<PAGE>
 
                                  FORM 10-QSB

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549


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

                For the quarterly period ended October 4, 1996

                                      OR

[ ]  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)

<TABLE>
 
<S>                                   <C>
              Delaware                                  23-2472952
-------------------------------------    ---------------------------------------
  (State or other jurisdiction of        (I.R.S. Employer Identification Number)
   incorporation or organization)

 
1100 Northmeadow Parkway, Suite 150, Roswell, GA                30076
------------------------------------------------                -----
(Address of principal executive offices)                      (Zip Code)

</TABLE>

Registrant's telephone number, including area code: (770) 475-2725

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

       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    .
                                                  ---    ----

       Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.  Yes X  No    .
                          ---   ---- 

       As of October 4, 1996, there were 6,371,684 shares of common stock
outstanding.
<PAGE>
 
                                     INDEX

                        PART I - FINANCIAL INFORMATION

ITEM 1.   Financial Statements: 

          Consolidated Balance Sheets as of  
          October 4, 1996 and April 5, 1996                                   3
 
          Consolidated Statements of Operations for
          the three months ended October 4, 1996 and October 6, 1995          4
 
          Consolidated Statements of Operations for
          the six months ended October 4, 1996 and October 6, 1995            5
 
          Consolidated Statements of Cash Flows
          the six months ended October 4, 1996 and October 6, 1995            6
 
          Notes to Consolidated Financial Statements                          7
 
ITEM 2.   Discussion and Analysis or Plan of Operations                       9


                          PART II - OTHER INFORMATION

ITEM 1.   Legal Proceedings                                                  12
                                                                             
ITEM 2.   Changes in Securities                                              12
                                                                             
ITEM 3.   Defaults Upon Senior Securities                                    12
                                                                             
ITEM 4.   Submission of  Matters to a Vote of  Security Holders              12
                                                                             
ITEM 5.   Other Information                                                  12
                                                                             
ITEM 6.   Exhibits and Reports on Form 8-K                                   12
                                                                             
SIGNATURES                                                                   13 
 

                                       2
<PAGE>
 
<TABLE>
<CAPTION>

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



                                                               October 4, 1996           April 5, 1996
                                                               ---------------          ---------------
<S>                                                            <C>                      <C>  
ASSETS                                                          (Unaudited)               (Audited)
Current assets:
    Cash and cash equivalents                                   $         21             $        143
    Receivables, net                                                   2,303                    1,564
    Inventories, net                                                   2,868                    2,715
    Prepaid expenses and other                                           108                       83
                                                                ------------             ------------
Total current assets                                                   5,300                    4,505

Property, equipment and improvements, net                                339                      523

Intangible assets, net                                                   586                      636

Other                                                                    104                       99
                                                                ------------             ------------

Total assets                                                    $      6,329             $      5,763
                                                                ============             ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable, trade                                     $      2,060             $      1,848
    Accrued liabilities:
         Payroll                                                         106                      113
         Prepaid sales                                                    17                      214
         Professional fees                                                24                       69
         Other                                                           484                      465
    Line of credit                                                       749                      599
    Notes payable to stockholders                                        250                      - -
    Current maturities of long term debt                                 421                      504
                                                                ------------             ------------
Total current liabilities                                              4,111                    3,812

Notes payable to stockholders                                             20                       20

Long term debt, less current maturities                                   15                       47
                                                                ------------             ------------

Total liabilities                                                      4,146                    3,879

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; 6,371,684 and 6,357,184 shares outstanding              64                       64
  Additional paid in capital                                          41,559                   41,543
  Accumulated deficit                                                (39,440)                 (39,723)
                                                                ------------             ------------
Total stockholders' equity                                             2,183                    1,884
                                                                ------------             ------------

Total liabilities and stockholders' equity                      $      6,329             $      5,763
                                                                ============             ============

</TABLE>

       See accompanying notes to the consolidated financial statements.

