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 December 31, 1997

                                       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 December 31, 1997       

  Common Stock, $.10 par value                            19,252,317
  Class B Stock, $.10 par value                            2,136,933


                  Total Number of Pages in this Document is 20.

<PAGE>
 

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES
                                      INDEX
 
                                                                Page No.
Part I.    Financial Information

           Consolidated Balance Sheets -
           December 31, 1997 and September 30, 1997                3

           Consolidated Statements of Operations
           and Accumulated Deficit - For the Three Months
           Ended December 31, 1997 and 1996                        4
 
           Consolidated Statements of Cash Flows - For the                      
           Three Months Ended December 31, 1997 and 1996           5
 
           Notes to Consolidated Financial Statements              6

           Management's Discussion and Analysis
           of Financial Condition and Results of Operations       11


Part II.  Other Information

          Item 6.  Exhibits and Reports on Form 8-K               19
 

                                      - 2 -
<PAGE>

                          PART I. FINANCIAL INFORMATION

               GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


                                                  December 31,    September 30,
In thousands except shares                            1997             1997
-------------------------------------------------------------------------------
ASSETS:                                           (Unaudited)
Current assets:
    Cash and cash equivalents                        $22,248        $21,526
    Accounts receivable, less allowance for
      doubtful receivables of $1,599 in 
      December and $1,703 in September                32,052         33,193
    Inventories                                       40,680         41,749
    Deferred income taxes                              1,925          2,244
    Other current assets                               7,028          7,903
-------------------------------------------------------------------------------
Total current assets                                 103,933        106,615
===============================================================================
Property, plant and equipment, net                    45,598         46,427
Capitalized software development costs, net           23,500         23,500
Other assets                                           9,565         10,793
-------------------------------------------------------------------------------
                                                    $182,596       $187,335
===============================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
   Current portion of long-term debt                  $8,534         $7,569
   Accounts payable, trade                            13,463         15,245
   Accrued payroll and payroll-related costs           9,098          6,990
   Deferred income                                     5,546          6,527
   Other current liabilities                          20,139         18,358
-------------------------------------------------------------------------------
Total current liabilities                             56,780         54,689
===============================================================================
Long-term debt, less current portion                  57,033         49,293
Deferred income taxes                                  2,449          2,789
Other liabilities                                        579            536
-------------------------------------------------------------------------------
Total liabilities                                    116,841        107,307
===============================================================================
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,
     35,000,000 shares authorized; issued and
     outstanding: 2,136,933 in December and
     September                                          214            214
   Common stock, par value $.10 per share,
     35,000,000 shares authorized; issued and
     outstanding: 19,582,699 in December and
     19,582,661 in September                          1,958          1,958
   Capital in excess of par value                   149,864        149,864
   Accumulated deficit                              (82,184)       (67,874)
   Cumulative foreign currency translation
     adjustment                                      (2,452)        (2,489)
   Common stock held in treasury, at cost:
     330,382 shares in December and September        (2,445)        (2,445)
-------------------------------------------------------------------------------
Total stockholders' equity                           65,755         80,028
-------------------------------------------------------------------------------
                                                   $182,596       $187,335
===============================================================================
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)
                                                         Three Months Ended
                                                             December 31,
                                     
In thousands, except per share data                      1997            1996
-------------------------------------------------------------------------------
Revenues:
  Net product sales                                     $37,500         $48,220
  Service revenue                                         9,481           9,485
  Lease revenue                                           1,238           1,338
-------------------------------------------------------------------------------
                                                         48,219          59,043
-------------------------------------------------------------------------------
Costs and expenses:
  Cost of product sales                                  18,836          23,117
  Amortization of capitalized software
    development costs                                     3,000           3,000
  Cost of service revenue                                 6,763           6,789
  Cost of lease revenue                                     137             138
  Selling, general and administrative                    20,242          21,449
  Research and product development                        8,934           9,673
  Restructuring of operations                             2,500              --
-------------------------------------------------------------------------------
                                                         60,412          64,166
-------------------------------------------------------------------------------
Operating loss                                          (12,193)         (5,123)
-------------------------------------------------------------------------------
Other income (expense):
  Interest, net                                          (1,396)           (339)
  Other, net                                                (71)           (112)
-------------------------------------------------------------------------------
                                                         (1,467)           (451)
-------------------------------------------------------------------------------
Loss before income taxes                                (13,660)         (5,574)
Income tax provision                                        200             100
-------------------------------------------------------------------------------
Net loss                                               ($13,860)        ($5,674)
===============================================================================
Basic and diluted loss per share                         ($0.67)         ($0.29)
===============================================================================
Accumulated deficit at beginning of period             ($67,874)       ($23,323)
Net loss                                                (13,860)         (5,674)
Payment of preferred stock dividends                       (450)           (450)
-------------------------------------------------------------------------------
Accumulated deficit at end of period                   ($82,184)       ($29,447)
===============================================================================
The accompanying notes are an integral part of these consolidated financial 
statements.

