UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-QSB/A


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

     For the quarterly period ended July 4, 1997


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

     Commission file number 0-16172

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


            Delaware                                     23-2472952
-------------------------------             ------------------------------------
(State or other jurisdiction of             (IRS Employer Identification Number)
incorporation or organization)

          1060 Windward Ridge Parkway, Suite 100, Alpharetta, GA 30005
          ------------------------------------------------------------
                    (Address of principal executive offices)

Issuer's telephone number, including area code: (770) 625-0000

                                       N/A
                                       ---
              (Former name, former address and former fiscal year,
                          if changed since last report)

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

                               Yes  [X]       No [ ]

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEEDING FIVE YEARS

Check mark whether the registrant  has filed all documents and reports  required
to be  filed  by  Section  12,  13 or 15 (d)  of  the  Exchange  Act  after  the
distribution of securities under a plan confirmed by a court.

                               Yes  [X]       No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 6,825,696 shares of common stock

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

<PAGE>

                                      INDEX

                         PART I - FINANCIAL INFORMATION

ITEM 1.   Financial Statements:

          Balance Sheets as of July 4, 1997 and April 4, 1997
          As Restated (Note 2)                                                 3

          Statements of Operations for the three months ended
          July 4, 1997 and July 5, 1996                                        4

          Statements of Cash Flows  the three months ended
          July 4, 1997 and July 5, 1996                                        5

          Notes to Financial Statements                                        6

ITEM 2.   Management's Discussion and Analysis or Plan of Operations           8


                           PART II - OTHER INFORMATION

ITEM 1.   Legal Proceedings                                                   10

ITEM 2.   Changes in Securities                                               10

ITEM 3.   Defaults Upon Senior Securities                                     10

ITEM 4.   Submission of Matters to a Vote of Security Holders                 10

ITEM 5.   Other Information                                                   10

ITEM 6.   Exhibits and Reports on Form 8-K                                    10

SIGNATURES                                                                    11

                                       2
<PAGE>

                    PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                              Computone Corporation
                                 Balance Sheets
              (in thousands except par value and number of shares)

<TABLE>
<CAPTION>
                                                                  July 4, 1997    April 4, 1997
                                                                  ------------    -------------
                                                                   (unaudited)
                                                                   As Restated     As Restated
ASSETS                                                              (Note 2)         (Note 2)
Current assets:
<S>                                                                 <C>              <C>
    Cash and cash equivalents                                       $    154         $     88
    Receivables, net                                                   2,409            1,636
    Inventories, net                                                   4,600            4,740
    Prepaid expenses and other                                           221              170
                                                                    --------         --------
Total current assets                                                   7,384            6,634

Property, equipment and improvements, net                                213              276

Intangible assets, net                                                   647              655

Other                                                                    102               90
                                                                    --------         --------

TOTAL ASSETS                                                        $  8,346         $  7,655
                                                                    ========         ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable, trade                                         $  2,084         $  2,647
    Accrued liabilities:
      Payroll                                                             99              112
      Prepaid sales                                                        6                9
      Professional fees                                                  105              171
      Other                                                              399              439
   Line of credit                                                        971               --
   Notes payable to stockholders                                         350              250
   Current maturities of long term debt                                  156              603
                                                                    --------         --------
Total current liabilities                                              4,170            4,231

Notes payable to stockholders                                            120              120

Long term debt, less current maturities                                  197               --
                                                                    --------         --------

Total liabilities                                                      4,487            4,351

Stockholders' Equity
  Convertible redeemable preferred stock, $.01 par value;
      10,000,000 shares authorized; 0 shares issued                       --               --
  Common stock, $.01 par value; 50,000,000 shares
      authorized; 6,825,696 and 6,712,074 shares outstanding              68               67
  Additional paid in capital                                          43,475           43,031
  Accumulated deficit                                                (39,684)         (39,794)
                                                                    --------         --------
Total stockholders' equity                                             3,859            3,304
                                                                    --------         --------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $  8,346         $  7,655
                                                                    ========         ========
</TABLE>

         See accompanying notes to the financial statements.

