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, 1998

                                       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, 1998       
   -----------------------------                  -----------------------------
   Common Stock, $.10 par value                           19,098,557
   Class B Stock, $.10 par value                           2,111,690

                  Total Number of Pages in this Document is 26.


                                       1
<PAGE>


                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES
                                      INDEX
 

 
                                                                Page No.
                                                                --------
Part I.   Financial Information

          Consolidated Balance Sheets -
          March 31, 1998 and September 30, 1997                    3
 
          Consolidated Statements of Operations and
          Accumulated Deficit - For the Three and Six Months
          Ended March 31, 1998 and 1997                            4
 
          Consolidated Statements of Cash Flows - For the      
          Six Months Ended March 31, 1998 and 1997                 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 4. Submission of Matters to a Vote of
                  Security-Holders                                19

          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


                                                   March 31,      September 30,
In thousands except shares                           1998             1997
-------------------------------------------------------------------------------
ASSETS:                                         (Unaudited)
Current assets:
  Cash and cash equivalents                       $15,419            $21,526
  Accounts receivable, less 
   allowance for doubtful
   receivables of $1,562 in March and 
   $1,703 in September                             31,091             33,193
  Inventories                                      37,138             41,749
  Deferred income taxes                             1,979              2,244
  Other current assets                              6,993              7,903
-------------------------------------------------------------------------------
Total current assets                               92,620            106,615
===============================================================================
Property, plant and equipment, net                 43,632             46,427
Capitalized software development costs, net        23,541             23,500
Other assets                                        9,185             10,793
-------------------------------------------------------------------------------
                                                 $168,978           $187,335
===============================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
  Current portion of long-term debt               $8,184              $7,569
  Accounts payable, trade                         13,302              15,245
  Accrued payroll and payroll-related costs        5,874               6,990
  Deferred income                                  6,379               6,527
  Other current liabilities                       18,352              18,358
-------------------------------------------------------------------------------
Total current liabilities                         52,091              54,689
===============================================================================
Long-term debt, less current portion              54,982              49,293
Deferred income taxes                              2,740               2,789
Other liabilities                                    242                 536
-------------------------------------------------------------------------------
Total liabilities                                110,055             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: 2,111,133 in March and
    2,136,933 in September                          211                 214
  Common stock, par value $.10 per share,
    35,000,000 shares authorized; issued
    and outstanding: 19,759,320 in March
    and 19,582,661 in September                   1,976               1,958
  Capital in excess of par value                150,597             149,864
  Accumulated deficit                           (89,693)            (67,874)
  Cumulative foreign currency translation
    adjustment                                   (2,523)             (2,489)
  Common stock held in treasury, at cost:
    330,382 shares in March and September        (2,445)             (2,445)
-------------------------------------------------------------------------------
Total stockholders' equity                       58,923              80,028
-------------------------------------------------------------------------------
                                               $168,978            $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      Six Months Ended 
                                          March 31,              March 31,
-------------------------------------------------------------------------------
In thousands, except per share data    1998      1997        1998       1997
-------------------------------------------------------------------------------
Revenues:
  Net product sales                  $37,430   $40,018      $74,931   $88,238
  Service revenue                      9,704     9,436       19,185    18,921
  Lease revenue                        1,197     1,317        2,434     2,655
-------------------------------------------------------------------------------
                                      48,331    50,771       96,550   109,814
-------------------------------------------------------------------------------
Costs and expenses:
  Cost of product sales               17,802    18,892       36,638    42,009
  Amortization of capitalized
    software development costs         2,972     3,000        5,972     6,000
  Cost of service revenue              6,647     6,823       13,410    13,612
  Cost of lease revenue                  110       191          247       329
  Selling, general and administrative 18,178    21,687       38,420    43,136
  Research and product development     8,173    10,642       17,107    20,315
  Restructuring of operations              -         -        2,500         -
-------------------------------------------------------------------------------
                                      53,882    61,235      114,294   125,401
-------------------------------------------------------------------------------
Operating loss                       (5,551)  (10,464)      (17,744)  (15,587)
-------------------------------------------------------------------------------
Other income (expense):
  Interest                           (1,415)     (499)       (2,811)    (838)
  Other, net                            207      (655)          136     (767)
------------------------------------------------------------------------------
                                     (1,208)   (1,154)       (2,675)  (1,605)
-------------------------------------------------------------------------------
Loss before income taxes             (6,759)  (11,618)      (20,419) (17,192)
Income tax provision                    300       100           500      200
-------------------------------------------------------------------------------
Net loss                            ($7,059) ($11,718)     ($20,919)($17,392)
===============================================================================
Loss per share                       ($0.35)   ($0.58)       ($1.02)  ($0.87)
===============================================================================
Weighted average number of common
  and common equivalent shares
  outstanding                        21,389    21,056        21,389   21,021
===============================================================================
Accumulated deficit at beginning 
  of period                        ($82,184) ($29,477)     ($67,874)($23,323)
Net loss                             (7,059)  (11,718)      (20,919) (17,392)
Payment of preferred stock dividends   (450)     (450)         (900)    (900)
-------------------------------------------------------------------------------
Accumulated deficit at end
  of period                        ($89,693) ($41,645)     ($89,693) ($41,615)
===============================================================================

