SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB

( X ) Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
 Act of 1934 For the fiscal year ended December 31, 1996 ( ) Transition Report
 Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the
            transition period from ______________ to _______________

                         Commission File Number 0-11883

                            Telebyte Technology, Inc.
             (Exact name of registrant as specified in its charter)

                                Nevada 11-2510138
                (State or other jurisdiction of (I.R.S. Employer
               incorporation or organization) Identification No.)

                   270 Pulaski Road, Greenlawn, New York 11740
                   (Address of principal executive) (Zip Code)

       Registrant's telephone number, including area code (516) 423-3232

      Securities registered pursuant to Section 12(b) of the Exchange Act:
                                      None

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

                     Common Stock, par value $0.01 per share
                                (Title of class)

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
 Regulation S-B contained in this form, and no disclosure will 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-KSB or any
                      amendment to this Form 10-KSB. ( X )

   The registrant's revenues for its most recent fiscal year were $4,136,685.

  The aggregate market value of the voting stock held by non-affiliates of the
                   registrant at March 11, 1997 was $878,366.

     The number of shares of common stock outstanding at March 11, 1997 was
                                   1,481,766.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None
 Transitional Small Business Disclosure Format (check one): Yes _____; No __X__


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2


                                                                         PART 1

Item 1.           Business

Telebyte Technology,  Inc. (herein either the "Company" or "Telebyte") designs,
manufactures,  and markets electronic data communications  products that operate
over copper and fiber cables. The Company's  operations are in a single business
segment  and,  except for sales to foreign  distributors,  the Company  does not
conduct any foreign operations. The Company was formed as a New York corporation
in 1983 and re-incorporated in Nevada in 1987.

Introduction

The  Company's  data  communications  equipment is used  principally  to provide
connectivity  solutions and maintain data  communications  networks.  Telebyte's
products effectively link computers to other computers and peripheral devices in
a manner  that  enables  them to  operate as a  complete  system.  An example of
growing  areas  are  data   acquisition   systems,   process  control   systems,
computerized time clocks,  intelligent  scales,  and bar code reading equipment.
The Company's six principal data communications product categories are interface
converters,  short haul modems, data  communications test equipment,  Local Area
Network (LAN) products, surge-lightning protectors and multiplexers. The Company
also sells a variety of data communications switching equipment and accessories.

In the large data  communication  marketplace,  Telebyte  focuses on the area of
"premises  communication"  or local  networks.  Telebyte  addresses the needs of
customers  that have  computer  systems  with data  communications  applications
including distances whose range is from a few feet to a few miles.  Accordingly,
Telebyte's  products are used in data communication  networks in facilities such
as industrial  plants,  factories,  high rise office  buildings,  or campus like
environments. The transmission media used in this environment are "twisted pair"
copper wire and/or fiber optic cable. Fiber optic  based  products represents  a
growing segment of the Company's product line.

The Company's products fill a variety of applications in the overall system plan
and are  considered  the "glue" to allow  many  different  systems  to  function
properly.  The Company's  prospective  market is  increasing  as the  ubiquitous
personal  computer  (PC) embraces more  applications.  The Company  endeavors to
maintain a broad  product line by developing  both improved  versions of current
products  and new  products.  Fiber  optic  products  have been an  increasingly
important factor in the Company's  business and future product  development will
continue to emphasize this area.

Business Developments for 1994, 1995 and 1996

During 1994 the Company expanded its product line through an original  equipment
manufacturer  (OEM)  relationship with a Florida based company to resell,  under
the Telebyte name, a group of switching  products.  Approximately  70,000 of the
Company's  product  catalogs  were mailed in November  of 1994.  Neural  network
processor  development  was completed and initial orders for the Company's Model
1000 Neuro Engine  neurocomputer  and neural network  modules,  Model 1001, were
received in the third quarter with initial deliveries beginning in late December
of 1994.  New  product  development  in 1994  resulted  in  eleven  new  product
introductions. In addition, several custom products were developed for customers
such as Trane Corp., VONS Supermarkets and Telegenix.

In 1995 Telebyte  devoted  efforts to redesign a significant  number of its core
short haul modems and  interface  converters  to include a new display  feature.
This display,  incorporating  liquid crystal  technology and called  DataSpy(R),
provides  a window  onto the data  link  thereby  simplifying  installation  and
maintenance of the network. DataSpy(R) is a registered trademark of Telebyte. In
addition,  Telebyte submitted a patent application to cover this feature.  It is
expected  that this feature  will act as a  significant  product  differentiator
between Telebyte and its competitors.

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3

1995 saw large  numbers of interface  converters  shipped to Intel and AT&T. A
system  integrator,  working for the U.S.  government,  took delivery of several
thousand  modem abort timers.  Also during 1995 the Company  decided to exit the
video market which had become  flooded with commodity  products from Asia.  This
competition  caused  margins to erode quickly and therefore the products did not
meet Telebyte's criteria for gross margin.

Many other companies availed  themselves of Telebyte's ability to design special
products or modify existing  products.  This product  "design-in" is expected to
produce  additional  volume sales as production  begins for the programs,  which
include these special Telebyte products.

1996 was a year in which  the  Company  took on a more  aggressive  position  in
establishing itself by virtue of increased media attention. This was realized by
advertising,  catalog mailings and trade show attendance.  This was augmented by
the single largest order for rack mounted interface converters, in the Company's
history, from a Government subcontractor.

Also in 1996, due to the poor sales of the  neurocomputer and a deterioration of
the  relationship  between  the  Company  and  the  owner  of the  neurocomputer
technology,  Telebyte  terminated the relationship  with that owner and withdrew
from the neurocomputer technology market.  Consistent with this decision was the
decision to focus on the growing of the data communications product line.

Products

Telebyte's   products   compete  in  six   different   product   areas  of  data
communications networks. These are Interface Converters, Short Haul Modems, Test
Equipment, LAN Products, Lightning Protection and Multiplexers.

Interface  converters  transform the characteristics of the electrical interface
of one device to enable it to become compatible with the electrical interface of
another.  This  conversion  may also include  modifying the protocol  and/or the
physical  medium,  i.e.,  copper  wire  to  fiber  cable.  As a  result,  a data
communications  network can be established or expanded  using  equipment  which
otherwise would be unable to transmit or receive data from each other. Interface
converters  represented  48% of  Telebyte's  revenue in 1996,  and  because  the
industry continues to develop new interface  standards,  the Company anticipates
that the market may require greater varieties of interface  converters,  thereby
expanding the available market for existing products and creating  opportunities
for new products.  Telebyte's line of interface  converters is available in most
of the  configurations  now  required  by the market and  includes  programmable
devices.  When the appropriate  opportunity  presents  itself,  the Company will
manufacture  custom  interface  converters  to  meet  a  particular   customer's
requirements.

Short haul modems differ from those modems which most people are familiar  with,
those that operate over the dial-up telephone network.  Short haul modem devices
provide the link over  dedicated  wires or optical  fibers among  computers  and
accessory equipment such as terminals, printers, badge readers, scales, bar code
readers, and other computer controlled machines. Short haul modems are also used
in establishing  communications  between micro or personal computers and mini or
main frame  computers.  Thus, the role of the short haul modem has been expanded
from  coupling  terminals  to a central  processing  unit to creating  extensive
computer to computer/peripheral networks. The Company's short haul modem devices
are designed to provide data communications  links ranging from relatively short
distances  to several  miles.  The Company  manufactures  and sells a variety of
short haul  modems  designed  for  particular  applications  and the  electrical
environment  of the user.  For  example,  Telebyte has three types of short haul
modems,  with  transmission  capabilities  that are suited for (i)  factories or
heavy manufacturing operations,  (ii) light manufacturing,  and (iii) industrial
office  areas or general  office  locations.  Due to  technological  changes and
innovations,  the  Company  has to develop  new short haul modem  products  on a
continual  basis to meet its  customers'  technical  requirements  and to remain
competitive in this market.  Short haul modems represented 29% of Telebyte's net
sales in 1996.