                                      - 4 -
                                       
<PAGE>


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

                                                  Increase (Decrease) in Cash
                                                      and Cash Equivalents
                                                   ---------------------------
                                                         Three Months Ended
                                                           December 31,
                                                   ----------------------------
In thousands                                            1997           1996
-------------------------------------------------------------------------------
Cash flows from operating activities:
  Net loss                                            ($13,860)       ($5,674)
  Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
      Depreciation and amortization                      6,971          6,510
      (Increase) decrease in accounts receivable           988         (2,951)
      Decrease in inventories                              944          1,009
      Increase in accounts payable
       and accrued expenses                              1,487            951
      (Increase) decrease in other net current assets    1,095         (2,085)
      Decrease in other net long-term assets             1,499            328
-------------------------------------------------------------------------------
Net cash used in operating activities                     (876)        (1,912)
-------------------------------------------------------------------------------
Cash flows from investing activities:
  Acquisition of property, plant, and equipment, net    (2,455)        (2,667)
  Capitalized software development costs                (3,000)        (3,000)
-------------------------------------------------------------------------------
Net cash used in investing activities                   (5,455)        (5,667)
-------------------------------------------------------------------------------
Cash flows from financing activities:
  Payments on revolver borrowings                       (4,799)            --
  Proceeds from notes and mortgages                     14,338          1,193
  Principal payments on notes and mortgages             (2,022)        (1,852)
  Proceeds from issuing common stock                       -              148
  Payment of preferred stock dividends                    (450)          (450)
-------------------------------------------------------------------------------
Net cash provided by (used in) financing activities      7,067           (961)
-------------------------------------------------------------------------------
Effect of exchange rates on cash                           (14)           (19)
-------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents       722         (8,559)
Cash and cash equivalents at beginning of period - (1)  21,526         26,264
-------------------------------------------------------------------------------
Cash and cash equivalents at end of period - (1)       $22,248        $17,705
===============================================================================
(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 December 31, 1997,
     the  consolidated  results of their  operations  for the three months ended
     December 31, 1997 and 1996, and their cash flows for the three months ended
     December  31, 1997 and 1996.  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 generally
     accepted  accounting  principles  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.  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 inventory, capitalized software, and certain other assets.

          The 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 year ended September 30, 1997.


NOTE 2.   INVENTORIES

     Inventories consist of (in thousands):

                                   December 31, 1997        September 30, 1997
                                   -----------------        ------------------

     Raw materials                    $16,674                     $16,075
     Work-in-process                    2,350                       4,914
     Finished goods                    21,656                      20,760
                                      -------                      ------
                                      $40,680                     $41,749
                                      =======                     =======


                                      - 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):

                                          December 31, 1997   September 30, 1997
                                          -----------------   -----------------

            Land                                 $ 1,775            $  1,770
            Buildings and improvements            29,885              29,716
            Test equipment, fixtures and
              field spares                        56,246              55,858
            Machinery and equipment               57,419              56,165
                                                 -------             -------
                                                 145,325             143,509
            Less:  accumulated depreciation
              and amortization                    99,727              97,082
                                                 -------             -------
                                                 $45,598             $46,427
                                                ========           =========
 
NOTE 4.     CAPITALIZED SOFTWARE DEVELOPMENT COSTS

            Capitalized software development costs consist of  (in thousands):

                                          December 31, 1997  September 30, 1997
                                          -----------------  ------------------

            Original cost                       $42,627             $39,627
            Less:  accumulated amortization      19,127              16,127
                                                -------             -------
                                                $23,500             $23,500
                                                =======             =======

NOTE 5.     LONG-TERM DEBT

            Long-term debt consists of (in thousands):

                                          December 31, 1997  September 30, 1997
                                          -----------------  ------------------

            Revolving credit facility           $  --               $ 4,799
            Notes payable                        29,025              15,353
            7-3/4% convertible senior
             subordinated debentures             25,000              25,000
            Mortgages payable                    11,542              11,710
                                                 ------              ------
                                                 65,567              56,862
            Less: current portion                 8,534               7,569
                                                 ------             -------
                                                $57,033             $49,293
                                                =======             =======
                                      - 7 -
<PAGE>