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  
                                                  ----------------------------
                                                           Six Months Ended
                                                              March 31,   
                                                  -----------------------------
In thousands                                              1998            1997 
-------------------------------------------------------------------------------
Cash flows from operating activities:                           
 Net loss                                             ($20,919)       ($17,392)
 Adjustments to reconcile net loss to net cash                         
 (used in) operating activities:                             
   Depreciation and amortization                        13,661          13,292  
   Decrease in accounts receivable                       1,726           5,022
   (Increase) decrease in inventories                    4,422           (984)
   Increase (decrease) in accounts payable                               
    and accrued expenses                                (2,743)         1,400   
   (Increase) decrease in other net current assets         925           (150)
   (Increase) decrease in other net long-term assets       874         (1,733) 
-------------------------------------------------------------------------------
Net cash (used in) operating activities                 (2,054)          (545) 
-------------------------------------------------------------------------------
Cash flows from investing activities:                           
  Acquisition of property, plant and equipment, net     (3,694)        (6,228) 
  Capitalized software development costs                (6,013)        (6,107) 
-------------------------------------------------------------------------------
Net cash (used in) investing activities                 (9,707)       (12,335) 
-------------------------------------------------------------------------------
Cash flows from financing activities:                           
  Revolver repayments                                   (4,799)             -
  Proceeds from notes and mortgages                     15,094          2,586   
  Principal payments on notes and mortgages             (4,475)        (3,560) 
  Proceeds from issuing common stock/warrants              748          1,061   
  Payment of preferred stock dividends                    (900)          (900)
-------------------------------------------------------------------------------
Net cash provided by (used in) financing activities      5,668           (813) 
-------------------------------------------------------------------------------
Effect of exchange rates on cash                           (14)          (180) 
-------------------------------------------------------------------------------
Net decrease in cash and cash equivalents               (6,107)       (13,873)
Cash and cash equivalents at beginning of period - (1)  21,526         26,264 
------------------------------------------------------------------------------- 
Cash and cash equivalents at end of period - (1)       $15,419        $12,391 
===============================================================================
(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,  1998,  the
consolidated  results of their  operations  for the three and six  months  ended
March 31, 1998 and 1997, and their cash flows for the six months ended March 31,
1998 and 1997. 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):

                                       March 31, 1998  September 30, 1997
                                       --------------  ------------------
           Raw materials                    $14,387          $16,075
           Work-in-process                    2,785            4,914
           Finished goods                    19,966           20,760
                                            -------          -------
                                            $37,138          $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):

                                          March 31, 1998    September 30, 1997
                                          --------------    ------------------

        Land                                  $ 1,780                $ 1,770
        Buildings and improvements             30,100                 29,716
        Test equipment,fixtures and 
          field spares                         55,614                 55,858
        Machinery and equipment                57,857                 56,165
                                              -------               --------
                                              145,351                143,509
        Less: accumulated depreciation and
              amortization                    101,719                 97,082
                                             --------               --------
                                              $43,632                $46,427
                                             ========               ========
 
