<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 December 31, 1996

                                       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)

          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
                                                  ------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes X . No   . 
   ---    --- 

At December 31, 1996, there were 16,082,310 outstanding shares of the
registrant's Common Stock, $.01 par value per share ("Common Stock").


<PAGE>   2

                       TELXON CORPORATION AND SUBSIDIARIES
        INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>

                                                                                                                  Page No.
                                                                                                                  --------
PART I.  FINANCIAL INFORMATION:
<S>                                                                                                                    <C>
       Item 1:             Consolidated Financial Statements
                                Balance Sheet...........................................................................3
                                Statement of Operations.................................................................4
                                Statement of Cash Flows.................................................................5
                                Notes to Consolidated Financial Statements..............................................6-10

       Item 2:             Management's Discussion and Analysis of Financial
                                Condition and Results of Operations....................................................11-21

PART II.          OTHER INFORMATION:

       Item 1:             Legal Proceedings...........................................................................22

       Item 6:             Exhibits and Reports on Form 8-K............................................................22-29

</TABLE>


                                       2
<PAGE>   3



                          PART I. FINANCIAL INFORMATION

                    ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS

                       TELXON CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>


                                                                   December 31,          March 31,
ASSETS                                                                1996                 1996
                                                                   -----------         ------------
Current assets:                                                    (Unaudited)

<S>                                                               <C>                    <C>      
     Cash (including cash equivalents of $50,000 and            
        $23,411) ...............................................  $  57,706              $  34,828
     Trading securities ........................................       --                      902
     Accounts receivable, net of allowance for doubtful
        accounts of $2,505 and $1,731...........................    103,552                133,592
     Notes and other accounts receivable .......................      9,288                  9,522
     Inventories ...............................................     85,945                111,132
     Prepaid expenses and other ................................      9,934                  9,939
                                                                  ---------              ---------
           Total current assets ................................    266,425                299,915
Property and equipment, net ....................................     46,414                 54,673
Intangible and other assets, net ...............................     38,960                 34,621
                                                                  ---------              ---------
         Total .................................................  $ 351,799              $ 389,209
                                                                  =========              =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Notes payable ...............................................  $   2,065              $      66
   Current portion of long-term debt ...........................        384                  1,156
   Accounts payable ............................................     31,307                 59,620
   Capital lease obligations due within one year ...............        622                    897
   Accrued liabilities .........................................     51,278                 52,181
                                                                  ---------              ---------
         Total current liabilities .............................     85,656                113,920
Capital lease obligations ......................................      1,127                  1,982
Convertible subordinated debentures ............................    107,224                107,224
Long-term debt .................................................       --                    1,331
Other long-term liabilities ....................................      2,339                  3,562
                                                                  ---------              ---------
          Total liabilities ....................................    196,346                228,019
Stockholders' equity:

    Preferred Stock, $1.00 par value per share; 500 shares              
       authorized, none issued..................................       --                     --

    Common Stock, $.01 par value per share; 50,000 shares
       authorized, 16,082 and 16,096 shares outstanding ........        161                    161
    Additional paid-in capital .................................     86,543                 85,750
    Retained earnings ..........................................     70,681                 78,096
    Equity adjustment for foreign currency translation .........     (1,062)                (2,064)
    Unearned compensation relating to restricted stock awards...       (258)                  (753)
    Treasury stock, 58 shares at cost ..........................       (612)                  --
                                                                  ---------              ---------
         Total stockholders' equity ............................    155,453                161,190
Commitments and contingencies ..................................       --                     --
                                                                  =========              =========
         Total .................................................  $ 351,799              $ 389,209
                                                                  =========              =========
</TABLE>

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

                                        3
<PAGE>   4


                       TELXON CORPORATION AND SUBSIDIARIES


                      CONSOLIDATED STATEMENT OF OPERATIONS

                    (In thousands, except per share amounts)

                                   (Unaudited)

<TABLE>
<CAPTION>

                                                       Three Months               Nine Months
                                                     Ended December 31,        Ended December 31,

                                                      1996         1995         1996         1995
                                                   ----------   --------      --------     --------
<S>                                                <C>          <C>         <C>          <C>       
Revenues:
   Product .....................................   $ 105,030    $ 113,247    $ 288,494    $ 291,382
   Customer service ............................      18,545       17,783       55,778       50,205
                                                   ---------    ---------    ---------    ---------
          Total revenues .......................     123,575      131,030      344,272      341,587

Cost of revenues:
   Product .....................................      76,646       68,461      204,915      171,935
   Customer service ............................      12,966       10,078       35,548       28,518
                                                   ---------    ---------    ---------    ---------
              Total cost of revenues ...........      89,612       78,539      240,463      200,453
                                                   ---------    ---------    ---------    ---------

   Gross profit ................................      33,963       52,491      103,809      141,134

Operating expenses:
   Selling expenses ............................      27,453       21,257       69,674       59,673
   Product development and engineering
       expenses ................................      13,839       12,704       35,043       34,318
   General and administrative expenses .........      16,206       10,750       37,914       28,991
                                                   ---------    ---------    ---------    ---------
              Total operating expenses .........      57,498       44,711      142,631      122,982
                                                   ---------    ---------    ---------    ---------

              (Loss) income from operations ....     (23,535)       7,780      (38,822)      18,152

Interest income ................................         161          157          511          451
Interest expense ...............................      (2,130)      (1,948)      (6,262)      (4,646)
Other non-operating income .....................      35,176          787       35,249        1,142
                                                   ---------    ---------    ---------    ---------

              Income (loss) before income taxes        9,672        6,776       (9,324)      15,099

Provision (benefit) for income taxes ...........       7,537        2,571       (1,961)       5,854
                                                   ---------    ---------    ---------    ---------

              Net income (loss) ................   $   2,135    $   4,205    $  (7,363)   $   9,245
                                                   =========    =========    =========    =========

Earnings per common and common equivalent share:

              Net income (loss) per share ......   $     .13    $     .26    $    (.45)   $     .57
                                                   =========    =========    =========    =========


Average number of common and common
      equivalent shares outstanding ............      16,150       16,302       16,207       16,301
                                                   =========    =========    =========    =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
 

                                      4
<PAGE>   5


                       TELXON CORPORATION AND SUBSIDIARIES

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

                                                           Nine Months Ended
                                                             December 31,
                                                            1996        1995
                                                          ---------   ----------
Cash flows from operating activities:

