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 June 30, 2000

                                       OR

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

                          Commission File Number 1-8086

                        GENERAL DATACOMM INDUSTRIES, INC.
                        ---------------------------------
             (Exact name of registrant as specified in its charter)


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

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

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

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

            Yes     X                  No
            ---                        --

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

                                               Number of Shares Outstanding

  Title of Each Class                                at June 30, 2000
------------------------------                      -----------------

 Common Stock, $.10 par value                            24,426,138
 Class B Stock, $.10 par value                            2,057,103

                   Total Number of Pages in this Document is 28.

<PAGE>

                       GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES

                                      INDEX

                                                                        Page

Part I -- FINANCIAL INFORMATION

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

               Consolidated Statements of Operations and
               Accumulated Deficit - For the Three and

               Nine Months Ended June 30, 2000 and 1999 . . . . . . . . . 4

               Consolidated Statements of Cash Flows - For the
               Nine Months Ended June 30, 2000 and 1999 . . . . . . . . . 5

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

               Management's Discussion and Analysis of

               Financial Condition and Results of Operations . . . . . . 16


Part II -- OTHER INFORMATION

        Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . .  27




                                      - 2 -

<PAGE>

                          PART I. FINANCIAL INFORMATION


               GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                       June 30,   September 30,
In thousands, except shares                              2000          1999
-------------------------------------------------------------------------------
ASSETS:                                               (Unaudited)
Current assets:
  Cash and cash equivalents                             $2,477        $3,790
  Accounts receivable, less allowance for doubtful
   receivables of $1,995  in June and $1,375
   in September                                         26,807        32,795
  Inventories                                           33,755        22,329
  Deferred income taxes                                  1,748         1,578
  Other current assets                                  12,891        12,624
-------------------------------------------------------------------------------
Total current assets                                    77,678        73,116
-------------------------------------------------------------------------------
Property, plant and equipment, net                      30,336        32,679
Capitalized software development costs, net             22,077        21,815
Other assets                                            10,446        12,764
-------------------------------------------------------------------------------
                                                      $140,537      $140,374
-------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
  Current portion of long-term debt                     $7,392        $4,533
  Accounts payable, trade                               25,371        18,669
  Accrued payroll and payroll-related costs              3,909         4,626
  Deferred income                                        7,384         6,082
  Other current liabilities                             15,618        16,449
-------------------------------------------------------------------------------
Total current liabilities                               59,674        50,359
-------------------------------------------------------------------------------
Long-term debt, less current portion                    60,218        64,532
Deferred income taxes                                    2,350         2,337
Other liabilities                                        1,236         1,053
-------------------------------------------------------------------------------
Total liabilities                                      123,478       118,281
-------------------------------------------------------------------------------

Commitments and contingent liabilities                      --            --
Stockholders' equity:
  Preferred stock, par value $1.00 per share, 3,000,000 shares authorized;issued
    and outstanding: 787,900 in June and 800,000 in September, all 9% cumulative
    convertible  exchangeable  preferred stock;  liquidation preference of $19.7
    million in June and

    $20 million in September                               788           800
  Class B stock, par value $.10 per share,
    10,000,000 shares authorized; issued
    and outstanding: 2,057,103 in June
    and 2,092,383 in September                             206           209
  Common stock, par value $.10 per share,
    50,000,000 shares authorized; issued
    and outstanding: 24,619,564 in June
    and 20,309,143 in September                          2,462         2,031
  Capital in excess of par value                       174,603       151,706
  Accumulated deficit                                 (154,978)     (127,472)
  Accumulated other comprehensive loss                  (4,590)       (2,736)
  Common stock held in treasury, at cost:
    193,426 shares in June and 330,382
    shares in September                                 (1,432)       (2,445)
-------------------------------------------------------------------------------
Total stockholders' equity                              17,059        22,093
-------------------------------------------------------------------------------
                                                      $140,537      $140,374
-------------------------------------------------------------------------------
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       -3-

<PAGE>

               GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS AND
                               ACCUMULATED DEFICIT

                                   (Unaudited)

                                        Three Montsh Ended  Nine Months Ended
                                            June 30,            June 30,
                                        ------------------  -------------------
In thousands, except per share data      2000       1999       2000      1999
-------------------------------------------------------------------------------
Revenues:
  Net product sales                    $27,358    $30,163    $91,780   $83,779
  Service revenue                       13,004     11,112     35,577    34,565
  Other revenue                            799      1,094      2,771     5,221
                                      --------    --------   -------   -------
                                        41,161     42,369    130,128   123,565
Cost of revenues:
  Cost of product sales                 14,870     15,504     48,526    42,962
  Cost of service revenue                9,681      7,984     26,577    23,996
  Cost of other revenue                     50         87        187       696
                                      --------    --------   --------  --------
                                        24,601     23,575     75,290    67,654

Gross margin                            16,560     18,794     54,838    55,911
  Amortization of capitalized
   software development costs            2,863      3,000      8,856     9,172

Operating expenses:
  Selling, general and administrative   15,167     14,514     44,692    45,967
  Research and product development       5,299      6,402     15,505    21,223
  Restructuring and other charges        2,000         --      2,500     2,000
                                      --------    --------   --------  -------
                                        22,466     20,916     62,697    69,190

Operating loss                          (8,769)    (5,122)   (16,715)  (22,451)
  Other income (expense):
  Interest, net                         (2,292)    (1,801)    (6,367)   (4,999)
  Debt conversion expense                   --         --     (2,403)       --
  Gain on sale of assets                    --         --        --      9,001
  Other, net                               167         49        522       448
                                      ---------   --------  ---------  --------
                                        (2,125)    (1,752)    (8,248)    4,450

Loss before income taxes               (10,894)    (6,874)   (24,963)  (18,001)
Income tax provision                       500        200      1,200       700
                                      ---------   --------  ---------  --------
Net loss                              ($11,394)   ($7,074)  ($26,163)  ($18,701)
                                      =========   ========  =========  ========
Basic and diluted loss per share        ($0.45)    ($0.34)    ($1.11)    ($0.92)
                                      =========   ========  =========  ========

