<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, 1999

                                       OR

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

             FOR THE TRANSITION PERIOD FROM __________TO __________

                         COMMISSION FILE NUMBER 0-11402

                               TELXON CORPORATION
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                                    <C>
            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) 664-1000
</TABLE>

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 [ ]. No [X].*

*        Other than its Quarterly Report on form 10-Q for the fiscal quarter
         ended December 31, 1998 and its Annual Report on Form 10-K for the
         fiscal year ended March 31, 1999, the registrant has filed all reports
         required to be filed by Section 13 of 15(d) of the Securities Exchange
         Act of 1934 during the preceding twelve months (during which the
         registrant has been subject to such filing requirements).

At September 30, 1999, there were 16,277,087 outstanding shares of the
registrant's Common Stock.


<PAGE>   2

                               TELXON CORPORATION
        INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
PART I.       FINANCIAL INFORMATION:                                                                    Page No.
                                                                                                        -------
<S>                                                                                                     <C>
         Item 1:      Consolidated Financial Statements
                      Balance Sheet                                                                       3
                      Statement of Operations                                                             4
                      Statement of Cash  Flows                                                            5
                      Notes to Consolidated Financial Statements                                          6-21

         Item 2:      Management's Discussion and Analysis of Financial
                      Condition and Results of Operations                                                 22-40

         Item 3:      Quantitative and Qualitative Disclosure About Market Risk                           41

PART II.      OTHER INFORMATION:

         Item 1:      Legal Proceedings                                                                   42

         Item 4:      Submission of Matters to a Vote of Security Holders                                 42

         Item 6:      Exhibits and Reports on Form 8-K                                                    42-53
</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,
                                                                                          1999                   1999
                                                                                    -----------------       ----------------
<S>                                                                                        <C>                    <C>
ASSETS                                                                                (Unaudited)
Current assets:
Cash                                                                                       $  12,176              $  22,459
Account receivable, net of allowance for doubtful
   accounts of $4,573 and $11,069                                                             71,277                 84,500
Notes and other accounts receivable                                                            1,581                  4,015
Receivable from affiliate                                                                      1,042                      -
Inventories                                                                                   95,422                129,049
Prepaid expenses and other                                                                     7,649                  9,029
                                                                                    -----------------       ----------------
              Total current assets                                                           189,147                249,052
Property and equipment, net                                                                   67,525                 69,557
Intangibles and other assets, net                                                             24,099                 30,235
Investment in affiliate                                                                       21,307                      -
                                                                                    -----------------       ----------------
              Total                                                                        $ 302,078              $ 348,844
                                                                                    =================       ================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable                                                                              $  41,725              $  68,567
Capital lease obligations due within one year                                                    414                    525
Accounts payable                                                                              41,398                 64,966
Payable to affiliate                                                                           4,213                      -
Income taxes payable                                                                           7,965                  6,434
Accrued liabilities                                                                           63,970                 74,285
                                                                                    -----------------       ----------------
              Total current liabilities                                                      159,685                214,777
Capital lease obligations                                                                      1,224                  1,435
Convertible subordinated notes and debentures                                                106,913                106,913
Long-term debt                                                                                13,067                      -
Other long-term liabilities                                                                    4,397                  5,446
                                                                                    -----------------       ----------------
              Total liabilities                                                              285,286                328,571
Minority interest                                                                                  -                  3,307
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, 16,277 and 16,234 shares issued                                                    163                    162
Additional paid-in capital                                                                    86,631                 87,029
Retained deficit                                                                             (63,720)               (61,977)
Accumulated other comprehensive income for foreign currency translation                       (4,563)                (5,464)
Unearned compensation relating to restricted stock awards                                       (334)                   (82)
Treasury stock; 5 and 78 shares of common stock at cost                                         (106)                (1,423)
Notes related to purchase of subsidiary stock                                                 (1,279)                (1,279)
                                                                                    -----------------       ----------------
              Total stockholders' equity                                                      16,792                 16,966
                                                                                    -----------------       ----------------
Commitments and contingencies                                                                      -                      -
                                                                                    -----------------       ----------------
              Total                                                                        $ 302,078              $ 348,844
                                                                                    =================       ================
</TABLE>


See accompanying notes to 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 Ended                 Six Months Ended
                                                                      September 30,                      September 30,
                                                             --------------------------------   --------------------------------
                                                                  1999             1998              1999             1998
                                                             ---------------   --------------   ---------------   --------------
                                                                               (As Restated)                      (As Restated)
<S>                                                                <C>              <C>              <C>              <C>
Revenues:
      Product, net                                                 $ 76,621         $ 82,405         $ 144,536        $ 172,598
      Customer service, net                                          19,674           21,236            39,584           42,206
                                                             ---------------   --------------   ---------------   --------------
Total net revenues                                                   96,295          103,641           184,120          214,804

Cost of revenues:
      Product                                                        57,428           52,750           108,297          107,224
      Customer service                                               12,078           13,502            24,289           26,328
                                                             ---------------   --------------   ---------------   --------------
Total cost of revenues                                               69,506           66,252           132,586          133,552
                                                             ---------------   --------------   ---------------   --------------

Gross profit:
      Product                                                        19,193           29,655            36,239           65,374
      Customer service                                                7,596            7,734            15,295           15,878
                                                             ---------------   --------------   ---------------   --------------
Total gross profit                                                   26,789           37,389            51,534           81,252

Operating expenses:
      Selling expenses                                               18,235           21,329            36,842           44,871
      Product development and engineering expenses                    5,992            9,427            13,142           18,438
      General & administrative expenses                              16,114           10,420            27,356           19,931
      Unconsummated business combination costs                            -            1,830                 -            3,579
                                                             ---------------   --------------   ---------------   --------------
Total operating expenses                                             40,341           43,006            77,340           86,819
                                                             ---------------   --------------   ---------------   --------------

Loss from operations                                                (13,552)          (5,617)          (25,806)          (5,567)

Interest income                                                         159              164               415              343
Interest expense                                                     (3,559)          (2,617)           (6,801)          (4,329)
                                                             ---------------   --------------   ---------------   --------------

Loss before other non-operating income (expense)
      and income taxes                                              (16,952)          (8,070)          (32,192)          (9,553)

Other non-operating income (expense)                                 32,650              (97)           32,467            1,264
                                                             ---------------   --------------   ---------------   --------------

Income (loss) before income taxes                                    15,698           (8,167)              275           (8,289)

Provision (benefit) for income taxes                                    738           (1,853)            2,016           (1,875)
                                                             ---------------   --------------   ---------------   --------------
Net income (loss)                                                  $ 14,960         $ (6,314)         $ (1,741)        $ (6,414)
                                                             ===============   ==============   ===============   ==============
Net income (loss) per common share:
              Basic                                                  $ 0.92          $ (0.39)          $ (0.11)         $ (0.40)
              Diluted                                                $ 0.92          $ (0.39)          $ (0.11)         $ (0.40)
Average number of common shares outstanding:
              Basic                                                  16,232           16,075            16,194           16,100
                                                             ===============   ==============   ===============   ==============
              Diluted                                                16,233           16,075            16,194           16,100
                                                             ===============   ==============   ===============   ==============
</TABLE>


See accompanying notes to consolidated financial statements.

                                       4
<PAGE>   5

                       TELXON CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                    Six Months Ended
                                                                                                     September 30,
                                                                                          -------------------------------------
                                                                                                1999                1998
                                                                                          -----------------   -----------------
Cash flows from operating activities:                                                                          (As Restated)
<S>                                                                                               <C>                 <C>
  Net loss                                                                                        $ (1,741)           $ (6,414)
  Adjustments to reconcile net loss to net
  cash (used in) provided by operating activities:
      Depreciation and amortization                                                                 12,231              13,094
      Amortization of restricted stock awards, net                                                     176                 149
      Provision for doubtful accounts                                                                1,256               3,562
      Provision for inventory obsolescence                                                           3,616               4,027
      Gain on sale of subsidiary stock                                                             (32,167)                  -
      Gain on sale of non-marketable investments                                                      (761)               (900)
      Equity in earnings of affiliate                                                                 (702)                  -
      (Gain) loss on disposal of property and equipment                                               (107)                238
      Loss on carrying value of non-marketable investment                                            1,283                   -
      Impairment charge                                                                                381                   -
      Minority interest                                                                                  -                 117
      Changes in assets and liabilities:
              Accounts and notes receivable                                                          6,744              34,319
              Amounts due to and from affiliate                                                      3,171                   -
              Inventories                                                                           19,245             (12,338)
              Prepaid expense and other                                                              1,607              (6,027)
              Intangibles and other assets                                                            (180)                531
              Accounts payable and accrued liabilities                                             (18,473)            (10,006)
              Other long-term liabilities                                                           (1,048)               (674)
                                                                                          -----------------   -----------------
   Net cash (used in) provided by operating activities                                              (5,469)             19,678
Cash flows from investing activities:
      Additions to property and equipment                                                           (8,969)            (18,848)
      Software and other investments                                                                (2,027)             (2,939)
      Proceeds from the sale of subsidiary stock, net of cash given                                 17,211                   -
      Proceeds from the sale of property and equipment                                                 261                   -
      Purchase of non-marketable investments                                                             -              (1,950)
      Proceeds from the sale of non-marketable investment                                            1,523                   -
      Additions to long-term notes receivable                                                            -                (608)
                                                                                          -----------------   -----------------
   Net cash provided by (used in) investing activities                                               7,999             (24,345)
Cash flows from financing activities:
      Extinguishment of former credit facility                                                     (48,888)                  -
      (Repayments) borrowings on former credit facility, net                                       (17,179)             14,580
      Borrowings on long-term provisions of debt facility                                           17,000                   -
      Borrowings on debt facility, net                                                              37,792                   -
      Principal payments on capital leases                                                            (322)               (343)
      Debt issue costs paid                                                                         (1,215)                  -
      Purchase of treasury shares                                                                        -                (488)
      Exercise of stock options (includes tax benefit)                                                   -               1,222
                                                                                          -----------------   -----------------
   Net cash (used in) provided by financing activities                                             (12,812)             14,971
      Effect of exchange rate changes on cash                                                           (1)               (218)
                                                                                          -----------------   -----------------
   Net (decrease) increase in cash and cash eqivalents                                             (10,283)             10,086
Cash and cash equivalents at beginning of period                                                    22,459              27,500
                                                                                          =================   =================
Cash and cash equivalents at end of period                                                        $ 12,176            $ 37,586
                                                                                          =================   =================
</TABLE>


See accompanying notes to consolidated financial statements.

                                       5
<PAGE>   6

                       TELXON CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (In thousands except per share amounts)
                           (Unaudited and As Restated)

1.       Management Representation

         The consolidated financial statements of Telxon Corporation ("Telxon")
         and its subsidiaries (collectively with Telxon, the "Company") have
         been prepared without audit and in accordance with the instructions to
         Form 10-Q. 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 operating results
         for the three and six months ended September 30, 1999, are not
         necessarily indicative of the results that may be achieved for the year
         ending March 31, 2000. The statements, including the March 31, 1999
         balance sheet, do not include all of the information and notes required
         by generally accepted accounting principles for complete financial
         statements and 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, 1999.
         Comparative September 30, 1998 consolidated financial statements are
         unaudited and as restated, are discussed in Note 4 - Restatement.

2.       Basis of Presentation

         As discussed in Note 12, Subsidiary Stock Transactions and
         Divestitures, during the three months ended September 30, 1999, the
         Company and its former subsidiary, Aironet Wireless Communications,
         Inc. ("Aironet") sold shares of Aironet's voting common stock on the
         Nasdaq National Market in an Initial Public Offering ("IPO"). As a
         result of the IPO, the Company's percentage interest in the voting
         common stock of Aironet is approximately 35%. As such, the Company has
         ceased to consolidate the results of Aironet as of April 1, 1999, the
         beginning of the Company's fiscal year. From that date forward, the
         Company has accounted for the results of Aironet under the equity
         method of accounting in accordance with the provisions of Accounting
         Principles Board Opinion No. 18 "The Equity Method of Accounting for
         Investments in Common Stock".

3.       Financial Results and Liquidity

         The Company incurred a net loss in fiscal 1999 of $136,982 with a
         decrease in consolidated revenues of $74,862 as compared to fiscal
         1998. Cash flows used in operating activities were $27,616 and cash
         flows used in investing activities were $40,921 for fiscal 1999. The
         primary source of cash flows for fiscal 1999 was net borrowings under
         its former credit facilities (including product financing arrangements)
         that aggregated $65,567. The Company's stockholders' equity and working
         capital at March 31, 1999 were $16,966 and $34,275, respectively.

         During the quarter and six months ended September 30, 1999, the Company
         earned net income of $14,960 and incurred a net loss of $1,741,
         respectively. The net income for the quarter ended September 30, 1999
         was primarily the result of the non-operating gain recorded related to
         the sale of Aironet voting common stock of $32,167. The Company
         incurred losses from operations of $13,552 and $25,806 for the quarter
         and six months ended September 30, 1999, respectively. The Company's
         stockholders' equity and working capital at September 30, 1999 were
         $16,792 and $29,462, respectively. For the six months ended September
         30, 1999, the Company used $5,469 of cash in operating activities.

         The Company has pursued the generation of cash from sources such as
         inventories and accounts receivable, the management of vendor payments
         and related operating expenditures. However, there can be no assurance
         that the cash flows generated

                                       6
<PAGE>   7

         from such sources will be sufficient to support the Company's efforts
         to manage the payment of the amounts presently owing to, or
         subsequently incurred with, its suppliers. If cash flows are not
         sufficient there could be further disruption of the flows of necessary
         materials, components, services or other cash requirements of the
         Company. In addition, litigation, commitments and contingencies
         referenced in Note 10 - Litigation and Contingencies could have a
         material adverse effect on the Company's cash flows and, in turn, on
         the Company's results of operations and financial condition.

4.       Restatement

         On February 23, 1999, the Company announced that, having completed the
         review of certain judgmental accounting matters with the Company's then
         outside auditors previously reported in the Company's January 27, 1999,
         press release, it would restate its previously issued financial
         statements for the fiscal years 1996, 1997 and 1998 and its unaudited
         interim financial statements for the first, second and third quarters
         of each fiscal year 1997 and 1998 and the first and second quarters of
         fiscal 1999. The accompanying financial statements reflect the
         announced restatement. The more significant restatement adjustments
         affecting the periods covered by the accompanying financial statements
         are described below.

         During the three months ended June 30, 1998, the Company increased its
         product sales returns reserve and related return inventory receivable
         by $3,963 and $1,902, respectively, to better reflect the levels of
         product returns in the Company's Value-add Distributor channel. The
         Company also capitalized $1,950 previously expensed during the three
         months ended June 30, 1998, related to the repurchase of common stock
         of Metanetics from a business partner, resulting in an investment to be
         amortized over a useful life of three years. Adjustments were also made
         to increase the Company's provision for the past due accounts
         receivable related to a certain foreign distributor as a result of
         questions regarding the on-going financial viability of the
         distributor. Such adjustments totaled $2,181 for the three months ended
         June 30, 1998. For the three months ended June 30, 1998, the company
         also reduced its inventory reserves by $697 to better approximate the
         exposure related to on-hand inventories. Additionally, the Company made
         an adjustment to record, during the three months ended June 30, 1998,
         the $900 gain related to the sale of Virtual Vision, which was
         previously recorded during the three months ended March 31, 1998, as
         certain conditions of the sale, though perfunctory, were not satisfied
         until after March 31, 1998.

         Product revenue of $14,100 and related cost of product revenue of
         $6,837 associated with a product financing arrangement recorded during
         the three months ended September 30, 1998, have been reversed as the
         criteria for revenue recognition had not been fully satisfied. Such
         product revenue and related cost of product revenue was recognized upon
         sell-through to the end customer. Product revenue of $6,984 and
         corresponding cost of product revenue of $4,719 related to the sale of
         the Company's product under which the Company guaranteed the customer's
         lease payments to a third party lessor, were deferred subject to the
         customer's satisfaction of the lease payments. Additionally, software
         license revenues of $2,000 recognized during the three months ended
         September 30, 1998 has also been deferred as certain contingencies
         related to the customer's acceptance of such software had not been
         satisfied. During the three months ended September 30, 1998, the
         Company decreased its product sales returns reserves and related return
         inventory receivable by $2,546 and $1,222, respectively, to better
         reflect the level of general product returns experienced by the
         Company. The statement of operations for the three months ended
         September 30, 1998, also reflects a $1,012 increase in bad debt expense
         due to the increased provision for the past due accounts receivable
         related to a foreign distributor. The Company recorded an adjustment to
         reduce its

                                       7
<PAGE>   8

         inventory reserves by $868 to better approximate the exposure related
         to on-hand inventories. The Company's operating results for the three
         months ended September 30, 1998, were reduced by $262 due to the net
         reversal of certain accrued software license revenues and software
         royalties related to a previously divested software operation, and to
         defer recognition of such items until those transactions are settled in
         cash.

         A summary of the effects of the restatement on the Company's statements
         of operations for the three months and six months ended September 30,
         1998 is presented below:

                                       8
<PAGE>   9

                       TELXON CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                      (In thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                              Three Months                             Six Months
                                                  -------------------------------------   -------------------------------------
                                                        Ended September 30, 1998                Ended September 30, 1998
                                                  -------------------------------------   -------------------------------------
                                                         As                  As                  As                 As
                                                      Presented           Restated           Presented            Restated
<S>                                                        <C>                <C>                 <C>                 <C>
Revenues:
  Product                                                  $103,133           $ 82,405            $197,210            $172,598
  Customer service                                           21,236             21,236              42,206              42,206
                                                  ------------------  -----------------   -----------------  ------------------
      Total revenues                                        124,369            103,641             239,416             214,804

Cost of revenues:
  Product                                                    62,411             52,750             119,722             107,224
  Customer service                                           13,502             13,502              26,327              26,328
                                                  ------------------  -----------------   -----------------  ------------------
      Total cost of revenues                                 75,913             66,252             146,049             133,552

Gross profit:
  Product                                                    40,722             29,655              77,488              65,374
  Customer service                                            7,734              7,734              15,879              15,878
                                                  ------------------  -----------------   -----------------  ------------------
      Total gross profit                                     48,456             37,389              93,367              81,252

Operating expenses:
  Selling expenses                                           20,317             21,329              41,678              44,871
  Product development and engineering expenses                9,261              9,427              18,191              18,438
  General and administrative expenses                        10,425             10,420              19,862              19,931
  Unconsummated business
     combination costs and other charges                      1,830              1,830               5,529               3,579
                                                  ------------------  -----------------   -----------------  ------------------
         Total operating expenses                            41,833             43,006              85,260              86,819
                                                  ------------------  -----------------   -----------------  ------------------

          Loss from operations                                6,623             (5,617)              8,107              (5,567)

Interest income                                                 164                164                 343                 343
Interest expense                                             (2,617)            (2,617)             (4,329)             (4,329)
                                                  ------------------  -----------------   -----------------  ------------------

          Loss before other non-operating
             income (expense) and
             income taxes                                     4,170             (8,070)              4,121              (9,553)

Other non-operating (expense) income                              -                (97)                460               1,264
                                                  ------------------  -----------------   -----------------  ------------------

          Income (loss) before income taxes                   4,170             (8,167)              4,581              (8,289)

Provision (benefit) for income taxes                          1,672             (1,853)              1,837              (1,875)
                                                  ------------------  -----------------   -----------------  ------------------

Net income (loss)                                          $  2,498          $  (6,314)           $  2,744           $  (6,414)
                                                  ==================  =================   =================  ==================

Net income (loss) per share:
               Basic                                       $   0.16          $   (0.39)           $   0.17           $   (0.40)
                                                  ==================  =================   =================  ==================
               Diluted                                     $   0.15          $   (0.39)           $   0.16           $   (0.40)
                                                  ==================  =================   =================  ==================

Average number of common shares outstanding:
               Basic                                         16,065             16,075              16,095              16,100
               Diluted                                       16,559             16,075              16,764              16,100
</TABLE>

                                       9
<PAGE>   10

5.       Earnings Per Share

         Computations of basic and diluted earnings per share of common stock
         have been made in accordance with the Financial Accounting Standards
         Board's (FASB) Statement of Financial Accounting Standards No. 128,
         "Earnings Per Share". All securities having an anti-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.

                  Reconciliation of Numerators and Denominators
                    Of the Basic and Diluted EPS Computations
                     (In thousands except per share amounts)

         In the following table, net loss represents the numerator, and the
         shares represent the denominator, in the earnings per share
         calculation.