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4

No other product areas had sales that exceeded 10% of net sales in 1996.

The third most important product area by sales revenue is called Test Equipment.
This area consists of two distinctly  different product groups,  namely wireline
simulation and protocol analyzers. The wireline simulator is used in engineering
development and in production tests. This area is experiencing growth due to the
availability  of new  communications  services  such ISDN  (Integrated  Services
Digital  Network),  HDSL  (High  Datarate  Subscriber  Line),  ADSL  (Asymmetric
Datarate  Subscriber Line) and T1 (high-speed data services offered by telephone
companies).  These  services have created new product  opportunities,  which are
being satisfied by a host of companies for whom the Telebyte wireline simulators
have become a valuable  piece of production  test  equipment to guarantee  their
products  comply  with  published   specifications.   These  products  are  also
applicable  to  engineering   product  development  and  evaluation  efforts  to
determine the  character  and  limitations  of certain data  communications  and
transmission  devices.  New transmission  technologies such as ATM (Asynchronous
Transfer Mode) are creating  additional  product  opportunities for existing and
new wireline simulators.

The other area of test equipment is protocol analyzers which are used to analyze
and test the  integrity of data  communications  networks.  Telebyte's  protocol
analyzer test equipment  product line includes  "plug-in" printed circuit boards
and stand alone units for use with IBM personal computers and compatible clones.
These items are  supplied  with the  software  necessary  to enable the personal
computer user to monitor or emulate the data line with other devices in the data
communications  network.  This test  equipment  product  assists in  maintenance
because it can rapidly  identify open leads,  missing  signals and other errors,
and  intermittent  problems  can be  tracked  and  stored  in  memory  for later
analysis.  During 1996  Telebyte  initiated  the  development  of a new protocol
analyzer to provide increased  performance.  This product,  called the Model 905
Comscope, was released in the first quarter of 1997.

Telebyte manufactures and sells a number of lightning and surge protectors which
prevent  damage  to data  communications  equipment  that can be  caused by high
voltage surges and transients,  ground  currents,  and other  lightning  induced
electrical disturbances encountered on data communication circuits.  The Company
believes  this area of business may expand as more diverse systems are deployed.

The Company's  multiplexers  allow data from a number of different devices to be
communicated  simultaneously  on the same circuit or channel.  Telebyte's  local
area multiplexers perform a task similar to its short haul modems, except that a
single  communications  link can  support  many  users.  Telebyte's  multiplexer
products  allow  simultaneous  data transfers over distances of up to 8,000 feet
for wire or 6,600 feet over fiber.

The Company generally  manufactures and maintains an inventory of products based
upon historical  levels of demand and sales forecasts.  Most of its products are
standard or catalog items.  On occasion,  the Company  produces  custom products
manufactured to a customer's specifications or for a specific application.

The  Company  has not  experienced  a shortage  of  manufacturing  materials  or
components,  and it  purchases  raw  materials  and supplies  from  domestic and
foreign  sources.  The  Company  does not depend upon any  particular  source of
supply, and not more than 10% of the purchases were from a single supplier.  Raw
material and supplies are readily available from various sources.

The research and new product development budget for 1997 is $405,000 compared to
approximately  $260,000 and $282,000 spent in 1996 and 1995,  respectively.  The
cost  of  research  and  development  is not  borne  directly  by the  Company's
customers.

Federal,  state, and local  environmental  laws and regulations have no material
impact on Telebyte or its business.  The Company is subject to the  governmental
regulations that apply to businesses generally.

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5

Sales and marketing

The Company markets its data communications  products by promotional  activities
such as telephone  sales,  paid  advertising,  press releases,  post card decks,
direct mail campaigns,  and  participating  in trade shows.  Telebyte  currently
conducts its sales and marketing  efforts  through an in-house sales staff and a
network of distributors.

On the basis of continuing  market  research the Company  believes that the most
effective way to increase its end user business, currently the largest source of
revenues,  is to  increase  the  circulation  and  content of its  catalog,  the
Datacom/Networking  Cookbook.  In 1995 the Company  distributed 100,000 catalogs
and in 1996 more than 200,000 were  distributed.  In 1996 the Company employed a
coverwrap  over the  catalog  cover with a return  postcard  in order to capture
qualified  leads  from  mailings  whose  source was rented  lists.  The  Company
continues to build its prospect database.

While the catalog is the focus of the promotional  activities,  the Company also
uses other  techniques  in addition to those  mentioned  above.  During 1996 the
Company  established  a Web site on the INTERNET  that  contains  the  Company's
complete  catalog.  This  Web  site,  http://telebyteusa.com,  is  producing  an
increasing  number of inquiries  which adds a large number of qualified leads to
the Company's database.

Sales  generated  by  all of  these  promotional  activities  are  primarily  to
end-users  rather  than  resellers.   Such  end-users  include  OEM's  (Original
Equipment Manufacturer),  system integrators or installers and customers who may
be employing the product for their own specific use.

The Company also uses distributors as resellers.  At the end of 1996 the Company
had 20 domestic  distributors of record.  Domestic  distributors do not have any
territorial  exclusivity.  In the domestic  marketplace, the Company's  sales to
end-users  dominates  its sales to  distributors.  The ratio of these sales were
3.13, 2.85 and 2.27 to 1 in 1996, 1995 and 1994, respectively.  Internationally,
the Company uses 57  distributors.  Some  products are  marketed  through  other
catalog  distributors.  Foreign sales represented  approximately  10.6% in 1996,
11.8% in 1995 and 12.6% in 1994 of net sales.

Domestic sales to end-users and domestic  distributors  are serviced by internal
sales  representatives  who  are  paid  commissions  on  all  sales  from  those
customers.  At the end of 1996 the  Company  had 5 such  representatives  on its
staff.  Foreign  sales are under the  direction of the  President of the Company
with the help of an  assistant.  These  sales are  carried  out by a network  of
international  distributors.  For the most  part  these  distributors  are given
territorial  exclusivity.  In some  countries  new  laws  make  exclusive  sales
arrangements illegal and additional distributors are being added.

The Company  does not depend upon the sales to any single  customer or a limited
group of  customers.  There are no sales to a single  customer  during  the last
three years exceeding 10% of net sales. Sales of products to the U.S. government
are not subject to  renegotiations of profits or termination of contracts at the
U.S.  government's  election.  For the most part such  sales are  covered by the
Company's General Service Administration (GSA) contract. The Company's sales are
not materially affected by seasonal factors.


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6

Competition

There are a significant number of companies engaged in manufacturing and selling
data  communications  equipment  in  the  same  markets  as the  Company.  Since
Telebyte's product line is diverse,  it is difficult to define and enumerate its
competition. As a general matter, there are competitors that are larger and more
established than Telebyte, many with technical and capital resources,  which the
Company  does  not  possess,   and  more  well-developed   sales  and  marketing
capabilities.

