<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                    FORM 10-Q

           [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1996

                                       or

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

           For the transition period from              to 
                                          ------------    ------------

                         Commission file number 0-11402
                                                ------------

                               TELXON CORPORATION
        ---------------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

          DELAWARE                                      74-1666060
-------------------------------            ------------------------------------
(State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
Incorporation or Organization

  3330 West Market Street, Akron, Ohio                    44333
-------------------------------------------------------------------------------
(Address of Principal Executive Offices)                (Zip Code)

 Registrant's Telephone Number, Including Area Code   (330) 664-3700
                                                    ---------------------------
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    
   -----    -----

At September 30, 1996, there were 16,099,952 outstanding shares of the
registrant's Common Stock, $.01 par value per share ("Common Stock").






<PAGE>   2

                       TELXON CORPORATION AND SUBSIDIARIES
        INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
                                                                                     Page No.
                                                                                     --------
<S>     <C>                                                                         <C>
PART I.  FINANCIAL INFORMATION:

       Item 1:             Consolidated Financial Statements
                                Balance Sheet...........................................3
                                Statement of Operations.................................4
                                Statement of Cash Flows.................................5
                                Notes to Consolidated Financial Statements...........6-10

       Item 2:             Management's Discussion and Analysis of Financial
                                Condition and Results of Operations.................11-20

PART II.          OTHER INFORMATION:

       Item 1:             Legal Proceedings...........................................21

       Item 4:             Submission of Matters to a Vote of Security Holders.........21

       Item 6:             Exhibits and Reports on Form 8-K.........................21-29
</TABLE>


                                       2

<PAGE>   3



                          PART I. FINANCIAL INFORMATION

                    ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS

                       TELXON CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                            September 30,    March 31,
                                                                                                1996            1996
                                                                                            -------------    ---------
ASSETS                                                                                       (Unaudited)
<S>                                                                                        <C>             <C>      
Current assets:                                                                              
     Cash (including cash equivalents of $9,368 and
         $23,411) ......................................................................      $  16,128       $  34,828
     Trading securities ................................................................           --               902
     Accounts receivable, net of allowance for doubtful accounts of $1,917 and $1,731 ..        112,015         133,592
     Notes and other accounts receivable ...............................................          9,931           9,522
     Inventories .......................................................................        106,870         111,132
     Prepaid expenses and other ........................................................          9,540           9,939
                                                                                              ---------       ---------
              Total current assets .....................................................        254,484         299,915
Property and equipment, net ............................................................         53,574          54,673
Intangible and other assets, net .......................................................         38,377          34,621
                                                                                              ---------       ---------
              Total ....................................................................      $ 346,435       $ 389,209
                                                                                              =========       =========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Notes payable .....................................................................      $  17,335       $      66
     Current portion of long-term debt .................................................            384           1,156
     Accounts payable ..................................................................         33,717          59,620
     Capital lease obligations due within one year .....................................            811             897
     Accrued liabilities ...............................................................         29,575          52,181
                                                                                              ---------       ---------
              Total current liabilities ................................................         81,822         113,920
Capital lease obligations ..............................................................          1,566           1,982
Convertible subordinated debentures ....................................................        107,224         107,224
Long-term debt .........................................................................           --             1,331
Other long-term liabilities ............................................................          3,599           3,562
                                                                                              ---------       ---------
              Total liabilities ........................................................        194,211         228,019
Stockholders' equity:
     Preferred Stock, $1.00 par value per share; 500 shares authorized, none issued ....           --              --
     Common Stock, $.01 par value per share; 50,000 shares authorized, 16,100 and 16,096
         shares outstanding ............................................................            162             161
     Additional paid-in capital ........................................................         86,444          85,750
     Retained earnings .................................................................         68,548          78,096
     Equity adjustment for foreign currency translation ................................         (1,848)         (2,064)
     Unearned compensation relating to restricted stock awards .........................           (470)           (753)
     Treasury stock, 58 shares at cost .................................................           (612)           --
                                                                                              ---------       ---------
              Total stockholders' equity ...............................................        152,224         161,190
Commitments and contingencies ..........................................................           --              --
                                                                                              =========       =========
              Total ....................................................................      $ 346,435       $ 389,209
                                                                                              =========       =========
</TABLE>

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


                                       3

<PAGE>   4


                       TELXON CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF OPERATIONS
                    (In thousands, except per share amounts)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                            Three Months                     Six Months
                                                         Ended September 30,             Ended September 30,
                                                        1996            1995            1996           1995
                                                      ---------       ---------       ---------       ---------
<S>                                                   <C>             <C>             <C>             <C>      
Revenues:
     Product ...................................      $  89,439       $  90,191       $ 183,464       $ 178,135
     Customer service ..........................         18,875          16,825          37,233          32,422
                                                      ---------       ---------       ---------       ---------
              Total revenues ...................        108,314         107,016         220,697         210,557

Cost of revenues:
     Product ...................................         62,445          52,063         128,270         103,474
     Customer service ..........................         11,534           9,437          22,582          18,440
                                                      ---------       ---------       ---------       ---------
              Total cost of revenues ...........         73,979          61,500         150,852         121,914
                                                      ---------       ---------       ---------       ---------

     Gross profit ..............................         34,335          45,516          69,845          88,643

Operating expenses:
     Selling expenses ..........................         21,037          18,748          42,220          38,416
     Product development and engineering
          expenses .............................         10,096          12,029          21,204          21,614
     General and administrative expenses .......         10,548           9,105          21,711          18,241
                                                      ---------       ---------       ---------       ---------
              Total operating expenses .........         41,681          39,882          85,135          78,271
                                                      ---------       ---------       ---------       ---------

              (Loss) income from operations ....         (7,346)          5,634         (15,290)         10,372

Interest income ................................            136             151             351             294
Interest expense ...............................         (2,162)         (1,532)         (4,132)         (2,698)
Other non-operating (expense) income ...........            (32)            355              73             355
                                                      ---------       ---------       ---------       ---------

              (Loss) income before income taxes          (9,404)          4,608         (18,998)          8,323

(Benefit)provision for income taxes ............         (4,702)          1,797          (9,499)          3,283
                                                      ---------       ---------       ---------       ---------
              Net (loss) income ................      $  (4,702)      $   2,811       $  (9,499)      $   5,040
                                                      =========       =========       =========       =========

Earnings per common and common equivalent share:

              Net (loss) income per share ......      $    (.29)      $     .17       $    (.58)      $     .31
                                                      =========       =========       =========       =========


Average number of common and common
      equivalent shares outstanding ............         16,182          16,248          16,265          16,066
                                                      =========       =========       =========       =========
</TABLE>



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


                                      4

<PAGE>   5


                       TELXON CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                    Six Months Ended
                                                                      September 30,
                                                                   1996          1995
                                                                 --------       --------
<S>                                                              <C>            <C>     
Cash flows from operating activities:
     Net (loss) income ....................................      $ (9,499)      $  5,040
     Adjustments to reconcile net (loss) income to
          net cash used in operating activities:
              Depreciation and amortization ...............        13,673         10,683
              Non-cash compensation related to
                   restricted stock awards ................           253            468
              Provision for doubtful accounts .............           180          1,139
              Provision for inventory obsolescence ........         5,972          2,770
              Deferred income taxes .......................        (1,025)          (606)
              Loss on disposal of assets ..................           295            227
              Trading securities ..........................          --           (5,026)
              Non-cash  gain on trading securities ........          --             (100)
              Proceeds from sale of trading securities ....           961          1,474
              Gain on sale of trading securities ..........           (59)          (138)
              Gain on sale of subsidiary stock ............          --             (355)
              Changes in assets and liabilities:
                   Accounts and notes receivable ..........        18,038        (22,055)
                   Refundable income taxes ................          --             (898)
                   Inventories ............................        (1,732)       (30,362)
                   Prepaid expenses and other .............            55           (236)
                   Intangible and other assets ............        (1,865)        (1,169)
                   Accounts payable and accrued liabilities       (46,431)        12,666
                   Other long-term liabilities ............            37            249
                                                                 --------       --------
                              Total adjustments ...........       (11,648)       (31,269)
                                                                 --------       --------
     Net cash used in operating activities ................       (21,147)       (26,229)

Cash flows from investing activities:
     Additions to property and equipment ..................        (8,269)        (9,294)
     Proceeds from the sale of assets .....................           150           --
     Payments for acquisitions, net of cash acquired ......          --           (2,401)
     Software investments .................................        (3,477)          (792)
                                                                 --------       --------
     Net cash used in investing activities ................       (11,596)       (12,487)

Cash flows from financing activities:
     Notes payable, net ...................................        17,269         23,796
     Purchase of treasury stock ...........................        (1,051)          --
     Principal payments on capital leases .................          (502)          (424)
     Principal payments on long-term borrowing ............        (2,103)          (125)
     Debt issue costs paid ................................          (239)          --
     Proceeds from exercise of stock options
          (includes tax benefit) ..........................           652          3,315
                                                                 --------       --------
     Net cash provided by financing activities ............        14,026         26,562

     Effect of exchange rate changes on cash ..............            17           (226)
                                                                 --------       --------
     Net decrease in cash and cash equivalents ............       (18,700)       (12,380)
     Cash and cash equivalents at beginning of period .....        34,828         31,364
                                                                 --------       --------
     Cash and cash equivalents at end of period ...........      $ 16,128       $ 18,984
                                                                 ========       ========
</TABLE>


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


                                       5


<PAGE>   6


                       TELXON CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            (Dollars in thousands except share and per share amounts)


1.       Management Representation

         The consolidated financial statements of Telxon Corporation and its
         subsidiaries (the "Company") have been prepared without audit. In the
         opinion of the Company, all adjustments, consisting of normal recurring
         adjustments necessary for a fair statement of results for the interim
         periods, have been made. The statements, which do not include all of
         the information and notes required by generally accepted accounting
         principles for complete financial statements, should be read in
         conjunction with the audited consolidated financial statements as
         contained in the Company's Annual Report on Form 10-K for the fiscal
         year ended March 31, 1996.

2.       Earnings Per Share

         Computations of earnings per common and common equivalent share of
         common stock are based on the weighted average number of common shares
         outstanding during the period increased by the net shares issuable on
         the assumed exercise of stock options using the treasury stock method.
         All securities having a dilutive effect on earnings per share have been
         excluded from such computations. Common stock purchase rights
         outstanding under the Company's stockholder rights plan, which
         potentially have a dilutive effect, have been excluded from the
         weighted common shares computation as preconditions to the
         exercisability of such rights were not satisfied.