<TABLE>
<CAPTION>
                                        For the Three Months Ended                       For the Three Months Ended
                                             September 30, 1999                           September 30, 1998
                                 ------------------------------------------- ---------------------------------------------------
                                     Net                        Per Share         Net                              Per Share
                                    Income         Shares         Amount          Loss             Shares            Amount
                                 -------------- --------------  ------------ --------------- ------------------- ---------------
                                                                             (As Restated)

<S>                                   <C>              <C>           <C>      <C>                        <C>            <C>
Net income(loss)                      $ 14,960                                $       (6,314)
                                 ==============                              ===============
BASIC INCOME (LOSS) PER SHARE
Income (loss) incurred by
  common stockholders                 $ 14,960         16,232        $ 0.92   $       (6,314)            16,075         $ (0.39)
                                 ==============                 ============ ===============                     ===============

EFFECT OF DILUTIVE
  SECURITIES
Options                                                     1                                                 -
                                                --------------                               -------------------

DILUTED INCOME (LOSS) PER SHARE
Income (loss) incurred by
  holders of common
  stock and common
  stock equivalents                   $ 14,960         16,233        $ 0.92   $       (6,314)            16,075         $ (0.39)
                                 ============== ==============  ============ =============== =================== ===============
</TABLE>

                                       10
<PAGE>   11


<TABLE>
<CAPTION>
                                          For the Six Months Ended                      For the Six Months Ended
                                            September 30, 1999                              September 30, 1998
                                 ----------------------------------------------- --------------------------------------------
                                      Net                       Per Share             Net                        Per Share
                                      Loss          Shares          Amount            Loss          Shares         Amount
                                 --------------- -------------- ---------------- --------------- -------------- -------------
                                                                                 (As Restated)
<S>                                    <C>              <C>             <C>            <C>              <C>          <C>
Net loss                               $ (1,741)                                       $ (6,414)
                                 ===============                                 ===============
BASIC LOSS PER SHARE
Loss incurred by
  common stockholders                  $ (1,741)        16,194          $ (0.11)       $ (6,414)        16,100       $ (0.40)
                                 ===============                ================ ===============                =============

EFFECT OF DILUTIVE
  SECURITIES
Options                                                      -                                               -
                                                 --------------                                  --------------

DILUTED LOSS PER SHARE
Loss incurred by
  holders of common
  stock and common
  stock equivalents                    $ (1,741)        16,194          $ (0.11)       $ (6,414)        16,100       $ (0.40)
                                 =============== ============== ================ =============== ============== =============
</TABLE>



         Options to purchase 3,571,698 shares of common stock at a weighted
         average exercise price of $14.93 were outstanding at September 30,
         1999, but were not included in the computation of diluted earnings per
         share for the three months then ended because the exercise price of
         such options was greater than the weighted average market price of
         common shares for the period.

         Options to purchase 3,845,698 shares of common stock at a weighted
         exercise price of $14.43 per share were outstanding at September 30,
         1999, but were not included in the computation of diluted earnings per
         share for the six months then ended because the options would have an
         anti-dilutive effect on the net loss for the period.

         Options to purchase 3,246,077 shares of common stock at a weighted
         average exercise price of $17.90 per share were outstanding at
         September 30, 1998, but were not included in the computation of diluted
         earnings per share for the three and six months then ended because the
         options would have had an anti-dilutive effect on the net loss for the
         periods then ended.

         The shares issuable upon conversion of Telxon's 5-3/4% Convertible
         Subordinated Notes and 7-1/2% Convertible Subordinated Debentures were
         omitted from the diluted earnings per share calculations because their
         inclusion at September 30, 1999 and 1998 would have had an
         anti-dilutive effect on earnings for the three months then ended.

                                       11
<PAGE>   12


6.  Comprehensive Income (Loss)
            Total comprehensive income (loss) consisted of the following:
<TABLE>
<CAPTION>
                                                                                       Three Months Ended
                                                                               September 30,            September 30,
                                                                                   1999                      1998
                                                                           ---------------------     ----------------------
                                                                                                          (As Restated)
<S>                                                                                    <C>                        <C>
            Net income (loss)                                                          $ 14,960                   $ (6,314)
            Other comprehensive income:
            Foreign currency translation adjustment                                         430                        818
                                                                           =====================     ======================
            Total comprehensive income (loss)                                          $ 15,390                   $ (5,496)
                                                                           =====================     ======================
</TABLE>


<TABLE>
<CAPTION>
                                                                                           Six Months Ended
                                                                                September 30,             September 30,
                                                                                     1999                      1998
                                                                           ---------------------     ----------------------
                                                                                                          (As Restated)
<S>                                                                                    <C>                        <C>
            Net loss                                                                   $ (1,741)                  $ (6,414)
            Other comprehensive income:
            Foreign currency translation adjustment                                         175                        635
                                                                           ---------------------     ----------------------
            Total comprehensive loss                                                   $ (1,566)                  $ (5,779)
                                                                           =====================     ======================
</TABLE>

7. Inventories
            Inventories consisted of the following:
<TABLE>
<CAPTION>
                                                                              September 30,                March 31,
                                                                                   1999                      1999
                                                                           ---------------------     ----------------------
<S>                                                                                    <C>                        <C>
            Purchased components                                                       $ 53,103                   $ 51,112
            Work-in-process                                                              19,254                     32,360
            Finished goods                                                               23,065                     45,577
                                                                           ---------------------     ----------------------
                                                                                       $ 95,422                  $ 129,049
                                                                           =====================     ======================
</TABLE>

8.  Accrued Liabilities
            Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
                                                                              September 30,                March 31,
                                                                                   1999                      1999
                                                                           ---------------------     ----------------------
<S>                                                                                    <C>                        <C>
            Deferred customer service revenues                                         $ 15,106                   $ 15,351
            Deferred product revenues                                                    10,879                     14,168
            Accrued discontinued product costs                                            8,221                     12,422
            Accrued payroll and other
               employee compensation                                                      7,104                     11,649
            Other accrued liabilities                                                    22,660                     20,695
                                                                           ---------------------     ----------------------
                                                                                       $ 63,970                   $ 74,285
                                                                           =====================     ======================
</TABLE>

                                       12
<PAGE>   13


         The Company's domestic accrual for severance costs decreased from a
         balance of $3,429 at March 31, 1999 to a balance of $2,725 at September
         30, 1999. This decrease was caused by severance charges of $1,102
         during the first half of fiscal 2000 that were more than offset by
         severance payments of $1,806 to terminated employees. A total of 33
         employees were terminated during the first half of fiscal 2000. The
         areas of the company affected were domestic sales operations, domestic
         product development, manufacturing operations and corporate
         administration. There have been no material changes to the amounts
         accrued at either March 31, 1999 or September 30, 1999. In addition to
         the domestic sales activity, 1 employee was terminated in the Company's
         international sales operations, during the second quarter of fiscal
         2000. The severance recorded related to this employee was approximately
         $1,100, and such amount was paid prior to September 30, 1999.



9.  Supplemental Cash Flow Information

<TABLE>
<CAPTION>
                                                                             Six Months Ended
                                                                   September 30,          September 30,
                                                                        1999                   1998
                                                              ---------------------  ---------------------
                                                                                          (As Restated)
<S>                                                                         <C>                    <C>
              Cash paid during the period for:
              Interest                                                      $6,172                 $4,676
              Income taxes                                                  $1,965                 $3,009
</TABLE>

         Capital lease additions of $276 during the six months ended September
         30, 1998 have been excluded from the accompanying consolidated
         statement of cash flows as a non-cash transaction. There were no
         capital lease additions during the six months ended September 30, 1999.
         The non-cash portion of the gain related to the sale of Aironet common
         stock of $14,956 has been excluded from the accompanying consolidated
         statement of cash flows as a non-cash transaction.

10.      Litigation and Contingencies

         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 the Company derivatively on behalf of Telxon.
         The named defendants are the Company; Robert F. Meyerson, former
         Chairman of the Board, Chief Executive Officer and director; 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,
         attorney's 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. On November 12, 1993, Telxon and the
         individual director defendants filed a Motion to Dismiss. The plaintiff
         filed its 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; however, the claims
         relating to breach of fiduciary duty survived the Motion to Dismiss.

         On October 31, 1996, plaintiff's counsel filed a Motion to Intervene in
         the derivative action on behalf of a new plaintiff stockholder. As part
         of the Motion to Intervene, the intervening plaintiff asked that the
         Court designate as operative for the action the intervening plaintiff's
         proposed Complaint, which alleges that a

                                       13
<PAGE>   14

         series of transactions in which the Company acquired technology from a
         corporation affiliated with Mr. Meyerson was wrongful in that Telxon
         already owned the technology by means of a pre-existing consulting
         agreement with another affiliate of Mr. Meyerson; the intervenor's
         complaint also names Raymond D. Meyo, President, Chief Executive
         Officer and director at the time of the first acquisition transaction,
         as a new defendant. The defendants opposed the Motion on grounds that
         the new claim alleged in the proposed Complaint and the addition of Mr.
         Meyo were time-barred by the statute of limitations and the intervening
         plaintiff did not satisfy the standards for intervention. After taking
         legal briefs, the Court ruled on June 13, 1997, to permit the
         intervention. On March 18, 1998, defendant Meyo filed a Motion for
         Judgement on the Pleadings (as to himself), in response to which
         Plaintiff filed its Answer and Brief in Opposition. The Motion was
         argued before the Court on November 4, 1998, and was granted from the
         bench, dismissing Meyo as a defendant in the case. The
         post-intervention claims are the subject of ongoing discovery, which
         should be completed by the end of 1999.

         On November 15, 1999, the defendants will be filing a Motion For
         Summary Judgment. The legal briefing on that Motion is scheduled for
         completion by December 8, 1999. No trial date has been set.

         The defendants believe that the post-intervention claims lack merit,
         and they intend to continue vigorously defending 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 and accordingly has not made
         provisions for any loss or related insurance recovery in its financial
         statements.

         On February 7, 1998, a complaint was filed against the Company in the
         District Court of Harris County, Texas, by Southwest Business
         Properties, the landlord of the Company's former Wynnwood Lane facility
         in Houston, Texas. The complaint alleges counts for breach of contract
         and temporary and permanent injunctive relief, all related to alleged
         environmental contamination at the Wynnwood property, and seeks
         specific performance, unspecified monetary damages for all injuries
         suffered by plaintiff, payment of pre-judgement interest, attorneys'
         fees and costs and other unspecified relief. In its Answer, Telxon
         denied plaintiff's allegations. No hearing has been had on, or is
         currently scheduled for, plaintiff's claim for temporary injunctive
         relief. The trial previously scheduled for March 1999 has been reset to
         commence on a day during the Court's two week docket beginning
         December 6, 1999, with the specific trial date to be set by the Court
         at that time, and the parties are currently engaged in the discovery.
         A supplemental complaint was subsequently filed on or about October
         27, 1999, which included more specific allegations concerning the
         matters alleged in the original complaint.  Telxon believes that these
         claims lack merit and continues to vigorously defend this action.
         Telxon also continues to pursue its claims for coverage from its
         insurance carrier with respect to the costs, expenses and potential
         damages arising out of this matter.

         While the litigation with the landlord remains pending, Telxon and the
         landlord filed on July 7, 1999 a joint application with the Texas
         Natural Resource Conservation Commission for approval of a proposed
         Response Action Work Plan for the property pursuant to the
         Commission's Voluntary Cleanup Program. The  plan, which was approved
         by the Commission in August 1999, projects completion of remediation
         and issuance of a closure certificate in 2002. The Company does not
         believe that the cost of the remediation under the plan will have a
         material adverse effect on its results of operations for any quarter
         in which any associated charges would be taken. If closure of the
         remediation is not certified when contemplated by the plan, and the
         Company were ultimately to become responsible for the alleged
         contamination, the associated loss could have a material adverse
         effect on results of operations for one or more quarters in which the
         associated charge(s) would be taken.

                                       14
<PAGE>   15

         On May 8, 1998, two class action suits were filed in the Court of
         Chancery of the State of Delaware, in and for the County of New Castle,
         by certain alleged stockholders of Telxon on behalf of themselves and
         purported classes consisting of Telxon stockholders, other than
         defendants and their affiliates, relating to an alleged offer by Symbol
         Technologies, Inc. ("Symbol") to acquire the Company. The named
         defendants are Telxon and its Directors at the time, namely, Frank E.
         Brick, Robert A. Goodman, Dr. Raj Reddy, John H. Cribb, Richard J.
         Bogomolny, and Norton W. Rose.

         The plaintiffs allege that on April 21, 1998, Symbol made an offer to
         purchase Telxon for $38.00 per share in cash and that on May 8, 1998,
         Telxon rejected Symbol's proposal. Plaintiffs further allege that
         Telxon has certain anti-takeover devices in place purportedly designed
         to thwart hostile bids for the Company. Plaintiffs charge the Director
         defendants with breach of fiduciary duty and claim that they are
         entrenching themselves in office. The plaintiffs seek certification of
         the purported class, unspecified compensatory damages, equitable and/or
         injunctive relief requiring the defendants to act in specified manners
         consistent with the defendant Directors' fiduciary duties, and payment
         of attorney's fees and costs. The parties have stipulated that the
         plaintiffs will file an Amended Complaint and that the defendants will
         answer only the Amended Complaint.

         On June 2, 1998, the Court ordered consolidation of the above-captioned
         cases. This action is in its early stages, with no scheduling order
         having been issued by the Court; discovery has not yet commenced. The
         defendants believe that these claims lack merit and intend to
         vigorously defend the consolidated action.

         From December 1998 through March 1999, a total of 27 class actions 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 the
         defendants and their affiliates, who purchased stock during the period,
         from May 21, 1996 through February 23, 1999 or various portions
         thereof. The named defendants are the Company, former President and
         Chief Executive Officer Frank E. Brick and former Senior Vice President
         and Chief Financial Officer Kenneth W. Haver. The actions have been
         referred to a single judge, and on February 9, 1999, the plaintiffs
         filed a Motion to Consolidate all of the actions. On April 26, 1999,
         the Court heard motions on naming class representatives and lead class
         counsel. The
         complaints allege claims for "fraud on the market" arising from alleged
         misrepresentations and omissions with respect to the Company's
         financial performance and prospects and an alleged violation of
         generally accepted accounting principles by improperly recognizing
         revenues. The various complaints seek certification of their respective
         purported classes, unspecified compensatory and punitive damages, pre-
         and post-judgment interest, and attorneys' fees and costs.

         On August 25, 1999, the Court appointed lead plaintiffs and their
         counsel, ordered the filing of an Amended Complaint, and dismissed 26
         of 27 class action suits without prejudice and consolidated those 26
         cases into the first filed action. On September 30, 1999, lead
         plaintiffs filed an Amended Class Action Complaint. The Amended
         Complaint alleges that Defendants engaged in a scheme to defraud
         investors through improper revenue recognition practices and
         concealment of material adverse conditions in Telxon's business and
         finances. The Amended Complaint seeks certification of the identified
         class, unspecified compensatory and punitive damages, pre- and
         post-judgment interest, and  attorneys fees and costs. On November 8,
         1999, the defendants jointly moved to dismiss the Amended Complaint.
         The defendants believe that the class claims lack merit, and they
         intend to vigorously defend these actions.

         By letter dated December 18, 1998, the Staff of the Division of
         Enforcement of the Securities and Exchange Commission advised the
         Company that it was conducting a preliminary, informal inquiry into
         trading of the securities of the Company at or about the time of the
         Company's December 11, 1998 press release announcing that the Company
         would be restating the revenues for its second fiscal quarter ended
         September 30, 1998. On January 20, 1999, the Commission issued a
         formal Order of Investigation with respect to certain securities
         trading and  accounting issues, pursuant to which subpoenas have been
         served requiring the production of specified documents and testimony.

                                       15
<PAGE>   16

         The Company has received a number of letters from its customers
         requesting Telxon to indemnify them with respect to their defense of
         demands which have been made on them by the Lemelson Medical,
         Education & Research Foundation Limited Partnership for the payment of
         a license fee for the alleged infringement of the Foundation's
         so-called "bar-code" patents by the customers' systems utilizing
         automatic identification technology, portions of which have been
         supplied by the Company. On October 27, 1999, the Foundation also sent
         a letter directly to the Company similarly demanding that the Company
         purchase a license with respect to "Telxon's use of machine vision and
         bar coding technology." The Company believes that the patents so being
         asserted against it and its customers are invalid, unenforceable and
         not infringed. This position has also been taken by seven other
         companies in the automatic identification industry, including the
         Company's principal competitors, which in July 1999 jointly filed a
         federal court action seeking a declaratory judgment to that effect
         against the Foundation.

         Except as otherwise specified, in the event that any of the foregoing
         litigation ultimately results in a money judgment against the Company
         or is otherwise determined adversely to the Company by a court of
         competent jurisdiction, such determination could, depending on the
         particular circumstances, adversely affect the Company's conduct of its
         business and the results and condition thereof. In the normal course of
         its operations, the Company is subject to performance under contracts
         and assertions that technologies it utilizes may infringe third party
         intellectual properties, and is also subject to various pending legal
         actions and contingencies, which may include matters involving
         suppliers, customers, lessors of Company products to customers and
         lessors of equipment to the Company.

11.      Income Taxes

         The Company's consolidated tax provision of $738 and $2,016 for the
         second quarter and first half of fiscal 2000, respectively, relate to
         foreign taxes on the Company's international subsidiaries. No taxes
         have been provided for the gain related to the sale of Aironet voting
         common stock as the Company has sufficient current year operating loss
         and net operating loss carryforwards to prevent a tax provision or
         liability. The Company has not recognized any income tax benefits other
         than those utilized through the realization of gains from the sale of
         Aironet voting common stock based on the Company's assessment that it
         is more likely than not that the deferred tax assets will not be
         utilized through future taxable income or implementation of tax
         planning strategies.

12.      Subsidiary Stock Transactions and Divestitures

         During the three months ended June 30, 1999, the Company repurchased
         60,000 shares of the voting common stock of Metanetics from former key
         employees, at a price of $2.00 per share. Giving effect to the share
         repurchase, the Company's interest in the voting common stock of
         Metanetics was 62% at June, 30, 1999. Prior to the repurchase of these
         shares, the Company's interest in the voting common stock of Metanetics
         was 60%.

         During the three months ended June 30, 1998, the Company entered into a
         series of transactions with a business partner relating to Metanetics,
         a development stage subsidiary that develops image processing
         technology. The Company repurchased 400,000 voting common shares of
         Metanetics for $1,950 or $4.875 per share.

                                       16
<PAGE>   17

         Simultaneously, the business partner agreed to pay amounts due of
         $1,850 for previously purchased manufacturing rights and software
         licenses. Additionally, the companies mutually agreed to terminate such
         agreements and released each other from any future liability related to
         the original agreements. The Company had originally recorded the
         additional $1,950 investment in Metanetics as an operating expense as
         of June 30, 1998, because of the historical financial losses of the
         subsidiary and future funding requirements for its operations. However,
         after further assessment as part of the restatement discussed in Note 4
         - Restatement above, and based in part on an independent valuation of
         Metanetics, the Company has capitalized this additional investment as
         goodwill to be amortized over a useful life of three years. Giving
         effect to the share repurchase, the Company's interest in the voting
         common stock of Metanetics was 60% at June 30, 1998. Prior to the
         repurchase of these shares, the company's interest in the voting common
         stock of Metanetics was 52%.

         During the three months ended June 30, 1998, the Company's Aironet
         subsidiary sold 222,222 shares of its voting common stock to various
         third party investors at a price of $3.50 per share. Proceeds from this
         sale of stock were $778. The resulting pre-tax net gain of $340 was
         recorded as non-operating income in the accompanying consolidated
         statement of operations. In addition to the sale of the shares of
         stock, 66,667 warrants at $3.50 per share for the purchase of Aironet
         voting common stock were issued. A gain of $47 relating to these
         warrants has been deferred until the warrants are exercised or lapse.
         The Company's remaining interest in the issued voting common stock of
         Aironet at June 30, 1998, was 76%. Prior to the sale of these shares,
         the Company's interest in the voting common stock of Aironet was 78%.

         Effective March 31, 1998, the Company sold the stock of its Virtual
         Vision subsidiary to a third party in exchange for $500 in cash and
         $4,500 in Series F Preferred Shares of FED Corporation at a value of
         $6.00 per share or 750,000 shares. As all of the conditions of the sale
         were not satisfied as of March 31, 1998, the related pre-tax gain of
         $900 was deferred. During the three months ended June 30, 1998, all of
         the conditions of the sale were satisfied and the Company recorded a
         pre-tax gain of $900 as non-operating income in the accompanying
         consolidated statement of operations.

         During the second quarter of fiscal 2000, Aironet and the Company sold
         6,919,434 shares of Aironet's voting common stock on the Nasdaq
         National Market at an offering price of $11.00 per share. Of the total
         number of shares offered, Aironet sold 4,637,196 shares and the Company
         sold 2,282,238 shares. The aggregate proceeds, net of underwriting
         discounts and commissions, were $47.4 million to Aironet and $23.3
         million to Telxon. Subsequent to this transaction, the Company's
         remaining interest in Aironet was approximately 35%. As a result of
         this transaction, the Company recorded a non-operating gain of
         approximately $32.2 million, net of additional transaction costs of
         $1.5 million. Also as a result of this transaction, the Company ceased
         consolidation of Aironet effective April 1, 1999. The Company will
         account for its investment under the equity method of accounting.
         Investment income of $363 and $702 was recorded for the Company's
         interest in the earnings of Aironet for the second quarter and first
         half of fiscal 2000.

13.      Senior Secured Credit Facility

         On August 30, 1999, the Company entered into a loan and security
         agreement whereby Telxon obtained a $100.0 million senior secured
         credit facility as a replacement for the Company's existing revolving
         credit agreement and business purpose promissory note. The facility
         consists of both term and revolving credit arrangements.