NOTE 4. CAPITALIZED SOFTWARE DEVELOPMENT COSTS

        Capitalized software development costs consist of (in thousands):

                                           March 31, 1998    September 30, 1997
                                           --------------    ------------------

        Original cost                         $39,655                $39,627
        Less:  accumulated amortization        16,114                 16,127
                                             --------                 ------
                                              $23,541                $23,500
                                             ========                =======

NOTE 5. LONG-TERM DEBT

                                           March 31, 1998    September 30, 1997
                                           -------------     -----------------
        Revolving credit facility            $     -                 $ 4,799
        Notes payable                         26,792                  15,353
        7-3/4% convertible senior
         subordinated debentures              25,000                  25,000
        Mortgages payable                     11,374                  11,710
                                             -------                  ------
                                              63,166                  56,862
        Less:  current portion                 8,184                   7,569
                                             -------                 --------
                                             $54,982                 $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  a new  group  of  financing
institutions.  The new Loan Agreement provided $15 million in proceeds (received
on October 22, 1997) from a five-year term loan (included in "notes  payable" in
the chart above).  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 March 31, 1998,  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 March 31,
1998,  as  compared  to $4.8  million of such  borrowings  outstanding  (under a
previous  credit  facility) as of September  30,  1997.  There were  $720,000 of
letters of credit outstanding as of March 31, 1998.

     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 both foreign currency
translation  adjustments  which  occur  subsequent  to  September  30,  1997 and
restructuring  charges up to $3.0 million) 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 Agreement.

7-3/4% Convertible Senior Subordinated Debentures
-------------------------------------------------
         
     On September 26, 1997, the Company issued $25 million of convertible senior
subordinated  debentures  ("Debentures")  which mature on September 30, 2002 (if
not converted or redeemed) and accrue  interest at a rate of 7-3/4% per annum.
The  Debentures,   issued  to  qualified  institutional  buyers  and  accredited
institutional  investors,  are convertible  into shares of the Company's  common
stock originally at a conversion price of $6.86 per share,

                                        8

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

NOTE 5. LONG-TERM DEBT (continued)

or the  equivalent  of 145.8  shares of common  stock for each $1,000  principal
amount of Debentures.  Under the terms of the Debentures, on March 30, 1998, the
conversion  price was reset to $6.279  per  share,  or the  equivalent  of 159.3
shares of common  stock for each $1,000  principal  amount of  Debenture.  Under
certain conditions,  such conversion price may again be reset to a reduced price
per share on September  30, 1999,  but in no event may the  conversion  price be
reset at a price below 85% of the  original  conversion  price.  As of March 31,
1998 and September 30, 1997, $25 million of Debentures were outstanding.

     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 Debentures.

NOTE 6. RESTRUCTURING OF OPERATIONS

     The net loss for the six months  ended March 31, 1998  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  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  and six month
periods  ended  March 31, 1998 and 1997,  and will not have an impact  until the
Company reports a quarterly profit.
 

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

                                      Three Months Ended      Six Months Ended
                                    --------------------    -------------------
                                         March 31,                 March 31,
                                       1998        1997        1998       1997
                                   ---------------------    -------------------

 Numerator:
 ---------
   Net loss                         $(7,059)  $(11,718)   $(20,919)  $(17,392)
   Preferred stock dividends           (450)      (450)       (900)      (900)
                                    --------  ---------   ---------  ---------
   Numerator for basic and diluted
     loss per share - loss applicable
     to common stockholders          $(7,509)  $(12,168)   $(21,819)  $(18,292)
                                     ========  =========   =========  =========
 Denominator:
 -----------
   Denominator for basic and diluted
     loss per share - weighted average
     shares outstanding               21,389     21,056      21,389     21,021
                                     =======     ======      ======     ======
   Basic and diluted loss per share  $(0.35)     $(0.58)     $(1.02)    $(0.87)
                                     =======     =======     =======    =======

