FORM 10-K/A

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
	
[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 
15(d) OF THE SECURITIES EXCHANGE ACT OF 
1934 (FEE REQUIRED)

For the fiscal year ended December 31, 1996

OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 
OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 
1934 (NO FEE REQUIRED) 

For the transition period from              to             

Commission File Number:  0-11551


                    EXECUTONE Information Systems, Inc.          
          (Exact name of registrant as specified in its charter)

           Virginia                                    86-0449210
(State or other jurisdiction of incorporation        (I.R.S.  Employer
or organization)                                    Identification No.)

478 Wheelers Farms Road, Milford, Connecticut             06460       
(Address of principal executive offices)               (Zip Code)


Registrant's telephone number, including area code:  (203)876-7600


Securities registered pursuant to Section 12(b) of the Act:

Title of each class               Name of each exchange on which registered
        N/A                                       None

Securities registered pursuant to Section 12(g) of the Act:

   
Common Stock, par value $.01 per share
7 1/2% Convertible Subordinated Debentures, Due March 15, 2011

    
   
                                                        
(Title of Class) 
                                                               

<PAGE>



Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act 
of 1934 during the preceding 12 months (or for such shorter period that 
the registrant was required to file such reports), and (2) has been subject 
to such filing requirements for the past 90 days.    Yes  X        No ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 
405 of Regulation S-K is not contained herein, and will not be contained, 
to the best of registrant's knowledge, in definitive proxy or information 
statements incorporated by reference in Part III of this Form 10-K or any 
amendment to this Form 10-K.  [  ]

The aggregate market value of the common stock held by non-affiliates 
of the registrant (assuming for this purpose that all executive officers and 
directors of the registrant are affiliates) as of March 24, 1997 was 
$117,323,737, based on the last sale price for the common stock on that 
date.


    
   
The number of shares outstanding of the registrant's only class of 
common stock, $.01 par value per share, as of March 24, 1997, was 
49,471,481.

    
   

                        DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference into the Part of 
this Form 10-K indicated below:

    
   
Part II     1996 Annual Report to Shareholders

    
   

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          TABLE OF CONTENTS


Item                                                                  Page


PART I


1.          Business                                                    1
2.          Properties                                                 11
3.          Legal Proceedings                                          11
4.          Submission of Matters to a Vote of Security Holders        12
             Executive Officers of the Registrant                      13



PART II

5.         Market for Registrant's Common Equity and Related           
            Stockholder Matters                                        16
6.         Selected Financial Data                                     16
7.         Management's Discussion and Analysis of Financial Condition  
            and Results of Operations                                  16
8.         Financial Statements and Supplementary Data                 16
9.         Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure                        16


PART III

10.      Directors and Executive Officers of the Registrant            17
11.      Executive Compensation                                        18
12.      Security Ownership of Certain Beneficial Owners and
           Management                                                  25
13.      Certain Relationships and Related Transactions                29


PART IV

14.        Exhibits, Financial Statement Schedules and Reports on Form 8-K   
                                                                       30
   

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PART I

ITEM 1.    BUSINESS

General

EXECUTONE Information Systems, Inc. ("EXECUTONE" or the 
"Company") develops, markets and supports voice and data 
communications systems.  Products and services include telephone 
systems, voice mail systems, in-bound and out-bound call center 
systems and specialized healthcare communications systems.  The 
Company, through its Unistar Entertainment subsidiary, also has the 
exclusive right to design, develop and manage the National Indian Lottery 
(the "NIL" or the "Lottery").    Products are sold under the EXECUTONE'r', 
INFOSTAR'r', IDS'tm', LIFESAVER'tm', INFOSTAR/ILS'tm' and UNISTAR'tm' 
brand names through a worldwide network of direct sales and service 
employees and independent distributors.

EXECUTONE's executive offices are located at 478 Wheelers 
Farms Road, Milford, Connecticut 06460, telephone (203) 876-7600.  
The Common Stock of EXECUTONE is traded on the NASDAQ National 
Market System under the symbol "XTON", and its Convertible 
Subordinated Debentures due 2011 trade on the NASDAQ system under 
the symbol "XTONG".


Recent Developments

In  1996, the Company sold its direct sales and service 
organization, including its network services division and the national 
service center, to Clarity Telecom Holdings, Inc. d/b/a/ Executone 
Business Solutions ("Clarity") for consideration valued at $69.6 million.  
The Company and Clarity also entered  into a five-year exclusive 
distributor agreement pursuant to which Clarity sells and services 
EXECUTONE'r' and INFOSTAR'r' telephone products to business and 
commercial locations that require up to 400 telephones.

The sale did not include the Pittsburgh direct sales and service 
office, which the Company separately sold to one of its existing 
independent distributors. 

After the sale, the Computer Telephony business consists of 
telephone products sales to independent distributors, of which Clarity is 
the largest distributor, along with the National Accounts and Federal 
Systems marketing groups.  The Company retains its Healthcare 
Communications and Call Center Management businesses and the 
Unistar business.

In April 1996, the Company rescinded its distribution agreement 
with GPT Video Systems due to failures by GPT to deliver properly 
functioning videoconferencing products on a timely basis.  The Company 
has also commenced a legal action against GPT to recover its damages. 
 In June 1996, the Company completed the sale of its videoconferencing 
division, including customer service contracts and certain inventory.

On December 19, 1995, the Company acquired 100% of the 
common stock of Unistar Gaming Corp., a Delaware corporation 
("Unistar Gaming").  Unistar Gaming, through its subsidiary Unistar 
Entertainment, Inc. ("Unistar"), has an exclusive five-year contract to 
design, develop, finance, and manage the Lottery, a national lottery 

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authorized by federal law and by a compact between the State of Idaho 
and the Coeur d'Alene Indian Tribe of Idaho ("Coeur d'Alene Tribe" or the 
"Tribe").  In return for providing these management services, Unistar will 
be paid a fee equal to 30% of the profits of the Lottery.

The Company acquired 100% of Unistar for 3.7 million shares of 
Common Stock, 250,000 shares of its Cumulative Convertible Preferred 
Stock, Series A ("Series A Preferred Stock") and 100,000 shares of its 
Cumulative Contingently Convertible Preferred Stock, Series B ("Series B 
Preferred Stock").

    
   
The telephone operations of the Lottery may not begin until the 
resolution of a pending legal proceeding.  Certain states have attempted 
to block the NIL by filing letters under 18 U.S.C. Section 1084 preventing 
long-distance carriers from providing telephone service to the NIL based 
on allegations that the NIL is not legal.  The Coeur d'Alene Tribe has 
initiated legal action to argue that the Lottery is authorized by the Indian 
Gaming Regulatory Act ("IGRA")  passed in 1988, that IGRA preempts state and 
federal statutes, that Section 1084 is inapplicable and that the states lack
authority to issue the Section 1084 notification letters to any carrier.  On
February 28, 1996, the Coeur d'Alene Tribal Court ruled that all requirements
of IGRA have been satisfied, that Section 1084 is inapplicable and that the
states lack jurisdiction to interfere with the NIL which will operate in
Idaho on the Reservation, and that the long distance carrier cannot 
refuse service to the NIL based upon Section 1084, an allegation that 
the NIL is in violation of IGRA or the federal anti-lottery statutes.  
This  ruling and a related order dated May 1,1996 are being appealed 
to the Tribal Appellate Court and probably will be appealed ultimately 
to United States federal courts as well. The Company has been advised by 
its outside counsel, Hunton & Williams, that based upon such firm's review 
of the applicable statutes, regulations and case law, it believes 
that the National Indian Lottery is authorized under IGRA and that the 
favorable rulings issued by the Coeur d'Alene Tribal Court on February 
28, and May 1, 1996 should be upheld on appeal.

    
   
Overview of Business 


    
   
The Company's revenues are derived from product sales to distributors,
direct sales of healthcare communications and call center products,
and direct sales to national accounts and federal government customers,
as well as installations, additions, changes, upgrades or relocation of
previously installed systems, maintenance contracts, and service charges
to the existing base of healthcare, call center, national account and federal
government customers.  The Company's products and services are
marketed and sold through a national network of Company direct sales and
service employees and independent distributors.

    
   

The Computer Telephony business offers value-added products 
and services to the small to medium-sized business customer.  The 
Company's integrated digital telephone systems emphasize flexible 
software applications, such as data switching and computer telephone 
interface, designed to enhance the customer's ability to communicate, 
obtain and manage information.  The Company's telephone systems 
provide the platform for its other voice and data software applications, 
such as automatic call distribution.

The Healthcare Communications business provides to its 
healthcare facility customers integration of voice and data between nurse 
and patient communication systems and hospital information systems, 
resulting in increased flexibility and efficiency in hospital operations, and 
improved patient care.  EXECUTONE has been a recognized name in 
this market for many years with its LIFESAVER'tm' and CARE/COM'r'II-E 
nurse call systems.  The Company markets software applications specific 
to hospital and nursing homes to help resolve other labor intensive tasks.

The Healthcare Communications business also markets the 
INFOSTAR/ILS'tm' locator system, which can improve productivity, save 
time and expense for users and eliminate overhead paging by instantly 
locating staff and equipment in a facility.  Each 

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person or piece of 
equipment wears an individually coded badge that transmits infrared 
signals to sensors placed throughout the facility, which forward the 
location information to a central processing unit.  The ILS system can be 
integrated with the Company's telephone systems and nurse call systems 
to provide additional productivity improvements for hospital environments.


    
   
The Call Center Management business develops and sells 
sophisticated telephony products that integrate a computerized digital 
telephone system platform with high-volume inbound, outbound and 
internal call processing systems.  Such systems include automatic call 
distribution systems, predictive dialing systems, and scripting software to 
assist agents handling calls.  Certain of these systems also provide data 
interface with host or mainframe computers.  These systems are sold to 
call center customers that have a need for systems to efficiently and cost-
effectively receive or place their customer or prospect calls, distribute 
those calls to available live operators, obtain information from callers, 
record and distribute messages from callers, and produce management 
reports on call activity.

    
   

In 1995, the Company acquired Unistar.  Unistar has an 
exclusive five-year contract with the Coeur d'Alene Tribe to design, 
develop, finance, and manage the Lottery, a national lottery authorized by 
IGRA  and a compact between the State of Idaho and the Tribe. Unistar 
provides development and management of the software, network design 
and call center applications for the Lottery's operations.

The telephone operations of the Lottery may not begin until 
resolution of a pending legal proceeding.  See "Legal Proceedings"  
Although the Unistar legal situation is essentially unchanged, 
management is hopeful that the Tribe will receive a positive decision 
early this year in the Tribal Appellate Court, affirming the Tribal Court's 
rulings last year on the legality of the National Indian Lottery, and that 
such a decision will accelerate a federal court decision.  In the meantime, 
Unistar is developing the business and gaming systems needed to 
conduct the Lottery, and plans to test these systems at an Internet test 
site between April and June 1997.  Assuming the successful completion 
of these tests, Unistar plans a controlled expanded test from July to 
September, and assuming continued successful results, a national 
launch over the Internet in the fourth quarter of 1997.

Computer Telephony Products


    
   
The Company develops and distributes a complete line of 
applications-oriented computer telephony products that are easy to 
install, easy to maintain and easy to use, and that create visible value for 
its customers.  The Company's complete portfolio of applications are 
built upon the Integrated Digital System (IDS'tm') family of digital telephone 
systems.  Products range from PBXs to satisfy the basic voice 
communications needs of small- to medium-sized businesses to 
standards-compliant CT applications, standalone and LAN-based 
applications including voice mail, unified messaging, Automatic Call 
Distribution (ACD) and wireless communications.

    
   
The Company's telephone systems are characterized by flexible 
software and a hardware design that makes them readily adaptable to 
evolving technology and customer requirements.  The Company 
attributes the market acceptance of its systems to standards-based, cost-
effective design and to the sophistication of its software options.  The 
Company's systems include an integrated automated attendant feature to 
answer and transfer calls quickly and efficiently without operator 
intervention. The Integrated Operator Terminal and management reports 
capabilities permit the monitoring of calls and improve the efficiency of 
directing calls to the appropriate extensions.  The Company's latest 
achievement in call processing, the Ultimate Operator, takes the 
operator's console to a new level by delivering superior call handling and 
reporting 

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capabilities in a Windows environment.  The IDS systems also 
support sophisticated call center and healthcare applications in addition 
to the Company's Integrated Locator System.  The recent introduction of 
the Company's LAN Card allows users with access to their organization's 
network to manage the IDS through their desktop PCs.