                                       17
<PAGE>   18

         Borrowings under the revolving loan provisions of such facility are to
         be subject to availability on qualifying accounts receivable and
         inventory, reduced by amounts borrowed and outstanding under the
         facility's term loan features and letters of credit. The revolving
         credit facility has a limit of $70.0 million less the outstanding
         balance of the term loans and until such time that the bridge loan
         described below is paid in full. At such time the maximum amount
         available will be increased to $80.0 million less the outstanding term
         loan balances. Availability under the agreement is estimated to be
         $11.4 million as of September 30, 1999. The maturity date of the loan
         and security agreement is September 30, 2002. At the maturity date the
         agreement is automatically renewed for successive one-year periods
         until such agreement is terminated.

         The secured credit facility has three term loan features. The first
         term loan of $6.0 million is limited by a portion of the liquidation
         value of the Company's machinery and equipment. The repayment terms for
         this term loan are straight-line over a 10-year period. The second term
         loan of $10.0 million is limited, together with the $30.0 million term
         loan discussed below, by the market value of Aironet capital stock
         owned by the Company. The repayment of this term loan is straight-line
         over a 3-year period. The third term loan of $30.0 million is limited
         by a specific percentage of the market value of Aironet capital stock
         owned by the Company. The repayment of this third term loan shall occur
         over an 11-month period commencing on December 26, 1999 and concluding
         on October 1, 2000, or upon any sale of additional capital stock of
         Aironet by the Company. The first installment on the $30.0 million term
         loan shall be made payable with the proceeds from the sale of Aironet
         stock. The payment of the remaining balance shall be made in ten equal
         installments.

         The interest rate charged on the revolving loan, the $6.0 million term
         loan, and the $30.0 million term loan is 2.75% above the Eurodollar
         rate or 0.5% above the financial institution's prime lending rate. On
         September 30, 1999, the prime lending rate and the Eurodollar rate were
         8.25% and 6.09% respectively. Therefore, interest was charged at a rate
         of 8.75% on these balances. In the event that the Aironet stock pledged
         on the $30.0 million term loan is sold the rate on this term loan will
         become fixed at 15.5%. The interest rate on the $10.0 million term loan
         is fixed at 12.5%. Interest is payable monthly. The interest rate
         charged is subject to change based upon the Company's financial
         results. The facility also provides for the payment of an unused line
         fee of 0.375% per annum on a monthly basis, and a 1.25% per annum fee
         for undrawn letters of credit.

         The $100.0 million credit facility is collateralized by essentially all
         of the Company's assets including accounts receivable, machinery and
         equipment, general intangibles, inventory, future proceeds and real
         property.

         The credit facility also requires the maintenance of various financial
         and non-financial covenants. Significant financial covenants include
         maintaining a minimum level of customer service revenue, ensuring that
         the total outstanding balance of the credit facility does not exceed
         collections from certain significant accounts, maintaining minimum
         earnings before interest, taxes, depreciation and amortization
         (EBITDA), and maintaining minimum tangible net worth requirements. As
         of September 30, 1999, the Company is in violation of certain of these
         covenants. As the company has obtained a waiver for such violation
         beyond one year from September 30, 1999, $13,067 of this debt has been
         classified as long term.

                                       18
<PAGE>   19



14.      Business Segments

         As of September 30, 1999 the Company's business consisted of three
         operating segments: a)handhelds, workslates, and other mobile computing
         devices through which the Company designs, develops, markets, and
         services a broad line of handheld devices ranging from low-end batch
         terminals to highly integrated mobile computers that incorporate laser
         bar code readers and include a variety of pen-based and touch screen
         workslate devices; b)sales and distributions of all its product lines
         in Europe; and c)sales and distribution of all of its product lines in
         international locations outside of Europe.

         Prior to the second fiscal quarter 2000, the Company's business
         consisted of four operating segments. Telxon's Aironet subsidiary,
         which designs, develops, markets, and services high speed
         standards-based wireless local area networking (LAN) solutions was also
         presented as a separate business segment, and is presented as such
         below for the quarter-ended September 30, 1998. As described in Note 2
         - Basis of Presentation, the Company has ceased consolidating the
         results of Aironet as of April 1, 1999. Aironet will no longer be
         presented as a separate business segment prospectively, and is not
         presented as such for the three and six-month period ended September
         30, 1999. The gain recognized from the sale of Aironet of $32,167 has
         been included within the U.S. operating segment for the three months
         ending September 30, 1999.

         Summarized financial information concerning the Company's reportable
         segments is shown in the following table.

<TABLE>
<CAPTION>
(in thousands)                  United                      Other        Adj./
                                States       Europe     International    Elims.    Consolidated
                             --------------------------------------------------------------------

<S>                              <C>           <C>            <C>        <C>            <C>
Three months ended
  September 30, 1999
Revenue from
  unaffiliated customers         $ 71,980      $ 18,784       $ 5,531    $       -      $ 96,295
Revenue from
  intercompany sales               11,089           174         1,253      (12,516)            -
                             --------------------------------------------------------------------
 Total revenue                   $ 83,069      $ 18,958       $ 6,784    $ (12,516)     $ 96,295

Income (loss) before
   income tax                    $ 15,347      $    985       $   861    $  (1,495)     $ 15,698
                             ====================================================================
</TABLE>

<TABLE>
<CAPTION>
                                 U.S.
                              Other than                                 Other         Adj./
                               Aironet       Aironet       Europe     International   Elims.     Consolidated
                             ----------------------------------------------------------------------------------
                            (As Restated)
<S>                              <C>            <C>          <C>           <C>         <C>           <C>
Three months ended
  September 30, 1998
Revenue from
  unaffiliated customers         $ 73,416       $ 5,275      $ 18,866      $ 6,085     $       -     $ 103,641
Revenue from
  intercompany sales                9,133         4,430           170          498       (14,231)            -
                             ----------------------------------------------------------------------------------
 Total revenue                   $ 82,549       $ 9,705      $ 19,036      $ 6,583     $ (14,231)    $ 103,641

(Loss) income before
   income tax                    $(11,593)      $   502      $  2,002      $   667     $     255     $  (8,167)
                             ==================================================================================
</TABLE>


                                       19

<PAGE>   20



<TABLE>
<CAPTION>
                              United                               Other               Adj./
                              States            Europe         International          Elims.         Consolidated
                        -------------------------------------------------------------------------------------------

<S>                               <C>              <C>                 <C>                 <C>           <C>
Six months ended
  September 30, 1999
Revenue from
  unaffiliated customers          $ 132,446        $ 39,658            $ 12,016            $      -      $ 184,120
Revenue from
  intercompany sales                 22,142             328               1,986             (24,456)             -
                        -------------------------------------------------------------------------------------------
      Total revenue               $ 154,588        $ 39,986            $ 14,002            $(24,456)     $ 184,120

(Loss) income before
   income tax                     $  (1,980)       $  3,305            $  1,933            $ (2,983)     $     275
                        ===========================================================================================
</TABLE>

<TABLE>
<CAPTION>
                               U.S.
                            Other than                                                 Other            Adj./
                              Aironet           Aironet           Europe           International        Elims.      Consolidated
                        ----------------------------------------------------------------------------------------------------------
                           (As Restated)
<S>                               <C>              <C>                 <C>                 <C>           <C>             <C>
Six months ended
  September 30, 1998
Revenue from
  unaffiliated customers          $ 153,697        $ 11,495            $ 36,427            $ 13,185      $       -      $ 214,804
Revenue from
  intercompany sales                 19,959           7,686                 316               1,112        (29,073)             -
                        ----------------------------------------------------------------------------------------------------------
      Total revenue               $ 173,656        $ 19,181            $ 36,743            $ 14,297      $ (29,073)     $ 214,804

(Loss) income before
   income tax                     $ (15,658)       $    779            $  4,385            $  1,928      $     277      $  (8,289)
                        ==========================================================================================================
</TABLE>


15.      Subsequent Events

         On November 8, 1999, the Company announced that it would move its
         executive offices from Akron, Ohio to Cincinnati, Ohio and relocate
         substantially all of its remaining Akron operations to The Woodlands,
         Texas and Fort Mitchell, Kentucky. Approximately 170 employees will be
         effected by these events and it is anticipated that the moves will be
         substantially completed by March 31, 2000. The Company anticipates that
         it will incur severance, moving, training, idle facility and other
         costs of approximately $4 million over the next twelve months
         associated with these events. The Company will account for such costs
         in accordance with the requirements of EITF 94-3 "Liability Recognition
         for Certain Employee Termination Benefits and Other Costs to Exit an
         Activity (including Certain Costs Incurred in a Restructuring)".

         On November 9, 1999, Cisco Systems, Inc. ("Cisco") announced that it
         will purchase the Company's affiliate, Aironet, for shares of Cisco
         common stock. Based upon the value of Cisco common stock on November 9,
         1999 this would result in total proceeds of $799 million. Based on that
         value, the total purchase price translates into $48.00 per each share
         of Aironet common stock. As the Company continues to own 4,994,262
         shares of Aironet stock, the estimated fair value of the proceeds of
         the transaction to the Company is estimated at $240 million. Based on
         this estimated fair value, the transaction will result in a pre-tax
         gain, prior to related transaction costs, of approximately $218 million
         and the Company carrying its resulting investment in Cisco shares on
         the fair value method of accounting in

                                       20
<PAGE>   21

         accordance with the requirements of SFAS No. 115 "Accounting for
         Certain Investments in Debt and Equity Securities".


16.      Reclassifications

         Certain items in the fiscal 1999 consolidated financial statements and
         notes thereto have been reclassified to conform to the fiscal 2000
         presentation.

                                       21
<PAGE>   22


                       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
REGARDING CERTAIN TRENDS OR OTHER FORWARD-LOOKING INFORMATION CONCERNING THE
COMPANY'S ANTICIPATED REVENUES, COSTS, FINANCIAL RESOURCES OR OTHERWISE
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 OR OTHER FUTURE
EVENTS PERTAINING TO THE COMPANY TO DIFFER MATERIALLY FROM THE FORWARD-LOOKING
STATEMENTS. THE SUMMARY OF CERTAIN OF THE RISKS AND OTHER IMPORTANT FACTORS
WHICH MAY AFFECT THE COMPANY'S BUSINESS, OPERATING RESULTS, FINANCIAL AND OTHER
CONDITION AND THE OCCURRENCE OF SUCH FUTURE EVENTS UNDER "FACTORS THAT MAY
AFFECT FUTURE RESULTS" BELOW SHOULD BE READ IN CONJUNCTION WITH THE MORE
COMPLETE DISCUSSION OF THOSE AND OTHER RISKS AND IMPORTANT FACTORS AFFECTING THE
BUSINESS, OPERATING RESULTS AND CONDITION OF THE COMPANY UNDER "ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION - FACTORS THAT MAY AFFECT FUTURE RESULTS", AND OTHER CAUTIONARY
STATEMENTS APPEARING UNDER "ITEM 1. BUSINESS" AND ELSEWHERE, IN THE COMPANY'S
ANNUAL REPORT ON FORM 10-K, FOR THE FISCAL YEAR ENDED MARCH 31, 1999.

On February 23, 1999, the Company announced that it would restate its previously
issued financial statements for the fiscal years 1996, 1997 and 1998, and its
unaudited interim financial statements for the first and second quarters of
fiscal 1999. This restatement was based upon the completion of a review of
certain judgmental accounting matters by the Audit Committee of the Board of
Directors, the Company's management and the Company's then outside auditors,
PricewaterhouseCoopers LLP. See Note 4 - Restatement to the accompanying
consolidated financial statements for further detail concerning the restatement
adjustments made. The financial information for all periods included in the
following discussion gives effect to the restatement and should be read in
conjunction with the restated information presented in Note 4 - Restatement to
the accompanying consolidated financial statements.

Overview

The Company recorded net income of $15.0 million or $.92 per share (diluted) and
a net loss of $1.7 million or $.11 per share (diluted) for the second quarter
and first half of fiscal 2000, respectively. Consolidated revenues decreased
$7.3 million or 7% and $30.7 million or 14% for the second quarter and first
half of fiscal 2000 as compared to those same periods in fiscal 1999. The
Company's consolidated gross margin percentages decreased to 28% for both the
second quarter and the first half of fiscal 2000 as compared to 36% and 38% for
those periods in fiscal 1999. Consolidated operating expenses decreased $2.7
million and $9.5 million for the second quarter and first half of fiscal 2000 as
compared to fiscal 1999 levels. A major contributor to these decreases was the
absence of unconsummated business combination costs incurred in response to
takeover and proxy contest proposals in the second quarter and first half of
fiscal 1999 of $1.8 million and $3.6 million, respectively. As a result of the
Company's operations, the Company recorded losses of $13.6 million and $25.8
million for the second quarter and first half of fiscal 2000 as compared to $5.6
million for the same periods in fiscal 1999. The results for the second quarter
of fiscal 2000 included non-operating gains of $32.7 million. The primary
component of this gain was related to the divestiture of the Company's former
subsidiary, Aironet Wireless Communications, Inc. ("Aironet") in July, 1999. The
results also include a tax provision of $.7 million and $2.0 million for the
second quarter and first half of fiscal 2000 due to foreign taxes. No tax
benefit has

                                       22
<PAGE>   23

been recognized for the second quarter and first half of fiscal 2000 based on
the Company's current year operating losses and current assessment regarding the
utilization and realization of such tax assets. Additionally, no provision has
been recorded related to the gain discussed above due to the utilization of net
operating loss carry-forwards.

The Company's results for fiscal 2000 do not include the results of its Aironet
subsidiary, which became a publicly traded company in July, 1999. The Company's
percentage ownership decreased to approximately 35% at that time, and the
Company can no longer exercise control over that entity. Accordingly, the
results for the first quarter of fiscal 2000 have been restated to reflect the
removal of Aironet's financial position, results of operations and cash flows
effective at the beginning of the fiscal year and reflect the results of Aironet
under the equity method of accounting.

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
management will identify the risks (especially those newly emerging from time to
time) affecting, and their impact on, the Company and its business, that the
Company's strategies and plans will take into account all market conditions and
changes thereto, or that such strategies and plans will be successfully
implemented. Accordingly, neither the historical results presented in the
Company's consolidated financial statements and discussed herein, nor are any
forward-looking statements in this Form 10-Q necessarily indicative of the
Company's 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.

Factors That May Affect Future Results

The Company's business, operating results and financial and other condition may
be affected by a number of risks and other important factors, including,
without limitation, the following, some of which are inherently difficult to
identify and predict and/or are beyond the Company's control: general and
industry-specific economic conditions; the ability of the Company's senior
management to successfully formulate and implement its recently announced plan
to relocate substantially all of its Akron, Ohio headquarters operations and to
identify and implement additional appropriate cost reduction, efficiency and
other operating improvement strategies and the amount of expenses actually
incurred and saved as a result; the continued adequacy of the Company's
internal and external sources of working capital; sales and manufacturing
cycles from quarter to quarter and within each quarter; serving markets
characterized by increasingly rapid technological change and associated changes
in market demand, product obsolescence and price erosion; intense competition;
the Company's ability to gain and maintain market acceptance of its products;
the levels of customer demand for the Company's products and customers'
commitments of resources to information technology investments; concentration
of revenues in the retail industry and possible decreases in their purchases
from the Company in response to any downturn in general economic prospects or
conditions to the extent that reduced levels of new store openings are not
offset by their investment in the Company's systems to improve the efficiency
of existing stores; ability to penetrate and expand revenues in new and
existing markets; risks associated with foreign sales and operations; timely
and efficient enhancement of appropriate product offerings through internal
development and acquisition of, or investment in, new businesses and
technologies; dependence on, and freedom from infringement of, technologies and
other proprietary rights of, or by, third parties; government regulation of
radio and other products, and product health and safety concerns; dependence on
sole source, or a limited number of, suppliers; and attracting and retaining
qualified employees. In addition to being subject to the foregoing factors and
other cautionary statements elsewhere in this Form 10-Q, the Company's conduct
of its business, and the results and condition thereof, is also subject to the
possible adverse effects of certain pending litigation and other contingencies
discussed in Note 9 - Litigation and Contingencies to the accompanying
consolidated financial statements included in Item 1

                                       23
<PAGE>   24

above. The financial results of the Company historically have not been
materially adversely impacted as a result of inflation. However, there can be no
assurance that inflation will not have a material adverse impact in the future.

Readiness for the Year 2000

THE INFORMATION SET FORTH UNDER THIS CAPTION IS HEREBY DESIGNATED TO BE A "YEAR
2000 READINESS DISCLOSURE" UNDER THE YEAR 2000 INFORMATION READINESS DISCLOSURE
ACT (THE "YEAR 2000 ACT"), PUBLIC LAW 105-271, AND THE STATEMENTS BELOW AND THE
REGISTRANT, AS THE MAKER THEREOF, SHALL BE ENTITLED TO THE PROTECTIONS PROVIDED
BY THE YEAR 2000 ACT.

As the end of the twentieth century nears, there is worldwide concern regarding
the use by many existing computer programs of only the last two digits rather
than four to identify the year in a date field. If not corrected, many computer
applications may fail to treat year dates intended to represent years in the
twenty-first century as such but instead treat them as still in the twentieth
century, potentially resulting in system failure or miscalculations disruptive
of business operations, including, among other things, an inability to initiate,
receive, process, invoice or otherwise complete normal business activities.
These Year 2000 issues affect virtually all companies and organizations.

Year 2000 issues affect both the Company's offerings of computer products and
related services to its customers as well as its own operations. The Year 2000
readiness of the Company's operations in turn involves not only its corporate
information systems but also computer-based systems used directly in the conduct
of its business ("Process Management Systems"), such as hardware and software
engineering design tools, manufacturing equipment and customer service and
maintenance tracking systems. In addition, the Company could also be affected by
the Year 2000 readiness of its customers and of its suppliers of raw materials,
components, peripherals, finished products and software and its providers of
facilities, equipment and services. The costs of the Company's Year 2000
readiness efforts are being funded from the Company's consolidated operating
cash flows and borrowings.

With respect to its products, the Company has identified those that are or will
be made Year 2000 ready. Those already or to-be-made-Year 2000 ready products
represent the existing products which management believes will continue to be a
significant part of the Company's ongoing product line. Customers may continue
to order the Company's other existing products, but with no assurance from the
Company as to their Year 2000 readiness or the feasibility or availability of an
upgrade path to readiness. All new products are being designed to be Year 2000
ready.

The Company has completed the software/firmware upgrades for its products which
were identified to be made Year 2000 ready, subject to continued incidental
debugging activities. Subject to negotiated contractual commitments, the Company
has been making upgrades available free of charge for products purchased after
December 31, 1997 which were ordered with the latest software version as of the
order date; an upgrade fee is charged customers who requested an older
software version when they ordered the equipment. Customers are responsible
for installing the upgrades, or they may retain the Company to do so for a fee.
The costs to date of upgrading the Company's products to Year 2000 readiness
have not been, and the Company does not expect that the remaining cost of doing
so will be, material to the Company's financial position or results of
operations.

The Company maintains detailed information concerning the Year 2000 readiness
of its products on its Internet web site at www.telxon.com.

The Company has purchased and worked with outside contractors to develop and
install new business corporate-wide domestic information systems in the
company's U.S. operations.  Though the new systems were identified as a
strategic business initiative independent of Year 2000 considerations, they are
also being designed to make the Company's Information Systems Year 2000 ready.
The Company's international subsidiaries have remediated their own Year 2000
readiness issues independent of the new domestic systems installation. The
overall implementation of the new corporate information systems was
substantially completed at the beginning of the Company's fiscal 2000 second
quarter, subject to normal ongoing post-implementation activities normally
associated with systems of this magnitude. Efforts toward the new product
repair and service management systems originally planned to have been
implemented have been suspended pending review of the business case for
proceding further with the estimated $1.5 million in contemplated replacement
systems, in the meantime, the legacy systems supporting these functions have
been remediated for Year 2000 issues and are in operation.

                                       24
<PAGE>   25

The total capital expenditures for the new systems installation were
$33.8 million. In addition, the company will also accelerate the replacement of
approximately $6.7 million of computer hardware in connection with the new
systems installation. As of September 30, 1999, the Company had purchased
$.8 million of replacement computer hardware and leased an additional
$4.9 million of replacement computer hardware.

In addition to these capitalized expenditures, the Company had incurred $9.0
million of accumulated non-capitalizable expenses as of September 30, 1999,
related to the new systems installation. The non-capitalized expenses for the
three months ended September 30, 1999 were approximately $3.7 million versus
approximately $1.3 million for the three months ended June 30, 1999. The
increased expenses recorded reflect the requirement that systems support
expenditures no longer qualify for capitalization since the systems have now
"gone live". These non-capitalizable expenses exclude the one-time, after-tax
charge of $1.0 million recorded during fiscal 1998 as a change in accounting
principle in accordance with the Financial Accounting Standards Board's
Emerging Issues Task Force consensus ruling "Accounting for Costs Incurred in
Connection with a Consulting Contract or an Internal Project That Combines
Business Process Reengineering and Information Technology Transformation." The
Company may incur additional non-capitalizable expenses in its efforts to
complete the project within appropriate time constraints and to management
requirements. These expenses have not been quantified at this time.

