UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(Mark One)

[X]  Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
     of 1934

     For the quarterly period ended December 31, 2004
                                    -----------------

[ ]  Transition report under Section 13 or 15(d) of the Exchange Act

     For the transition period from __________ to __________


                          Commission file number 1-8086
                                                 ------

                        General DataComm Industries, Inc.
--------------------------------------------------------------------------------
        (Exact Name of Small Business Issuer as Specified in its Charter)


           Delaware                                            06-0853856
--------------------------------------------------------------------------------
(State of Other Jurisdiction of                             I.R.S. employer
 Incorporation or Organization)                            Identification No.)


                      6 Rubber Avenue, Naugatuck, CT 06770
--------------------------------------------------------------------------------
                    (Address of Principal Executive Officers)


                                  203-729-0271
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)


--------------------------------------------------------------------------------
         (Former Name, Former Address and Former Fiscal Year, if Changed
                               Since Last Report)

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]

                     APPLICABLE ONLY TO ISSUERS INVOLVED IN
                        BANKRUPTCY PROCEEDINGS DURING THE
                              PRECEDING FIVE YEARS

         Check whether the registrant filed all documents and reports required
to be filed by Section 12,13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.

                               Yes [X]     No [ ]

                       APPLICABLE ONLY TO CORPORATE ISSUER

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of January 31, 2005:

                        3,303,872 shares of Common Stock
                         664,978 shares of Class B Stock

         Transitional Small Business Disclosure Format (check one):

                               Yes [ ]     No [X]
<PAGE>

                       GENERAL DATACOMM INDUSTRIES, INC.

                    INDEX TO QUARTERLY REPORT ON FORM 10-QSB

PART I      FINANCIAL INFORMATION                                          Page
------                                                                     ----
Item 1.     Financial Statements (unaudited):

              Condensed Consolidated Balance Sheets as of
               December 31, 2004 and September 30, 2004......................3

              Condensed Consolidated Statements of Operations for
               the Three Months Ended December 31, 2004 and 2003.............4

              Condensed Consolidated Statements of Cash Flows for
               the Three Months Ended December 31, 2004 and 2003.............5

              Notes to the Condensed Consolidated Financial Statements.......6

Item 2.     Management's Discussion and Analysis or Plan of Operation.......12

Item 3.     Controls and Procedures ........................................27

PART II     OTHER INFORMATION

Item 1.     Legal Proceedings...............................................28

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds.....28

Item 3.     Defaults Upon Senior Securities.................................28

Item 4.     Submission of Matters of a Vote of Security Holders.............28

Item 5.     Other Information...............................................28

Item 6.     Exhibits........................................................28

                                       2
<PAGE>

                               PART I. FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                        General DataComm Industries, Inc.
                      Condensed Consolidated Balance Sheets
                          (in thousands except shares)

                                                     December 31,  September 30,
                                                         2004          2004*
                                                     (Unaudited)
-------------------------------------------------------------------------------
Assets:
Current assets:
  Cash and cash equivalents                            $       721  $       586
  Accounts receivable, less allowance for
   doubtful accounts of $656 at December 31,
   2004 and $586 at September 30, 2004                       2,431        2,147
  Inventories                                                3,464        4,110
  Other current assets                                          90          216
-------------------------------------------------------------------------------
Total current assets                                         6,706        7,059
-------------------------------------------------------------------------------
Property, plant and equipment, net                           4,152        4,205
===============================================================================
Total Assets                                           $    10,858  $    11,264
===============================================================================

Liabilities and Stockholders' Deficit:
Current liabilities:
  Current portion of long-term debt
   ($1,600 owed to related parties)                    $    36,246  $    37,281
  Accounts payable                                           1,605        1,662
  Accrued payroll and payroll-related costs                    368          271
 Other current liabilities                                   9,621        8,783
-------------------------------------------------------------------------------
Total current liabilities                                   47,840       47,997
-------------------------------------------------------------------------------
Long-term debt, less current portion                            --           --
Other liabilities                                              960        1,301
===============================================================================
Total Liabilities                                           48,800       49,298
===============================================================================

Commitments and contingencies                                   --           --

Stockholders' deficit:
  Preferred stock, par value $1.00 per share,
   2,000,000 shares authorized, none oustanding                 --           --
  9% Preferred stock, par value $1.00 per
   share, 800,000 shares authorized,
   787,900 shares issued and outstanding
   outstanding; $27.7 million liquidation
   preference at December 31, 2004                             788           788
  Class B common stock, par value $.01 per
   share, 5,000,000 shares authorized;
   664,978 shares issued and outstanding                         7            7
  Common stock, par value $.01 per share,
   25,000,000 shares authorized;
   3,305,833 shares issued                                      33           33
  Capital in excess of par value                           198,433      198,433
  Accumulated deficit                                     (237,058)    (237,150)
  Common stock held in treasury, at cost;
   1,961 shares                                               (145)        (145)
===============================================================================
Total Stockholders' Deficit                                (37,942)     (38,034)
===============================================================================
Total Liabilities and Stockholders' Deficit                 10,858  $    11,264
===============================================================================

* Derived from the Company's audited consolidated balance sheet at September 30,
  2004.

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

                                       3
<PAGE>
                                                           Three Months Ended
                                                              December  31,
                                                        -----------------------
                                                            2004         2003
-------------------------------------------------------------------------------
Revenues                                                $    3,867   $    5,101
Cost of revenues                                             1,581        2,179
-------------------------------------------------------------------------------

Gross margin                                                 2,286        2,922

Operating expenses:

  Selling, general and administrative                        1,256        1,909
  Research and product development                             546          767
-------------------------------------------------------------------------------
                                                             1,802        2,676

Operating  income                                              484          246

Other income (expense):
  Interest expense                                            (872)        (904)
  Gain on sale of minority interest                            300           --
  Other, net                                                    41           96
-------------------------------------------------------------------------------
                                                              (531)        (808)

Loss before reorganization items and income taxes              (47)        (562)

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

Reorganization items:
                  Claims reductions                            145           --
-------------------------------------------------------------------------------

Income (loss) before income taxes                               98         (562)

Income tax provision                                             6            5
-------------------------------------------------------------------------------

Net income (loss)                                               92         (567)

Less: dividends applicable to preferred stock                 (443)        (451)
-------------------------------------------------------------------------------

Net loss applicable to common and Class B stock         $     (351)      (1,018)
===============================================================================

Basic and diluted loss per share                        $    (0.09)  $    (0.26)
-------------------------------------------------------------------------------
Weighted average number of common and Class B
  shares outstanding, basic and diluted:                 3,968,850    3,958,541
===============================================================================


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

                                       4
<PAGE>
<TABLE>
<CAPTION>

                        General DataComm Industries, Inc.
           Condensed Consolidated Statements of Cash Flows (Unaudited)
                                 (In thousands)

                                                                                             Three Months Ended
                                                                                                 December 31,
                                                                                         ----------------------------
                                                                                             2004            2003
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>             <C>
Cash flows from operating activities:
Net income (loss)                                                                        $         92    $       (567)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
  Depreciation and amortization                                                                    68              45
  Gain on claim reductions                                                                       (145)             --
  Changes in:
    Accounts receivable                                                                          (295)           (594)
    Inventories                                                                                   646              78
    Accounts payable                                                                              (57)            (50)
    Accrued payroll and payroll-related costs                                                      97            (175)
    Other net current liabilities                                                                 964             532
    Other net long-term assets                                                                   (196)             39
---------------------------------------------------------------------------------------------------------------------

Net cash  provided (used) by operating activities                                               1,174            (692)
=====================================================================================================================

Cash flows from investing activities:
 Acquisition of property, plant and equipment, net                                                 --             (15)
 Note receivable collections                                                                       11             111
---------------------------------------------------------------------------------------------------------------------

Net cash  provided by investing activities                                                         11              96
=====================================================================================================================

Cash flows from financing activities:
 Proceeds from notes payable to related parties                                                    --             600
 Principal payments on term obligation                                                         (1,050)         (1,054)
---------------------------------------------------------------------------------------------------------------------

Net cash used by financing activities                                                          (1,050)           (454)
=====================================================================================================================

Net increase (decrease) in cash and cash equivalents                                              135          (1,050)

Cash and cash equivalents, beginning of period                                                    586           2,438
---------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of period                                                 $        721    $      1.388
=====================================================================================================================

Supplemental disclosures of cash flow information:
 Cash paid during the period for:
  Interest                                                                               $        235    $        257
  Income taxes                                                                           $          3    $         16
  Reorganization items                                                                   $         17    $        253
=====================================================================================================================
</TABLE>

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

                                       5
<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

Note 1 - Basis of Presentation and Liquidity

         The accompanying unaudited interim condensed consolidated financial
statements of General DataComm Industries, Inc. (the "Company" or "GDC") have
been prepared on a going concern basis, in accordance with generally accepted
accounting principles for interim financial information, the instructions to
Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for year end financial statements. In the opinion of management,
these statements include all adjustments, consisting of normal and recurring
adjustments, considered necessary for a fair presentation of the results for the
periods presented. The results of operations for the periods presented are not
necessarily indicative of results which may be achieved for the entire fiscal
year ending September 30, 2005. The unaudited interim condensed consolidated
financial statements should be read in conjunction with the financial statements
and notes thereto contained in the Company's annual report on Form 10-K for the
fiscal year ended September 30, 2004 as filed with the Securities and Exchange
Commission.