     Outstanding  securities which could  potentially  effect 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 March 31, 1998  approximated  3,215,000
shares,  2,060,000  shares of which would not have  otherwise  been  included in
diluted  earnings  per share  calculations  as of March  31,  1998  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

 

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, 
                                       ------------------      ----------------
                                         1998      1997           1998    1997
                                       ------------------      ----------------
Revenues:
    Net product sales                   77.4%     78.8%          77.6%   80.4%
    Service revenue                     20.1      18.6           19.9    17.2
    Leasing revenue                      2.5       2.6            2.5     2.4
                                        ----      ----           ----    ----
                                       100.0     100.0          100.0   100.0

Costs and expenses:
    Costs of revenues                   50.8      51.0           52.1    50.9
    Amortization of capitalized
      software development costs         6.2       5.9            6.2     5.5
    Selling, general and administrative 37.6      42.7           39.8    39.3
    Research and product development    16.9      21.0           17.7    18.5
    Restructuring of operations            -         -            2.6       -
                                        ----      ----           ----    ----
Operating loss                         (11.5)    (20.6)         (18.4)  (14.2)
                                        ----     ------         ------  ------
Net (loss)                             (14.6)%   (23.1)%        (21.7)% (15.8)%
                                       =======   =======        ======= =======

Noteworthy  observations  include:  (1) most of the quarterly  and  year-to-date
revenue decline has occurred in product revenues; as a result,  product revenues
represent  a  reduced  percentage  of  total  revenue,   while  service  revenue
represents  an  increased  percentage  of total  revenue;  (2) cost of revenues,
measured as a percent of revenue,  improved  slightly by 0.2  percentage  points
from the same quarter one year ago;  however,  on a  year-to-date  basis cost of
revenues increased 1.2 percentage points,  principally  reflecting the impact of
reduced production and sales volumes in the first fiscal quarter;  (3) operating
expenses were reduced to 54.5% of revenue in the quarter ended March 31, 1998 as
compared  to  63.7%  for the  same  period  one year  ago,  as a result  of cost
reductions  implemented in the first quarter; on a year-to-date basis, operating
expenses  (excluding  restructuring of operations  costs) declined from 57.8% to
57.5% of revenues due to the positive  effect of $7.9 million in cost reductions
offset by the impact of a $13.2 million reduction in the revenue base.
                                      
                                       11
<PAGE>

Revenues
--------
                                    Three months ended        Six months ended
                                        March 31,                 March 31,    
                                    -------------------      ------------------
                                    1998           1997      1998         1997
                                    -------------------      ------------------

           Revenues              $48,331        $50,771    $96,550     $109,814
           Percent Change          (4.8)%             -     (12.1)%           -

Quarter - Revenues in the quarter  declined  $2.4 million  compared to the prior
year.  Revenues  from  Asian  markets  were  down $3.3  million  while all other
revenues  netted an increase  of $0.9  million.  Asian  business  was  adversely
effected by the financial  turmoil in the market which delayed  certain  revenue
opportunities and may eliminate others.

A shift  occurred  in  product  line  revenues  whereby  new ATM  product  sales
increased $4 million while  shipments of  traditional  internetworking  products
dropped $5.9  million.  Expansion of networks in Europe,  through the  strategic
partnership with Lucent  Technologies,  as well as growing interest in voice and
video  applications  in  domestic  markets,  account  for  the  strength  in ATM
revenues.  The decline in  internetworking  products is attributed to slow sales
into Asian  markets as discussed  above and, in  addition,  to weakness in Latin
American business.

Geographically,  international  revenues accounted for 49% of total consolidated
revenues  in the  quarter  ended  March  31,  1998  as  compared  to 46% for the
comparable period one year ago.