3.       Inventories

         Inventories consisted of the following:
<TABLE>
<CAPTION>
                                              September 30, 1996          March 31,
                                                 (Unaudited)                1996
                                              ------------------      --------------
<S>                                           <C>                     <C>           
          Purchased components.............   $       44,388          $       50,022
          Work-in-process..................           33,001                  35,379
          Finished goods...................           29,481                  25,731
                                              --------------          --------------
                                              $      106,870          $      111,132
                                              ==============          ==============
</TABLE>

4.       Accrued Liabilities

         Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
                                                                      September 30,
                                                                          1996                   March 31,
                                                                       (Unaudited)                 1996
                                                                     --------------            -----------
<S>                                                                    <C>                      <C>        
          Deferred customer service revenues......................     $    16,482              $    15,063
          Accrued payroll and other employee compensation.........           7,916                   10,586
          Other accrued liabilities...............................           5,177                   26,532
                                                                       -----------              -----------
                                                                       $    29,575              $    52,181
                                                                       ===========              ===========
</TABLE>


                                       6

<PAGE>   7


                       TELXON CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            (Dollars in thousands except share and per share amounts)


5.       Supplemental Cash Flow Information
<TABLE>
<CAPTION>
                                                                      Six Months Ended
                                                         September 30,               September 30,
                                                              1996                       1995
                                                      ----------------------     ----------------------
                                                                          (Unaudited)
<S>                                                       <C>                      <C>        
           Cash paid during the period for
                Interest............................      $     4,419              $     2,445
                Income taxes........................            6,127                    3,749
</TABLE>

         Capital lease additions are non-cash transactions and, accordingly,
         $509 has been excluded from property and equipment additions in the
         fiscal 1996 Consolidated Statement of Cash Flows.

         Secured promissory notes aggregating $6,200 which were received in
         connection with the Company's divestiture of certain retail application
         software operations have been excluded from the fiscal 1997
         Consolidated Statement of Cash Flows as a non-cash transaction. See
         Note 9 - Divestiture for further details of such transaction.

         The Company's re-issuance of $439 treasury stock to satisfy purchases
         made by employees through the Telxon Corporation 1995 Employee Stock
         Purchase Plan has been excluded from the fiscal 1997 Consolidated
         Statement of Cash Flows as a non-cash transaction. See Note 10 - Other
         Transactions and Events for further details of the re-issuance.

6.       Litigation and Contingencies

         In December 1992, four class action suits were filed in the United
         States District Court, Northern District of Ohio, by certain alleged
         stockholders of the Company on behalf of themselves and purported
         classes consisting of Telxon stockholders, other than defendants and
         their affiliates, who purchased the Company's common stock between May
         20, 1992 and January 19, 1993. The named defendants are the Company,
         former President and Chief Executive Officer Raymond D. Meyo, and then
         current President, Chief Operating Officer and Chief Financial Officer
         Dan R. Wipff. On February 1, 1993, the plaintiffs filed their Amended
         and Consolidated Class Action Complaint related to the four actions,
         alleging claims for fraud on the market and negligent
         misrepresentation, arising from alleged misrepresentations and
         omissions with respect to the Company's financial performance and
         prospects, and alleged trading activities of the named individual
         defendants. The Amended Complaint seeks certification of the purported
         class, unspecified compensatory damages, the imposition of a
         constructive trust on certain of the defendants' assets and other
         unspecified extraordinary equitable and/or injunctive relief, interest,
         attorneys' fees and costs. The defendants, including the Company, filed
         a Motion to Dismiss which was denied by the court on June 3, 1993.

         On April 16, 1993, the Plaintiffs filed their Motion for Class
         Certification. The defendants, including the Company, filed their
         briefs in opposition to Class Certification on October 13, 1993. On
         December 17, 


                                       7

<PAGE>   8

                       TELXON CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            (Dollars in thousands except share and per share amounts)

         1993, the District Court certified the class, consisting of Telxon
         stockholders, other than defendants and their affiliates, who
         purchased Telxon common stock between May 20, 1992 and December 14,
         1992.

         Following the completion of discovery (other than of experts), each
         defendant filed a Motion for Summary Judgment on May 19, 1995, all of
         which were opposed by the plaintiffs. On September 14, 1995, the Court
         granted each defendant summary judgment on all counts, which the
         plaintiffs have appealed to the defendants to the United States Sixth
         Circuit Court of Appeals. The appeal was heard on October 24, 1996, and
         the parties are awaiting the decision from the Court of Appeals. The
         defendants intend to continue vigorously defending the Consolidated
         Class Action. Though there can be no assurance that the Company's
         summary judgment will be upheld on appeal on all counts or as to the
         ultimate outcome of any portion of the case with respect to which the
         summary judgment may be reversed, no provision has been made in the
         accompanying consolidated financial statements for any liability that
         may result to the Company in such an event.

         On September 21, 1993, a derivative Complaint was filed in the Court of
         Chancery of the State of Delaware, in and for Newcastle County, by an
         alleged stockholder of Telxon derivatively on behalf of Telxon. The
         named defendants are the Company; Robert F. Meyerson, Chairman of the
         Board and Chief Executive Officer; Dan R. Wipff, then President, Chief
         Operating Officer and Chief Financial Officer and director; Robert A.
         Goodman, Corporate Secretary and outside director; Norton W. Rose,
         outside director and Dr. Raj Reddy, outside director. The Complaint
         alleges breach of fiduciary duty to the Company and waste of the
         Company's assets in connection with certain transactions entered into
         by Telxon and compensation amounts paid by the Company. The Complaint
         seeks an accounting, injunction, rescission, attorneys' fees and costs.
         While the Company is nominally a defendant in this derivative action,
         no monetary relief is sought by the plaintiff from the Company;
         accordingly, no provisions for any loss nor any related insurance
         recovery therefor have been made in the accompanying consolidated
         financial statements. On November 12, 1993, Telxon and the individual
         director defendants filed a Motion to Dismiss. The plaintiff filed his
         brief in opposition to the Motion on May 2, 1994, and the defendants
         filed a final responsive brief. The Motion was argued before the Court
         on March 29, 1995, and on July 18, 1995, the Court issued its ruling.
         The Court dismissed all of the claims relating to the plaintiff's
         allegations of corporate waste. The claims relating to breach of
         fiduciary duty survived the Motion to Dismiss and are now the subject
         of discovery, which is continuing; no deadline for the completion of
         discovery has yet been set by the Court. The defendants believe that
         the remaining claims lack merit, and they intend to vigorously defend
         this action. While the ultimate outcome of this action cannot presently
         be determined, the Company does not anticipate that this matter will
         have a material adverse effect on the Company's consolidated financial
         position, results of operations or cash flows.

                                       8
<PAGE>   9


                       TELXON CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            (Dollars in thousands except share and per share amounts)

         In the normal course of its operations, the Company is subject to
         performance under contracts, and has various legal actions and certain
         contingencies pending, including a claim made by the owner of a
         manufacturing facility formerly leased by the Company that the Company
         caused and should remediate alleged soil contamination at the facility.
         The Company, with professional assistance, is investigating the
         existence, scope, nature and cause of the claimed contamination.
         Information necessary to support a reasonable estimate of the scope of
         loss, if any, is not presently available and, accordingly, no provision
         has been made in accompanying financial statements. The Company, while
         not conceding denial of coverage, has been advised by its insurers that
         coverage is not available concerning this matter. While the Company,
         based on its initial assessment of the situation, believes the matter's
         ultimate resolution will not have a material adverse effect on the
         Company's business or financial condition, if the Company were
         ultimately required to remediate such contamination, the associated
         costs could have a material adverse effect on results of operations for
         one or more quarters in which the associated charge(s) would be taken.
         In management's opinion, all other such outstanding matters have either
         been reflected in the consolidated financial statements, are covered by
         insurance or would not have a material adverse effect on the Company's
         business, consolidated financial position or results of operations or
         cash flows.

7.       Short-Term Financing

         The Company had no borrowings outstanding under its $100,000 credit
         agreement at September 30, 1996, and was in compliance with all
         restrictive covenants contained in the agreement at September 30, 1996.

         The Company had $17,335 outstanding under its $20,000 business purpose
         revolving promissory note at September 30, 1996. At September 30, 1996,
         the note was bearing interest at an annual rate of 6.87%.

         Effective August 16, 1996, the Company's $100,000 credit agreement was
         amended, among other things, to conditionally grant to the lenders a
         security interest in certain assets of the Company which will only
         become effective if the Company were to become in default under the
         credit agreement and then only if the requisite lenders were to direct
         that the security documents be filed. Thereafter, the Company entered
         into an amendment conditionally granting a similar security
         interest to the lender under the $20,000 business purpose revolving
         promissory note.

8.       Income Taxes

         The Company's consolidated effective income tax rate reflects income
         before taxes plus non-deductible goodwill amortization, which sum is
         multiplied by the United States statutory rate and increased by foreign
         rate differentials.

         The increases in the Company's second quarter and first half of fiscal
         1997 


                                       9
<PAGE>   10



                       TELXON CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            (Dollars in thousands except share and per share amounts)

         consolidated effective income tax rates from those experienced during
         the same periods in fiscal 1996 are primarily due to an increase in
         foreign income taxed at higher foreign tax rates and the decrease in
         U.S. taxable income without decreases in non-deductible reconciling
         items such as goodwill amortization.

9.       Divestiture

         Effective April 1, 1996, the Company sold certain retail application
         software operations, with net assets of approximately $5,000, to a
         third-party for cash and secured promissory notes including interest,
         totaling $6,400. Under the terms of the sale, the Company is also to
         receive, over the next five years, license fees amounting to 20% of the
         revenue generated by the subject software, with minimum required
         payments aggregating $6,600. Although no gain has been recorded as of
         September 30, 1996, as a result of this transaction, the Company will
         recognize gain from the sale as cash proceeds are received.

10.      Other Transactions and Events

         On July 16, 1996, the Company re-issued 41,754 shares of its treasury
         stock, with a weighted average price per share of $10.43, to satisfy
         purchases made by employees through the Telxon Corporation 1995
         Employee Stock Purchase Plan at a price of $11.75 per share. The
         remaining 58,246 shares of treasury stock have been accounted for at
         cost plus brokerage fees under the caption of treasury stock in the
         fiscal 1997 Consolidated Balance Sheet.

         Effective August 23, 1996, the Company repurchased 432,558 shares of
         the voting common stock of its Metanetics Corporation subsidiary from a
         former employee. The shares were repurchased by the Company at a price
         of $1.04 per share and resulted in a $449 non-operating loss. Effective
         September 30, 1996, the Company re-sold the repurchased shares to a
         corporation owned by Mr. Meyerson and his wife at the same $1.04 price
         per share, resulting in an offsetting non-operating gain of $449.

11.      Reclassifications

         Certain items in the fiscal 1996 consolidated financial statements and
         notes thereto have been reclassified to conform to the fiscal 1997
         presentation.


                                       10
<PAGE>   11


TELXON CORPORATION AND SUBSIDIARIES


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND     
         RESULTS OF OPERATIONS

         IN ADDITION TO DISCUSSING AND ANALYZING THE COMPANY'S RECENT HISTORICAL
         FINANCIAL RESULTS AND CONDITION, THE FOLLOWING MANAGEMENT'S DISCUSSION
         AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INCLUDES
         STATEMENTS CONCERNING CERTAIN TRENDS AND OTHER FORWARD-LOOKING
         INFORMATION AFFECTING OR RELATING TO THE COMPANY WHICH ARE INTENDED TO
         QUALIFY FOR THE PROTECTIONS AFFORDED "FORWARD-LOOKING STATEMENTS" UNDER
         THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, PUBLIC LAW
         104-67. THE FORWARD-LOOKING STATEMENTS MADE HEREIN AND ELSEWHERE IN
         THIS FORM 10-Q ARE INHERENTLY SUBJECT TO RISKS AND UNCERTAINTIES WHICH
         COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
         FORWARD-LOOKING STATEMENTS. SEE "FACTORS THAT MAY AFFECT FUTURE
         RESULTS" BELOW AND CAUTIONARY STATEMENTS APPEARING UNDER "ITEM 1.
         BUSINESS" AND ELSEWHERE IN THE FORM 10-K FILED BY THE COMPANY WITH
         RESPECT TO ITS FISCAL YEAR ENDED MARCH 31, 1996 FOR A DISCUSSION OF THE
         IMPORTANT FACTORS AFFECTING THE REALIZATION OF THOSE RESULTS.