                                       3


<PAGE>
 

ITEM 1. Financial Statements (continued)


                             Computone Corporation
                 Interim Consolidated Statements of Operations
                  (in thousands except per share amounts)   

                                  (unaudited)


<TABLE> 
<CAPTION> 
                                                             Three Months Ended                            
                                                    October 4, 1996     October 6, 1995             
                                                    ---------------     ---------------             
<S>                                                 <C>                <C>                          
Revenues:                                                                                           
     Product sales                                  $       3,504       $       2,694               
                                                                                                    
Expenses:                                                                                           
     Cost of products sold                                  2,058               1,758               
     Selling, general and administrative                      930                 863               
     Product development                                      265                 231               
                                                    -------------       -------------               
                                                            3,253               2,852               
                                                    -------------       -------------               
                                                                                                    
Operating income from continuing operations                   251                (158)              
                                                                                                    
Non-Operating income (expense):                                                                     
     Other income (expense)                                     3                  (1)              
     Interest expense                                         (36)                (25)              
                                                    -------------       -------------               
Income from continuing operations before taxes                215                (184)              
                                                                                                    
Income tax expense (benefit):                                                                       
     Current                                                  - -                 - -               
     Deferred                                                 - -                 - -               
                                                    -------------       -------------               
                                                              - -                 - -               
                                                    -------------       -------------               
Income from continuing operations                             215                (184)              
                                                    -------------       -------------               
                                                                                                    
                                                                                                    
Net income                                          $         215       $        (184)              
                                                    =============       =============               
                                                                                                    
Net income per common share and common                                                              
share equivalents:                                                                                  
  Income from continuing operations                          0.03               (0.03)              
                                                    -------------       -------------               
                                                                                                    
Net income per common share                         $        0.03       $       (0.03)              
                                                    =============       =============               
                                                                                                    
                                                                                                    
Weighted average common shares and                                                                  
   common share equivalents outstanding                     6,843               6,412               
                                                    =============       =============                
</TABLE> 


See accompanying notes to the consolidated financial statements.

                                       4

<PAGE>
 

ITEM 1. Financial Statements (continued)


                             Computone Corporation
              Interim Condensed Consolidated Statements of Income
                    (in thousands except per share amounts)
                                  (unaudited)
<TABLE> 
<CAPTION> 


                                                                Six Months Ended
                                                        October 4, 1996   October 6,1995
                                                        ---------------   --------------
<S>                                                     <C>                <C>
                                                                         
Revenues:                                                                
     Product sales                                        $      6,529      $      4,550
                                                                         
Expenses:                                                                
     Cost of products sold                                       3,910             3,033
     Selling, general and administrative                         1,734             2,136
     Product development                                           539               787
                                                          ------------      ------------
                                                                 6,183             5,956
                                                          ------------      ------------
                                                                         
Operating income from continuing operations                        346            (1,406)
                                                                         
Non-Operating income (expense):                                          
     Other income                                                    3                 9
     Interest expense                                              (66)              (40)
                                                          ------------      ------------
                                                                         
Income from continuing operations before taxes                     283            (1,437)
                                                                         
Income tax expense (benefit):                                            
     Current                                                      - -                - -
     Deferred                                                     - -                - -
                                                          ------------      ------------
                                                                  - -                - -
                                                          ------------      ------------
Income from continuing operations                                  283            (1,437)
                                                                         
                                                          ------------      ------------
                                                                         
Net income                                                $        283      $     (1,437)
                                                          ============      ============
                                                                         
Net income per common share and common                                   
share equivalents:                                                       
  Income from continuing operations                               0.04             (0.23)
                                                          ------------      ------------
                                                                         
Net income per common share                               $       0.04      $      (0.23)
                                                          ============      ============
                                                                         
                                                                         
Weighted average common shares and                                       
   common share equivalents outstanding                          6,843             6,383
                                                          ============      ============
</TABLE>

                                       5

       See accompanying notes to the consolidated financial statements.


<PAGE>
 

                             Computone Corporation
                     Consolidated Statements of Cash Flows
                                (in thousands)


<TABLE> 
<CAPTION> 
                                                                             For the six months ended       
                                                                        October 4, 1996    October 6, 1995 
                                                                          (unaudited)        (unaudited)   
                                                                        ---------------    ---------------  
<S>                                                                     <C>                 <C>  
Cash flows from operating activities:
  Income  (loss) from continuing operations                               $     283         $  (1,437)
  Adjustments to reconcile income (loss) from continuing operations
     to net cash provided by (used in) continuing operations:
       Depreciation and amortization                                            340               646
       Provision for possible losses                                             78              (400)
       Changes in current assets and current liabilities:
          Accounts receivables                                                 (747)            1,917
          Inventories                                                          (224)             (549)
          Prepaid expenses and other                                            (26)               23
          Accounts payable and accrued liabilities                              (18)             (719)
                                                                          ---------         ---------

