for issues  associated with
the  complete  outsourcing  of  manufacturing  operations  along with  worldwide
shortages of critical electronic components.

The  Company has also  continued  to improve its  financial  position  since the
fiscal year ended September 30, 1999. In December 1999 the Company  improved its
access to working  capital  resources by expanding its credit  facility to $70.0
million,  as compared to $40.0  million at September  30,  1999,  an increase of
$30.0  million,  or 75%.  In  addition,  $22.0  million of the $25.0  million in
Convertible 7 3/4% Debentures  ("Debentures")  outstanding at September 30, 1999
have been  converted  into and  exchanged  for common  stock,  thereby  reducing
outstanding  indebtedness and increasing  stockholders'  equity.  In addition to
improving the Company's financial position, the Debenture reductions will result
in interest expense savings of $1.7 million annually.

Discussion  of the current  fiscal year's  operating  results as compared to the
corresponding  periods of fiscal 1999 are included below. Unique one-time items,
including  restructuring charges, debt conversion expense and gain from the sale
of assets,  are discussed under the captions  "Restructuring  of Operations" and
"Interest Expense and Other Income and Expense."

                                     - 15 -


<PAGE>

Results of Operations

The following table sets forth selected consolidated  financial data stated as a
percentage of total revenues (unaudited):

                                 Three Months Ended        Six Months Ended
                                     March 31,                 March 31,
                                -------------------      --------------------
                                 2000         1999         2000        1999
                                -------------------      --------------------
Revenues:
  Net product sales             70.2%        66.5%        72.4%       66.0%
  Service revenue               27.5         29.6         25.4        28.9
  Other revenue                  2.3          3.9          2.2         5.1
                               -----        -----        -----       -----
                               100.0        100.0        100.0       100.0
Cost of revenues                58.1         54.1         57.0        54.3
                               -----        -----        -----       -----
Gross margin                    41.9         45.9         43.0        45.7
Amortization of capitalized
  software development costs     7.2          7.8          6.7         7.5
Selling, general and
 administrative                 36.1         37.7         33.2        38.7
Research and product
 development                    12.1         18.4         11.5        18.3
                               -----        -----        -----       -----

Operating loss before
   restructuring charges       (13.5)       (18.0)        (8.4)      (18.9)

Restructuring of operations       --           --          0.5         2.4
                               ------       ------       ------      ------
Operating loss                 (13.5)%      (18.0)%       (8.9)%     (21.3)%
                               ------       ------       ------      ------
Net loss excluding
  unique items*                (19.2)%      (22.0)%      (13.3)%     (22.9)%
                               ------       ------       ------      ------
Net loss                       (21.3)%      (22.0)%      (16.6)%     (14.3)%
                               ======       ======       ======      ======

--------------------
*Unique items are comprised of restructuring  charges,  debt conversion  expense
and gain on sale of assets.

Summary comments are as follows:  (1) quarter and year-to-date  product revenues
increased  approximately 13% and 20%,  respectively,  while service revenues are
down  slightly  from fiscal 1999;  as a result,  product  revenue  represents an
increased  percentage of total  revenue;  (2) other  revenue  represents a lower
percentage  of  total  revenue,   reflecting  a  reduction  in  royalty  revenue
attributable  to a division  being sold in  December  1998  (refer to Note 7 for
details);  (3) quarter and year-to-date cost of revenues,  measured as a percent
of revenue,  increased  as compared to the prior year,  reflecting,  in order of
relative  importance,  the  combined  impact of a reduction  in (higher  margin)
royalty  revenue,  reduced service margins and a less  significant  reduction in
product margins;  (4) year-to-date  operating expenses (excluding  restructuring
charges) are down more than 12  percentage  points when measured as a percent of
revenue, reflecting the combined impact of revenue growth and expense reductions
realized  from  the  Company's  fiscal 1999

                                     - 16 -
<PAGE>

restructuring efforts; (5) the year-to-date operating loss, excluding the impact
of  restructuring  charges,  improved  by  approximately  11  percentage  points
measured  as a percent of  revenue;  (6) the  year-to-date  net loss,  excluding
unique items,  reflects a similar  improvement  of  approximately  10 percentage
points when measured as a percent of revenue.