         OVERVIEW

         The Company's first half of fiscal 1997 results were in line with
         earlier expectations as the Company recorded revenue growth of
         approximately 5% over the same period in the prior year and a loss of
         $.58 per share. The Company anticipates a return to profitability in
         the second half of fiscal 1997, as the result of the initiatives it is
         taking to streamline operations. Those initiatives include narrowing   
         the Company's product line, improving its manufacturing efficiencies,
         and workforce reductions to reduce employee headcount by 300, or
         approximately 15 percent. The Company will continue to review all
         aspects of its business and may take further actions to achieve more
         effective and efficient operations, some of which may result in
         certain nonrecurring charges in addition to those incurred in the
         first half of  fiscal 1997.

         The Company's continuing strategic objectives are to increase revenues
         and market penetration while reducing costs as a percentage of total
         revenues, to drive new product development and use vertical systems
         groups to expand into targeted markets. The Company's goal is to
         deliver profitable growth and increased stockholder value over the
         coming years.

         The Company operates in a rapidly changing and dynamic market, and the
         Company's strategies and plans are designed to adapt to changing market
         conditions where and when possible. However, there can be no assurance
         that the Company's strategies and plans will take into account all
         market conditions and changes thereto or that they will be successfully
         implemented. Accordingly, the historical results presented in the
         Company's consolidated financial statements and discussed herein are
         not necessarily indicative of future results. See "Factors That May
         Affect Future Results" for a discussion of risk factors which may
         affect the Company's future results of operations.



                                       11
<PAGE>   12


         FACTORS THAT MAY AFFECT FUTURE RESULTS

         The risks and other important factors which may affect the Company's
         business, operating results, and financial and other condition include,
         without limitation, the following:

         The Company's results of operations are affected by a variety of
         factors, including economic conditions specific to the industries in
         which it competes, decreases in average selling price over the life of
         any particular product, the timing, manufacturing complexity and
         expense of new product introductions (both by the Company and its
         competitors), the timely implementation of new manufacturing
         technologies, the ability to safeguard patents and other intellectual
         property in a rapidly evolving market, the rapid increase in demand for
         some products and the rapid decline in demand for others and the
         Company's ability to anticipate and plan for that changing market
         demand. Certain of these factors are beyond the Company's control.

         The Company's expectations regarding future cost reductions and
         profitability resulting from the streamlining of operations and the
         achievement of greater manufacturing efficiencies are dependent upon
         the successful identification and implementation of appropriate cost
         saving and operational efficiency initiatives. To the extent that these
         measures are not fully and successfully implemented or that their
         implementation is delayed, the Company's ability to realize such cost
         reductions and profitability may be materially adversely affected.

         Historically, the Company's shipments during any particular quarter
         generally represent orders received either during that quarter or
         shortly before the beginning of that quarter. The Company endeavors to
         maintain sufficient levels of purchased components to meet the delivery
         requirements of its customers. However, there can be no assurance that
         during any given quarter, the Company has or can procure the
         appropriate mix of purchased components to accommodate any given order.
         Therefore, the Company's financial performance in any quarter is
         dependent to a significant degree upon obtaining orders which can be
         manufactured and delivered to its customers in that quarter. Financial
         performance for any given quarter cannot be known or fully assessed
         until near the end of that quarter.

         The Company has also historically recognized a substantial portion of
         its product revenues in the last month of each quarter. A significant
         portion of the Company's expenses are relatively fixed, and timing of
         increases in such expenses is based in large part on the Company's
         forecast of future revenues. As a result, if revenues do not meet
         expectations, the Company may be unable to quickly adjust expenses to
         levels appropriate to actual revenues, which could have a materially
         adverse effect on the Company's results of operations.

         The markets in which the Company competes are intensely competitive and
         characterized by increasingly rapid technological change, introduction
         of new products with improved performance characteristics, product
         obsolescence and price erosion. Failure to keep pace with product and
         technological advances could negatively affect the Company's
         competitive position and 


                                       12
<PAGE>   13

         prospects for growth. Customers' anticipation of new or enhanced
         product offerings by the Company or a competitor may lead them to defer
         purchases of the Company's existing products. In addition, companies
         that are participants in the broader computer industry are potential
         competitors. Some of the Company's competitors and potential
         competitors have substantially greater financial, technical,
         intellectual property, marketing and human resources than the Company.

         The Company's future success depends on its ability to develop and
         rapidly bring to market technologically advanced products. From time to
         time the Company invests in development stage and other entities who
         possess or who could potentially possess strategically important
         technologies. Due to the nature of these entities and  their
         operations, there can be no assurance that these investments will be
         realizable or will result in marketable and/or successful products.
         There can be no assurance that the Company's research and development
         activities will lead to the commercially successful introduction of
         new or improved products or that the Company will not encounter delays
         or problems in connection therewith. The cost of perfecting new and
         improved technologies to satisfy customer quality and delivery
         expectations as they are brought to market cannot always be fully
         anticipated and may adversely affect Company operating profits during
         such introductions. In addition, the average selling prices for
         computer products generally decrease over the products' lives. To
         mitigate such decreases, the Company seeks to reduce manufacturing
         costs of existing products and to introduce new products, functions
         and other price/performance-enhancing features. To the extent that
         these product enhancements do not occur on a timely basis or do not
         result in a sufficient increase in sales prices to end users, the
         Company's operating results could be materially adversely
         affected.

         To date, the Company's revenues have been concentrated in the retail
         industry, historically representing over 50% of its total revenues. The
         Company's future growth depends, in part, on its ability to
         successfully penetrate and expand its revenues in new markets. There
         can be no assurance that such penetration and expansion into new
         markets can be achieved.

         The Company believes its future success is also dependent, in part,
         upon its ability to continue to enhance its product offerings through
         internal development and the acquisition of new businesses and
         technologies, but there can be no assurance that the Company will be
         able to identify, acquire or profitably operate new businesses or
         otherwise implement its growth strategy successfully. For the Company
         to manage its growth and integrate any newly acquired entities, it must
         continue to improve operations and financial and management information
         systems and effectively motivate and manage employees. If the Company
         is unable to successfully pursue and manage such growth, its business
         and results of operations could be adversely affected. In the event
         that, as part of its efforts to improve its operating efficiencies or
         otherwise, the Company elects to divest itself of a majority or greater
         interest in its technical subsidiaries, the Company's revenues may be
         adversely affected.

         The Company regards certain of its hardware and software technologies
         as proprietary and relies on a combination of United States and foreign
         patent, copyright, trademark and trade secret laws, as well as license
         and other 


                                       13
<PAGE>   14

         contractual confidentiality provisions, to protect its proprietary
         rights. Despite the Company's efforts to safeguard its proprietary
         rights, there can be no assurance that the Company will be successful
         in doing so or that the Company's competitors will not independently
         develop or patent technologies that are substantially equivalent or
         superior to or otherwise circumvent the Company's technologies and
         proprietary rights.

         The Company's products utilize hardware and software technologies
         licensed from third parties. There can be no assurance that the Company
         will be able to license needed technology in the future. An early
         termination of certain of these license agreements (including patent
         rights licensed from Symbol Technologies, Inc., one of its principal
         competitors, necessary for the Company's manufacture and sale of its
         integrated laser scanning terminals which account for a material
         portion of the Company's current sales) could have a materially adverse
         effect on the Company's ability to market certain of its products,
         hence, on its business, results of operations and financial condition.
         The Company believes that its products, processes and trademarks do not
         infringe on the rights of third parties, but there can be no assurance
         that third parties will not assert infringement or other related claims
         against the Company or its licensors in the future. Any infringement
         claim or related litigation against the Company, or any challenge to
         the validity of the Company's own intellectual property rights, and the
         expense of defending the same could materially adversely effect the
         Company's ability to market its products and hence, on its business,
         results of operations and financial condition.

         Certain of the Company's products, sub-assemblies and components are
         procured from a single source supplier and others are procured from
         only a limited number of suppliers. The Company has in the past
         encountered, and may in the future encounter, shortages of supplies and
         delays in deliveries of necessary components. Such shortages and delays
         could have a materially adverse effect on the Company's ability to ship
         products.

         As a substantial portion of the Company's total revenues, ranging from
         approximately 25%-30% in recent years, is from customers located
         outside of the United States, the Company's results could be negatively
         affected by global and regional economic conditions, changes in foreign
         currency exchange rates, trade protection measures, regulatory
         acceptance of the Company's products in foreign countries, longer
         accounts receivable collection patterns and other considerations
         peculiar to the conduct of international business. Additionally, as
         certain of its products, components and sub-assemblies are purchased
         from outside the United States, the Company is subject to similar risks
         in those procurement activities.

         Certain of the Company's products intentionally transmit radio signals
         as part of their normal operation. These products are subject to
         regulatory approval, restrictions on the use of certain frequencies and
         the creation of interference, and other requirements by the Federal
         Communications Commission and corresponding authorities in each country
         in which they are marketed. Regulatory changes could significantly
         impact the Company's operations by restricting the Company's
         development efforts, making current products obsolete or increasing the
         opportunity for additional competition. The intentional emission of
         electromagnetic radiation has also been the subject of recent public
         concern regarding possible health and safety risks, 

                                       14
<PAGE>   15

         and though the Company believes that the low power output and the
         distance typically maintained between a product and the user means that
         its products do not pose material safety concerns, there can be no
         assurance that such safety issues will not arise in the future and will
         not have a materially adverse effect on the Company's business.

         Among other things, the Company's future success depends in large 
         part on the continued service of its key technical, marketing and
         management personnel and on its ability to continue to attract and
         retain qualified employees, particularly those highly skilled design,
         process and test engineers involved in the manufacture of existing
         products and the development of products and processes. The
         competition for such personnel is intense, and the loss of key
         employees could have a materially adverse effect on the Company's
         business, financial condition and results of operations.

         In addition to the factors discussed above and elsewhere in this Form
         10-Q which may adversely affect the Company's conduct of its business
         and the results thereof, the Company's financial condition is also
         subject to the possible adverse effects of certain pending litigation
         and other contingencies discussed above under Note 6 to the
         consolidated financial statements included in Part I - Item 1 above.

         RESULTS OF OPERATIONS

         Revenues
         --------

         Total consolidated revenues for the second quarter and first half of
         fiscal 1997 increased $1.3 million or 1% and $10.1 million or 5%,
         respectively, as compared to the same periods in fiscal 1996.