The Company has been working with an outside consultant since November 1998 to
evaluate the Year 2000 readiness of its engineering, manufacturing and customer
maintenance and service Process Management Systems and information technology
infrastructure. The consultant's findings and recommendations were received by
the Company on February 8, 1999. The Year 2000 readiness inventory compiled by
the consultant has been under continuing, extensive review by teams, including
senior management from each of the affected functional areas. Giving effect to
the teams' remediation efforts to date, almost 99% of the inventoried items are
currently Year 2000 ready or have been determined by operations management
to be low priority items for which no Year 2000 remediation action is currently
required. The costs of the study and resulting remediation have been and will
be borne by the respective functional areas. The functional teams continue to
work toward completing the remaining remediation as soon as practicable and on
reviewing  and revalidating their findings. Remediation options will include
re-writing the affected software or replacing the affected hardware or
software with hardware or software that is Year 2000 ready. The Company
believes that, in general, replacement Year 2000 ready hardware and software
for its Process Management Systems and information technology infrastructure
are readily available, making that the most likely means of addressing
remediation needs. The Company believes that the remediation remaining to be
done with respect to all mission critical items will be timely completed and
that the cost thereof will not be material.

                                       25
<PAGE>   26

The Company's own Year 2000 readiness is also affected by the Year 2000
readiness of its customers as well as of its suppliers of raw materials,
components, peripherals, finished products and software and its providers of
facilities, equipment and services and any failure on their part to achieve
readiness in their own operations or with respect to the items they supply or
otherwise provide to the Company. The volume of Year 2000 inquiries which the
Company has received from its customers regarding the Year 2000 readiness of the
Company products they use suggests that the Company's customers are addressing
their Year 2000 issues. The Company has made Year 2000 readiness inquiries of
the current suppliers to its engineering, manufacturing and service functions
and is assessing the responses, which to date have been received from
approximately 90% of those suppliers. The responses received from the
suppliers have not identified any material Year 2000 issues but generally
indicate only that the respective suppliers are in the midst of their own Year
2000 readiness efforts. The Company continues to seek Year 2000 readiness
information from the remaining suppliers. The Company has also made readiness
inquires of its providers of facilities and related equipment and services
(elevators, HVAC, utilities, etc.). As the result of a limited number of
potential Year 2000 issues, which those inquiries have identified to date, the
Company has replaced or is in the process of updating the affected items at a
nominal cost. The Company continues to assess and follow up on the providers'
responses, most of which have indicated only that the respective providers are
in the midst of their own Year 2000 readiness efforts.

There are several possible scenarios, which, alone or in aggregate effect,
could, depending on the particular circumstances, materially adversely affect
the Company's business and/or its financial results or conditions. These
scenarios could affect the Year 2000 readiness of the Company's own product or
service offerings, disrupt its business operations or negatively impact its
operating results. The Company could be adversely affected by the failure of one
or more of its suppliers of raw materials, components, peripherals, finished
products or software or its providers of facilities, equipment and services to
achieve Year 2000 readiness in their own operations or with respect to the items
they supply or otherwise provide to the Company. If such an event were to, or
circumstances indicate that one is likely to, occur, the Company would seek
alternative sources of supply (the Company periodically reviews its sourcing
options as part of its general operating procedures independent of Year 2000
concerns) or seek to develop or obtain a software upgrade to make the affected
item Year 2000 ready. As with all businesses engaged in some facet of the
computer industry, there is a risk that the Company's customers may, in advance
of or after the change in the millennium, experience Year 2000 failures or other
difficulties in their use of computer systems comprised of or incorporating
products or services furnished by the Company and may commence legal action or
seek other compensation for their resulting losses; such legal actions, even if
not ultimately determined adverse to the Company, would likely involve
significant defense costs to the Company, particularly where the combination of
products and/or services of several different vendors in addition to the Company
in the subject customer system presents complex issues for isolating the cause
of the Year 2000 problem and determining the vendor responsible for that
problem. Disruptions in the economy generally, domestically and/or in foreign
countries, resulting from Year 2000 issues could also materially affect the
Company. At this time, the Company does not believe that the likelihood of any
of the above scenarios occurring can be reliably predicted, or that the nature
or extent of their possible adverse effects on the Company, can be reasonably
estimated. Though the Company currently does not have formal contingency plans
in place to address any particular possible Year 2000 scenario, the Company
would develop appropriate contingency plans if and when any significant
risks relating to its Year 2000 readiness are identified.

                                       26
<PAGE>   27

RESULTS OF OPERATIONS

The results of operations and financial position of the Company discussed below
contains the results of its former Aironet subsidiary for fiscal 1999 only.

<TABLE>
<CAPTION>
Revenues
(in thousands)
                                             Three Months Ended
                                                September 30,                              Decrease
                                     -------------------------------------     ----------------------------------
                                           1999                1998                 Dollar          Percentage
                                     -----------------   -----------------     -----------------   --------------
<S>                                         <C>                 <C>                   <C>                 <C>
Product, net                                 $ 76,621            $ 82,405              $ (5,784)           -7.0%
Customer service, net                          19,674              21,236                (1,562)           -7.4%
                                     =================   =================     =================
Total net revenues                           $ 96,295           $ 103,641              $ (7,346)           -7.1%
                                     =================   =================     =================
</TABLE>

<TABLE>
<CAPTION>
                                              Six Months Ended
                                                September 30,                              Decrease
                                     -------------------------------------     ----------------------------------
                                           1999                1998                 Dollar          Percentage
                                     -----------------   -----------------     -----------------   --------------
<S>                                         <C>                 <C>                   <C>                 <C>
Product, net                                $ 144,536           $ 172,598             $ (28,062)          -16.3%
Customer service, net                          39,584              42,206                (2,622)           -6.2%
                                     =================   =================     =================
Total net revenues                          $ 184,120           $ 214,804             $ (30,684)          -14.3%
                                     =================   =================     =================
</TABLE>

Net product revenues include the sale of portable tele-transaction computers
("PTCs"), including rugged, wireless mobile computers and pen-based and
touch-screen workslates; hardware accessories; wireless data communication
products; custom application software, network management software and software
licenses; and a variety of professional services, including systems integration
and project management.

Consolidated product revenues decreased as compared to prior year levels and
remained constant with those levels experienced in the first quarter of fiscal
2000. Demand for the Company's products are lower as compared with fiscal 1999,
particularly in the Company's North American operations where the Company's
legacy products continue to experience competitive pressures. Additionally,
start-up issues with the Company's business system implementation with respect
to manufacturing operations and liquidity issues caused delays in the flows of
purchased components to the Company's manufacturing process, negatively
impacting product shipments and revenues. Revenues from the Company's pen-based
products were a minor percentage of total revenues during the second quarters of
both fiscal 1999 and fiscal 2000, with the balance of the Company's revenues
coming from PTCs. Consolidated product revenues for the second quarter of fiscal
2000 included $13.0 million of revenue related to transactions previously
deferred pending customer acceptance of prior period deliveries. Product
revenues for the second quarter of fiscal 2000 and fiscal 1999 included revenues
of $14.5 million and $11.3 million, respectively, related to the rollout of
Company products to a large domestic retailer. Revenues related to this one
customer accounted for 19% and 14% of the Company's consolidated product
revenues for the second quarter of fiscal 2000 and fiscal 1999, respectively.
Also, the volume of revenues from the Company's Value-Add Distributor channel
decreased approximately $9.2 million and $26.4 million for the second quarter
and first half of fiscal 2000 as compared to the same periods in fiscal 1999.
This decrease was caused by the new management's emphasis on the Company's
direct sales channel. Revenues related to Value-Added Distributors now represent
less than 10% of product revenues.

The Company anticipates that the start-up issues related to its business systems
will be temporary and will not have a significant impact in future periods.
Additionally, delays in the manufacture and shipment of product caused by
restricted supplier deliveries of purchased components should be alleviated as
the Company increases its liquidity, both through the successful execution of
its cost reduction strategies and the proceeds ultimately realized from the
Aironet/Cisco transaction described below. Furthermore, the Company believes
that the introduction of new products, including the recently announced
pen-based PTC-2124, PTC-2134 and PTC-2234 and additional new products scheduled
for release over the next six to nine months, will update and compliment the
Company's existing product offerings and thereby positively impact the
Company's revenues. The Company does not anticipate realizing significant
revenues during the fiscal 2000 third quarter from the new products already
released, and the scheduled releases of the additional new products are subject
to the possible delays and other uncertainties inherent in the development
process. There can be no assurance that these products will find acceptance in
the marketplace or when they may generate significant revenues for the Company.

Consolidated customer service revenues decreased as the result of decreased
"time and material" billings due to start-up issues with the Company's new
information system.

                                       27
<PAGE>   28

This decrease in customer service revenues reflects the impact of decreased
product revenues over the past three quarters. Offsetting these decreases was
the continued growth in the Company's installed base of product.

Revenues from the Company's international operations (including Canada)
decreased $5.4 million or 16% and $3.6 million or 6% during the second quarter
and first half of fiscal 2000 compared to the same periods in fiscal 1999,
respectively. The decrease in the Company's international revenues was primarily
the result of decreased revenues from shipments to the Company's international
distributors. The decrease in international distributor revenues of $4.3 million
and $5.0 million for the second quarter and first half of fiscal 2000 as
compared to those same periods in fiscal 1999. The results of the Company's
international operations were not materially impacted by changes in foreign
currency exchange rates.

The Company's reserve for sales returns and allowances decreased from a balance
at March 31, 1999 of $15.0 million to $9.4 million at September 30, 1999. This
decrease was caused by fewer outstanding accounts receivable for the Company's
Value-Add Distributors and improved rates of return and cash collections in the
Company's direct sales channel.

The Company's consolidated revenues for the second quarter and first half of
fiscal 1999 included revenues of Aironet to outside customers of $5.3 million
and $11.5 million, respectively.

<TABLE>
<CAPTION>
Cost of Revenues
(in thousands)
                                                        Three Months Ended                          Increase
                                                           September 30,                           (Decrease)
                                                 ----------------------------------   -------------------------------------
Cost of Revenues:                                     1999              1998                Dollar            Percentage
                                                 ----------------  ----------------   --------------------   --------------
<S>                                                     <C>               <C>                     <C>              <C>
Product                                                 $ 57,428          $ 52,750                $ 4,678             8.9%
Customer service                                          12,078            13,502                 (1,424)          -10.5%
                                                 ----------------  ----------------   --------------------
Total cost of revenues                                  $ 69,506          $ 66,252                $ 3,254             4.9%
                                                 ================  ================   ====================

Cost of product revenue as a
  percentage of product revenue,
  net                                                      75.0%             64.0%

Cost of customer service revenue
  as a percentage of customer
  service revenue, net                                     61.4%             63.6%
</TABLE>


                                       28
<PAGE>   29

<TABLE>
<CAPTION>
Cost of Revenues
(in thousands)
                                                        Six Months Ended                        Increase
                                                          September 30,                         (Decrease)
                                               ------------------------------------   --------------------------------
Cost of Revenues:                                   1999                1998             Dollar          Percentage
                                               ----------------   -----------------   --------------   ---------------
<S>                                                  <C>                 <C>                <C>                 <C>
Product                                              $ 108,297           $ 107,224          $ 1,073              1.0%
Customer service                                        24,289              26,328           (2,039)            -7.7%
                                               ================   =================   ==============
Total cost of revenues                               $ 132,586           $ 133,552          $  (966)            -0.7%
                                               ================   =================   ==============

Cost of product revenue as a
  percentage of product revenue,
  net                                                    74.9%               62.1%

Cost of customer service revenue
  as a percentage of customer
  service revenue, net                                   61.4%               62.4%
</TABLE>

The increase in the consolidated cost of product revenues as a percentage of
consolidated product revenues was primarily the result of increased
underabsorbed manufacturing overhead costs during the second quarter and first
half of fiscal 2000, as compared to those levels experienced in fiscal 1999 of
$1.9 million and $4.8 million, respectively. This undersabsorption was caused by
lower than expected volumes and manufacturing inefficiencies. Also contributing
to the increased cost percentage was an increase in the provisions for
manufacturing excess and obsolete inventory for the second quarter and first
half of fiscal 2000 of $1.0 million and $2.0 million, respectively. The
increased provision for excess and obsolete manufacturing inventories was
primarily due to decreased revenue volumes and related inventory usage as
compared to on-hand inventory balances. An increase in negative purchase price
variances also contributed to the increase in the cost percentage for the second
quarter and first half of fiscal 2000, as compared to those levels experienced
in fiscal 1999 by $1.7 million and $2.5 million, respectively. For the second
quarter and first half of fiscal 2000, increased fixed royalty costs related to
a supply agreement with Aironet were $1.3 million. Further contributing to the
increase in the costs percentage was an increase in non-conformance repair and
expediting costs for the second quarter and first half of fiscal 2000 of $.9
million and $2.0 million, respectively. Due to the deconsolidation of the
results of Aironet for fiscal 2000, intercompany profit benefit related to
Aironet products used as components of the Company's product was reduced for the
second quarter and first half of fiscal 2000 by $2.4 million and $4.5 million.
Additional costs recorded for the first half of fiscal 2000 included the
write-down of $.6 million of equipment held subject to a lease, increased fees
paid to Value-Add Distributors of $.6 million and severance charges related to
manufacturing personnel of $.4 million.

The Company is subject to a high degree of technological change in market and
customer demands. The Company therefore continually monitors its inventories for
excess and obsolete items based upon a combination of historical usage and
forecasted usage of such inventories. Additionally, discrete provisions are made
when existing facts and circumstances indicate that the subject inventory will
not be utilized.

Management disposes of excess and obsolete inventory as necessary and as
manpower permits. During the first half of fiscal 1999, the Company disposed of
$2.8 million of excess and obsolete material. Of this amount $1.3 million
related to manufacturing purchased components, $1.2 million related to the
Company's customer service inventories and $.2 million related to the Company's
international operations. Subsequent to September 30, 1999, the Company
physically disposed of $16.5 million of excess and obsolete purchased
components. There were no material recoveries related to the disposal of this
material.

                                       29
<PAGE>   30

Inventory allowance provisions for the first half of fiscal 2000 were composed
of manufacturing purchased components of $2.7 million, customer service spare
parts and used equipment of $.2 million and international finished goods
inventories of $.7 million. Inventory allowance accounts were further increased
by reclassification of accrued liabilities of $6.2 million related to purchase
commitments for obsolete purchased components. At September 30, 1999, inventory
allowance accounts aggregated $35.2 million and were composed of manufacturing
purchased components of $26.7 million, customer service spare parts and used
equipment of $6.1 million and international finished goods inventories of $2.4
million. In addition to the inventory allowance accounts, the Company has
recorded accrued liabilities totaling $8.2 million for the purchase commitments
to outside contract manufacturers for discontinued products.

At September 30, 1999, the Company has approximately $10.4 million of finished
goods inventory held at distributors and customers and approximately $3.5
million of manufacturing purchased components at contract manufacturers. At
March 31, 1999, the Company had approximately $25.7 million of finished goods
inventory held at distributors and customers and approximately $5.7 million of
manufacturing purchased components at contract manufacturers. The decrease in
the amount of finished goods held at distributors and customers was the result
of revenue recognized upon installation and customer acceptance of the products.
Additionally, the inventory value of finished goods due back from customers for
product returns decreased in proportion to the decrease in the reserve for sales
returns and allowances.

The Company accrues fees due its Value-Add Distributors for the distribution
services and technical support provided to end users as well as cooperative
advertising costs. These fees are generally based upon the sales value of the
goods to the end user. During the second quarter and first half of fiscal 2000,
the Company incurred $.2 million and $1.1 million of these fees, respectively.

The Company's consolidated cost of revenues for the second quarter and first
half of fiscal 1999 included costs of revenues related to Aironet's outside
customers of $3.6 million and $7.5 million, respectively.

The decrease in the customer service cost of revenues as a percentage of
customer service revenues during the second quarter and first half of fiscal
2000 despite decreased revenue levels primarily resulted from cost containment
efforts and lower costs benefits derived from the Company's service repair
operations in Juarez, Mexico.

                                       30
<PAGE>   31
<TABLE>
<CAPTION>
Operating Expenses
(in thousands)
                                                 Three Months Ended                       (Decrease)
                                                   September 30,                          Increase
                                         ----------------------------------    --------------------------------
Operating expenses:                           1999               1998              Dollar         Percentage
                                         ---------------    ---------------    ---------------   --------------
<S>                                            <C>                <C>                <C>                <C>
Selling expenses                               $ 18,235           $ 21,329           $ (3,094)          -14.5%
Product development and
   engineering expenses                           5,992              9,427             (3,435)          -36.4%
General and administrative
   expenses                                      16,114             10,420              5,694            54.6%
Unconsummated business
   combination costs                                  -              1,830             (1,830)            N.M.
                                         ---------------    ---------------    ---------------
Total operating expenses                       $ 40,341           $ 43,006           $ (2,665)           -6.2%
                                         ===============    ===============    ===============
</TABLE>

<TABLE>
<CAPTION>
Operating Expenses
(in thousands)
                                                 Six Months Ended                        (Decrease)
                                                   September 30,                          Increase
                                         ----------------------------------    --------------------------------
Operating expenses:                           1999               1998              Dollar         Percentage
                                         ---------------    ---------------    ---------------   --------------
<S>                                            <C>                <C>                <C>                <C>
Selling expenses                               $ 36,842           $ 44,871           $ (8,029)          -17.9%
Product development and
   engineering expenses                          13,142             18,438             (5,296)          -28.7%
General and administrative
   expenses                                      27,356             19,931              7,425            37.3%
Unconsummated business
   combination costs                                  -              3,579             (3,579)            N.M.
                                         ---------------    ---------------    ---------------
Total operating expenses                       $ 77,340           $ 86,819           $ (9,479)          -10.9%
                                         ===============    ===============    ===============
</TABLE>

Consolidated selling expenses, as a percentage of revenues remained constant for
the second quarter and first half of fiscal 2000 as compared to fiscal 1999 at
19% and 20%, respectively. Contributing to the overall dollar decrease in
selling expenses was a decrease in commissions of $.8 million and $2.0 million
for the second quarter and first half of fiscal 2000 due to the decreased
revenue base. The provision for bad debts also decreased for the second quarter
and first half of fiscal 2000 by $1.0 million and $2.3 million, respectively.
This decrease is primarily the result of provisions for doubtful accounts
related to a foreign distributor during the second quarter and first half of
fiscal 1999 of $1.0 million and $3.2 million, respectively. Also contributing to
the decrease in selling expenses were cost containment efforts in the Company's
North American sales operations, whose expenses decreased $1.0 million and $2.1
million for the second quarter and first half of fiscal 2000 as compared to the
same periods in fiscal 1999. Offsetting these decreases in both the second
quarter and first half of fiscal 2000 were severance charges related to the
Company's international sales operations of $1.1 million.

Selling expenses related to Aironet were $1.3 million and $2.8 million during
the second quarter and first half of fiscal 1999.

The Company's allowance for doubtful accounts decreased from a balance of $11.1
million at March 31, 1999 to a balance of $4.6 million at September 30, 1999.
The Company provided for $1.3 million of bad debts, and bad debt write-offs
totaled $7.4 million.

                                       31
<PAGE>   32

These bad debt write-offs included $6.6 million of accounts receivable related
to the foreign distributor referenced above.

Consolidated product development and engineering as a percentage of revenues
decreased to 6% for the second quarter of fiscal 2000 and compared to 9% for the
second quarter of fiscal 1999. Consolidated product development and engineering
as a percentage of revenues in the first half of fiscal 2000 decreased to 7%
compared to 9% for the same period last year. The overall dollar decreases in
product development and engineering expenses was due to current management
efforts to perform more engineering tasks with Company personnel rather than
with more expensive contract engineering firms. These actions have reduced
expenses related to contract labor and outside engineering services.
Additionally, increased management focus on engineering processes and job
completion has resulted in reduced parts usage, rework and travel costs. Total
engineering expenses incurred in the U.S. for the second quarter and first half
of fiscal 2000 were reduced by $2.2 million and $2.8 million, respectively, as
compared to those same periods in fiscal 1999. The Company also incurred
severance charges of $.2 million during the first half of fiscal 2000 related to
personnel changes in its product development and engineering operations.

Product development and engineering expenses related to Aironet were $1.5
million and $3.2 million during the second quarter and first half of fiscal
1999.

During the first half of fiscal 2000, the Company capitalized software
development costs in accordance with the requirements of Statement of Financial
Accounting Standards No. 86 "Accounting for the Costs of Computer Software to Be
Sold, Leased, or Otherwise Marketed" aggregating $2.0 million, offset by
amortization of $2.6 million on previously unamortized software.

Consolidated general and administrative expenses as a percentage of revenues
were 17% and 10% for the second quarter of fiscal 2000 as compared to the second
quarter of fiscal 1999. Consolidated general and administrative expenses as a
percentage of revenues were 15% and 9% for the first half and second quarter of
fiscal 2000 as compared to the first half of fiscal 1999. The increase in
general and administrative expenses is primarily due to the increase in expenses
related to the Company's corporate information systems project, including
amortization of costs related to installed modules as well as other costs which
may not be capitalized, such as training and debugging costs. The increase in
these expenses aggregated to $4.3 million and $5.8 million for the second
quarter and first half of fiscal 2000 as compared to the same periods in fiscal
1999. Additionally, the Company has incurred greater bank fees related to its
credit facilities than in fiscal 1999. The increase in bank fees expensed for
the second quarter and first half of fiscal 2000 as compared to the same periods
in fiscal 1999 were $1.0 million and $1.3 million, respectively.