The Company's principal competitors are RAD Data Communications,  Ltd. (which is
based in Israel with local offices in New Jersey),  Black Box (with headquarters
based in Pennsylvania), and Patton Electronics (based in Maryland), and a number
of small  companies.  Telebyte  competes  with these  companies  on the basis of
quality,  price,  breadth of product line,  sales and marketing  capability  and
technological  support, and innovation.  The Company relies principally upon the
price/performance  ratio of its  converter,  multiplexer,  and surge  protection
products.  Telebyte  also  attracts  market  share by its ability to fill orders
quickly and provide  technical  support to its  customers.  The Company does not
have  a  significant   market   presence  with  its  test   equipment  and  data
communications accessories.

Historically, the Company has not relied upon  patents,  registered  trademarks 
or licenses to give it a competitive advantage.

Employees

As of  December  31,  1996,  the Company  had 35 full time  employees.  Of these
employees,  two  are  executives,  six  are  in  sales,  four  in  research  and
engineering, four in administration, and the balance in manufacturing, shipping,
and related  activities.  The Company uses  subcontractors and part-time help to
support its current operations. None of the employees are represented by a labor
union, and the Company considers its employee relations to be good.

Backlog

At December  31,  1996,  the  Company's  backlog was  $119,780  all of which the
Company expects to fill in fiscal 1997.  Comparable backlog at December 31, 1995
was $270,533.

Item 2.           Properties

Telebyte's executive office, plant, and manufacturing  facility are located in a
20,000 square foot building on 3.2 acres,  at 270 Pulaski Road,  Greenlawn,  New
York 11740.  The Company  purchased the land and building in September 1985. The
Company  refinanced  the  existing  mortgage  in May 1988 and the  property  now
secures a mortgage loan payable on a fully  self-amortizing basis over 20 years.
Interest  under the  mortgage  is based on 2.75%  over the  bank's  prime  rate,
however,  such rate  cannot be less  than 10% and will be  recalculated  on June
1,1997.  The outstanding  principle balance of the mortgage loan, as of December
31, 1996, was $1,024,378. Management believes that all of its properties, plant,
and equipment are well maintained and adequate for its requirements.

Of the 20,000  square feet the Company has leased 5,000 square feet to a tenant.
Management  believes  that  Telebyte's  existing  manufacturing  facilities  are
sufficient to support its present needs and anticipated  growth, and the Company
does not foresee any significant capital expansion of its plant in Greenlawn.


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7

Item 3.           Legal Proceedings

There are no material pending legal  proceedings to which the Company is a party
or by which its properties are subject.


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

Not applicable.


                                     PART II


Item 5.  Market for the Company's Common Equity and Related Stockholder Matters

Until  September 2, 1992, the Company's  common stock was listed on the National
Association of Securities  Dealers  Automated  Quotation System ("NASDAQ") under
the symbol  "TBTI."  After that date the stock was moved to the Over The Counter
Bulletin Board since it no longer met the  requirements of NASDAQ's  minimum bid
price.

The following  table sets forth the high and low bid prices for the common stock
for  each  fiscal  quarter  during  1996 and 1995 as  reported  by the  National
Association of Securities  Dealers,  NASD. The bid and ask prices for the common
stock on March 11, 1997 were $.81 and $1.13 respectively.


                                 1996                               1995

                     High               Low               High              Low

First Quarter         7/8               3/4                7/8              5/8

Second Quarter        7/8              7/16              2 1/4            1 1/8

Third Quarter         7/8             23/32              2 1/8            1 1/8

Fourth Quarter      1 1/4             11/16              1 1/4              5/8


The above quotations  reflect  inter-dealer  prices,  and may not include retail
mark-up,  mark-down or  commissions  and may not  necessarily  represent  actual
transactions.

At March 7,  1997,  there  were  approximately  321  holders  of  record  of the
Company's  common  stock.  Most of the  shares of the  common  stock are held in
street name for a larger number of beneficial owners.

To date,  Telebyte has not paid a cash  dividend.  The payment and amount of any
future  dividends  will  necessarily   depend  upon  conditions  then  existing,
including  the  Company's  earnings,   financial   condition,   working  capital
requirements,  and other  factors.  The Company does not  anticipate  paying any
dividends in the foreseeable future.


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8

Item 6.  Management's Discussion and Analysis of Financial Condition and

Results of Operations

Fiscal 1996 Compared to Fiscal 1995

Sales for the year ended December 31, 1996  increased by 10% to $4,136,685.  The
sales  increase  was  primarily a result of the  increased  sales and  marketing
efforts begun by the Company in 1996. This included  increased  catalog mailings
and  attendance at many industry trade shows.  The area of interface  converters
continued to expand as well as fiber optic products as a group.

An analysis of the gross  margin for 1996  reveals that it was 52.5% as compared
to 55.2% for 1995.  This was primarily a function of product mix which  includes
newer  products that have reduced  gross  margins due to start-up  charges and a
more  competitive  environment  as well as an increased  provision  for obsolete
materials  of  inventory  during  1996.  Cost of  sales  increased  by  $281,704
reflecting the increase in sales as well the above factors.

Selling,  general, and administrative costs increased by $190,092.  The increase
resulted  primarily from increased  promotional  expenses of $145,000 related to
the printing and distribution of a much larger quantity of the Company's catalog
and other related marketing  efforts which include  attendance at industry trade
shows.

Research and development  decreased in 1996 to $260,322,  or 6.3% of sales, from
$282,172, or 7.5% of sales in 1995. The decrease was due to the loss of a senior
engineer who was working on a part time basis.

Interest  expenses of $113,033 in 1996 decreased to 2.7% of sales as compared to
$115,081, or 3.0% in 1995.

Interest income decreased by $1,971.  The marginal decrease in 1996 reflects the
lower levels of cash on hand during 1996.  In 1996 the Company had rental income
of $48,195, equal to the 1995 rental income. For 1997 the Company expects rental
income of approximately $48,000.

The Company  generated  net income of $30,455 or $0.02 per share,  .7% of sales,
compared to $101,592 or $.07 per share,  2.7% of sales,  for 1995. This decrease
reflects the higher selling,  general and administrative,  and promotional costs
incurred in 1996 and a slight decrease in the Company's gross profit percentage.

The Company  believes that all of the market  indications  for the future of the
data communications  market and for the Company's products are positive and will
increase for 1997;  however there can be no assurance that this will happen. The
Company has  terminated  the external  salesperson  hired in 1995 as the Company
found that sales were not forthcoming from this effort.


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9

Liquidity and Capital Resources

In 1996,  the Company  invested  $60,071 in property  and  equipment,  which was
financed  through  internally  generated  funds.  The  statements  of cash flows
indicate  that the Company  generated  $107,760 in 1996  compared to $320,050 in
1995 in cash from operations. The decrease was primarily due to lower net income
and increased inventory levels.

Working  capital  increased  as of December  31, 1996 by $15,284 to  $1,876,550,
compared with  $1,891,834 at December 31, 1995.  The current ratio  decreased to
6.2 to 1 at December 31, 1996, compared to 7.0 to 1 at December 31, 1995.