On November 2, 2001, General DataComm Industries, Inc. and its domestic
subsidiaries ("the Debtors") filed a voluntary petition for relief under Chapter
11 of the Bankruptcy Code in the United States Bankruptcy Court for the District
of Delaware. The Company continued in possession of its properties and the
management of its business as debtors in possession.

Leading up to its Chapter 11 Bankruptcy filing on November 2, 2001, the Company
had experienced financial losses and resulting covenant defaults on its secured
loans. In addition, the Company had sold three divisions comprising a
significant portion of its business, in an effort to improve its debt and
liquidity position. However, because of a general economic downturn and a
depressed demand for high-technology products and businesses, the Company was
unable to realize a level of immediate proceeds in order to satisfy its secured
lenders and provide adequate liquidity to fund continuing operations. Therefore,
the Company sought protection from its creditors with its bankruptcy filing.

During the fiscal year ended September 30, 2002, and in the aftermath of the
sales of its business units, the Company consolidated its remaining operations
into its owned facility in Naugatuck, Connecticut and downsized its staff and
operating assets to more properly reflect its reduced operating requirements.

The Company emerged from Chapter 11 effective on September 15, 2003 pursuant to
a court-approved plan of reorganization. Under the plan of emergence, the
Company intends to pay all creditors 100% of their allowed claims based upon a
five year business plan. However, the Company cannot assure its investors that
it will be able to obtain new customers or to generate the increase in revenues
required to meet its business plan objectives.

The Company has virtually no current ability to borrow additional funds. It
must, therefore, fund operations from cash balances and cash generated from
operating activities. The Company has significant short term obligations
including payment of accrued professional fees (approximately $1 million at
December 31, 2004) and monthly payments of principal and interest (currently
such monthly principal and interest totals approximately $340,000) under its
senior loan agreement. In fiscal 2004 the Company borrowed $1.6 million from
related parties in order to meet its current payment obligations (see Note 4).
Furthermore, the Company has significant future outstanding obligations as shown

                                       6
<PAGE>

in the accompanying condensed consolidated balance sheet at December 31, 2004.
In order to meet these and other future payments the Company must achieve
revenue growth while at the same time limiting investments in inventories and
capital assets.

The Company's failure to make required payments under the new loan agreement
would constitute an event of default. In addition, the Company is required to
maintain a minimum level of EBITDA (earnings before interest, taxes depreciation
and amortization) each quarter to avoid an event of default (see Note 4) and was
required to obtain a waiver in fiscal 2004 in order to avoid an event of
default. The Company's quarterly operating results are subject to fluctuation
due to a number of factors resulting in more variability and less predictability
in the Company's quarter-to-quarter sales and operating results. Such factors
include (but are not limited to): dependence on a small number of customers,
short delivery times, dependence on subcontract manufacturers, low order
backlog, ability to timely develop new products and market acceptance of new
products. The Company did not meet the EBITDA financial covenant for the period
ended September 30, 2004 and received a waiver for such period. While the
Company's calculations for the period ended December 31, 2004 show that the
Company was in compliance with the financial covenant, future compliance will
require improved earnings. There can be no assurance that the Company will be
able to avoid an event of default on the loan agreement. If there is such a
default, the senior secured lenders may accelerate payment of the outstanding
debt ($12.8 million at December 31, 2004) and exercise their security interests,
which likely would require the Company to again file for bankruptcy protection.
An acceleration by the senior secured lenders would also result in a default and
acceleration by the debentures holders ($21.9 million of principal outstanding
at December 31, 2004). Based on the covenant violation for the quarter ended
September 30, 2004 and the uncertainty that the Company can comply with the
EBITDA covenant during the quarterly periods during fiscal 2005, the Company's
long-term debt has been classified as current liabilities in the accompanying
consolidated balance sheets at both December 31 and September 30, 2004.

At December 31, 2004, the Company had a stockholders' deficit of approximately
$37.9 million. In addition, the Company's principal source of liquidity includes
cash and cash equivalents of approximately $0.7 million and it had a working
capital deficit of approximately $41.1 million. The large negative working
capital reflects the classification of all long-term secured debt as current
liabilities.

Because operating results can fluctuate significantly due to decreases in
customer demand or decreases in the acceptance of future products, the Company,
during fiscal 2004, has not been, and may not be in the future able to generate
positive cash flow from operations. Should the need arise, it may become
necessary to borrow additional funds or otherwise raise additional capital.
However, since the Company does not have any source of additional funds or
capital in place, any such requirement could have a material adverse effect on
the Company.

The potential liquidity and cash flow risks described above raise substantial
doubt about the Company's ability to continue as a going concern. The Company's
independent auditors have expressed uncertainty about the Company's ability to
continue as a going concern in their opinion on the Company's fiscal 2004
financial statements.

Management has responded to such risks as part of an ongoing strategy, by
restructuring the sales force, increasing factory shutdown time, containing
expenses, reducing employee salaries and wages and reducing the size of the
employee workforce. In addition, in fiscal 2004 the Company obtained $1.6
million from loans from related parties primarily for replacement of senior
indebtedness being repaid with the proceeds. (see Note 4). The Company also is
actively marketing for sale or lease its headquarters land and building and
pursuing other asset recoveries, the proceeds of which would be used to reduce
secured debt and related interest.

                                       7
<PAGE>
<TABLE>
<CAPTION>

While the Company is aggressively pursuing opportunities and corrective actions,
there can be no assurance that the Company will be successful in its efforts to
generate sufficient cash from operations or obtain additional funding sources.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern and do not include any
adjustments that may result from the outcome of these uncertainties.

Note 2 - Earnings (Loss) Per Share

         Basic earnings (loss) per share is computed by dividing net income
available to common stockholders by the weighted average number of common and
Class B shares outstanding during the period. Diluted earnings per share gives
effect to all potential dilutive common shares outstanding during the period. In
computing diluted earnings per share, the average price of the Company's common
stock for the period is used in determining the number of shares assumed to be
purchased from exercise of stock options. Dividends applicable to preferred
stock represent accumulating dividends that are not declared or accrued. The
following table sets forth the computation of basic and diluted earnings (loss)
applicable to common and Class B stock for the three months ended December 31,
2004 and 2003 (in thousands, except shares and per share data):

                                                               Three Months
                                                             Ended December 31,
                                                        --------------------------
                                                           2004           2003
----------------------------------------------------------------------------------
<S>                                                     <C>            <C>
Net income (loss)                                       $        92    $      (567)
   Less:  dividends applicable to preferred stock              (443)          (451)
----------------------------------------------------------------------------------
Net loss applicable to common and Class B stock         $      (351)   $    (1,018)
==================================================================================

Weighted average number of common and Class B
   shares outstanding, basic and diluted:                 3,968,850      3,958,541
----------------------------------------------------------------------------------

Basic and diluted (loss) per common and Class B share   $     (0.09)   $     (0.26)

==================================================================================
Number of  shares subject to option excluded
   from computation of diluted earnings per
   share because their effect is anti-dilutive              276,500        283,210
==================================================================================
</TABLE>

Other outstanding securities not included in the computation of earnings (loss)
per share include convertible notes payable and warrants issued to related
parties and convertible preferred stock, the impact of which is dilutive on
reported loss per share, and contingent warrants granted to secured lenders
which are issuable only in the event of a default or of certain payment terms
not being met and the impact of which is also dilutive to reported loss per
share (for further discussion of these items, see Notes 7, 9 and 12 in Item 8 of
the Company's annual report on Form 10-K for the fiscal year ended September 30,
2004 as filed with the Securities and Exchange Commission and Note 4 below).
<TABLE>
<CAPTION>

3.  Inventories

Inventories consist of  (in thousands):

                                                        December 31,   September 30,
                                                            2004            2004
----------------------------------------------------------------------------------
<S>                                                     <C>            <C>
Raw materials                                           $       903    $     1,124
Work-in-process                                               1,328          1,323
Finished goods                                                1,233          1,665
----------------------------------------------------------------------------------
                                                        $     3,464    $     4,110
==================================================================================
</TABLE>

                                       8
<PAGE>

Inventories are stated at the lower of cost or market using a first-in, first
out method. Reserves in the amount of $2,517,000 and $2,563,000 were recorded at
December 31, 2004 and September 30, 2004, respectively, for excess and obsolete
inventories.