Year-to-Date - The $13.3 million,  or 12.1%,  revenue decline is attributable to
reduced  product revenue levels,  with both domestic and  international  markets
contributing to the decline ($7.1 million and $6.2 million,  respectively).  The
product revenue reduction was experienced across the Access and  Internetworking
product lines down $4.8 million (11.6%) and $10.3 million (38.4%), respectively.
ATM revenues are now ahead of last year's level by $1.8 million,or 8.7%. 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  weakness  in Asian  markets  and a  general  market
movement  toward  frame relay and ATM  technologies  and away from  multiplexing
technology.  ATM  product  revenues  have  now  shown  modest  growth  for  four
consecutive quarters.

Cost of Revenues:
                                Three months ended         Six months ended
                                     March  31,                March 31,       
                                ------------------         -----------------
                                1998          1997         1998         1997
                                ------------------         -----------------

 Cost of revenues              $24,559      $25,906        $50,295    $55,950
 As a percent of revenue         50.8%        51.0%          52.1%      50.9%

 Amortization of capitalized
   software development costs   $2,972       $3,000         $5,972     $6,000
 As a percent of revenue          6.2%         5.9%           6.2%       5.5%


                                       12

<PAGE>

Quarter - The results for the  quarters are very  consistent.  Cost of revenues,
measured as a percent of  revenues,  were only  slightly  lower (0.2  percentage
points)  for the quarter  ended March 31, 1998 as compared to the  corresponding
quarter in fiscal 1997.  Amortization of capitalized  software development costs
amounted to $3 million in each of the quarters ended March 31, 1998 and 1997.

Year-to-Date  - Cost of revenues,  measured as a percent of revenues,  increased
1.2 percentage points as compared to the corresponding  period last fiscal year,
with cost of  product  sales  accounting  for the  increase.  The  product  cost
increase  reflects  the  negative  impact that lower  production  volumes has on
manufacturing costs (product sales down 15.1% as compared to the same period one
year  ago).   Amortization  of  capitalized   software  development  costs  were
approximately equal amounts ($6 million).

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         Six months ended
                                     March  31,                  March 31, 
                                 -------------------        -----------------
                                 1998          1997         1998         1997
                                 -------------------        -----------------

   Selling, general, and
    administrative expenses    $18,178      $21,687       $38,420       $43,136
   Percent change               (16.2)%           -        (10.9)%            -
   As a percent of revenue       37.6%        42.7%         39.8%         39.3%

Quarter - The Company's  cost  reduction  plan  implemented  in the first fiscal
quarter contributed to a $3.5 million, or 16.2%,  reduction in selling,  general
and administrative costs for the quarter ended March 31, 1998 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.  As  a  result  of  these  efforts,   selling,   general  and
administrative  expenses  decreased  by 5.1% when  measured as a  percentage  of
revenue for the quarter ended March 31, 1998,  even though there was also a $4.8
reduction in revenues.

Year-to-Date  -  Year-to-date  selling,   general  and  administrative  expenses
decreased $4.7 million, or 10.9%, from the corresponding  period of fiscal 1997.
The  same  cost  reductions  noted  above  also  contributed  favorably  to  the
year-to-date  results.  However,  due to a 12.1%  decline in revenues,  selling,
general and  administrative  expenses,  when measured as a percentage of revenue
for the six months ended March 31, 1998, still reflected an increase of 0.5%.

                                       13

<PAGE>

Research and Product Development Costs
 
                                        Three months ended     Six months ended
                                             March  31,            March 31, 
                                        ------------------    ----------------- 
                                         1998         1997     1998        1997
                                        ------------------    -----------------

      Gross expenditures               $11,186     $13,749   $23,120    $26,422
      Percent change                    (18.6)%         -     (12.5)%         -
      As percent of revenue              23.1%       27.1%     23.9%      24.1%
      ________________________________________________________________________
      Capitalized software costs        $3,013     $3,107     $6,013    $6,107
      As a percent of gross
         expenditures                    26.9%      22.6%      26.0%     23.1%
      ________________________________________________________________________

      Net R&D expense                   $8,173     $10,642   $17,107   $20,315
      Percent change                    (23.2)%          -    (15.8)%        -
      As a percent of revenue            16.9%       21.0%     17.7%     18.5%
      _________________________________________________________________________

Quarter - The  Company  continues  to invest  heavily in  research  and  product
development, yet recently implemented cost management efforts resulted in a $2.6
million, or 18.6%,  reduction in gross research and development spending for the
quarter  ended March 31, 1998 as compared to the same period one year ago.  This
decrease was primarily  attributable  to reduced  usage of outside  services and
consultants  and lower  compensation  costs due to lower  worldwide  engineering
headcount.  As a percentage of revenue,  gross product  research and development
decreased by 4.0% in the second quarter of fiscal 1998 from the same quarter one
year ago.