         Second quarter fiscal 1997 consolidated product revenues decreased $.8
         million or 1% from results recorded during the same period in the prior
         year, while first half fiscal 1997 consolidated product revenues
         increased $5.3 million or 3% over fiscal 1996's first half results.
         Product revenues include the sale of pen-based and touch-screen
         workslates, rugged wireless mobile computers and other portable
         tele-transaction computer ("PTC") units, hardware accessories, custom
         application software and software licenses, and a variety of
         professional services, including system integration and project
         management. The decrease in second quarter product revenues was
         primarily due to a decrease in PTC unit volume that was only partially
         offset by an increase in the average selling price per PTC unit as the
         Company initiated certain efforts to increase its backlog. The increase
         in product revenues for the first half of fiscal 1997 was primarily due
         to increases in average selling price per PTC unit partially offset by
         decreases in PTC unit volume as the sales mix continued to trend
         towards more comprehensive products and systems. The Company's
         technical subsidiary Itronix Corporation, a designer, developer and
         manufacturer of rugged, wireless, portable microcomputers, recorded
         total product revenues of $20.3 million and $40.8 million during the
         second quarter and first half of fiscal 1997, respectively, and was a
         significant contributor to the increase in average selling price per
         PTC. Itronix had total product revenues of $6.0 million and $10.0
         million in the second quarter and first half of fiscal 1996,
         respectively.

         Customer service revenues for the second quarter and first half of
         fiscal 1997 increased $2.1 million or 12% and $4.8 million or 15%,
         respectively, as 

                                       15
<PAGE>   16

         compared to the same periods in fiscal 1996. These revenue increases
         were primarily due to volume increases and growth in the installed base
         of the Company's products.

         Revenues for the Company's international operations (including Canada)
         for the second quarter and first half of fiscal 1997 increased $3.0
         million or 11% and $6.2 million or 11%, respectively, as compared to
         the same periods in fiscal 1996. Changes in currency exchange rates and
         intercompany hedging activities did not materially affect the results
         of the Company's international operations.

         The Company anticipates increased consolidated revenues for the third
         and fourth quarters of fiscal 1997 as compared to the first two
         quarters of fiscal 1997.

         Costs of Revenues
         -----------------

         Consolidated cost of product revenues as a percentage of product
         revenues increased to 70% for the second quarter and first half of
         fiscal 1997 as compared to 58% for the same periods in fiscal 1996. The
         decreases in product gross margins from those recorded during the
         second quarter and first half of fiscal 1996 were primarily due to the
         mix of large-volume/low margin business, higher costs on early stage
         rollouts of new products and manufacturing inefficiencies. Included in
         the large-volume/low margin business experienced in the first half of
         fiscal 1997 was one single, large customer contract that negatively
         impacted the second quarter's and first half's cost percentages by 2%
         and 1%, respectively. Additionally, the second quarter and first half
         of fiscal 1997 cost percentages were negatively impacted by 4% and 2%,
         respectively, as a result of increased inventory valuation provisions
         and by 2% and 1%, respectively, for increased  customer allowances.
         Included in the fiscal 1996 results were adjustments to estimated
         amounts accrued for warranty costs and revenues related to the sale of
         non-exclusive software licenses and manufacturing rights to a
         third-party business partner. These adjustments combined to reduce the
         second quarter fiscal 1996 cost percentage by approximately 1%.

         The Company anticipates the consolidated cost of product revenues
         percentage to decrease from second quarter fiscal 1997 levels during
         the next two quarters as it continues to implement its cost reduction
         and efficiency initiatives.

         Consolidated cost of customer service revenues as a percentage of
         customer service revenues increased to 61% during the second quarter of
         fiscal 1997 from 56% during the same period in the previous fiscal
         year. Consolidated cost of customer service revenues as a percentage of
         customer service revenues also increased to 61% for the first half of
         fiscal 1997 as compared to 57% for the same period in the previous
         fiscal year. The increases in the cost of customer service revenues
         percentage during the second quarter and first half of fiscal 1997 were
         primarily due to increased direct material and labor costs required to
         repair the Company's more sophisticated and complex products.

         Inventory valuation accounts for the second quarter of fiscal 1997 were
         increased to cover the risk of obsolescence due to new product
         introductions and continuing technological change. As of September 30,
         1996, inventory valuation accounts increased to $15.1 million or 12% of
         gross inventory as 

                                       16
<PAGE>   17

         compared to $10.1 million or 8% of gross inventory as of March 31,
         1996. The Company anticipates continuing to provide for obsolescence as
         revenue volumes from new product offerings replace revenue from older
         products.

         Operating Expenses
         ------------------

         Selling expenses for the second quarter and first half of fiscal 1997
         increased $2.3 million or 12% and $3.8 million or 10%, respectively, as
         compared to the same periods in fiscal 1996. As a percentage of
         revenues, second quarter and first half of fiscal 1997 selling expenses
         increased 1% as compared to the same periods in fiscal 1996 and
         primarily reflect the Company's increased marketing activities.
         Additionally, the Company recorded severance charges of approximately
         $.5 million related to sales and marketing operations during the second
         quarter of fiscal 1997.

         Product development and engineering expenses for the second quarter and
         first half of fiscal 1997 decreased $1.9 million or 16% and $.4 million
         or 2%, respectively, as compared to the same periods in fiscal 1996.
         These decreases are primarily attributable to the deferral of certain
         research and development activities during the second quarter of fiscal
         1997 as well as the Company's implementation of certain cost reduction
         initiatives. Partially offsetting these decreases were severance
         charges of approximately $.4 million related to product development and
         engineering operations recorded during the second quarter of fiscal
         1997. The Company anticipates research and development activity, which
         includes new and continued product development of wireless data
         communications and spread spectrum technology, pen-based technology,
         rugged wireless mobile computers, augmented reality hardware and
         software, advanced image reading and two dimensional bar-code
         technology and other product improvements, to increase during the next
         two quarters from second quarter fiscal 1997 levels.

         The Company capitalized internal software development costs in
         accordance with the requirements of SFAS No. 86 aggregating $1.3
         million and $2.6 million during the second quarter and first half of
         fiscal 1997, respectively.

         General and administrative expenses for the second quarter and first
         half of fiscal 1997 increased $1.4 million or 16% and $3.5 million or
         19%, respectively, as compared to the same periods in fiscal 1996. As a
         percentage of revenues, general and administrative expenses increased
         approximately 1% as compared to the same periods in fiscal 1996 and
         reflects the increase in corporate resources necessary to support the
         Company's operations.

         Income Taxes
         ------------

         The Company's consolidated effective income tax rate for the second
         quarter and first half of fiscal 1997 was 50% as compared to 39% for
         the same periods in fiscal 1996. The consolidated effective income tax
         rate reflects income before taxes plus non-deductible goodwill
         amortization, which sum is multiplied by the United States statutory
         rate and increased by foreign rate differentials. The increases in the
         Company's consolidated effective income tax rate are primarily due to
         an increase in foreign taxable income taxed at higher foreign tax rates
         and the decrease in U.S. taxable income without decreases in
         non-deductible reconciling items such as goodwill amortization.



                                       17
<PAGE>   18


         Other Non-Operating Transactions
         --------------------------------

         Effective August 23, 1996, the Company repurchased 432,558 shares of
         the voting common stock of its Metanetics Corporation subsidiary from a
         former employee. The shares were repurchased by the Company at a price
         of $1.04 per share and resulted in a $449,000 non-operating loss. The
         Company's percentage interest in the voting common stock of Metanetics
         increased from 49% to 58% as a result of the repurchase. Effective
         September 30, 1996, the Company re-sold the repurchased shares to a
         corporation owned by Mr. Meyerson and his wife at the same $1.04 price
         per share, resulting in an offsetting non-operating gain of $449,000
         and the reduction of the Company's remaining percentage interest in
         Metanetics voting common stock to 49%.

         Liquidity
         ---------

         At September 30, 1996, the Company had cash and cash equivalents of
         $16.1 million, as compared to $34.8 million at March 31, 1996. The
         Company's current ratio (current assets divided by current liabilities)
         was 3.1:1 at September 30, 1996, as compared to 2.6:1 at March 31,
         1996. The Company's current ratio increased as working capital (current
         assets less current liabilities) decreased slightly for the changes in
         cash and cash equivalents of $18.7 million, accounts receivable of
         $21.6 million, inventories of $4.3 million, and notes payable of $17.3
         million. These working capital decreases were partially offset by
         increases resulting from changes in accounts payable of $25.9 million
         and accrued liabilities of $22.6 million. Accounts receivable balances
         decreased from amounts recorded at March 31, 1996, primarily due to the
         collection of a large amount of outstanding receivables related to
         fiscal 1996 year-end revenues. Days sales outstanding increased from 84
         days at March 31, 1996, to 95 days at September 30, 1996, primarily due
         to an increase in the number of complex and lengthy large customer
         installations. Inventory levels, in total, decreased at September 30,
         1996, as compared to those recorded at March 31, 1996, as the Company's
         efforts to streamline its product line reduced the  component
         procurement requirements for second quarter fiscal 1997 production
         levels. Notes payable increased as the Company increased bank
         borrowings to fulfill operational cash flow requirements. Accounts
         payable decreased primarily due to decreased manufacturing inventory
         levels and increased payments to vendors. Accrued liabilities
         decreased from amounts recorded at March 31, 1996, primarily due to
         the reduction in the Company's income tax obligations resulting from
         the consolidated net loss for the first half of fiscal 1997.

         The Company believes that available cash and cash equivalents,
         internally generated funds and credit availability will be sufficient
         to meet working capital requirements for the next twelve months.



                                       18
<PAGE>   19


         Cash Flows from Operating Activities
         ------------------------------------

         Net cash used in operating activities was $21.1 million for the six
         months ended September 30, 1996, as compared to net cash used in
         operating activities of $26.2 million for the same period in fiscal
         1996. Cash flows for the first half of fiscal 1997, as compared to the
         same period in fiscal 1996, were positively impacted by the change in
         cash flow impacts of accounts and notes receivable of $40.1 million,
         inventories of $28.6 million, non-cash charges of $4.8 million, trading
         securities of $5.0 million and other positive cash flow items
         aggregating $1.6 million. These positive impacts were offset by
         negative cash flow impacts in accounts payable and accrued liabilities
         of $59.1 million, the $14.5 million reduction in net earnings and other
         items aggregating $1.4 million.

         Investing Activities
         --------------------

         Net cash used in investing activities during the six months ended
         September 30, 1996, decreased $.9 million from net cash used during the
         same period in fiscal 1996. The Company invested $8.3 million in
         capital equipment during the first half of fiscal 1997, a decrease of
         $1.0 million as compared to the same period of fiscal 1996. Software
         investments in the first half of fiscal 1997 increased $2.7 million
         over the same period in the prior year while payments related to
         acquisitions decreased $2.4 million from amounts recorded in the first
         half of fiscal 1996.

         Financing Activities
         --------------------

         Cash flows from financing activities decreased $12.5 million during the
         first half of fiscal 1997 as compared with the same period in fiscal
         1996. The decrease was primarily due to the reduction in borrowings on
         notes payable of $6.5 million, decreased proceeds from the exercise of
         stock options of $2.7 million, a $2.0 million increase in principal
         payments on long-term borrowings as certain long-term obligations were
         fully repaid prior to maturity, and the purchase of $1.1 million of
         treasury stock.

         Effective August 16, 1996, the Company's $100.0 million credit
         agreement was amended, among other things, to conditionally grant to
         the lenders a security interest in certain assets of the Company which
         will only become effective if the Company were to become in default
         under the credit agreement and then only if the requisite lenders were
         to direct that the security documents be filed. Thereafter, the Company
         entered into an amendment conditionally granting a similar security
         interest to the lender under the Company's $20.0 million business      
         purpose revolving promissory note.