<S>                                                       <C>         <C>     
   Net (loss) income ..................................   $ (7,363)   $  9,245
   Adjustments to reconcile net (loss) income to
       net cash used in operating activities:
         Depreciation and amortization ................     21,948      16,334
         Non-cash compensation related to
             restricted stock awards ..................        474         653
         Provision for doubtful accounts ..............        947       1,427
         Provision for inventory obsolescence .........     11,502       4,919
         Deferred income taxes ........................     (1,026)     (1,034)
         Gain on sale of assets .......................    (35,176)       --
         Loss on disposal of assets ...................        402         213
         Trading securities ...........................       --        (1,349)
         Non-cash  gain on trading securities .........       --          (787)
         Proceeds from sale of trading securities .....        961        --
         Gain on sale of trading securities ...........        (59)       --
         Gain on sale of subsidiary stock .............       --          (355)
         Changes in assets and liabilities:
            Accounts and notes receivable .............     15,645     (65,497)
            Refundable income taxes ...................       --        (1,614)
            Inventories ...............................     (1,101)    (23,784)
            Prepaid expenses ..........................       (472)      1,217
            Intangible and other assets ...............     (5,297)     (1,471)
            Accounts payable and accrued liabilities ..    (25,499)      4,420
            Other long-term liabilities ...............     (1,223)        768
                                                          --------    --------
                  Total adjustments ...................    (17,974)    (65,940)
                                                          --------    --------
     Net cash used in operating activities ............    (25,337)    (56,695)

Cash flows from investing activities:
   Additions to property and equipment ................    (10,926)    (16,231)
   Proceeds from the sale of assets ...................     65,655        --
   Payments for acquisitions, net of cash acquired ....       --        (2,401)
   Software investments ...............................     (5,120)       (808)
                                                          --------    --------
   Net cash provided by (used in) investing activities      49,609     (19,440)

Cash flows from financing activities:
   Notes payable, net .................................      1,999     (15,475)
   Purchase of treasury stock .........................     (1,051)       --
   Principal payments on capital leases ...............       (702)       (660)
   Principal payments on long-term borrowings .........     (2,103)       (190)
   Debt issue costs paid ..............................       (303)     (2,063)
   Proceeds from issuance of convertible
       subordinated notes .............................       --        82,500
   Proceeds from exercise of stock options
       (includes tax benefit) .........................        710       5,230
                                                          --------    --------
   Net cash (used in) provided by financing activities      (1,450)     69,342
   Effect of exchange rate changes on cash ............         56        (266)
                                                          --------    --------
   Net increase (decrease) in cash and cash equivalents     22,878      (7,059)
   Cash and cash equivalents at beginning of period ...     34,828      31,364
                                                          --------    --------
   Cash and cash equivalents at end of period .........   $ 57,706    $ 24,305
                                                          ========    ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.

                                       5
<PAGE>   6


                       TELXON CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            (Dollars in thousands except share and per share amounts)


1.       Management Representation

         The consolidated financial statements of Telxon Corporation and its
         subsidiaries (the "Company") have been prepared without audit. In the
         opinion of the Company, all adjustments, consisting of normal recurring
         adjustments and one-time adjustments recorded in the third quarter of
         fiscal 1997 and aggregating $27,500, necessary for a fair statement of
         results for the interim periods, have been made. The statements, which
         do not include all of the information and notes required by generally
         accepted accounting principles for complete financial statements,
         should be read in conjunction with the audited consolidated financial
         statements as contained in the Company's Annual Report on Form 10-K for
         the fiscal year ended March 31, 1996.

2.       Earnings Per Share

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

3.    Inventories

      Inventories consisted of the following:
<TABLE>
<CAPTION>

                                                                               December 31,
                                                                                  1996     March 31,
                                                                               (Unaudited)   1996
                                                                                --------    -------
<S>                                                                            <C>         <C>     
    Purchased components ..............................................        $  30,417   $ 50,022
    Work-in-process ...................................................           30,102     35,379
    Finished goods ....................................................           25,426     25,731
                                                                                --------   --------
                                                                                $ 85,945   $111,132
                                                                                ========   ========
</TABLE>
4.  Accrued Liabilities

    Accrued liabilities consisted of the following:

<TABLE>
<CAPTION>
                                                                               December 31,
                                                                                  1996     March 31, 
                                                                                Unaudited)   1996
                                                                                --------   --------
<S>                                                                             <C>        <C>     
    Accrued payroll and other employee compensation ...................         $ 19,577   $ 14,394
    Deferred customer service revenues ................................           13,675     15,063
    Other accrued liabilities .........................................           18,026     22,724
                                                                                --------   --------
                                                                                $ 51,278   $ 52,181
                                                                                ========   ========
</TABLE>



                                        6
<PAGE>   7


                       TELXON CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            (Dollars in thousands except share and per share amounts)

<TABLE>
<CAPTION>

5.       Supplemental Cash Flow Information


                                                       Nine Months Ended
                                                    December 31,   December 31,
                                                        1996            1995
                                                    ------------   -------------
                                                           (Unaudited)

         Cash paid during the period for

<S>                                                 <C>            <C>        
            Interest.........................         $5,846           $4,557
            Income taxes.....................         $7,368            4,432

</TABLE>
         Capital lease additions are non-cash transactions and, accordingly, $48
         and $666 have been excluded from property and equipment additions in
         the fiscal 1997 and fiscal 1996 Consolidated Statement of Cash Flows.

         Secured promissory notes aggregating $6,200, which were received in
         connection with the Company's divestiture of certain retail application
         software operations in April 1996, have been excluded from the fiscal
         1997 Consolidated Statement of Cash Flows as a non-cash transaction.

         The Company's re-issuance of $439 of treasury stock, which was used to
         satisfy purchases made by employees through the Telxon Corporation 1995
         Employee Stock Purchase Plan in July 1996, has been excluded from the
         fiscal 1997 Consolidated Statement of Cash Flows as a non-cash
         transaction.

6.       Litigation and Contingencies

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

         On April 16, 1993, the Plaintiffs filed their Motion for Class
         Certification. The defendants, including the Company, filed their
         briefs in opposition to Class Certification on October 13, 1993. On
         December 17, 1993, the District Court certified the class, consisting
         of Telxon stockholders, other than defendants and their affiliates, who
         purchased Telxon common stock between May 20, 1992, and December 14,
         1992.