                                       3
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                              Computone Corporation
                            Statements of Operations
                      (in thousands, except per share data)

                                                         Three Months Ended
                                                    ----------------------------
                                                    July 4, 1997    July 5, 1996
                                                    ------------    ------------
                                                            (unaudited)
Revenues:
     Product sales                                     $ 3,494         $ 3,025
                                                       -------         -------
Expenses:
     Cost of products sold                               2,121           1,852
     Selling, general and administrative                   959             805
     Product development                                   275             274
                                                       -------         -------
                                                         3,355           2,931
                                                       -------         -------

Operating income                                           139              94

Other  income (expense):
     Other income (expense)                                 (2)              4
     Interest expense - affiliates                          (6)            (10)
     Interest expense - other                              (20)            (20)
                                                       -------         -------

Income before income taxes                                 111              68

Provision for income taxes                                  --              --
                                                       -------         -------

Net income                                             $   111         $    68
                                                       =======         =======
Income per common share:
            Basic                                      $  0.02         $  0.01
                                                       =======         =======
Weighted average common shares and
  common equivalents outstanding                         7,145           6,482
                                                       =======         =======

            See accompanying notes to the financial statements.

                                       4
<PAGE>

Item 1. Financial Statements

                              Computone Corporation
                            Statements of Cash Flows
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                    Three Months Ended
                                                               -----------------------------
                                                               July 4, 1997     July 5, 1996
                                                               ------------     ------------
                                                                        (unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                              <C>              <C>
  Net income (loss) from operations                              $    111         $     68
  Adjustments to reconcile income (loss) from operations
     to net cash provided by (used in) operations:
       Depreciation and amortization                                  123              168
       Provision for uncollectible accounts                           (17)              51
       Provision for inventory reserve                                (39)               0
       Changes in current assets and current liabilities:
          Accounts receivable                                        (756)            (123)
          Inventories                                                 179             (149)
          Prepaid expenses and other                                  (50)              (9)
          Accounts payable and accrued liabilities                   (604)            (108)
                                                                 --------         --------

Net cash (used in) provided by operations                          (1,053)            (102)
                                                                 --------         --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   (Increase) decrease in other assets                                (12)              (5)
   Capitalization of software costs                                   (73)             (45)
   Capital expenditures                                                29              (18)
                                                                 --------         --------

Net cash used in investing activities                                 (56)             (68)
                                                                 --------         --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings from affiliates                                          100                0
  Repayment to affiliates                                               0                0
  Repayment of debt - net                                            (447)             (60)
  Net borrowings under term loan - others                             250                0
  Net borrowings under lines of credit - others                     1,271              150
  Exercise of common stock options and warrants                         1               16
                                                                 --------         --------

Net cash (used in) provided by financing activities                 1,175              106
                                                                 --------         --------

Net increase (decrease) in cash and cash equivalents                   66              (64)
Cash and cash equivalents, beginning of period                         88              143
                                                                 --------         --------
Cash and cash equivalents, end of period                         $    154         $     79
                                                                 ========         ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the year for:
        Interest                                                 $     27         $     30
</TABLE>

               See accompanying notes to the financial statements.

5
<PAGE>

                              COMPUTONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   BASIS OF PRESENTATION
     ---------------------

     The financial  statements included in this Form 10-QSB/A have been prepared
by the Company,  without  audit,  pursuant to the rules and  regulations  of the
Securities   and  Exchange   Commission.   Certain   information   and  footnote
disclosures,  normally included in financial  statements  prepared in accordance
with generally accepted accounting principles,  have been condensed, or omitted,
pursuant to such rules and  regulations.  These financial  statements  should be
read in conjunction with the financial  statements and related notes included in
the Company's Fiscal 1997 Form 10-KSB.

     The financial  statements  presented  herein, as of July 4, 1997 reflect in
the opinion of management,  all adjustments necessary for a fair presentation of
financial position and the results of operations for the periods presented.  The
results of operations for any interim period are not  necessarily  indicative of
the results for the full year.