Weighted average number of common and
common equivalent shares outstanding    26,463     21,918     24,840     21,819
                                      =========   ========  =========  ========

Accumulated deficit at beginning of
  period                             ($143,141) ($115,593) ($127,472) ($103,066)
Net loss                               (11,394)    (7,074)   (26,163)   (18,701)
Payment of preferred stock dividends      (443)      (450)    (1,343)    (1,350)
                                     ---------- ---------- ---------- ----------
Accumulated deficit at end of period ($154,978) ($123,117) ($154,978) ($123,117)
                                     ========== ========== ========== ==========

---------------
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

                                                   ----------------------------
                                                         Nine Months Ended
                                                              June 30,

                                                   ----------------------------
In thousands                                             2000          1999
-------------------------------------------------------------------------------
Cash flows from operating activities:

  Net loss                                            ($26,163)    ($18,701)
  Adjustments to reconcile net loss to net cash
  used in operating activities:
    Depreciation and amortization                       16,827       19,574
    Non-cash charge for debt conversion                  2,403           --
    Non-cash charge for lease receivable write-off       2,000           --
    Gain on sale of assets                                  --       (9,001)
    Changes in:
      Accounts receivable                                5,209        3,190
      Inventories                                      (11,660)        (694)
      Accounts payable and accrued expenses              5,291        7,098
      Other net current assets                           2,649       (1,819)
      Other net long-term assets                        (3,390)      (2,176)
-------------------------------------------------------------------------------
Net cash used in operating activities                   (6,834)      (2,529)
-------------------------------------------------------------------------------
Cash flows from investing activities:

  Acquisition of property, plant and equipment, net     (5,041)      (6,282)
  Capitalized software development costs                (9,117)      (9,534)
  Proceeds from sale of assets, net                         --       12,013
-------------------------------------------------------------------------------
Net cash used in investing activities                  (14,158)      (3,803)
-------------------------------------------------------------------------------
Cash flows from financing activities:

  Revolver borrowings, net                               2,822       11,435
  Proceeds from notes and mortgages                     20,700       14,679
  Principal payments on notes and mortgages             (3,197)     (18,898)
  Proceeds from issuing common stock                       791          380
  Payment of preferred stock dividends                  (1,343)      (1,350)
-------------------------------------------------------------------------------
Net cash provided by financing activities               19,773        6,246
-------------------------------------------------------------------------------
Effect of exchange rates on cash                           (94)         (91)
-------------------------------------------------------------------------------
Net decrease in cash and cash equivalents               (1,313)        (177)
Cash and cash equivalents at beginning of period - (1)   3,790        3,757
-------------------------------------------------------------------------------
Cash and cash equivalents at end of period - (1)        $2,477       $3,580
===============================================================================

(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  for a fair  statement of the  consolidated  financial
                position of General DataComm  Industries,  Inc. and subsidiaries
                (the  "Corporation"  or  "Company")  as of June  30,  2000,  the
                consolidated  results of their operations for the three and nine
                months  ended June 30,  2000 and 1999,  and their cash flows for
                the nine months ended June 30, 2000 and 1999.  Such  adjustments
                are  generally  of  a  normal   recurring   nature  and  include
                adjustments   to  certain   accruals   and  asset   reserves  to
                appropriate levels.

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

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

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

NOTE 2.         INVENTORIES

                Inventories consist of (in thousands):

                                   June 30, 2000       September 30, 1999
                                   -------------       ------------------

                Raw materials        $   9,088             $   5,054
                Work-in-process          5,289                 1,732
                Finished goods          19,378                15,543
                                     ---------              --------
                                      $ 33,755              $ 22,329
                                      ========              ========

                                      - 6 -

<PAGE>

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


NOTE 3.         PROPERTY, PLANT AND EQUIPMENT

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

                                               June 30, 2000    Sept. 30, 1999
                                               -------------    --------------

                Land                              $   1,753       $   1,775
                Buildings and improvements           30,091          30,280
                Test equipment, fixtures
                 and field spares                    56,177          54,460
                Machinery and equipment              59,609          58,099
                                                   --------        --------
                                                    147,630         144,614
                Less:  accumulated depreciation     117,294         111,935
                                                   --------        --------
                                                   $ 30,336        $ 32,679
                                                   ========        ========


NOTE 4.         CAPITALIZED SOFTWARE DEVELOPMENT COSTS

                The accumulated amortization of capitalized software development
                costs amounted to $15,827,000  and  $18,065,000 at June 30, 2000
                and September 30, 1999, respectively. The reduction reflects the
                write-off of fully amortized  capitalized software in accordance
                with the Company's accounting policy.

NOTE 5.         LONG-TERM DEBT

                Long-term debt consists of (in thousands):

                                            June 30, 2000    September 30, 1999
                                            -------------    ------------------

                Revolving credit facility     $ 17,933            $ 15,111
                Notes payable                   36,948              18,543
                7 3/4% convertible senior
                  subordinated debentures        3,000              25,000
                Real estate mortgages            9,729              10,411
                                              --------             --------
                                                67,610              69,065
                Less:  current portion           7,392               4,533
                                              --------             --------
                                              $ 60,218            $ 64,532
                                              ========             ========



                                      - 7 -

<PAGE>

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


NOTE 5. LONG-TERM DEBT (continued)

                Expansion of Credit Facility and Receipt of Proceeds

                On May 14, 1999,  the Company  entered  into a three-year  $40.0
                million  loan  and  security  agreement  with  Foothill  Capital
                Corporation  (the  "Loan  Agreement").  The Loan  Agreement  was
                comprised  of $15.0  million in term  loans and a $25.0  million
                (maximum  value)  revolving  line of credit.  Monthly  principal
                payments on the term loans in the amount of  $312,000  commenced
                June 1,  2000.  At any point in time,  up to a  maximum  of $3.0
                million of the outstanding term loan balance is convertible into
                the  Company's  common stock at a conversion  price of $5.00 per
                share.