                                       7
<PAGE>   8
                       TELXON CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            (Dollars in thousands except share and per share amounts)

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

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

         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 has
         various legal actions and certain contingencies pending, including a
         claim made by the owner of a manufacturing facility formerly leased by
         the Company that the Company caused and should remediate alleged soil
         contamination at the facility. The Company, with professional
         assistance, is investigating the existence, 


                                       8
<PAGE>   9
                       TELXON CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            (Dollars in thousands except share and per share amounts)


         scope, nature and cause of the claimed contamination. Information
         necessary to support a reasonable estimate of the scope of loss, if
         any, is not presently available and, accordingly, no provision has
         been made in accompanying financial statements. The Company, while not
         conceding denial of coverage, has been advised by its insurers that
         coverage is not available concerning this matter. While the Company,
         based on its initial assessment of the situation, believes the
         matter's ultimate resolution will not have a material adverse effect
         on the Company's business or financial condition, if the Company were
         ultimately required to remediate such contamination, the associated
         costs could have a material adverse effect on results of operations
         for one or more quarters in which the associated charge(s) would be
         taken. In management's opinion, all other such outstanding matters
         have either been reflected in the consolidated financial statements,
         are covered by insurance or would not have a material adverse effect
         on the Company's business, consolidated financial position or results
         of operations or cash flows.

7.       Short-Term Financing

         The Company had no borrowings outstanding under its $100,000 credit
         agreement at December 31, 1996, and was in compliance with all
         restrictive covenants contained in the agreement at December 31, 1996.

         The Company had $2,065 outstanding under its $20,000 business purpose
         revolving promissory note at December 31, 1996. At December 31, 1996,
         the note was bearing interest at an annual rate of 6.75%.

8.       Income Taxes

         The Company's consolidated effective income tax rate reflects income
         before taxes plus non-deductible goodwill amortization and the tax
         effect of non-recurring charges related to the redesign of certain of
         the Company's international operations, which sum is multiplied by the
         United States statutory rate and increased by foreign rate
         differentials.

         The increase in the Company's third quarter fiscal 1997 consolidated
         effective income tax rate from the rate experienced during the same
         period in fiscal 1996 is primarily due to the increase in foreign
         income taxed at higher foreign tax rates, the tax effect of
         non-recurring charges related to the redesign of certain of the
         Company's international operations and the decrease in U.S. taxable
         income without decreases in non-deductible reconciling items such as
         goodwill amortization.

         The decrease in the Company's consolidated effective income tax rate
         and the corresponding reduction of tax benefits recognized for the 
         first nine months of fiscal 1997 from the rate experienced during
         the same period in fiscal 1996 is primarily due to the decrease in
         U.S. taxable income and the tax effect of non-recurring charges
         related to the redesign of certain of the Company's international
         operations without decreases in non-deductible reconciling items
         such as goodwill amortization.
 

                                      9
<PAGE>   10
                       TELXON CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            (Dollars in thousands except share and per share amounts)


9.       Divestiture

         Effective December 31, 1996, the Company sold substantially all of the
         assets of its Itronix Corporation subsidiary, with a net book value of
         $30.7 million, as well as all of the subsidiary's associated business,
         for $65.5 million in cash, plus the assumption by the buyer of certain
         specified liabilities of the transferred business totaling $8.3
         million. The transaction resulted in a $35.2 million gain, net of
         transaction costs of $7.9 million, and has been recorded as
         non-operating income in the fiscal 1997 Consolidated Statement of
         Operations. The cash purchase price is subject to possible adjustment
         based upon an audit of the Itronix balance sheet as of the December 31,
         1996 closing date, and the buyer is entitled to customary
         indemnification from the Company with respect to retained liabilities
         and, through March 31, 1998, to the Company's representations,
         warranties and covenants in the sale agreement. Under the terms of the
         sale, the Company is precluded from competing with the buyer in the
         manufacture and sale of ruggedized notebook computers for a period of
         five years after the date of sale, other than the Company's resale of
         products obtained from the buyer under a mutual reseller agreement.

10.      Subsequent Transactions and Events

         Subsequent to December 31, 1996, the Company re-issued 33,806 shares of
         treasury stock to satisfy purchases made by employees through the
         Telxon Corporation 1995 Employee Stock Purchase Plan.

         Subsequent to December 31, 1996, the Company repurchased 155,000 shares
         of its common stock pursuant to its open market repurchase program
         announced in June, 1996. Under this program, a total of 255,000 shares
         have been repurchased.

11.      Reclassifications

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

                                     10
<PAGE>   11


TELXON CORPORATION AND SUBSIDIARIES


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

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

         OVERVIEW

         The Company's results for the first nine months of fiscal 1997 were in
         line with earlier expectations as the Company recorded slightly higher
         revenue levels in comparison to the same period in the prior year and a
         loss (including certain non-recurring charges discussed below) of $.45
         per share. For the third quarter ended December 31, 1996, the Company
         recorded net income (including a non-operating gain from the
         disposition of a subsidiary, net of non-recurring charges during the
         quarter) of $2.1 million, or $.13 per share. The Company anticipates
         continued profitability from operations in the fourth quarter of fiscal
         1997 as it continues to benefit from the implementation of certain cost
         reduction and efficiency improvement initiatives. Those initiatives
         include streamlining the Company's product line, improving its
         manufacturing operations, workforce reductions and early retirements.
         The Company will continue to review all aspects of its business and may
         take further actions to achieve more effective and efficient operations
         which could result in non-recurring charges in addition to those
         recorded in the first nine months of fiscal 1997.

         The Company's continuing strategic objectives are to increase both
         revenues from continuing operations and market penetration in targeted
         markets while reducing costs as a percentage of total revenues, to
         drive new product development and use vertical systems groups to expand
         in targeted markets. The Company's goal is to deliver profitable growth
         from its core businesses and markets and increased stockholder value
         over the long term.

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

                                       11
<PAGE>   12



         FACTORS THAT MAY AFFECT FUTURE RESULTS

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

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

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

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

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

         The markets in which the Company competes are intensely competitive and
         characterized by increasingly rapid technological change, introduction
         of new products with improved performance characteristics, product
         obsolescence and price erosion. Failure to keep pace with product and
         technological advances could negatively affect the Company's
         competitive position and prospects for growth. Customers' anticipation
         of new or enhanced product offerings by the Company or a competitor may
         lead them to defer purchases of the Company's existing products. 
         In addition, companies that are 

                                       12
<PAGE>   13

         participants in the broader computer industry are potential
         competitors. Some of the Company's competitors and potential
         competitors have substantially greater financial, technical,
         intellectual property, marketing and human resources than the Company.

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

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

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

         The Company regards certain of its hardware and software technologies
         as proprietary and relies on a combination of United States and foreign
         patent, copyright, trademark and trade secret laws, as well as license
         and other contractual confidentiality provisions, to protect its
         proprietary rights. Despite the Company's efforts to safeguard its
         proprietary rights, there can be no assurance that the Company will be
         successful in doing so or that the Company's competitors will not
         independently develop or patent technologies 


                                       13
<PAGE>   14

         that are substantially equivalent or superior to or otherwise
         circumvent the Company's technologies and proprietary rights.