2.   RESTATEMENT OF FINANCIAL DATA
     -----------------------------

     The Company has restated its financial  statements  for the fiscal  quarter
ended  July  4,  1997  (as  presented   herein)  as  a  result  of  the  ongoing
investigation by the Securities and Exchange Commission (SEC) in matters focused
principally  on  the  Company's  revenue   recognition   policies  and  internal
accounting  controls.  Since March 1996,  the Company has been the subject of an
investigation  by the SEC  pursuant to a Formal  Order of Private  Investigation
relating to the Company. Since that date, certain former and current officers of
the Company have testified in the  investigation.  On June 22, 1998, the Company
was advised by the Staff of the SEC of the Staff's  intention  to  recommend  an
enforcement  action  against the Company for alleged  violations  of the federal
securities  laws and to  recommend  the filing of a complaint  in federal  court
seeking a permanent  injunction  against the Company for violations arising from
the Company's  reporting of certain revenues in violation of generally  accepted
accounting  principles in periodic  filings made during certain of the quarterly
and annual  filings by the Company in the five year period ending April 3, 1998.
As a result of the foregoing,  the Company is required,  among other things,  to
restate certain previously issued financial information. The Company has advised
the  Staff  of the  Company's  intention  to  negotiate  a  mutually  acceptable
settlement of this matter.

     In  response  to the  forgoing,  the  Company  has  taken a number of steps
including  (a)  changing  the  application  of its revenue  recognition  policy,
effective  with the fourth  quarter of the fiscal year ended  April 3, 1998,  to
defer  recognition  of  revenue  to  customers  who are not the end users of the
Company's  product  until such time as the product has been sold  through to the
end user;  (b) improving  its quarterly and fiscal year end cut-off  procedures;
(c) accepting the  resignation  of the  Company's  previous  president and chief
executive officer subsequent to April 3, 1998; and (d) accepting the resignation
of the Company's  previous chief financial officer  subsequent to April 3, 1998.
The Company believes that these steps will provide reasonable assurance that the
aforementioned accounting errors do not recur.

     This  restatement  of  financial  statements  results  does not  effect the
statement of operations, statement of cash flows or earnings per common share in
the periods presented herein. The effects on receivables, inventory, accumulated
deficit is reflected on the statement of shareholders' equity.

                                       6
<PAGE>

                              COMPUTONE CORPORATION
                    NOTES TO FINANCIAL STATEMENTS, CONTINUED
                                   (UNAUDITED)

3.   INVENTORIES
     -----------

     Inventories,  net of a reserve for obsolete,  excess and non-salable items,
consisted of the following at July 4, 1997 and April 4, 1997 (in thousands):

                                       July 4, 1997         April 4, 1997
                                       ------------         -------------
                                       As Restated           As Restated
                                         (Note 2)              (Note 2)
     Finished goods                      $  1,624              $  1,880
     Work in progress                         761                   725
     Raw materials                          2,215                 2,135
                                         --------              --------
                                         $  4,600              $  4,740
                                         ========              ========

4    INCOME PER SHARE
     ----------------

     Income per common  share is computed by dividing net income  applicable  to
common stock by the weighted average number of shares of common stock and common
share equivalents outstanding during each period.

5.   INCOME TAXES
     ------------

     Income  taxes  are  calculated  using the  liability  method  specified  by
Statement of Financial Accounting  Standards No.109 (SFAS 109),  "Accounting for
Income Taxes".  Management  provides a valuation  allowance against its deferred
tax assets to the extent that  management  concludes that it is more likely than
not that the Company will not benefit from the  utilization of such deferred tax
assets.

6.   DEBT
     ----

     On June 20, 1997,  the Company  entered into a financing  arrangement  with
Heller  Financial  to  provide a term loan in the  amount of  $254,000  which is
collateralized  by  the  Company's  inventory  and a  line  of  credit  of up to
$2,500,000,  based  on  the  available  borrowing  base,  collateralized  by the
Company's accounts  receivable.  The term loan bears interest at a rate of prime
plus 1.50% and is payable in monthly  installments  of  $4,233.00  plus  accrued
interest for the first  thirty-five  months with a final monthly  payment in the
amount of the entire then outstanding principal plus accrued interest.  The line
of credit  bears  interest at a rate of prime plus 1.25%.  At July 4, 1997,  the
balance outstanding of the term loan was approximately  $247,000 and the Company
borrowed  approximately  $971,000  under  the terms of the line of  credit.  The
Company also paid in full its  outstanding  balance to NationsBank in the amount
of $400,000.