Consolidated Results

Revenues: Current quarter revenues were up $2.6 million, or 6.7%, as compared to
the corresponding quarter of fiscal 1999. Product revenues were up $3.3 million,
or 12.7%,  service revenues were down $0.1 million,  or 0.8%, and other revenues
were down $0.6 million,  or 37.9%. The Broadband Systems Division's ATM business
accounted for all of the product revenue growth;  the reduction in other revenue
reflects a $0.4 million  reduction in royalty revenue  resulting from a division
being sold (refer to Note 7 for details)  and a $0.2 million  reduction in lease
revenue.

Year-to-date  revenues  for the six  months  ended  March 31,  2000 were up $7.8
million, or 9.6%, as compared to the first half of fiscal 1999. Product revenues
were up $10.8 million,  or 20.2%,  service  revenues were down $0.9 million,  or
3.8%,  and other  revenues  were down $2.2 million,  or 52.2%.  Both the Network
Access Division  (revenues up $4.5 million,  or 16.2%) and the Broadband Systems
Division (revenues up $6.3 million, or 24.4%) contributed to the product revenue
growth;  the  decline in  service  revenue  reflects  weakness  in the  domestic
marketplace  -  principally  attributable  to customers  minimizing  new systems
implementation  activity as they  transitioned  into calendar year 2000; and the
reduction  in other  revenues  reflects  the  combined  impact of a $1.1 million
reduction  in royalty  revenue  resulting  from the sale of a  division,  a $0.3
million  reduction in leasing  revenue and $0.8 million of contractual  research
and development revenue recorded in the prior year (no such revenue was recorded
in the current year).

Geographically,  international  revenues amounted to 48% and 50% of consolidated
revenues  for  the  three-  and   six-month   periods   ended  March  31,  2000,
respectively,  as  compared to 46% and 47% for  corresponding  periods of fiscal
1999.

Gross  Margins:  Gross  margins,  measured as a percent of revenue and excluding
capitalized  software  amortization,  were down 4.0  percentage  points  and 2.7
percentage   points  for  the  three  and  six  months  ended  March  31,  2000,
respectively,  as  compared  to the  corresponding  periods  one year ago.  Both
product and service  margins  contributed  to the overall margin  declines.  The
product  margin  declines,  experienced in both the Network Access and Broadband
Systems  divisions,  reflect the combined impact of the customer mix (on average
sell  prices) and premium  costs  arising from  worldwide  shortages of critical
electronic components.

Amortization  of capitalized  software  amounted to $3.0 million in the quarters
ended March 31, 2000 and 1999; year-to-date amortization of capitalized software
amounted to $6.0 million and $6.2 million in the  six-month  periods ended March
31, 2000 and 1999, respectively.

                                     - 17 -

<PAGE>

Operating  Expenses:  The  Company's  fiscal  1999  restructuring  efforts  have
resulted in a reduction in the Company's  operating  expenses.  Specific Company
restructuring  actions impacting current year results include:  (1) the December
1998  reorganization into three distinct business units with increased operating
autonomy  (refer to Note 6,  "Restructuring  of  Operations,"  in this quarterly
report and Note 2, "Restructuring of Operations," in the Company's  consolidated
financial  statements filed with Form 10-K for the year ended September 30, 1999
for  further  discussion);  and  (2)  the  shutdown  of a  non-strategic  remote
technology center in England in July 1999.