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



NOTE 5.     LONG-TERM DEBT (continued)

            Revolving Credit Facility

          On October 22, 1997,  the Company  entered into a new $40 million loan
     and security  agreement (the "Loan Agreement") with  Transamerica  Business
     Credit  Corporation and The CIT  Group/Business  Credit,  Inc. The new Loan
     Agreement  provided $15 million in proceeds  (received on October 22, 1997)
     from a five-year term loan. In addition,  the Loan Agreement provides for a
     $25  million  (maximum  value)  revolving  line of credit for a  three-year
     period ending in October 2000,  subject to extension.  Availability of such
     funds is subject to satisfying a borrowing  base formula  related to levels
     of certain accounts  receivable and inventories,  which may limit available
     borrowings to less than $25 million (at December 31, 1997, the total amount
     available  for  borrowings  and  letters of credit was $25  million).  Most
     assets of the  Company,  including  accounts  receivable,  inventories  and
     property, plant and equipment, are pledged as collateral.

          No revolving line of credit borrowings were outstanding as of December
     31, 1997, as compared to $4.8 million of such borrowings outstanding (under
     a previous credit  facility) as of September 30, 1997.  There were $920,000
     of letters of credit outstanding as of December 31, 1997.

          The new Loan Agreement  includes  covenants  which may limit access to
     future  borrowings and may accelerate  payment  requirements on outstanding
     borrowings.  The most  restrictive  covenant  requires the maintenance of a
     minimum  balance  of  $80  million  for  the  sum of  stockholders'  equity
     (excluding foreign currency translation  adjustments which occur subsequent
     to  September  30,  1997)  and  outstanding   7-3/4%   convertible   senior
     subordinated debentures.  Other covenants require that the Company maintain
     a  current  ratio  equal to or  greater  than 1.5 and that  annual  capital
     expenditures  not exceed $15 million.  A combination of cost reductions and
     revenue growth are required in fiscal 1998 to maintain  compliance with the
     Loan  Agreement's  financial  covenants.  Management has implemented and is
     committed to execute further cost reduction actions as necessary to improve
     the Company's  operating results and maintain  availability of the new loan
     and security agreement.

          Refer to the Company's  consolidated  financial statements and related
     notes thereto,  filed with Form 10-K for the year ended September 30, 1997,
     for further disclosures  applicable to the above-referenced  Loan Agreement
     and other  long-term  debt  obligations,  including  $25  million of 7-3/4%
     convertible senior subordinated  debentures  outstanding as of December 31,
     1997 and September 30, 1997.


                                      - 8 -

<PAGE>

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



NOTE 6.   RESTRUCTURING OF OPERATIONS

          The net loss for the quarter ended December 31, 1997 includes a charge
     of $2.5  million,  or $0.12 per share,  which is  comprised of a $1 million
     provision for  post-employment  benefits under the Company's severance plan
     related to the  elimination of  approximately  200 full-time  positions and
     $1.5  million  for the  write-off  of  intangible  assets  and other  costs
     associated with the elimination of low-volume product lines.


NOTE 7.   IMPLEMENTATION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.128,
          "EARNINGS PER SHARE"  (EPS)
        
          In 1997, the Financial  Accounting Standards Board issued Statement of
     Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128" or
     the  "Statement").  SFAS 128 replaced the previously  reported  primary and
     fully diluted earnings per share with basic and diluted earnings per share,
     respectively.  Unlike primary earnings per share,  basic earnings per share
     excludes  any  dilutive  effects  of  options,  warrants,  and  convertible
     securities.  Diluted  earnings per share is very similar to the  previously
     reported fully diluted earnings per share. SFAS 128 requires restatement of
     all prior  period  earnings  per share  information  to  conform to the new
     reporting requirements. The Company has implemented SFAS 128, including new
     disclosure requirements, in the quarter ended December 31, 1997.

          Under current and prior accounting standards, common stock equivalents
     are not  factored  into  earnings  per  share  calculations  for  companies
     reporting net losses. As a result,  implementation of SFAS 128 did not have
     an impact on the  Company's  reported  loss per share  information  for the
     three month periods ended  December 31, 1997 and 1996, and will not have an
     impact until the Company reports a quarterly profit.