                                       7
<PAGE>

ITEM 2.   MANAGEMENT'S  DISCUSSION  AND ANALYSIS OR PLAN OF  OPERATIONS  FOR THE
          THREE MONTHS ENDED JULY 4, 1997.

SEE NOTE 2 IN ITEM 1 - RESTATEMENT OF FINANCIAL DATA

RESULTS OF OPERATIONS
---------------------

     The Company  reported  income from  continuing  operations  for the quarter
ended July 4, 1997 of $111,000 compared to income from continuing  operations of
$68,000 for the  comparable  quarter of the prior fiscal  year.  The increase in
income is due  primarily to the increase in product  sales  revenue to VAR's and
major accounts.

     Product sales revenue from continuing operations for the quarter ended July
4,  1997  totaled  approximately  $3,494,000  compared  to  $3,025,000  for  the
comparable  quarter of the prior fiscal year,  an increase of 15%. This increase
in product sales revenue can be attributed to the increase in sales to VAR's and
major accounts.

     Cost of products  sold for the quarter  amounted  to  $2,121,000  or 61% of
product sales revenues  versus  $1,852,000 or 61% for the comparable  quarter of
the prior year.  The increase in cost of products  sold can be attributed to the
increase in product sales revenue.

     Selling, general and administrative expenses amounted to $959,000 or 27% of
product sales revenue for the three months ended July 4, 1997 versus $805,000 or
27% of product sales revenue for the comparable three months of the prior fiscal
year. The increase in expenses  during the quarter ended July 4, 1997 versus the
same  period  of the prior  fiscal  year can be  attributed  to an  increase  in
headcount in the areas of sales and customer service.

     Product  development  expenses  amounted to $275,000 or 8% of product sales
revenue for the three months ended July 4, 1997 versus $274,000 or 9% of product
sales revenue for the comparable three month period of the prior fiscal year.

LIQUIDITY
---------

     In response to the Company's  liquidity  needs,  the Company entered into a
financing arrangement with Heller Financial,  on June 20,1997, to provide a term
loan  in the  amount  of  $254,000  which  is  collateralized  by the  Company's
inventory  and a line of  credit  of up to  $2,500,000,  based on the  available
borrowing base,  collateralized by the Company's accounts receivable. As of June
20, 1997, $1,400,000 was available for borrowing under the term loan and line of
credit, of which,  $400,000 was used to payoff the then remaining balance on the
existing  note payable to bank with the  remaining  $1,000,000  available to the
Company for the working  capital  purposes.  As of July 4, 1997,  $1,150,000 was
available for borrowing under the line of credit.  The Company believes that the
working capital provided by Heller  Financial,  together with anticipated  funds
expected  to  be  generated  by  operating  activities,   should  be  reasonably
sufficient to cover  operating  expenses to be incurred during fiscal 1998. Cash
commitments for  non-cancelable  long-term  operating real and personal property
leases during fiscal 1998 is  approximately  $262,000.  The Company has no plans
for any  major  capital  improvements.  Relationships  with  major  vendors  are
satisfactory  although  the  Company is on a "Cash On  Delivery"  status  with a
significant number of raw materials vendors.

     Cash used in investing  activities amounted to $56,000 for the three months
ended July 4, 1997  compared with $68,000 used in financing  activities  for the
comparable  three months of the prior fiscal year.  This  decrease from the same
period of the prior fiscal year can be  attributable  to the write-off a certain
computer  equipment that was replaced during the fourth quarter of the Company's
prior fiscal year.

         Cash  provided by  financing  activities  during the three months ended
July 4, 1997 was  $1,175,000  versus  $106,000  of cash  provided  by  financing
activities  for the months ended July 5, 1996.  This change can be attributed to
the Company's aforementioned new financing arrangement with Heller Financial.