Operating expenses were down $1.8 million,  or 8.3%, for the quarter ended March
31, 2000 as compared to same quarter one year ago,  reflecting the net impact of
a $0.3  million,  or 2.1%,  increase  in  selling,  general  and  administrative
expenses and a $2.1  million,  or 29.4%,  reduction in research and  development
expense. The increase in selling, general and administrative expense principally
reflects a strategic  investment  in the systems  and people  infrastructure  of
VITAL  Network  Services to position the business  unit for future  growth.  The
reduction  in  research  and  development  expense  reflects  the  shutdown of a
non-strategic  remote  technology  center  in  England  in July  1999  and  cost
reductions resulting from more defined and focused development programs.

Year-to-date  operating expenses (excluding  restructuring  charges) for the six
months ended March 31, 2000 were down $6.5 million, or 14.1%, as compared to the
six months ended March 31, 1999.  The  reduction is comprised of a $1.9 million,
or 6.1%, reduction,  in selling,  general and administrative expenses and a $4.6
million, or 31.1%,  reduction in research and development  expense. The selling,
general and administrative  reduction  principally  reflects headcount and other
related cost reductions resulting from the Company's December 1998 reengineering
of its sales and  marketing  strategy,  including  an  increased  focus on sales
activity through distributors and other channels, a reduced focus on direct-sell
activity and more productive  marketing  initiatives.  Such cost reductions were
partially  offset with an increased  investment  in VITAL's  infrastructure,  as
discussed above. The reduction in research and development  expense reflects the
shutdown of a non-strategic  remote  technology  center in England in July 1999,
the sale of a  non-strategic  division and reduced  costs  associated  with more
defined and focused development programs.

The Company  continues to channel a high  percentage  of its  revenues  into new
product development.  Gross research and development spending for the six months
ended  March 31,  2000  amounted to $16.3  million,  or 18.3% of  revenue.  Such
spending is, however,  being closely  monitored by the Network Access Division's
and Broadband Systems Division's management teams. The strategy of both business
units has been to  significantly  reduce  or  eliminate  development  activities
targeted at sustaining  legacy  products,  to limit the  investment of new funds
into projects  considered to have only the highest  likelihood of success and to
use outside development engineers to complement internal development activities,
all in an effort to focus development efforts and improve productivity.

Restructuring of Operations:  The Company recorded restructuring charges of $0.5
million  and $2.0  million  in the six  months  ended  March 31,  2000 and 1999,
respectively.  Refer to Note 6,  "Restructuring  of  Operations,"  for  detailed
discussion.

                                     - 18 -

<PAGE>

Interest Expense and Other Income and Expense: Interest expense amounted to $2.1
million  and $1.5  million  for the  quarters  ended  March  31,  2000 and 1999,
respectively,  and $4.1  million and $3.2 million for the six months ended March
31, 2000 and 1999, respectively. The increases are attributable to higher levels
of outstanding borrowings,  a higher rate of interest (prime plus 5%) payable on
the  Company's  new  $20.0  million  term loan  received  in  December  1999 and
increases in the prime rate of interest.

Fiscal year 2000 other expense  includes  non-cash  charges for debt  conversion
expense;  such charges  amounted to $0.9 million (or $0.03 per share)  and $2.4
million (or $0.10 per share) for the three- and  six-month  periods  ended March
31, 2000, respectively.  Details regarding the debt-to-equity conversions, which
increased   stockholders'   equity  and  reduced  outstanding   indebtedness  by
approximately  $22.0  million  during the six months ended March 31,  2000,  are
discussed in Note 5, "Long-Term Debt."

Prior year "other income"  includes a gain of $9.0 million,  or $0.41 per share,
from the sale of a division. Refer to Note 7, "Sale of Technology Alliance Group
Division," for further discussion.

Income Taxes:  Tax provisions  recorded by the Company,  principally for foreign
income and  domestic  state  taxes,  amounted  to $400,000  and  $200,000 in the
quarters ended March 31, 2000 and 1999, respectively,  and $700,000 and $500,000
in the  six-month  periods  ended  March 31,  2000 and 1999,  respectively.  The
Company has significant  federal net operating loss  carryforwards  available to
offset future federal income tax liabilities.  However, based on the uncertainty
of the ultimate realization of such carryforwards, no net deferred tax asset (or
related  deferred  tax  benefit) has been  recorded in the  Company's  financial
statements.