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

                                      - 9 -
<PAGE>

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



NOTE 7.   IMPLEMENTATION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.128,
          "EARNINGS PER SHARE"  (EPS) (continued)


                                            The three months ended December 31,
                                            -----------------------------------
                                                1997               1996
    Numerator:
     Net loss                                 $(13,860)         $(5,674)
     Preferred stock dividends                    (450)            (450)
                                              --------          --------
     Numerator for basic and diluted
       loss per share -- income available
       to common stockholders                 $(14,310)         $(6,124)
                                              ========          ========


     Denominator:
      Denominator for basic and diluted
      loss per share -- weighted average
      shares outstanding                       21,389            20,987
                                              =======           =======

     Basic and diluted loss per share         $(0.67)           $(0.29)
                                              =======           =======


Outstanding securities which could potentially affect diluted EPS in the future,
when the Company reports a quarterly  profit,  include  convertible  debentures,
convertible  preferred  stock and  employee  stock  options  and  warrants.  For
additional disclosure information, including conversion terms, refer to Notes 5,
8 and 10, respectively, in the Company's consolidated financial statements filed
with Form 10-K for the year ended  September  30,  1997.  Total  employee  stock
options  outstanding  at  December  31,  1997  approximated   3,025,000  shares,
2,153,000  shares of which  would not have  otherwise  been  included in diluted
earnings  per share  calculations  as of December  31, 1997 because the options'
exercise price was greater than the average market price of the common shares.

                                      -10-
<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


GENERAL SUMMARY DISCUSSION
 
Revenues for the  quarters  ended  December 31, 1997 and 1996  amounted to $48.2
million and $59.0 million, respectively, a reduction of $10.8 million, or 18.3%.
Revenues  were  down $3.1  million,  or 6.1%,  as  compared  to the  immediately
preceding  quarter ended September 30, 1997. There was a net loss for the period
of $(13.9) million, or $(0.67) per share, compared to loss of $(5.7) million, or
$(0.29) per share, in the same period one year ago. The net loss for the quarter
ended  December  31, 1997  includes a charge of $(2.5)  million,  or $(0.12) per
share,  for costs  associated with a cost reduction and  restructuring  program.
Excluding the  restructuring  charge,  the current  quarter net loss was $(11.4)
million,  or  $(0.55)  per share,  representing  a slight  improvement  over the
immediately preceding quarter ended September 30, 1997.

Since the end of March  1997,  the Company has been  reducing  expenses  through
employee  attrition  and  spending  reductions.  Operating  expenses  (excluding
restructuring of operations  costs) for the quarter ended December 31, 1997 were
down $1.9 million,  or 5.7% as compared to the same period one year ago and down
$2.3 million,  or 6.8%, as compared to the immediately  preceding  quarter ended
September  30,  1997.  Furthermore,  the Company has recently  taken  additional
action to further  reduce  expenses,  and on January 6, 1998  announced a formal
cost reduction  plan. The plan includes the  elimination  of  approximately  200
full-time  positions,  the elimination of certain low-volume  products and other
expense  reductions.  The Company  currently  estimates  that total  fiscal 1998
operating  expenses  (excluding  restructuring  of  operations  costs)  will  be
approximately  $18  million,  or 14%,  lower than total  fiscal  1997  operating
expenses.

Cash balances and working capital amounted to $22.2 million and $47.2 million as
of December 31, 1997.  On October 22, 1997,  the Company  entered into a new $40
million  loan  and  security  agreement  (the  "Loan  Agreement").  The new Loan
Agreement  has provided  the Company  with $15 million in proceeds  (received on
October 22, 1997) from a five-year  term loan. In addition,  the Loan  Agreement
provides  for a $25  million  (maximum  value)  revolving  line of credit  for a
three-year period ending in October 2000, subject to extension.  Availability of
such funds is subject to satisfying a borrowing  base formula  related to levels
of  certain  accounts  receivable  and  inventories,  which may limit  available
borrowings  to less than $25 million (at  December  31,  1997,  the total amount
available for borrowings and letters of credit was $25 million).  Most assets of
the Company, including accounts receivable,  inventories and property, plant and
equipment, are pledged as collateral.

The new Loan Agreement does include  covenants  which may limit access to future
borrowings and may accelerate  payment  requirements on outstanding  borrowings.
Please  reference the "Liquidity and Capital  Resources"  section  following for
further discussion.

In addition to the new Loan Agreement, the Company continues to actively explore
alternate sources of funds, such as the sale of technology,  technology  funding
arrangements and other strategic options.