The Company has steadily introduced a portfolio of products fully 
compliant with the latest industry standards (TAPI, TSAPI, CSTA) and 
incorporating the most advanced elements of computer telephony 
integration.  The TAPI telephones support any desktop application using 
the TAPI standard for computer-telephone integration. Unified Messaging 
and Voice Activated Speed Dial further increase productivity by speeding 
the calling process.

The Company also offers a voice mail system that can be 
integrated with the IDS telephone systems and with telephone systems 
manufactured by others.  The INFOSTAR/VX2 voice mail system 
receives, records, stores, distributes, transfers and replays messages 
from both external and internal callers and can supplement other call 
center systems.  In 1996 the Company introduced the INFOSTAR/VXC 
Voice Exchange Card, a complete voice processing system built on a 
card that integrates directly into the IDS switch, eliminating the need for a 
standalone voice mail system.  In 1997, the Company signed an 
agreement to distribute the Active Voice line of voice processing and 
unified messaging products.

The Company develops its application-specific software options 
using high-level programming languages to facilitate further 
enhancements and portability.  EXECUTONE's software includes remote 
capabilities built into certain systems that enable the Company to 
customize and update selected features continuously, which increases 
the value of such systems and lengthens their useful lives.  Certain of the 
Company's systems are capable of having service diagnostics, updates 
and modifications performed on a remote basis.  The ability to provide 
such off-site servicing increases the efficiency of customer support and 
service.

Healthcare Communication Products


    
   
The Company develops, manufactures, markets and services a 
line of specialized internal communications systems that are used 
primarily in the healthcare industry.  These internal communications 
systems are microprocessor-based patient-to-nurse communication 
systems, intercoms, paging and sound equipment, and room status 
indicators. 

    
   

    
   
Platform Systems.  Released on January 17, 1997, the 
Healthcare Communications Platform (HCP) is the communications 
solution dedicated to a single platform technology for complete systems 
integration.  The HCP exemplifies the Company's commitment to provide 
total communication capability.  With the HCP system, the nurse call 
function is now integrated with an IDS phone system to provide the dual 
function at one master control center.  Nurse call, locator, wireless 
phones, pocket pagers, patient reports, and management reports can all 
integrate seamlessly using a single platform fully utilizing all product 
benefits.

    
   
Nurse Call Systems.  The Company's LIFESAVER'tm' nurse call 
system is an advanced system integrating voice and data communication 
between nurse and patient and providing enhanced self-diagnostics.  The 
LIFESAVER system is a state-of-the-art communications network that 
provides routine and emergency signaling, voice communications and 
data transmission.  The nurse console offers menu-driven functions and 
step-by-step user prompts.  The system is highly flexible, offering many 
programmable features that allow customization of its operations to the 
hospital's needs.  A single system can serve more than 300 patient beds 
(150 rooms) and up to eight nurse 

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control stations, and up to eight 
systems can be networked for centralized operation. The LIFESAVER 
integrates with the Company's locator system.


    
   
The CARE/COM  II-E nurse call system represents the first step 
in EXECUTONE's plan to bring the benefits of a totally integrated 
communications system to the healthcare market on the Company's IDS 
digital platform.  The CARE/COM lI-E system provides patient-to-staff 
and staff-to-staff voice communication on an automatic three-level call 
priority basis.  This new system can currently support 72 patient stations 
per system, with the ability to integrate three systems together and 
support 216 patient stations.  A five-line LCD display Nurse Control 
Station allows simple call processing and system operation.  The system 
is highly flexible to meet the individually defined needs of today's 
hospitals and long-term care facilities.

    
   
Patient Reporting Systems.  The Healthcare Division also 
markets the INFOSTAR /PRS patient reporting system, an automated 
voice storage system that allows the efficient transfer of patient 
information between nurses.  Patient reports are password-protected for 
confidentiality and admission, and discharge and transfer information are 
also supported.  The system uses standard telephone instruments and 
provides full voice messaging capability.  The INFOSTAR/PRS system 
reduces report time, provides continuity at shift changes, and improves 
report quality.


    
   
Locator Systems.  The Company's INFOSTAR/ILS'tm' locator 
system is an integrated system using infrared transmitter badges to 
communicate location data to sensors installed throughout a facility.  The 
badges transmit regularly at user-programmed intervals and can be worn 
by staff personnel or attached to equipment.  The location data is 
collected by the sensors and forwarded to a central processing unit that 
organizes the data so it can be accessed at one or more display stations. 
 The display of staff and equipment location information can be in the 
form of a list or in the form of a map of the facility using icons.  The 
display can be filtered to show only particular staff members, groups of 
personnel, particular pieces of equipment or groups of equipment.  The 
system can be integrated with either the IDS telephone systems, allowing 
the activation of features and display of information on the telephone set, 
or the Company's nurse call systems, allowing the activation of features 
and display of information at the nurse control station and patient 
stations.  The INFOSTAR/VLS version of this product allows outside 
callers using non-IDS based products to locate personnel within a facility, 
find out who the person is with, complete the call, or leave a voice 
message.  The ILS and VLS systems can also be integrated to other 
manufacturers' PBXs.  Nortel has now made ILS available to its dealer 
network for sale by its dealers in conjunction with Nortel PBXs.  The ILS 
system is also marketed by the Computer Telephony sales channels for 
office environments.

    
   
The Events Processing System collects information from the ILS 
system and associates the data to logical, workable and productive real 
time data for a customer's employees and assets.  Specific applications 
include:  door monitoring, wandering patient alert, staff presence 
indicators, badge button press (staff assist or emergency assist), asset 
management and equipment tracking.  The system allows a facility to 
program events that will trigger alarms, lock doors, light lights, open 
elevator doors, and more.  The system is completely programmable, 
which allows the customer to determine which applications will best fit 
their needs.

Wireless Telephone Systems.  The Healthcare Communications 
group also markets the Ericsson Freeset, an in-building wireless 
communications system which operates on the 900MHz bandwidth.  Its 
low power output (.75mW) makes it ideal for the healthcare environment, 
which is very sensitive to high power devices such as cellular telephones 
and 2-way radios that may interfere with vital telemetry equipment.  The 
Freeset system is extremely flexible in providing complete coverage over 
a large area 

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based on its ability to add as many base stations as 
necessary to provide coverage.  The system can grow to support up to 
600 handsets, making it the system of choice for large installations.

The Company also markets the Monarch'tm' 1.9GHz Wireless 
Telephone System, which is an in-building wireless communications tool 
that provides cellular-like mobility to a facility without expensive airtime 
charges.  The Monarch system operates on the 1.9GHz U-PCS 
bandwidth set aside by the FCC strictly for personal communications use 
which means the signal will not cause interference or be interfered with 
by conventional telemetry equipment.  The Monarch system can support 
up to 2 base stations per system, providing a coverage area of over 
250,000 square feet in a typical office environment.  In an open 
warehouse environment, the coverage is much greater.  Each base 
station allows for eight simultaneous conversations and the Monarch 
system can support a maximum of up to 32 handsets.


    
   
Other Communication Products.  The INFOSTAR 'r'/StatLink 'tm' 
product is designed to provide call management and integration of 
EXECUTONE nurse call systems to telephone numbers, wireless 
telephones and pager devices.  INFOSTAR/StatLink has the flexibility to 
modify patient call flow based on the specific requirements of the 
healthcare facility.  Calls can be routed on a 4-level priority basis to any 
extension, telephone or site pager configured in the database.  The 
system is a communications solution that can be integrated with any 
PBX.   Patient priorities and requests can be managed more efficiently 
and calls can be completed on a more timely basis with less strain on the 
staff and patients.

    
   
The INFOSTAR'r'/InfoSTAT'tm' product is a software package 
intended for use in emergency departments to provide complete 
communication of real time events and data.  Used as a daily operational 
tool, the InfoSTAT system provides emergency staff with priority data and 
conditions affecting the department.  Staff can check at a glance the 
status of treatment rooms, room and bed assignments, hospital staff 
assignment and location, and patient status and location.  InfoSTAT is 
customized for each hospital and integrates with a facility's existing 
administrative software such as ADT systems.  

Call Center Management Products 

 The Company's call center management products consist of the 
following systems, which can be integrated with the Company's computer 
telephone systems and with each other to provide large-volume inbound, 
outbound and internal call management.  Computer-telephone integration 
("CTI") technology integrates the IDS'tm' call processing function with 
information in a customer's computer database.  Primarily used by large 
incoming call centers to automatically identify incoming callers and by 
outbound centers to contact and provide records of contacts, CTI limits 
the amount of time that an agent spends contacting or identifying the 
caller, thereby providing better customer service, reducing the number of 
required agents and reducing telephone line and transmission expense.  


    
   
 Predictive Dialers and Scripting Products - The 
INFOSTAR'r'/Predictive Dialer is an automated call system designed to 
boost productivity in outbound call centers.  The system integrates 
telephone, data collection and  transaction processing functions for those 
customers who require high volume contact by telephone to transact 
business, such as sales, credit and collections, blood banks and fund-
raising.  Working with the host computer and the IDS'tm' telephone system 
platform, the dialer automatically dials telephone numbers pulled from the 
host computer database and detects "live" calls.  Available 
representatives receive these calls and, through CTI, can view screen 
information about the customer from the database immediately after the 
customer answers the phone.  The system predicts the availability of 
agents in order to reduce 

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abandoned calls and increase agent 
productivity, and reduces agent contact with busy signals, no answers, 
wrong numbers and answering machines.  Management reports provide 
instant and historical feedback on call distribution, list management, data 
input integrity and file maintenance.  Scripting software allows the call 
center to create a script to guide its agents through various call scenarios 
and prompt the input of desired information.

    
   

    
   
Automatic Call Distribution ("ACD") - ACD systems are designed 
to increase responsiveness to inbound callers and increase agent 
productivity.  ACD systems provide the capability to distribute or route 
incoming calls to available agents based upon management's 
specifications,  and allow the supervisor of the call processing group to 
monitor call traffic on-line via a computer terminal.  The Company 
produces ACD software for call centers of up to 500 agents in multiple 
shifts (225 in any single shift), in five levels of sophistication, 
the highest of which is "Custom Plus ACD."  Custom Plus ACD provides the 
capability to store and retrieve call data for a limited period,  print out 
standard call traffic reports, customize reports to the needs of a specific 
application, monitor traffic with color screens and graphics, and greatly 
enhance the ability to store and retrieve historical call data.

    
   
Sales and Marketing

The Company's distribution network consists of (1) domestic 
independent distributors with approximately 180 locations operating 
under exclusive and nonexclusive agreements throughout the United 
States and Canada; (2)  138 direct healthcare and call center sales and 
service employees in the United States; (3) a National Accounts group 
that uses the sales, installation, service and support capabilities of 
EXECUTONE's distribution network to serve multiple offices and 
departments of companies; (4) a Government Systems group that uses 
the distribution network to serve offices of federal, state and local 
government agencies; and (5) 24 independent distributors operating in 17 
other foreign countries.

For those distributors that have exclusive distribution rights for 
specified products, retention of such rights is subject to satisfaction of 
established criteria for sales and service to customers on an ongoing 
basis. The divesting of or acquisition of customer bases to or from 
distributors in specific geographic territories may occur in the normal 
course of the Company's business.

EXECUTONE's National Accounts business provides uniformity 
in pricing, coordination, installation, billing and service for National 
Accounts customers such as Electronic Data Systems, Airborne Express, 
Paychex, Inc., W. W. Grainger, Home Quarters Warehouse, Inc., 
Bridgestone/Firestone, Carlson Companies, PetsMart  and TCI Cable.  
The National Accounts group coordinates the sales, installation, service 
and support functions of independent sales offices to serve the multiple 
offices and departments of large companies.