                                       8
<PAGE>

ITEM 2.   MANAGEMENT'S  DISCUSSION  AND ANALYSIS OR PLAN OF  OPERATIONS  FOR THE
          THREE MONTHS ENDED JULY 4, 1997, CONTINUED.

LIQUIDITY (CONTINUED)
---------------------

     Working  capital  amounted to  $3,214,000  at July 4, 1997,  an increase of
$811,000,  since  April  4,  1997.  The  ratio  of  current  assets  to  current
liabilities  at July 4, 1997 was 1.77 to 1.00  compared to 1.57 to 1.00 at April
4, 1997.

OUTLOOK FOR REMAINDER OF FISCAL YEAR 1998
-----------------------------------------

SALES BY PRODUCT LINE
---------------------

     The Company  continues to  experience  growth in its sales of remote access
products following its decision to strategically aligned its sales focus towards
this marketplace versus sales of input\output devices. The sales information for
the first quarter of fiscal 1998 ended July 4, 1997 is listed below.  Management
is fairly  optimistic  that the level of sales of remote  access  products  as a
percentage  of net revenue will  continue to increase  over the remainder of the
current fiscal year and should approach the 50% of net revenues level.

<TABLE>
<CAPTION>
                       Remote Access Servers                Input\Output Devices               Total
                   Sales $ (000's)     % of Total       Sales $ (000's)    % of Total     Sales $ (000's)    % of Total
                   ---------------     ----------       ---------------    ----------     ---------------    ----------
<S>                     <C>                <C>               <C>               <C>              <C>               <C>
Qtrly Info: 98          1,610              46%               1,884             54%              3,494             100%
            97          1,030              34%               1,995             66%              3,025             100%
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     The Company believes that the working capital provided by Heller Financial,
together  with   anticipated   funds  expected  to  be  generated  by  operating
activities,  should be reasonably  sufficient to cover operating  expenses to be
incurred  during fiscal 1998.  Cash  commitments  for  non-cancelable  long-term
operating real and personal  property leases during fiscal 1998 is approximately
$262,000.  The  Company  has  no  plans  for  any  major  capital  improvements.
Relationships  with major vendors are satisfactory  although the Company is on a
"Cash On Delivery" status with a significant number of raw materials vendors.

RESULTS OF OPERATIONS
---------------------

     The  Company  expects  continued  growth in the sales of its remote  access
products. At July 4, 1997, the Company had open orders of approximately $320,000
and had not yet shipped orders  totaling  $1,509,200 for April,  May and June on
the non-cancelable, non-returnable purchase order that was received from a major
customer in January 1997. The revenue and costs  associated with the shipment of
approximately  $1,287,000 in fourth quarter  shipments to this customer have not
yet been  recognized  as of July 21, 1997 because this customer had not yet paid
for, or sold through,  the products received during the fourth quarter of fiscal
1997.  The Company will recognize  revenue on these fourth quarter  shipments as
the customer pays for the products that they sell.  The Company and its customer
are  continuing  to monitor  the best  methods  possible  for the sale and "pull
through" of the inventory that the customer has on hand.

                                       9
<PAGE>

                           PART II - OTHER INFORMATION


ITEM 1.   LEGAL PROCEEDINGS

          None,  other than those  matters  described in Item 3 to the Company's
          Annual Report on Form 10-KSB for the year ended April 4, 1997.


ITEM 2.   CHANGES IN SECURITIES

          Not Applicable


ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          Not Applicable.


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

          Not Applicable.


ITEM 5.   OTHER INFORMATION

          Not Applicable.


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          Not Applicable.

                                       10
<PAGE>

                                   SIGNATURES


     In accordance  with the  requirements  of the Exchange Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



                              COMPUTONE CORPORATION


Date:  June 28, 1999          By:  \s\ Perry Pickerign
                                   -------------------
                                   Perry Pickerign
                                   President and Chief Executive Officer
                                   (Principal Operating Officer)


                              By:  \s\ Keith Daniel
                                   ----------------
                                   Keith Daniel
                                   Chief Financial Officer
                                   (Principal Financial and Accounting Officer)