                                     - 11 -
<PAGE>


The Company has made (and  continues to make) large  investments in research and
product  development  which have resulted in advanced  products and technologies
that  management  believes are of significant  value in today's  marketplace and
have the potential to deliver  substantially  higher  revenues,  and ultimately,
shareholder  value, on a longer term basis.  The Company views its master supply
contracts in place with strategic partners such as Lucent  Technologies and L.M.
Ericsson as confirmation of such value and revenue potential.


Results of Operations

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

                                          Three months ended  December 31,   
                                          --------------------------------   
                                            1997                  1996
                                            ----                  ----
Revenues: 
    Net product sales                      77.7%                  81.6%
    Service revenue                        19.7                   16.1
    Leasing revenue                         2.6                    2.3
                                           ----                   ----
                                          100.0                   100.0
Costs and expenses:
    Costs of revenues                      53.4                    50.9
    Amortization of capitalized
      software development costs            6.2                     5.1
    Selling, general and administrative    42.0                    36.3
    Research and product development       18.5                    16.4
    Restructuring of operations             5.2                     --
                                           ----                    ---- 
Operating loss                            (25.3)                   (8.7)        
                                           ----                    ----
Net (loss)                                (28.7)%                  (9.6)%
                                          =======                  ======       

A reduced revenue base (down 18.3% from one year ago) creates large fluctuations
in year-to-year  comparisons  when measured as a percent of revenue.  Noteworthy
observations  include:  (1) most of the revenue  decline has occurred in product
revenues; as a result,  product revenues represent a reduced percentage of total
revenue in the current quarter,  while both service and lease revenue  represent
an  increased  percent of total  revenue;  (2) cost of  revenue,  measured  as a
percent of revenue,  is up 2.5  percentage  points,  principally  reflecting the
impact of  under-absorption  of  manufacturing  overhead  costs  due to  reduced
product production levels;  (3) operating expenses  (excluding  restructuring of
operations  costs),  although  down  6.3% in  dollar  terms as  compared  to the
previous fiscal year, amounted to 60.5% of revenue in the quarter ended December
31, 1997 as compared to 52.7% for the same period one year ago, due to a reduced
revenue  base;  and  (4)  research  and  product  development  related  expenses
(including  capitalized  software  amortization)  amounted to 24.7% and 21.5% of
revenue  for  the  three-month   periods  ended  December  31,  1997  and  1996,
respectively,  reflecting  the Company's  continued  commitment  to  significant
investment in its ATM and Access product development activities.


                                     - 12 -
<PAGE>


Revenues
 
                                            Three Months Ended
                                               December 31,     
                                            --------------------
                                            1997            1996   
                                            ----            ----
         Revenues                          $48,219         $59,043
         Percent Change                     (18.3)%

The $10.8 million, or 18.3%,  revenue decline is attributable to reduced product
revenue levels, with both domestic and international markets contributing to the
decline  ($4.8  million  and  $6  million,  respectively).   The  reduction  was
experienced  across all product  lines,  with Access,  Internetworking,  and ATM
product  revenues  down $4.2  million  (20.5%),  $4.4  million  (32.1%) and $2.2
million (17.3%), respectively.  Access revenues reflect a continued reduction in
sales of the Company's legacy analog and low-speed  products,  with sales growth
from new Access product  introductions  not yet fully  offsetting such declines.
The  Internetworking  (multiplexer)  business  decline reflects a general market
movement  toward  frame relay and ATM  technologies  and away from  multiplexing
technology. ATM product revenues,  although down as compared to the same quarter
one year ago, have now shown modest growth for three consecutive quarters.

Geographically,  international  revenues accounted for 52% of total consolidated
revenues in the quarter ended December 31, 1997,  relatively  unchanged from the
53% level one year ago.


Cost of Revenues:
                                                       Three Months Ended
                                                          December 31,       
                                                      ---------------------
                                                      1997             1996
                                                      ----             ----
        Cost of revenues                            $25,736          $30,044
        As a percent of revenue                       53.4%            50.9%

        Amortization of capitalized software cost    $3,000           $3,000
        As a percent of revenue                        6.2%             5.1%

Cost of revenues,  measured as a percent of revenues,  increased 2.5  percentage
points for the quarter ended December 31, 1997 as compared to the  corresponding
quarter last year,  with product cost of sales  comprising most of the increase.
The product cost increase reflects the absorption of fixed production costs over
a reduced revenue base (product sales down 22.2% as compared to the same quarter
one year ago), partially offset with improved margins realized on product sales.
The impact of service and lease margin variances were not material.

Separately, amortization of capitalized software development cost amounted to $3
million in each of the quarters ended December 31, 1997 and 1996.