         Non-Cash Transactions
         ---------------------

         Effective April 1, 1996, the Company sold certain retail application
         software operations, with net assets of approximately $5.0 million to a
         third-party for $6.4 million. Of the $6.4 million sale price, $.2
         million was received in cash while the balance was received in the form
         of secured promissory notes receivable and has been excluded from the
         fiscal 1997 Consolidated Statement of Cash Flows as a non-cash
         investing transaction. Although no gain has been recorded as of
         September 30, 1996, as a result of this transaction, the Company will
         recognize gain from the sale as cash proceeds are received.

                                       19
<PAGE>   20

         Effective July 16, 1996, the Company re-issued 41,754 shares of
         treasury stock, with a weighted average price per share of $10.43, to
         satisfy purchases made by employees through the Telxon Corporation 1995
         Employee Stock Purchase Plan for a price of $11.75 per share. The sale
         of these treasury shares, which were purchased by Plan participants
         through payroll deductions, has been excluded from the fiscal 1997
         Consolidated Statement of Cash Flows as a non-cash financing
         transaction.


                                       20
<PAGE>   21


                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
--------------------------

See Note 6 to the consolidated financial statements included in Part I of this
Quarterly Report on Form 10-Q for a discussion of the material pending legal
proceedings to which the Company is a party, which footnote discussion is
incorporated in this Part II by this reference.

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

         (a)      The Company held its Annual Meeting of Stockholders on
                  September 18, 1996 (the "Annual Meeting").

         (b)      The sole matter voted upon by the Company's stockholders at
                  the Annual Meeting was the election of the two directors of 
                  the class to hold office until the 1999 annual meeting of
                  stockholders. Proxies for the Annual Meeting were solicited
                  pursuant to Regulation 14 under the Securities Exchange Act
                  of 1934, there was no solicitation in opposition to
                  management's nominees as listed in the proxy statement, and
                  all of such nominees were elected.

         (c)      The following votes were cast for each director nominee:

                           For the election of Robert F. Meyerson --

                                    Votes for:                13,824,662
                                    Votes withheld:              779,327

                           For the election of Norton W. Rose --

                                    Votes for:                13,819,700
                                    Votes withheld:              784,289

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------

         (a)      Exhibits required by Item 601 of Regulation S-K:

                  3.1      Restated Certificate of Incorporation of Registrant,
                           incorporated herein by reference to Exhibit No. 3.1
                           to Registrant's Form 10-K for the year ended March
                           31, 1993.

                  3.2      Amended and Restated By-Laws of Registrant, as
                           amended, incorporated herein by reference to Exhibit
                           No. 2(b) to Registrant's Registration Statement on
                           Form 8-A with respect to its Common Stock filed
                           pursuant to Section 12(g) of the Securities Exchange
                           Act, as amended by Amendment No. 1 thereto filed
                           under cover of a Form 8 and Amendment No. 2 thereto
                           filed on Form 8-A/A.

                  4.1      Portions of the Restated Certificate of Incorporation
                           of Registrant pertaining to the rights of holders of
                           Registrant's Common Stock, par value $.01 per share
                           incorporated herein by



                                       21
<PAGE>   22


                           reference to Exhibit 3.1 to Registrant's Form 10-K
                           for the year ended March 31, 1993.

                  4.2      Text of form of Certificate for the Registrant's
                           Common Stock, par value $.01 per share, and
                           description of graphic and image material appearing
                           thereon, incorporated herein by reference to Exhibit
                           4.2 to the Registrant's Form 10-Q for the quarter
                           ended June 30, 1995.

                  4.3      Rights Agreement between Registrant and KeyBank
                           National Association, as Rights Agent, dated as of
                           August 25, 1987, as amended and restated as of July
                           31, 1996, incorporated herein by reference to Exhibit
                           4 to Registrant's Current Report on Form 8-K dated
                           August 5, 1996.

                           4.3.1    Form of Rights Certificate (included as
                                    Exhibit A to the Rights Agreement included
                                    as Exhibit 4.3 above). Until the
                                    Distribution Date (as defined in the Rights
                                    Agreement), the Rights Agreement provides
                                    that the common stock purchase rights
                                    created thereunder are evidenced by the
                                    certificates for Registrant's Common Stock
                                    (the text of which and description thereof
                                    is included as Exhibit 4.2 above, which
                                    stock certificates are deemed also to be
                                    certificates for such common stock purchase
                                    rights) and not by separate Rights
                                    Certificates; as soon as practicable after
                                    the Distribution Date, Rights Certificates
                                    will be mailed to each holder of
                                    Registrant's Common Stock as of the close of
                                    business on the Distribution Date.

                  4.4      Indenture by and between the Registrant and
                           AmeriTrust Company National Association, as Trustee,
                           dated as of June 1, 1987, regarding Registrant's
                           7-1/2% Convertible Subordinated Debentures Due 2012,
                           incorporated herein by reference to Exhibit 4.2 to
                           Registrant's Registration Statement on Form S-3,
                           Registration No. 33-14348, filed May 18, 1987.

                           4.4.1    Form of Registrant's 7-1/2% Convertible
                                    Subordinated Debentures Due 2012 (set forth
                                    in the Indenture included as Exhibit 4.4
                                    above).

                  4.5      Indenture by and between the Registrant and Bank One
                           Trust Company, N.A., as Trustee, dated as of December
                           1, 1995, regarding Registrant's 5-3/4% Convertible
                           Subordinated Notes due 2003, incorporated herein by
                           reference to Exhibit 4.1 to Registrant's Registration
                           Statement on Form S-3, Registration No. 333-1189,
                           filed February 23, 1996.

                           4.5.1    Form of Registrant's 5-3/4% Convertible
                                    Subordinated Notes due 2003 issued under the
                                    Indenture included as Exhibit 4.5 above,
                                    incorporated herein by reference to Exhibit
                                    4.2 to Registrant's Registration Statement
                                    on 

                                       22
<PAGE>   23

                                    Form S-3, Registration No. 333-1189, 
                                    filed February 23, 1996.

                           4.5.2    Registration Rights Agreement by and among
                                    the Registrant and Hambrecht & Quist LLC and
                                    Prudential Securities Incorporated, as the
                                    Initial Purchasers of Registrant's 5-3/4%
                                    Convertible Subordinated Notes due 2003,
                                    with respect to the registration of said
                                    Notes under applicable securities laws,
                                    incorporated herein by reference to Exhibit
                                    4.3 to Registrant's Registration Statement
                                    on Form S-3, Registration No. 333-1189, 
                                    filed February 23, 1996.

                  10.1     Compensation and Benefits Plans of the Registrant.

                           10.1.1   Amended and Restated Retirement and Uniform
                                    Matching Profit-Sharing Plan of Registrant,
                                    effective July 1, 1993, incorporated herein
                                    by reference to Exhibit 10.1.1 to
                                    Registrant's Form 10-K for the year ended
                                    March 31, 1994.

                                    10.1.1.a Amendment, dated January 1, 1994,
                                             to the Plan included as Exhibit
                                             10.1.1 above, incorporated herein
                                             by reference to Exhibit 10.1.1.a to
                                             Registrant's Form 10-K for the year
                                             ended March 31, 1994.

                                    10.1.1.b Amendment, dated April 1, 1994, to
                                             the Plan included as Exhibit 10.1.1
                                             above, incorporated herein by
                                             reference to Exhibit 10.1.1.b to
                                             Registrant's Form 10-K for the year
                                             ended March 31, 1994.

                                    10.1.1.c Amendment, dated January 1, 1994,
                                             to the Plan included as Exhibit
                                             10.1.1 above, incorporated herein
                                             by reference to Exhibit 10.1.1.c to
                                             Registrant's Form 10-Q for the
                                             quarter ended December 31, 1994.

                           10.1.2   1990 Stock Option Plan for employees of the
                                    Registrant, as amended, incorporated herein
                                    by reference to Exhibit 10.1.3 to
                                    Registrant's Form 10-Q for the quarter ended
                                    September 30, 1995.

                           10.1.3   1990 Stock Option Plan for Non-Employee
                                    Directors of the Registrant, as amended,
                                    incorporated herein by reference to Exhibit
                                    10.1.4 to Registrant's Form 10-Q for the
                                    quarter ended September 30, 1995.

                           10.1.4   Non-Qualified Stock Option Agreement between
                                    the Registrant and Raj Reddy, dated as of
                                    October 17, 1988, incorporated herein by
                                    reference to Exhibit 10.1.6 to Registrant's
                                    Form 10-K for the year ended March 31, 1994.

                                       23
<PAGE>   24

                                    10.1.4.a Description of amendment extending
                                             the term of the Agreement
                                             included as Exhibit 10.1.4 above,
                                             incorporated herein by reference to
                                             Exhibit 10.1.6.a to Registrant's
                                             Form 10-Q for the quarter ended
                                             September 30, 1994.

                           10.1.5   1992 Restricted Stock Plan of the 
                                    Registrant, incorporated herein by
                                    reference to Exhibit 10.1.17 to the
                                    Registrant's Form 10-Q for the quarter
                                    ended December 31, 1993.

                                    10.1.5.a Amendment, dated December 7, 1993,
                                             to the Plan included as Exhibit 
                                             10.1.5 above, incorporated herein 
                                             by reference to Exhibit 10.1.17.a 
                                             to the Registrant's Form 10-Q for
                                             the quarter ended December 31, 
                                             1993.

                                    10.1.5.b Amendment, dated July 18, 1994,
                                             to the Plan included as Exhibit 
                                             10.1.5 above, incorporated
                                             herein by reference to Exhibit
                                             10.1.17.b to Registrant's Form
                                             10-Q for the quarter ended
                                             September 30, 1994.

                           10.1.6   1995 Employee Stock Purchase Plan of the 
                                    Registrant, as amended, incorporated 
                                    herein by reference to Exhibit 10.1.7 to 
                                    Registrant's Form 10-Q for the
                                    quarter ended September 30, 1995.

                           10.1.7   Description of compensation arrangements 
                                    between the Registrant and Robert F.
                                    Meyerson, Chairman of the Board of
                                    Registrant, incorporated herein by
                                    reference to 10.1.7 to Registrant's Form
                                    10-Q for the quarter ended June 30, 1995.

                           10.1.8   Employment Agreement between Telxon 
                                    Products, Inc., a wholly owned
                                    subsidiary of the Registrant, and Dan R.
                                    Wipff, dated September 29, 1994,
                                    incorporated herein by reference to Exhibit
                                    10.1.8 to Registrant's Form 10-Q for the
                                    quarter ended September 30, 1994.

                           10.1.9   Services and Non-Competition Agreement, 
                                    dated as of January 18, 1993, among
                                    Accipiter Corporation, Robert F. Meyerson
                                    and the Registrant, incorporated herein by
                                    reference to Exhibit 10.28 to the
                                    Registrant's Form 10-Q for the quarter
                                    ended December 31, 1992.

                           10.1.10  Employment Agreement between the 
                                    Registrant and John H. Cribb effective
                                    as of April 1, 1993, incorporated herein by
                                    reference to Exhibit 10.1.11 to
                                    Registrant's Form 10-K for the year ended
                                    March 31,  1994.

                           10.1.11  Employment Agreement between the 
                                    Registrant and Frank Brick, effective as 
                                    of October 15, 1993, incorporated

                                       24
<PAGE>   25

                                    herein by reference to Exhibit 10.1.16 on
                                    Registrant's Form 10-Q for the quarter ended
                                    September 30, 1994.