The  Company  has  renewed  its line of credit,  which now expires in July 1997,
based upon eligible  accounts  receivable,  raw  materials,  and finished  goods
inventories,  for a maximum of $1,000,000 from Merrill Lynch. The line of credit
is  available  for general  working  capital  purposes  and to finance  business
growth. As of December 31, 1996, there was no outstanding  balance due under the
line of credit.  During  the past  three  years the  Company's  operations  have
generated sufficient working capital to sustain its current levels of operations
and the  Company  believes  that cash  generated  by the  Company's  operations,
current cash and cash equivalents, and the line of credit should supply the cash
resources to meet its cash needs for the next twelve months.  The Company has no
commitments for any major capital expenditures in 1997.


Effect of Inflation

During the five-year  period ending  December 31, 1996,  the Company was able to
decrease  its costs of sales of its  products  to  compensate  for the effect of
inflation  on the  cost of  components.  This was  accomplished  by  changes  in
manufacturing methodology, namely, increasing the amount of product manufactured
on a sub-contractor basis.


Item 7.           Financial Statements

See "Index to Financial Statements" beginning on page F-1 below.

Item 8.          Changes in and Disagreements with Accountants in Accounting and
Financial Disclosures

Not applicable.







<PAGE>
10


                                    Part III


Item 9.      Directors, Executive Officers, Promoters, and Control Persons;

The following table sets forth certain information concerning Company's officers
and directors as of December 31, 1996. Telebyte's directors are elected to serve
until the next annual  meeting of  shareholders  or until their  successors  are
elected and  qualified.  The executive  officers are appointed  annually by, and
serve at the pleasure of, the Board of Directors.

Name, age, and positions     Business experience during past            Director
held with the Company        five years and principal occupation         since

Joel A. Kramer, age 59,(1)   Mr. Kramer has served as President          1983
President and Chairman of    of the Company since August 1983,
the Board of Directors       and Chairman of the Board since
                             February 1989.

Kenneth S. Schneider,Ph.D.,  Dr. Schneider has served as Treasurer       1983
age 51, Vice President,      and Vice President, of the Company
Treasurer, Secretary, and    since August 1983; and he was elected
Director                     Secretary in March 1991.  Dr. Schneider
                             is a senior member of the Institute of
                             Electrical and Electronic Engineers.

Jamil Sopher, age 53 (2)     Mr. Sopher is a Principal Financial         1996
Director                     Analyst with the World Bank where
                             he has been employed for 18 years.

Robert M. Kramer, age 56 (3) Mr. Kramer is a private investor and has    1996
Director                     been since 1987.  Prior thereto he held the
                             position of Vice President at Drexel Burnham
                             Lambert and Shearson-Lehman.


(1) Mr. Robert M. Kramer is the brother of Mr. Joel A. Kramer, the President and
Chairman of the Board of Directors of the Company.
(2) Mr.  Sopher  received a Bachelor of Science and MSEE from Cornell and an MBA
from Harvard.
(3) Mr.  Kramer  received a BSME from  Polytechnic  Institute,  a MSME from City
College of NY and an MBA from the Wharton Graduate School.

Section 16 Compliance

Based upon a review of copies of the forms  required to be filed  under  Section
16(a) of the  Securities  Exchange Act of 1934 or written  representations  from
officers and directors,  the Company  believes all officers and  directors,  and
greater than ten percent owners of the Company's common stock have complied with
Section 16(a.)


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11

Item 10.     Executive Compensation

The following table sets forth the cash  compensation paid or accrued during the
last three  fiscal  years to the  executive  officers of the Company  whose cash
compensation exceeded $100,000.  The table includes Company contributions on the
officer's behalf to the Company's 401(k) Plan.


<TABLE>
                                                               Summary Compensation Table

                           Annual Compensation                                  Long-Term
                           Compensation
                                                                            Awards                    Payouts

<CAPTION>
      (a)          (b)       (c)       (d)         (e)            (f)            (g)               (h)           (i)
    Name and                                   Other Annual    Restricted        Stock          Long-Term        All Other
   Principal       Year    Salary     Bonus    Compensation   Stock Awards   Options/SARs    Incentive Payout   Compensation
    Position
                             ($)       ($)         ($)           (No.)          (No.)              ($)              ($)
    <S>            <C>        <C>       <C>         <C>            <C>            <C>               <C>              <C>
Joel A. Kramer    1996    $107,100   $4,300    $ 11,481(1)         0              0            $11,281(2)          $3,203
President, CEO    1995    $105,497   $13,300    $11,367(1)         0            5,000           $9,281(2)          $2,997
  & Director      1994     $97,968   $11,500    $12,697(1)         0            5,000           $9,281(2)          $2,948

  Kenneth S.      1996     $95,599   $3,150     $7,256 (1)         0              0             $4,080(2)          $2,819
   Schneider
   Sr. V.P.       1995     $95,153   $9,000     $6,619(1)          0            5,000           $4,080(2)          $2,668
 Sales, Sec.,
   Treas. &       1994     $90,394   $6,200     $6,678(1)          0            5,000           $4,080(2)          $2,858
   Director

<FN>

(1)  Commissions  - Mr.  Kramer  received  a 2.5%  commission  of net  sales  to
customers not located within the United States.  Mr.  Schneider  received a 0.5%
commission  of net sales to  customers  located  within the United  States.  The
amounts  paid are set forth  above  under the  caption  entitled  "Other  Annual
Compensation".


(2) Deferred Compensation - see Long-Term Incentive Plans Table below.
 </FN>
</TABLE>


<TABLE>
                                            Long-Term Incentive Plans - Awards in Last Fiscal Year

                                                                 Estimated Future Payouts under Non-Stock Price-Based Plans
<CAPTION>

                      Number of Shares,   Performance or Other
                       Units or Other         Period Until          Threshold          Target            Maximum
                                               Maturation
        Name             Rights (#)            or Payout             ($ or #)         ($ or #)           ($ or #)
<S>                        <C>                   <C>                   <C>               <C>               <C>

   Joel A. Kramer                            June 11, 2002          $26,667(1)       $26,667(1)         $26,667(1)
Pres.,CEO & Director

Kenneth S. Schneider                         April 16, 2010         $26,667(1)       $26,667(1)         $26,667(1)
   Sr.V.P. Sales,
       Sec.,
 Treas. & Director

<FN>
(1) In 1990 the Company entered into deferred  compensation  agreements with key
officers,  pursuant  to which  the  officers  will  receive  a  defined  amount,
approximately  30% of their  1990 base  salary,  each year for a period 10 years
after reaching age 65. The deferred  compensation  plans are funded through life
insurance  and  are  being  provided  for  currently.  The  expense  charged  to
operations in 1996 for such future obligations was $15,361 ($11,281  and $4,080,
for Joel Kramer and Kenneth Schneider, respectively).
</FN>
</TABLE>

<PAGE>
12
<TABLE>
                                                     Aggregate Option Grants in Last Fiscal Year
<CAPTION>
                                                 % of Total Options         Exercise or
                           Number of Options    Granted to Employees         Base Price             Expiration
         Name                   Granted          in Fiscal Year 1995           ($/Sh)                  Date