The Company's Government Systems group addresses the 
special procurement and administrative requirements of federal, state 
and local government agencies.  Sales are made through a combination 
of master contracts and competitively solicited proposals for large or 
complex telecommunications requirements.  Government Systems 
coordinates the installation, service and support activities of independent 
sales offices to provide ongoing support to government agency offices 
nationwide.


    
   
Although the Company offers a broad range of products through 
various sales channels nationwide, computer telephony product 
purchases by Clarity, the purchaser of the Company's direct sales and 
service organization and the Company's largest distributor, represented a 
significant portion of the Company's total revenues in 1996 and 

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are expected to continue to represent a large portion of the Company's 
revenues.  The loss of Clarity as a customer could have a material 
adverse effect on the Company, assuming the Company could not 
replace the shipments with other alternative distribution.  The Company 
believes that it has the means within a reasonable period of time to 
establish alternative distribution channels in most of Clarity's 
territory were that to become necessary.  However, the Company does 
not currently believe there is any significant risk of losing Clarity 
as a customer because Clarity is dependent upon a continued supply of 
the Company's proprietary products to service and upgrade its large 
existing customer base.

    
   

Backlog consists primarily of products that have been ordered 
and that will be shipped or installed within 30 to 60 days of the order 
(other than call center and healthcare orders, which have a longer lead 
time), or systems the installation of which is not yet required by the 
customer.  Backlog as of December 31, 1996, was $23,159,000 
compared to $33,091,000 at December 31, 1995, and the Company 
expects virtually all of such backlog to be filled within the current fiscal 
year.


Product Maintenance

EXECUTONE warrants parts and labor on its systems, typically 
for one year, and provides maintenance and service after warranty 
expiration either on a contract or time and materials basis.  Most of the 
Company's products are repaired at its 56,000-square foot repair facility 
located in Poway, California.  

Product Development and Engineering

As of March 1, 1997, EXECUTONE employed approximately 100 
individuals engaged in product design and development.  The Company's 
product development program is designed to anticipate and respond to 
customer needs through development of new products and enhancement 
of existing products.  During 1996, the Company's engineering efforts 
focused on applications-oriented software products, including new 
releases of computer telephone system, call center and healthcare 
communications software.  EXECUTONE continually strives to reduce 
production costs by incorporating new technology into its design and 
manufacturing operations.  For the years ended December 31, 1996, 
1995, and 1994, Company-sponsored product development and 
engineering expenditures (including product management and testing) 
amounted to approximately $13.8 million, $14.7 million, and $12.2 million, 
respectively.

Manufacturing

Most of EXECUTONE's telephone products are manufactured by 
Wong's Electronics Company, Ltd. ("Wong's") in Malaysia, by Quality 
Telecommunication Products, also referred to as Compania Dominicana 
de Telefonos ("Codetel"), in the Dominican Republic, and by the 
Company directly in Poway, California.  Many of the printed circuit boards 
for the Company's products are manufactured, and many products are 
assembled into systems and system components, in the United States.
 
The Company's Manufacturing Services Agreement with Wong's 
currently expires in February 1998 but is automatically extended each 
year for an additional one-year term unless either party gives notice of 
termination three months prior to expiration of the current term.  The 
contract may be terminated earlier by either party in the event of a 
material breach by the other party.

If the agreement between Wong's and EXECUTONE should be 
terminated for any reason, or if  Wong's is unable to ship or has to reduce 
shipments, or if restrictions 

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are imposed materially limiting the importation 
of products produced by foreign manufacturers, the Company could be 
affected adversely until satisfactory alternative sources are in place.  The 
profitability of EXECUTONE's operations could be affected to the extent it 
is unable to reflect the direct and indirect costs of products purchased 
from Wong's in its pricing policies.  The prices for products purchased by 
EXECUTONE from its suppliers are payable in U.S. dollars.

The majority of EXECUTONE's specialized healthcare and 
internal communication systems are produced in the United States at the 
Company's facility in Poway, California or at domestic subcontractors.  
The functions of repair, warehousing and distribution of the Company's 
products are performed at the Company's facilities in Poway.


Trademarks, Patents and Copyrights

Management believes that the continued success of 
EXECUTONE is dependent upon the ability to design, develop and 
market new products and new or enhanced applications.  The 
patentability of such new products or applications is evaluated and patent 
applications are filed where necessary to protect unique developments.  
The Company currently holds ten utility patents, expiring at various times 
between 2007 and 2013, has six U.S. patent applications pending, and 
six patent applications pending in several foreign countries.

The Company has registered or applied to register its trademarks 
when it believes registration to be important to its ongoing business 
operations.  The Company also generally claims copyright protection for 
software, circuit designs, schematics and technical documentation used 
in connection with its products, and relies upon trade secret, contract and 
copyright laws to protect its proprietary rights in its software, designs and 
documentation.

Certain of EXECUTONE's products incorporate technology and 
software licensed from independent third parties.  Generally, these 
licenses require payment of a royalty for each system sold that 
incorporates the licensed technology or require that the Company 
purchase the product from the licensor.

Government Regulation

Many of the Company's systems are designed to be connected 
to the public telecommunications network and as such are required to 
comply with certain rules of the Federal Communications Commission 
("FCC") pertaining to telecommunications equipment. The Company has 
not experienced any material adverse effect on its business or operations 
as a result of such regulation and compliance.

Certain uses of outbound call processing systems are regulated 
by federal and state law.  Among other things, the FCC has adopted rules 
pursuant to the Federal Telephone Consumer Protection Act to protect 
residential telephone subscribers' privacy rights to avoid receiving 
telephone solicitations to which they object.  Certain states have enacted 
similar laws limiting access to telephone subscribers who object to 
receiving solicitations.  Although compliance with these laws may limit the 
potential use of the Company's predictive dialer systems in some 
respects, the Company's systems can be programmed to operate 
automatically in full compliance with these laws through the use of 
appropriate calling lists and calling campaign time parameters.  

To the extent the Company markets its products internationally, it 
is required to comply with applicable foreign law, including certification 
of its products by appropriate 

9
<PAGE>

government regulatory organizations.

Competition

The market segments in which the Company offers its products 
and services are highly competitive.  The under 400-desktop voice 
communications segment in the United States, the primary market for the 
Company's Computer Telephony sales channels, is served by many 
domestic and foreign communications equipment and software 
manufacturers and distributors, including Lucent Technologies (the 
former equipment business of AT&T), Nortel (formerly named Northern 
Telecom), Toshiba, InterTel and Mitel, as well as numerous specialized 
companies.  The Company believes that it may be fourth in telephone 
system shipments to the under 400-desktop voice communications 
market, after AT&T/Lucent, Nortel, and Toshiba, based on industry 
surveys of 1996 data.  However, such information may not be sufficient to 
make an exact assessment of the Company's competitive position 
relative to its competitors.  Although the Company can be competitive on 
price compared to several of these companies, many of EXECUTONE's 
competitors have substantially more capital, technology and marketing 
resources than the Company.

The Company believes its call center products are in a good 
competitive position although to date it has not penetrated a significant 
portion of this market.  Principal competitors are EIS, Davox, Mosaix and 
Melita.

The Company's principal competitors in healthcare 
communications are Hill-Rom Company, DuKane and Rauland-Borg.  
The Company believes it has a strong competitive position in nurse call 
and locator products.

The Company competes by offering a full array of integrated 
telecommunication products and services to its customers.  The 
Company also competes on the basis of the quality of its products, its 
customer service, nationwide distribution and installation, and price.

Employees

As of March 1, 1997, EXECUTONE employed approximately 750 
persons, directly and through its subsidiaries.  Less than 3% of the 
employees of the Company and its subsidiaries are represented by 
unions, all of which employees are represented by the International 
Brotherhood of Electrical Workers.  Management believes that the 
Company's relations with its employees are good.

10
<PAGE>


ITEM 2.    PROPERTIES

EXECUTONE's principal offices are located in a leased facility in 
Milford, Connecticut.  The Company has warehouse, manufacturing and 
distribution facilities in Poway, California.  As of December 31, 1996, the 
Company utilized 4 facilities in the United States with an aggregate of 
approximately 273,000 square feet for its ongoing operations.

The Company's facilities are occupied under lease agreements.  
The current annual rent for the Company's facilities is approximately $3 
million.  The Company also subleases from Clarity small areas of 30 
former district sales offices, aggregating approximately 23,000 square 
feet, for use by sales and technical employees for approximately 
$600,000 per year.  The Company has one facility totaling approximately 
14,000 square feet of space that is no longer used in ongoing operations 
and is subleased.  

The Company believes its facilities are adequate and generally 
suitable for its business requirements at the present time and for the 
immediate future.  The following is a brief description of the primary 
facilities of the Company.

Use                            Location                    Approximate  
                                                           Size

Corporate Headquarters         Milford, Connecticut        150,000 
and Research, Development                                  square feet
and Engineering Facility


Distribution, Production &     Poway, California           115,000 
Repair Center and Warehouse                                square feet


Other, including warehouses    Milford, Connecticut        30,800 
and subleased office space                                 square feet



ITEM 3.    LEGAL PROCEEDINGS


    
   
On October 16, 1996, the Coeur d'Alene Tribe filed an action 
entitled Coeur d'Alene Tribe v.  AT&T Corp. in the Tribal Court, located in 
Plummer, Idaho (Case No. C195-097), requesting a ruling that the Lottery to 
be developed and managed by the Company's Unistar Entertainment subsidiary is
legal under IGRA, that IGRA preempts state and federal laws on the subject
of Indian gaming, that Section 1084 is inapplicable and that the states lack 
authority to issue Section 1084 notification letters to any carrier,
and an injunction preventing AT&T from refusing to provide telephone 
service to the NIL.   This action was necessary because several network 
carriers have been sent Section 1084 letters under the Federal 
Communications Act by states opposed to the NIL.  These letters state 
that the NIL is illegal under state and federal laws and prohibit the 
carriers from carrying network traffic for the NIL.  The telephone 
operations of the NIL may not begin until resolution of this proceeding 
and agreement of a network carrier to carry the network traffic of the NIL. 
 On February 28, 1996, the Tribal Court ruled that all requirements of 
IGRA have been satisfied,  that Section 1084 is inapplicable and the states
lack jurisdiction to interfere with the NIL, and that AT&T cannot refuse
service to the NIL based upon Section 1084, an allegation that the NIL
is in violation of IGRA or the 

11
<PAGE>

federal anti-lottery statutes.  This 
ruling and a related order dated May 1, 1996 are being appealed to the 
Tribal Appellate Court and probably will be appealed to the United States 
federal courts as well.  The Company has been advised by its outside 
counsel, Hunton & Williams, that based upon such firm's review of the 
applicable statutes, regulations and case law, it believes that the Lottery 
is authorized under IGRA and that the favorable rulings issued by the 
Coeur d'Alene Tribal Court on February 28 and May  1, 1996 should be 
upheld on appeal.  However, this litigation, as well as other litigation 
which could be brought by states opposed to the NIL, could delay 
commencement of operations, and it is impossible at this time to predict 
when the NIL will commence telephone operations.  The Company does 
not believe the outcome of this litigation will have a material adverse 
effect on the Company's consolidated financial position, results of 
operations or liquidity.

    
   
The Company currently is a named defendant in a number of 
lawsuits and is a party to a number of other proceedings that have arisen 
in the normal course of its business.  Those lawsuits and proceedings 
relate primarily to the collection of indebtedness owed to the Company, 
the performance of products sold by the Company, and various contract 
disputes.  In the opinion of the Company, these proceedings are not 
expected to have a material adverse effect on the consolidated financial 
position, results of operations or liquidity of the Company and, to the 
extent they are not covered by insurance, reserves adequate to satisfy 
such liabilities have been established.


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

No matter was submitted to a vote of security holders in the 
fourth quarter of the fiscal year covered by this report.