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

                In  addition,  a financial  covenant  of the New Loan  Agreement
                requires that  stockholders'  equity, as defined,  must equal or
                exceed  $10.0  million.  At June 30,  2000,  such  stockholders'
                equity was $18.4  million.  In  addition,  on July 31,  2000 the
                Company sold $5.0  million of preferred  stock which, after
                expenses, would bring such stockholders' equity on a pro forma
                basis to $23.3 million.

                The new $20.0 million term loan bears  interest at the higher of
                13.5% or the prime rate of interest plus 5.0% (on June 30, 2000,
                the  applicable  prime  rate  of  interest  was  9.5%),  payable
                monthly.  Commencing in March 2001, quarterly principal payments
                in the amount of $1.0 million become  payable,  and the new term
                loan is due and payable in full upon  termination  or expiration
                of the New Loan Agreement. Up to a maximum of $4.0  million  of
                this new term loan  balance is convertible  into the  Company's
                common  stock at a  conversion price of $9.00 per share.

                Under  the  revolving  line of  credit  portion  of the New Loan
                Agreement,  funds are advanced subject to satisfying a borrowing
                base formula  related to levels of certain  accounts  receivable
                and  inventories   and  the   satisfaction  of  other  financial
                covenants.

                                      - 8 -

<PAGE>

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


NOTE 5.         LONG-TERM DEBT (continued)

                Under this  formula,  at June 30, 2000,  the Company  would have
                been able to borrow up to $27.3 million.  Borrowings outstanding
                on the line of  credit  amounted  to  $17.9  million  and  $15.1
                million at June 30, 2000 and September 30, 1999, respectively.

                Most  assets  of the  Company,  including  accounts  receivable,
                inventories  and  property,  plant and  equipment are pledged as
                collateral  under the New Loan  Agreement.  Interest on revolver
                borrowings  is  payable  monthly  at the  greater  of prime plus
                0.625%, or 7.0% per annum. The applicable prime rate was 9.5% at
                June 30, 2000.

                Conversion of Debentures into Equity

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

                In various  separate,  unsolicited and negotiated  transactions,
                the Company  issued an aggregate  of 4,110,600  shares of common
                stock in exchange for the $22.0 million of Debentures referenced
                above,  as  compared  to  3,772,938  shares  issuable  under the
                original debenture conversion terms. Issuance of the incremental
                337,662 shares resulted in a non-cash charge of $2.4 million for
                debt conversion  expense during the nine-month period ended June
                30, 2000.

                After giving effect to these conversions, outstanding Debentures
                amounted to $3.0 million at June 30, 2000.

                Real Estate Mortgages

                As of June 30,  2000,  the Company had $9.1 million in mortgages
                outstanding  with one lending  group on its  previous  Corporate
                headquarters property, which is currently

                                      - 9 -

<PAGE>

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


NOTE 5.         LONG-TERM DEBT (continued)

                vacant and available for sale,  and its  Naugatuck,  Connecticut
                property,  where its VITAL Network Services main offices and its
                manufacturing  operations  are located.  To maintain  compliance
                with the covenant  requirements of these mortgage  agreements if
                the  building  is  not  sold,  the  Company   intends  to  raise
                additional equity capital or take other initiatives on or before
                October 2, 2000.

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

NOTE 6.         RESTRUCTURING AND OTHER CHARGES AND LOSS CONTINGENCY

                The three- and nine-month  periods ended June 30, 2000 include a
                charge of $2.0 million,  or $0.08 per share,  for  uncollectible
                lease  receivables and related costs  attributable to a customer
                bankruptcy.

                Litigation regarding the Company's legal right to take title and
                possession of the equipment under lease is currently in process.
                The Company intends to litigate the case vigorously and feels it
                will  ultimately  be successful  in  recovering  its  equipment.
                However, if the Company is not successful in its efforts to take
                title and physical  possession  of such  equipment,  the Company
                could  realize an additional  charge of up to an estimated  $2.1
                million.

                The  Company  recorded a $500,000  charge for  restructuring  of
                operations in the first fiscal  quarter ended  December 31, 1999
                for severance  costs  associated  with the decision to outsource
                manufacturing  operations.  Refer to the Company's  consolidated
                financial  statements  and related notes thereto filed with Form
                10-K for the fiscal year ended September 30, 1999 for discussion
                of restructuring of operations charges recorded in fiscal 1999.

NOTE 7.         SALE OF TECHNOLOGY ALLIANCE GROUP  DIVISION

                On  December  30,  1998,  the  Company  sold the  assets  of its
                Technology Alliance Group ("TAG") division. The sale resulted in
                a pre-tax gain of approximately $9.0

                                     - 10 -

<PAGE>

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


NOTE 7.         SALE OF TECHNOLOGY ALLIANCE GROUP  DIVISION (continued)

                million, or $0.41 per share, in the nine-month period ended June
                30,  1999 and  generated  cash  proceeds,  net of  expenses,  of
                approximately $12.0 million.  Technology licensing revenues from
                the sold  division,  included  in "other  revenue,"  amounted to
                $1,115,000  in the  nine-month  period  ended June 30,  1999 (no
                licensing  revenue was  recognized in the quarter ended June 30,
                1999).

NOTE 8.         SEGMENT INFORMATION - INTERIM DISCLOSURES

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

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

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

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

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


                                     - 11 -

<PAGE>

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


NOTE 8.         SEGMENT INFORMATION - INTERIM DISCLOSURES (continued)

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

                                       Three Months Ended   Nine Months Ended
                                           June 30,             June 30,
                                      -----------------     -------------------
                                        2000      1999      2000         1999
                                      -----------------     -------------------

Revenue:
  Network Access Division             $14,038   $15,952     $46,445     $44,125
  Broadband Systems Division           13,346    14,269      45,403      40,601
  VITAL Network Services, L.L.C.       13,004    11,112      35,577      34,565
  DataComm Leasing Corporation            773     1,036       2,703       3,159
  Other                                    --        --          --       1,115
                                      -------   -------    --------    --------
    Total                             $41,161   $42,369    $130,128    $123,565
                                      =======   =======    ========    ========
Operating Income (Loss):
  Network Access Division             $   338   $ 1,685    $  3,037    $   (257)
  Broadband Systems Division           (9,452)   (7,721)    (19,921)    (24,874)
  VITAL Network Services, L.L.C.          915     1,092       1,770       4,518
  DataComm Leasing Corporation            568       831       2,069       2,394
  Other                                    --        --          --         420
                                      --------  -------    ---------   --------
    Total                             $(7,631)  $(4,113)   $(13,045)   $(17,799)
                                      ========  =======    =========   ========