                  10.2     Material Leases of the Registrant.

                           10.2.1   Lease between Registrant and 3330 W. Market
                                    Properties, dated as of December 30, 1986,
                                    incorporated herein by reference to Exhibit
                                    10.2.1 to Registrant's Form 10-K for the 
                                    year ended March 31, 1994.

                           10.2.2   Lease between Itronix Corporation, a wholly
                                    owned subsidiary of the Registrant, and
                                    Hutton Settlement, Inc., dated as of April
                                    5, 1993, incorporated herein by reference to
                                    Exhibit 10.2.3 to the Registrant's Form 10-K
                                    for the year ended March 31, 1993.

                           10.2.3   Commercial Lease and Condominium Lease
                                    Agreement between Itronix Corporation, a
                                    wholly owned subsidiary of the Registrant,
                                    and Metropolitan Mortgage & Securities
                                    Company, Inc., dated May 26, 1994,
                                    incorporated herein by reference to Exhibit
                                    10.2.3 to Registrant's Form 10-K for the
                                    year ended March 31, 1995.

                           10.2.4   Standard Office Lease (Modified Net Lease)
                                    between Registrant and John D. Dellagnese
                                    III, dated as of July 19, 1995, including an
                                    Addendum thereto, incorporated herein by
                                    reference to Exhibit 10.2.4 to Registrant's
                                    Form 10-K for the year ended March 31, 1996.

                                    10.2.4.a Second Addendum, dated as of
                                             October 5, 1995, to the Lease
                                             included as Exhibit 10.2.4 above,
                                             incorporated herein by reference to
                                             Exhibit 10.2.4.a to Registrant's
                                             Form 10-K for the year ended March
                                             31, 1996.

                                    10.2.4.b Third Addendum, dated as of March
                                             1, 1996, to the Lease included as
                                             Exhibit 10.2.4 above, incorporated
                                             herein by reference to Exhibit
                                             10.2.4.b to Registrant's Form 10-K
                                             for the year ended March 31, 1996.

                  10.3     Credit Agreements of the Registrant.

                           10.3.1   Amended and Restated Revolving Credit, Term
                                    Loan and Security Agreement between the
                                    Registrant and the Bank of New York
                                    Commercial Corporation, dated as of March
                                    31, 1995 (replaced by the revolving credit
                                    facility established by the Agreement
                                    included as Exhibit 10.3.2 below),
                                    incorporated herein by reference to 


                                       25
<PAGE>   26

                                    Exhibit 10.3 to Registrant's Form 10-K for 
                                    the year ended March 31, 1995.

                                    10.3.1.a Amendment No. 1, dated as of June 
                                             16, 1995, to the Agreement 
                                             included as Exhibit 10.3.1 above, 
                                             incorporated herein by reference 
                                             to Exhibit 10.3.1 to Registrant's 
                                             Form 10-K for the year ended 
                                             March 31, 1995.

                                    10.3.1.b Amendment No. 2, dated as of 
                                             December 1, 1995, to the 
                                             Agreement included as Exhibit
                                             10.3.1 above, incorporated herein 
                                             by reference to Exhibit 10.3.1.b 
                                             to Registrant's Form 10-Q for the 
                                             quarter ended December 31, 1995.

                           10.3.2   Credit Agreement by and among the 
                                    Registrant, the lenders party thereto from 
                                    time to time and The Bank of New York, as 
                                    letter of credit issuer, swing line lender 
                                    and agent for the lenders, dated as of March
                                    8, 1996 (replaced the revolving credit and
                                    term  loan facility established by the
                                    Agreement included as Exhibit 10.3.1
                                    above, as amended by Amendments No. 1 and
                                    2 thereto included as Exhibits 10.3.1.a
                                    and 10.3.1.b  above), incorporated herein
                                    by reference to Exhibit 10.3.2 to
                                    Registrant's Form 10-K for the year
                                    ended March 31, 1996.

                                    10.3.2.a Amendment No. 1, dated as of 
                                             August 6, 1996, to the Agreement 
                                             included as Exhibit 10.3.2 above, 
                                             incorporated herein by reference 
                                             to Exhibit 10.3.2.a to 
                                             Registrant's Current Report on 
                                             Form 8-K, dated August 16, 1996.

                                    10.3.2.b Security Agreement, dated as of 
                                             August 6, 1996, by and among
                                             the Registrant and The Bank of New
                                             York, as Agent, incorporated
                                             herein by reference to Exhibit
                                             10.3.2.b to Registrant's Current
                                             Report on Form 8-K, dated August
                                             16, 1996.

                           10.3.3   Business Purpose Revolving Promissory Note 
                                    made by the Registrant in favor of Bank
                                    One, Akron, N.A., dated September 8, 1995,
                                    and related Letter Agreement between them
                                    of even date, incorporated herein by
                                    reference to Exhibit 10.3.2 to Registrant's
                                    Form 10-Q for the quarter ended September
                                    30, 1995.

                           10.3.4   Business Purpose Revolving Promissory Note 
                                    made by the Registrant in favor of Bank
                                    One, Akron,  N.A., dated November 24, 1995,
                                    and related Letter  Agreement between them  
                                    dated November 22, 1995, incorporated 


                                      26
<PAGE>   27

                                   herein by reference to Exhibit 10.3.3 to 
                                   Registrant's Form 10-Q for the quarter 
                                   ended December 31, 1995.
                          
                           10.3.5  Business Purpose Revolving Promissory Note 
                                   made by the Registrant in favor of Bank
                                   One, Akron, N.A., dated January 31, 1996,
                                   and related Letter Agreement between them
                                   dated of even date, incorporated herein by
                                   reference to Exhibit 10.3.4 to Registrant's
                                   Form 10-Q for the quarter ended December 31, 
                                   1995.

                           10.3.6  Business Purpose Revolving Promissory Note 
                                   made by the Registrant in favor of Bank
                                   One, Akron, N.A., dated February 29, 1996,
                                   and related Letter Agreement between them
                                   dated of even date, incorporated herein by
                                   reference to Exhibit 10.3.6 to Registrant's
                                   Form 10-K for the year ended March 31, 1996.

                           10.3.7  Business Purpose Revolving Promissory Note 
                                   (Swing Line) made by the Registrant in
                                   favor of Bank One, Akron, N.A., dated March
                                   20, 1996, incorporated herein by reference
                                   to Exhibit 10.3.7 to Registrant's Form 10-K
                                   for the year ended March 31, 1996.

                           10.3.8  Business Purpose Revolving Promissory Note 
                                   (Swing Line) made by the Registrant in
                                   favor of Bank One, Akron, N.A., dated August
                                   6, 1996 (in replacement of the Note
                                   included as Exhibit 10.3.7 above),
                                   incorporated herein by reference to Exhibit
                                   10.3.8 to Registrant's Current Report on
                                   Form 8-K, dated August 16, 1996.

                                    10.3.8.a Bank One Security Agreement, 
                                             dated as of August 6, 1996, by
                                             and among the Registrant and Bank
                                             One, Akron, N.A., incorporated
                                             herein by reference to Exhibit
                                             10.3.8.a to Registrant's Current
                                             Report on Form 8-K,  dated August
                                             16, 1996.

                  10.4     Amended and Restated Agreement between the 
                           Registrant and Symbol Technologies, Inc., dated
                           as of September 30, 1992, incorporated herein by
                           reference to Exhibit 10.4 to Registrant's Form 10-K
                           for the year ended March 31, 1993.

                  10.5     Plan and Agreement of Merger, dated as of January 
                           18, 1993, among the Registrant, WSACO, Inc. and
                           Teletransaction, Inc., incorporated herein by
                           reference to Exhibit 10.29 to the Registrant's Form
                           10-Q for the quarter ended December 31, 1992.

                  10.6     Agreement of Purchase and Sale of Assets by and 
                           among Vision Newco, Inc., a wholly owned
                           subsidiary of the Registrant, Virtual Vision, Inc.,
                           as debtor and debtor in possession, and the Official
                           Unsecured Creditors' Committee, on behalf of the
                           bankruptcy estate of Virtual Vision, dated as of
                           July 13, 1995, 


                                       27
<PAGE>   28

                           incorporated herein by reference to Exhibit 10.8 to
                           Registrant's Form 10-Q for the quarter ended June 
                           30, 1995.

                  10.7     Subscription Agreement by and among New Meta 
                           Licensing Corporation, a subsidiary of the
                           Registrant, and certain officers of the Registrant
                           as Purchasers, dated as of September 19, 1995,
                           incorporated herein by reference to Exhibit 10.8 to
                           Registrant's Form 10-Q for the quarter ended
                           September 30, 1995.

                  10.8     Stock Purchase Agreement by and between Metanetics
                           Corporation, a subsidiary of the Registrant fka New
                           Meta Licensing Corporation, and Accipiter II, Inc.,
                           dated as of September 30, 1996, filed herewith.

                  10.9     Shareholder Agreement by and among New Meta Licensing
                           Corporation, a subsidiary of the Registrant,
                           and its Shareholders, including the officers of the
                           Registrant party to the Agreement included as
                           Exhibit 10.7 above, dated as of September 29, 1995,
                           incorporated herein by reference to Exhibit 10.9 to
                           Registrant's Form 10-Q for the quarter ended 
                           September 30, 1995.

                           10.9.1  First Amendment, dated as of September 29, 
                                   1995, to the Agreement included as
                                   Exhibit 10.9 above, incorporated herein by
                                   reference to Exhibit 10.9.1 to Registrant's
                                   Form 10-Q for the quarter ended December 31,
                                   1995.

                           10.9.2  Second Amendment, dated as of January, 
                                   1996, to the Agreement included as Exhibit
                                   10.9 above, incorporated herein by reference
                                   to Exhibit 10.9.2 to Registrant's Form 10-Q
                                   for the quarter ended December 31, 1995.

                           10.9.3  Amended and Restated Shareholder Agreement 
                                   by and among Metanetics Corporation (fka New
                                   Meta Licensing Corporation) and its
                                   Shareholders, dated as of March 28, 1996,
                                   superseding the Agreement included as
                                   Exhibit 10.9 above, as amended by the First
                                   and Second Amendments thereto included as
                                   Exhibits 10.9.1 and 10.9.2 above,
                                   incorporated herein by reference to Exhibit
                                   10.9.3 to Registrant's Form 10-K filed for
                                   the year ended March 31, 1996.

                           10.9.4  First Amendment, dated as of March 30, 
                                   1996, to the Agreement included as Exhibit
                                   10.9.3 above, incorporated herein by
                                   reference to Exhibit 10.9.4 to Registrant's  
                                   Form 10-K for the year ended March 31, 
                                   1996.

                  11.      Computation of Common Shares outstanding and 
                           earnings per share for the six months ended 
                           September 30, 1996 and 1995, filed herewith.