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

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

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

         Certain of the Company's products intentionally transmit radio signals
         as part of their normal operation. These products are subject to
         regulatory approval, restrictions on the use of certain frequencies and
         the creation of interference, and other requirements by the Federal
         Communications Commission and corresponding authorities in each country
         in which they are marketed. Regulatory changes could significantly
         impact the Company's operations by restricting the Company's
         development efforts, making current products obsolete or increasing the
         opportunity for additional competition. The intentional emission of
         electromagnetic radiation has also been the subject of recent public
         concern regarding possible health and safety risks, and though the
         Company believes that the low power output and the distance typically
         maintained between a product and the user means that its products do
         not pose material safety concerns, there can be no assurance that such
         safety issues will not arise in the future and will not have a
         materially adverse effect on the Company's business.

                                       14

<PAGE>   15

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

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

         RESULTS OF OPERATIONS

         Revenues
         --------

         Total consolidated revenues for the third quarter of fiscal 1997
         decreased $7.5 million or 6% while consolidated revenues for the first
         nine months of fiscal 1997 increased $2.7 million or 1% over the same
         periods in fiscal 1996.

         Third quarter fiscal 1997 consolidated product revenues decreased $8.2
         million or 7% from results recorded during the same period in the prior
         year, while consolidated product revenues for the first nine months of
         fiscal 1997 decreased $2.9 million or 1% over fiscal 1996's same period
         results. Product revenues include the sale of pen-based and
         touch-screen workslates, rugged wireless mobile computers and other
         portable tele-transaction computer ("PTC") units, hardware accessories,
         custom application software and software licenses, and a variety of
         professional services, including system integration and project
         management. The decrease in product revenues experienced in the third
         quarter and first nine months of fiscal 1997 was primarily due to a
         decrease in PTC unit volume that was partially offset by an increase in
         the average selling price per PTC unit as the sales mix continued to
         trend towards more comprehensive products and systems. The Company's
         former technical subsidiary Itronix Corporation, a designer, developer
         and manufacturer of rugged wireless portable microcomputers which was
         sold effective December 31, 1996, recorded total product revenues of
         $21.8 million and $62.6 million during the third quarter and first nine
         months of fiscal 1997, respectively, and was a significant contributor
         to the increase in average selling price per PTC. Itronix had total
         product revenues of $21.3 million and $30.6 million in the third
         quarter and first nine months of fiscal 1996, respectively.

         Customer service revenues for the third quarter and first nine months
         of fiscal 1997 increased $.7 million or 4% and $5.6 million or 11%,
         respectively, as compared to the same periods in fiscal 1996. These
         revenue increases were primarily due to volume increases and growth in
         the installed base of the Company's products.

         Revenues for the Company's international operations (including Canada)
         for the third quarter and first nine months of fiscal 1997 increased
         $2.9


                                       15
<PAGE>   16

         million or 9% and $9.1 million or 10%, respectively, as compared to
         the same periods in fiscal 1996. Changes in currency exchange rates
         and intercompany hedging activities did not materially affect the
         results of the Company's international operations.

         The Company anticipates increased consolidated revenues from continuing
         operations in the fourth quarter of fiscal 1997 from third quarter
         fiscal 1997 levels. Revenue from continuing operations excludes revenue
         from the Company's former Itronix subsidiary, which amounted to $22.3 
         million and $63.8 million, respectively, in the third quarter and 
         first nine months of fiscal 1997.

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

         Consolidated product gross margin for the third quarter of fiscal 1997
         decreased to 27% as compared to 40% for the same period in fiscal 1996
         while the consolidated product gross margin for the first nine months
         of fiscal 1997 decreased to 29% as compared to 41% for the same period
         in fiscal 1996.

         The decrease in the third quarter of fiscal 1997 consolidated product
         gross margins from those recorded during the same period in fiscal 1996
         was primarily due to certain non-recurring charges recorded during the
         third quarter of fiscal 1997. These non-recurring items, which include
         provisions for the decreased carrying value of the Company's
         inventories affected by the streamlining of its product lines and
         charges related to the Company's workforce reduction and early
         retirement initiatives, accounted for approximately $9.4 million and
         $1.7 million or 12% and 2%, respectively, of the consolidated cost of
         product revenue for the third quarter of fiscal 1997 as compared with
         the same period in fiscal 1996. In addition to the non-recurring
         charges recorded in the third quarter of fiscal 1997, which accounted
         for approximately 5% of the consolidated cost of product revenues for
         the first nine months of fiscal 1997, consolidated product gross
         margins for the first nine months of fiscal 1997 were reduced from
         those recorded during the same period in fiscal 1996 by the mix of
         large-volume/low margin business, higher costs on early stage rollouts
         of new products, and additional inventory and customer allowances
         provisions recorded during the first half of fiscal 1997. Included in
         the fiscal 1996 results were revenues related to the sale of
         non-exclusive software licenses and manufacturing rights to a
         third-party business partner which increased the third quarter fiscal
         1996 consolidated product gross margin by approximately 1%.

         The Company anticipates the consolidated product gross margin to
         increase from third quarter fiscal 1997 levels during the fourth
         quarter of fiscal 1997 as a result of the absence of the aforementioned
         third quarter non-recurring charges as well as the continued benefit of
         the Company's implementation of certain cost reduction and efficiency
         initiatives.

         Consolidated customer service gross margin decreased to 30% during the
         third quarter of fiscal 1997 from 43% during the same period in the
         previous fiscal year. Consolidated customer service gross margin
         decreased to 36% for the first nine months of fiscal 1997 as compared
         to 43% for the same period in the previous fiscal year. The decrease in
         the consolidated customer service gross margin during the third quarter
         of fiscal 1997 was primarily due to certain non-recurring charges
         recorded during the period as well as the increased direct material and
         labor costs required to repair the 

                                       16
<PAGE>   17

         Company's more sophisticated and complex products. These non-recurring
         items, which include provisions for the decreased carrying value of
         the Company's inventories affected by the streamlining of its product
         lines and charges related to the consolidation of customer service
         operations, accounted for approximately $.7 million and $.3 million or
         5% and 2%, respectively, of the consolidated cost of customer service
         revenues for the third quarter of fiscal 1997. The decrease in the
         consolidated customer service gross margin for the first nine months
         of fiscal 1997 was primarily due to increased direct material and
         labor costs required to repair the Company's more sophisticated
         products and also reflects the aforementioned third quarter
         non-recurring charges, with the latter accounting for approximately 3%
         of the consolidated cost of customer service revenues for the first
         nine months of fiscal 1997.