     The  Broadband  Systems  Division  results  for the three-  and  nine-month
periods  ended June 30, 2000 include a charge of $2.0 million for  uncollectible
lease receivables and related costs attributable to a customer bankruptcy. Refer
to Note 6,  "Restructuring  and Other Charges and Loss Contingency," for further
discussion.   Reconciliations   of  operating   loss,  as  reported   above,  to
consolidated loss before income taxes are summarized below:

Operating loss, per above             $(7,631)  $(4,113)   $ (13,045)  $(17,799)
Capitalized software activity, net        171        --          262        362
General corporate expenses             (1,309)   (1,009)      (3,432)    (3,014)
Restructuring of operations                --        --         (500)    (2,000)
Debt conversion expense                    --        --       (2,403)       --
Gain on sale of assets                     --        --           --      9,001
Other expense                          (2,125)   (1,752)      (5,845)    (4,551)
                                       -------   -------   ---------   --------
Loss Before Income Taxes             $(10,894)  $(6,874)   $ (24,963)  $(18,001)
                                     =========  ========   ==========  =========



                                     - 12 -

<PAGE>

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


NOTE  9.        EARNINGS (LOSS) PER SHARE

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

                                    Three Months Ended      Nine Months Ended
                                        June 30                  June 30
                                    ------------------------------------------
                                    2000        1999         2000        1999
                                    ------------------------------------------
   Numerator:
     Net loss                      $(11,394)   $(7,074)    $(26,163)  $(18,701)
     Preferred stock dividends         (443)      (450)      (1,343)    (1,350)
                                   ---------   --------    --------   ---------
     Numerator for basic and
      diluted loss per share -
      loss applicable to common
      stockholders                 $(11,837)   $(7,524)    $(27,506)  $(20,051)
                                   =========   ========    =========  =========

   Denominator:
     Denominator for basic and
      diluted loss per share -
      weighted average
      shares outstanding             26,463     21,918      24,840     21,819
                                   --------   ---------    --------   --------
   Basic and diluted loss per
     share                         $  (0.45)  $  (0.34)    $ (1.11)   $ (0.92)
                                   =========  =========    ========   ========


The  net loss  reported  for the three  months  ended June 30,  2000  includes a
     charge  of $2.0  million,  or $0.08  per  share,  for  uncollectible  lease
     receivables and related costs  attributable to a customer  bankruptcy.  The
     net loss reported for the nine months ended June 30, 2000 includes the $2.0
     million  (or $0.08 per share)  charge  referenced  above,  a  restructuring
     charge of $0.5 million (or $0.02 per share) and debt conversion  charges of
     $2.4  million  (or $0.10 per  share).  The net loss  reported  for the nine
     months ended June 30, 1999 includes  restructuring  charges of $2.0 million
     (or $0.09 per share) and a gain on the sale of assets of $9.0  million  (or
     $0.41 per share).

Outstanding securities (not included in the above computations  because of their
     dilutive  impact on reported  loss per share)  which could  potentially
     dilute  earnings per share in the future  include  convertible  debentures,
     convertible  preferred  stock,  employee  stock options and  warrants.  For
     additional  disclosure  information,  including  conversion terms, refer to
     Notes 7, 10 and 12, respectively,  in the Company's  consolidated financial
     statements  filed with Form 10-K for the year  ended  September  30,  1999.
     Separately,  refer to Note 11 of this report for discussion of $5.0 million
     of convertible preferred stock issued subsequent to June 30, 2000.

                                     - 13 -

<PAGE>

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


NOTE 9.         EARNINGS (LOSS) PER SHARE (continued)

                Weighted average employee stock options  outstanding  during the
                nine months ended June 30, 2000  approximated  4,035,000 shares,
                of  which  674,000  would  not have  been  included  in  diluted
                earnings per share  calculations  for the nine months ended June
                30, 2000 (if the Company  reported net income for the referenced
                period) because the effect would be antidilutive.

NOTE 10.        COMPREHENSIVE LOSS

                The following table sets forth the computation of  comprehensive
                loss:

                                                     (in thousands)
                                         Three Months Ended    Nine Months Ended
                                           June 30,                 June 30,
                                         ------------------    -----------------
                                         2000         1999     2000        1999
                                         ------------------    -----------------
      Net loss                         $(11,394)  $(7,074)   $(26,163) $(18,701)
      Other comprehensive loss,
      net of tax:
        Foreign currency translation

         adjustments                       (978)      (93)     (1,854)     (757)
                                       ---------  --------   --------- ---------
      Comprehensive loss               $(12,372)  $(7,167)   $(28,017) $(19,458)
                                       =========  ========   ========= =========


NOTE 11.        SUBSEQUENT EVENT

                On  July  31,  2000,  the  Company  sold  200,000  shares  of 5%
                Cumulative  Convertible  Preferred Stock ("Preferred Stock") for
                $5,000,000 to two accredited  investors in a negotiated  private
                transaction  exempt from registration  under Section 4(2) of the
                Securities  Act of 1933,  as  amended.  The  Preferred  Stock is
                convertible into one million shares of common stock at $5.00 per
                share,  or five  shares  of  common  stock  for  each  share  of
                preferred stock.

                The  Company  has the option to convert the Preferred Stock
                into  common  stock if the market price of the  Company's
                common stock exceeds 125% of the conversion  price, or $6.25 per
                share, for a specified  period,  and has the right to redeem the
                Preferred  Stock at  original  issue  price  (par) in the  event
                certain  transactions of $50,000,000 or more are effected by the
                Company and a registration

                                     - 14 -

<PAGE>

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


NOTE 11.        SUBSEQUENT EVENT (continued)

                statement is in effect covering the common stock. Separately,
                the Preferred Stock will  automatically be converted into common
                stock on July 31, 2002, unless extended, if a registration
                statement is not timely filed or kept effective. Dividends are
                payable quarterly, at the option of the Corporation, in common
                stock or cash.