                                     - 13 -
<PAGE>

High  technology  products in particular are subject to sales price pressures as
competition  grows and sales cycles  reach  maturity.  The Company  continues to
partially  offset the effect of such sales price  pressures with the negotiation
of reduced material  component prices,  improvements in manufacturing  costs and
efficiencies  and the  introduction  of new generation  products which generally
provide higher margins.


Selling, General and Administrative Expenses

                                                       Three Months Ended
                                                           December 31,     
                                                       -------------------
                                                       1997            1996
        Selling, general, and
          administrative expenses                   $20,242           $21,449
        Percent change                               (5.6)%                -
        As a percent of revenue                      42.0%              36.3%

The Company's  cost  management  efforts  resulted in a $1.2  million,  or 5.6%,
reduction in selling,  general and  administrative  costs for the quarter  ended
December  31,  1997 as  compared  to the  same  period  one year  ago.  The cost
reductions were achieved in both domestic and international operations,  despite
ongoing  salary  merit  increases  and other  inflationary  increases.  The cost
reductions  are  comprised  of reduced  compensation  and travel  costs,  a more
effectively   managed  promotion  and  advertising  program  and  reduced  sales
commission costs  attributable to reduced product  revenues.  However,  selling,
general and  administrative  expenses increased when measured as a percentage of
revenue for the quarter ended December 31, 1997, due to a reduced revenue base.

Research and Product Development Costs
                                                        Three Months Ended
                                                            December 31,     
                                                       --------------------
                                                       1997             1996   
                                                       ----             ----

        Gross expenditures                            $11,934        $12,673
        Percent change                                 (5.8)%            --
        As percent of revenue                           24.7%          21.5%
        
        Capitalized software costs                     $3,000        $3,000
        As a percent of gross expenditures              25.1%          23.7%
        
        Net R&D expense                                $8,934        $9,673
        Percent change                                 (7.6)%            --
        As a percent of revenue                         18.5%         16.4%
        

                                     - 14 -

<PAGE>

The Company  continued to invest  heavily in product  research  and  development
during the first quarter of fiscal 1998,  with gross spending  approximating  an
annual rate of $48 million, or 24.7% of revenue.  Gross research and development
spending for the quarter ended December 31, 1997  decreased by $0.7 million,  or
5.8%, as compared to the corresponding  quarter of fiscal 1997,  principally due
to reduced use of outside  services  and  consultants.  Spending  related to the
Company's   ATM  product   line,   including   development   of  the   Company's
next-generation  Strobos(TM) product line, amounted to 54% of total research and
product  development  spending  for the quarter  ended  December  31,  1997,  as
compared to 51% for the same quarter one year ago. As noted above, first quarter
fiscal 1998 gross research and product development spending amounted to 24.7% of
consolidated revenue, up from 21.5% in the corresponding quarter of fiscal 1997,
reflecting  the impact of a  substantially  reduced  revenue base in the quarter
ended  December 31, 1997.  The  complexity of the ATM technology has in the past
demanded,  and  will  continue  to  demand,  significant  research  and  product
development investment.

Capitalized  software development costs remained unchanged at $3 million for the
quarters ended December 31, 1997 and 1996.

Interest and Other Income and Expense
-------------------------------------

Net interest  expense amounted to $1.4 million and $0.3 million for the quarters
ended  December 31, 1997 and 1996,  respectively.  The $1.1 million  increase is
attributable  to interest  expense  (including  amortization  of offering costs)
associated with $25 million of convertible senior subordinated debentures issued
in September 1997 and interest  expense  incurred on a new $15 million term loan
executed on October 22, 1997.  Refer to "Foreign  Currency  Risk" below for some
discussion of other income and expense.

Income Tax Provisions
---------------------

Tax provisions  recorded by the Corporation,  principally for foreign income and
domestic  state taxes,  amounted to $200,000 and $100,000 in the quarters  ended
December 31, 1997 and 1996,  respectively.  As noted in the  Corporation's  Form
10-K  filed  for  the  year  ended  September  30,  1997,  the  Corporation  has
significant federal net operating loss carryforwards  available.  However, based
on the Corporation's past financial  performance and the uncertainty of ultimate
realization  of such  carryforwards,  no net  deferred  tax  asset  (or  related
deferred  tax  benefit)  has  been  recorded  in  the  Corporation's   financial
statements.