4.  Long-Term Debt

Long-term debt consists of (in thousands):
                                                 December 31,   September 30,
                                                     2004           2004
---------------------------------------------------------------------------
Term Obligation                                  $    10,348    $    11,398
PIK Obligation                                         2,500          2,500
Notes Payable to Related Parties, net of debt
 discount of $106 at December 31, 2004 and
 $121 at September 30, 2004                            1,494          1,479
Debentures                                            21,904         21,904
---------------------------------------------------------------------------
                                                      36,246         37,281
Less current portion                                  36,246         37,281
---------------------------------------------------------------------------
                                                 $         0    $         0
---------------------------------------------------------------------------

For the quarter ended September 30, 2004, the Company would have been in default
of the financial covenant in its loan agreement with its senior secured lenders
had it not obtained a waiver. Since the waiver does not extend to future
financial covenant calculations, which are performed quarterly, the senior
secured debt (the Term Obligation and PIK Obligation) and the Debentures and
notes payable to related parties which contain cross default provisions are
classified as current liabilities on the accompanying balance sheets at December
31 and September 30, 2004 (see Note 1). Interest on the PIK Obligation and
Debentures is not required to be paid currently. Such accrued interest amounted
to $3,279,000 and $2,692,000, at December 31 and September 30, 2004,
respectively, and is classified as a current liability along with the
corresponding debt.

Long-term debt matures in amounts totaling $3,926,000 in fiscal 2005, $4,163,000
in fiscal 2006, $3,348,000 in fiscal 2007, and $24,809,000 in fiscal 2008,
assuming that there is no acceleration in the future due to an event of default.

In conjunction with the issuance of a note payable to a related party on
September 30, 2004, the Company issued a warrant, the value of which was
recorded as debt discount. See "Notes Payable to Related Parties" below.

Term Obligation, PIK Obligation and Debentures

Under the terms of the loan and security agreement which became effective
September 15, 2003, minimum principal payments under the Term Obligation are
$250,000 per month, and were adjusted to $287,444 beginning January 1, 2005 to
amortize the remaining principal balance over 36 months. Interest is payable
monthly at the annual rate of 7.25% through December 31, 2003, and thereafter at
the greater of (i) 7.25% and (ii) the prime rate plus 2.5% (the prime rate was
5.25% on December 31, 2004). In addition, proceeds from the potential sales of
non-core assets and certain other proceeds must be used to reduce the term
obligation.

The Company also entered into a loan in the original principal amount of $5
million, subject to adjustment, due December 31, 2007 (the "PIK Obligation").
Interest accrues at the same rates as the Term Obligation. Principal in the
amount of $2.5 million and accrued interest thereon were forgiven under terms of
the Agreement which expired on December 31, 2004. The amount owing under the PIK
obligation, if any, may be adjusted by the Bankruptcy Court.

                                       9
<PAGE>

Debentures with principal and interest due in fiscal 2008 were or will be issued
to unsecured creditors as part of the Company's Plan of Reorganization.

For further details of the loan and security agreement and a description of the
Term Obligation, PIK Obligation and Debentures, see Note 4, "Reorganization Plan
and Emergence from Chapter 11" included in Item 8 of the Company's annual report
on Form 10-K for the year ended September 30, 2004 as filed with the Securities
and Exchange Commission.

Notes Payable to Related Parties

Pursuant to authorization by the Board of Directors and amendments to the loan
agreement with the Company's senior lenders, the Company has borrowed an
aggregate of $1,600,000 in a series of loans during the period December 30, 2003
through September 30, 2004 from Howard S. Modlin, Chairman of the Board, who has
loaned an aggregate of $1,050,000 and John L. Segall, a Director, who has loaned
an aggregate of $550,000. The loans were made primarily for replacement of
senior indebtedness being repaid with the proceeds. The loans are each for two
years and bear interest accruing from the date of issue, at the rate of 10% per
annum, payable monthly commencing three full months after the date of the loan.
The notes are secured by all of the assets of the Company subordinate to the
first lien of the Company's senior lenders who hold the Term and PIK
obligations, and are convertible into common stock at the option of the holder.
The conversion price of the notes was in excess of the quoted market price of
the Company's common stock on the dates the loans were made. The first such
loans aggregate $600,000 and were made on December 30, 2003 with a conversion
price of $2.12 per share, and were made equally by Messrs. Modlin and Segall, or
$300,000 each. The second such loans aggregated $250,000 and were made on March
1, 2004 with a conversion price of $.8625 per share and were made equally by
them, or $125,000 each. The third such loans were made on March 31, 2004 with a
conversion price of $.5625 per share and were made equally by them, or $125,000
each. The fourth such loan was made on June 30, 2004 by Mr. Modlin for $250,000
and is convertible at $.42 per share. The fifth such loan was made on September
30, 2004 by Mr. Modlin for $250,000 with half due on September 30, 2005 and the
balance due on September 30, 2006, and, in connection with the loan, the Company
issued to Mr. Modlin a five year warrant to purchase 761,614 shares of common
stock for $.32825 per share. Any shares issued on conversion or exercise of the
warrant will not be registered and must be held for investment without a view to
distribution. The conversion prices of the notes were in excess of the quoted
market price of the Company's common stock on the dates the loans were made. The
warrant was valued at $121,000 utilizing the Black-Scholes method and resulted
in the related loan being recorded at a corresponding discount.

Note 5.  Accounting for Stock-Based Compensation

As permitted under Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has elected
to continue to measure costs for its employee stock compensation plans by using
the accounting methods prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", which allows that no compensation
cost be recognized provided the exercise price of options granted is equal to or
greater than fair market value of the Company's stock at date of grant.

Proforma results, representative of financial results which would have been
reported by the Company if it had adopted the fair value based method of
accounting for stock-based compensation under SFAS No. 123, are summarized below
(amounts in thousands, except per share data):

                                       10
<PAGE>

                                            Three Months Ended December 31,
                                            -------------------------------
                                               2004                2003
---------------------------------------------------------------------------
Net income (loss), as reported              $        92         $      (567)
Deduct:  total stock-based
 employee compensation
 expense determined underfair
 value based method for all awards                   (9)                (18)
---------------------------------------------------------------------------
Proforma net income (loss)                           83                (585)
Dividends applicable to preferred stock            (443)               (451)
---------------------------------------------------------------------------
Proforma net income (loss)
 applicable to common and
 Class B stock                              $      (360)        $    (1,036)
===========================================================================
Proforma  earnings (loss) per
 share (basic and diluted)                  $     (0.09)        $     (0.26)
===========================================================================

The Black-Scholes method was used to compute the proforma amounts presented
above. No material stock options or other stock-based employee compensation
awards were granted to employees in the three month periods ended December 31,
2004 and 2003.

Note 6.  Gain on Sale of Minority Interest.

On November 30, 2004, the Corporation sold its 25% minority interest in Grupo
GDC de Mexico, S.A. de C.V., for $300,000. The proceeds were applied to the
Company's outstanding loans with its senior lenders. In addition, the Company
entered into a twelve-month trademark license agreement with the former Mexican
subsidiary for an aggregate license fee of $150,000, to be amortized in equal
monthly installments.

Note 7. Subsequent Events

On January 26, 2005, the Board of Directors adopted a new 2005 Stock and Bonus
Plan ("Plan") covering 1,200,000 shares of Common Stock, and the Stock Option
Committee authorized certain options pursuant to the new Plan. The Plan is
similar to the 2003 Stock and Bonus Plan. No shares of Class B are authorized
under the Plan.

Pursuant to the Plan, the Committee granted to Howard S. Modlin, Chief Executive
Officer, a stock option to purchase 551,121 shares at $.61 per share and granted
to each of Lee Paschall, Aletta Richards and John L. Segall, Directors, stock
options to purchase 30,000 shares at $.55 per share, of the Corporation's Common
Stock. The Committee also granted an aggregate of 212,050 options to 75
employees to purchase the Corporation's Common stock at an option price of $.55
per share, including 30,000 options to each of George Best, Vice President,
Sales and Marketing, William G. Henry, Vice President, Finance and
Administration and Principal Finance Officer, and George Gray, Vice President,
Operations and Chief Technology Officer. The options vest in increments of 20%
one, two, three, four and five years after grant and expire ten years after
grant. The shares issuable under such options are not registered under the
Securities Act of 1933 and must be held for investment unless so registered or
an exemption from registration exists. The Corporation plans to register the
shares before the first options are exercisable.

                                       11
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Notice Concerning Forward-Looking Statements

THE FOLLOWING DISCUSSION AND ANALYSIS OF THE COMPANY'S FINANCIAL CONDITION AND
THE RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS QUARTERLY REPORT ON
FORM 10-QSB AND IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
SEPTEMBER 30, 2004 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

THIS REPORT ON FORM 10-QSB CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. FOR
THIS PURPOSE, STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL
FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE
FOREGOING, THE WORDS "BELIEVES", "ANTICIPATES", "PLANS", "EXPECTS" AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE
FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES AND ARE NOT
GUARANTEES OF FUTURE PERFORMANCE. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE INDICATED IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH UNDER THE HEADING "RISK
FACTORS" BELOW. UNLESS REQUIRED BY LAW, THE COMPANY UNDERTAKES NO OBLIGATION TO
UPDATE ANY FORWARD-LOOKING STATEMENTS OR REASONS WHY ACTUAL RESULTS MAY DIFFER.