      <S>                         <C>                    <C>                    <C>                     <C>
  Joel A. Kramer                   0                      0                      -                       -
 Kenneth S. Schneider              0                      0                      -                       -
<FN>
The following  table sets forth  information  concerning  each exercise of stock
options  during fiscal 1996 by each of the named  executive  officers and fiscal
year-end value of unexercised options:
</FN>
</TABLE>
<TABLE>
                          Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
<CAPTION>
                                                                             Number of         Value of Unexercised
                           Number of Shares             Value          Unexercised Options at  In-the-Money Options
         Name            Acquired on Exercise       Realized ($)         December 31, 1996     at December 31, 1996
        <S>                       <C>                    <C>                    <C>                    <C>
    Joel A. Kramer                 0                      0                  10,000 (2)                0 (3)
 Kenneth S. Schneider              0                      0                  10,000 (2)                0 (3)
<FN>
(1)  Calculation  based  upon the  average of the high and low bid prices of the
Company's Common Stock from the National Quotation Bureau on December 31, 1996.
(2) All such  options  are  currently  exercisable.  (3) All such  options  have
exercise prices greater than the value of the Company's Common Stock on December
31, 1996.
</FN>
</TABLE>
Compensation Plans and Other Compensation

The Company adopted a Stock Option Plan (the "1993 Plan") under which options to
purchase  100,000 shares of the Company's common stock, par value $.01 per share
have been reserved.  As of December 31, 1996, there were 75,000 shares available
for  grants  under the 1993 Plan.  Pursuant  to the 1993  Plan,  the  Company is
permitted to issue  incentive  stock  options  ("Incentive  Stock  Options") and
non-qualified  stock  options.  Incentive  Stock Options under the 1993 Plan are
intended to qualify for the tax  treatment  accorded  under  Section  422 of the
Internal Revenue Code of 1986, as amended (the "Code.")

All  directors,  officers or other key  employees of the Company are eligible to
participate  in the 1993  Plan.  The 1993 Plan is  administered  by the Board of
Directors of the Company, which, to the extent it shall determine,  may delegate
its power with  respect to the  administration  of the 1993 Plan to a  committee
consisting of not less than three directors.

Under the 1993 Plan, Incentive Stock Options to purchase shares of the Company's
common  stock  shall not be granted for less than 100 percent of the fair market
value of the common  stock on the date the  Incentive  Stock  Option is granted;
provided,  however, that in the case of an Incentive Stock Option granted to any
person  then  owning  10  percent  of the  voting  power of all  classes  of the
Company's  stock,  the purchase  price per share subject to the Incentive  Stock
Option may be not less than 110 percent of the fair market value of the stock on
the date of the grant of the option. Non-qualified stock options to purchase the
Company's  common stock are granted at prices  determined by the Company's Board
of Directors.

Options under the 1993 Plan may not have a term of more than 10 years; provided,
however,  that an Incentive  Stock  Option  granted to a person then owning more
than 10 percent of the voting  power of all classes of the  Company's  stock may
not be exercisable  more than 5 years after the date such option is granted.  In
addition, the aggregate fair market value,  determined at the time the option is
granted,  of the  stock  with  respect  to which  Incentive  Stock  Options  are
exercisable  for the first time by an  employee in any  calendar  year under the
1993 Plan may not exceed $100,000.

Options were  granted for 5,000  shares to a director of the Company  during the
year ended December 31, 1996 with an exercise price of $.79,  which was the fair
market value of the Company's  stock on the date of the grant.  No other options
were granted or exercised during 1996.

The Company's 1983 Stock Option Plan  terminated in 1994. No executive  officers
or directors have any outstanding options under the 1983 Stock Option Plan.
<PAGE>
13
The Company has an informal bonus plan in which officers and other key personnel
participate.  The  bonus  award,  if any,  is  fixed  annually  by the  Board of
Directors. Bonuses were allocated and paid to executive officers under this plan
during fiscal 1996 and shown on the foregoing Summary Compensation Table.

The Company  maintains a deferred  compensation plan under Internal Revenue Code
Section  401(k).  All  employees  are  eligible  to  participate;   the  Company
contributes  50% of the first 2% deferred by the  employee.  Each  employee  can
contribute  between 2% and 15% of his annual salary.  Contributions  in calendar
year 1996 cannot  exceed  $9,240.  Benefits are 100% vested and are payable upon
the employee's death,  disability,  retirement,  termination,  and under certain
financial  circumstances.  At December 31, 1996,  $2,027 was  contributed to the
plan for officers.  All  contributions are reflected in the salary column in the
Summary Compensation Table.

Except for life and medical insurance  benefit programs,  which are available to
all employees, the Company has no other compensation plans.

Outside   directors   receive  a  per  meeting  fee  of  $500,  in  addition  to
reimbursement  of expenses for  attending  each meeting.  By agreement  with the
World Bank, Mr. Sopher cannot accept the meeting fee.

 Item 11.  Security
Ownership of Certain  Beneficial Owners and  Management

The following  table sets forth as of December 31, 1996  information  concerning
(i) the shares held by each person or group known to own beneficially  more than
5% of the outstanding shares of common stock, (ii) shares owned by directors and
(iii) the shares owned by all directors and officers as a group.


Name and Address of            Number of Shares         Percent of
Beneficial Owner               Beneficially Owned       Class

Kenneth S. Schneider           294,538 (1) (2)          19.7%
270 Pulaski Road
Greenlawn, NY 11740

Joel A. Kramer                 274,996 (2) (3)          18.5%
270 Pulaski Road
Greenlawn, NY 11740

Jamil Sopher                      1,730                  (5)
270 Pulaski Road
Greenlawn,  NY 11740

Robert M. Kramer                  5,000(4)               (5)
270 Pulaski Road
Greenlawn, NY 11740

All officers and directors
as a group (4 in number)        576,264                  38.2%

(1)  Includes  1,500 shares  owned by Dr.  Schneider as custodian  for his minor
children.

(2) Includes  10,000 shares  issuable upon the exercise of stock options granted
under the Company's 1993 Stock Option Plan.

(3)   Includes 2,361 shares owned of record by Mr. Kramer's children.

(4) Includes 5,000 shares  issuable upon exercise of stock options granted under
the Company's 1993 Stock Option Plan.

(5) Less than 1%.


<PAGE>
14

item 12.  Certain Relationships and Related Transactions

None.

Item 13. Exhibits and Reports on Form 8-K(a)

Exhibits

3(a) The Company's  Certificate of  Incorporation  under the State of Nevada was
filed as an  Exhibit  with the  Proxy  Statement  filed in June  1987  (File No.
0-11883) and is incorporated by reference herein.

3(b)The By-laws of the Company as a Nevada  corporation were filed as an Exhibit
on Form 8-K in third quarter of 1987 (File No. 0-11883) and are  incorporated by
reference herein.

10(a)The  Company's  1993  Stock  Option  Plan was  filed as an  Exhibit  to the
Company's  definitive 1994 proxy statement filed in May 1994 (File No. 0-11883),
and is incorporated by reference herein.

10(b)Commercial  mortgage and consolidation agreement dated May 25, 1988 between
Home Federal Savings Bank and Telebyte Technology,  Inc., filed as an Exhibit to
the  Company's  1988  Annual  Report on Form  10-K  (File  No.  0-11883)  and is
incorporated by reference herein.

10(c)Deferred  compensation  agreements dated December 12, 1990 between Telebyte
Technology,  Inc.  and Joel A.  Kramer  and  Kenneth S.  Schneider,  filed as an
Exhibit to the Company's 1990 Annual Report on Form 10-K (File No.  0-11883) and
is incorporated by reference herein.

10(e)$1,000,000  Revolving Line of Credit  agreement dated June 23, 1994 between
Merrill Lynch and Telebyte Technology,  Inc. and was filed as an exhibit on Form
10-KSB  for  the  year  ended  December  31,  1994  (File  No.  0-11883)  and is
incorporated by reference herein.