12
<PAGE>


EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of the Company are as follows:

Name                    Age          Position With Company


    
   
Alan Kessman             50          Chairman of the Board,            
                                     President and  
                                     Chief Executive Officer

    
   

Michael W. Yacenda       45          Executive Vice President and
                                     President, UniStar       
                                     Entertainment

Barbara C. Anderson      45          Vice President, General
                                     Counsel and Secretary

James E. Cooke III       48          Vice President, National
                                     Accounts

Anthony R. Guarascio     43          Vice President, Finance  and
                                     Chief Financial Officer

Israel J. Hersh          43          Vice President,      
                                     Software Engineering

Elizabeth Hinds          55          Vice President,       
                                     Human Resources

Robert W. Hopwood        53          Vice President and Vice   
                                     President-Operations,        
                                     Unistar Entertainment 

Andrew Kontomerkos       51          Senior Vice President,     
                                     Hardware Engineering and         
                                     Production

Vic Northrup             40          Vice President,           
                                     Computer Telephony


Frank J. Rotatori        54          Vice President, Healthcare 
                                     Communications

Shlomo Shur              47          Senior Vice President,  
                                     Advanced Technology

Alan Kessman has served as Chairman and Chief Executive 
Officer of the Company since 1988.  Prior to that, he had served as 
President and Chief Executive Officer of ISOETEC Communications, 
Inc., a predecessor of the Company ("ISOETEC"), since 1983.  From 
1978 to 1983, Mr. Kessman served as President of three operating 
subsidiaries of Rolm Corporation, and from 1981 to 1983, he served as a 
Corporate Vice President of Rolm Corporation, responsible for sales and 
service in the eastern United States.

13
<PAGE>


Michael W. Yacenda has served as Executive Vice President of 
EXECUTONE since January 1990.  Prior to that time, he was Vice 
President, Finance and Chief Financial Officer of the Company from July 
1988 to January 1990.  He served as a Vice President of ISOETEC from 
1983 to 1988.  From 1974 to 1983, Mr. Yacenda was employed by Arthur 
Andersen & Co., a public accounting firm.  Mr. Yacenda is a certified 
public accountant.

Barbara C. Anderson has been Vice President, General Counsel 
and Secretary since 1990.  From 1985 to 1989, she was Corporate 
Counsel of United States Surgical Corporation, a manufacturer of 
medical devices.

James E. Cooke III has served as Vice President, National 
Accounts since February 1996.  Prior to that time, from 1992 until 1996, 
Mr. Cooke served as Division Manager of Operations for the Company, 
and from 1988 through 1991, Mr. Cooke was a District Manager for the 
Company.  From 1985 until 1988, Mr. Cooke was the President of an 
interconnect company, and from 1981 to 1985, he was a General 
Manager and a Regional Manager of the Jarvis Corporation.  For eight 
years prior to that time, he worked at Xerox Corporation in various sales 
and management positions.

Anthony R. Guarascio has been Vice President, Finance and 
Chief Financial Officer since January 1994, and prior thereto was Vice 
President and Corporate Controller since January 1990.  From 1984 until 
1990, Mr. Guarascio was the Corporate Controller of the Company and 
ISOETEC.

Israel J. Hersh has been Vice President, Software Engineering 
since February 1996.  Mr. Hersh joined the Company as Director of 
Software Development in 1984, and was promoted to Senior Director of 
Software Engineering in January 1994.   Prior to his employment with the 
Company, Mr. Hersh was a manager of the software development 
department for T-Bar, Inc.  Mr. Hersh has a B.S. in Electrical Engineering 
from Tel Aviv University and a MS in Electrical Engineering from 
Bridgeport University.

Elizabeth Hinds has been Vice President, Human Resources 
since January 1996.  Prior to joining the Company, Ms. Hinds was Vice 
President, Human Resources of Chilton Company, a wholly-owned 
subsidiary of Capital Cities/American Broadcasting Company, Inc. 
("CC/ABC"), from February 1993 until January 1996.  Ms. Hinds was the 
Director of Human Resources for CC/ABC from June 1987 until February 
1993.

Robert W. Hopwood has been Vice President of the Company 
and Vice President-Operations of its Unistar Entertainment subsidiary 
since May 1996, and prior thereto served as Vice President, Customer 
Care of the Company from January 1990.  From 1983 until 1990, Mr. 
Hopwood was the Director of Technical Operations of the Company and 
ISOETEC.

Andrew Kontomerkos has been Senior Vice President, Hardware 
Engineering and Production since January 1994, and prior thereto was 
Vice President, Hardware Engineering since 1988.  He served as a Vice 
President of ISOETEC since 1983.  From 1982 to 1983, he was a Vice 
President and founder of SAM Communications, Inc., a 
telecommunications research and development company which was one 
of the predecessors to ISOETEC; that corporation was merged into 
ISOETEC in 1983.  From 1979 to 1982, Mr. Kontomerkos was Director of 
Telecommunications Systems Development of TIE/communications, Inc., 
a manufacturer of telecommunications systems.

14
<PAGE>


Vic Northrup has been Vice President of the Company since  February 1997,
and President of the Computer Telephony business since May 1996.  Prior
thereto, he was Senior Director of Sales and Operations and a district general
manager of the Company.

Frank J. Rotatori has been Vice President, Healthcare 
Communications since February 1996.  Prior thereto he was Vice 
President, European Operations since February 1994, and prior thereto 
was Director of Call Center Management Products during 1992 and 
1993, Vice President-Direct Sales from 1990 through 1991 and Vice 
President-Customer Service of the Company from 1988 to 1990.  Mr. 
Rotatori joined ISOETEC in 1986 as a regional manager.  From 1982 to 
1986, he served as General Manager and Eastern Regional Manager for 
Rolm Corporation.  For 13 years prior to that time, he worked at Xerox 
Corporation in various manufacturing, accounting, sales and service 
management positions.

Shlomo Shur has been Senior Vice President, Advanced 
Technology since January 1994, and prior thereto was Vice President, 
Software Engineering since 1988.  He served as a Vice President of 
ISOETEC from 1983 to 1988.  From 1982 to 1983, he was Vice President 
and a founder of SAM Communications, Inc., a telecommunications 
research and development company which was one of the predecessors 
to ISOETEC; that corporation was merged into ISOETEC in 1983.  From 
1978 to 1982, Mr. Shur was Manager, Software Development for 
TIE/communications, Inc., a manufacturer of telecommunications 
systems.

15
<PAGE>


PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND 
RELATED STOCKHOLDER MATTERS

Incorporated by reference to "Stock Data" in  the Registrant's 
1996 Annual Report to Shareholders.


ITEM 6.    SELECTED FINANCIAL DATA

Incorporated by reference to "Selected Financial Data" in the 
Registrant's 1996 Annual Report to Shareholders.


ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Incorporated by reference to "Management's Discussion and 
Analysis of Financial Condition and Results of Operations" in the 
Registrant's 1996 Annual Report to Shareholders.


ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements are incorporated by reference to the 
Financial Statements in the Registrant's 1996 Annual Report to 
Shareholders.  The Schedule appears at pages S-1 through S-2 of this 
report.


ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH 
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL 
DISCLOSURE

Not applicable.

16
<PAGE>


PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE 
COMPANY

    
   
The following persons are currently serving as directors and have been 
nominated by the Board of Directors as candidates for election as 
directors at the Annual Meeting of Shareholders to be held on July 29, 
1997.  Certain information regarding each director is set forth below, 
including each individual's principal occupation and business experience 
during the last five years, directorships in other public companies, and the 
year in which the individual was elected a director of the Company or one 
of its predecessor companies.

<TABLE>
<CAPTION>
                                                                     Director
Name                     Age  Principal Occupation                    Since
<S>                      <C>      <C>                                  <C>
Alan Kessman           50   President, Chief Executive Officer,        1983
                            and Chairman of the Company 
                            since 1988; and of one of the 
                            Company's predecessor corporations 
                            since 1983.
                                                                         
Stanley M. Blau        59   President, The Blau Group Ltd., an         1983
                            investment  firm; formerly Vice 
                            Chairman of the Company from 1988 
                            until 1996; and Chief Executive 
                            Officer of one of the Company's predecessor 
                            corporations, from 1987 until July 1988.

Thurston R. Moore      50   Partner, Hunton & Williams (Attorneys),    1990
                            Richmond, Virginia, since 1981.

Richard S. Rosenbloom  64   David Sarnoff Professor of Business        1992
                            Administration, Harvard Business School,
                            since 1980.  Mr. Rosenbloom is a director 
                            of Arrow Electronics, Inc.

Jerry M. Seslowe       51   Managing Director of Resource Holdings     1996
                            Ltd., an investment and financial consulting 
                            firm, since 1983.
</TABLE>

Executive Officers

See Part I for information concerning executive officers of the Company.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires that the 
Company's directors and executive officers, and persons who own more 
than 10% of a registered class of the Company's equity securities, file 
with the Securities and Exchange Commission initial reports of ownership 
and reports of change in ownership of Common Stock and other equity 
securities of the Company.  Officers, directors and greater than 10% 
shareholders are required by SEC regulation to furnish the Company with 
copies of all Section 16(a) forms that they file.

17
<PAGE>


To the Company's knowledge, based solely on review of the copies of 
such reports furnished to the Company, and written representations that 
no other reports were required, during the fiscal year ended December 
31, 1996, all Section 16(a) filing requirements applicable to its officers, 
directors and greater than 10% beneficial owners were complied with, 
except that Mr. Israel Hersh, a Vice President of the Company, failed to 
file a timely Report on Form 4 to report an open market sale of Common 
Stock.


ITEM 11. EXECUTIVE COMPENSATION


Director Compensation

Each non-employee director receives an annual retainer of 
$10,000, payable in equal quarterly installments, plus a fee of $1,250 for 
each Board meeting attended.  The Company also reimburses directors 
for their travel and accommodation expenses incurred in attending Board 
meetings.

In addition, each non-employee director is granted annually an 
option to purchase shares of the Company's Common Stock under the 
terms and conditions of the Company's 1990 Directors' Stock Option 
Plan (the "Plan") approved by the shareholders on June 20, 1990 and 
amended, with the approval of the shareholders, on July 30, 1996.

As of March 31, 1997, 30,000 shares had been issued upon 
exercise of options granted under the original terms of the Plan, options 
to purchase 24,000 shares of Common Stock were outstanding under the 
original terms of the Plan, and options to purchase an additional 77,600 
shares were outstanding under the 1996 amendment to the Plan.  The 
number of shares for which options may be granted each year are 
determined by reference to the Black-Scholes option pricing model to 
provide an option equal in value to $10,000 based upon the market price 
of the Common Stock at the date of grant.  An aggregate of up to 
250,000 shares are issuable under the Plan.  Each non-employee 
director received options to purchase 12,900 shares in 1996.

On February 1, 1996 and June 23, 1992, Jerry M. Seslowe and 
Richard S. Rosenbloom were each granted warrants to purchase 25,000 
shares of the Company's Common Stock at $2.63 and $1.25 per share, 
respectively, the closing market prices on those dates.  The warrants vest 
ratably over a three-year period and expire on February 1, 2001 and June 
23, 1997, respectively.  Messrs. Seslowe and Rosenbloom received 
these warrants upon being elected to serve on the Company's Board of 
Directors. 

18
<PAGE>


Summary Compensation Table

The following table sets forth the compensation by the Company 
of the Chief Executive Officer and the four most highly compensated 
other executive officers of the Company for services in all capacities to 
the Company and its subsidiaries during the past three fiscal years.

<TABLE>
<CAPTION>
                                       Annual Compensation         Long-Term Compensation
                                                     Other Annual  Awards of     All Other
Name and                         Salary      Bonus   Compensation   Options/  Compensation
Principal Position	       Year     ($)      ($) (1)       ($) (2)   SARs (#)     ($)(3)
<S>                       <C>     <C>        <C>           <C>         <C>         <C>
Alan Kessman              1996   400,000    63,000         -0-         -0-        9,536
Chairman of the Board,    1995   400,000      -0-          -0-         -0-       10,328
President and Chief       1994   391,000    100,000       8,506        -0-        8,084
Executive Officer	
	
Michael W. Yacenda        1996   256,000    49,900         -0-         -0-        5,935
Executive Vice President  1995   256,000     -0-           -0-         -0-        6,353
                          1994   243,154    39,600        10,000       -0-       56,484

Shlomo Shur               1996   215,700    12,393         -0-         -0-        5,192         
Senior Vice President,    1995   215,700     -0-           -0-         -0-        5,514
Advanced Technology       1994   211,539    23,088        10,000       -0-        4,856

Andrew Kontomerkos        1996   214,000    12,350         -0-         -0-        5,703
Senior Vice President,    1995   214,000     -0-           -0-         -0-        5,535
Hardware Engineering      1994   205,888    38,025        10,000       -0-        5,509
and Production	

Anthony Guarascio         1996   160,000    42,000         -0-         -0-        2,993
Vice President and        1995   160,000     -0-           -0-                    2,919
Chief Financial           1994   155,000    14,000         -0-                   23,002
Officer
	
</TABLE>

(1)  Includes special bonuses awarded in 1994 to certain Company 
employees following successful implementation of measures to 
overcome the effect of a fire at the facilities of one of the Company's 
major suppliers in China in December 1993.  Special bonuses totaling 
$50,000, $30,000, $15,000, $20,000, and $8,000 were awarded to Messrs. 
Kessman, Yacenda, Shur, Kontomerkos, and Guarascio, respectively.