Overview

The Company has incurred net losses since 1994 and as of September 30, 2004, the
most recent fiscal year end, had an accumulated deficit of $237.2 million. The
significant amount of the Company's operating losses resulted from costs
incurred prior to 2002 in developing and marketing Asynchronous Transfer Mode
("ATM") technology in the former Broadband Systems Division ("BSD").

After implementing a number of restructuring and cost reduction programs in an
attempt to better align operating cost structure with revenues, in 2001 three of
the Company's business units were actively marketed for sale with the objective
of reducing outstanding debt and providing additional liquidity.

Between June and August 2001, three of the Company's four operating divisions
representing a significant portion of the assets of the Company, including BSD,
were sold. However, due to the impact of a general economic downturn and a
decline in the telecommunication industry in particular, the Company did not
realize sufficient proceeds from the sales to satisfy its secured debtors.
Revenues of divisions sold constituted 59% of consolidated revenue in fiscal
2001. By the end of fiscal 2001 the number of employees declined to 210
employees from 1,019 at the beginning of the year. Further cost-saving
reductions were subsequently implemented which reduced headcount to 76 employees
at December 31, 2004.

                                       12
<PAGE>

On November 2, 2001 General DataComm Industries, Inc. and its domestic
subsidiaries filed a voluntary petition for relief under chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware. The Company continued in possession of its properties and the
management of its business as debtors in possession pursuant to the Bankruptcy
Code.

During the year ended September 30, 2002, and in the aftermath of the sales of
three of its business units, the Company consolidated its remaining operations
into its owned facility in Naugatuck, Connecticut, and downsized its staff and
operating assets to more properly reflect current operating requirements for its
one remaining business unit.

Pursuant to a reorganization plan approved by the Bankruptcy Court, the Company
emerged from Bankruptcy on September 15, 2003.


RESULTS OF OPERATIONS

Revenues

                                          Three Months Ended December 31,
                                          -------------------------------
         (in thousands)                      2004                  2003
                                          ---------             ---------
         Revenues                         $   3,867             $   5,101

Revenues for the three months ended December 31, 2004 decreased 24% to
$3,867,000 from $5,101,000 reported for the three months ended December 31,
2003. This decrease is attributable to lower unit sales to large
telecommunication carrier channel distributors, which primarily affected sales
to Thomas Technologies and Sunbelt Telecommunications, offset by an increase in
sales to Qwest Communications. However, net sales increased 50% sequentially
from the quarter ended September 30, 2004 and reflects an increase in sales of
the Company's newer IP products to carriers.

A decline in demand for the Company's products began in fiscal 2001 due to
economic and industry-wide factors affecting the telecommunications industry,
including financial constraints affecting customers and over-capacity in our
customers' markets. The Company anticipates that the current reduced capital
spending levels by its customers will continue to affect sales until there is an
overall recovery in the telecommunications market, which, although there is some
evidence of improvement, may not change significantly in 2005. Accordingly, the
ability to forecast future revenue trends in the current environment is
difficult.

Gross Margin

                                          Three Months Ended December 31,
                                          -------------------------------
         (in thousands)                      2004                  2003
                                          ---------             ---------

         Gross margin                     $   2,286             $   2,922
         Percentage of revenues                59.1%                 57.3%

Gross margin, as a percentage of sales, in the three months ended December 31,
2004 was 59.1% as compared to 57.3% in the three months ended December 31, 2003.
The 1.8% increase in gross profit margin in the three months ended December 31,

                                       13
<PAGE>

2004 was attributable to the sale of older inventories that had previously been
written off based on the Company's accounting policy on determining
obsolescence, which added 4.4%, offset in part by plant cost inefficiencies
associated with lower sales volumes and other effects amounting to a reduction
of 2.6%.

In future periods, the Company's gross margin will vary depending upon a number
of factors, including the mix of products sold, the cost of products
manufactured at subcontract facilities, the channels of distribution, the price
of products sold, discounting practices, price competition, increases in
material costs and changes in other components of cost of sales. As and to the
extent the Company introduces new products, it is possible that such products
may have lower gross profit margins than other established products in higher
volume production. Accordingly, gross margin as a percentage of sales may vary.

Selling, General and Administrative

                                                 Three Months Ended December 31,
                                                 -------------------------------
         (in thousands)                             2004                 2003
                                                 ---------            ---------
         Selling, general and administrative     $   1,256            $   1,909
         Percentage of revenues                       32.5%                37.4%

The Company's selling, general and administrative ("SG&A") expenses decreased to
$1,256,000, or 32.5% of sales in the three months ended December 31, 2004 from
$1,909,000, or 37.4% of sales in the three months ended December 31, 2003. The
reduction in spending in the quarter of $653,000, or 34%, was due to lower
payroll and payroll-related costs ($420,000) resulting from a reduced number of
employees, Company mandated salary and work week reductions and lower sales
commissions due to lower sales levels; lower post-bankruptcy liability insurance
costs ($55,000); reduced sales force travel expenses ($91,000); and other
reductions in operating expenses due to cost reduction efforts ($87,000).

Research and Product Development

                                                 Three Months Ended December 31,
                                                 -------------------------------
         (in thousands)                             2004                 2003
                                                 ---------            ---------

         Research and product development        $     546            $     767
         Percentage of revenues                       14.1%                15.0%

Research and product development ("R&D") expenses decreased to $546,000 in the
three months ended December 31, 2004 as compared to $767,000 in the three months
ended December 31, 2003, due to lower labor costs resulting from a 20% salary
reduction and a reduced number of engineers.

Other Income (Expense)

Interest expense decreased to $872,000 in the three months ended December 31,
2004 from $904,000 in the three months ended December 31, 2003, due to principal
payments made on the Company's term obligation offset by higher interest rates
on notes payable to related parties and higher variable interest on the term
obligation.

                                       14
<PAGE>

Additional items included in other income (expense) for the three months ended
December 31, 2004 and 2003 totaled $341,000 and $96,000, respectively. The 2004
quarterly amount includes $300,000 profit on sale of a 25% minority interest in
a Mexican company (see Note 6). The 2003 quarterly amounts included $70,000 in
income from the sale of excess furniture and equipment.

Reorganization Items

Reorganization items in the three months ended December 31, 2004 include
$145,000 in reduced claims from unsecured creditors in the Company's bankruptcy
case due to challenges raised by the Company.

Provision for Income Taxes

No federal income tax provisions or tax benefits were provided in the three
months ended December 31, 2004 and 2003 due to the valuation allowance provided
against the net change in deferred tax assets. The Company established a full
valuation allowance against its net deferred tax assets due to the uncertainty
of realization of benefits of the net operating loss carryforwards from prior
years. The Company has federal tax credit and net operating loss carryforwards
of approximately $12.0 million and $206.1 million, respectively, as of September
30, 2004. Income tax provisions for the three months ended December 31, 2004 and
2003 reflect minimum state taxes.

Liquidity and Capital Resources
                                               December 31,       September 30,
         (in thousands)                            2004               2004
                                                 --------          --------
         Cash and cash equivalents               $    721          $    586
         Working capital (deficit)                (41,134)          (40,938)
         Total assets                              10,858            11,264
         Long-term debt, including current
          portion                                  36,246            37,281
         Total liabilities (excluding
          redeemable preferred stock)              48,800            49,298


                                               Three Months Ended December 31,
                                               -------------------------------

                                                   2004               2004
                                                 --------          --------
         Net cash provided (used) by:
           Operating activities                     1,174              (692)
           Investing activities                        11                96
           Financing activities                    (1,050)             (454)


                                       15
<PAGE>

Note: Significant risk factors exist due to the Company's limited financial
resources and dependence on achieving future positive cash flows in order to
satisfy its obligations and avoid a default under its loan and debenture
obligations. See "Risk Factors" below for further discussion.

Cash Flows

Net cash provided by operating activities totaled $1,174,000 in the three months
ended December 31, 2004 compared to net cash used in operating activities of
$692,000 in the three months ended December 31, 2003. The net income in the 2004
quarter was $92,000. Non-cash items included in this net income were expenses
for depreciation of $68,000 and gains on claim reductions of $145,000. An
increase in accounts receivable due to a 50% increase in sales from the
September 2004 quarter resulted in a use of cash of $295,000. Inventories were
lower by $646,000 as the Company was able to achieve shipments of on-hand
inventories to satisfy customer orders and generate a source of cash through
reduced purchasing. Unpaid interest which accrued on the Company's debt
increased $632,000. Other sources of cash totaled a net amount of $76,000.

The net loss in the 2003 quarter was $567,000. In addition to the net loss,
other items contributing to the $692,000 of net cash used in operating
activities were an increase in accounts receivable of $594,000 and a reduction
in accrued payroll and payroll related costs of $175,000 and other net uses of
$3,000, offset by an increase in accrued interest of $647,000.

Cash provided by investing activities was $11,000 from collection of a note
receivable in the quarter ended December 31, 2004, compared to cash provided of
$96,000, from collection of a note receivable of $111,000 offset by acquisition
of equipment of $15,000, in the quarter ended December 31, 2003.