General and administrative expenses related to Aironet were $.7 million and $1.6
million during the second quarter and first half of fiscal 1999.

The Company's domestic accrual for severance costs decreased from a balance of
$3.4 million at March 31, 1999 to a balance of $2.7 million at September 30,
1999. This decrease was caused by severance charges of $1.1 million during the
first half of fiscal 2000, which were more than offset by severance payments of
$1.8 million to terminated employees. A total of 33 employees were terminated
during the first half of fiscal 2000. The areas of the Company affected were
domestic sales operations, domestic product development, manufacturing
operations and corporate administration. There have been no material changes to
the amounts accrued at either March 31, 1999 or September 30, 1999. In addition
to the domestic severance activity, 1 employee was terminated in the Company's
international sales operations during the second quarter of fiscal 2000. The
severance recorded related to this employee was $1.1 million.

                                       32
<PAGE>   33

Fiscal 2000 operating expenses were favorably impacted by the absence of costs
incurred in response to an unsolicited takeover proposal and to a proxy contest
for the second quarter and first half of fiscal 1999 of $1.8 million and $3.6
million, respectively.

Interest Expense and Other Non-operating Income (Expense), net
(in thousands)
<TABLE>
<CAPTION>
                                                                 Three Months Ended                        Increase
                                                                   September 30,                           (Decrease)
                                                         ---------------------------------   ------------------------------------
                                                              1999             1998              Dollar            Percentage
                                                         ---------------   ---------------   ---------------    -----------------
<S>                                                            <C>               <C>               <C>              <C>
Interest income                                                $    159          $    164          $     (5)         -3.0%
Interest expense                                                 (3,559)           (2,617)             (942)         36.0%
Gain on sale of subsidiary stock                                 32,167                 -            32,167           N.M.
Other non-operating (expense) income                                483               (97)              580           N.M.
                                                         ===============   ===============   ===============
Total interest expense and other
 non-operating (expense) income, net                           $ 29,250          $ (2,550)         $ 31,800           N.M.
                                                         ===============   ===============   ===============
</TABLE>

<TABLE>
<CAPTION>
                                                                 Six Months Ended                          Increase
                                                                    September 30,                          (Decrease)
                                                         ---------------------------------   -----------------------------------
                                                              1999              1998             Dollar           Percentage
                                                         ---------------   ---------------   ---------------    ----------------
<S>                                                            <C>               <C>               <C>             <C>
Interest income                                                $    415          $    343          $     72          21.0%
Interest expense                                                 (6,801)           (4,329)           (2,472)         57.1%
Gain on sale of subsidiary stock                                 32,167                 -            32,167           N.M.
Other non-operating income                                          300             1,264              (964)        -76.3%
                                                         ===============   ===============   ===============
Total interest expense and other
 non-operating income, net                                     $ 26,081          $ (2,722)         $ 28,803           N.M.
                                                         ===============   ===============   ===============
</TABLE>

Interest expense increased for the second quarter and first half of fiscal 2000
as compared to the same periods in fiscal 1999 due the increased borrowings and
the interest rates charged under the Company's new credit facility.

During the first quarter of fiscal 2000, the Company recorded $1.3 million of
non-operating expense related to the reduction in carrying value of an
investment in non-marketable securities. The Company's estimate of the reduction
was based upon the market value of subsequent equity transactions of the
investee with third parties. The investment is composed of stock in the
development-stage technology company that purchased the Company's Virtual Vision
subsidiary.

During the first quarter of fiscal 2000, the Company sold an investment in
marketable securities of another development stage technology company for cash
proceeds of $1.5 million. As this investment was previously non-marketable, its
carrying value was based upon the cost basis and was $.7 million. The Company
therefore recorded a pre-tax gain of $.8 million.

                                       33
<PAGE>   34

During the second quarter of fiscal 2000, the Company entered into a set of
transactions whereby the Company repurchased its Corporate Jet which was
previously sold and leased-back, and resold the Corporate Jet to a third party.
As a result of these transactions, the Company retained net cash proceeds of $.3
million. This was recorded as non-operating gain.

During the second quarter of fiscal 2000, Aironet and the Company sold 6,846,800
shares of Aironet's voting common stock in an initial public offering on the
Nasdaq National Market at a price of $11.00 per share. Of the total number of
shares offered, Aironet sold 4,564,562 shares and the Company sold 2,282,238
shares. The aggregate proceeds, net of underwriting discounts and commissions,
were $47.4 million to Aironet and $23.3 million to Telxon. Subsequent to this
transaction, the Company's remaining interest in Aironet was approximately 35%.
As a result of this transaction, the Company recorded a non-operating gain of
approximately $32.2 million, net of additional transaction costs of $1.5
million. Also as a result of this transaction, the Company ceased consolidation
of Aironet effective April 1, 1999. The Company will account for its investment
under the equity method of accounting. Investment income of $.4 million and $.7
million was recorded for the Company's interest in the earnings of Aironet for
the second quarter and first half of fiscal 2000.

During the first quarter of fiscal 1999, the transaction to sell the stock of
Virtual Vision to a third party was consummated, resulting in the recording of a
$.9 million non-operating gain. Subsequent to the consummation of the
transaction, positive adjustments to such gain totaling $.2 million were
recorded. These adjustments related to the changes in purchase price based upon
key employee retention rates subsequent to the transaction.

During the first quarter of fiscal 1999, Aironet sold 222,222 shares of its
voting common stock to various third party investors at a price of $3.50 per
share. The resulting pre-tax gain of approximately $.3 million was recorded as
other non-operating income in the accompanying consolidated statement of
operations. In addition to the sale of shares of stock, 66,667 warrants at $3.50
per share for the purchase of Aironet voting common stock were issued. A gain of
approximately $.05 million relating to these warrants has been deferred until
the warrants are exercised or lapse. The Company's remaining interest in the
voting common stock of Aironet at June 30, 1998 was 76%.


<TABLE>
<CAPTION>
Income Taxes
(in thousands)
                                                  Three Months Ended
                                                     September 30,                            Increase
                                             -------------------------------     ------------------------------------
                                                1999              1998                Dollar            Percentage
                                             ------------    ---------------     ------------------   ---------------
<S>                                                <C>             <C>                     <C>           <C>
Provision (benefit) for
  income taxes                                     $ 738           $ (1,853)               $ 2,591       -139.8%
</TABLE>


                                       34
<PAGE>   35
<TABLE>
<CAPTION>
Income Taxes
(in thousands)
                                                     Six Months Ended
                                                      September 30,                           Increase
                                             ---------------------------------     -------------------------------
                                                 1999              1998               Dollar         Percentage
                                             -------------    ----------------     --------------   --------------
<S>                                               <C>                <C>                 <C>           <C>
Provision (benefit) for
  income taxes                                    $ 2,016            $ (1,875)           $ 3,891       -207.5%
</TABLE>

The Company's consolidated tax provision of $.7 million and $2.0 million for the
second quarter and first half of fiscal 2000 relates to foreign taxes on the
Company's international subsidiaries. No taxes have been provided for the gain
related to the sale of Aironet voting common stock as the Company has sufficient
current year operating losses and net operating loss carryforwards to prevent a
tax provision or liability. The Company has not recognized any income tax
benefits other than those utilized through the realization of gains from the
sale of Aironet voting common stock based on the Company's assessment that it is
more likely than not that the deferred tax assets will not be utilized through
future taxable income or implementation of tax planning strategies.

<TABLE>
<CAPTION>
Liquidity
(in thousands, except ratios)                                                                                 Dollar
                                                               September 30,            March 31,            Increase
                                                                   1999                   1999              (Decrease)
                                                           ----------------------   -----------------    -----------------
<S>                                                                    <C>                 <C>                  <C>
Cash                                                                   $  12,176           $  22,459            $ (10,283)
Accounts receivable                                                       71,277              84,500              (13,223)
Notes and other receivables                                                1,581               4,015               (2,434)
Receivable from affiliate                                                  1,042                   -                1,042
Inventories                                                               95,422             129,049              (33,627)
Other                                                                      7,649               9,029               (1,380)
                                                           ======================   =================    =================
Total current assets                                                   $ 189,147           $ 249,052            $ (59,905)
                                                           ======================   =================    =================

Notes payable                                                          $  41,725           $  68,567            $ (26,842)
Capital lease obligations                                                    414                 525                 (111)
Accounts payable                                                          41,398              64,966              (23,568)
Payable to affiliate                                                       4,213                   -                4,213
Income taxes payable                                                       7,965               6,434                1,531
Accrued liabilities                                                       63,970              74,285              (10,315)
                                                           ======================   =================    =================
Total current liabilities                                              $ 159,685           $ 214,777            $ (55,092)
                                                           ======================   =================    =================

Working capital (current assets
  less current liabilities)                                            $  29,462           $  34,275            $  (4,813)
                                                           ======================   =================    =================

Current ratio (current assets
divided by current liabilities)                                              1.2                 1.2
</TABLE>

The decrease in the Company's working capital at September 30, 1999, from March
31, 1999 was primarily due to decreases in cash, accounts receivable and
inventories. The reductions in working capital were generally offset by
reductions in notes payable, accounts payable and accrued liabilities. The
decrease in accounts receivable reflects improved cash collections in the
Company's domestic operations. Accordingly, consolidated sales outstanding
decreased from 98 days at March 31, 1999 to 68 days at September 30, 1999.
Additionally, the decrease in accounts receivable reflects the



                                       35
<PAGE>   36

absence of Aironet accounts receivable from outside customers of $4.2 million.
The decrease in the Company's inventories was the result of increased reserves
for manufacturing purchased components of $4.7 million and increased reserves
for customer service spare parts of $3.1 million. Additionally, the Company's
inventories related to the Company's finished goods held at customers and
distributors decreased due to the rollout of finished goods to customers of
$14.9 million. Inventories staged to rollout to customer sites also decreased
$4.4 million. Also causing the decrease in inventories is the absence of
Aironet's manufacturing inventories of $4.6 million. The decrease in the notes
payable balance was primarily caused by repayments of amounts borrowed with
proceeds from the sale of Aironet voting common stock and the recharacterization
of $13.1 million of such borrowings as long-term. Accounts payable decreased
primarily due to increased payments to vendors with internally generated funds
as well as proceeds from the sale of Aironet shares. Accrued liabilities
decreased primarily due to the $6.2 million reclassification of amounts accrued
related to purchase commitments for obsolete purchased components.

<TABLE>
<CAPTION>
Cash Flows from Operating Activities
(in thousands)                                                                                            Dollar
                                                                     Six Months Ended                    Increase
                                                                       September 30,                    (Decrease)
                                                             -----------------------------------       in Cash Flow
                                                                  1999                1998                Impact
                                                             ---------------     ---------------    --------------------
<S>                                                                <C>                 <C>                    <C>
Net loss                                                           $ (1,741)           $ (6,414)              $   4,673
Depreciation and amortization                                        12,231              13,094                    (863)
Provision for doubtful accounts                                       1,256               3,562                  (2,306)
Provision for inventory obsolescence                                  3,616               4,027                    (411)
Accounts and notes receivable                                         6,744              34,319                 (27,575)
Gain on sale of subsidiary                                          (32,167)                  -                 (32,167)
Inventories                                                          19,245             (12,338)                 31,583
Prepaid expenses and other                                            1,607              (6,027)                  7,634
Accounts payable and accrued liabilities                            (18,473)            (10,006)                 (8,467)
Other, net                                                            2,213                (539)                  2,752
Net cash (used in) provided by
                                                             ===============     ===============    ====================
   operating activities                                            $ (5,469)           $ 19,678               $ (25,147)
                                                             ===============     ===============    ====================
</TABLE>

The decrease in cash flows from the Company's consolidated operating activities
for the second quarter of fiscal 2000 from comparable fiscal 1999 levels was
primarily due to negative cash flow impacts of the Company's operating loss for
the six months ended September 30, 1999, accounts and notes receivable, accounts
payable and accrued liabilities. These negative cash flow impacts were partially
offset by positive cash flow impacts for inventories, prepaid expenses and other
and the decrease in the net loss for the period. The cash flow impact of
accounts and notes receivable decreased due to the significant decline in the
accounts receivable balance during fiscal 1999. There was no such decrease
during the current fiscal year as the accounts receivable balance and days of
sales outstanding have remained constant during the first half of fiscal 2000.
Accounts payable and accrued liabilities utilized more cash during fiscal 2000
due to the relatively high amounts outstanding at March 31, 1999 and subsequent
pay-down of those amounts upon the Company obtaining new financing during the
second quarter of fiscal 2000. The cash flow impact of inventories was favorably
impacted by the significant decline of inventories related to finished goods
held for pending installation at customer sites or for customer acceptance of
such goods. In the prior



                                       36
<PAGE>   37

year, there was a build-up of manufacturing inventories held at customer and
distributor locations.

<TABLE>
<CAPTION>
Cash Flows from Investing  Activities
(in thousands)                                                                                            Dollar
                                                                     Six Months Ended                    Increase
                                                                       September 30,                    (Decrease)
                                                           ------------------------------------        in Cash Flow
                                                                  1999                1998                Impact
                                                           ---------------    -----------------    -----------------
<S>                                                               <C>                <C>                   <C>
Additions to property and equipment                               $(8,969)           $ (18,848)            $  9,879
Software and other investments                                     (2,027)              (2,939)                 912
Proceeds from the sale of subsidiary
   stock, net of cash given                                        17,211                    -               17,211
Purchase of non-marketable investments                                  -               (1,950)               1,950
Proceeds from sale of non-marketable
   investments                                                      1,523                    -                1,523
Other                                                                 261                 (608)                 869
                                                           ---------------    -----------------    -----------------
Net cash provided by (used in)
   investing activities                                           $ 7,999            $ (24,345)            $ 32,344
                                                           ===============    =================    =================
</TABLE>

The increase in cash flows from the Company's consolidated investing activities
was primarily the result of the sale of Aironet stock for net proceeds of $17.2
million. Additionally, there was a reduction in the amount of additions to
property and equipment of approximately $9.9 million. Costs related to the
Company's corporate information systems project are no longer capitalized due to
the completion of the installation of the principal modules of the systems. Cash
flows from investing activities were also positively impacted by the absence of
the purchase of non-marketable investments and additions to long-term notes.
Additionally, proceeds were realized form the sale of non-marketable
investments.



                                       37

<PAGE>   38

<TABLE>
<CAPTION>
Cash Flows from Financing  Activities
(in thousands)
                                                                                                       Dollar
                                                                    Six Months Ended                  Increase
                                                                      September 30,                  (Decrease)
                                                           -----------------------------------      in Cash Flow
                                                               1999                  1998             Impact
                                                           --------------       --------------      ------------
<S>                                                            <C>                  <C>              <C>
Extinguishment of former credit facility                       $ (48,888)           $       -        $ (48,888)
(Repayments) borrowings on former
   credit facility, net                                          (17,179)              14,580          (31,759)
Borrowings on long-term provisions
  of debt facility                                                17,000                    -           17,000
Borrowings on debt facility, net                                  37,792                    -           37,792
Principal payments on capital leases                                (322)                (343)              21
Debt issue costs paid subsidiary                                  (1,215)                   -           (1,215)
Purchase of treasury shares                                            -                 (488)             488
Exercise of stock options                                              -                1,222           (1,222)
                                                           ==============       ==============     ============
Net cash  (used in)  provided by
  financing activities                                         $ (12,812)           $  14,971        $ (27,783)
                                                           ==============       ==============     ============
</TABLE>


The decrease in cash flows from financing activities was primarily due to
repayments and extinguishment under the Company's former credit facility.
Amounts borrowed under the company's existing debt facility have been
approximately $11.3 million less those amounts borrowed under the Company's
former credit facility.

On August 30, 1999, the Company entered into a loan and security agreement
whereby Telxon obtained a $100.0 million senior secured credit facility as a
replacement for the Company's former revolving credit agreement and business
purpose promissory note. The facility consists of both term and revolving credit
arrangements.

Borrowings under the revolving loan provisions of such facility are subject to
availability on qualifying accounts receivable and inventory, reduced by amounts
borrowed and outstanding under the facility's term loan features and letters of
credit. The revolving credit facility has a limit of $70.0 million less the
outstanding balance of the term loans and until such time that the bridge loan
described below is paid in full. At that time the maximum amount available will
be increased to $80.0 million less the outstanding term loan balances.
Availability under the agreement is estimated to be $11.4 million as of
September 30, 1999. The maturity date of the loan and security agreement is
September 30, 2002. At the maturity date the agreement is automatically renewed
for successive one-year periods until such agreement is terminated.

The secured credit facility has three term loan features. The first term loan of
$6.0 million is limited by a portion of the liquidation value of the Company's
machinery and equipment. The repayment terms for this term loan are
straight-line over a 10-year period. The second term loan of $10.0 million is
limited, together with the $30.0 million term loan discussed below, by the
market value of Aironet capital stock owned by the Company. The repayment of
this term loan is straight-line over a 3-year period. The third term loan of
$30.0 million is limited by a specific percentage of the market value of Aironet
capital stock owned by the Company. The repayment of this third term loan shall
occur over an 11-month period commencing on December 26, 1999 and concluding on
October 1, 2000, or upon any sale of additional capital stock of Aironet by the
Company. The first installment on the $30.0 million term loan shall be made
payable with the



                                       38
<PAGE>   39

proceeds from the sale of Aironet stock. The payment of the remaining balance
shall be made in ten equal installments.

The interest rate charged on the revolving loan, the $6.0 million term loan, and
the $30.0 million term loan is 2.75% above the Eurodollar rate or 0.5% above the
financial institution's prime lending rate. On September 30, 1999, the prime
lending rate and the Eurodollar rate were 8.25% and 6.09% respectively.
Therefore, interest was charged at a rate of 8.75% on these balances. In the
event that the Aironet stock pledged on the $30.0 million term loan is sold, the
rate on this term loan will become fixed at 15.5%. The interest rate on the
$10.0 million term loan is fixed at 12.5%. Interest is payable monthly. The
interest rate charged is subject to change based upon the Company's financial
results. The facility also provides for the payment of an unused line fee of
0.375% per annum on a monthly basis, and a 1.25% per annum fee for undrawn
letters of credit.

The $100.0 million credit facility is collateralized by essentially all of the
Company's assets including accounts receivable, machinery and equipment, general
intangibles, inventory, future proceeds and real property.

The credit facility also requires the maintenance of various financial and
non-financial covenants. Significant financial covenants include maintaining a
minimum level of customer service revenue, ensuring that the total outstanding
balance of the credit facility does not exceed collections from certain
significant accounts, maintaining minimum earnings before interest, taxes,
depreciation and amortization (EBITDA), and maintaining minimum tangible net
worth requirements. As of September 30, 1999, the Company is in violation of
certain of these covenants. As the company has obtained a waiver for such
violation beyond one year from September 30, 1999, $13,067 of this debt has been
classified as long term.

Subsequent Events

On November 8, 1999, the Company announced that it would move its executive
offices from Akron, Ohio to Cincinnati, Ohio and relocate substantially all of
its remaining Akron operations to The Woodlands, Texas and Fort Mitchell,
Kentucky. Approximately 170 employees will be effected by these events and it is
anticipated that the moves will be substantially completed by March 31, 2000.
The Company anticipates that it will incur severance, moving, training, idle
facility and other costs of approximately $4 million over the next twelve months
associated with these events. The Company will account for such costs in
accordance with the requirements of EITF 94-3 "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)".

On November 9, 1999, Cisco Systems, Inc. ("Cisco") announced that it will
purchase the Company's affiliate, Aironet, for shares of Cisco common stock.
Based upon the value of Cisco common stock on November 9, 1999 this would result
in total proceeds of $799 million. Based on that value, the total purchase price
translates into $48.00 per each share of Aironet common stock. As the Company
continues to own 4,994,262 shares of Aironet stock, the estimated fair value of
the proceeds of the transaction to the Company is estimated at $240 million.
Based on this estimated fair value, the transaction will result in a pre-tax
gain, prior to related transaction costs, of approximately $218 million and the
Company carrying its resulting investment in Cisco shares on the fair value
method of accounting in accordance with the requirements of SFAS No. 115
"Accounting for Certain Investments in Debt and Equity Securities".


New Accounting Standards

During fiscal 1999, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133"). SFAS



                                       39
<PAGE>   40

No. 133 provides accounting and reporting standards for derivative instruments.
This standard will require the Company to recognize all derivatives as either
assets or liabilities in the statement of financial position and to measure
those instruments at fair value. The Company is required to adopt the provisions
of SFAS No. 133 during the first quarter of fiscal 2002 (as delayed by Statement
of Financial Accounting Standards No. 137 - Deferral of the Effective Date of
FASB Statement No. 133). Management believes that the adoption of this
pronouncement will not have a material effect on the Company's consolidated
financial position, results of operations or cash flows.


                                       40
<PAGE>   41


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

In the ordinary course of business, the Company is subject to foreign currency
and interest rate risks. The risks primarily relate to the sale of the Company's
products to foreign customers through its foreign subsidiaries and changes in
interest rates on the Company's short-term financing and capital lease
obligations.