(2)  This category represents employee stock option credits that could 
have been used after July 1, 1993 and prior to December 31, 1994 to pay 
the exercise price of employee stock options held by the employee.  All 
credits shown in this column were used to exercise stock options in 1994. 
 See Note 3.

(3)  This category includes for 1994 stock option credits used to pay the 
exercise price of employee stock options exercised during 1994 by Mr. 
Yacenda in the amount of $50,549 and by Mr. Guarascio in the amount
of $20,383.  The credits were granted in 1988, 1992 and 1994 (see Note
2 above).  The column does not include 1992 or 1994 credits used in
1994 that were reported as "Other Annual Compensation" for 1994.
This category also includes for each individual 
a matching contribution by the Company under the Company's 401(k) 
plan in the amount of $660 each for each year.  This column also 
includes premiums paid by the Company for long-term disability and life 
insurance for the 

19
<PAGE>

individuals in the following amounts in 1996: Mr. 
Kessman, $8,876; Mr. Yacenda, $5,275; Mr. Shur, $4,532; Mr. 
Kontomerkos, $5,043; and Mr. Guarascio, $2,333; in the following 
amounts in 1995: Mr. Kessman, $9,668; Mr. Yacenda, $5,693; Mr. Shur, 
$4,854; Mr. Kontomerkos, $4,875; and Mr. Guarascio, $2,259; and in the 
following amounts in 1994: Mr. Kessman, $7,424; Mr. Yacenda, $4,774; 
Mr. Shur, $4,196; Mr. Kontomerkos, $4,849; and Mr. Guarascio, $1,959.

Employment Agreement

The Company and Mr. Kessman entered into an employment 
continuity agreement in January 1995 that provides certain benefits to Mr. 
Kessman in the event of the termination of Mr. Kessman's employment 
following a change in control in the Company, including a lump sum 
payment equal to 2.99 times his then current base salary plus the 
average of any bonuses awarded to Mr. Kessman during the two fiscal 
years preceding the termination of his employment.  Under the terms of 
the agreement, a change in control includes the acquisition of beneficial 
ownership of 20% of the Company's voting securities by any person or 
group.  The agreement continues through the length of Mr. Kessman's 
employment with the Company.

Option Grants in Last Fiscal Year

There were no grants of options  made to any officers during 1996.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-
End Option Values

The following table sets forth each exercise of stock options 
made during the year ended December 31, 1996 by the Chief Executive 
Officer and the four most highly compensated other executive officers 
and the fiscal year-end value of unexercised options held by those 
individuals as of December 31, 1996. There were no exercises or 
holdings of stock appreciation rights by any officers during 1996, and 
there are no outstanding stock appreciation rights.

<TABLE>
<CAPTION>
                                             Number of           Value of Unexercised 
                                          Unexercised Options   In-the Money Options at
                 Share                   at Fiscal Year-End(#)  Fiscal Year-End ($) (1)
              Acquired on      Value        Exercisable/           Exercisable/
Name           Exercise (#) Realized ($)   Unexercisable          Unexercisable
<S>              <C>           <C>            <C>                     <C>         
Alan Kessman    65,688       $108,472       22,500/12,500         $15,938/4,688

Michael W.      35,000        83,125        50,000/8,000           38,250/3,000
Yacenda      

Shlomo Shur     35,000        89,688        38,750/6,250           29,531/2,344

Andrew          24,000        61,500        30,000/5,000           22,500/1,875
Kontomerkos               

Anthony         19,000        48,688        33,750/6,250           23,906/2,344
Guarascio      
</TABLE>

(1)	Based upon the last sale price on December 31, 1996 of 
$2.375 per share of Common Stock.

20
<PAGE>


COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION


It is the responsibility of the Compensation Committee of 
the Board of Directors to administer the Company's 
incentive plans, review the performance of management 
and approve the compensation of the Chief Executive 
Officer and other executive officers of the Company.

The Compensation Committee believes that the Company's 
success depends on the coordinated efforts of individual 
employees working as a team toward defined common 
goals.  The objectives of the Company's compensation 
program are to align executive compensation with business 
objectives, to reward individual and team performance 
furthering the business objectives, and to attract, retain and 
reward employees who will contribute to the long-term 
success of the Company with competitive salary and 
incentive plans.

Specifically, executive compensation decisions are based 
on the  following factors:

1.   The total direct compensation package for the 
Company's executives is made up of three elements:  base 
salary, a short-term incentive program in the form of a 
performance-based bonus, and a long-term incentive 
program in the form of stock options and other inducements 
to own the Company's stock.

2.   The Committee believes that the total compensation of 
all executives should have a large incentive element that is 
dependent upon overall Company performance measured 
against objectives established at the beginning of the fiscal 
year.  Bonus and stock opportunities represent a significant 
portion of the total compensation package, in an attempt to 
further the Company's goal of linking compensation more 
closely to the Company's performance.  The percentage of 
direct compensation that is dependent upon the Company's 
attainment of its objectives also generally increases as the 
responsibility of the officer in question for the overall 
corporate performance increases.

3.   Total compensation levels, i.e., base salary, bonus 
potential, and number of stock options, are established by 
individual levels of responsibility and regular reference to 
competitive compensation levels for executives performing 
similar  functions and having equivalent levels of 
responsibility.  However, whether actual bonuses are paid 
to each executive depends upon the achievement of 
Company profitability goals.  In the case of certain 
executives who have direct responsibility for individual 
business units, a portion of the incentive compensation for 
such executives may consist of bonuses tied to the 
performance against predetermined targets of the individual 
business units for which they are responsible.

4.   In 1995 and 1996, the Compensation Committee did 
not perform a general survey of executive compensation.  
The Committee determined that the operating results of the 
Company did not support any base salary increases for 
officers and no changes were made to the compensation of 
any officers named in the Summary Compensation Table.  
In 1994 and in previous years, the Compensation 
Committee has reviewed various executive compensation 
data developed by the Company's Human Resources 
Department with an independent consultant from base 
salary and bonus compensation information reported in a 
nationally recognized independent compensation survey 
(the "Survey") for a group of companies in the Company's 
industry or similar industries and of comparable size and 
complexity.  The Committee compared the base salary and 
bonus levels of the Survey group to the existing salary and 
bonus compensation of the Company's management.

21
<PAGE>


5.   The Committee views the 50th percentile of the Survey 
data as average compensation for comparable positions and 
believes it is the minimum level necessary for the Company 
to be competitive in attracting and retaining qualified 
executives in its industry and geographic locations.  
Therefore, the base salaries for the Chief Executive Officer 
and the four other highest paid executive officers were 
established in 1994 at approximately the 50th percentile for 
comparable positions in the Survey companies.

6.   Merit increases in base salary for executives other than 
Mr. Kessman have been reviewed on an individual basis by 
Mr. Kessman and increases are dependent upon a favorable 
evaluation by Mr. Kessman of individual executive 
performance relative to individual goals, the functioning of 
the executive's team within the corporate structure, success 
in furthering the corporate strategy and goals, and 
individual management skills.  Based upon his evaluation, 
Mr. Kessman recommends base salary increases to the 
Committee for its approval.

7.   In addition to base salary and merit increases, the 
Compensation Committee considers incentive bonuses for 
its executive officers, including the Chief Executive 
Officer, both prospectively based upon the attainment of 
specific performance goals, and retrospectively based upon 
the Committee's discretionary judgment as to the 
performance during the year of the Company and its 
executive officers or other considerations deemed 
appropriate at the time.  Bonus potential for 1996 was the 
same as for 1995 and 1994 for all officers named in the 
Summary Compensation Table.  To establish 1996 bonus 
potential for executive officers, including the Chief 
Executive Officer, the Compensation Committee reviewed 
recommendations by the Chief Executive Officer based on 
data provided by the Survey.  The Committee provided that 
each officer would be eligible for a bonus equal to a 
percentage of his or her salary consistent with the Survey 
data if certain pre-established 1996 pretax income targets or 
goals were achieved by the Company.  The bonus incentive 
was structured so that if the Company fully achieved or 
exceeded its predetermined 1996 goals, total cash 
compensation of the executive (salary and bonus) would 
increase to approximately the 75th percentile of the Survey 
salary data.  Partial achievement of the pretax income goals 
(above 75% attainment) would result in partial bonus 
payments.  In 1996 the pretax income from operations, 
excluding the gain on sale of certain businesses, for the 
entire year was below the 75% threshold though pre-tax 
operating income for the second six months of the year was 
on plan as adjusted for the operations remaining after the 
sale of the direct selling organization in May 1996.  
Therefore, the Compensation Committee approved payment 
of the quarterly portion of the bonus plan for the last two 
quarters of 1996 which amounted to about 2.5% of salary 
for each of the executives.  Additionally, the Committee 
approved additional special bonuses for certain executives 
based on their successful completion of the sale of the 
direct selling organization and the successful 
implementation of the changes after the sale and the 
operating performance of the Company in the last six 
months of the year.  Mr. Kessman received a $10,000 
bonus in accordance with the existing plan for the last two 
quarters of 1996 (2.5% of base salary), plus a $25,000 
bonus for the successful completion of the sale of the direct 
selling organization and an additional special bonus of 
$28,000 for the Company's performance after the sale of 
the direct organization.

The Committee reserves the right to make discretionary 
bonus awards in appropriate circumstances where an 
executive might merit a bonus based on other 
considerations.

8.   All executives, including the Chief Executive Officer, 
are eligible for annual stock option grants under the 
employee stock option plans applicable to employees 
generally, as approved by the Compensation Committee.  
The number of options granted to any individual depends 
on individual performance, salary level and competitive 
data.  In addition, in determining the number of stock 
options granted to each senior executive, the Compensation 
Committee reviews the unvested options of each executive 
to determine 

22
<PAGE>

the future benefits potentially available to the 
executive.  The number of options granted will depend in 
part on the total number of unvested options deemed 
necessary to create a long-term incentive on the part of the 
executive to remain with the Company in order to realize 
future benefits.

No options were granted in 1996 to Mr. Kessman or the 
four highest paid other executive officers.

In conclusion, the Compensation Committee believes that 
the base salary, bonus and stock options of the Company's 
Chief Executive Officer and other executives are 
appropriate in light of competitive pay practices and the 
Company's performance against short and long-term 
performance goals.

                          RICHARD ROSENBLOOM
                                 JERRY SESLOWE

PERFORMANCE GRAPH

The graph below compares, for the last five fiscal years, the 
yearly percentage change in cumulative total returns 
(assuming reinvestment of dividends and interest) of (i) the 
Company's Common Stock, (ii) the Company's 
Debentures, (iii) the NASDAQ Stock Market and (iv) a 
peer group index constructed by the Company (the "Peer 
Group").
The Peer Group consists of the following companies:

Aspect Telecommunications  Corp.           Inter-Tel, Inc. 
Boston Technology, Inc.                    InterVoice, Inc.  
Brite Voice Systems, Inc.                  Microlog  Corporation 
Centigram Communications Corp.             Mitel Corporation 
Comdial Corporation                        Norstan, Inc.          
Davox Corporation                          Octel Communications Corp.
Digital Sound Corporation                      
Electronic Information Systems, Inc.       Syntellect, Inc. 
Mosaix (formerly                           Teknekron Communications 
  Digital Systems International, Inc.)          Systems, Inc. (TCSI)

TIE/Communications, Inc., was formerly included among 
the Peer Group companies.  It has been eliminated because 
it is now privately held.