         The Company anticipates the consolidated customer service gross margin
         to increase from third quarter fiscal 1997 levels during the fourth
         quarter of fiscal 1997 as a result of the absence of the aforementioned
         third quarter non-recurring charges as well as the continued benefit of
         the Company's implementation of certain cost reduction and efficiency
         initiatives.

         Inventory valuation accounts for the third quarter of fiscal 1997 were
         increased to provide for the decreased carrying value of the Company's
         inventories affected by the streamlining of its product lines. As of
         December 31, 1996, inventory valuation accounts increased to $18.0
         million or 17% of gross inventory as compared to $10.1 million or 8% of
         gross inventory as of March 31, 1996. The Company anticipates
         continuing to provide for inventory obsolescence resulting from
         technological change.

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

         Selling expenses for the third quarter and first nine months of fiscal
         1997 increased $6.2 million or 29% and $10.0 million or 17%,
         respectively, as compared to the same periods in fiscal 1996. As a
         percentage of revenues, selling expenses for the third quarter and
         first nine months of fiscal 1997 increased 6% and 3%, respectively, as
         compared to the same periods in fiscal 1996 and primarily reflect
         certain non-recurring charges recorded during the third quarter of
         fiscal 1997. These non-recurring items include charges related to the
         redesign of the Company's worldwide distribution and logistics
         operations as well as charges related to the Company's workforce
         reduction and early retirement initiatives. These two items accounted
         for approximately $3.6 million and $3.1 million or 13% and 11%,
         respectively, of the selling expenses recorded during the third quarter
         of fiscal 1997. In total, these non-recurring charges accounted for
         approximately 10% of the selling expenses recorded during the first
         nine months of fiscal 1997. The Company anticipates selling expenses to
         decrease during the fourth quarter of fiscal 1997 from third quarter
         fiscal 1997 levels as a result of the absence of the aforementioned
         third quarter non-recurring charges, the continued benefit of the
         Company's implementation of certain cost reduction initiatives, and the
         elimination of selling expenses related to its former Itronix
         subsidiary. Included in the Company's consolidated results for the
         third quarter and first nine months of fiscal 1997 were approximately
         $2.2 million and $6.2 million, respectively, of selling expenses
         incurred by Itronix.

         Product development and engineering expenses for the third quarter and
         first nine months of fiscal 1997 increased $1.1 million or 9% and $.7
         million or 

                                       17
<PAGE>   18

         2%, respectively, as compared to the same periods in fiscal 1996. The
         increase in third quarter product development and engineering expenses
         is primarily attributable to certain non-recurring charges recorded
         during the third quarter of fiscal 1997 that were partially offset by
         the implementation of certain cost reduction initiatives. These
         non-recurring items include charges related to the Company's workforce
         reduction and early retirement initiatives as well as charges related
         to the consolidation of certain product development and engineering
         functions, and account for approximately $1.7 million and $.4 million
         or 13% and 3%, respectively, of the product development and
         engineering expenses recorded during the third quarter of fiscal 1997.
         Included in the results of the first nine months of fiscal 1996 was a
         $1.0 million reimbursement from a customer for certain development
         expenses incurred by the Company specific to that customer. The
         Company anticipates research and development activity, which includes
         new and continued product development of wireless data communications
         and spread spectrum technology, pen-based technology, augmented
         reality hardware and software, advanced image reading and two
         dimensional bar-code technology and other product improvements, to
         decrease during the fourth quarter of fiscal 1997 from third quarter
         fiscal 1997 levels as a result of the absence of the aforementioned
         third quarter non-recurring charges, the continued benefit of the
         Company's implementation of certain cost reduction initiatives, and
         the elimination of product development and engineering expenses
         related to its former Itronix subsidiary. Included in the Company's
         consolidated results for the third quarter and first nine months of
         fiscal 1997 were approximately $2.0 million and $5.2 million,
         respectively, of product development and engineering expenses incurred
         by Itronix.

         The Company capitalized internal software development costs in
         accordance with the requirements of SFAS No. 86 aggregating $1.3
         million and $4.0 million during the third quarter and first nine months
         of fiscal 1997, respectively. The Company anticipates the dollar amount
         of internal software development costs to be capitalized during the
         fourth quarter of fiscal 1997 to decrease from third quarter fiscal
         1997 levels as a result of the reduction in force of certain software
         development operations within the Company.

         General and administrative expenses for the third quarter and first
         nine months of fiscal 1997 increased $5.5 million or 51% and $8.9
         million or 31%, respectively, as compared to the same periods in fiscal
         1996. As a percentage of revenues, general and administrative expenses
         for the third quarter and first nine months of fiscal 1997 increased
         approximately 5% and 3%, respectively, as compared to the same periods
         in fiscal 1996 and primarily reflect certain non-recurring charges
         recorded during the third quarter of fiscal 1997. These non-recurring
         items, which include charges related to the Company's workforce
         reduction and early retirement initiatives, corporate information
         systems, and certain consulting agreements, amounted to approximately
         $5.9 million and accounted for approximately 36% and 15%, respectively,
         of the general and administrative expenses recorded during the third
         quarter and first nine months of fiscal 1997. The Company anticipates
         general and administrative expenses to decrease during the fourth
         quarter of fiscal 1997 from third quarter fiscal 1997 levels as a
         result of the absence of the aforementioned third quarter
         non-recurring charges, the continued benefit of the Company's
         implementation of certain cost reduction initiatives, and the
         elimination of general and administrative expenses related to its
         former Itronix subsidiary. Included in the Company's consolidated
         results for the third

                                       18
<PAGE>   19

         quarter and first nine months of fiscal 1997 were approximately $.5
         million and $1.8 million, respectively, of general and administrative
         expenses incurred by Itronix.
         
         Income Taxes
         ------------

         The Company's consolidated effective income tax rate for the third
         quarter of fiscal 1997 was 78% as compared to 38% for the same period
         in fiscal 1996, while the consolidated effective income tax rate for
         the first nine months of fiscal 1997 was 21% as compared to 39% for the
         same period in fiscal 1996. The consolidated effective income tax rate
         reflects income before taxes plus non-deductible goodwill amortization
         and the tax effect of non-recurring charges related to the redesign of
         certain of the Company's international operations, which sum is
         multiplied by the United States statutory rate and increased by foreign
         rate differentials.