Capitalized software development costs were about the same in each quarter ($3.0
million as compared to $3.1 million in the same period one year ago), indicating
that software  development  activities  represent a greater  proportion of total
research and product development spending.

Year-to-Date - Year-to-date  product research and development spending displayed
similar trends.  Gross spending for the six months ended March 31, 1998 and 1997
amounted to $23.1 million and $26.4  million,  respectively,  a decrease of $3.3
million, or 12.5%.

Capitalized  software  development costs for the six months ended March 31, 1998
amounted  to $6.0  million as compared  to $6.1  million  for the  corresponding
period of fiscal 1997.

The complexity of the ATM technology has in the past demanded, and will continue
to demand, significant research and product development investment. To retain an
effective pool of available  engineering  talent,  the Company operates research
and  development  facilities  in four  locations,  including  the United  States
(Middlebury,  Connecticut  and  Boston,  Massachusetts),  Canada  and the United
Kingdom.

                                       14
<PAGE>


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


     Net  interest  expense  amounted to $1.4  million and $0.5  million for the
quarters ended March 31, 1998 and 1997, respectively.  Year-to-date net interest
expense  amounted  to $2.8  million  and $0.8  million for fiscal 1998 and 1997,
respectively.  The  increases  are  attributable  to  interest  expense and fees
(including  amortization  of  offering  costs)  associated  with $25  million of
convertible  senior  subordinated  debentures issued in September 1997 and a new
$15 million term loan executed on October 22, 1997.  Refer to "Foreign  Currency
Risk" below for discussion of other income and expense.

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

     Tax provisions recorded by the Company,  principally for foreign income and
domestic  state taxes,  amounted to $300,000 and $100,000 in the quarters  ended
March 31, 1998 and 1997,  respectively.  Year-to-date tax provisions amounted to
$500,000 and $200,000  for fiscal 1998 and 1997,  respectively.  As noted in the
Company's Form 10-K filed for the year ended September 30, 1997, the Company has
significant federal net operating loss carryforwards  available.  However, based
on the Company'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 Company's financial statements.

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  are  recorded  as a  component  of "Other  Income  and
Expense" in the Company's consolidated  statements of operations and resulted in
a currency  exchange gain of $38,000 and a currency  exchange loss of $(669,000)
for the  quarters  ended  March 31,  1998 and 1997,  respectively.  Year-to-date
currency  exchange  losses amounted to $(212,000) and $(709,000) for fiscal 1998
and 1997, respectively.

     No individual foreign subsidiary  comprises 10 percent or more of, and most
such foreign 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.

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

     The Company's cash and cash equivalents  amounted to $15.4 million at March
31,  1998,  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 $15.4  million as of March 31, 1998 and from a $25
million 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  a new  group  of  financing
institutions.  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

                                       15
<PAGE>

borrowing  base formula  related to levels of certain  accounts  receivable  and
inventories,  which may limit available  borrowings to less than $25 million (at
March 31, 1998, 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 March 31,
1998,  as  compared  to $4.8  million of such  borrowings  outstanding  (under a
previous  credit  facility) as of September  30,  1997.  There were  $720,000 of
letters of credit outstanding as of March 31, 1998.

     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 both foreign currency
translation  adjustments  subsequent  to  September  30, 1997 and  restructuring
charges up to $3 million) and outstanding 7-3/4% convertible senior subordinated
debentures,  issued in September 1997. As such minimum balance at March 31, 1998
is calculated to be $86.8 million,  this covenant  effectively limits the sum of
cumulative  future losses  (subsequent  to March 31, 1998) and  preferred  stock
dividend  payments to $6.8  million.  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.