(23) Consent of Grant Thornton LLP,  independent  certified public  accountants


(b) Reports on Form 8-K

There were no reports on Form 8-K filed during the fourth quarter for the fiscal
year ended December 31, 1996.


<PAGE>
15


                                   Signatures

In accordance  with Section 13 or 15(d) of the Securities  Exchange Act of 1934,
the  Registrant  had duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

TELEBYTE TECHNOLOGY, INC.



By:      __________\s\_________________
         Joel A. Kramer, President and
         Chairman of the Board
         (Principal Executive Officer)


By:      ___________\s\________________
         Michael Breneisen, Vice President of Finance
         (Principal Financial and Accounting Officer)


Date:    March 28, 1997


In accordance  with the  Securities  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.


March 28, 1997    __________\s\_____________
Joel A. Kramer, Director


March 28, 1997    __________\s\_____________
Kenneth S. Schneider, Director



March 28, 1997    ___________\s\____________
Jamil Sopher, Director



March 28, 1997    ___________\s\____________
Robert M. Kramer, Director






<PAGE>
F-1


                            Telebyte Technology, Inc.

                          INDEX TO FINANCIAL STATEMENTS



                                                                      Page


Report of Independent Certified Public Accountants                     F-2

Balance Sheets as of December 31, 1996 and 1995                        F-3

Statements of Earnings for the years ended
   December 31, 1996 and 1995                                          F-5

Statement of Shareholders' Equity for the years
   ended December 31, 1996 and 1995                                    F-6

Statements of Cash Flows for the years ended
   December 31, 1996 and 1995                                          F-7

Notes to Financial Statements                                          F-8






<PAGE>
F-2

                         REPORT OF INDEPENDENT CERTIFIED
                               PUBLIC ACCOUNTANTS




To the Board of Directors and Shareholders of
     Telebyte Technology, Inc.


We have audited the accompanying balance sheets of Telebyte Technology,  Inc. as
of  December  31,  1996  and  1995,  and the  related  statements  of  earnings,
shareholders'  equity and cash flows for the years then ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Telebyte Technology, Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended,  in  conformity  with  generally  accepted  accounting
principles.





GRANT THORNTON LLP


Melville, New York
March 11, 1997



<PAGE>
F-3

                            Telebyte Technology, Inc.

                                 BALANCE SHEETS

                                  December 31,






    ASSETS                                          1996                  1995
                                                ----------            ----------
CURRENT ASSETS
    Cash and cash equivalents                   $  583,721            $  609,466
    Accounts receivable, net of allowance of
       $15,000                                     413,953               464,688
    Inventories                                  1,078,111               963,904
    Prepaid expenses and other                      79,083                87,354
    Deferred income taxes                           80,000                80,000
                                                 ---------             ---------
         Total current assets                    2,234,868             2,205,412




PROPERTY AND EQUIPMENT - AT COST,
    less accumulated depreciation                1,170,035             1,198,462








OTHER ASSETS                                        43,352                47,552
                                                ----------            ----------
                                                $3,448,255            $3,451,426
                                                ==========            ==========











The accompanying notes are an integral part of these statements.



<PAGE>
F-4

                            Telebyte Technology, Inc.

                           BALANCE SHEETS (continued)

                                  December 31,






    LIABILITIES AND SHAREHOLDERS' EQUITY           1996                   1995
                                                  ------                 ------
CURRENT LIABILITIES
    Accounts payable                           $  198,023            $  133,068
    Accrued expenses                               94,743               119,890
    Current maturities of long-term debt           65,552                60,620
                                               ----------            -----------
         Total current liabilities                358,318               313,578



LONG-TERM DEBT, less current maturities           983,107             1,046,325


COMMITMENTS


SHAREHOLDERS' EQUITY
    Common stock - $.01 par value; 9,000,000
      shares authorized; 1,636,566 shares issued;
      1,481,766 and 1,501,566 shares outstanding
      in 1996 and 1995, respectively               16,366                16,366
    Capital in excess of par value              2,751,988             2,751,988
    Accumulated deficit                          (560,431)             (590,886)
    Treasury stock -  154,800 and 135,000 shares
       at cost, in 1996 and 1995, respectively   (101,093)              (85,945)
                                               -----------           -----------
                                                2,106,830             2,091,523
                                               ----------            -----------
                                               $3,448,255            $3,451,426
                                               ==========            ==========







The accompanying notes are an integral part of these statements.


<PAGE>
F-5

                            Telebyte Technology, Inc.

                             STATEMENTS OF EARNINGS

                             Year ended December 31,



                                                  1996                   1995
                                                  ----                   ----
Net sales                                      $4,136,685            $3,758,953
Cost of sales                                   1,965,382             1,683,678
                                               ----------            ----------
         Gross profit                           2,171,303             2,075,275

Operating expenses
    Selling, general and administrative         1,833,069             1,642,977
    Research and development                      260,322               282,172
                                                ---------             ---------
                                                2,093,391             1,925,149

         Operating profit                          77,912               150,126

Other income (expense)
    Interest income                                18,381                20,352
    Rental income                                  48,195                48,195
    Interest expense                             (113,033)             (115,081)
                                                ----------             ---------
                                                  (46,547)              (46,534)

         Earnings before income taxes              31,455               103,592

Income tax provision (benefit)                      1,000                (2,000)
                                                 --------              ---------
         NET EARNINGS                            $ 30,455              $101,592
                                                 ========              =========
Earnings per common share                          $.02                   $.07
                                                 ========              =========
Weighted average number of common
    shares outstanding                          1,489,958             1,511,292
                                                =========             =========

The accompanying notes are an integral part of these statements.




<PAGE>
F-6
<TABLE>

                            Telebyte Technology, Inc.
                        STATEMENT OF SHAREHOLDERS' EQUITY
                     Years ended December 31, 1996 and 1995


<CAPTION>

                               Number of                          Capital in
                                shares          Common             excess of         Accumulated         Treasury
                                issued           stock             par value           deficit             stock            Total
<S>                              <C>              <C>                <C>                 <C>                <C>            <C>

Balance at January 1, 1995    1,636,566         $16,366           $2,751,988          $(692,478)        $(77,658)     $1,998,218


Purchase of treasury stock                                                                                (8,287)         (8,287)

Net earnings                                                                            101,592                          101,592
                              ---------          -------          ----------          ----------        ---------     ------------
Balance at December 31, 1995  1,636,566          16,366            2,751,988           (590,886)         (85,945)      2,091,522

Purchase of treasury stock                                                                               (15,148)        (15,148)

Net earnings                                                                             30,455                           30,455
                              ---------         --------          ----------          ----------        ---------     ------------
Balance at December 31, 1996  1,636,566         $16,366           $2,751,988          $(560,431)       $(101,093)     $2,106,830
                              =========         ========          ==========          ==========       ==========     ============

<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>

<PAGE>
F-7


                            Telebyte Technology, Inc.