Operating Segments:  Discussion and analysis of the financial performance of the
Company's  reportable operating segments is presented below (such discussions do
not  include  the impact of charges  for  restructuring  of  operations,  as the
Company does not segregate  such charges by business  unit).  In the case of all
operating segments,  reference is made to Note 8, "Segment Information - Interim
Disclosures," for further discussion and disclosure.

Network Access Division ("NAD")

NAD's current quarter  operating  income amounted to $1.0 million as compared to
$0.6  million  in the same  quarter  one year  ago.  Revenue  and  gross  margin
contribution  were  relatively  unchanged  from the prior year. The $0.4 million
improvement  in  operating  income  resulted  from a $0.4  million  reduction in
operating expenses.

NAD's  year-to-date  operating income amounted to $2.7 million as compared to an
operating  loss of $(1.9)  million in first six months of fiscal 1999.  The $4.6
million turnaround and improvement  reflects the net effect of revenue growth of
$4.2 million,  or 15.0%,  resulting  gross margin  growth of $1.6  million,  and
operating expense reductions of $3.0 million, or 20.1%. NAD's revenue growth was
achieved in both the domestic and  international  marketplace.  NAD's  operating
expense reductions are primarily the result of the Company's  restructuring plan
(executed in December  1998),  which included a strategy to reduce selling costs
by selling through distributors and other indirect channels.

                                     - 19 -
<PAGE>

Broadband Systems Division ("BSD")

BSD's current  quarter  operating loss amounted to $(6.5) million as compared to
$(9.8) million in the same quarter one year ago, an improvement of $3.3 million,
or 33.4%. The $3.3 million improvement reflects the net effect of revenue growth
of $3.4  million,  or  30.2%,  resulting  margin  growth  of $1.1  million,  and
operating  expense  reductions  of $2.2 million,  or 14.1%.  The $3.4 million of
revenue  growth  reflects  ATM  product  revenue  growth  which  occurred in the
international  marketplace.  BSD's  operating  expense  reductions  reflect  the
combined  impact of the Company's  restructuring  plan executed in December 1998
and the shutdown of a non-strategic  remote technology center in England in July
1999.

BSD's operating loss for the six months ended March 31, 2000 amounted to $(10.5)
million as compared to $(17.2)  million for the  corresponding  period of fiscal
1999, an improvement  of $6.7 million,  or 39.0%.  The $6.7 million  improvement
reflects the net effect of revenue growth of $5.7 million,  or 21.7%,  resulting
margin growth of $2.5 million, and operating expense reductions of $4.2 million,
or 13.6%. BSD's ATM and  Internetworking  products  contributed $4.0 million and
$2.7 million of revenue  growth,  respectively,  and such growth was achieved in
both  the  domestic  and  international   marketplace.   The  operating  expense
reductions resulted from the actions referenced above.

ATM product revenues  amounted to $11.6 million and $23.2 million for the three-
and  six-month  periods  ended March 31,  2000,  as compared to $8.0 million and
$19.2  million  for the three-  and  six-month  periods  ended  March 31,  1999,
reflecting year-to-date growth of approximately 21%.

Refer to the Summary  Discussion  on page 15 for the  management  comment on the
potential for higher revenue in the quarter ended March 31, 2000.

VITAL Network Services, L.L.C. ("VITAL")

VITAL's  service  revenue  amounted to $11.4  million  and $11.5  million in the
quarters ended March 31, 2000 and 1999,  respectively.  VITAL's  current quarter
operating  income  amounted to $0.3  million as compared to $1.7  million in the
same quarter one year ago, a reduction of $1.4 million, or 85%. The $1.4 million
reduction  is comprised  of a margin loss of $0.9  million  (principally  due to
increased costs) and a $0.5 million,  or 23.8%,  increase in operating expenses.
As noted earlier,  VITAL's increased spending reflects a strategic investment in
the division's  systems and people  infrastructure  in an effort to position the
business unit for future growth.