                The conversion price could  potentially be adjusted  downward at
                six  predetermined  reset dates  commencing on January 31, 2001,
                and each three months  thereafter,  if the average closing price
                of the  Company's  common  stock  during  the ten  trading  days
                preceding  such  predetermined  dates falls below the conversion
                price then in effect.  An  additional  reset date is possible if
                the  Company's  net worth  falls  below a certain  formula as of
                September  30,  2000.  However,  in no event can the  conversion
                price  drop below a point  where the  Preferred  Stock  would be
                convertible  into more than  19.999% of the common  stock shares
                outstanding, excluding Class B stock and treasury shares.

                The Company also issued  warrants for the  investors to purchase
                an additional 200,000 shares of common stock at $5.75 per share.
                Such warrants expire in five years. The Company has the right to
                redeem such warrant shares two years after issuance for $.01 per
                share if the  common  stock  market  price  exceeds  200% of the
                exercise  price  then in effect  for 20  trading  days out of 30
                consecutive  trading  days and the holder does not  exercise the
                warrant by the date fixed for redemption. The Company has agreed
                to register the underlying shares of the common stock.

                                     - 15 -

<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES

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

Summary Highlights

The Company's service business unit, VITAL Network Services,  L.L.C.,  generated
record level quarterly  revenues.  Service revenues for the current quarter grew
17.0% as compared to the same quarter one year ago and 14.3%  sequentially  from
the preceding quarter.  However,  current quarter product revenues and financial
results were unfavorably  impacted by a major customer becoming insolvent in the
quarter.  The  resulting  effect  on the  quarter  was a  shortfall  in  product
shipments  (down 9.3% from the same  quarter one year ago and 5.9%  sequentially
from  the  preceding  quarter)  and  a  one-time  charge  of  $2.0  million  for
uncollectible lease receivables and related costs.

Total  revenues for the nine months  ended June 30, 2000 reflect  growth of $6.6
million,  or 5.3%,  from fiscal 1999. In addition,  the  Company's  reported net
loss,  excluding  unique one-time items, was narrowed to $(21.3) million for the
nine  months  ended  June  30,  2000 as  compared  to  $(25.7)  million  for the
corresponding period of fiscal 1999, an improvement of $4.4 million, or 17%.

In December 1999 the Company improved its access to working capital resources by
expanding its credit facility to $70.0 million,  as compared to $40.0 million at
September 30, 1999,  an increase of $30.0  million,  or 75%. In addition,  $22.0
million of the $25.0  million in  Convertible 7 3/4%  Debentures  ("Debentures")
outstanding  at September  30, 1999 have been  converted  into and exchanged for
common  stock,   thereby  reducing   outstanding   indebtedness  and  increasing
stockholders' equity. In addition to improving the Company's financial position,
the  Debenture   reductions   will  result  in  interest   expense   savings  of
approximately $1.7 million annually.  Furthermore, on July 31, 2000, the Company
sold $5.0 million of convertible preferred stock.

On June 26, 2000, the Company  announced that it had retained CIBC World Markets
Corp.  to  advise  the  Company  in  evaluating   its  strategic  and  financial
alternatives.  A major focus of the  relationship  will  include  assistance  in
defining  strategic  and  financial  objectives  and  implementating   strategic
initiatives to achieve these objectives.

                                     - 16 -

<PAGE>

Results of Operations

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

                                        Three Months Ended    Nine Months Ended
                                              June 30,              June 30,
                                         ----------------     -----------------
                                          2000      1999      2000        1999
                                         ----------------     -----------------
Revenues:
    Net product sales                     66.5%     71.2%     70.6%     67.8%
    Service revenue                       31.6      26.2      27.3      28.0
    Other revenue                          1.9       2.6       2.1       4.2
                                          ------   ------     -----    ------
                                         100.0     100.0     100.0     100.0
Cost of revenues                          59.8      55.6      57.9      54.8
                                         ------    ------    -----     ------
Gross margin                              40.2      44.4      42.1      45.2
Amortization of capitalized
  software development costs               7.0       7.1       6.8       7.4
Selling, general and administrative       36.8      34.3      34.3      37.2
Research and product development          12.9      15.1      11.9      17.2
                                         ------    ------    -----     ------

Operating loss before unique charges     (16.4)    (12.1)    (10.9)    (16.6)

Restructuring and other charges            4.9        --       1.9       1.6
                                         -------   ------    ------    -------

Operating loss                           (21.3)%   (12.1)%   (12.8)%   (18.2)%
                                         -------   ------    ------    ------

Net loss excluding unique items*         (22.8)%   (16.7)%   (16.3)%   (20.8)%
                                         -------   ------    ------    -------

Net loss                                 (27.7)%   (16.7)%   (20.1)%   (15.1)%
                                         =======   ======    ======    =======
--------------------
*Unique items are  comprised of the  write-down  of lease  receivables  due to a
customer bankruptcy,  restructuring charges, debt conversion expense and gain on
sale of assets.

Consolidated Results

Revenues:  Current quarter revenues were down $1.2 million, or 2.9%, as compared
to the  corresponding  quarter of fiscal 1999.  Product  revenues were down $2.8
million,  or 9.3%,  service  revenues  were up $1.9  million,  or 17%, and other
revenues  were down $0.3 million,  or 27%. For reasons cited above,  the Company
had anticipated higher product sales from its Broadband Systems Division.

Year-to-date  revenues  for the nine  months  ended  June 30,  2000 were up $6.6
million, or 5.3%, as compared to the first half of fiscal 1999. Product revenues
were up $8.0 million,  or 9.6%; service revenues were up $1.0 million,  or 2.9%;
and other revenues were down $2.5 million, or 46.9%.

                                     - 17 -

<PAGE>

All three operating business units (Broadband  Systems Division,  Network Access
Division and VITAL Network Services)  registered revenue growth  year-over-year.
The decline in "other revenues" relates  principally to a division that was sold
in fiscal 1999 ($1.1 million),  to contract  development  revenue in fiscal 1999
that did not repeat in fiscal 2000 ($0.8  million),  and lower leasing  revenues
($0.5 million).