Foreign Currency Risk
---------------------

The Company's foreign  subsidiaries are exposed to foreign currency  fluctuation
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  are  recorded as a component  of "Other  Income and Expense" in the
Company's  consolidated  statements  of  operations  and  resulted  in  currency
exchange losses of $250,000 and $40,000 for the quarters ended December 31, 1997
and  1996,  respectively.  The  current  quarter  exchange  loss is  principally
attributable  to the impact of the  strength  of the U.S dollar  relative to the
Canadian dollar.

No individual  foreign  subsidiary  comprises 10 percent or more of consolidated
revenue or assets; most subsidiary  operations  represent less than 5 percent of
consolidated  revenue or assets.  The Company  historically has not entered into
hedge contracts or any form of derivative or similar investment.

                                     - 15 -

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

The Company's  cash and cash  equivalents  amounted to $22.2 million at December
31,  1997,  as compared to $21.5  million at  September  30,  1997.  The Company
believes its fiscal 1998 cash  requirements  will be satisfied from its cash and
cash equivalents balance of $22.2 million as of December 31, 1997 and from a $25
million (maximum value) revolving loan facility discussed below.

On October  22,  1997,  the  Company  entered  into a new $40  million  loan and
security  agreement (the "Loan  Agreement")  with  Transamerica  Business Credit
Corporation and The CIT Group/Business  Credit,  Inc. The new Loan Agreement has
provided the Company with $15 million in proceeds (received on October 22, 1997)
from a five-year term loan. In addition,  the Loan Agreement  provides for a $25
million (maximum value) revolving line of credit for a three-year  period ending
in October 2000, subject to extension.  Availability of such funds is subject to
satisfying  a  borrowing  base  formula  related to levels of  certain  accounts
receivable and  inventories,  which may limit available  borrowings to less than
$25 million (at December 31, 1997, the total amount available for borrowings and
letters  of credit  was $25  million).  Most  assets of the  Company,  including
accounts receivable,  inventories and property, plant and equipment, are pledged
as collateral.

No revolving line of credit borrowings were outstanding as of December 31, 1997,
as compared to $4.8  million of such  borrowings  outstanding  (under a previous
credit  facility) as of September  30, 1997.  There were  $920,000 of letters of
credit outstanding as of December 31, 1997.

The new Loan  Agreement  includes  covenants  which may  limit  access to future
borrowings and may accelerate  payment  requirements on outstanding  borrowings.
The most restrictive  covenant  requires the maintenance of a minimum balance of
$80 million for the sum of  stockholders'  equity  (excluding  foreign  currency
translation adjustments subsequent to September 30, 1997) and outstanding 7-3/4%
convertible  senior  subordinated  debentures,  issued in September  1997.  (The
Company is  currently  in the process of  negotiating  an  amendment to the Loan
Agreement  ("Amendment")  whereby restructuring costs incurred by the Company in
fiscal 1998, not to exceed $3 million, would not reduce Stockholders' Equity for
the purpose of calculating covenant compliance.) As such balance at December 31,
1997 was $90.7 million,  this covenant  effectively limits the sum of cumulative
future losses  (subsequent  to December 31, 1997) and preferred  stock  dividend
payments,  less 60 percent of the value of new capital  stock  issued,  to $10.7
million (or $13.2 million if the referenced Amendment is executed). In the event
of non-compliance  with financial or other covenants,  the Company would have to
obtain a waiver or  amendment  from the lender.  However,  there is no assurance
that the  lender  would  grant such a waiver or  amendment  and in such case the
Company would have to pursue other sources of financing. In the past the Company
has relied on its ability to offer for sale its common stock,  preferred  stock,
convertible   debentures  and/or  warrants  as  viable  alternative  sources  of
financing.  The  availability  and terms of such  offerings  in the future  will
depend on such  items as the  Company's  future  financial  performance  and its
ability to demonstrate  favorable  trends in reported  financial  results.  As a
result,  these  sources  may  not be  available,  or may be  available  on  less
favorable  terms, in the future.  The Company's  inability to have access to the
new loan and security agreement and/or alternative  financing sources would have
a material adverse effect on the Company's financial condition.

Since the Company  realized  losses of $42.8  million and $13.9  million for the
year  ended  September  30,  1997  and the  quarter  ended  December  31,  1997,
respectively,  a combination of cost  reductions and revenue growth are required
in fiscal  1998 to  maintain  compliance  with the loan's  financial  covenants.
Management has

                                     - 16 -

<PAGE>

implemented  and is  committed  to execute  further  cost  reduction  actions as
necessary to improve the Company's  operating results and maintain  availability
of the new loan and security agreement. Other covenants require that the Company
maintain a current  ratio equal to or greater  than 1.5 and that annual  capital
expenditures not exceed $15 million.