VITAL's trends for the six months ended March 31, 2000 are consistent with those
in the quarter as noted above.  Service  revenue  amounted to $22.6  million and
$23.5  million  in  the  six-month  periods  ended  March  31,  2000  and  1999,
respectively,  a  reduction  of $0.9  million,  or  3.8%.  VITAL's  year-to-date
operating  income  amounted to $0.9  million as compared to $3.4  million in the
corresponding period one year ago, a reduction of $2.5 million, or 75%. The $2.5
million  reduction  is  comprised  of a margin  loss of $1.8  million and a $0.7
million, or 20.1%, increase in operating expenses.

                                     - 20 -

<PAGE>

DataComm Leasing Corporation

DataComm  Leasing   Corporation   ("DLC")  offers  BSD  and  NAD  customers  the
opportunity  to lease rather than  purchase  products.  Most of DLC's leases are
with  BSD  customers  due to the  more  expensive  nature  of BSD  products  and
customers' desire to finance such equipment through leases.

DLC's  operating   income,   derived  from  both  operating  and  finance  lease
activities,  amounted to $0.8 million in the  quarters  ended March 31, 2000 and
1999,  and $1.5  million and $1.6 million in the six months ended March 31, 2000
and 1999, respectively.

Foreign Currency Risk

The Company's foreign subsidiaries are exposed to foreign currency  fluctuations
since they are invoicing  customers in local  currencies  while  liabilities for
product  purchases from the parent Company are transacted in U.S.  dollars.  The
impact  of  foreign  currency  fluctuations  on  these  U.S.  dollar-denominated
liabilities  is  recorded as a component  of "Other  Income and  Expense" in the
Company's consolidated  statements of operations.  Such activity resulted in net
currency exchange gains of $111,000 and $42,000 for the quarters ended March 31,
2000 and 1999, respectively, and $363,000 and $270,000 for the six-month periods
ended March 31, 2000 and 1999, respectively.

No individual  foreign  subsidiary  comprises 10 percent or more of consolidated
revenue or assets, and most subsidiary  operations represent less than 5 percent
of consolidated assets. Therefore, the Company historically has not entered into
hedge contracts or any form of derivative or similar investment. Separately, the
introduction  of the Euro as a  common  currency  for  members  of the  European
Monetary  Union,   which  occurred  during  fiscal  1999,  is  not  expected  to
significantly  impact the Company's  exposure to foreign currency  transactions.
See "Market Risk" below for further discussion of foreign currency risk.

Market Risk

The  Company is exposed to various  market  risks,  including  potential  losses
arising  from  adverse  changes  in market  rates and  prices  (such as  foreign
currency  exchange and interest rates),  and dependence upon a limited number of
major distributors and resellers.  The Company historically has not entered into
derivatives,  forward  exchange  contacts  or other  financial  instruments  for
trading, speculation or hedging purposes.

Interest Risk

For discussion applicable to interest risk, reference is made to Form 10-K filed
with the  Securities and Exchange  Commission  for the year ended  September 30,
1999, Item 7, Management's  Discussion and Analysis of Results of Operations and
Financial Condition, under the caption "Interest Risk."

                                     - 21 -
<PAGE>

Liquidity and Capital Resources

Future cash  requirements are planned to be satisfied from a combination of cash
balances  ($3.4 million at March 31, 2000) and  borrowings  available  under the
Company's  revolving  line of credit,  under which the  Company's  lenders  have
authorized  up to a maximum  of $35.0  million.  Borrowings  outstanding  on the
Company's  revolving line of credit  amounted to $13.6 million and $15.1 million
at March 31, 2000 and September 30, 1999, respectively.  In addition,  alternate
financing sources may also be available,  if required.  Such alternate financing
sources include, among other items, the sale of assets,  technologies,  existing
businesses  and/or the Company's  common stock,  and the sale or  discounting of
customer leases.