                                       28
<PAGE>   29

                  27.      Financial Data Schedule as of September 30, 1996, 
                           filed herewith.

                  (b)      Reports on Form 8-K

                           During the fiscal quarter ended September 30, 1996
                           for which this Quarterly Report on Form 10-K
                           is filed, the Registrant filed the following Current
                           Reports on Form 8-K: (i) Current Report dated July
                           8, 1996, attaching the Registrant's press release of
                           that date reporting the authorization by the
                           Company's Board of Directors of the repurchase by
                           the Company of up to three million of its
                           outstanding Shares and the initial repurchases made
                           under the repurchase program (neither the Form 8-K
                           nor the press release included any financial
                           statements); (ii) Current Report dated July 17,
                           1996, attaching the Registrant's press release of
                           that date which announced its financial results for
                           the first fiscal quarter ended June 30, 1996, as well
                           as discussing the effects of its financial condition
                           at that date under the subordination provisions of
                           the Company's 5-3/4% Convertible Subordinated Notes
                           (the press release as incorporated into the Form 8-K
                           included consolidated balance sheets for the
                           Registrant as of June 30, 1996 (unaudited), and March
                           31, 1996, and condensed consolidated statements of
                           income for the three-month periods (unaudited) ended
                           June 30, 1996 and 1995); (iii) Current Report dated
                           August 5, 1996, reporting the amendment and
                           restatement of the Company's stockholder rights plan
                           (the Form 8-K did not include any financial
                           statements); and (iv) Current Report dated August
                           16, 1996, reporting amendments to the Company's
                           primary credit facility with The Bank of New York,
                           as Agent for an eight-bank lending group, and its
                           supplemental credit facility with Bank One, Akron,
                           N.A. In addition, subsequent to the end of the
                           September 30, 1996 fiscal quarter, the Registrant
                           filed a Current Report on Form 8-K dated October 18,
                           1996, attaching the Registrant's press release of
                           that date which announced its financial results for
                           the second fiscal quarter and six months ended
                           September 30, 1996, as well as discussing the effects
                           of its financial condition at that date under the
                           subordination provisions of the 5-3/4% Convertible
                           Subordinated Notes (the press release as
                           incorporated into the Form 8-K included consolidated
                           balance sheets for the Registrant as of September
                           30, 1996 (unaudited), and March 31, 1996, and
                           condensed consolidated statements of income for the
                           three-month and six-month periods (unaudited) ended
                           September 30, 1996 and 1995).



                                       29
<PAGE>   30


                       TELXON CORPORATION AND SUBSIDIARIES

                                    SIGNATURE

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

         Date:    November 14, 1996

                                              TELXON CORPORATION
                                              ------------------
                                              (Registrant)

                                              /s/    Kenneth W. Haver
                                              -------------------------
                                                     Kenneth W. Haver

                                              Senior Vice President and
                                              Chief Financial Officer



<PAGE>   31


                               TELXON CORPORATION

                                   EXHIBITS TO

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1996


<PAGE>   32


                                INDEX TO EXHIBITS
                                -----------------

Where
Filed

*         3.1              Restated Certificate of Incorporation of Registrant, 
                           incorporated by reference to Exhibit No. 3.1 to
                           Registrant's Form 10-K for the year ended March 31,
                           1993.

*         3.2              Amended and Restated By-Laws of Registrant, as 
                           amended, incorporated by reference to Exhibit No.
                           2(b) to Registrant's Registration Statement on Form
                           8-A with respect to its Common Stock filed pursuant
                           to Section 12(g) of the Securities Exchange Act, as
                           amended by Amendment No. 1 thereto filed under cover
                           of a Form 8 and Amendment No. 2 thereto filed on Form
                           8-A/A.

*         4.1              Portions of the Restated Certificate of 
                           Incorporation of Registrant pertaining to the
                           rights of holders of Registrant's Common Stock, par
                           value $.01 per share incorporated by reference to
                           Exhibit 3.1 to Registrant's Form 10-K for the year
                           ended March 31, 1993.

*         4.2              Text of form of Certificate for the Registrant's 
                           Common Stock, par value $.01 per share, and
                           description of graphic and image material appearing
                           thereon, incorporated herein by reference to Exhibit
                           4.2 to Registrant's Form 10-Q for the quarter ended
                           June 30, 1995.

*         4.3              Rights Agreement between Registrant and KeyBank 
                           National Association, as Rights Agent, dated as of
                           August 25, 1987, as amended and restated as of July
                           31, 1996, incorporated herein by reference to Exhibit
                           4 to Registrant's Current Report on Form 8-K, dated
                           August 5, 1996.

*                          4.3.1    Form of Rights Certificate (included 
                                    as Exhibit A to the Rights Agreement
                                    included as Exhibit 4.3 above). Until the
                                    Distribution Date (as defined in the Rights
                                    Agreement), the Rights Agreement provides
                                    that the common stock purchase rights
                                    created thereunder are evidenced by the
                                    certificates for Registrant's Common Stock
                                    (the text of which and description thereof
                                    is included as Exhibit 4.2 above, which
                                    stock certificates are deemed also to be
                                    certificates for such common stock purchase
                                    rights) and not by separate Rights
                                    Certificates; as soon as practicable after
                                    the Distribution Date, Rights Certificates
                                    will be mailed to each holder of
                                    Registrant's Common Stock as of the close of
                                    business on the Distribution Date.

*         4.4              Indenture by and between the Registrant and 
                           AmeriTrust Company National Association, as Trustee,
                           dated as of June 1, 1987, regarding Registrant's
                           7-1/2% Convertible Subordinated Debentures Due 2012,
                           incorporated herein by reference to Exhibit


<PAGE>   33


Where
Filed
-----

                           4.2 to Registrant's Registration Statement on Form
                           S-3, Registration No. 33-14348, filed May 18, 1987.

*                          4.4.1   Form of the Registrant's 7-1/2% Convertible 
                                   Subordinated Debentures Due 2012 (set forth
                                   in the Indenture included as Exhibit 4.4
                                   above).

*         4.5              Indenture by and between the Registrant and Bank One
                           Trust Company, N.A., as Trustee, dated as of December
                           1, 1995, regarding Registrant's 5-3/4% Convertible
                           Subordinated Notes due 2003, incorporated herein by
                           reference to Exhibit 4.1 to Registrant's Registration
                           Statement on Form S-3, Registration No. 333-1189,
                           filed February 23, 1996.

*                          4.5.1    Form of Registrant's 5-3/4% Convertible 
                                    Subordinated Notes due 2003 issued under the
                                    Indenture included as Exhibit 4.5 above,
                                    incorporated herein by reference to Exhibit
                                    4.2 to Registrant's Registration Statement
                                    on Form S-3, Registration No. 333-1189,
                                    filed February 23, 1996.

*                          4.5.2    Registration Rights Agreement by and among 
                                    the Registrant and Hambrecht & Quist LLC and
                                    Prudential Securities Incorporated, as the
                                    Initial Purchasers of Registrant's 5-3/4%
                                    Convertible Subordinated Notes due 2003,
                                    with respect to the registration of said
                                    Notes under applicable securities laws,
                                    incorporated herein by reference to Exhibit
                                    4.3 to Registrant's Registration Statement
                                    on Form S-3, Registration No. 333-1189,
                                    filed February 23, 1996.

                           
         10.1              Compensation and Benefits Plans of the Registrant.

*                          10.1.1   Amended and Restated Retirement and Uniform
                                    Matching Profit-Sharing Plan of Registrant,
                                    effective July 1, 1993, incorporated herein
                                    by reference to Exhibit 10.1.1 to
                                    Registrant's Form 10-K for the year ended
                                    March 31, 1994.

*                                   10.1.1.a Amendment, dated January 1, 1994,
                                             to the Plan included as Exhibit 
                                             10.1.1 above, incorporated herein 
                                             by reference to Exhibit 10.1.1.a 
                                             to Registrant's Form 10-K
                                             for the year ended March 31, 1994.

*                                   10.1.1.b Amendment, dated April 1, 1994, to
                                             the Plan included as Exhibit 
                                             10.1.1 above, incorporated herein 
                                             by reference to Exhibit
                                             10.1.1.b to Registrant's Form 
                                             10-K for the year ended March 
                                             31, 1994.


<PAGE>   34


*                                   10.1.1.c    Amendment, dated January 1, 
                                                1994, to the Plan included as 
                                                Exhibit 10.1.1 above, 
                                                incorporated herein by
                                                reference to Exhibit 10.1.1.c 
                                                to Registrant's Form 10-Q for 
                                                the quarter ended December 31, 
                                                1994.

*                          10.1.2   1990 Stock Option Plan for employees of the
                                    Registrant, as amended, incorporated herein
                                    by reference to Exhibit 10.1.3 to
                                    Registrant's Form 10-Q for the quarter ended
                                    September 30, 1995.

*                          10.1.3   1990 Stock Option Plan for Non-Employee 
                                    Directors of the Registrant, as amended,
                                    incorporated herein by reference to Exhibit
                                    10.1.4 to Registrant's Form 10-Q for the
                                    quarter ended September 30, 1995.

*                          10.1.4   Non-Qualified Stock Option Agreement 
                                    between the Registrant and Raj Reddy, dated
                                    as of October 17, 1988, incorporated herein
                                    by reference to Exhibit 10.1.6 to
                                    Registrant's Form 10-K for the year ended
                                    March 31, 1994.

*                                   10.1.4.a   Description of amendment
                                               extending the term of the 
                                               Agreement included as Exhibit 
                                               10.1.4 above, incorporated 
                                               herein by reference to Exhibit 
                                               10.1.6.a to Registrant's Form 
                                               10-Q for the quarter ended
                                               September 30, 1994.

*                          10.1.5   1992 Restricted Stock Plan of the 
                                    Registrant, incorporated herein by reference
                                    to Exhibit 10.1.17 to the Registrant's Form
                                    10-Q for the quarter ended December 31,
                                    1993.

*                                   10.1.5.a    Amendment, dated December 7,
                                                1993, to the Plan included as
                                                Exhibit 10.1.5 above,
                                                incorporated herein by
                                                reference to Exhibit 10.1.17.a
                                                to the Registrant's Form
                                                10-Q for the quarter ended
                                                December 31, 1993.

*                                   10.1.5.b    Amendment, dated July 18,
                                                1994, to the Plan included as
                                                Exhibit 10.1.5 above,
                                                incorporated herein by
                                                reference to Exhibit 10.1.17.b
                                                to Registrant's Form 10-Q for 
                                                the quarter ended September 30,
                                                1994.

*                          10.1.6   1995 Employee Stock Purchase Plan of the 
                                    Registrant, as amended, incorporated herein
                                    by reference to Exhibit 10.1.7 to
                                    Registrant's Form 10-Q for the quarter ended
                                    September 30, 1995.

<PAGE>   35

Where
Filed
------

*                          10.1.7   Description of compensation arrangements 
                                    between the Registrant and Robert F.
                                    Meyerson, Chairman of the Board of
                                    Registrant, incorporated herein by reference
                                    to Exhibit 10.1.7 to Registrant's Form 10-Q
                                    for the quarter ended September 30, 1995.

*                          10.1.8   Employment Agreement between Telxon 
                                    Products, Inc., a wholly owned subsidiary of
                                    the Registrant, and Dan R. Wipff, dated
                                    September 29, 1994, incorporated herein by
                                    reference to Exhibit 10.1.8 to Registrant's
                                    Form 10-Q for the quarter ended September
                                    30, 1994.

*                          10.1.9   Services and Non-Competition Agreement, 
                                    dated as of January 18, 1993, among
                                    Accipiter Corporation, Robert F. Meyerson
                                    and the Registrant, incorporated herein by
                                    reference to Exhibit 10.28 to the
                                    Registrant's Form 10-Q for the quarter ended
                                    December 31, 1992.