Interest Rate Risk

The Company's debt facility, including revolving loans and term loans, carries
interest rate risk that is generally related to the financial institution's
prime lending rate or the Eurodollar rate. If these rates were to change while
the Company has borrowings under such facility, the related interest expense
would increase or decrease accordingly. As of September 30, 1999, the Company
had $37.8 million due currently and $17.0 million due long-term under revolving
loans and term loan provisions of the debt facility, respectively.

The Company's convertible subordinated debentures carry fixed rates of interest
and therefore do not pose interest rate risk to the Company. However, interest
rate changes would effect the fair market value of the debentures. At September
30, 1999, the Company had $106.9 million of convertible subordinated debentures
outstanding.

The Company monitors its interest rate risk, but does not engage in any hedging
activities using derivative financial instruments.

Foreign Currency Risk

The financial results of the Company's foreign subsidiaries are measured in
their local currencies. Assets and liabilities are translated into U.S. dollars
at the rates of exchange at the end of each period and revenues and expenses are
translated at average rates of exchange at the end of the period. Resulting
translation adjustments are reported as a component of comprehensive income.

Historically, the Company has not experienced any significant foreign currency
gains or losses involving U.S. Dollars and other currencies. This is primarily
due to natural hedges of revenues and expenses in the functional currencies of
the countries in which subsidiaries are located. Although the Company did not
have any forward currency exchange contracts in place at September 30, 1999, it
does monitor its foreign currency exposure and has utilized these derivative
financial instruments to mitigate foreign currency risk when it considers
appropriate.


                                       41
<PAGE>   42

PART II.  OTHER INFORMATION

ITEM 6. LEGAL PROCEEDINGS

See Note 10 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 22, 1999 (the "Annual Meeting").


         (b)      The sole matter voted upon by the Company's stockholders at
                  the Annual Meeting was the election of two directors of the
                  class to hold office until the 2002 annual meeting of
                  stockholders. R. Dave Garwood and L. Michael Hone were
                  nominated by the Board of Directors for election to serve
                  as the directors of such class, and they were elected by the
                  Company's stockholders at the Annual Meeting. The other
                  directors of the Company, whose terms of office as directors
                  continued after the Annual Meeting, are Richard J. Bogomolny,
                  John H. Cribb, Robert A. Goodman, John W. Paxton, Sr. and
                  Dr. Raj Reddy.

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

                  For the election of R. Dave Garwood --
                        Votes for:         14,186,610
                        Votes withheld:       389,404; and

                  For the election of L. Michael Hone --
                        Votes for:         14,260,860
                        Votes withheld:       315,154


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. 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.

                  3.2      Amended and Restated By-Laws of Registrant,
                           incorporated herein by reference to Exhibit 3.2 to
                           Registrant's Form 10-K for the year ended March 31,
                           1999.

                  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 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.

                  4.2      Text of form of Certificate for 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 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.


                                       42
<PAGE>   43

                           4.3.2    Letter agreement among Registrant, KeyBank
                                    National Association and Harris Trust and
                                    Savings Bank, dated June 11, 1997, with
                                    respect to the appointment of Harris Trust
                                    and Savings Bank as successor Rights Agent
                                    under the Rights Agreement included as
                                    Exhibit 4.3 above, incorporated herein by
                                    reference to Exhibit 4.3.2 to Registrant's
                                    Form 10-K for the year ended March 31, 1997.

                  4.4      Indenture by and between 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 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 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 Registrant.

                           10.1.1        Amended and Restated Retirement and
                                         Uniform Matching Profit-Sharing Plan of
                                         Registrant, as amended, incorporated
                                         herein by reference to Exhibit 10.1.1
                                         to Registrant's Form 10-K for the year
                                         ended March 31, 1999.

                           10.1.2        1990 Stock Option Plan for employees of
                                         Registrant, as amended, incorporated
                                         herein by reference to Exhibit 10.1.2
                                         to Registrant's Form 10-Q for the
                                         quarter ended September 30, 1997.

                                       43
<PAGE>   44

                           10.1.3        1990 Stock Option Plan for Non-Employee
                                         Directors of Registrant, as amended,
                                         filed herewith.

                           10.1.4        Non-Qualified Stock Option Agreement
                                         between Registrant and Raj Reddy, dated
                                         as of October 17, 1988, incorporated
                                         herein by reference to Exhibit 10.1.4
                                         to Registrant's Form 10-Q for the year
                                         ended March 31, 1999.

                                         10.1.4.a          Description of
                                                           amendments extending
                                                           the term of the
                                                           Agreement included as
                                                           Exhibit 10.1.4 above,
                                                           filed herewith.

                           10.1.5        1992 Restricted Stock Plan of
                                         Registrant, as amended, incorporated
                                         herein by reference to Exhibit 10.1.5
                                         to Registrant's Form 10-Q for the
                                         quarter ended December 31, 1998.

                           10.1.6        1995 Employee Stock Purchase Plan of
                                         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        1996 Stock Option Plan for employees,
                                         directors and advisors of Aironet
                                         Wireless Communications, Inc., a
                                         subsidiary of Registrant, incorporated
                                         herein by reference to Exhibit 10.1.7
                                         to Registrant's Form 10-K for the year
                                         ended March 31, 1997.

                                         10.1.7.a          Amended and Restated
                                                           1996 Stock Option
                                                           Plan for employees,
                                                           directors and
                                                           advisors of Aironet
                                                           Wireless
                                                           Communications, Inc.,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.1.7.a to
                                                           Registrant's Form
                                                           10-K for the year
                                                           ended March 31, 1998.

                                         10.1.7.b          First Amendment to
                                                           Amended and Restated
                                                           1996 Stock Option
                                                           Plan for employees,
                                                           directors and
                                                           advisors of Aironet
                                                           Wireless
                                                           Communications, Inc.,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.1.7.b to
                                                           Registrant's Form
                                                           10-K for the year
                                                           ended March 31, 1999.

                           10.1.8        1999 Stock Option Plan for Non-Employee
                                         Directors of Aironet Wireless
                                         Communications, Inc., filed herewith.


                                       44
<PAGE>   45

                           10.1.9        Non-Competition Agreement by and
                                         between Registrant and Robert F.
                                         Meyerson, effective February 27, 1997,
                                         incorporated herein by reference to
                                         Exhibit 10.1.8 to Registrant's Form
                                         10-K for the year ended March 31, 1997.

                           10.1.10       Employment Agreement between Registrant
                                         and John W. Paxton, Sr., effective as
                                         of March 22, 1999, incorporated herein
                                         by reference to Exhibit 10.1.10 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1999.

                           10.1.11       Employment Agreement between Registrant
                                         and Kenneth A. Cassady, effective as of
                                         June 7, 1999, incorporated herein by
                                         reference to Exhibit 10.1.11 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1999.

                           10.1.12       Employment Agreement between Registrant
                                         and Woody M. McGee, effective as of
                                         June 1, 1999, incorporated herein by
                                         reference to Exhibit 10.1.12 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1999.

                           10.1.13       Amended and Restated Employment
                                         Agreement between Registrant and James
                                         G. Cleveland, effective as of April 1,
                                         1997, incorporated herein by reference
                                         to Exhibit 10.1.10 to Registrant's Form
                                         10-K for the year ended March 31, 1998.

                           10.1.14       Amended and Restated Employment
                                         Agreement between Registrant and Danny
                                         R. Wipff, effective as of April 1,
                                         1997, incorporated herein by reference
                                         to Exhibit 10.1.14 to Registrant's Form
                                         10-K for the year ended March 31, 1998.

                           10.1.15       Description of Key Employee Retention
                                         Program, incorporated herein by
                                         reference to Exhibit 10.1.15 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1998.

                                         10.1.15.a         Form of letter
                                                           agreement made with
                                                           key employees
                                                           selected under the
                                                           retention program
                                                           described in Exhibit
                                                           10.1.15 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.1.15.a to
                                                           Registrant's Form
                                                           10-K for the year
                                                           ended March 31, 1998.

                           10.1.16       Employment Agreement, effective as of
                                         April 1, 1997, between Registrant and
                                         Frank E. Brick, a former executive
                                         officer, incorporated herein by
                                         reference to Exhibit 10.1.9 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1998.

                           10.1.17       Amended and Restated Employment
                                         Agreement, effective as of April 1,
                                         1997, between Registrant and Kenneth W.
                                         Haver, a former executive officer,
                                         incorporated herein by



                                       45
<PAGE>   46

                                         reference to Exhibit 10.1.11 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1998.

                           10.1.18       Amended and Restated Employment
                                         Agreement, effective as of April 1,
                                         1997, between Registrant and David W.
                                         Porter, a former executive officer,
                                         incorporated herein by reference to
                                         Exhibit 10.1.13 to Registrant's Form
                                         10-K for the year ended March 31, 1998.

                           10.1.19       Letter agreement of Registrant with
                                         Robert A. Goodman, dated as of December
                                         29, 1997 and executed and delivered
                                         January 20, 1998, for continued
                                         consulting services following certain
                                         changes in his law practice,
                                         incorporated herein by reference to
                                         Exhibit 10.1.17 to Registrant's Form
                                         10-K for the year ended March 31, 1998.

                           10.1.20       Letter agreement of Registrant
                                         with R. Dave Garwood, dated August 30,
                                         1999, for MRP-II consulting services,
                                         filed herewith.

                  10.2     Material Leases of Registrant.

                           10.2.1        Lease between Registrant and 3330 W.
                                         Market Properties, dated as of December
                                         30, 1986, for premises at 3330 West
                                         Market Street, Akron, Ohio,
                                         incorporated herein by reference to
                                         Exhibit 10.2.1 to Registrant's Form
                                         10-K for the year ended March 31, 1999.

                           10.2.2        Lease Agreement between The Woodlands
                                         Commercial Properties Company, L.P. and
                                         Registrant, made and entered into as of
                                         January 16, 1998, including Rider No. 1
                                         thereto, for premises at 8302 New
                                         Trails Drive, The Woodlands, Texas,
                                         incorporated herein by reference to
                                         Exhibit 10.2.2 to Registrant's Form
                                         10-K for the year ended March 31, 1998.

                           10.2.3        Standard Office Lease (Modified Net
                                         Lease) between Registrant and John D.
                                         Dellagnese III, dated as of July 19,
                                         1995, for premises at 3875 Embassy
                                         Parkway, Bath, Ohio, 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.

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

                                         10.2.3.b          Third Addendum, dated
                                                           as of March 1, 1996,
                                                           to the Lease included
                                                           as Exhibit 10.2.3
                                                           above, incorporated
                                                           herein by reference
                                                           to Exhibit 10.2.4.b
                                                           to Registrant's Form
                                                           10-K for the year
                                                           ended March 31, 1996.

                                       46
<PAGE>   47

                                         10.2.3.c          Fourth Addendum,
                                                           dated as of April 16,
                                                           1996, to the Lease
                                                           included as Exhibit
                                                           10.2.3 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.2.2.c to
                                                           Registrant's Form
                                                           10-Q for the quarter
                                                           ended June 30, 1997.

                                         10.2.3.d          Fifth Addendum, dated
                                                           as of June 24, 1997,
                                                           to the Lease included
                                                           as Exhibit 10.2.3
                                                           above, incorporated
                                                           herein by reference
                                                           to Exhibit 10.2.2.d
                                                           to Registrant's Form
                                                           10-Q for the quarter
                                                           ended June 30, 1997.

                                         10.2.3.e          Sixth Addendum, dated
                                                           as of March, 1998, to
                                                           the Lease included as
                                                           Exhibit 10.2.3 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.2.3.e to
                                                           Registrant's Form
                                                           10-Q for the quarter
                                                           ended September 30,
                                                           1998.

                                         10.2.3.f          Seventh Addendum,
                                                           dated as of July 20,
                                                           1998, to the Lease
                                                           included as Exhibit
                                                           10.2.3 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.2.3.f to
                                                           Registrant's Form
                                                           10-Q for the quarter
                                                           ended September 30,
                                                           1998.

                                         10.2.3.g          Eighth Addendum,
                                                           dated as of September
                                                           8, 1998, to the Lease
                                                           included as Exhibit
                                                           10.2.3 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.2.3.g to
                                                           Registrant's Form
                                                           10-Q for the quarter
                                                           ended September 30,
                                                           1998.

                                         10.2.3.h          Sublease Agreement,
                                                           dated as of
                                                           September 1, 1998,
                                                           between Registrant
                                                           and Aironet Wireless
                                                           Communications, Inc.
                                                           for the premises
                                                           subject to the Lease
                                                           included as Exhibit
                                                           10.2.3 above, as
                                                           amended through the
                                                           Eighth Addendum
                                                           thereto included as
                                                           Exhibit 10.2.3.g
                                                           above, incorporated
                                                           herein by reference
                                                           to Exhibit 10.2.3.h
                                                           to Registrant's Form
                                                           10-K for the year
                                                           ended March 31,
                                                           1999.

                                         10.2.3.i          Renewal, dated June
                                                           16, 1999, with
                                                           respect to the
                                                           Sublease Agreement
                                                           included as Exhibit
                                                           10.2.3.h above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.2.3.i to
                                                           Registrant's Form


                                       47
<PAGE>   48

                                                           10-K for the year
                                                           ended March 31, 1999.

                           10.2.4        Lease Contract between Desarrollos \
                                         Inmobiliarios Paso del Norte, S.A. de
                                         C.V. and Productos y Servicios de
                                         Telxon, S.A. de C.V., a subsidiary of
                                         Registrant, for premises in Ciudad
                                         Juarez, Chihuahua, Mexico, made and
                                         entered into as of April 10, 1997,
                                         incorporated herein by reference to
                                         Exhibit 10.2.4 to Registrant's Form
                                         10-K for the year ended March 31, 1998.

                  10.3     Credit Agreements of Registrant.

                           10.3.1        Credit Agreement by and among
                                         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 (refinanced
                                         and replaced by the Loan and Security
                                         Agreement included as Exhibit 10.3.3
                                         below), incorporated herein by
                                         reference to Exhibit 10.3.2 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1996.


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

                                         10.3.1.b         Amendment No. 2,
                                                          dated as of December
                                                          16, 1996, to the
                                                          Agreement included as
                                                          Exhibit 10.3.1 above,
                                                          incorporated herein by
                                                          reference to Exhibit
                                                          10.3.2.c to
                                                          Registrant's Form 8-K
                                                          dated December 16,
                                                          1996.

                                         10.3.1.c         Amendment No. 3,
                                                          dated as of December
                                                          12, 1997, to the
                                                          Agreement included as
                                                          Exhibit 10.3.1 above,
                                                          included herein by
                                                          reference to Exhibit
                                                          10.3.1.d to
                                                          Registrant's Form 10-K
                                                          for the year ended
                                                          March 31, 1998.

                                         10.3.1.d         Waiver and Agreement,
                                                          dated as of December
                                                          29, 1998, with respect
                                                          to the Agreement
                                                          included as Exhibit
                                                          10.3.1 above,
                                                          incorporated herein by
                                                          reference to Exhibit
                                                          10.3.1.e to
                                                          Registrant's Form 10-Q
                                                          for the quarter ended
                                                          December 31, 1998.

                                         10.3.1.e         Waiver Extension and
                                                          Agreement, dated as of
                                                          February 12, 1999,
                                                          with respect to the
                                                          Agreement included as
                                                          Exhibit 10.3.1 above,
                                                          incorporated herein by
                                                          reference to Exhibit
                                                          10.3.1.f to

                                       48
<PAGE>   49
                                                            Registrant's Form
                                                           10-Q for the quarter
                                                           ended December 31,
                                                           1998.

                                         10.3.1.f          Second Waiver
                                                           Extension Agreement
                                                           and Amendment No. 4,
                                                           dated as of March 26,
                                                           1999, with respect to
                                                           the Agreement
                                                           included as Exhibit
                                                           10.3.1 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.1.a to
                                                           Registrant's Form 8-K
                                                           dated April 1, 1999.

                                         10.3.1.g          Amended and Restated
                                                           Security Agreement,
                                                           dated as of March 26,
                                                           1999, by and among
                                                           Registrant and The
                                                           Bank of New York, as
                                                           Agent for the Lenders
                                                           from time to time
                                                           party to the
                                                           Agreement included as
                                                           Exhibit 10.3.1 above,
                                                           (terminated in
                                                           connection with the
                                                           refinancing obtained
                                                           pursuant to the
                                                           Loan and Security
                                                           Agreement included
                                                           as Exhibit 10.3.3
                                                           below) incorporated
                                                           herein by reference
                                                           to Exhibit 10.3.1.b
                                                           to Registrant's
                                                           Form 8-K dated
                                                           April 1, 1999.

                                         10.3.1.h          Deed of Trust,
                                                           Assignment of Leases
                                                           and Rents, Security
                                                           Agreement, Fixture
                                                           Filing and Financing
                                                           Statement, dated as
                                                           of March 26, 1999,
                                                           by Registrant to
                                                           First American Title
                                                           Insurance Company as
                                                           Trustee for the
                                                           benefit of The Bank
                                                           of New York, as
                                                           Agent for the
                                                           Lenders from time to
                                                           time party to the
                                                           Agreement included as
                                                           Exhibit 10.3.1 above,
                                                           (terminated in
                                                           connection with the
                                                           refinancing obtained
                                                           pursuant to the
                                                           Loan and Security
                                                           Agreement included as
                                                           Exhibit 10.3.3 below)
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.1.h to
                                                           Registrant's Form
                                                           10-K for the year
                                                           ended March 31, 1999.

                                         10.3.1.i          Patent and Trademark
                                                           Security Agreement,
                                                           dated as of March 26,
                                                           1999, by Registrant
                                                           and certain of its
                                                           subsidiaries to The
                                                           Bank of New York, as
                                                           Agent for the benefit
                                                           of the Lenders from
                                                           time to time party to
                                                           the Agreement
                                                           included as Exhibit
                                                           10.3.1 above,
                                                           (terminated in
                                                           connection with the
                                                           refinancing obtained
                                                           pursuant to the
                                                           Loan and Security
                                                           Agreement included as
                                                           Exhibit 10.3.3 below)
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.1 to
                                                           Registrant's Form
                                                           10-K for the year
                                                           ended March 31, 1999.

                                         10.3.1.j          Pledge Agreement,
                                                           dated as of March 26,
                                                           1999, by Registrant
                                                           to The Bank of New
                                                           York, as Agent for
                                                           the benefit of the
                                                           Lenders from time to
                                                           time party to the
                                                           Agreement included as
                                                           Exhibit 10.3.1 above,
                                                           (terminated in
                                                           connection with the
                                                           refinancing obtained
                                                           pursuant to the
                                                           Loan and Security
                                                           Agreement included as
                                                           Exhibit 10.3.3 below)
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.1.j to
                                                           Registrant's Form

                                       49
<PAGE>   50

                                                           10-K for the year
                                                           ended March 31, 1999.

                                         10.3.1.k          Third Waiver
                                                           Extension Agreement
                                                           and Amendment No. 5,
                                                           dated as of June 29,
                                                           1999, with respect to
                                                           the Agreement
                                                           included as Exhibit
                                                           10.3.1 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.1.a to
                                                           Registrant's Form 8-K
                                                           dated July 1, 1999.

                           10.3.2        Business Purpose Revolving Promissory
                                         Note (Swing Line) made by Registrant in
                                         favor of Bank One, NA, dated August 4,
                                         1998, (refinanced and replaced by the
                                         Loan and Security Agreement included
                                         as Exhibit 10.3.3 below), incorporated
                                         herein by reference to Exhibit 10.3.4
                                         to Registrant's Form 10-Q for the
                                         quarter ended June 30, 1998.

                                         10.3.2.a          Consent, dated as of
                                                           December 29, 1998,
                                                           with respect to the
                                                           Note included as
                                                           Exhibit 10.3.2 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.4.a to
                                                           Registrant's Form
                                                           10-Q for the quarter
                                                           ended December 31,
                                                           1998.

                                         10.3.2.b          Further Consent,
                                                           dated as of February
                                                           12, 1999, with
                                                           respect to the Note
                                                           included as Exhibit
                                                           10.3.2 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.4.a to
                                                           Registrant's Form
                                                           10-Q for the quarter
                                                           ended December 31,
                                                           1998.

                                         10.3.2.c          Second Further
                                                           Consent and
                                                           Agreement, dated as
                                                           of March 26, 1999,
                                                           with respect to the
                                                           Note included as
                                                           Exhibit 10.3.2 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.4.c b to
                                                           Registrant's Form 8-K
                                                           dated April 1, 1999.

                                         10.3.2.d          Amended and Restated
                                                           Security Agreement,
                                                           dated as of March 26,
                                                           1999, by and among
                                                           Registrant and Bank
                                                           One, NA with respect
                                                           to the Note included
                                                           as Exhibit 10.3.2
                                                           above (terminated in
                                                           connection with the
                                                           refinancing obtained
                                                           pursuant to the Loan
                                                           and Security
                                                           Agreement included
                                                           as Exhibit 10.3.3
                                                           below), incorporated
                                                           herein by reference
                                                           to Exhibit 10.3.2.d
                                                           to Registrant's Form
                                                           10-K for the year
                                                           ended March 31, 1999.