On December 30, 1999, the Company expanded its credit facility to $70.0 million,
as compared to $40.0 million at September 30, 1999.  The $30.0 million  increase
is comprised of a $20.0  million  term loan  (proceeds  received on December 31,
1999) and a $10.0 million  increase in the revolving  line-of-credit  portion of
the credit  facility.  The expansion  results in a $70.0 million credit facility
comprised of $35.0  million in term loans and a $35.0  million  (maximum  value)
revolving  line of credit  (New  Loan  Agreement).  Refer to Note 5,  "Long-Term
Debt,"  for a  detailed  discussion  of the New  Loan  Agreement  and the  terms
thereof.

Under the revolving line of credit portion of the Company's New Loan  Agreement,
availability  of funds is subject to satisfying a borrowing base formula related
to levels of certain accounts receivable and inventories and the satisfaction of
other  financial  covenants.  Therefore,  maximum funds  available for borrowing
under  the  revolving  line of credit  portion  of the New Loan  Agreement  will
fluctuate as sales and collections efforts affect accounts receivable  balances.
Such maximum  availability  amounted to $31.5  million at March 31,  2000.  Most
assets of the Company, including accounts receivable,  inventories and property,
plant and  equipment  are  pledged as  collateral.  Amounts  outstanding  on the
revolving  line of credit are payable in full upon  termination  of the New Loan
Agreement.  Separately, letters of credit reduce the availability of funds under
the  revolving  line of credit;  letters of credit in the amount of $200,000 and
$267,000   were   outstanding   at  March  31,  2000  and  September  30,  1999,
respectively.

Financial  covenants  of the New  Loan  Agreement  require  that  the  Company's
reported  stockholders'  equity,   excluding  the  impact  of  foreign  currency
translation  adjustments occurring subsequent to March 31, 1999, equal or exceed
$10.0 million. Such stockholders' equity, as defined,  amounted to $30.2 million
at March 31, 2000.  Other covenants  limit annual capital  expenditures to $12.0
million.  Violation of such  covenants  may result in limiting  access to future
borrowings   and/or   acceleration   of  payment   requirements  on  outstanding
borrowings.

To further improve the Company's financial position,  $22.0 million of the $25.0
million in 7 3/4% Convertible Debentures ("Debentures") outstanding at September
30, 1999 were  converted  into and  exchanged  for common  stock  during the six
months ended March 31,  2000,  thereby  reducing  outstanding  indebtedness  and
increasing stockholders' equity. Outstanding Debentures, after such conversions,
amounted to only $3.0 million at March 31, 2000, as compared to $25.0 million at
September 30, 1999. In addition to improving the Company's  financial  position,
the $22.0  million of  Debenture  reductions  will  result in  interest  expense
savings of $1.7 million annually. Refer to Note 5, "Long-Term Debt," for further
discussion.

                                     - 22 -
<PAGE>

Reference is made to the Company's consolidated financial statements and related
notes thereto and exhibits filed with Form 10-K for the year ended September 30,
1999 for further disclosures applicable to all other outstanding indebtedness of
the Corporation.

Operating

Net cash used in operating  activities amounted to $8.7 million and $1.0 million
in the six-month periods ended March 31, 2000 and 1999, respectively.  Increases
in inventories  ($5.2  million) and  investments in leased assets ($2.2 million)
account for a substantial  part of the cash consumption for the six months ended
March 31, 2000. The inventory growth resulted from precautionary  measures taken
by  the  Company  as  it  transitioned  to  fully  outsource  its  manufacturing
operations during the quarter;  the Company anticipates a reduction in inventory
over the following six months. The increased  investments in leases reflects the
impact of customer  operating leases entered into during the quarter ended March
31, 2000 with the Company's subsidiary, DataComm Leasing Corporation.