         The increase in the Company's consolidated effective income tax rate
         for the third quarter of fiscal 1997 as compared to the consolidated
         effective income tax rate experienced during the same period in fiscal
         1996 is due to the increase in foreign income taxed at higher foreign
         tax rates, the tax effect of non-recurring charges related to the
         redesign of certain of the Company's international operations and the
         decrease in U.S. taxable income without decreases in non-deductible
         reconciling items such as goodwill amortization.

         The decrease in the consolidated effective income tax rate and the
         corresponding reduction of tax benefits recognized for the first nine
         months of fiscal 1997 as compared to the consolidated effective income
         tax rate experienced during the same period in fiscal 1996 is due to
         the decrease in U.S. taxable income and the tax effect of non-recurring
         charges related to the redesign of certain of the Company's
         international operations without decreases in non-deductible
         reconciling items such as goodwill amortization.

         The Company anticipates its consolidated effective income tax rate to
         decrease in the fourth quarter of fiscal 1997 from the rate
         experienced during the third quarter of fiscal 1997 due to the absence
         of the tax effect of the non-recurring charges related to the redesign
         of certain of the Company's international operations recorded during 
         the third quarter of fiscal 1997.

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

         Effective December 31, 1996, the Company sold substantially all of the
         assets of its Itronix Corporation subsidiary, with a net book value of
         $30.7 million, as well as all of the subsidiary's associated business,
         for $65.5 million in cash, plus the assumption by the buyer of certain
         specified liabilities of the transferred business totaling $8.3
         million. The transaction resulted in a $35.2 million gain, net of
         transaction costs of $7.9 million, and has been recorded as
         non-operating income in the fiscal 1997 Consolidated Statement of
         Operations. The cash purchase price is subject to possible adjustment
         based upon an audit of the Itronix balance sheet as of the December 31,
         1996 closing date, and the buyer is entitled to customary
         indemnification from the Company with respect to retained liabilities
         and, through March 31, 1998, to the Company's representations,
         warranties and covenants in the sale agreement. Under the terms of the
         sale, the Company is precluded from competing with the buyer in the
         manufacture and sale of ruggedized notebook computers for a period of
         five years after the date of sale, other than the Company's resale of
         products obtained from the buyer under a mutual reseller agreement.


                                       19
<PAGE>   20

         Liquidity
         ---------

         At December 31, 1996, the Company had cash and cash equivalents of
         $57.7 million, as compared to $34.8 million at March 31, 1996. The
         Company's current ratio (current assets divided by current liabilities)
         was 3.1:1 at December 31, 1996, as compared to 2.6:1 at March 31, 1996.
         The Company's current ratio increased as working capital (current
         assets less current liabilities) decreased slightly for the changes in
         accounts receivable of $30.0 million, inventories of $25.2 million, and
         notes payable of $2.0 million. These working capital decreases were
         partially offset by increases resulting from changes in accounts
         payable of $28.3 million and cash and cash equivalents of $22.9
         million. Accounts receivable balances decreased from amounts recorded
         at March 31, 1996, primarily due to the sale of the trade receivables
         as part of the sale of the Company's former Itronix subsidiary.
         Consolidated days sales outstanding, adjusted for the sale of the
         Company's former Itronix subsidiary by excluding Itronix's results from
         both comparative periods, decreased from 95 days at March 31, 1996, to
         83 days at December 31, 1996. Inventory levels, in total, decreased at
         December 31, 1996, as compared to those recorded at March 31, 1996,
         primarily due to the Company's reduced procurement requirements
         resulting from the implementation of product streamlining initiatives
         as well as the sale of the inventory of the Company's former Itronix
         subsidiary. Accounts payable decreased primarily due to decreased
         manufacturing inventory procurement and increased payments to vendors.

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

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

         Net cash used in operating activities was $25.3 million for the nine
         months ended December 31, 1996, as compared to net cash used in
         operating activities of $56.7 million for the same period in fiscal
         1996. Cash flows for the first nine months of fiscal 1997, as compared
         to the same period in fiscal 1996, were positively effected by the
         change in cash flow impacts of accounts and notes receivable of $81.1
         million, inventories of $22.7 million, non-cash charges of $11.7
         million, trading securities of $3.0 million and other positive cash
         flow items aggregating $2.0 million. These positive impacts were offset
         by negative cash flow impacts for the gain on the sale of the Itronix
         assets of $35.2 million, accounts payable and accrued liabilities of
         $29.9 million, $16.6 million reduction in net earnings, intangible and
         other assets of $3.8 million, prepaid expenses of $1.7 million, and
         other items aggregating $2.0 million.

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

         Net cash provided by investing activities during the nine months ended
         December 31, 1996, increased $69.0 million from net cash used during
         the same period in fiscal 1996, primarily due to the receipt of $65.7
         million in cash proceeds from the sale of the Itronix assets during the
         first nine months of fiscal 1997. The Company invested $10.9 million in
         capital equipment during the first nine months of fiscal 1997, a
         decrease of $5.3 million as compared to the same period of fiscal 1996.
         Software investments in the first nine months of fiscal 1997 totaled
         $5.1 million, an increase of $4.3 million over the same period in the
         prior year, while payments related to acquisitions

                                       20
<PAGE>   21

         decreased $2.4 million from amounts recorded in the first nine months
         of fiscal 1996.

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

         Cash flows from financing activities decreased $70.8 million during the
         first nine months of fiscal 1997 as compared with the same period in
         fiscal 1996. The decrease in cash flows from financing activities for
         the first nine months of fiscal 1997 was primarily due to the absence
         of $82.5 million in proceeds from the issuance of convertible
         subordinated notes recorded during the same period in fiscal 1996 and
         the cash flow impact of the $4.5 million decrease in proceeds from the
         exercise of stock options, partially offset by the cash flow impact of
         the $17.5 million increase in borrowings on notes payable.

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

         Effective April 1, 1996, the Company sold certain retail application
         software operations, with net assets of approximately $5.0 million, to
         a third-party for $6.4 million. Of the $6.4 million sale price, $.2
         million was received in cash, while the balance was received in the
         form of secured promissory notes receivable and has been excluded from
         the fiscal 1997 Consolidated Statement of Cash Flows as a non-cash
         investing transaction. Although no gain has been recorded as of
         December 31, 1996 as a result of this transaction, the Company will
         recognize gain from the sale as cash proceeds are received.

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

         Subsequent Events
         -----------------

         Subsequent to December 31, 1996, the Company re-issued 33,806 shares of
         treasury stock to satisfy purchases made by employees through the 
         Telxon Corporation 1995 Employee Stock Purchase Plan.