*                          10.1.10  Employment Agreement between the Registrant
                                    and John H. Cribb effective as of April 1,
                                    1993, incorporated herein by reference to
                                    Exhibit 10.1.11 to Registrant's Form 10-K
                                    for the year ended March 31, 1994.

*                          10.1.11  Employment Agreement between the Registrant
                                    and Frank Brick, effective as of October 15,
                                    1993, incorporated herein by reference to
                                    Exhibit 10.1.16 on Registrant's Form 10-Q
                                    for the quarter ended September 30, 1994.

                  10.2     Material Leases of the Registrant.

*                          10.2.1   Lease between Registrant and 3330 W. Market
                                    Properties, dated as of December 30, 1986,
                                    incorporated herein by reference to Exhibit
                                    10.2.1 to Registrant's Form 10-K for the
                                    year ended March 31, 1994.

*                          10.2.2   Lease between Itronix Corporation, a wholly
                                    owned subsidiary of the Registrant, and
                                    Hutton Settlement, Inc., dated as of April
                                    5, 1993, incorporated herein by reference to
                                    Exhibit 10.2.3 to the Registrant's Form 10-K
                                    for the year ended March 31, 1993.

*                          10.2.3   Commercial Lease and Condominium Lease 
                                    Agreement between Itronix Corporation, a
                                    wholly owned subsidiary of the Registrant,
                                    and Metropolitan Mortgage & Securities
                                    Company, Inc., dated May 26, 1994,
                                    incorporated herein by reference to Exhibit
                                    10.2.3 to Registrant's Form 10-K for the 
                                    year ended March 31, 1995.


<PAGE>   36

Where
Filed
-----

*                          10.2.4   Standard Office Lease (Modified Net Lease)
                                    between Registrant and John D. Dellagnese
                                    III, dated as of July 19, 1995, including an
                                    Addendum thereto, incorporated herein by
                                    reference to Exhibit 10.2.4 to Registrant's
                                    Form 10-K for the year ended March 31, 1996.

*                                   10.2.4.a Second Addendum, dated as of 
                                             October 5, 1995, to the Lease
                                             included as Exhibit 10.2.4 above,
                                             incorporated herein by reference to
                                             Exhibit 10.2.4.a to Registrant's
                                             Form 10-K for the year ended March
                                             31, 1996.

*                                  10.2.4.b  Third Addendum, dated as of 
                                             March 1, 1996, to the Lease
                                             included as Exhibit 10.2.4 above,
                                             incorporated herein by reference to
                                             Exhibit 10.2.4.b to Registrant's
                                             Form 10-K for the year ended March
                                             31, 1996.

*                          10.3.1   Amended and Restated Revolving Credit, Term
                                    Loan and Security Agreement between the
                                    Registrant and the Bank of New York
                                    Commercial Corporation, dated as of March
                                    31, 1995 (replaced by the revolving credit
                                    facility established by the Agreement
                                    included as Exhibit 10.3.2 below),
                                    incorporated herein by reference to Exhibit
                                    10.3 to Registrant's Form 10-K for the year
                                    ended March 31, 1995.

*                                   10.3.1.a Amendment No. 1, dated as of
                                             June 16, 1995, to the Agreement
                                             included as Exhibit 10.3.1 above,
                                             incorporated herein by reference to
                                             Exhibit 10.3.1 to Registrant's Form
                                             10-K for the year ended March 31,
                                             1995.

*                                   10.3.1.b Amendment No. 2, dated as of
                                             December 1, 1995, to the Agreement
                                             included as Exhibit 10.3.1 above,
                                             incorporated herein by reference to
                                             Exhibit 10.3.1.b to Registrant's
                                             Form 10-Q for the quarter ended
                                             December 31, 1995.

*                          10.3.2   Credit Agreement by and among the 
                                    Registrant, the lenders party thereto from
                                    time to time and The Bank of New York, as
                                    letter of credit issuer, swing line lender
                                    and agent for the lenders, dated as of March
                                    8, 1996 (replaced the revolving credit
                                    and term loan facility established by the
                                    Agreement included as Exhibit 10.3.1 above,
                                    as amended by Amendments No. 1 and 2
                                    thereto included as Exhibits 10.3.1.a and
                                    10.3.1.b above), incorporated herein by
                                    reference to Exhibit


<PAGE>   37
Where
Filed
-----
                                    10.3.2 to Registrant's Form 10-K for the
                                    year ended March 31, 1996.

*                                   10.3.2.a Amendment No. 1, dated as of
                                             August 6, 1996, to the Agreement
                                             included as Exhibit 10.3.2 above,
                                             incorporated herein by reference to
                                             Exhibit 10.3.2.a to Registrant's
                                             Current Report on Form 8-K, dated
                                             August 16, 1996.

*                                   10.3.2.b Security Agreement, dated as of 
                                             August 6, 1996, by and among the
                                             Registrant and The Bank of New
                                             York, as Agent, incorporated herein
                                             by reference to Exhibit 10.3.2.b to
                                             Registrant's Current Report on Form
                                             8-K, dated August 16, 1996.

*                          10.3.3   Business Purpose Revolving Promissory Note 
                                    made by the Registrant in favor of Bank One,
                                    Akron, N.A., dated September 8, 1995, and
                                    related Letter Agreement between them of
                                    even date, incorporated herein by reference
                                    to Exhibit 10.3.2 to Registrant's Form 10-Q
                                    for the quarter ended September 30, 1995.

*                          10.3.4   Business Purpose Revolving Promissory Note 
                                    made by the Registrant in favor of Bank One,
                                    Akron, N.A., dated November 24, 1995, and
                                    related Letter Agreement between them dated
                                    November 22, 1995, incorporated herein by
                                    reference to Exhibit 10.3.3 to Registrant's
                                    Form 10-Q for the quarter ended December 31,
                                    1995.

*                          10.3.5   Business Purpose Revolving Promissory Note 
                                    made by the Registrant in favor of Bank One,
                                    Akron, N.A., dated January 31, 1996, and
                                    related Letter Agreement between them dated
                                    of even date, incorporated herein by
                                    reference to Exhibit 10.3.4 to Registrant's
                                    Form 10-Q for the quarter ended December 
                                    31, 1995.

*                          10.3.6   Business Purpose Revolving Promissory Note 
                                    made by the Registrant in favor of Bank One,
                                    Akron, N.A., dated February 29, 1996, and
                                    related Letter Agreement between them dated
                                    of even date, incorporated herein by
                                    reference to Exhibit 10.3.6 to Registrant's
                                    Form 10-K for the year ended March 31, 1996.

*                          10.3.7   Business Purpose Revolving Promissory Note 
                                    (Swing Line) made by the Registrant in favor
                                    of Bank One, Akron, N.A., dated March 20,
                                    1996, incorporated herein by reference to
                                    Exhibit 10.3.7 to Registrant's Form 10-K for
                                    the year ended March 31, 1996.
<PAGE>   38
Where
Filed
-----
*                         10.3.8    Business Purpose Revolving Promissory Note 
                                    (Swing Line) made by the Registrant in favor
                                    of Bank One, Akron, N.A., dated August 6, 
                                    1996 (in replacement of the Note included
                                    as Exhibit 10.3.7 above), incorporated
                                    herein by reference to Exhibit 10.3.8 to
                                    Registrant's Current Report on Form 8-K,    
                                    dated August 16, 1996.

*                                   10.3.8.a Bank One Security Agreement, 
                                             dated as of August 6, 1996, by 
                                             and among the Registrant and Bank
                                             One, Akron, N.A., incorporated 
                                             herein by reference to Exhibit 
                                             10.3.8.a to Registrant's Current 
                                             Report on Form 8-K, dated August 
                                             16, 1996.

*          10.4            Amended and Restated Agreement between the 
                           Registrant and Symbol Technologies, Inc., dated as of
                           September 30, 1992, incorporated herein by reference
                           to Exhibit 10.4 to Registrant's Form 10-K for the
                           year ended March 31, 1993.

*          10.5            Plan and Agreement of Merger, dated as of  January 
                           18, 1993, among the Registrant, WSACO, Inc. and
                           Teletransaction, Inc., incorporated herein by
                           reference to Exhibit 10.29 to the Registrant's Form
                           10-Q for the quarter ended December 31, 1992.

*          10.6            Agreement of Purchase and Sale of Assets by and 
                           among Vision Newco, Inc., a wholly owned subsidiary
                           of the Registrant, Virtual Vision, Inc., as debtor
                           and debtor in possession, and the Official Unsecured
                           Creditors' Committee, on behalf of the bankruptcy
                           estate of Virtual Vision, dated as of July 13, 1995,
                           incorporated herein by reference to Exhibit 10.8 to
                           Registrant's Form 10-Q for the quarter ended June 30,
                           1995.

*          10.7            Subscription Agreement by and among New Meta 
                           Licensing Corporation, a subsidiary of the
                           Registrant, and certain officers of the Registrant as
                           Purchasers, dated as of September 19, 1995,
                           incorporated herein by reference to Exhibit 10.8 to
                           Registrant's Form 10-Q for the quarter ended
                           September 30, 1995.

**         10.8            Stock Purchase Agreement by and between Metanetics
                           Corporation, a subsidiary of the Registrant fka New
                           Meta Licensing Corporation, and Accipiter II, Inc.,
                           dated as of September 30, 1996, filed herewith.

*          10.9            Shareholder Agreement by and among New Meta 
                           Licensing Corporation, a subsidiary of the
                           Registrant, and its Shareholders, including the
                           officers of the Registrant party to the Agreement
                           included as Exhibit 10.7 above, dated as of September
                           29, 1995, incorporated herein by reference to Exhibit
                           10.9 to Registrant's Form 10-Q for the quarter ended
                           September 30, 1995.
<PAGE>   39
Where
Filed
-----
*                          10.9.1  First Amendment, dated as of September 29, 
                                   1995, to the Agreement included as
                                   Exhibit 10.9 above, incorporated herein by
                                   reference to Exhibit 10.9.1 to Registrant's
                                   Form 10-Q for the quarter ended December 31,
                                   1995.

*                          10.9.2  Second Amendment, dated as of January, 
                                   1996, to the Agreement included as Exhibit
                                   10.9 above,  incorporated herein by
                                   reference to Exhibit 10.9.2 to Registrant's
                                   Form 10-Q for the quarter ended December 31,
                                   1995.

*                          10.9.3  Amended and Restated Shareholder Agreement 
                                   by and  among Metanetics Corporation (fka
                                   New Meta Licensing   Corporation) and its
                                   Shareholders, dated as of March 28, 1996,
                                   superseding the Agreement included as
                                   Exhibit 10.9 above, as amended by the First
                                   and Second Amendments thereto included as
                                   Exhibits 10.9.1 and 10.9.2 above,
                                   incorporated herein by reference to Exhibit
                                   10.9.3 to Registrant's Form 10-K for the
                                   year ended March 31, 1996.

*                          10.9.4  First Amendment, dated as of March 30, 1996,
                                   to the Agreement included as Exhibit
                                   10.9.3 above, incorporated herein by
                                   reference to Exhibit 10.9.4 to Registrant's
                                   Form 10-K for the year ended March 31, 1996.

**                11.      Computation of Common Shares outstanding and 
                           earnings per share for the six months ended 
                           September 30, 1996 and 1995, filed herewith.

**                27.      Financial Data Schedule as of September 30, 1996, 
                           filed herewith.

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

 *    Previously filed

**    Filed herewith