                                         10.3.2.e          Deed of Trust,
                                                           Assignment of Leases
                                                           and Rents, Security
                                                           Agreement, Fixture
                                                           Filing and Financing
                                                           Statement, dated as
                                                           of March 26, 1999,
                                                           by Registrant to
                                                           First American Title
                                                           Insurance Company as
                                                           Trustee for the


                                       50
<PAGE>   51

                                                           benefit of Bank One,
                                                           NA with respect to
                                                           the Note included as
                                                           Exhibit 10.3.2 above
                                                           (terminated in
                                                           connection with the
                                                           refinancing obtained
                                                           pursuant to the Loan
                                                           and Security
                                                           Agreement included
                                                           as Exhibit 10.3.3,
                                                           below). incorporated
                                                           herein by reference
                                                           to Exhibit 10.3.2.e
                                                           to  Registrant's Form
                                                           10-K for the year
                                                           ended March 31,
                                                           1999.

                                         10.3.2.f          Patent and Trademark
                                                           Security Agreement,
                                                           dated as of March 26,
                                                           1999, by Registrant
                                                           and certain of its
                                                           subsidiaries to Bank
                                                           One, NA with respect
                                                           to the Note included
                                                           as Exhibit 10.3.2
                                                           above (terminated in
                                                           connection with the
                                                           refinancing obtained
                                                           pursuant to the Loan
                                                           and Security
                                                           Agreement included
                                                           as Exhibit 10.3.3
                                                           below), incorporated
                                                           herein by reference
                                                           to Exhibit 10.3.2.f
                                                           to Registrant's Form
                                                           10-K for the year
                                                           ended March 31, 1999.

                                         10.3.2.g          Third Further Consent
                                                           and Note Modification
                                                           Agreement, dated as
                                                           of June 29, 1999,
                                                           with respect to the
                                                           Note included as
                                                           Exhibit 10.3.2 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.2.g b to
                                                           Registrant's Form 8-K
                                                           dated July 1, 1999.

                  10.3.3   Loan and Security Agreement, dated as of August 26,
                           1999, by and between the Registrant, the Lenders
                           party thereto, and Foothill Capital Corporation, as
                           Agent, incorporated by reference to Exhibit 10.3.3
                           to Registrant's Form 8-K dated August 30, 1999.

                           10.3.3.a     Pledge Agreement, dated as of August 26,
                                        1999, between Registrant and Foothill
                                        Capital Corporation, as Agent for the
                                        Lenders from time to time party to the
                                        Loan and Security Agreement included as
                                        Exhibit 10.3.3 above, pledging, among
                                        other assets, the stock owned by
                                        Registrant in Aironet Wireless
                                        Communications, Inc. and Registrant
                                        subsidiaries to Agent as collateral to
                                        secure Registrant's obligations under
                                        the Loan and Security Agreement, filed
                                        herewith.

                           10.3.3.b     Real Property Deed of Trust (Harris
                                        County, Texas), made as of August 26,
                                        1999 by Registrant unto Joseph C.
                                        Mathews as trustee for the benefit of
                                        Foothill Capital Corporation, as Agent
                                        for the Lenders from time to time party
                                        to the Loan and Security Agreement
                                        included as Exhibit 10.3.3 above, filed
                                        herewith.

                           10.3.3.c     Patent, Trademark, Copyright and License
                                        Mortgage, made as of August 26, 1999 by
                                        Registrant in favor of Foothill Capital
                                        Corporation ,as Agent for the Lenders
                                        from time to time party to the Loan and
                                        Security Agreement included as Exhibit
                                        10.3.3 above, filed herewith.

                  10.4     Amended and Restated Agreement between 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, 1998.

                  10.5     License, Rights, and Supply Agreement between Aironet
                           Wireless Communications, Inc. and Registrant, dated
                           as of March 31, 1998, incorporated herein by
                           reference to Exhibit 0.5 to Registrant's Form
                           10-K for the year ended March 31, 1998.

                           10.5.1        First Amendment, dated as of March 8,
                                         1996, to the Agreement included as
                                         Exhibit 10.5 above, filed herewith.

                           10.5.2        Agreement, dated as of November 8,
                                         1999, by and among Registrant, Cisco
                                         Systems, Inc. and Aironet Wireless
                                         Communications, Inc., filed herewith.

                  10.6     Asset Purchase Agreement by and among Dynatech
                           Corporation, IAQ Corporation, Registrant and Itronix
                           Corporation, then a subsidiary of Registrant, dated
                           as of December 28, 1996, incorporated herein by
                           reference to Exhibit 2 to Registrant's Form 8-K dated
                           December 31, 1996.

                  10.7     Agreement of Purchase and Sale of Assets by and among
                           Vision Newco, Inc., a subsidiary of 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.

                  10.8     Stock Purchase Agreement by and among Registrant and
                           FED Corporation, dated as of March 31, 1998, with


                                       51
<PAGE>   52

                           respect to FED Corporation's purchase of all of the
                           stock of Virtual Vision, Inc. (fka Vision Newco,
                           Inc.), incorporated herein by reference to Exhibit
                           10.7 to Registrant's Form 10-K for the year ended
                           March 31, 1998.

                           10.8.1        Escrow Agreement by and among FED
                                         Corporation, Registrant and First Union
                                         National Bank, with respect to the
                                         transactions under the Stock Purchase
                                         Agreement included as Exhibit 10.7
                                         above, incorporated herein by reference
                                         to Exhibit 10.7.1 to Registrant's Form
                                         10-K for the year ended March 31, 1998.

                  10.9     Subscription Agreement by and among New Meta
                           Licensing Corporation, a subsidiary of Registrant,
                           and certain officers of 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.

                  10.10    Amended and Restated Shareholder Agreement by and
                           among Metanetics Corporation fka New Meta Licensing
                           Corporation, and its Shareholders, including the
                           officers of Registrant party to the Agreement
                           included as Exhibit 10.8 above, dated as of March 28,
                           1996, incorporated herein by reference to Exhibit
                           10.9.3 to Registrant's Form 10-K for the year ended
                           March 31, 1996.

                           10.10.1       First Amendment, dated as of March 30,
                                         1996, to the Agreement included as
                                         Exhibit 10.9 above, incorporated herein
                                         by reference to Exhibit 10.9.4 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1996.

                  10.11    Stock Purchase Agreement by and among Meta Holding
                           Corporation, a subsidiary of Registrant, and certain
                           officers of Registrant as Purchasers, dated as of
                           March 30, 1996, incorporated herein by reference to
                           Exhibit 10.8 to Registrant's Form 10-K for the year
                           ended March 31, 1997.

                  10.12    Stock Purchase Agreement by and between Metanetics
                           Corporation, a subsidiary of Registrant fka New Meta
                           Licensing Corporation, and Accipiter II, Inc., dated
                           as of September 30, 1996, incorporated herein by
                           reference to Exhibit 10.8 to Registrant's Form 10-Q
                           for the quarter ended September 30, 1996.

                  10.13    Stock Purchase Agreement by and between Registrant
                           and Telantis Capital, Inc., dated as of March 31,
                           1997, incorporated herein by reference to Exhibit
                           10.10 to Registrant's Form 10-K for the year ended
                            March 31, 1997.

                  10.14    Subscription Agreement by and among Aironet Wireless
                           Communications, Inc., a subsidiary of Registrant, and
                           the investors who executed the same, dated as of
                           March 31, 1998, incorporated herein by reference to
                           Exhibit 10.14 to Registrant's Form 10-K for the year
                           ended March 31, 1998.



                                       52

<PAGE>   53

                           10.14.1       Form of Warrant issued pursuant to the
                                         Subscription Agreement included as
                                         Exhibit 10.14 above, incorporated
                                         herein by reference to Exhibit 10.14.1
                                         to Registrant's Form 10-K for the year
                                         ended March 31, 1998.

                           10.14.2       Stockholders Agreement by and among
                                         Aironet Wireless Communications, Inc.
                                         and its Stockholders party thereto,
                                         including Registrant and the investors
                                         party to the Subscription Agreement
                                         included as Exhibit 10.14 above,
                                         entered into as of March 31, 1998 in
                                         connection with the transactions under
                                         the Subscription Agreement,
                                         incorporated herein by reference to
                                         Exhibit 10.14.2 to Registrant's Form
                                         10-K for the year ended March 31, 1998.

                           10.14.3       Registration Rights Agreement by and
                                         among Aironet Wireless Communications,
                                         Inc. and certain of its security
                                         holders, including Registrant and the
                                         investors party to the Subscription
                                         Agreement included as Exhibit 10.14
                                         above, entered into as of March 31,
                                         1998 in connection with the
                                         transactions under the Subscription
                                         Agreement, incorporated herein by
                                         reference to Exhibit 10.14.3 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1998.

                  10.15    Stockholder Apgreement, made as of November 8, 1999
                           between Cisco Systems, Inc., Osprey Acquisition
                           Corporation and Registrant, and related Irrevocable
                           Proxy, executed by Registrant as a stockholder of
                           Aironet Wireless Communications, Inc. as an
                           inducement toward the entry by Cisco Systems, Inc.
                           and Osprey Acquisition Corporation into an Agreement
                           and Plan of Merger and Reorganization dated of even
                           date providing for the acquisition of Aironet by
                           Cisco, filed herewith.

                  10.16    DFS Vendor Agreement between Registrant and Deutsche
                           Financial Services Corporation, dated as of September
                           30, 1998, incorporated herein by reference to Exhibit
                           10.15 to Registrant's Form 10-Q for the quarter ended
                           December 31, 1998.

                  27.      Financial Data Schedule as of June 30, 1999, filed
                           herewith.

            (b)  Reports on Form 8-K

            During the second quarter of fiscal 2000 to which this Annual
Report on Form 10-Q relates, the Registrant filed the following Current Reports
on Form 8-K: (1) Current Report bearing a cover date of July 1, 1999, attaching
Registrant's press release of that date, announcing the further extension of
waivers under Registrant's revolving Credit facility and separate business
purpose revolving promissory note, effective through August 30, 1999, and
certain related amendments to the underlying credit agreements as well as a
delay in the filing of the Form 10-K for Registrant's fiscal year ended March
31, 1999 pending completion of the closing of the Registrant's fourth fiscal
quarter and the annual audit of its fiscal 1999 financial statment; (ii)
Current Report bearing a cover date of July 14, 1999, which announced
Registrant's financial results for the fourth quarter of fiscal 1999, and the
fiscal year, ended March 31, 1999 (the press release, as incorporated in the
Form 8-K, includes unaudited condensed consolidated balance sheets for the
Registrant for March 31, 1999 and March 31, 1998 and unaudited condensed
consolidated statements of operations for Registrant for the quarterly and
twelve-month periods ended March 31, 1999 and March 31, 1998, which finanial
statement give effect to the restatements previously discussed in the
Registrant's February 23, 1999, March 1, 1999 and June 16, 1999 press releases,
each of which have been filed under cover of a Form 8-K bearing a cover date as
of the respective press release dates); (iii) Current Report bearing a cover
date of July 19, 1999, as updated by Amendment No. 1 thereto filed under cover
of a Form 8-K/A bearing the same cover date, reporting the Company's engagement
of Arthur Andersen LLP to audit the company's consolidated financial statements
for the fiscal year ending March 31, 2000 and the dismissal of
PricewaterhouseCoopers LLP as the principal accountant to audit the company's
consolidated financial statements effective upon the completion of the audit of
the Company's consolidated financial statements for the fiscal year ended March
31, 1999 and the issuance of their report thereon; and (iv) Current Report on
bearing a cover date of August 30, 1999, reporting the closing of its new $100
million senior secured credit facility with Foothill Capital Corporation with
which the Registrant refinanced its predecessor revolving credit facility and
separate business purpose revolving promissory note referenced in (i) above in
this Item 6(b).

                                       53
<PAGE>   54


                               TELXON CORPORATION

                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934,the
registrant has duly caused this Form 10-Q to be signed and on its behalf by the
undersigned thereunto duly authorized.


Date:             November 15, 1999


                                                       TELXON CORPORATION
                                                       (Registrant)



                                                       /s/  Woody M. McGee
                                                       -----------------------
                                                       Woody M. McGee,
                                                       Vice President and Chief
                                                         Financial Officer




<PAGE>   55



                               TELXON CORPORATION

                                    EXHIBITS

                                       TO

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1999




<PAGE>   56


                                INDEX TO EXHIBITS

Where
Filed
-----

*                 3.1      Restated Certificate of Incorporation of Registrant,
                           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.

*                 3.2      Amended and Restated By-Laws of Registrant, as
                           amended, incorporated herein by reference to Exhibit
                           3.2 to Registrant's Form 10-K for the year ended
                           March 31, 1999.

*                 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 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.

*                 4.2      Text of form of Certificate for 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 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.

*                          4.3.2         Letter agreement among Registrant,
                                         KeyBank National Association and Harris
                                         Trust and



<PAGE>   57

                                         Savings Bank, dated June 11, 1997, with
                                         respect to the appointment of Harris
                                         Trust and Savings Bank as successor
                                         Rights Agent under the Rights Agreement
                                         included as Exhibit 4.3 above,
                                         incorporated herein by reference to
                                         Exhibit 4.3.2 to Registrant's Form 10-K
                                         for the year ended March 31, 1997.

*                 4.4      Indenture by and between 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 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 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 Registrant.

*                          10.1.1        Amended and Restated Retirement and
                                         Uniform Matching Profit-Sharing Plan of
                                         Registrant, as amended, incorporated
                                         herein by reference to Exhibit 10.1.1
                                         to Registrant's Form 10-K for the year
                                         ended March 31, 1999.

*                          10.1.2        1990 Stock Option Plan for employees of
                                         Registrant, as amended, incorporated
                                         herein by reference to Exhibit 10.1.2
                                         to Registrant's Form 10-Q for the
                                         quarter ended September 30, 1997.



<PAGE>   58

**                         10.1.3        1990 Stock Option Plan for Non-Employee
                                         Directors of Registrant, as amended,
                                         filed herewith.

*                          10.1.4        Non-Qualified Stock Option Agreement
                                         between Registrant and Raj Reddy,
                                         dated as of October 17, 1988,
                                         incorporated herein by reference to
                                         Exhibit 10.1.4 to Registrant's Form
                                         10-K for the year ended March 31,
                                         1999.

**                                       10.1.4.a           Description of
                                                            amendments extending
                                                            the term of the
                                                            Agreement included
                                                            as Exhibit 10.1.4
                                                            above, filed
                                                            herewith.

*                          10.1.5        1992 Restricted Stock Plan of
                                         Registrant, as amended, incorporated
                                         herein by reference to Exhibit 10.1.5
                                         to Registrant's Form 10-Q for the
                                         quarter ended December 31, 1998.

*                          10.1.6        1995 Employee Stock Purchase Plan of
                                         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        1996 Stock Option Plan for employees,
                                         directors and advisors of Aironet
                                         Wireless Communications, Inc., a
                                         subsidiary of Registrant, incorporated
                                         herein by reference to Exhibit 10.1.7
                                         to Registrant's Form 10-K for the year
                                         ended March 31, 1997.

*                                        10.1.7.a           Amended and
                                                            Restated 1996 Stock
                                                            Option Plan for
                                                            employees, directors
                                                            and advisors of
                                                            Aironet Wireless
                                                            Communications,
                                                            Inc., incorporated
                                                            herein by reference
                                                            to Exhibit 10.1.7.a
                                                            to Registrant's Form
                                                            10-K for the year
                                                            ended March 31,
                                                            1998.

*                                        10.1.7.b           First Amendment to
                                                            Amended and Restated
                                                            1996 Stock Option
                                                            Plan for employees,
                                                            directors and
                                                            advisors of Aironet
                                                            Wireless
                                                            Communications,
                                                            Inc., incorporated
                                                            herein by reference
                                                            to Exhibit 10.1.7.b
                                                            to Registrant's Form
                                                            10-K for the year
                                                            ended March 31,
                                                            1999.

**                         10.1.8        1999 Stock Option Plan for Non-Employee
                                         Directors of Aironet Wireless
                                         Communications, Inc., filed herewith.

*                          10.1.9        Non-Competition Agreement by and
                                         between Registrant and Robert F.
                                         Meyerson, effective



<PAGE>   59

                                         February 27, 1997, incorporated herein
                                         by reference to Exhibit 10.1.8 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1997.

*                          10.1.10       Employment Agreement between Registrant
                                         and John W. Paxton, Sr., effective as
                                         of March 22, 1999, incorporated herein
                                         by reference to Exhibit 10.1.10 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1999.

*                          10.1.11       Employment Agreement between Registrant
                                         and Kenneth A. Cassady, effective as
                                         of June 7, 1999, incorporated herein
                                         by reference to Exhibit 10.1.11 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1999.

*                          10.1.12       Employment Agreement between Registrant
                                         and Woody M. McGee, effective as of
                                         June 1, 1999, incorporated herein by
                                         reference to Exhibit 10.1.12 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1999.

*                          10.1.13       Amended and Restated Employment
                                         Agreement between Registrant and James
                                         G. Cleveland, effective as of April 1,
                                         1997, incorporated herein by reference
                                         to Exhibit 10.1.10 to Registrant's Form
                                         10-K for the year ended March 31, 1998.

*                          10.1.14       Amended and Restated Employment
                                         Agreement between Registrant and Danny
                                         R. Wipff, effective as of April 1,
                                         1997, incorporated herein by reference
                                         to Exhibit 10.1.14 to Registrant's Form
                                         10-K for the year ended March 31, 1998.

*                          10.1.15       Description of Key Employee Retention
                                         Program, incorporated herein by
                                         reference to Exhibit 10.1.15 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1998.

*                                        10.1.15.a          Form of letter
                                                            agreement made with
                                                            key employees
                                                            selected under the
                                                            retention program
                                                            described in Exhibit
                                                            10.1.15 above,
                                                            incorporated herein
                                                            by reference to
                                                            Exhibit 10.1.15.a to
                                                            Registrant's Form
                                                            10-K for the year
                                                            ended March 31,
                                                            1998.

*                          10.1.16       Employment Agreement, effective as of
                                         April 1, 1997, between Registrant and
                                         Frank E. Brick, a former executive
                                         officer, incorporated herein by
                                         reference to Exhibit 10.1.9 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1998.

*                          10.1.17       Amended and Restated Employment
                                         Agreement, effective as of April 1,
                                         1997, between Registrant and Kenneth W.
                                         Haver, a former executive officer,
                                         incorporated herein by reference to
                                         Exhibit 10.1.11 to Registrant's Form
                                         10-K for the year ended March 31, 1998.



<PAGE>   60

*                          10.1.18       Amended and Restated Employment
                                         Agreement, effective as of April 1,
                                         1997, between Registrant and David W.
                                         Porter, a former executive officer,
                                         incorporated herein by reference to
                                         Exhibit 10.1.13 to Registrant's Form
                                         10-K for the year ended March 31, 1998.

*                          10.1.19       Letter agreement of Registrant with

                                         Robert A. Goodman, dated as of
                                         December 29, 1997 and executed and
                                         delivered January 20, 1998, for
                                         continued consulting services following
                                         certain changes in his law practice,
                                         incorporated herein by reference to
                                         Exhibit 10.1.17 to Registrant's Form
                                         10-K for the year ended March 31,
                                         1998.

**                         10.1.20       Letter agreement of Registrant
                                         with R. Dave Garwood, dated August 30,
                                         1999, for MRP-II consulting services,
                                         filed herewith.

                  10.2     Material Leases of Registrant.

*                          10.2.1        Lease between Registrant and 3330 W.
                                         Market Properties, dated as of
                                         December 30, 1986, for premises at
                                         3330 West Market Street, Akron, Ohio,
                                         incorporated herein by reference to
                                         Exhibit 10.2.1 to Registrant's Form
                                         10-K for the year ended March 31,
                                         1999.

*                          10.2.2        Lease Agreement between The Woodlands
                                         Commercial Properties Company, L.P. and
                                         Registrant, made and entered into as
                                         of January 16, 1998, including Rider
                                         No. 1 thereto, for premises at 8302
                                         New Trails Drive, The Woodlands,
                                         Texas, incorporated herein by reference
                                         to Exhibit 10.2.2 to Registrant's Form
                                         10-K for the year ended March 31,
                                         1998.

*                          10.2.3        Standard Office Lease (Modified Net
                                         Lease) between Registrant and John D.
                                         Dellagnese III, dated as of July 19,
                                         1995, for premises at 3875 Embassy
                                         Parkway, Bath, Ohio, 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.

*                                        10.2.3.a           Second Addendum,
                                                            dated as of October
                                                            5, 1995, to the
                                                            Lease included as
                                                            Exhibit 10.2.3
                                                            above, incorporated
                                                            herein by reference
                                                            to Exhibit 10.2.4.a
                                                            to Registrant's Form
                                                            10-K for the year
                                                            ended March 31,
                                                            1996.

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

*                                        10.2.3.c          Fourth Addendum,
                                                            dated as of April
                                                            16, 1996, to the
                                                            Lease included as
                                                            Exhibit 10.2.3
                                                            above, incorporated
                                                            herein by



<PAGE>   61
                                                            reference to Exhibit
                                                            10.2.2.c to
                                                            Registrant's Form
                                                            10-Q for the quarter
                                                            ended June 30, 1997.

*                                        10.2.3.d           Fifth Addendum,
                                                            dated as of June 24,
                                                            1997, to the Lease
                                                            included as Exhibit
                                                            10.2.3 above,
                                                            incorporated herein
                                                            by reference to
                                                            Exhibit 10.2.2.d to
                                                            Registrant's Form
                                                            10-Q for the quarter
                                                            ended June 30, 1997.