The Peer Group includes companies who compete with the 
Company in the general voice communications equipment 
area as well as those active in several more specialized 
areas, such as ACD (automatic call distribution), voice 
mail, interactive voice response systems, and predictive 
dialing systems, as well as additional general voice 
communications companies.  The Company believes that 
the mix of the companies in the Peer Group accurately 
reflects the mix of businesses in which the Company is 
currently engaged and will be engaged in the foreseeable 
future.

The Peer Group is not identical to the Survey group used to 
evaluate compensation of executives described in the 
Compensation Committee Report.  The Peer Group above 
does not provide sufficient compensation data for the 
Committee's purposes, and the Survey group includes 
non-public entities for whom stock price data for the 
performance graph is unavailable.

23
<PAGE>


Although AT&T and Northern Telcom are the Company's 
principal competitors in supplying voice communications 
equipment, software and services to the under-300-desktop 
market, the business in which the Company is primarily 
engaged, both of those companies are much larger than the 
Company and derive most of their revenues from other 
lines of business and so have not been included in the Peer 
Group.  The returns of each Peer Group issuer have been 
weighted in the graph below to reflect that issuer's stock 
market capitalization at the beginning of each calendar 
year.

24
<PAGE>


Comparison of Five-Year Cumulative Return
Among EXECUTONE, including the Common
Stock ("XTON") and the Debentures ("XTONG"),
the NASDAQ (US) Index and the Company's
Peer Group

<TABLE>
CAPTION>
Weighted Average
Cumulative Total Returns   1991   1992   1993   1994   1995   1996
<S>                        <C>    <C>    <C>    <C>    <C>    <C>
XTON                      $100    $223   $354   $400   $285   $292
NASDAQ                    $100    $116   $134   $131   $185   $227
PEER GROUP                $100    $134   $236   $213   $305   $382
XTONG                     $100    $181   $249   $248   $288   $321
[PERFORMANCE GRAPH]
</TABLE>

Compensation Committee Interlocks and Insider Participation

The members of the Compensation Committee until July 30, 
1996, were Thurston Moore, Richard Rosenbloom and William Smart.  
The members of the Compensation Committee commencing July 30, 
1996, were Richard Rosenbloom and Jerry Seslowe.

No member of the Committee is a former or current officer or 
employee of the Company or any subsidiary, except that Mr. Moore has 
acted as an Assistant Secretary of the Company.  Mr. Moore is a partner 
in the law firm of Hunton & Williams, which regularly acts as counsel to 
the Company.

No executive officer of the Company served as a director or a 
member of the Compensation Committee or of the equivalent body of any 
entity, any one of whose executive officers serve on the Compensation 
Committee or the Board of Directors of the Company.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL 
OWNERS AND MANAGEMENT

The following table lists any person (including any "group" as that 
term is used in Section 13(d)(3) of the Exchange Act) who, to the 
knowledge of the Company, was the beneficial owner as of March 31, 
1997, of more than 5% of the outstanding voting shares of the Company. 
 Unless otherwise noted, the owner has sole voting and dispositive power 
with respect to the securities.

<TABLE>
<CAPTION>

                     Name and Address of          Amount and Nature of    Percentage
Title of Class       Beneficial Owner             Beneficial Ownership    of Class(1)
<S>                       <C>                        <C>                         <C>
Common Stock         Entitles Associated with       4,557,989 (2)             9.22
                     Hambrecht & Quist
                     Group
                     One Bush Street
                     San Francisco, CA
                     94104

                     Entities Associates with        3,245,078 (3)            6.58
                     Edmund H., Shea, Jr.
                     655 Brea Canyon Road
                     Walnut Creek, CA

25
<PAGE>

                     91789

Series A Stock       Cooper Life Sciences             78,819                  31.53
                     160 Broadway  
                     New York, NY  10038
               
                     James W. Spencer                 26,265                10.65
                     3042 Spring Hill Road
                     Smyrna, GA  30080

                     Watertone L.L.C.                 127,895                 51.16
                     730 Fifth Avenue 
                     New York, NY  10038     
                  
Series B Stock       Cooper Life Sciences              31,528                 31.53
                     160 Broadway  
                     New York, NY  10038
               
                     James W. Spencer                  10,650                10.65
                     3042 Spring Hill Road
                     Smyrna, GA  30080

                     Watertone L.L.C.                  51,157                 51.16
                     730 Fifth Avenue
                     New York, NY  10038

</TABLE>

(1)  With respect to the Common Stock, percentages shown are based 
upon 49,471,481 shares of Common Stock actually outstanding as of 
March 31, 1997.  In cases where the beneficial ownership of the 
individual or group includes options, warrants or convertible securities, 
the percentage is based on 49,471,481 shares actually outstanding, plus 
the number of shares issuable upon exercise or conversion of any such 
options, warrants or convertible securities held by the individual or group. 
 The percentage does not reflect or assume the exercise or conversion of 
any options, warrants or convertible securities not owned by the individual 
or group in question.

(2)  The Hambrecht & Quist entities share power to vote and dispose of 
all such shares.

(3)  Includes 11,935 shares of Common Stock issuable upon conversion 
of the Company's Debentures, of which entities associated with Mr. Shea 
own $148,800 in principal amount, representing less than 1% of the 
outstanding principal amount.  The Shea entities share the power to vote 
and dispose of all such shares.

The following table sets forth as of March 31, 1997, the beneficial 
ownership of the Company's voting shares by all current directors and 
nominees of the Company, the Chief Executive Officer, and the four next 
most highly compensated executive officers and all directors and 
executive officers of the Company as a group.  Unless otherwise 
indicated, each person listed below has sole voting and investment power 
over all shares beneficially owned by him or her.

<TABLE>
<CAPTION>
                       Name of                  Amount and Nature of    Percentage
Title of Class         Beneficial Owner         Beneficial Ownership    of Classs (1)
<S>                     <C>                         <C>                    <C>
Common Stock           Stanley M. Blau           705,429  (2)             1.42
                       Anthony Guarascio         264,060  (3)                *

26
<PAGE>
 
                       Alan Kessman              1,741,336  (4)            3.52
                       Andrew Kontomerkos          471,732  (5)              *
                       Thurston R. Moore           124,535  (6)              *
                       Richard S. Rosenbloom        63,200  (7)              *
                       Jerry M. Seslowe            195,915  (8)              *
                       Shlomo Shur                 742,055  (9)            1.52
                       Michael W. Yacenda        1,005,190  (10)            2.03

                       All Directors and         6,382,855 (11)            12.65
                       Officers as a Group 
                      (17 persons)


Series A Stock          Stanley M. Blau              -0-        
                        Anthony Guarascio            -0-
                        Alan Kessman                 -0-
                        Andrew Kontomerkos           -0-
                        Thurston R. Moore            -0-
                        Richard S. Rosenbloom        -0-
                        Jerry M. Seslowe           4,692 (12)              1.87
                        Shlomo Shur                  -0-
                        Michael W. Yacenda           -0-

                        All Directors and           4,692                  1.87
                        Officers as a Group 
                        (17 persons)


Series B Stock          Stanley M. Blau               -0-               
                        Anthony Guarascio             -0-
                        Alan Kessman                  -0-
                        Andrew Kontomerkos            -0-
                        Thurston R. Moore             -0-
                        Richard S. Rosenbloom         -0-
                        Jerry M. Seslowe           1,877 (13)              1.87
                        Shlomo Shur                   -0-
                        Michael W. Yacenda            -0-

                        All Directors and           1,877                  1.87
                        Officers as a Group 
                        (17 persons)

</TABLE>

(1)  With respect to the  Common Stock, percentages shown are based 
upon 49,471,481 shares of Common Stock actually outstanding as of 
March 31, 1997.  In cases where the beneficial ownership of the 
individual or group includes options, warrants or convertible securities, 
the percentage is based on 49,471,481 shares actually outstanding, plus 
the number of shares issuable upon exercise or conversion of any such 
options, warrants or convertible securities held by the individual or group. 
 The percentage does not reflect or assume the exercise or conversion of 
any options, warrants or convertible securities not owned by the individual 
or group in question.

(2)  Includes 300,000 shares subject to options exercisable within 60 
days of June 1, 1997.

27
<PAGE>


(3)  Includes 40,000 shares subject to options exercisable within 60 days 
of June 1, 1997 and 9,412 shares issuable upon conversion of the 
Company's Debentures, of which Mr. Guarascio beneficially owns 
$100,000 in principal amount or less than 1% of the outstanding principal 
amount.

(4)  Includes 35,000 shares subject to options exercisable within 60 days 
of June 1, 1997.

(5)  Includes 35,000 shares subject to options exercisable within 60 days
of June 1, 1997.

(6)  Includes 38,200 shares subject to options exercisable within 60 days 
of June 1, 1997.

(7)  Includes 38,200 shares subject to options and 25,000 shares subject 
to warrants exercisable within 60 days of June 1, 1997.

(8)  Includes  37,912 shares subject to options and 25,000 shares subject 
to warrants, 46,245 of which are exercisable within 60 days of June 1, 
1997.  Also includes12,755 shares of Common Stock owned and 63,559 
shares of Common Stock subject to exercisable options held by 
Resource Holdings Associates, of which Mr. Seslowe is a managing 
director and in which he holds a greater than 10% ownership interest.  
Does not include 203,756 shares of Common Stock contingently issuable 
upon conversion of the Preferred Stock owned by Mr. Seslowe or the 
45,875 shares of Common Stock contingently issuable upon conversion 
of the Preferred Stock owned by Resource Holdings Associates.

(9)  Includes 45,000 shares subject to options exercisable within 60 days 
of June 1, 1997.

(10)  Includes 58,000 shares subject to options exercisable within 60 days 
of June 1, 1997 and 3,576 shares issuable upon conversion of the 
Company's Debentures, of which Mr. Yacenda beneficially owns $38,000 
in principal amount or less than 1% of the outstanding principal amount.

(11)  Includes 903,742 shares subject to options, and 50,000 shares 
subject to warrants, of which 661,286 and 33,334, respectively, are 
exercisable within 60 days of June 1, 1997, and 45,176 shares issuable 
upon conversion of the Company's Debentures.

(12)  Includes 862 shares held by Resource Holdings.

(13)  Includes 345 shares held by Resource Holdings.

28
<PAGE>


ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED 
TRANSACTIONS

In connection with the Company's acquisition of Unistar, the 
Company paid or agreed to pay Resource Holdings Ltd, a former 
shareholder of Unistar, accrued investment banking fees incurred by 
Unistar prior to the acquisition of $105,000, and total finder's fees of 
$320,000 based on the value of the transaction.  Mr. Seslowe was 
elected  a director of the Company after the acquisition.  Both Resource 
Holdings and Mr. Seslowe acquired Common Stock and Preferred Stock 
of the Company in exchange for their shares of Unistar.  Mr. Seslowe is a 
managing director of and owns more than 10% of Resource Holdings.  
The Company's management believes that the transactions with 
Resource Holdings were on terms as favorable to the Company as could 
be expected from unaffiliated third parties. 

The Executive Stock Incentive Plan (the "Executive Plan") approved by 
shareholders at the 1994 Annual Meeting was implemented in October 
1994 with 30 employees participating.  Under the terms of the Executive 
Plan, eligible employees were granted the right to purchase shares of the 
Company's Common Stock at a price of $3.1875 per share.  Participating 
employees financed the purchases of these shares through loans by the 
Company's bank lender at the prime rate less 1/4%.  The loans are fully-
recourse to the participating employees but are guaranteed by letters of 
credit from the Company to the lending bank.  The Company holds the 
purchased Common Stock as security for its guarantees of the 
repayment of the loans.  The following table contains information about 
borrowings in excess of $60,000 by executive officers that were 
outstanding during 1996 pursuant to the Executive Plan that are 
guaranteed by the Company.  No director, nominee, or beneficial owner 
of more than 5% of any class of voting securities is eligible for 
participation in the Executive Plan.