Cash used by financing activities of $1,050,000 for the quarter ended December
31, 2004 represented principal payments on the Company's term obligation. Net
cash used by financing activities for the quarter ended December 31, 2003
represented principal payments of $1,054,000 on the Company's term obligation
offset by proceeds of $600,000 received from notes payable to related parties.

Liquidity

The Company has virtually no current ability to borrow additional funds. It
must, therefore, fund operations from cash balances and cash generated from
operating activities. The Company has significant short-term obligations
including payment of professional fees and monthly payments of principal and
interest (currently such principal and interest totals approximately $340,000
each month) under its senior loan agreement. Furthermore, the Company has
significant outstanding obligations to pay total long-term debt of approximately
$48.8 million, along with interest thereon.

The Company's failure to make required payments under the senior loan agreement
would constitute an event of default. In addition, the Company is required to
meet a financial covenant to avoid an event of default (see Note 4 to Notes to
Financial Statements included in Item 2 to this Form 10-QSB"). Although the
Company was not in default of the financial covenant as of September 30, 2004,
it was necessary for the Company to obtain a waiver of compliance with such
covenant in order to avoid a default as the Company did not meet the financial
covenant requirement.

Since emerging from bankruptcy, the Company has incurred a loss before
reorganization items and income taxes in excess of $3,000,000. Furthermore, the
ability of the Company to meet cash flow and loan covenant requirements is
directly affected by the factors described below "Risk Factors". There can be no
assurance that the Company will be able to avoid a default on the senior loan
agreement. If there is such a default, the senior secured lenders may accelerate
payment of the outstanding debt ($12.8 million at December 31, 2004) and
foreclose on their security interests which likely would require the Company to
again file for bankruptcy protection.

                                       16
<PAGE>

The Company emerged from Chapter 11 bankruptcy on September 15, 2003. Under the
plan of emergence, the Company plans to pay all creditors 100% of their allowed
claims based upon a five year business plan. The ability to meet the objectives
of this business plan is directly affected by the factors described below in the
"Risk Factors" section. The Company cannot assure investors that it will be able
to obtain new customers or to generate the increased revenues required to meet
its business plan objectives. In addition, in order to execute the business
plan, the Company may need to seek additional funding through public or private
equity offerings, debt financings or commercial partners. Since the Company has
virtually no current ability to borrow additional funds, it cannot assure
investors that it will obtain funding on acceptable terms, if at all. If the
Company is unable to generate sufficient revenues or access capital on
acceptable terms, it may be required to (a) obtain funds on unfavorable terms
that may require the Company to relinquish rights to certain of our technologies
or that would significantly dilute our stockholders and/or (b) significantly
scale back current operations. Either of these two possibilities would have a
material adverse effect on the Company's business, financial condition and
results of operations.

Since filing for Chapter 11 bankruptcy protection on November 2, 2001,
operations have been funded primarily through cash generated from operations and
loans from related parties. Proceeds realized from sales and liquidations of
non-core assets were required to be used to pay down the secured debt.

At December 31, 2004 the Company's principal source of liquidity included cash
and cash equivalents of $721,000 compared to $586,000 at September 30, 2004. At
December 31, 2004, the Company's working capital was a deficit of approximately
$41.1 million, compared to a deficit of approximately $40.9 million at September
30, 2004. Negative working capital reflects the classification of all long-term
secured debt as a current liability as a result of non-compliance with a
financial covenant. See Note 4, the section on "Loan Agreement" of Notes to
Condensed Consolidated Financial Statements included in Item 2 in this Form
10-QSB.

The Company has significant unpaid professional fees (approximately $1.0
million) at December 31, 2004 that are expected to be paid in fiscal 2005. In
order to meet these and other future payments, the Company must achieve revenue
growth while at the same time limiting investments in inventories and capital
assets.

As a result of the potential liquidity and cash flow risks described above, the
Company's independent auditors expressed uncertainty about the Company's ability
to continue as a going concern in their opinion on the Company's fiscal 2004
financial statements.

Management has responded to such risks as part of an ongoing strategy by
restructuring its sales force, increasing factory shutdown time, containing
expenses and reducing the size of the employee workforce. In addition, in fiscal
2004 the Company obtained $1.6 million from loans from related parties to be
used for working capital and general purposes (see Note 7 of the Notes to
Condensed Consolidated Financial Statements included in Item 2 of this Form
10-QSB). The Company also is actively marketing for sale its land and building
and pursuing other asset recoveries, the proceeds of which would be used to
reduce secured debt and related interest.

                                       17
<PAGE>

Critical Accounting Policies

The Company's financial statements and accompanying notes are prepared in
accordance with generally accepted accounting principles in the United States of
America. Preparing financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenue
and expenses. Management bases its estimates and judgements on historical
experience and on various other factors that are believed to be reasonable under
the circumstances. Due to the inherent uncertainty involved in making estimates,
actual results reported in future periods might be based upon amounts that
differ from those estimates. The following represent what the Company believes
are among the critical accounting policies most affected by significant
management estimates and judgements.

Revenue Recognition. The Company recognizes a sale when the product is shipped
and the following four criteria are met upon shipment: (1) persuasive evidence
of an arrangement exists; (2) title and risk of loss transfers to the customer;
(3) the selling price is fixed or determinable; and (4) collectibility is
reasonably assured. A reserve for future product returns is established at the
time of the sale based on historical return rates and return policies including
stock rotation for sales to distributors that stock the Company's products.
Service revenue is either recognized when the service is performed or, in the
case of maintenance contracts, on a straight-line basis over the term of the
contract.

Warranty Reserves - The Company offers warranties of various lengths to our
customers depending on the specific product and the terms of our customer
purchase agreements. Standard warranties require the Company to repair or
replace defective product returned during the warranty period at no cost to the
customer. An estimate for warranty related costs is recorded based on actual
historical return rates and repair costs at the time of sale. On an on-going
basis, management reviews these estimates against actual expenses and makes
adjustments when necessary. While warranty costs have historically been within
expectations of the provision established, there is no guarantee that the
Company will continue to experience the same warranty return rates or repair
costs as in the past. A significant increase in product return rates or the
costs to repair our products would have a material adverse impact on the
Company's operating results.

Impairment of Long-Lived Assets. The Company assesses the impairment of
long-lived assets whenever events or changes in circumstances indicate that the
carrying value may not be recoverable under the guidance prescribed by SFAS No.
144. The Company's long-lived assets consist of real estate, property and
equipment.

At December 31, 2004 and September 30, 2004, real estate represents the only
significant remaining long-lived asset that has not been fully written down for
impairment.

Inventories. The Company values inventory at the lower of cost or market. Cost
is computed using standard cost, which approximates actual cost on a first-in,
first-out basis. Agreements with certain customers provide for return rights.
The Company is able to reasonably estimate these returns and they are accrued
for at the time of shipment. Inventory quantities on hand are reviewed on a
quarterly basis and a provision for excess and obsolete inventory is recorded
based primarily on product demand for the preceding twelve months. Historical
product demand may prove to be an inaccurate indicator of future demand in which
case the Company may increase or decrease the provision required for excess and
obsolete inventory in future periods. The Company has possession of inventory,
from a former division that was sold in 2001, which has been written off for
financial reporting purposes. If the Company is able to sell inventory in the
future that has been previously written down or off, such sales will result in
higher than normal gross margin.

Allowance for Doubtful Accounts. The Company estimates losses resulting from the
inability of its customers to make payments for amounts billed. The
collectability of outstanding invoices is continually assessed. Assumptions are

                                       18
<PAGE>

made regarding the customer's ability and intent to pay, and are based on
historical trends, general economic conditions and current customer data. Should
our actual experience with respect to collections differ from these assessments,
there could be adjustments to our allowance for doubtful accounts.

Deferred Tax Assets. The Company has provided a full valuation allowance related
to its deferred tax assets. In the future, if sufficient evidence of the
Company's ability to generate sufficient future taxable income in certain tax
jurisdictions becomes apparent, the Company will be required to reduce its
valuation allowances, resulting in income tax benefits in the Company's
consolidated statement of operations. Management evaluates the realizability of
the deferred tax assets and assesses the need for the valuation allowance each
year.

Recent Accounting Pronouncements

In December 2003, the FASB revised Interpretation No. 46, Consolidation of
Variable Interest Entities. This interpretation of Accounting Research Bulletin
No. 51 Consolidated Financial Statements, addresses consolidation of variable
interest entities. FIN 46 requires certain variable interest entities to be
consolidated by the primary beneficiary if the entity does not effectively
disperse risks among the parties involved. The provisions are effective no later
than the end of the first reporting period that ends after March 15, 2004. The
Company has no variable interest entities and accordingly the adoption of this
Interpretation did not have a material impact on the Company's financial
position or results of operations.

In April 2003, the FASB issued SFAS 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which amends SFAS 133 for certain
decisions made by the FASB Derivatives Implementation Group. In particular, SFAS
149 (1) clarifies under what circumstances a contract with an initial net
investment meets the characteristic of a derivative, (2) clarifies when a
derivative contains a financing component, (3) amends the definition of
underlying to conform it to language used in FASB interpretation number (FIN)
45, and (4) amends certain other existing pronouncements. SFAS 149 is effective
for contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. In addition, most provisions of
SFAS 149 are to be applied prospectively. The Company has no derivative
contracts and accordingly the adoption of SFAS 149 does not currently have a
material impact on the Company's financial position or results of operations.