Geographically,  international  product  revenues  amounted  to 39%  and  50% of
consolidated revenues for the three- and nine-month periods ended June 30, 2000,
respectively,  as  compared to 46% and 51% for  corresponding  periods of fiscal
1999.

Gross  Margins:  Gross  margins,  measured as a percent of revenue and excluding
capitalized  software  amortization,  were down 4.2  percentage  points  and 3.1
percentage   points  for  the  three  and  nine  months  ended  June  30,  2000,
respectively,  as compared to the  corresponding  periods one year ago. Although
both product and service margins contributed to the overall margin declines, the
primary reason for the overall decline was due to revenue mix, with a decline in
higher margin  product sales being offset with increases in lower margin service
business.

Amortization of capitalized  software  amounted to $2.9 million and $3.0 million
in the  quarters  ended  June 30,  2000  and  1999,  respectively;  year-to-date
amortization of capitalized  software  amounted to $8.9 million and $9.2 million
in the nine-month periods ended June 30, 2000 and 1999, respectively.

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

Operating  expenses were down $0.5 million,  or 2.2%, for the quarter ended June
30, 2000 as compared to same quarter one year ago,  reflecting the net impact of
a $0.6  million,  or 4.5%,  increase  in  selling,  general  and  administrative
expenses and a $1.1  million,  or 17.2%,  reduction in research and  development
expense. The increase in selling, general and administrative expense principally
reflects a strategic  investment  in the systems  and people  infrastructure  of
VITAL  Network  Services to position the business  unit for future  growth.  The
reduction  in  research  and  development  expense  reflects  the  shutdown of a
non-strategic  remote  technology  center  in  England  in July  1999  and  cost
reductions resulting from more defined and focused development programs.

Year-to-date  operating expenses (excluding  restructuring charges) for the nine
months ended June 30, 2000 were down $7.0 million,  or 10.4%, as compared to the
nine months ended June 30, 1999.  The  reduction is comprised of a $1.3 million,
or 2.8%, reduction,  in selling,  general and administrative expenses and a $5.7
million, or 26.9%,  reduction in research and development  expense. The selling,
general and administrative reduction principally reflects headcount and

                                     - 18 -

<PAGE>

other  related  cost  reductions  resulting  from the  Company's  December  1998
reengineering of its sales and marketing strategy,  including an increased focus
on sales activity through  distributors  and other channels,  a reduced focus on
direct-sell  activity  and more  productive  marketing  initiatives.  Such  cost
reductions  were  partially  offset  with an  increased  investment  in  VITAL's
infrastructure,  as discussed  above.  The reduction in research and development
expense  reflects the shutdown of a non-strategic  remote  technology  center in
England in July 1999,  the sale of a  non-strategic  division and reduced  costs
associated with more defined and focused development programs.

The Company  continues to channel a high  percentage  of its  revenues  into new
product development. Gross research and development spending for the nine months
ended  June 30,  2000  amounted  to $24.4  million,  or 18.7% of  revenue.  Such
spending is, however,  being closely  monitored by the Network Access Division's
and Broadband Systems Division's management teams. The strategy of both business
units has been to  significantly  reduce  or  eliminate  development  activities
targeted at sustaining  legacy  products,  to limit the  investment of new funds
into projects  considered to have only the highest  likelihood of success and to
use outside development engineers to complement internal development activities,
all in an effort to focus development efforts and improve productivity.

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

Interest Expense and Other Income and Expense: Interest expense amounted to $2.3
million  and  $1.8  million  for the  quarters  ended  June 30,  2000 and  1999,
respectively,  and $6.4  million and $5.0 million for the nine months ended June
30, 2000 and 1999, respectively. The increases are attributable to higher levels
of outstanding borrowings,  a higher rate of interest (prime plus 5%) payable on
the  Company's  new $20.0  million term loan  received in December  1999 and the
effect of  increases  in the  prime  rate of  interest  on the  Company's  other
floating rate debt.

Fiscal year 2000 other expense  includes  non-cash  charges for debt  conversion
expense;  such  charges  amounted  to $2.4  million (or $0.10 per share) for the
nine-month  period ended June 30, 2000.  Details  regarding  the  debt-to-equity
conversions,  which  increased  stockholders'  equity  and  reduced  outstanding
indebtedness  by  approximately  $22.0 million during the nine months ended June
30, 2000, are discussed in Note 5, "Long-Term Debt."

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

Income Taxes:  Tax provisions  recorded by the Company,  principally for foreign
income and  domestic  state  taxes,  amounted  to $500,000  and  $200,000 in the
quarters ended June 30, 2000 and 1999, respectively, and $1,200,000 and $700,000
in the  nine-month  periods  ended  June 30,  2000 and 1999,  respectively.  The
Company has significant  federal net operating loss  carryforwards  available to
offset future federal income tax liabilities.  However, based on the uncertainty
of the ultimate realization of such carryforwards, no net deferred tax asset (or
related  deferred tax benefit) has been recorded in the  Company's  consolidated
financial statements.

                                     - 19 -

<PAGE>

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

Network Access Division ("NAD")

NAD's current quarter  operating  income amounted to $0.3 million as compared to
$1.7  million  in the same  quarter  one year ago.  Revenues  were  down  $(1.9)
million,  or 12%,  which drove the  operating  income  reduction.  Revenues were
impacted by lower sales of legacy analog products, principally in Canada, offset
in part with higher sales of newer products in domestic markets.

NAD's  year-to-date  operating income amounted to $3.0 million as compared to an
operating  loss of $(0.3)  million in the first nine months of fiscal 1999.  The
$3.3  million  turnaround  and  improvement  reflects  the net effect of revenue
growth of $2.3 million, or 5.3%,  resulting gross margin growth of $0.4 million,
and operating expense reductions of $2.9 million, or 13.7%. NAD's revenue growth
was  achieved  primarily  in the  domestic  marketplace  offset in part by lower
shipments of legacy products in Canada.  NAD's operating expense  reductions are
primarily the result of the Company's  restructuring  plan (executed in December
1998),  which  included a strategy to reduce  selling  costs by selling  through
distributors and other indirect channels.