                               Highest Amount of            Unpaid
                               Indebtedness Between         Indebtedness
                               1/1/96 and 3/31/97,          at 3/31/97    
                               Including                    Including
Name                           Accrued Interest             Accrued Interest

Alan Kessman                   $2,227,051                   $2,227,051

Michael W. Yacenda              1,312,691                    1,312,691

Shlomo Shur                       649,557                      649,557

Andrew Kontomerkos                649,557                      649,557

Barbara C. Anderson               353,287                      317,067

James E. Cooke III                371,175                      371,175

Anthony R. Guarascio              519,645                      519,645

Israel J. Hersh                   111,353                      111,353

Robert W. Hopwood                 374,434                      374,434

Vic Northrup                      262,104                      262,104

Frank J. Rotatori                 222,705                      222,705

    
   

29
<PAGE>


PART IV


ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND 
REPORTS ON FORM 8-K

(a)(1), (a)(2) and (d).  The financial statements required by this item and 
incorporated herein by reference are as follows:


Report of Independent Public Accountants

Consolidated Balance Sheets - December 31, 1996 and 1995

Consolidated Statements of Operations - Years ended December 31, 
1996, 1995 and 1994

Consolidated Statements of Changes in Stockholders' Equity - Three 
years ended December 31, 1996

Consolidated Statements of Cash Flows - Years ended December 31, 
1996, 1995 and 1994

Notes to Consolidated Financial Statements


The schedules to consolidated financial statements required by this item 
and included in this report are as follows:

Report of Independent Public Accountants on Schedule

Schedule II - Valuation and Qualifying Accounts


(a)(3) and (c).  The exhibits required by this item and included in this 
report or incorporated herein by reference are as follows:


Exhibit No.


2-1        Agreement and Plan of Merger by and among EXECUTONE 
Information Systems, Inc., Executone Newco, Inc., and Unistar 
Gaming Corp., dated as of December 19, 1995.  Incorporated by 
reference to the Registrant's Current Report on Form 8-K dated 
January 3, 1996.

2-2        Asset Purchase Agreement among V Technology Acquisition 
Corporation, EXECUTONE Information Systems, Inc. and 
Vodavi, Inc. dated November 5, 1993, and Amendment dated 
February 18, 1994.  Incorporated by reference to the Registrant's 
Annual Report on Form 10-K for the year ended December 31, 
1993.

2-3        Asset Purchase Agreement by and among Tone Holdings, Inc. 
and Tone Acquisition Corporation, EXECUTONE Network 
Services, Inc. and EXECUTONE 

30
<PAGE>

Information Systems, Inc. dated 
as of April 9, 1996, and Amendment No. 1 to Asset Purchase 
Agreement dated as of May 31, 1996, by and among Clarity 
Telecom Holdings, Inc. (formerly known as Tone Holdings, Inc.), 
Clarity Telecom, Inc. (formerly known as Tone Acquisition 
Corporation), EXECUTONE Network Services, Inc. and 
EXECUTONE Information Systems, Inc.  Incorporated by 
reference to the Registrant's Annual Report on Form 10-K/A for 
the year ended December 31, 1995 filed on June 4, 1996.

3-1        Articles of Incorporation, as amended through December 18, 
1995.  Incorporated by reference to the Registrant's Annual 
Report on Form 10-K  for the year ended December 31, 1995 
filed on April 15, 1996.

3-2        Articles of Amendment dated and filed December 19, 1995, 
amending the Company's Articles of Incorporation.  Incorporated 
by reference to the Registrant's Current Report on Form 8-K 
dated January 3, 1996.

3-3        Bylaws, as amended.  Incorporated by reference to the 
Registrant's Registration Statement on Form S-3 (File No. 33-
62257) filed August 30, 1995.

4-1        Second Amended and Restated Loan and Security Agreement 
dated as of August 30, 1994 and First Amendment thereto dated 
January 1, 1995, between EXECUTONE Information Systems, 
Inc., Continental Bank N.A. and the other Lenders named 
therein.  Incorporated by reference to the Registrant's Annual 
Report on Form 10-K for the year ended December 31, 1994.

4-2        Loan Agreement dated as of August 30, 1994, between 
EXECUTONE Information Systems, Inc., certain employees 
thereof, and the Lenders named therein.  Incorporated by 
reference to the Registrant's Annual Report on Form 10-K for 
the year ended December 31, 1994.

4-3        First Amendment dated January 1, 1995, Second Amendment 
dated September 29, 1995, and Third Amendment dated 
December 29, 1995, to the Second Amended and Restated Loan 
and Security Agreement by and among EXECUTONE 
Information Systems, Inc., the Financial Institutions Listed on the 
Signature Page Thereof, and Bank of America Illinois.  
Incorporated by reference to the Registrant's Annual Report on 
Form 10-K for the year ended December 31, 1995 filed on April 
15, 1996.


    
   
4-10      Indenture dated March 1, 1986 with United States Trust 
Company of New York relating to 7 1/2% Convertible Subordinated 
Debentures of Vodavi Technology Corporation due March 15, 
2011.  Incorporated by reference to Vodavi Technology 
Corporation's Registration Statement on Form S-1 (as amended) 
(Registration No. 33-3827) filed on March 9, 1986 and amended 
April 1, 1986.

    
   

    
   
4-11      First Supplemental Indenture dated August 4, 1989 with United 
States Trust Company of New York relating to 7 1/2% Convertible 
Subordinated Debentures due March 15, 2011.  Incorporated by 
reference to the Registrant's Annual Report on Form 10-K for the 
year ended December 31, 1989.

    
   

4-12     Specimen Certificate representing 7 1/2% Convertible 
Subordinated Debentures.  Incorporated by reference to the 
Registrant's Annual Report on Form 10-K for the year ended 
December 31, 1989.

10-1      1984 Employee Stock Purchase Plan of EXECUTONE 
Information Systems, Inc.  Incorporated by reference to the 
Registrant's Registration Statement on Form S-8 (File No. 33-
23294) declared effective by the Commission on August 23, 
1988.

31
<PAGE>

10-2      1986 Stock Option Plan of EXECUTONE Information Systems, 
Inc.  Incorporated by reference to the Registrant's Registration 
Statement on Form S-8 (File No. 33-23294) declared effective by 
the Commission on August 23, 1988.

10-3      1984 Stock Option Plan of EXECUTONE Information Systems, 
Inc.  Incorporated by reference to the Registrant's Annual Report 
on Form 10-K for the year ended December 31, 1990, as 
amended by Form 8 filed on August 20, 1991.

10-4      401(k) Savings Plan of Vodavi Technology Corporation dated 
December 27, 1985.  Incorporated by reference to the 
Registrant's Annual Report  on Form 10-K for the year ended 
December 31, 1989.

10-5      Stock Option Bonus Credit Plan of EXECUTONE Information 
Systems, Inc. dated December 31, 1988.  Incorporated by 
reference to the Registrant's Annual Report  on Form 10-K for 
the year ended December 31, 1989.


    
   
10-6      1990 Directors' Stock Option Plan as amended July 30, 1996.  
Previously filed. 

    
   

10-7      1994 Executive Stock Incentive Plan.  Incorporated by reference 
to the Registrant's Annual Report on Form 10-K for the year 
ended December 31, 1994.

10-9      Volume Purchase Agreement dated January 31, 1992,  between 
U. S. Sprint Communications Company Limited Partnership and 
EXECUTONE Information Systems, Inc.  Incorporated by 
reference to the Registrant's Annual Report on Form 10-K for the 
year ended December 31, 1991, as amended by Form 8 filed on 
June 12, 1992.

10-10     Amendments dated as of April 1, 1995, and 1993 to Volume 
Purchase Agreement dated January 31, 1992, between U. S. 
Sprint Communications Company Limited Partnership and 
EXECUTONE Information Systems, Inc.  Incorporated by 
reference to the Registrant's Annual Report on Form 10-K/A for 
the year ended December 31, 1995 filed on August 29, 1996.

10-16    Manufacturing Services Agreement dated as of January 10, 
1995, between EXECUTONE Information Systems, Inc. and 
Compania Dominicana de Telefonos, C por A (Codetel).  
Incorporated by reference to the Registrant's Annual Report on 
Form 10-K  for the year ended December 31, 1995 filed on April 
15, 1996.

10-17    Manufacturing Services Agreement dated February 9, 1990 
between Wong's Electronics Co., Ltd. and EXECUTONE 
Information Systems, Inc.  Incorporated by reference to the 
Registrant's Annual Report on Form 10-K for the year ended 
December 31, 1990, as amended by Form 8 filed on August 20, 
1991.

10-19    Warrant to Purchase 25,000 Shares of Common Stock of 
EXECUTONE Information Systems, Inc. in favor of Richard S. 
Rosenbloom dated June 23, 1992.  Incorporated by reference to 
the Registrant's Annual Report on Form 10-K for the year ended 
December 31, 1992.


    
   
10-20    Warrant to Purchase 25,000 Shares of Common Stock of the
Registrant, in favor or Jerry M. Seslowe, dated February 1, 1996.
Filed herewith.

    
   

10-21     Management Agreement for the National Indian Lottery dated 
January 16,1995.  Incorporated by reference to the Registrant's 
Annual Report on Form 10-K for the year ended December 31, 
1995 filed on April 15, 1996.

32
<PAGE>

10-22    Distributor Agreement dated as of May 31, 1996, between 
EXECUTONE Information Systems, Inc. and Clarity Telecom, 
Inc.  Incorporated by reference to the Registrant's Annual Report 
on Form 10-K/A for the year ended December 31, 1995 filed on 
June 4, 1996.

11         Statement regarding computation of per share earnings.  
Previously filed.


    
   
13         1996 Annual Report to Shareholders of EXECUTONE 
Information Systems, Inc. Previously filed.

    
   

21         Subsidiaries of EXECUTONE Information Systems, Inc.  Filed 
herewith.

23.1      Consent of Arthur Andersen LLP. Filed herewith.

23.2      Consent of Hunton & Williams.  Filed herewith.


    
   
27          Financial Data Schedule. Previously filed.

    
   


Undertakings


For the purposes of complying with the rules governing Form S-8 under 
the Securities Act of 1933, the undersigned registrant hereby undertakes 
as follows, which undertaking shall be incorporated by reference into 
registrant's Registration Statements on the following Form S-8 filings:

S-8 Reg. No. 2-91008 filed May 9, 1984 on 1983 Employee Stock 
Purchase Plan (650,000 shares)

S-8 Reg. No. 33-959 filed October 17, 1985 on 1984 Stock Option Plan 
(390,000 shares)

S-8 Reg. No. 33-6604 filed June 19, 1986 on 1983 Stock Option Plan 
(350,000 shares)

S-8 Reg. No. 33-16585 filed August 24, 1987 on 1986 and 1983 Stock 
Option Plans (800,000 shares)

S-8 Reg. No. 33-23294 filed August 3, 1988 on 1986 Stock Option Plan 
(7,000,000 shares) and Employee Stock Purchase Plan (500,000 shares)

S-8 Reg. No. 33-42561 filed September 4, 1991 on 1984 Employee Stock 
Purchase Plan (350,000 shares) and Directors' Stock Option Plan 
(100,000 shares)

S-8 Reg. No. 33-45015 filed January 2, 1992 on 1984 Employee Stock 
Purchase Plan (400,000 shares)

S-8 Reg. No. 33-57519 filed January 31, 1995 on 1984 Employee Stock 
Purchase Plan (1,000,000 shares).

Insofar as indemnification arising under the Securities Act of 1933 (the 
"Act") may be permitted to directors, officers and controlling persons of 
the registrant pursuant to the foregoing provisions, or otherwise, the 
registrant has been advised that in the opinion of the Securities and 
Exchange Commission such indemnification is against public policy as 
expressed in the Securities Act of 1933 and is, therefore, unenforceable. 
 In the event that a claim for indemnification against such liabilities (other 
than the payment by the 

33
<PAGE>

registrant of expenses incurred or paid by a 
director, officer or controlling person of the registrant in the successful 
defense of any action, suit or proceeding) is asserted by such director, 
officer or controlling person in connection with the securities being 
registered, the registrant will, unless in the opinion of its counsel the 
matter has been settled by controlling precedent, submit to the court of 
appropriate jurisdiction the question whether such indemnification by it is 
against public policy as expressed in the Act and will be governed by the 
final adjudication of such issue.