In May 2003, the Financial Accounting Standards Board ("FASB") issued SFAS 150,
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity. SFAS 150 improves the accounting for certain financial
instruments that, under previous guidance, issuers could account for as equity.
SFAS 150 requires that those instruments be classified as liabilities in
statements of financial position. SFAS 150 is effective for interim periods
beginning after June 15, 2003. In its October 2003 meeting, the FASB Board
decided to defer the effective date of certain provisions of SFAS 150. SFAS No.
150 does not currently impact the Company's financial statements.

FASB Statement 123 (Revision 2004), "Share-Based Payment," was issued in
December 2004 and is effective for reporting periods beginning after December
15, 2005. The new statement requires all share-based payments to employees to be
recognized in the financial statements based on their fair values. The Company
currently accounts for its share-based payments to employees under the intrinsic
value method of accounting set forth in Accounting Principles Board Opinion No.
25, `Accounting for Stock Issued to Employees." Additionally, the Company
complies with the stock-based employer compensation disclosure requirements of
SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure, an amendment of FASB Statement No. 123." The Company plans to adopt
the new statement in its financial statements for the quarter and year ending
September 2005.

                                       19
<PAGE>

RISK FACTORS

THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
FOR THIS PURPOSE, STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF
HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING
THE FOREGOING, THE WORDS "BELIEVES", "ANTICIPATES", "PLANS", "EXPECTS" AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE
FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES AND ARE NOT
GUARANTEES OF FUTURE PERFORMANCE. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE INDICATED IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH UNDER THIS HEADING.

         GDC Limited Operating History Since Emerging from Bankruptcy. The
Company emerged from Bankruptcy on September 15, 2003. The Company had
voluntarily filed for protection under Chapter 11 of the US Bankruptcy Code on
November 2, 2001, after incurring seven consecutive years of losses and selling
three of its four operating divisions in 2001. Accordingly, an investor in our
common stock must evaluate the risks, uncertainties, and difficulties frequently
encountered by a Company emerging from Chapter 11 and that operates in rapidly
evolving markets such as the telecommunications equipment industry.

Due to the Company's limited and negative operating history and poor performance
since emergence, the Company may not successfully implement any of its
strategies or successfully address these risks and uncertainties. As described
by the following factors, past financial performance should not be considered to
be a reliable indicator of future performance, and investors should not use
historical trends to anticipate results or trends in future periods.

         Limited Financial Resources and Risk of Default. The Company has
virtually no current ability to borrow additional funds. It must, therefore,
substantially fund operations from cash balances and cash generated from
operating activities. The Company has significant short term obligations
including payment of professional fees and monthly payments of principal and
interest (currently such principal and interest totals approximately $340,000
per month) under its new loan agreement. Furthermore, the Company has
significant outstanding obligations and commitments approximating $49.6 million
(see Item 7 of the Company's Annual Report on Form 10-K for the year ended
September 30, 2004 as filed with the Securities and Exchange Commission, in the
section on "Liquidity" for additional discussion of this Risk Factor and the
Company's contractual cash obligations as of September 30, 2004).

The Company's failure to make required payments under the senior loan agreement
would constitute an event of default. In addition, the Company is required to
meet a financial covenant to avoid an event of default (see Notes 1 and 4 to
Notes to Financial Statements included in Item 8 of the Company's annual report
on Form 10-K). Although the Company was not in default of the financial covenant
as of September 30, 2004, it was necessary to obtain a waiver of compliance with
such covenant in order to avoid a default as the Company did not meet the
financial covenant requirement.

In fiscal 2004, which period covers most results since emerging from bankruptcy,
the Company incurred operating losses of $175,000 and a loss before
reorganization items and income taxes of $3,491,000. Furthermore, the ability of
the Company to meet cash flow and loan covenant requirements is directly
affected by the factors described in the "Risk Factors" section.

                                       20
<PAGE>

There can be no assurance that the Company will be able to avoid a default on
the new loan agreement. If there is such a default, the senior secured lenders
may accelerate payment of the outstanding debt ($12.8 million at December 31,
2004) and foreclose on their security interests which likely would require the
Company to again file for bankruptcy protection. In addition, at December 31,
2004, the Company's new loan agreement provides the lenders with warrants to (i)
purchase up to 51% (currently 35%) of the Company's common stock at $.01 per
share in the event of default, currently 35% based on repayment of debt and (ii)
purchase 10% of the Company's Common stock if the debt owing to them is not
fully paid by December 31, 2004. Such debt was not fully paid by December 31,
2004. Both such warrants and any common stock issued thereunder will be
cancelled if the lender's outstanding debt is fully paid by December 31, 2007.

         Dependence on Legacy and Recently Introduced Products and New Product
Development. The Company's future results of operations are dependent on market
acceptance of existing and future applications for the Company's current
products and new products in development. The majority of sales continue to be
provided by the Company's legacy products, primarily our DSU/CSU, V.34 lines
which represented approximately 80% of net sales in fiscal 2004. The Company
anticipates that net sales from legacy products will decline over the next
several years and net sales of new products will increase at the same time, with
significant quarterly fluctuations possible, and without assurance that sales of
new products will increase at the same time.

Market acceptance of the Company's recently introduced and future product lines
is dependent on a number of factors, not all of which are in the Company's
control, including the continued growth in the use of bandwidth intensive
applications, continued deployment of new telecommunication services, market
acceptance of multiservice access devices, the availability and price of
competing products and technologies, and the success of the Company's sales and
marketing efforts. Failure of the Company's products to achieve market
acceptance would have a material adverse effect on the Company's business,
financial condition and results of operations. Failure to introduce new products
in a timely manner in order to replace sales of legacy products could cause
customers to purchase products from competitors and have a material adverse
effect on the Company's business, financial condition and results of operations.

New products under development may require additional development work,
enhancement and testing or further refinement before the Company can make them
commercially available. The Company has in the past experienced delays in the
introduction of new products, product applications and enhancements due to a
variety of internal factors, such as reallocation of priorities, financial
constraints, difficulty in hiring sufficient qualified personnel, and unforeseen
technical obstacles, as well as changes in customer requirements. Such delays
have deferred the receipt of revenue from the products involved. If the
Company's products have performance, reliability or quality shortcomings, then
the Company may experience reduced orders, higher manufacturing costs, delays in
collecting accounts receivable, and additional warranty and service expenses.

         Customer Concentration. Our historical customers have consisted
primarily of RBOCs, long distance service providers, wireless service providers,
and Resellers who sell to these customers. The market for the services provided
by the majority of these service providers has been influenced largely by the
passage and interpretation of the Telecommunications Act of 1996 (the "1996
Act"). Service providers require substantial capital for the development,
construction, and expansion of their networks and the introduction of their
services. The ability of service providers to fund such expenditures often
depends on their ability to budget or obtain sufficient capital resources. Over
the past several years, resources made available by these customers for capital
acquisitions have declined, particularly due to recent negative market
conditions in the United States. If the Company's current or potential service

                                       21
<PAGE>

provider customers cannot successfully raise the necessary funds, or if they
experience any other adverse effects with respect to their operating results or
profitability, their capital spending programs may be adversely impacted which
could materially adversely affect the Company's business, financial condition
and results of operations.

A small number of customers have historically accounted for a majority of the
Company's sales (see Item 1. Business - Sales and Marketing). Sales to the
Company's top five customers accounted for 56% and 61% of sales in fiscal 2004
and 2003, respectively. There can be no assurance that the Company's current
customers will continue to place orders with the Company, that orders by
existing customers will continue at the levels of previous periods, or that the
Company will be able to obtain orders from new customers. GDC expects the
economic climate and conditions in the telecommunication equipment industry to
remain unpredictable in fiscal 2005, and possibly beyond. The loss of one or
more of our service provider customers, such as occurred during the past three
years through industry consolidation or otherwise, could have a material adverse
effect on our sales and operating results. A bankruptcy filing by one or more of
the Company's major customers could materially adversely affect the Company's
business, financial condition and results of operations.

         Dependence on Key Personnel. The Company's future success will depend
to a large extent on the continued contributions of its executive officers and
key management, sales, and technical personnel. Each of the Company's executive
officers, and key management, sales and technical personnel would be difficult
to replace. The Company does not have employment contracts with its key
employees. The Company implemented significant cost and staff reductions in
recent years, which may make it more difficult to attract and retain key
personnel. The loss of the services of one or more of the Company's executive
officers or key personnel, or the inability to attract qualified personnel,
could delay product development cycles or otherwise could have a material
adverse effect on the Company's business, financial condition and results of
operations.