Reference is made to the Company's  consolidated  financial statements,  Note 5,
filed  with  Form  10-K for the  year  ended  September  30,  1997  for  further
disclosures   applicable  to  the  above-referenced  Loan  Agreement  and  other
long-term debt obligations,  including $25 million of 7-3/4%  convertible senior
subordinated  debentures  outstanding  as of December 31, 1997 and September 30,
1997.

Total  outstanding  debt  amounted to $65.6  million at December  31,  1997,  as
compared  to $56.9  million at  September  30,  1997.  The net  increase of $8.7
million  is  comprised  of the new  $15  million  term  loan  referenced  above,
partially  offset with the repayment of $4.8 million of  borrowings  outstanding
under a previous  revolving  credit  facility and principal  reductions on other
outstanding borrowings.

Operating
---------
Net cash used in operating  activities  amounted to $(0.9) million for the three
months  ended   December  31,  1997  as  compared  to  $(1.9)  million  for  the
corresponding quarter one year ago.

Non-debt working capital,  excluding cash and cash  equivalents,  decreased from
$38 million at September  30, 1997 to $33.4  million at December  31, 1997.  The
$4.6  million  reduction  is  comprised  of,  among other  items,  $1.1  million
reductions in both accounts  receivable  (reduced revenue level) and inventories
(improved  inventory  management) and a $2.1 million increase in accrued payroll
costs (timing).

Investing
---------
Property,  plant and  equipment  investments  amounted to $2.5  million and $2.7
million in the  quarters  ended  December 31, 1997 and 1996,  respectively.  The
Company  continues to closely  monitor all  requests for capital  spending in an
effort to preserve cash and limit such  investment to instances  which appear to
offer the greatest  return on investment.  Investments  in capitalized  software
amounted to $3 million in each of the quarters ended December 31, 1997 and 1996.

Financing
---------
Net cash provided by financing  activities amounted to $7.1 million in the three
months ended December 31, 1997,  reflecting  $7.5 million of net debt borrowings
($15 million in new  borrowings  less $6.8 million in debt  repayments  and $0.7
million of costs  incurred  to execute  the new  borrowings),  less  $450,000 in
preferred stock dividend  payments.  This compares to net cash consumption of $1
million in the three months ended  December 31, 1996,  comprised of $0.1 million
of proceeds  received  from the  issuance of common  stock  pursuant to employee
stock  programs,  offset by $0.7 million of net debt  reduction  and $450,000 in
preferred stock dividend payments.

Reference  is made to Note 5 on page 7 for a  condensed  summary of  outstanding
long-term  debt as of December  31, 1997 and  September  30,  1997.  Separately,
reference is made to the consolidated financial statements, Notes 5 and 8, filed
with Form 10-K for the year ended  September  30, 1997 for  further  disclosures
applicable to outstanding  long-term debt and the conversion terms applicable to
$25 million of 7-3/4%  convertible senior  subordinated  debentures (Note 5) and
$20 million of convertible  preferred stock  outstanding (Note 8), both of which
were outstanding as of December 31, 1997 and September 30, 1997.

                                     - 17 -

<PAGE>


CERTAIN RISK FACTORS
--------------------

Continuing Losses: The Company has sustained net losses for the past 13 quarters
ended  December 31, 1997.  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  restricted net loss
performance,  maintenance  of a current  ratio  which  equals or exceeds 1.5 and
capital spending restrictions.  If the Company fails to comply with the required
covenants and a waiver or amendment is not  obtained,  the Company may be unable
to borrow funds under such agreement.  In such case the Company will 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 new $40  million  Loan  Agreement  obligation,  such  default may
result in payment of other outstanding indebtedness to be accelerated.

Volatility of Stock Price:  The trading price of the Common Stock has fluctuated
widely in response to 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,  and changes in
earnings  estimates  by  analysts.  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.


                                     - 18 -

<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES



Part II.  Other Information


          Item 6.  Exhibits and Reports on Form 8-K
                   (a) Index of Exhibits
                         None.

                   (b) Reports on Form 8-K
                         No reports on Form 8-K were filed during the quarter 
                         for which this report is filed.


                                     - 19 -

                                       
<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)

                                           /S/ WILLIAM S. LAWRENCE
                                                                  
                                           William S. Lawrence
                                           Senior Vice President, Finance and
                                           Principal Financial Officer


Dated:  February 13, 1998

                                     - 20 -