*                                        10.2.3.e           Sixth Addendum,
                                                            dated as of March,
                                                            1998, to the Lease
                                                            included as Exhibit
                                                            10.2.3 above,
                                                            incorporated herein
                                                            by reference to
                                                            Exhibit 10.2.3.e to
                                                            Registrant's Form
                                                            10-Q for the quarter
                                                            ended September 30,
                                                            1998.

*                                        10.2.3.f           Seventh Addendum,
                                                            dated as of July 20,
                                                            1998, to the Lease
                                                            included as Exhibit
                                                            10.2.3 above,
                                                            incorporated herein
                                                            by reference to
                                                            Exhibit 10.2.3.f to
                                                            Registrant's Form
                                                            10-Q for the quarter
                                                            ended September 30,
                                                            1998.

*                                        10.2.3.g           Eighth Addendum,
                                                            dated as of
                                                            September 8, 1998,
                                                            to the Lease
                                                            included as Exhibit
                                                            10.2.3 above,
                                                            incorporated herein
                                                            by reference to
                                                            Exhibit 10.2.3.g to
                                                            Registrant's Form
                                                            10-Q for the quarter
                                                            ended September 30,
                                                            1998.

*                                        10.2.3.h           Sublease Agreement,
                                                            dated as of
                                                            September 1, 1998,
                                                            between Registrant
                                                            and Aironet Wireless
                                                            Communications, Inc.
                                                            for the premises
                                                            subject to the Lease
                                                            included as Exhibit
                                                            10.2.3 above, as
                                                            amended through the
                                                            Eighth Addendum
                                                            thereto included as
                                                            Exhibit 10.2.3.g
                                                            above, incorporated
                                                            herein by reference
                                                            to Exhibit 10.2.3.h
                                                            to Registrant's Form
                                                            10-K for the year
                                                            ended March 31,
                                                            1999.

*                                        10.2.3.i           Renewal, dated June
                                                            16, 1999, with
                                                            respect to the
                                                            Sublease Agreement
                                                            included as Exhibit
                                                            10.2.3.h above,
                                                            incorporated herein
                                                            by reference to
                                                            Exhibit 10.2.3.i to
                                                            Registrant's Form
                                                            10-K for the year
                                                            ended March 31,
                                                            1999.
<PAGE>   62

*                          10.2.4        Lease Contract between  Desarrollos \
                                         Inmobiliarios Paso del Norte, S.A. de
                                         C.V. and Productos y Servicios de
                                         Telxon, S.A. de C.V., a subsidiary of
                                         Registrant, for premises in Ciudad
                                         Juarez, Chihuahua, Mexico, made and
                                         entered into as of April 10, 1997,
                                         incorporated herein by reference to
                                         Exhibit 10.2.4 to Registrant's Form
                                         10-K for the year ended March 31,
                                         1998.

                  10.3     Credit Agreements of Registrant.

*                          10.3.1        Credit Agreement by and among
                                         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,
                                         (refinanced and replaced by the Loan
                                         and Security Agreement included as
                                         Exhibit  10.3.3 below)  incorporated
                                         herein by reference to Exhibit 10.3.2
                                         to Registrant's Form 10-K for the year
                                         ended March 31, 1996.

*                                        10.3.1.a          Amendment No. 1,
                                                           dated as of August
                                                           6, 1996, to the
                                                           Agreement included as
                                                           Exhibit 10.3.1 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.2.a to
                                                           Registrant's Form
                                                           8-K dated August 16,
                                                           1996.

*                                        10.3.1.b          Amendment No. 2,
                                                           dated as of December
                                                           16, 1996, to the
                                                           Agreement included
                                                           as Exhibit 10.3.1
                                                           above, incorporated
                                                           herein by reference
                                                           to Exhibit 10.3.2.c
                                                           to Registrant's Form
                                                           8-K dated December
                                                           16, 1996.

*                                        10.3.1.c          Amendment No. 3,
                                                           dated as of December
                                                           12, 1997, to the
                                                           Agreement included as
                                                           Exhibit 10.3.1 above,
                                                           included herein by
                                                           reference to Exhibit
                                                           10.3.1.d to
                                                           Registrant's Form
                                                           10-K for the year
                                                           ended March 31,
                                                           1998.

*                                        10.3.1.d          Waiver and Agreement,
                                                           dated as of December
                                                           29, 1998, with
                                                           respect to the
                                                           Agreement included as
                                                           Exhibit 10.3.1 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.1.e to
                                                           Registrant's Form
                                                           10-Q for the quarter
                                                           ended December 31,
                                                           1998.

*                                        10.3.1.e          Waiver Extension and
                                                           Agreement, dated as
                                                           of February 12, 1999,
                                                           with respect to the
                                                           Agreement included as
                                                           Exhibit 10.3.1 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.1.f to
                                                           Registrant's Form
                                                           10-Q for the quarter
                                                           ended December 31,
                                                           1998.




<PAGE>   63

*                                        10.3.1.f          Second Waiver
                                                           Extension Agreement
                                                           and Amendment No. 4,
                                                           dated as of March 26,
                                                           1999, with respect to
                                                           the Agreement
                                                           included as Exhibit
                                                           10.3.1 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.1.a to
                                                           Registrant's Form 8-K
                                                           dated April 1, 1999.

*                                        10.3.1.g          Amended and Restated
                                                           Security Agreement,
                                                           dated as of March 26,
                                                           1999, by and among
                                                           Registrant and The
                                                           Bank of New York, as
                                                           Agent for the
                                                           Lenders from time to
                                                           time party to the
                                                           Agreement included
                                                           as Exhibit 10.3.1
                                                           (terminated in
                                                           connection with the
                                                           refinancing obtained
                                                           pursuant to the Loan
                                                           and Security
                                                           Agreement included
                                                           as Exhibit 10.3.3
                                                           below) above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.1.b to
                                                           Registrant's Form
                                                           8-K dated April 1,
                                                           1999.

*                                        10.3.1.h          Deed of Trust,
                                                           Assignment of Leases
                                                           and Rents, Security
                                                           Agreement, Fixture
                                                           Filing and Financing
                                                           Statement, dated as
                                                           of March 26, 1999,
                                                           by Registrant to
                                                           First American Title
                                                           Insurance Company as
                                                           Trustee for the
                                                           benefit of The Bank
                                                           of New York, as
                                                           Agent for the Lenders
                                                           from time to time
                                                           party to the
                                                           Agreement included as
                                                           Exhibit 10.3.1 above,
                                                           (terminated in
                                                           connection with the
                                                           refinancing obtained
                                                           pursuant to the Loan
                                                           and Security
                                                           Agreement included
                                                           as Exhibit 10.3.3
                                                           below) incorporated
                                                           herein by reference
                                                           to Exhibit 10.3.1.h
                                                           to Registrant's Form
                                                           10-K for the year
                                                           ended March 31,
                                                           1999.

*                                        10.3.1.i          Patent and  Trademark
                                                           Security Agreement,
                                                           dated as of March
                                                           26, 1999, by
                                                           Registrant and
                                                           certain of its
                                                           subsidiaries to The
                                                           Bank of New York, as
                                                           Agent for the benefit
                                                           of the Lenders from
                                                           time to time party
                                                           to the Agreement
                                                           included as Exhibit
                                                           10.3.1 above,
                                                           (terminated in
                                                           connection with the
                                                           refinancing obtained
                                                           pursuant to the Loan
                                                           and Security
                                                           Agreement included
                                                           as Exhibit 10.3.3
                                                           below) incorporated
                                                           herein by reference
                                                           to Exhibit 10.3.1.i
                                                           to Registrant's Form
                                                           10-K for the year
                                                           ended March 31, 1999.

*                                        10.3.1.j          Pledge Agreement,
                                                           dated as of March
                                                           26, 1999, by
                                                           Registrant to The
                                                           Bank of New York, as
                                                           Agent for the benefit
                                                           of the Lenders from
                                                           time to time party to
                                                           the Agreement
                                                           included as Exhibit
                                                           10.3.1 above,
                                                           (terminated in
                                                           connection with the
                                                           refinancing obtained
                                                           pursuant to the Loan
                                                           and Security
                                                           Agreement included
                                                           as Exhibit 10.3.3
                                                           below) incorporated
                                                           herein by reference
                                                           to Exhibit 10.3.1.j
                                                           to Registrant's Form
                                                           10-K for the year
                                                           ended March 31, 1999.




<PAGE>   64

*                                        10.3.1.k          Third Waiver
                                                           Extension Agreement
                                                           and Amendment No. 5,
                                                           dated as of June 29,
                                                           1999, with respect
                                                           to the Agreement
                                                           included as Exhibit
                                                           10.3.1 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.1.a to
                                                           Registrant's Form
                                                           8-K dated July 1,
                                                           1999.

*                          10.3.2        Business Purpose Revolving Promissory
                                         Note (Swing Line) made by Registrant
                                         in favor of Bank One, NA, dated August
                                         4, 1998, (refinanced and replaced by
                                         the Loan and Security Agreement
                                         included as Exhibit 10.3.3 below)
                                         incorporated herein by reference to
                                         Exhibit 10.3.4 to Registrant's Form
                                         10-Q for the quarter ended June 30,
                                         1998.

*                                        10.3.2.a          Consent, dated as of
                                                           December 29, 1998,
                                                           with respect to the
                                                           Note included as
                                                           Exhibit 10.3.2
                                                           above, incorporated
                                                           herein by reference
                                                           to Exhibit 10.3.4.a
                                                           to Registrant's Form
                                                           10-Q for the quarter
                                                           ended December 31,
                                                           1998.

*                                        10.3.2.b          Further Consent,
                                                           dated as of February
                                                           12, 1999, with
                                                           respect to the Note
                                                           included as Exhibit
                                                           10.3.2 above,
                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.4.a to
                                                           Registrant's Form
                                                           10-Q for the quarter
                                                           ended December 31,
                                                           1998.

*                                        10.3.2.c          Second Further
                                                           Consent and
                                                           Agreement, dated as
                                                           of March 26, 1999,
                                                           with respect to the
                                                           Note included as
                                                           Exhibit 10.3.2
                                                           above, incorporated
                                                           herein by reference
                                                           to Exhibit 10.3.4.c
                                                           b to Registrant's
                                                           Form 8-K dated April
                                                           1, 1999.

*                                        10.3.2.d          Amended and Restated
                                                           Security Agreement,
                                                           dated as of March
                                                           26, 1999, by and
                                                           among Registrant and
                                                           Bank One, NA with
                                                           respect to the Note
                                                           included as Exhibit
                                                           10.3.2 above
                                                           (terminated in
                                                           connection with the
                                                           refinancing obtained
                                                           pursuant to the Loan
                                                           and Security
                                                           Agreement included
                                                           as Exhibit 10.3.3
                                                           below), incorporated
                                                           herein by reference
                                                           to Exhibit 10.3.2.d
                                                           to Registrant's Form
                                                           10-K for the year
                                                           ended March 31,
                                                           1999.

*                                        10.3.2.e          Deed of Trust,
                                                           Assignment of Leases
                                                           and Rents, Security
                                                           Agreement, Fixture
                                                           Filing and Financing
                                                           Statement, dated as
                                                           of March 26, 1999,
                                                           by Registrant to
                                                           First American Title
                                                           Insurance Company as
                                                           Trustee for the
                                                           benefit of Bank One,
                                                           NA with respect to
                                                           the Note included as
                                                           Exhibit 10.3.2
                                                           above, (terminated
                                                           in connection with
                                                           the refinancing
                                                           obtained pursuant to
                                                           the Loan and
                                                           Security Agreement
                                                           included as Exhibit
                                                           10.3.3 below)





<PAGE>   65

                                                           incorporated herein
                                                           by reference to
                                                           Exhibit 10.3.2.e to
                                                           Registrant's Form
                                                           10-K for the year
                                                           ended March 31,
                                                           1999.

*                                        10.3.2.f          Patent and Trademark
                                                           Security Agreement,
                                                           dated as of March
                                                           26, 1999, by
                                                           Registrant and
                                                           certain of its
                                                           subsidiaries to Bank
                                                           One, NA with respect
                                                           to the Note included
                                                           as Exhibit 10.3.2
                                                           above, (terminated
                                                           in connection with
                                                           the refinancing
                                                           obtained pursuant to
                                                           the Loan and
                                                           Security Agreement
                                                           included as Exhibit
                                                           10.3.3 below)
                                                           incorporated
                                                           herein by reference
                                                           to Exhibit 10.3.2.f
                                                           to Registrant's Form
                                                           10-K for the year
                                                           ended March 31,
                                                           1999.

*                                        10.3.2.g          Third Further Consent
                                                           and Note Modification
                                                           Agreement, dated as
                                                           of June 29, 1999,
                                                           with respect to the
                                                           Note included as
                                                           Exhibit 10.3.2
                                                           above, incorporated
                                                           herein by reference
                                                           to Exhibit 10.3.2.g
                                                           b to Registrant's
                                                           Form 8-K dated July
                                                           1, 1999.

*                          10.3.3       Loan and Security Agreement, dated as of
                                        August 26, 1999, by and between the
                                        Registrant, the Lenders party thereto,
                                        and Foothill Capital Corporation, as
                                        Agent, incorporated by reference to
                                        Exhibit 10.3.3 to Registrant's Form 8-K
                                        dated August 30, 1999.

**                                      10.3.3.a       Pledge Agreement, dated
                                                       as of August 26, 1999,
                                                       between Registrant and
                                                       Foothill Capital
                                                       Corporation, as Agent
                                                       for the Lenders from
                                                       time to time party to
                                                       the Loan and Security
                                                       Agreement included as
                                                       Exhibit 10.3.3 above,
                                                       pledging, among other
                                                       assets, the stock owned
                                                       by Registrant in Aironet
                                                       Wireless Communications,
                                                       Inc. and Registrant
                                                       subsidiaries to Agent as
                                                       collateral to secure
                                                       Registrant's obligations
                                                       under the Loan and
                                                       Security Agreement,
                                                       filed herewith.

**                                      10.3.3.b       Real Property Deed of
                                                       Trust (Harris County,
                                                       Texas), made as of August
                                                       26, 1999 by Registrant
                                                       unto Joseph C. Mathews
                                                       as trustee for the
                                                       benefit of Foothill
                                                       Capital Corporation, as
                                                       Agent for the Lenders
                                                       from time to time party
                                                       to the Loan and Security
                                                       Agreement included as
                                                       Exhibit 10.3.3 above,
                                                       filed herewith.

**                                      10.3.3.c       Patent, Trademark,
                                                       Copyright and License
                                                       Mortgage, made as of
                                                       August 26, 1999 by
                                                       Registrant in favor
                                                       of Foothill Capital
                                                       Corporation, as Agent
                                                       for the Lenders from
                                                       time to time party to
                                                       the Loan and Security
                                                       Agreement included as
                                                       Exhibit 10.3.3 above,
                                                       filed herewith.

*                 10.4     Amended and Restated Agreement between 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, 1998.

*                 10.5     License, Rights, and Supply Agreement between Aironet
                           Wireless Communications, Inc., and Registrant, dated
                           as of March 31, 1998, incorporated herein by
                           reference to Exhibit 10.5 to Registrant's Form 10-K
                           for the year ended March 31, 1998.

*                          10.5.1        First Amendment, dated as of March 8,
                                         1996, to the Agreement included as
                                         Exhibit 10.5 above, incorporated
                                         herein by reference to Exhibit 10.5.1
                                         to Registrant's Form 10-K for the year
                                         ended March 31, 1999.

**                         10.5.2        Agreement, dated as of November 8,
                                         1999, by and among Registrant, Cisco
                                         Systems, Inc. and Aironet Wireless
                                         Communications, Inc., filed herewith.

*                 10.6     Asset Purchase Agreement by and among Dynatech
                           Corporation, IAQ Corporation, Registrant and Itronix
                           Corporation, then a subsidiary of Registrant, dated
                           as of December 28, 1996, incorporated herein by
                           reference to Exhibit 2 to Registrant's Form 8-K dated
                           December 31, 1996.

*                 10.7     Agreement of Purchase and Sale of Assets by and among
                           Vision Newco, Inc., a subsidiary of 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.

*                 10.8     Stock Purchase Agreement by and among Registrant and
                           FED Corporation, dated as of March 31, 1998, with
                           respect to FED Corporation's purchase of all of the




<PAGE>   66
                           stock of Virtual Vision, Inc. (fka Vision Newco,
                           Inc.), incorporated herein by reference to Exhibit
                           10.7 to Registrant's Form 10-K for the year ended
                           March 31, 1998.

*                           10.8.1       Escrow Agreement by and among FED
                                         Corporation, Registrant and First
                                         Union National Bank, with respect to
                                         the transactions under the Stock
                                         Purchase Agreement included as Exhibit
                                         10.7 above, incorporated herein by
                                         reference to Exhibit 10.7.1 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1998.

*                 10.9     Subscription Agreement by and among New Meta
                           Licensing Corporation, a subsidiary of Registrant,
                           and certain officers of 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.

*                 10.10    Amended and Restated Shareholder Agreement by and
                           among Metanetics Corporation fka New Meta Licensing
                           Corporation, and its Shareholders, including the
                           officers of Registrant party to the Agreement
                           included as Exhibit 10.8 above, dated as of March 28,
                           1996, incorporated herein by reference to Exhibit
                           10.9.3 to Registrant's Form 10-K for the year ended
                           March 31, 1996.

*                          10.10.1       First Amendment, dated as of March 30,
                                         1996, to the Agreement included as
                                         Exhibit 10.9 above, incorporated
                                         herein by reference to Exhibit 10.9.4
                                         to Registrant's Form 10-K for the year
                                         ended March 31, 1996.

*                 10.11    Stock Purchase Agreement by and among Meta Holding
                           Corporation, a subsidiary of Registrant, and certain
                           officers of Registrant as Purchasers, dated as of
                           March 30, 1996, incorporated herein by reference to
                           Exhibit 10.8 to Registrant's Form 10-K for the year
                           ended March 31, 1997.

*                 10.12    Stock Purchase Agreement by and between Metanetics
                           Corporation, a subsidiary of Registrant fka New Meta
                           Licensing Corporation, and Accipiter II, Inc., dated
                           as of September 30, 1996, incorporated herein by
                           reference to Exhibit 10.8 to Registrant's Form 10-Q
                           for the quarter ended September 30, 1996.

*                 10.13    Stock Purchase Agreement by and between
                           Registrant and Telantis Capital, Inc., dated as of
                           March 31, 1997, incorporated herein by reference to
                           Exhibit 10.10 to Registrant's Form 10-K for the year
                           ended March 31, 1997.

*                 10.14    Subscription Agreement by and among Aironet Wireless
                           Communications, Inc., a subsidiary of Registrant, and
                           the investors who executed the same, dated as of
                           March 31, 1998, incorporated herein by reference to
                           Exhibit 10.14 to Registrant's Form 10-K for the year
                           ended March 31, 1998.




<PAGE>   67

*                          10.14.1       Form of Warrant issued pursuant to the
                                         Subscription Agreement included as
                                         Exhibit 10.14 above, incorporated
                                         herein by reference to Exhibit 10.14.1
                                         to Registrant's Form 10-K for the year
                                         ended March 31, 1998.

*                          10.14.2       Stockholders Agreement by and among
                                         Aironet Wireless Communications, Inc.
                                         and its Stockholders party thereto,
                                         including Registrant and the investors
                                         party to the Subscription Agreement
                                         included as Exhibit 10.14 above,
                                         entered into as of March 31, 1998 in
                                         connection with the transactions under
                                         the Subscription Agreement,
                                         incorporated herein by reference to
                                         Exhibit 10.14.2 to Registrant's Form
                                         10-K for the year ended March 31,
                                         1998.

*                          10.14.3       Registration Rights Agreement by and
                                         among Aironet Wireless Communications,
                                         Inc. and certain of its security
                                         holders, including Registrant and the
                                         investors party to the Subscription
                                         Agreement included as Exhibit 10.14
                                         above, entered into as of March 31,
                                         1998 in connection with the
                                         transactions under the Subscription
                                         Agreement, incorporated herein by
                                         reference to Exhibit 10.14.3 to
                                         Registrant's Form 10-K for the year
                                         ended March 31, 1998.

**                10.15    Stockholder Agreement, made as of November 8, 1999
                           between Cisco Systems, Inc., Osprey Acquisition
                           Corporation and Registrant, and related Irrevocable
                           Proxy, executed by Registrant as a stockholder of
                           Aironet Wireless Communications, Inc. as an
                           inducement toward the entry by Cisco Systems Inc. and
                           Osprey Acquisition Corporation into an Agreement and
                           Plan of Merger and Reorganization dated of even date
                           providing for the acquisition of Aironet by Cisco,
                           filed herewith.

*                 10.16    DFS Vendor Agreement between Registrant and Deutsche
                           Financial Services Corporation, dated as of September
                           30, 1998, incorporated herein by reference to Exhibit
                           10.15 to Registrant's Form 10-Q for the quarter ended
                           December 31, 1998.

**                27.      Financial Data Schedule as of June 30, 1999, filed
                           herewith.

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

*        Previously filed

**       Filed herewith