Broadband Systems Division ("BSD")

BSD's current  quarter  operating  loss before  unique items  amounted to $(7.5)
million as  compared  to $(7.7)  million in the same  quarter  one year ago,  an
improvement of $0.2 million,  with operating expense reductions of $1.3 million,
or 8.6%,  offset in part by a reduction in revenues of $(0.9) million,  or 6.5%.
Revenues  were  impacted  negatively  by the  insolvency  of a  major  customer.
Operating  expense  reductions  reflect  the  combined  impact of the  Company's
restructuring plan executed in December 1998 and the shutdown of a non-strategic
remote technology center in England in July 1999.

BSD's operating loss for the nine months ended June 30, 2000 amounted to $(17.9)
million as compared to $(24.9)  million for the  corresponding  period of fiscal
1999, an improvement of $5.0 million, or 19.9%. The improvement reflects the net
effect of revenue growth of $4.8 million,  or 11.8%,  resulting margin growth of
$1.5 million,  and  operating  expense  reductions  of $5.5  million,  or 12.0%.
Revenue growth was achieved in both the domestic and international  marketplace.
The operating expense reductions resulted from the actions referenced above.

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

VITAL's  service  revenue  amounted to $13.0  million  and $11.1  million in the
quarters ended June 30, 2000 and 1999,  respectively.  VITAL's  current  quarter
operating  income  amounted to $0.9  million as compared to $1.1  million in the
same quarter one year ago, a reduction of $0.2  million,  or 16.2%.  The results
include  the impact of  increased  spending  for  strategic  investments  in the
division's  systems  and  people  infrastructure  in an effort to  position  the
business unit for future growth.

                                     - 20 -

<PAGE>

VITAL's trends for the nine months ended June 30, 2000 are consistent with those
in the quarter as noted above.  Service  revenue  amounted to $35.6  million and
$34.6  million  in  the  nine-month  periods  ended  June  30,  2000  and  1999,
respectively,  an  increase  of $1.0  million,  or  2.9%.  VITAL's  year-to-date
operating  income  amounted to $1.8  million as compared to $4.5  million in the
corresponding period one year ago, a reduction of $(2.7) million.

DataComm Leasing Corporation

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

DLC's  operating   income,   derived  from  both  operating  and  finance  lease
activities, amounted to $0.6 million and $0.8 million in the quarters ended June
30, 2000 and 1999,  respectively;  and $2.1 million and $2.4 million in the nine
months ended June 30, 2000 and 1999, respectively.

Foreign Currency Risk

The Company's foreign subsidiaries are exposed to foreign currency  fluctuations
since they are invoicing  customers in local  currencies  while  liabilities for
product  purchases from the parent Company are transacted in U.S.  dollars.  The
impact  of  foreign  currency  fluctuations  on  these  U.S.  dollar-denominated
liabilities  is  recorded as a component  of "Other  Income and  Expense" in the
Company's consolidated  statements of operations.  Such activity resulted in net
currency  exchange gains of $280,000 and $42,000 for the quarters ended June 30,
2000 and 1999,  respectively,  and  $644,000  and  $311,000  for the  nine-month
periods ended June 30, 2000 and 1999, respectively.

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

Market Risk

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

                                     - 21 -

<PAGE>

Interest Risk

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

Liquidity and Capital Resources

Future cash  requirements are planned to be satisfied from a combination of cash
balances  ($2.5  million  at June 30,  2000),  borrowings  available  under  the
Company's  $35 million  maximum  value  revolving  line of credit ($8.3  million
available at June 30, 2000 - see further  discussion  below),  proceeds from the
sale of $5.0  million of  preferred  stock on July 31, 2000 and,  if  necessary,
alternate financing sources.  Alternative financing sources include, among other
items,  the  sale  of  assets,  technologies,  existing  businesses  and/or  the
Company's  common and preferred  stock,  and the sale or discounting of customer
leases.

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

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

In addition, on July 31, 2000, the Company generated cash proceeds and increased
stockholders'  equity in the amount of approximately  $5.0 million from the sale
of  preferred  stock.  Refer  to  Note  11,  "Subsequent   Event,"  for  further
discussion.

Under the revolving line of credit portion of the Company's New Loan  Agreement,
availability  of funds is subject to satisfying a borrowing base formula related
to levels of certain accounts receivable and inventories and the satisfaction of
other  financial  covenants.  Therefore,  maximum funds  available for borrowing
under  the  revolving  line of credit  portion  of the New Loan  Agreement  will
fluctuate as sales and collections efforts affect accounts receivable  balances.
Such maximum availability amounted to $27.3 million at June 30, 2000. Borrowings
outstanding on the Company's  revolving line of credit amounted to $17.9 million
and  $15.1  million  at June 30,  2000 and  September  30,  1999,  respectively.
Separately,  letters  of  credit  reduce  the  availability  of funds  under the
revolving line of credit; letters of credit in the amount

                                     - 22 -

<PAGE>

of $1,043,000  and $267,000 were  outstanding at June 30, 2000 and September 30,
1999, respectively.

Most assets of the  Company,  including  accounts  receivable,  inventories  and
property, plant and equipment are pledged as collateral.  Amounts outstanding on
the  revolving  line of credit are payable in full upon  termination  of the New
Loan Agreement.

Financial  covenants  of the New  Loan  Agreement  require  that  the  Company's
reported  stockholders'  equity,   excluding  the  impact  of  foreign  currency
translation  adjustments occurring subsequent to March 31, 1999, equal or exceed
$10.0 million. Such stockholders' equity, as defined,  amounted to $18.4 million
at June 30, 2000.  (In addition,  on July 31, 2000 the Company sold $5.0 million
of Preferred Stock which would bring such stockholders'  equity to $23.4 million
at July 31, 2000 on a pro foma  basis).  Under terms of the New Loan  Agreement,
revolving line of credit  availability  could be reduced by $1.5 million or $3.5
million if such stockholders'  equity, as defined,  falls below $18.1 million or
$15.0 million,  respectively.  Other covenants limit annual capital expenditures
to $12.0 million.  Violation of such covenants may result in limiting  access to
future  borrowings  and/or  acceleration of payment  requirements on outstanding
borrowings.