                            STATEMENTS OF CASH FLOWS

                             Year ended December 31,



                                                   1996                  1995
                                                  -----                 -----
Cash flows from operating activities
    Net earnings                                 $30,455             $ 101,592
    Adjustments to reconcile net earnings to net
       cash provided by operating activities
          Depreciation and amortization           88,497                76,193
          Deferred income taxes
          Provision for losses on accounts
              receivable                                                (1,633)
          (Increase) decrease in operating assets
              Accounts receivable                 50,735               (51,312)
              Inventories                       (114,207)               88,153
              Prepaid expenses and other          12,471                58,528
              Other assets
          Increase (decrease) in operating liabilities.
              Accounts payable                    64,956                (8,149)
              Accrued expenses                   (25,147)               56,678
                                                 --------              --------
       Net cash provided by operating activities 107,760               320,050
                                                 --------              --------
Cash flows from investing activities
    Additions to property and equipment          (60,071)             (112,161)
                                                 --------             ---------
         Net cash used in investing activities   (60,071)             (112,161)

Cash flows from financing activities
    Principal payments of long-term debt         (58,286)              (55,770)
    Purchase of treasury stock                   (15,148)               (8,287)
    Proceeds from long-term debt                                        26,257
                                                 --------              --------
         Net cash used in financing activities   (73,434)              (37,800)
                                                 --------              --------
         NET (DECREASE)INCREASE IN CASH
              AND CASH EQUIVALENTS               (25,745)              170,089

Cash and cash equivalents at beginning of year   609,466               439,377
                                               ---------             ---------
Cash and cash equivalents at end of year       $ 583,721             $ 609,466
                                               =========             =========



The accompanying notes are an integral part of these statements.



<PAGE>
F-8

                            Telebyte Technology, Inc.

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 1996 and 1995



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Telebyte Technology, Inc. (the "Company") designs, manufactures and markets
     electronic  data  communications   products.  The  Company's  products  are
     primarily sold to end-users,  domestic  dealers and  distributors,  foreign
     dealers and distributors and original equipment manufacturers.  The Company
     does not  depend  upon  sales to a single  customer  or a limited  group of
     customers and there were no sales to a single  customer during the last two
     years exceeding 10% of net sales. The Company operates in a single business
     segment  and has no foreign  operations.  Export  sales were  $441,000  and
     $445,000 in 1996 and 1995, respectively.

     A summary of the significant  accounting policies  consistently  applied in
     the preparation of the accompanying financial statementS follows:

     1.  Inventories

         Inventories  are stated at the lower of cost  (first-in,  first-out) or
         market.

     2.  Property and Equipment

         Property  and   equipment   are  stated  at  cost,   less   accumulated
         depreciation.  Depreciation is computed on the straight-line basis over
         the  estimated  useful  lives of the  assets,  which  are 35 years  for
         building and improvements and 5 years for equipment.

     3.  Income Taxes

         Deferred income taxes are recognized for temporary  differences between
         financial  statement and income tax bases of asset and  liabilities and
         loss  carryforwards  for which  income tax  benefits are expected to be
         realized in future years. A valuation allowance has been established to
         reduce the  deferred tax assets as it is more likely than not that all,
         or some portion, of such deferred tax assets will not be realized.  The
         effect on  deferred  taxes of a change in tax  rates is  recognized  in
         income in the period that includes the enactment date.

     4.  Earnings Per Share

         Earnings per share of common  stock are based on the  weighted  average
         number of shares of common stock  outstanding  during the year.  Common
         stock  equivalents  are not material to the calculation of earnings per
         share.

     5.  Stock-Based Compensation Plans

         The Company  maintains  two  fixed  stock option  plans,  as more fully
         described in Note G to  the financial  statements,  accounted for using
         the "intrinsic  value" method pursuant to the  provisions of Accounting
         Principles  Board  Opinion  No. 25,  "Accounting  for  Stock  Issued to
         Employees." The fair value and pro forma effects on the  Company's  net
         earnings  and  net  earnings  per  common  share  are not presented  as
         the fair value of the options granted (determined
<PAGE>
 F-9                          Telebyte Technology, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                           December 31, 1996 and 1995



NOTE A (continued)


         pursuant  to  Statement  of  Financial  Accounting  Standards  No. 123,
         "Accounting  for  Stock-Based  Compensation")  is  not  material to the
         financial statements.

     6.  Statements of Cash Flows

         For purposes of the  statements  of cash flows,  the Company  considers
         highly  liquid  cash  investments  with an  original  maturity of three
         months or less to be cash  equivalents.  The Company  paid  interest of
         $113,033 and $115,871 and income taxes of $1,000 and $2,208 in 1996 and
         1995, respectively.

     7.  Revenue Recognition

         Revenue is  recognized  from sales when a product is  shipped.  Service
         fees are recognized upon the completion of the related service.

     8.  Use of Estimates and Fair Value of Financial Instruments

         In preparing financial statements in conformity with generally accepted
         accounting  principles,  management  is required to make  estimates and
         assumptions  that affect the reported amounts of assets and liabilities
         and the disclosure of contingent  assets and liabilities at the date of
         the financial statements and revenues and expenses during the reporting
         period. Actual results could differ from those estimates.

         The Company has estimated the fair value of financial instruments using
         available  market  information  and  other  valuation  methodologies in
         accordance  with  Financial  Accounting Standards No. 107, "Disclosures
         About  Fair  Value of Financial Instruments." Management of the Company
         believes that the fair  value  of  financial   instruments,  consisting
         of cash, accounts receivable and  debt, approximate carrying value  due
         to  the immediate or short-term   maturity associated with its cash and
         accounts receivable  and  the  interest rates associated with its debt.


NOTE B - INVENTORIES

     Inventories consist of the following at December 31:

                                                  1996                   1995
                                                 ------                 ------
        Purchased components and materials      $519,645               $521,082
        Work in process                          222,963                171,230
        Finished goods                           335,503                271,592
                                             -----------               --------
                                             $ 1,078,111               $963,904
                                             ===========               ========
<PAGE>
 F-10                        Telebyte Technology, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                           December 31, 1996 and 1995


NOTE C - PROPERTY AND EQUIPMENT

     Property and equipment consist of the following at December 31:

                                                  1996                     1995
                                                 -----                    -----
        Land                                  $300,000                 $300,000
        Building and improvements            1,024,583                1,024,583
        Equipment                              514,825                  454,754
                                             ---------                ---------
                                             1,839,408                1,779,337
        Less accumulated depreciation          669,373                  580,875
                                            ----------               ----------
                                            $1,170,035               $1,198,462
                                            ==========               ==========

NOTE D - DEBT

     1.  Line of Credit Facility

         The Company has an agreement with a financial institution,  expiring in
         July 1997, which provides the Company with a line of credit facility of
         up to $1,000,000  based on eligible  accounts  receivable and purchased
         components and materials and finished goods inventories of the Company,
         as defined in the agreement.  Borrowings  under the line of credit bear
         interest  at the  bank's  specified  prime  rate  plus  .75%  (9.25% at
         December 31, 1996). There was no outstanding  balance against this line
         at December 31, 1996.