Reports on Form 8-K

The Registrant filed no reports on Form 8-K during the quarter ended 
December 31, 1996.

34
<PAGE>


          SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

EXECUTONE Information Systems, Inc.

By: __/s/ Alan Kessman___________________ 
      Alan Kessman, Chairman, President 
      and Chief Executive Officer

April 28, 1997
Milford, Connecticut

Pursuant to the requirements of the Securities and Exchange Act of 
1934, this Report has been signed below by the following persons on 
behalf of the Registrant and in the capacities and on the dates indicated.

April 28, 1997                __/s/  Alan Kessman______________
                              Alan Kessman
                              Chairman, President and Chief  Executive    
                              Officer (Principal Executive Officer)

April 28, 1997               ______________________________
                              Stanley M. Blau
                              Director

April 28, 1997                __/s/  Anthony Guarascio__________
                              Anthony R. Guarascio
                              Vice President-Finance, and Chief Financial 
                              Officer (Principal Financial and Accounting 
                              Officer)

April 28, 1997                 ___/s/  Thurston R. Moore___________     
                               Thurston R. Moore
                               Director

April 28, 1997                 ___/s/   Richard S. Rosenbloom___         
                               Richard S. Rosenbloom
                               Director

April 28, 1997                ______________________________      
                              Jerry M. Seslowe
                              Director


35
<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders of
EXECUTONE Information Systems, Inc.:



We have audited in accordance with generally accepted auditing 
standards, the financial statements included in EXECUTONE Information 
Systems, Inc. and subsidiaries' annual report to stockholders 
incorporated by reference in this Form 10-K, and have issued our report 
thereon dated January 31, 1997.  Our audit was made for the purpose of 
forming an opinion on those statements taken as a whole.  The schedule 
listed in Item 14 is the responsibility of the Company's management and 
is presented for purposes of complying with the Securities and Exchange 
Commission's rules and are not part of the basic financial statements.  
This schedule has been subjected to the auditing procedures applied in 
the audit of the basic financial statements and, in our opinion, fairly states 
in all material respects the financial data required to be set forth therein in 
relation to the basic financial statements taken as a whole.



ARTHUR ANDERSEN LLP
Stamford, Connecticut
January 31, 1997

S-1
<PAGE>


SCHEDULE II

<TABLE>
<CAPTION>
VALUATION AND QUALIFYING ACCOUNTS
(Amounts in Thousands)


                                                Additions                Deductions
                                                Charged       Charged    Net
                                    Balance at  (Credited)    (Credited) Writeoffs      Balance at
                                    Beginning  to Costs      to Other    Uncollectible  End of
                                    of  Period  and Expenses  Accounts   Accounts       Period
<S>                                  <C>          <C>          <C>                        <C>                         <C> 
Year ended December 31, 1996
  Deducted from asset accounts:
  Allowance for doubtful accounts   $1,715       $1,921        $(551)*     $(979)        $2,106
  Allowance for uncollectible 
     notes receivable	                 259        (82)          2,039*      ----          2,216

Year ended December 31, 1995
  Deducted from asset accounts:
  Allowance for doubtful accounts    1,335        1,872         ------      (1,492)       1,715
  Allowance for uncollectible 
    notes receivable                   691        (432)         ------       -----          259

Year ended December 31, 1994
  Deducted from asset accounts:
  Allowance for doubtful accounts    1,017        1,381         ------      (1,063)       1,335
  Allowance for uncollectible 
     notes receivable                1,084        (393)         ------       -------       691



*	Adjustments related to sale of direct sales 
organization 
</TABLE>

S-2
<PAGE>


             EXECUTONE INFORMATION SYSTEMS, INC.
          EXHIBITS TO 1996 ANNUAL REPORT ON FORM 10-K


Exhibit No.


2-1        Agreement and Plan of Merger by and among EXECUTONE 
Information Systems, Inc., Executone Newco, Inc., and Unistar 
Gaming Corp., dated as of December 19, 1995.  Incorporated by 
reference to the Registrant's Current Report on Form 8-K dated 
January 3, 1996.

2-2        Asset Purchase Agreement among V Technology Acquisition 
Corporation, EXECUTONE Information Systems, Inc. and 
Vodavi, Inc. dated November 5, 1993, and Amendment dated 
February 18, 1994.  Incorporated by reference to the Registrant's 
Annual Report on Form 10-K for the year ended December 31, 
1993.

2-3        Asset Purchase Agreement by and among Tone Holdings, Inc. 
and Tone Acquisition Corporation, EXECUTONE Network 
Services, Inc. and EXECUTONE Information Systems, Inc. dated 
as of April 9, 1996, and Amendment No. 1 to Asset Purchase 
Agreement dated as of May 31, 1996, by and among Clarity 
Telecom Holdings, Inc. (formerly known as Tone Holdings, Inc.), 
Clarity Telecom, Inc. (formerly known as Tone Acquisition 
Corporation), EXECUTONE Network Services, Inc. and 
EXECUTONE Information Systems, Inc.  Incorporated by 
reference to the Registrant's Annual Report on Form 10-K/A for 
the year ended December 31, 1995 filed on June 4, 1996.

3-1        Articles of Incorporation, as amended through December 18, 
1995.  Incorporated by reference to the Registrant's Annual 
Report on Form 10-K for the year ended December 31, 1995 
filed on April 15, 1996.

3-2         Articles of Amendment dated and filed December 19, 1995, 
amending the Company's Articles of Incorporation.  Incorporated 
by reference to the Registrant's Current Report on Form 8-K 
dated January 3, 1996.

3-3        Bylaws, as amended.  Incorporated by reference to the 
Registrant's Registration Statement on Form S-3 (File No. 33-
62257) filed August 30, 1995.

4-1        Second Amended and Restated Loan and Security Agreement 
dated as of August 30, 1994 and First Amendment thereto dated 
January 1, 1995, between EXECUTONE Information Systems, 
Inc., Continental Bank N.A. and the other Lenders named 
therein.  Incorporated by reference to the Registrant's Annual 
Report on Form 10-K for the year ended December 31, 1994.

4-2        Loan Agreement dated as of August 30, 1994, between 
EXECUTONE Information Systems, Inc., certain employees 
thereof, and the Lenders named therein.  Incorporated by 
reference to the Registrant's Annual Report on Form 10-K for the 
year ended December 31, 1994.

4-3        First Amendment dated January 1, 1995, Second Amendment 
dated September 29, 1995, and Third Amendment dated 
December 29, 1995, to the Second Amended and Restated Loan 
and Security Agreement by and among EXECUTONE 
Information Systems, Inc., the Financial Institutions Listed on the 
Signature Page Thereof, and Bank of America Illinois. 
Incorporated by reference 

E-1
<PAGE>

to the Registrant's Annual Report on 
Form 10-K for the year ended December 31, 1995 filed on April 
15, 1996.


    
   
4-10      Indenture dated March 1, 1986 with United States Trust 
Company of New York relating to 7 1/2% Convertible Subordinated 
Debentures of Vodavi Technology Corporation due March 15, 
2011.   Incorporated by reference to Vodavi Technology 
Corporation's Registration Statement on Form S-1 (as amended) 
(Registration No. 33-3827) filed on March 9, 1986 and amended 
April 1, 1986.

    
   

    
   
4-11      First Supplemental Indenture dated August 4, 1989 with United 
States Trust Company of New York relating to 7 1/2% Convertible 
Subordinated Debentures due March 15, 2011.   Incorporated by 
reference to the Registrant's Annual Report on Form 10-K for the 
year ended December 31, 1989.

    
   

4-12      Specimen Certificate representing 7 1/2% Convertible 
Subordinated Debentures.  Incorporated by reference to the 
Registrant's Annual Report on Form 10-K for the year ended 
December 31, 1989.

10-1      1984 Employee Stock Purchase Plan of EXECUTONE 
Information Systems, Inc.  Incorporated by reference to the 
Registrant's Registration Statement on Form S-8 (File No. 33-
23294) declared effective by the Commission on August 23, 
1988.

10-2      1986 Stock Option Plan of EXECUTONE Information Systems, 
Inc.   Incorporated by reference to the Registrant's Registration 
Statement on Form S-8 (File No. 33-23294) declared effective by 
the Commission on August 23, 1988.

10-3      1984 Stock Option Plan of EXECUTONE Information Systems, 
Inc.  Incorporated by reference to the Registrant's Annual Report 
on Form 10-K for the year ended December 31, 1990, as 
amended by Form 8 filed on August 20, 1991.

10-4     401(k) Savings Plan of Vodavi Technology Corporation dated 
December 27, 1985.  Incorporated by reference to the 
Registrant's Annual Report  on Form 10-K for the year ended 
December 31, 1989.

10-5     Stock Option Bonus Credit Plan of EXECUTONE Information 
Systems, Inc. dated December 31, 1988.  Incorporated by 
reference to the Registrant's Annual Report  on Form 10-K for 
the year ended December 31, 1989.


    
   
10-6      1990 Directors' Stock Option Plan as amended on July 30, 1996. 
Previously filed.

    
   

10-7      1994 Executive Stock Incentive Plan.  Incorporated by reference 
to the Registrant's Annual Report on Form 10-K for the year 
ended December 31, 1994.

10-9     Volume Purchase Agreement dated January 31, 1992,  between 
U. S. Sprint Communications Company Limited Partnership and 
EXECUTONE Information Systems, Inc.  Incorporated by 
reference to the Registrant's Annual Report on Form 10-K for the 
year ended December 31, 1991, as amended by Form 8 filed on 
June 12, 1992.

10-10    Amendments dated as of April 1, 1995, and 1993 to Volume 
Purchase Agreement dated January 31, 1992, between U. S. 
Sprint Communications Company Limited Partnership and 
EXECUTONE Information Systems, Inc. Incorporated by 
reference to the Registrant's Annual Report on Form 10-K/A for 
the year ended December 31, 1995 filed on August 29, 1996.

E-2
<PAGE>


10-16    Manufacturing Services Agreement dated as of January 10, 
1996, between EXECUTONE Information Systems, Inc. and 
Compania Dominicana de Telefonos, C por A (Codetel).  
Incorporated by reference to the Registrant's Annual Report on 
Form 10-K for the year ended December 31, 1995 filed on April 
15, 1996.

10-17    Manufacturing Services Agreement dated February 9, 1990 
between Wong's Electronics Co., Ltd. and EXECUTONE 
Information Systems, Inc.  Incorporated by reference to the 
Registrant's Annual Report on Form 10-K for the year ended 
December 31, 1990, as amended by Form 8 filed on August 20, 
1991.

10-19    Warrant to Purchase 25,000 Shares of Common Stock of 
EXECUTONE Information Systems, Inc. in favor of Richard S. 
Rosenbloom dated June 23, 1992.  Incorporated by reference to 
the Registrant's Annual Report on Form 10-K for the year ended 
December 31, 1992.


    
   
10-20    Warrant to Purchase 25,000 Shares of Common Stock of the
Registrant, in favor or Jerry M. Seslowe, dated February 1, 1996.
Filed herewith.

    
   

10-21    Management Agreement for the National Indian Lottery dated 
January 16,1995.  Incorporated by reference to the Registrant's 
Annual Report on Form 10-K for the year ended December 31, 
1995 filed on April 15, 1996.

10-22    Distributor Agreement dated as of May 31, 1996, between 
EXECUTONE Information Systems, Inc. and Clarity Telecom, 
Inc.  Incorporated by reference to the Registrant's Annual Report 
on Form 10-K/A for the year ended December 31, 1995 filed on 
June 4, 1996.

11         Statement regarding computation of per share earnings. 
Previously filed.


    
   
13         1996 Annual Report to Shareholders of EXECUTONE 
Information Systems, Inc. Previously filed.

    
   

21         Subsidiaries of EXECUTONE Information Systems, Inc.  Filed 
herewith.

23.1      Consent of Arthur Andersen LLP.  Filed herewith.

23.2      Consent of Hunton & Williams.  Filed herewith.


    
   
27         Financial Data Schedule. Previously filed.

    
   


E-3
<PAGE>