     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  Agreement  funds 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 $20.9 million for
the year ended  September  30,  1997 and the six months  ended  March 31,  1998,
respectively,  a combination  of cost  reductions and revenue growth is required
for the balance of 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 Agreement.

     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 March 31, 1998 and September 30, 1997.

     Total  outstanding  debt  amounted to $63.2  million at March 31, 1998,  as
compared  to $56.9  million at  September  30,  1997.  The net  increase of $6.3
million is comprised of the new $15 million term loan referenced  above and $0.6
million of capital equipment  financing,  partially offset with the repayment of
$4.8  million  of  borrowings  outstanding  under a  previous  revolving  credit
facility  and  $4.5  million  in  principal   reductions  on  other  outstanding
borrowings.

                                       16

<PAGE>

Operating

     Net cash used in operating  activities  amounted to $(1.4)  million for the
six  months  ended  March  31,  1998  as  compared  to  $(0.5)  million  for the
corresponding period one year ago.

     Non-debt working capital,  excluding cash and cash  equivalents,  decreased
from $38 million at September 30, 1997 to $33.3  million at March 31, 1998.  The
$4.7  million  reduction is primarily  comprised  of, among other items,  a $4.6
million  managed  reduction in inventory,  a $2.1 million  reduction in accounts
receivable  resulting  from a  reduced  level of sales  activity  and  continued
improvement  with  collection  efforts,  offset by a $1.9  million  reduction in
accounts  payable  (related  to the  inventory  reduction)  and a  $1.1  million
reduction in accrued payroll costs due to the timing of payments.

Investing

     Property, plant and equipment investments amounted to $3.7 million and $6.2
million in the six-month  periods  ended March 31, 1998 and 1997,  respectively.
The Company  continues to closely  monitor all 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
$6.0 million and $6.1 million,  respectively, for the six months ended March 31,
1998 and 1997.

Financing

     Net cash provided by financing  activities  amounted to $5.0 million in the
six months ended March 31, 1998,  reflecting $5.1 million of net debt borrowings
($15.0 million in new borrowings  less $9.3 million in debt  repayments and $0.6
million of costs  incurred to execute the new  borrowings)  and $0.7  million of
proceeds  received from the issuance of common stock  pursuant to employee stock
programs  and from the issuance of warrants,  less  $900,000 in preferred  stock
dividend payments.  This compares to net cash consumption of $0.8 million in the
six months ended March 31, 1997,  comprised of $1.1 million of proceeds received
from the issuance of common stock pursuant to employee stock programs, offset by
$1.0 million of net debt  reduction  and $900,000 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  March  31,  1998  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 March 31, 1998 and September 30, 1997.

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

     Continuing  Losses:  The Company has  sustained  net losses for the past 14
quarters ended March 31, 1998.  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


                                       17
<PAGE>

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 4.  Submission of Matters to a Vote of Security-Holders
       
              On February 5, 1998, at the Annual Meeting of Stockholders of
              the Corporation, the stockholders:

              - Elected directors to the Corporation for a term of three years:

                                                      Number of Votes Cast     
                                               -------------------------------
                                                   For                Withheld 
                                               -------------------------------
                Mr. Charles P. Johnson         17,745,964            1,252,609
                Mr. Howard S. Modlin           17,780,485            1,218,088

              - Adopted an amendment to the 1979 Employee Stock Purchase Plan,
                reserving an additional 600,000 shares of the Corporation's
                Common Stock for issuance thereunder:

                 Number of votes cast for:      15,739,275
                 Number of votes cast against:   3,077,084
                 Number of votes abstained:        182,214
 
       Item 6.   Exhibits and Reports on Form 8-K

                 (a) Index of Exhibits

                    10.9 First Amendment to Loan and Security Agreement between 
                         General DataComm Industries, Inc. et al., and 
                         Transamerica Business Credit Corporation, et al.

                 (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
                                            ----------------------------------
                                            Senior Vice President, Finance and
                                            Principal Financial Officer


Dated:  May 15, 1998
                                     20