Non-debt working capital, excluding cash and cash equivalents, amounted to $27.9
million at March 31, 2000,  as compared to $23.5  million at September 30, 1999,
with the increase in inventory levels,  as discussed above,  being the principal
reason for the increase.

Investing

Investments in property, plant and equipment amounted to $2.4 million during the
six months ended March 31, 2000 as compared to $4.9 million in the corresponding
period  one  year  ago.  Approximately  $600,000  of the  prior  year's  capital
investments were applicable to VITAL Network Services' purchase of Olicom assets
(for additional  discussion,  refer to Note 4, "VITAL Network  Services,  L.L.C.
Partnership  With  Olicom,  Inc.,"  in  the  Company's   consolidated  financial
statements  filed  with  Form  10-K  for the year  ended  September  30,  1999).
Separately,  investments  in capitalized  software  amounted to $6.1 million and
$6.5  million  in  the  six-month   periods  ended  March  31,  2000  and  1999,
respectively.  All investment  activity is targeted to satisfy minimum operating
requirements  and to  embrace  new  undertakings  with  the  greatest  potential
returns.

In the prior year six months ended March 31, 1999, the Company  generated  $12.0
million in net proceeds from the sale of the Technology Alliance Group division,
which  was  identified  as a  non-strategic  entity by the  Company's  strategic
business units.  Refer to Note 7, "Sale of Technology  Alliance Group Division,"
for further discussion.

Financing

Net cash provided by financing  activities  amounted to $16.9 million in the six
months ended March 31, 2000, comprised of $17.1 million of net borrowings,  $0.7
million in  proceeds  received  from the  issuance of common  stock  pursuant to
employee  stock  programs  and the payment of $0.9  million in  preferred  stock
dividends. This activity compares to $0.9 million of cash

                                     - 23 -
<PAGE>

provided  by  financing  activities  in the six  months  ended  March 31,  1999,
comprised of $1.4 million of net borrowings,  $0.4 million in proceeds  received
from the issuance of common stock  pursuant to employee  stock  programs and the
payment of $0.9 million in preferred stock dividends.

Reference  is made to Note 5,  "Long-Term  Debt,"  for a  condensed  summary  of
outstanding  long-term  debt as of March 31, 2000 and  September  30, 1999,  and
discussion of new borrowing and debt reduction  activities  occurring during the
six months ended March 31, 2000.

Future Adoption of New Accounting Statements

Reference is made to the consolidated  financial statements filed with Form 10-K
for the year ended September 30, 1999, Note 1, for discussion  regarding  future
adoption of new accounting pronouncements.

Year 2000 Compliance

Reference is made to Form 10-K filed with the Securities and Exchange Commission
for the year ended  September  30, 1999,  Item 7,  Management's  Discussion  and
Analysis of Results of  Operations  and Financial  Condition,  under the caption
"Year 2000 Compliance" for year 2000 compliance related discussion.  The Company
has encountered no major year 2000 compliance problems through March 31, 2000.

Certain Risk Factors

Continuing Losses: The Company has sustained net losses for the past 22 quarters
ended March 31,  2000.  There can be no  assurance  as to when the Company  will
achieve net income.

Credit  Availability:  As noted above, the Company's New Loan Agreement requires
compliance with specific  financial  covenants,  including the requirement  that
reported stockholders' equity, as defined, equals or exceeds $10.0 million (such
stockholders' equity, as defined,  amounted to $30.2 million at March 31, 2000).
Although  not  anticipated,  should  the  Company  ever fail to comply  with the
required covenants,  or fail to comply with any other provisions of the New Loan
Agreement  which would  result in a default,  and a waiver or  amendment  is not
obtained,  the Company may be unable to borrow  funds under such  agreement.  In
such case the  Company  would be required  to seek other  financing  to fund its
operations,  and there can be no  assurance  the Company  will be able to obtain
such  financing  or, if  obtained,  on terms  deemed  favorable  by the Company.
Furthermore, in the event the Company does default on its $70.0 million New Loan
Agreement obligation, such default may result in a requirement to accelerate the
due dates and payment of other outstanding indebtedness.