         Dependence on Key Suppliers and Component Availability. The Company
generally relies upon several contract manufacturers to assemble finished and
semi-finished goods. The Company's products use certain components, such as
microprocessors, memory chips and pre-formed enclosures that are acquired or
available from one or a limited number of sources. Component parts that are
incorporated into board assemblies are sourced directly by the Company from
suppliers. The Company has generally been able to procure adequate supplies of
these components in a timely manner from existing sources. While most components
are standard items, certain application-specific integrated circuit chips used
in many of the Company's products are customized to the Company's
specifications. None of the suppliers of components operate under contract.
Additionally, availability of some standard components may be affected by market
shortages and allocations. The Company's inability to obtain a sufficient
quantity of components when required, or to develop alternative sources due to
lack of availability or degradation of quality, at acceptable prices and within
a reasonable time, could result in delays or reductions in product shipments
which could materially affect the Company's operating results in any given
period. In addition, as referenced above the Company relies heavily on
outsourcing subcontractors for production. The inability of such subcontractors
to deliver products in a timely fashion or in accordance with the Company's
quality standards could materially adversely affect the Company's operating
results and business.

The Company uses internal forecasts to manage its general finished goods and
components requirements. Lead times for materials and components may vary
significantly, and depend on factors such as specific supplier performance,
contract terms, and general market demand for components. If orders vary from
forecasts, the Company may experience excess or inadequate inventory of certain
materials and components, and suppliers may demand longer lead times and higher
prices. From time to time, the Company has experienced shortages and allocations
of certain components, resulting in delays in fulfillment of customer orders.

                                       23
<PAGE>

Such shortages and allocations may occur in the future, and could have a
material adverse effect on the Company's business, financial condition and
results of operations.

         Fluctuations in Quarterly Operating Results. The Company's sales are
subject to quarterly and annual fluctuations due to a number of factors
resulting in more variability and less predictability in the Company's
quarter-to-quarter sales and operating results. As a small number of customers
have historically accounted for a majority of the Company's sales, order
volatility by any of these major customers has had and may have an impact on the
Company in the prior, current and future fiscal years.

Most of the Company's sales require short delivery times. The Company's ability
to affect and judge the timing of individual customer orders is limited. Large
fluctuations in sales from quarter-to-quarter could be due to a wide variety of
factors, such as delay, cancellation or acceleration of customer projects, and
other factors discussed below. The Company's sales for a given quarter may
depend to a significant degree upon planned product shipments to a single
customer, often related to specific equipment or service deployment projects.
The Company has experienced both acceleration and slowdown in orders related to
such projects, causing changes in the sales level of a given quarter relative to
both the preceding and subsequent quarters.

Delays or lost sales can be caused by other factors beyond the Company's
control, including late deliveries by the third party subcontractors the Company
is using to outsource its manufacturing operations and by vendors of components
used in a customer's products, slower than anticipated growth in demand for the
Company's products for specific projects or delays in implementation of projects
by customers and delays in obtaining regulatory approvals for new services and
products. Delays and lost sales have occurred in the past and may occur in the
future. The Company believes that sales in the past have been adversely impacted
by merger and restructuring activities by some of its top customers. These and
similar delays or lost sales could materially adversely affect the Company's
business, financial condition and results of operations. See "Customer
Concentration" and "Dependence on Key Suppliers and Component Availability".

The Company's backlog at the beginning of each quarter typically is not
sufficient to achieve expected sales for that quarter. To achieve its sales
objectives, the Company is dependent upon obtaining orders in a quarter for
shipment in that quarter. Furthermore, the Company's agreements with certain of
its customers typically provide that they may change delivery schedules and
cancel orders within specified timeframes, typically up to 30 days prior to the
scheduled shipment date, without significant penalty. Some of the Company's
customers have in the past built, and may in the future build, significant
inventory in order to facilitate more rapid deployment of anticipated major
projects or for other reasons. Decisions by such customers to reduce their
inventory levels could lead to reductions in purchases from the Company in
certain periods. These reductions, in turn, could cause fluctuations in the
Company's operating results and could have an adverse effect on the Company's
business, financial condition and results of operations in the periods in which
the inventory is reduced.

Operating results may also fluctuate due to a variety of factors, including
market acceptance of the Company's new InnovX line of products, delays in new
product introductions by the Company, market acceptance of new products and
feature enhancements introduced by the Company, changes in the mix of products
and or customers, the gain or loss of a significant customer, competitive price
pressures, changes in expenses related to operations, research and development
and marketing associated with existing and new products, and the general
condition of the economy.

All of the above factors are difficult for the Company to forecast, and these or
other factors can materially and adversely affect the Company's business,
financial condition and results of operations for one quarter or a series of
quarters. The Company's expense levels are based in part on its expectations
regarding future sales and are fixed in the short term to a certain extent.
Therefore, the Company may be unable to adjust spending in a timely manner to

                                       23
<PAGE>

compensate for any unexpected shortfall in sales. Any significant decline in
demand relative to the Company's expectations or any material delay of customer
orders could have a material adverse effect on the Company's business, financial
condition, and results of operations. There can be no assurance that the Company
will be able to sustain profitability on a quarterly or annual basis. In
addition, the Company has had, and in some future quarter may have operating
results below the expectations of public market analysts and investors. In such
event, the price of the Company's Common Stock would likely be materially and
adversely affected. See "Potential Volatility of Stock Price".

         Competition. The market for telecommunications network access equipment
addressed by the Company's products can be characterized as highly competitive,
with intensive equipment price pressure. This market is subject to rapid
technological change, wide-ranging regulatory requirements, the entrance of low
cost manufacturers and the presence of formidable competitors that have greater
name recognition and financial resources. Certain technology such as the V.34
and DSU/CSU portion of the SpectraComm and InnovX lines are not considered new
and the market has experienced decline in recent years.

Industry consolidation could lead to competition with fewer, but stronger
competitors. In addition, advanced termination products are emerging, which
represent both new market opportunities, as well as a threat to the Company's
current products. Furthermore, basic line termination functions are increasingly
being integrated by competitors, such as Cisco, Lucent Technologies, Inc. and
Nortel Networks, into other equipment such as routers and switches. To the
extent that current or potential competitors can expand their current offerings
to include products that have functionality similar to the Company's products
and planned products, the Company's business, financial condition and results of
operations could be materially adversely affected. Many of the Company's current
and potential competitors have substantially greater technical, financial,
manufacturing and marketing resources than the Company. In addition, many of the
Company's competitors have long-established relationships with network service
providers. There can be no assurance that the Company will have the financial
resources, technical expertise, manufacturing, marketing, distribution and
support capabilities to compete successfully in the future.

         Rapid Technological Change. The network access and telecommunications
equipment markets are characterized by rapidly changing technologies and
frequent new product introductions. The rapid development of new technologies
increases the risk that current or new competitors could develop products that
would reduce the competitiveness of the Company's products. The Company's
success will depend to a substantial degree upon its ability to respond to
changes in technology and customer requirements. This will require the timely
selection, development and marketing of new products and enhancements on a
cost-effective basis. The development of new, technologically advanced products
is a complex and uncertain process, requiring high levels of innovation. The
Company may need to supplement its internal expertise and resources with
specialized expertise or intellectual property from third parties to develop new
products.

Furthermore, the communications industry is characterized by the need to design
products that meet industry standards for safety, emissions and network
interconnection. With new and emerging technologies and service offerings from
network service providers, such standards are often changing or unavailable. As
a result, there is a potential for product development delays due to the need
for compliance with new or modified standards. The introduction of new and
enhanced products also requires that the Company manage transitions from older
products in order to minimize disruptions in customer orders, avoid excess
inventory of old products and ensure that adequate supplies of new products can
be delivered to meet customer orders. There can be no assurance that the Company
will be successful in developing, introducing or managing the transition to new
or enhanced products, or that any such products will be responsive to
technological changes or will gain market acceptance. The Company's business

                                       24
<PAGE>

financial condition and results of operations would be materially adversely
affected if the Company were to be unsuccessful, or to incur significant delays
in developing and introducing such new products or enhancements. See "Dependence
on Legacy and Recently Introduced Products and New Product Development".

         Compliance with Regulations and Evolving Industry Standards. The market
for the Company's products is characterized by the need to meet a significant
number of communications regulations and standards, some of which are evolving
as new technologies are deployed. In the United States, the Company's products
must comply with various regulations defined by the Federal Communications
Commission and standards established by Underwriters Laboratories and Bell
Communications Research and new products introduced in the SpectraComm line will
need to be NEBS Certified. As standards continue to evolve, the Company will be
required to modify its products or develop and support new versions of its
products. The failure of the Company's products to comply, or delays in
compliance, with the various existing and evolving industry standards, could
delay introduction of the Company's products, which could have a material
adverse effect on the Company's business, financial condition and results of
operations.

         GDC May Require Additional Funding to Sustain Operations. The Company
emerged from Chapter 11 bankruptcy on September 15, 2003. Under the plan of
emergence, the Company plans to pay all creditors 100% of their allowed claims
based upon a five year business plan. The ability to meet the objectives of this
business plan is directly affected by the factors described in this section
"Risk Factors". The Company cannot assure investors that it will be able to
obtain new customers or to generate the increased revenues required to meet our
business plan objectives. In addition, in order to execute the business plan,
the Company may need to seek additional funding through public or private equity
offerings, debt financings or commercial partners. The Company cannot assure
investors that it will obtain funding on acceptable terms, if at all. If the
Company is unable to generate sufficient revenues or access capital on
acceptable terms, it may be required to (a) obtain funds on unfavorable terms
that may require the Company to relinquish rights to certain of our technologies
or that would significantly dilute our stockholders and/or (b) significantly
scale back current operations. Either of these two possibilities would have a
material adverse effect on the Company's business, financial condition and
results of operations.