     2.  Long-Term Debt

         The  Company's  first  mortgage  note is  collateralized  by  land  and
         building and the other notes payable are  collateralized  by equipment.
         The  remaining  unpaid  mortgage  note  balance at December 31, 1996 is
         payable in equal monthly installments of $12,484 (inclusive of interest
         at 10%)  with a  maturity  date  of June  2008.  The  interest  rate is
         computed  based on a 2.75%  increment  over the bank's  prime  interest
         rate,however,such rate cannot be less than 10% and will be recalculated
         on June 1, 1997 and thereafter  every   three   years.   Financing  and
         other  costs   aggregating   $85,122  incurred  in connection  with the
         acquisition  of real property and the refinancing of mortgage  debt are
         stated  at  cost,  net  of  accumulated  amortization  of  $44,047  and
         $39,847 at  December  31, 1996 and 1995, respectively, and are included
         in "Other  assets" in the  accompanying balance sheets. Amortization is
         provided on a straight-line basis over the life of the mortgage note of
         20 years.
<PAGE>
F-11                         Telebyte Technology, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                           December 31, 1996 and 1995


NOTE D (continued)


         Long-term debt is summarized as follows at December 31:

                                                      1996                1995
                                                     ------              ------
        First mortgage note payable to bank in
            equal monthly installments, including
            interest, through June 2008            $1,024,378        $1,067,501
        Notes payable to bank in equal monthly
            installments, including interest
            at 9% to 10%, through February 1998        24,281            39,444
                                                    ---------         ---------
                                                    1,048,659         1,106,945

        Less current maturities                        65,552            60,620
                                                    ---------        -----------
                                                    $ 983,107        $1,046,325
                                                    =========        ==========
         Aggregate  maturities of long-term  debt as of December 31, 1996 are as
follows:

                              1997                    $65,552
                              1998                     63,130
                              1999                     60,535
                              2000                     66,874
                              2001                     73,877
                              Thereafter              718,691
                                                   ----------
                                                   $1,048,659
                                                   ==========
<PAGE>
F-12
                            Telebyte Technology, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                           December 31, 1996 and 1995


NOTE E - EMPLOYEE BENEFIT PLANS

     The Company  sponsors an employee  investment  savings 401(k) plan to which
     both the Company and  employees  contribute.  Employer  contributions  of
     $7,094 and $7,172 were made to the plan in 1996 and 1995, respectively.

     The Company  maintains  deferred  compensation  agreements with several key
     officers,  whereby the officers will receive a defined amount approximating
     30% of their 1990 base salary for a period of 10 years after  reaching  age
     65. The deferred  compensation  plans are funded through life insurance and
     are being provided for currently. The expense charged to operations in 1996
     and  1995  for  such  future  obligations  was  approximately  $15,400  and
     $13,400, respectively for each year.


NOTE F - INCOME TAXES

The provision for income taxes consists of current state taxes in 1996 and 1995.

The  actual  income tax  expense  differs  from the  Federal  statutory  rate as
follows:

                                        1996                      1995
                                  Amount       %       Amount        %
                                  ----------------    -------------------
  Federal statutory rate          $10,700    34.0%     $35,200      34.0%
  State income taxes, net of
     Federal income tax benefit       700     2.1        1,300       1.2
  Officers' life insurance          5,200    16.6        3,900       3.7
  Other                               300     1.2          900        .9

  Benefit of net operating loss
    carryforward                  (15,900)  (50.7)     (39,300)    (37.9)
                                  --------  ------     --------    -------
                                   $1,000     3.2 %     $2,000       1.9%
                                  ========  =======    ========    =======
<PAGE>
F-13  
                          Telebyte Technology, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                           December 31, 1996 and 1995


NOTE F (continued)

     At December 31, 1996, the Company has net operating loss  carryforwards and
     tax credits expiring from 2001 through 2006 of  approximately  $950,000 and
     $79,000,  respectively,  available to reduce Federal income taxes resulting
     from future operations.

     The tax effects of  temporary  differences  which give rise to deferred tax
     assets  (liabilities)  at December  31, 1996 and 1995,  are  summarized  as
     follows:

                                                    1996                  1995
                                                   ------                ------
        Deferred tax assets
            Net operating loss carryforwards    $ 379,000             $ 420,000
            Investment tax credit carryforwards    79,000                79,000
            Inventory valuation                    48,000                21,000
            Allowance for doubtful accounts         6,000                 6,000
                                                ---------             ---------
                      Gross deferred tax assets   512,000               526,000
        Deferred tax liabilities
            Excess tax over book depreciation    (153,000)             (145,000)
                                                ----------            ----------
        Net deferred tax assets before
            valuation allowance                   359,000               381,000

        Valuation allowance                      (279,000)             (301,000)
                                                 ---------           -----------
                      Net deferred tax asset   $   80,000            $   80,000
                                               ===========           ===========

NOTE G - STOCK OPTION PLANS

     In 1983,  the Company  adopted a plan which  provided  for the  granting to
     officers and key employees of the Company of incentive  stock  options,  as
     defined in the  Internal  Revenue  Code,  for the  purchase of a maximum of
     250,000 shares of the Company's common stock.  Under the terms of the plan,
     the options, which expire ten years after grant, are exercisable at a price
     equal to the fair market  value of the stock at the date of the grant.  The
     options  become  exercisable  in  four  annual   installments,   the  first
     installment occurring within one year after the date of grant.
<PAGE>
F-14
                            Telebyte Technology, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                           December 31, 1996 and 1995


NOTE G (continued)

     In 1994, the Company  adopted the 1993 Stock Option Plan (the "1993 Plan"),
     which  provides  for the  granting to  directors  and key  employees of the
     Company of incentive stock options and  nonqualified  stock options for the
     purchase  of a maximum of 100,000  shares of the  Company's  common  stock.
     Under the terms of the 1993 Plan, the options, which expire ten years after
     grant,  are  exercisable  at a price equal to the fair market  value of the
     stock at the date of the grant for  incentive  stock  options and at prices
     determined by the Board of Directors for  nonqualified  stock options,  and
     become  exercisable in accordance with terms established at the time of the
     grant.  At December 31, 1996, the Company had reserved  65,000 shares under
     the 1993 Plan.

     The  following is a summary of activity with respect to stock options under
the plans:

                                      Number    Option price    Weighted average
                                    of shares   Per share        exercise price
                                    ---------   ---------------  --------------
  Outstanding at January 1, 1995      66,250    $.3125 to $1.03        $.66
      Granted                         15,000         2.04              2.04
      Expired                         (4,500)    .3125 to .75           .36
                                      ------
  Outstanding at December 31, 1995    76,750     .3125 to 2.04          .95
      Granted                          5,000          .79               .79
      Expired                        (10,000)    1.03 to 2.04          1.54
                                     --------
  Outstanding at December 31, 1996    71,750     .3125 to 2.04          .86
                                     ========
  Balance exercisable at 12/31/96     66,750     .3125 to 2.04          .84
                                     ========


NOTE H - COMMITMENTS

     The Company  leases certain  equipment  used in its operations  pursuant to
     noncancellable  operating  leases  expiring  through  October 1998.  Rental
     expense  for such  equipment  was  $17,015  and  $15,502  in 1996 and 1995,
     respectively.  The minimum rental  commitments  under these  noncancellable
     operating leases, at December 31, 1996, are summarized as follows:

                              1997                              $ 14,147
                              1998                                 9,391
                                                                --------
                                                                 $23,538
                                                                ========

<PAGE>
EXHIBIT 23

                             CONSENT OF INDEPENDENT
                          CERTIFIED PUBLIC ACCOUNTANTS


We have  issued our report  dated March 11,  1997,  accompanying  the  financial
statements  included in the Annual Report of Telebyte  Technology,  Inc. on Form
10-KSB  for  the  year  ended  December  31,  1996.  We  hereby  consent  to the
incorporation  by  reference  of said report in the  Registration  Statement  of
Telebyte  Technology,  Inc. on Form  S-8 (File No. 0-11883). 


GRANT THORNTON LLP

Melville, New York
March 11, 1997