Reliance  on  Outsourced  Manufacturing:  On  September  30,  1999,  the Company
announced  that  it  had  outsourced  substantially  all  of  its  manufacturing
operations. Therefore, the Company is largely dependent on third-party suppliers
to meet product delivery  deadlines and quality  requirements.  Any shortfall in
the  satisfaction  of these  requirements  could  negatively  impact revenue and
profitability in that quarter, and possibly thereafter.

                                     - 24 -
<PAGE>

Volatility of Stock Price:  The trading price of the Company's  Common Stock has
fluctuated  widely  in  response  to,  among  other  things,  quarter-to-quarter
operating results,  industry conditions,  awards of orders to the Company or its
competitors,  new product or product development announcements by the Company or
its  competitors,  changes in earnings  estimates by analysts  and, from time to
time,  the  volatile  nature of equity  markets.  Any  shortfall  in  revenue or
earnings from expected  levels could have an immediate and  significant  adverse
effect on the trading price of the Company's Common Stock in any given period.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Portions of the  foregoing  discussion  include  descriptions  of the  Company's
expectations regarding future trends affecting its business. The forward-looking
statements  made  in  this  document,  as  well  as  all  other  forward-looking
statements  or  information  provided by the Company or its  employees,  whether
written or oral,  are made in reliance  upon the safe harbor  provisions  of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements and
future  results  are  subject  to, and should be  considered  in light of risks,
uncertainties,  and other factors which may affect future results including, but
not limited to, competition, rapid changing technology,  regulatory requirements
and  uncertainties of international  trade.  Examples of risks and uncertainties
include,  among other things:  (i) the Company's ability to maintain  compliance
with the covenant requirements of its New Loan Agreement and all other financing
arrangements,  including, if necessary, the ability to achieve amendments and/or
waivers  thereto  to  maintain  compliance  with the  terms  of all  outstanding
indebtedness; (ii) the possibility that the additional indebtedness permitted to
be  incurred  under  the  revolving  credit  facility  portion  of the New  Loan
Agreement may not be sufficient to maintain the Company's operations;  (iii) the
Company's ability to satisfy its financial  obligations and to obtain additional
financial  resources,  if required;  (iv) the Company's  ability to  effectively
restructure its operations and achieve profitability;  (v) the Company's ability
to retain  existing  and obtain new  customers;  (vi) the  Company's  ability to
maintain existing supply arrangements and terms; and (vii) the Company's ability
to retain key employees.

Readers  are  cautioned  not to place  undue  reliance  on such  forward-looking
statements,  which reflect management's analysis only as of the date hereof. The
Company   undertakes  no  obligation   and  does  not  intend  to  update  these
forward-looking  statements to reflect events or circumstances  that arise after
the date hereof.

                                     - 25 -
<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES

                           PART II. OTHER INFORMATION



Item 4 -- Submission of Matters to a Vote of Security-Holders

   On March 2, 2000, at the Annual Meeting of Stockholders  of the  Corporation,
   stockholders  elected Lee M.  Paschall and John L. Segall as directors to the
   Corporation for a term of three years:

        - Number of votes cast for:         21,348,699
        - Number of votes withheld:            543,332

Item 6 -- Exhibits and Reports on Form 8-K

   a.  Exhibits
               None.

   b.  Reports on Form 8-K
               None.



                                     - 26 -
<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                             GENERAL DATACOMM INDUSTRIES, INC.
                                                       (Registrant)
                                             By:     /S/ WILLIAM G. HENRY
                                             --------------------------------
                                                  William G. Henry
                                                  Vice President, Finance and
                                                  Principal Financial Officer


Dated:  May 12, 2000
        ------------

                                     - 27 -