         Risks Associated With Entry into International Markets. The Company to
date has had minimal direct sales to customers outside of North America since
2001. The Company has little recent experience in international markets with the
exception of a few direct customers and resellers/integrators. The Company
intends to expand sales of its products outside of North America and to enter
certain international markets, which will require significant management
attention and financial resources. Conducting business outside of North America
is subject to certain risks, including longer payment cycles, unexpected changes
in regulatory requirements and tariffs, difficulties in supporting foreign
customers, greater difficulty in accounts receivable collection and potentially
adverse tax consequences. To the extent any Company sales are denominated in
foreign currency, the Company's sales and results of operations may also be
directly affected by fluctuations in foreign currency exchange rates. In order
to sell its products internationally, the Company must meet standards
established by telecommunications authorities in various countries, as well as
recommendations of the Consultative Committee on International Telegraph and
Telephony. A delay in obtaining, or the failure to obtain, certification of its
products in countries outside the United States could delay or preclude the
Company's marketing and sales efforts in such countries, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.

         Risk of Third Party Claims of Infringement. The network access and
telecommunications equipment industries are characterized by the existence of a
large number of patents and frequent litigation based on allegations of patent
infringement. From time to time, third parties may assert exclusive patent,
copyright, trademark and other intellectual property rights to technologies that
are important to the Company. The Company has not conducted a formal patent

                                       25
<PAGE>

search relating to the technology used in its products, due in part to the high
cost and limited benefits of a formal search. In addition, since patent
applications in the United States are not publicly disclosed until the related
patent is issued and foreign patent applications generally are not publicly
disclosed for at least a portion of the time that they are pending, applications
may have been filed which, if issued as patents, could relate to the Company's
products. Software comprises a substantial portion of the technology in the
Company's products. The scope of protection accorded to patents covering
software-related inventions is evolving and is subject to a degree of
uncertainty which may increase the risk and cost to the Company if the Company
discovers third party patents related to its software products or if such
patents are asserted against the Company in the future.

The Company may receive communications from third parties asserting that the
Company's products infringe or may infringe the proprietary rights of third
parties. In its distribution agreements, the Company typically agrees to
indemnify its customers for any expenses or liabilities resulting from claimed
infringements of patents, trademarks or copyrights of third parties. In the
event of litigation to determine the validity of any third-party claims, such
litigation, whether or not determined in favor of the Company, could result in
significant expense to the Company and divert the efforts of the Company's
technical and management personnel from productive tasks. In the event of an
adverse ruling in such litigation, the Company might be required to discontinue
the use and sale of infringing products, expend significant resources to develop
non-infringing technology or obtain licenses from third parties. There can be no
assurance that licenses from third parties would be available on acceptable
terms, if at all. In the event of a successful claim against the Company and the
failure of the Company to develop or license a substitute technology, the
Company's business, financial condition, and results of operations could be
materially adversely affected.

         Limited Protection of Intellectual Property. The Company relies upon a
combination of patent, trade secret, copyright, and trademark laws and
contractual restrictions to establish and protect proprietary rights in its
products and technologies. The Company has been issued certain U.S. and Canadian
patents with respect to certain products. There can be no assurance that third
parties have not or will not develop equivalent technologies or products without
infringing the Company's patents or that a court having jurisdiction over a
dispute involving such patents would hold the Company's patents valid,
enforceable and infringed. The Company also typically enters into
confidentiality and invention assignment agreements with its employees and
independent contractors, and non-disclosure agreements with its suppliers,
distributors and appropriate customers so as to limit access to and disclosure
of its proprietary information. There can be no assurance that these statutory
and contractual arrangements will deter misappropriation of the Company's
technologies or discourage independent third-party development of similar
technologies. In the event such arrangements are insufficient, the Company's
business, financial condition and results of operations could be materially
adversely affected. The laws of certain foreign countries in which the Company's
products are or may be developed, manufactured or sold may not protect the
Company's products or intellectual property rights to the same extent as do the
laws of the United States and thus, make the possibility of misappropriation of
the Company's technology and products more likely.

         Potential Volatility of Stock Price. The trading price of the Company's
Common Stock may be subject to wide fluctuations in response to
quarter-to-quarter variations in operating results, announcements of
technological innovations or new products by the Company or its competitors,
developments with respect to patents or proprietary rights, general conditions
in the telecommunication network access and equipment industries, changes in
earnings estimates by analysts, or other events or factors. In addition, the
stock market has experienced extreme price and volume fluctuations, which have
particularly affected the market prices of many technology companies and which

                                       26
<PAGE>

have often been unrelated to the operating performance of such companies.
Company-specific factors or broad market fluctuations may materially adversely
affect the market price of the Company's Common Stock. The Company has
experienced significant fluctuations in its stock price and share trading volume
in the past and may continue to do so.

         The Company is Controlled by a Small Number of Stockholders and Certain
Creditors. In particular, Mr. Modlin, Chairman of the Board and Chief Executive
Officer, and President of Weisman Celler Spett & Modlin, P.C., legal counsel for
the Company, owns approximately 69% of the Company's outstanding shares of Class
B stock. Furthermore, Mr. Modlin is also executor of the estate of Mr. Charles
P. Johnson, the former Chairman of the Board and Chief Executive Officer, and
such estate owns approximately 27% of the outstanding shares of Class B stock.
Class B stock under certain circumstances has 10 votes per share in the election
of Directors. The Board of Directors is to consist of no less than three and no
more than thirteen directors, one of which was designated by the Creditors
Committee (and thereafter may be designate by the Trustee). The holders of the
9% Preferred Stock are presently entitled to designate two directors until all
arrears on the dividends on such 9% Preferred Stock are paid in full. In
addition, until the Company's primary secured loan obligations are paid in full,
the primary secured lender, Ableco Finance LLC ("Ableco") is entitled to
designate three directors and, upon default in its loan, its affiliate shall
have the right under the two warrants it holds, to (i) acquire from 5%
(currently 35%) to 51% of the outstanding Common Stock depending on the amount
of the outstanding secured debt at such time, and (ii) acquire 10% of the
outstanding Common Stock on a diluted basis. If Ableco's loan is not repaid in
full by September 15, 2006, the Trustee may designate two more directors, and in
the event of a payment default under the Debentures which is not cured within 60
days after written notice, the Trustee shall be entitled to select a majority of
the Board of Directors. Accordingly, in the absence of a default under Ableco's
loan, or a payment default under the Debentures, Mr. Modlin may be able to elect
all members of the Board of Directors not designated by the holders of the 9%
Preferred Stock, Ableco and the Trustee and determine the outcome of certain
corporate actions requiring stockholder approval, such as mergers and
acquisitions of the Company. This level of ownership by such persons and
entities could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, control of
the Company. Such provisions could limit the price that certain investors might
be willing to pay in the future for shares of the Company's Common Stock,
thereby making it less likely that a stockholder will receive a premium in any
sale of shares. To date, the holders of the 9% Preferred Stock and Ableco have
not designated any directors.

ITEM 3.  CONTROLS AND PROCEDURES

For the period covered by this report, the Company carried out an evaluation,
under the supervision and with the participation of the Company's management,
including the Company's President and Chief Executive Officer, and Vice
President and Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-15. Based upon that evaluation, the Company's President
and Chief Executive Officer, and Vice President and Chief Financial Officer,
have concluded that the Company's disclosure controls and procedures are
effective to ensure the information required to be disclosed in reports filed or
submitted under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. There have been no significant changes in
the Company's internal controls over financial reporting that occurred during
the period covered by this Quarterly Report on Form 10-QSB that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.

                                       27
<PAGE>

                           PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

Not applicable

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Payment of dividends on the 9% Cumulative Convertible Exchangeable Preferred
Stock were suspended June 30, 2000. Such dividend arrearages total $7,977,487.50
as of December 31, 2004.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable

ITEM 5.  OTHER INFORMATION

Reference is made to Note 7. Subsequent Events for description of new 2005 Stock
and Bonus Plan.

ITEM 6.  EXHIBITS

(a)      Exhibits Index:

Exhibit Number    Description of Exhibit
--------------    ----------------------

10.1              2005 Stock and Bonus Plan

31.1              Certification of Chief Executive Officer pursuant to Rule
                  13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act
                  of 1934.

31.2              Certification of Chief Financial Officer pursuant to Rule
                  13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act
                  of 1934

32.1              Certification of Chief Executive Officer and Chief Financial
                  Officer pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

                                       28
<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.


February 14, 2005                   /s/ WILLIAM G. HENRY
                                    --------------------------------------------
                                    William G. Henry
                                    Vice President, Finance and Administration
                                    Chief Financial Officer


                                       29