         Subsequent to December 31, 1996, the Company repurchased 155,000 shares
         of its common stock pursuant to its open market repurchase program
         announced in June 1996. Under this program, a total of 255,000 shares
         have been repurchased.

                                       21
<PAGE>   22


                           PART II. OTHER INFORMATION


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

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

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

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

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

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

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

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

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

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

                             4.3.1      Form of Rights Certificate (included as
                                        Exhibit A to the Rights Agreement 
                                        included as Exhibit 4.3 above). Until 
                                        the Distribution Date (as defined in 
                                        the Rights Agreement), the Rights
                                        Agreement provides that the common 
                                        stock purchase rights created 
                                        thereunder are evidenced by the
                                        certificates for Registrant's Common 
                                        Stock (the text of which and description

                                       22
<PAGE>   23



                                            thereof is included as Exhibit 4.2
                                            above, which stock certificates are
                                            deemed also to be certificates for
                                            such common stock purchase rights)
                                            and not by separate Rights
                                            Certificates; as soon as practicable
                                            after the Distribution Date, Rights
                                            Certificates will be mailed to each
                                            holder of Registrant's Common Stock
                                            as of the close of business on the
                                            Distribution Date.

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

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

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

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

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

                  10.1       Compensation and Benefits Plans of the Registrant.

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

                                            10.1.1.a          Amendment, dated
                                                              January 1, 1994,
                                                              to the Plan
                                                              included as
                                                              Exhibit 10.1.1
                                                              above,
                                                              incorporated
                                                              herein by
                                                              reference to
                                                              Exhibit


                                       23
<PAGE>   24

                                                        10.1.1.a to Registrant's
                                                        Form 10-K for the year
                                                        ended March 31, 1994.

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

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

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

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

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

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

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

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

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

                             10.1.6         1995 Employee Stock Purchase Plan of
                                            the Registrant, as amended,
                                            incorporated herein by reference to
                                       24
<PAGE>   25

                                            Exhibit 10.1.7 to Registrant's Form
                                            10-Q for the quarter ended September
                                            30, 1995.

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

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

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

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

                 10.2       Material Leases of the Registrant.

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

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

                                            10.2.2.a          Second Addendum,
                                                              dated as of
                                                              October 5, 1995,
                                                              to the Lease
                                                              included as
                                                              Exhibit 10.2.2
                                                              above,
                                                              incorporated
                                                              herein by
                                                              reference to
                                                              Exhibit 10.2.4.a
                                                              to Registrant's
                                                              Form 10-K for the
                                                              year ended March
                                                              31, 1996.

                                            10.2.2.b          Third Addendum,
                                                              dated as of March
                                                              1, 1996, to the
                                                              Lease included as
                                                              Exhibit 10.2.2
                                                              above,
                                                              incorporated
                                                              herein by
                                                              reference to
                                                              Exhibit 10.2.4.b
                                                              to Registrant's
                                                              Form 10-K for the
                                                              year ended March
                                                              31, 1996.

                 10.3       Credit Agreements of the Registrant.

                                       25
<PAGE>   26


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

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

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

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

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

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

                                            10.3.2.c    Amendment No. 2, dated
                                                        as of December 16, 1996,
                                                        to the Agreement
                                                        included as Exhibit
                                                        10.3.2 above,
                                                        incorporated herein by


                                       26
<PAGE>   27

                                                        reference to Exhibit
                                                        10.3.2.c to Registrant's
                                                        Current Report on Form
                                                        8-K dated December 16,
                                                        1996.

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

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

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

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

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

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

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

                 10.4        Amended and Restated Agreement between the
                             Registrant and Symbol Technologies, Inc., dated as
                             of September 30, 1992, incorporated

                                       27
 


<PAGE>   28

                             herein by reference to Exhibit 10.4 to Registrant's
                             Form 10-K for the year ended March 31, 1993.

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

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

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

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

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

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

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

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

                                       28
<PAGE>   29

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

                11.       Computation of Common Shares outstanding and earnings
                          per share for the nine months ended December 31, 1996 
                          and 1995, filed herewith.

                27.       Financial Data Schedule as of December 31, 1996, filed
                          herewith.

(b)      Reports on Form 8-K

         During the fiscal quarter ended December 31, 1996 for which this
         Quarterly Report on Form 10-K is filed, the Registrant filed a Current
         Report on Form 8-K dated October 18, 1996, attaching the Registrant's
         press release of that date which announced its financial results for
         the second quarter and six months ended September 30, 1996 as well as
         discussing the effects of its financial condition at that date under
         the subordination provisions of the 5-3/4% Convertible Subordinated
         Notes (the press release as incorporated into the Form 8-K included
         consolidated balance sheets for the Registrant as of September 30, 1996
         (unaudited), and March 31, 1996, and condensed consolidated statements
         of income for the three-month and six-month periods (unaudited) ended
         September 30, 1996 and 1995). In addition, subsequent to the end of the
         December 31, 1996 fiscal quarter, the Registrant filed the following
         Current Reports on Form 8-K: (i) Current Report dated December 16,
         1996, reporting an amendment to the Company's primary credit facility
         with The Bank of New York, as Agent for an eight-bank lending group;
         and (ii) Current Report dated December 31, 1996, reporting the sale by
         the Company of substantially all of the assets and all of the
         associated business of its wholly owned Itronix Corporation subsidiary
         to IAQ Corporation, a wholly owned subsidiary of Dynatech Corporation
         (the "Buyer"), for approximately $65.5 million (included as Appendix A
         in the Form 8-K were (1) a pro forma condensed balance sheet as of
         September 30, 1996, giving effect to (A) the sale of substantially all
         of the Itronix assets to, and the assumption of certain specified
         Itronix liabilities by, the Buyer, and (B) related pro forma
         adjustments, all as though the transaction occurred at September 30,
         1996; and (2) unaudited pro forma condensed statements of operations
         for the fiscal year ended March 31, 1996, and for the six months ended
         September 30, 1996, giving effect to (A) the elimination of the results
         of operations of the Registrant's Itronix subsidiary, as described in
         Note (A), and (B) related pro forma adjustments, all as though the
         transaction occurred on April 1, 1995).

                                       29
<PAGE>   30

                       TELXON CORPORATION AND SUBSIDIARIES

                                    SIGNATURE

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

         Date:    February 13, 1997

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

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

                                            Senior Vice President and
                                            Chief Financial Officer


<PAGE>   31


                               TELXON CORPORATION

                                   EXHIBITS TO

                                    FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 1996


<PAGE>   32


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

  Where
  Filed
  -----

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

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

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

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

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

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

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


<PAGE>   33



  Where
  Filed
  ------
    *              4.4      Indenture by and between the Registrant and
                            AmeriTrust Company National Association, as
                            Trustee, dated as of June 1, 1987, regarding
                            Registrant's 7-1/2% Convertible Subordinated
                            Debentures Due 2012, incorporated herein by
                            reference to Exhibit 4.2 to Registrant's
                            Registration Statement on Form S-3, Registration
                            No. 33-14348, filed May 18, 1987.
                            