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

Operating

Net cash used in operating  activities amounted to $6.8 million and $2.5 million
in the nine-month periods ended June 30, 2000 and 1999, respectively, reflecting
the impact of  reported  net losses (net of  non-cash  items) and other  balance
sheet  fluctuations.  Inventory growth accounted for cash consumption during the
nine months ended June 30, 2000.  The inventory  growth is  attributable  to the
cancellation of a $19 million order resulting from a customer bankruptcy, and to
precautionary  measures  taken  by  the  Company  as it  transitioned  to  fully
outsource its manufacturing  operations during the year. The Company anticipates
a reduction in inventory to more historic  levels in the quarter ended September
30, 2000 and beyond.

Non-debt working capital, excluding cash and cash equivalents, amounted to $22.9
million at June 30, 2000, as compared to $23.5 million at September 30, 1999.

Investing

Investments in property, plant and equipment amounted to $5.0 million during the
nine months ended June 30, 2000 as compared to $6.3 million in the corresponding
period  one  year  ago.  Approximately  $600,000  of the  prior  year's  capital
investments were the result of an acquisition of a service business. Separately,
investments in capitalized software amounted to $9.1 million and $9.5 million in
the  nine-month  periods  ended  June  30,  2000  and  1999,  respectively.  All
investment activity is targeted to satisfy minimum operating requirements and to
embrace new undertakings with the greatest potential returns.

                                     - 23 -

<PAGE>

In the (prior year) nine months ended June 30, 1999, the Company generated $12.0
million in net proceeds from the sale of the Technology Alliance Group division,
which  was  identified  as a  non-strategic  entity by the  Company's  strategic
business units.  Refer to Note 7, "Sale of Technology  Alliance Group Division,"
for further discussion.

Financing

Net cash provided by financing  activities amounted to $19.8 million in the nine
months ended June 30, 2000,  comprised of $20.3 million of net borrowings,  $0.8
million in  proceeds  received  from the  issuance of common  stock  pursuant to
employee  stock  programs  and the payment of $1.3  million in  preferred  stock
dividends.  This activity  compares to $6.2 million of cash povided by financing
activities in the nine months ended June 30, 1999,  comprised of $7.2 million of
net  borrowings,  $0.4 million in proceeds  received from the issuance of common
stock  pursuant to employee  stock  programs  and the payment of $1.4 million in
preferred stock dividends.

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

In  addition,  reference  is made to Note 11,  "Subsequent  Event," for detailed
discussion  regarding  $5.0 million of Preferred  Stock issued by the Company on
July 31, 2000.

Future Adoption of New Accounting Statements

Reference is made to the consolidated  financial statements filed with Form 10-K
for the year ended September 30, 1999, Note 1, for discussion  regarding  future
adoption  of  new  accounting  pronouncements.   Additionally,  the  Company  is
currently in the process of reviewing  the  Securities  and Exchange  Commission
Staff  Accounting  Bulletin  Number 101 regarding  revenue  recognition  issues.
However,  the Company does not anticipate any significant changes in its current
revenue recognition policies.

Certain Risk Factors

Continuing Losses: The Company has sustained net losses for the past 23 quarters
ended June 30,  2000.  There can be no  assurance  as to when the  Company  will
achieve net income.

Credit  Availability:  As noted above, the Company's New Loan Agreement requires
compliance with specific  financial  covenants,  including the requirement  that
reported stockholders' equity, as defined, equals or exceeds $10.0 million (such
stockholders'  equity,  as defined,  amounted to $18.4 million at June 30, 2000,
and $23.4 million at July 31, 2000, on a proforma basis,  after the sale of $5.0
million in Preferred Stock).  Although not anticipated,  should the Company ever
fail to comply  with the  required  covenants,  or fail to comply with any other
provisions  of the New Loan  Agreement  which would  result in a default,  and a
waiver or amendment is not  obtained,  the Company may be unable to borrow funds
under such  agreement.  In such case the Company would be required to seek other
financing to fund its operations, and there can be no assurance

                                     - 24 -

<PAGE>

the Company  will be able to obtain such  financing  or, if  obtained,  on terms
deemed  favorable  by the  Company.  Furthermore,  in the event the Company does
default on its $70.0  million New Loan  Agreement  obligation,  such default may
result  in a  requirement  to  accelerate  the due dates  and  payment  of other
outstanding indebtedness.

In addition,  as discussed in Note 5,  "Long-Term  Debt," the Company intends to
increase  stockholders'  equity by  October  2,  2000 to  satisfy  the  covenant
requirements of certain mortgage agreements.

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

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

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

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

                                     - 25 -

<PAGE>

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



                                     - 26 -

<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES

                           PART II. OTHER INFORMATION




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

   a.  Exhibits

         None.

  b.  Reports on Form 8-K

        A Form 8-K,  dated May 17,  2000,  was filed on May 26, 2000 to announce
        the Company's  termination of its agreement with Twister  Communications
        Network,  Inc.  as a result of  Twister's  insolvency.  Refer to Note 6,
        "Restructuring  and Other  Charges  and Loss  Contingency,"  for further
        discussion.

        In addition,  a Form 8-K,  dated July 31,  2000,  was filed on August 9,
        2000 to announce  the  Company's  sale of 200,000  shares of  Cumulative
        Convertible  Preferred  Stock for $5.0  million  and the terms  thereof.
        Refer to Note 11, "Subsequent Event," for further discussion.

                                     - 27 -

<PAGE>

                                   SIGNATURES

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

                                         GENERAL DATACOMM INDUSTRIES, INC.
                                         --------------------------------
                                                   (Registrant)

                                         By:    /S/ WILLIAM G. HENRY
                                                --------------------
                                                William G. Henry
                                                Vice President, Finance and
                                                Principal Financial Officer


Dated:  August 14, 2000

                                     - 28 -