    *                       4.4.1     Form of the Registrant's 7-1/2% 
                                      Convertible Subordinated Debentures Due
                                      2012 (set forth in the Indenture
                                      included as Exhibit 4.4 above).
                            
    *            4.5        Indenture by and between the Registrant and Bank
                            One Trust Company, N.A., as Trustee, dated as of
                            December 1, 1995, regarding Registrant's 5-3/4%
                            Convertible Subordinated Notes due 2003,
                            incorporated herein by reference to Exhibit 4.1 to
                            Registrant's Registration Statement on Form S-3,
                            Registration No. 333-1189, filed February 23,
                            1996.
                            
    *                       4.5.1     Form of Registrant's 5-3/4% Convertible
                                      Subordinated Notes due 2003 issued under
                                      the Indenture included as Exhibit 4.5
                                      above, incorporated herein by reference
                                      to Exhibit 4.2 to Registrant's
                                      Registration Statement on Form S-3,
                                      Registration No. 333-1189,
                                      filed February 23, 1996.
                            
    *                       4.5.2     Registration Rights Agreement by and
                                      among the Registrant and Hambrecht &
                                      Quist LLC and Prudential Securities
                                      Incorporated, as the Initial Purchasers
                                      of Registrant's 5-3/4% Convertible
                                      Subordinated Notes due 2003, with
                                      respect to the registration of said
                                      Notes under applicable securities laws,
                                      incorporated herein by reference to
                                      Exhibit 4.3 to Registrant's Registration
                                      Statement on Form S-3, Registration No.
                                      333-1189, filed February 23, 1996.
                            
                  10.1      Compensation and Benefits Plans of the Registrant.

    *                       10.1.1    Amended and Restated Retirement and
                                      Uniform Matching Profit-Sharing Plan of
                                      Registrant, effective July 1, 1993,
                                      incorporated herein by reference to
                                      Exhibit 10.1.1 to Registrant's Form 10-K
                                      for the year ended March 31, 1994.
                                      
    *                                 10.1.1.a    Amendment, dated January 1,
                                                  1994, to the Plan included 
                                                  as Exhibit 10.1.1 above, 
                                                  incorporated herein by
                                                  reference to Exhibit 
                                                  10.1.1.a to Registrant's 
                                                  Form 10-K for the year
                                                  ended March 31, 1994.
                                      
    *                                 10.1.1.b    Amendment, dated April 1, 
                                                  1994, to the Plan included 
                                                  as Exhibit 10.1.1 above,
                                                  incorporated herein by 
                                                  reference to Exhibit
                                                  10.1.1.b to Registrant's 
                                                  Form 10-K for the year
                                                  ended March 31, 1994.
                                      
<PAGE>   34
  Where
  Filed
  -----

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

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

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

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

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

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

    *                                     10.1.5.a  Amendment, dated December
                                                    7, 1993, to the Plan
                                                    included as Exhibit 10.1.5
                                                    above, incorporated herein
                                                    by reference to Exhibit
                                                    10.1.17.a to the
                                                    Registrant's Form 10-Q for
                                                    the quarter ended December
                                                    31, 1993.
                                                    
    *                                     10.1.5.b  Amendment, dated July 18,
                                                    1994, to the Plan included
                                                    as Exhibit 10.1.5 above,
                                                    incorporated herein by
                                                    reference to Exhibit
                                                    10.1.17.b to Registrant's
                                                    Form 10-Q for the quarter
                                                    ended September 30, 1994.

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

    *                      10.1.7      Description of compensation arrangements 
                                       between the Registrant and Robert F.
                                       Meyerson, Chairman of the Board of
                                       Registrant, incorporated herein by
                                       reference 
<PAGE>   35
  Where 
  Filed
  -----
                                       to Exhibit 10.1.7 to Registrant's Form
                                       10-Q for the quarter ended September 30,
                                       1995.

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

   *                       10.1.9      Services and Non-Competition Agreement, 
                                       dated as of January 18, 1993, among
                                       Accipiter Corporation, Robert F. Meyerson
                                       and the Registrant, incorporated herein
                                       by reference to Exhibit 10.28 to the
                                       Registrant's Form 10-Q for the quarter
                                       ended December 31, 1992.
   
   *                       10.1.10     Employment Agreement between the 
                                       Registrant and Frank Brick, effective as
                                       of October 15, 1993, incorporated herein
                                       by reference to Exhibit 10.1.16 on
                                       Registrant's Form 10-Q for the quarter
                                       ended September 30, 1994.

                10.2       Material Leases of the Registrant.

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

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

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

   *                                      10.2.2.b   Third Addendum, dated as of
                                                     March 1, 1996, to the Lease
                                                     included as Exhibit 10.2.2
                                                     above, incorporated herein
                                                     by reference to Exhibit
                                                     10.2.4.b to Registrant's
                                                     Form 10-K for the year
                                                     ended March 31, 1996.

   *                       10.3.1      Amended and Restated Revolving Credit, 
                                       Term Loan and Security Agreement between
                                       the Registrant and the Bank of New York
                                       Commercial Corporation, dated as of March
                                       31, 1995 (replaced by the revolving
                                       credit facility established by the
                                       Agreement included as Exhibit 10.3.2
                                       below), incorporated herein by reference
                                       to 
<PAGE>   36
  Where
  Filed
  -----
                                       Exhibit 10.3 to Registrant's Form
                                       10-K for the year ended March 31, 1995.

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

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

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

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

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

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

<PAGE>   37
  Where
  Filed
  -----

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

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

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

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

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

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

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

    *           10.4        Amended and Restated Agreement between the
                            Registrant and Symbol Technologies, Inc., dated as
                            of September 30, 1992, incorporated herein by
                            reference to Exhibit 10.4 to Registrant's Form 10-K
                            for the year ended March 31, 1993.
<PAGE>   38
  Where
  Filed
  -----

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

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

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

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

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

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

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

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

<PAGE>   39
 Where
 Filed
 -----

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

   **   11.  Computation of Common Shares outstanding and earnings per share for
             the nine months ended December 31, 1996 and 1995, filed herewith.

   **   27.  Financial Data Schedule as of December 31, 1996, filed herewith.

----------
    *             Previously filed

   **             Filed herewith