     Net cash provided by (used in) continuing operations                      (314)             (519)
                                                                          ---------         ---------

Net cash provided by (used in) operating activities                            (314)             (519)
                                                                          ---------         ---------


Cash flows from investing activities:
   (Increase) decrease in other assets                                           (4)                3
   Capitalization of software costs                                             (75)             (158)
   Capital expenditures                                                         (30)              (71)
                                                                          ---------         ---------

Net cash used in investing activities                                          (109)             (226)
                                                                          ---------         ---------


Cash flows from financing activities:
  Repayment of debt - net                                                      (115)              (85)
  Net borrowings under lines of credit                                          150               665
  Net borrowings from affiliates                                                250               - -
  Exercise of common stock options and warrants                                  16               - -
                                                                          ---------         ---------

Net cash (used in) provided by financing activities                             301               580
                                                                          ---------         ---------

Net decrease in cash and cash equivalents                                      (122)             (165)
Cash and cash equivalents, beginning of period                                  143               297
                                                                          ---------         ---------
Cash and cash equivalents, end of period                                  $      21         $     132
                                                                          =========         =========


Supplemental disclosures of cash flow information:
    Cash paid during the year for:
        Interest                                                          $      66         $      40
</TABLE> 

       See  accompanying notes to the consolidated financial statements.

                                       6


<PAGE>
 
                             COMPUTONE CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


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

     The financial statements included in this Form 10-QSB 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 1996 Form 10-K.

     The financial statements presented herein, as of October 4, 1996 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.   INVENTORIES
     -----------

     Inventories, net of a reserve for obsolete, excess and non-salable items,
consisted of the following at October 4, 1996 and  April 5, 1996 (in thousands):

<TABLE>
<CAPTION>
 
                         October 4, 1996  April 5, 1996
                         ---------------  -------------
<S>                      <C>              <C>
 
     Finished goods               $  457         $  830
     Work in progress                865            516
     Raw materials                 1,546          1,369
                                  ------         ------
                                  $2,868         $2,715
                                  ======         ======
</TABLE>

3.   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.

                                       7
<PAGE>
 
                             COMPUTONE CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


4.   INCOME TAXES
     ------------

     On April 3, 1993, the Company adopted the Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes".  Such adoption had no
cumulative effect on the Company's consolidated financial statements.  Prior
years' financial statements have not been restated.

     The Company has available net operating and capital loss carryforwards,
including preacquisition operating loss carryforwards which relate to a
predecessor company, which expire during the period 2003-2008.  The Company's
possible use of the loss carryforwards will be limited as a result of several
different changes in ownership which have occurred since the carryforwards
started to accumulate.  The use of the net operating loss carryforwards are
limited due to statutory provisions which apply after certain changes in control
occur.

     For financial reporting purposes, a valuation allowance has been
established to reflect a net deferred tax balance of $0 as of the date of
adoption of FAS 109 as well as at October 4, 1996.

     The Company estimates that no current provision for income taxes is
required for the three months ended October 4, 1996.

5.   DEBT
     ----

     On August 12, 1994, the Company secured financing from a bank in the form
of a $300,000 note payable and a $500,000 revolving credit agreement
("Agreement").  On April 7, 1995, the Company refinanced the note in the amount
of $402,823 and reduced the monthly payments from $16,666.67 to $13,427.44.  The
note bears interest at a rate of floating prime plus 2%.  On July 31, 1995, the
Company has a line of credit facility with the bank which provides for $750,000
in advances at a rate of prime plus 1% and matured in August 1996.  In November
1996, the Company paid $410,000 toward the consolidated debt and reached an
agreement to extend its maturity date to May  1997.  The consolidated note bears
interest at a rate of prime plus 2% with interest only monthly payments in the
amount of approximately $5,000.  The principal balance of the consolidated debt
will be due at maturity.

     On September 10, 1996, the Company secured financing from a shareholder in
the form of a $250,000 note payable.  The note bears interest at a rate of 10%
and matures on December 31, 1996.

6.   FINANCING
     ---------

     On October 9 and October 11, 1996, the Company raised a total of
approximately $1,400,000 through an offshore private placement. A total of
300,000 shares were sold at an offering price of $5.25 per share.

                                       8
<PAGE>
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS FOR THE
        THREE AND SIX MONTHS ENDED OCTOBER 4, 1996.


INTRODUCTION
------------

     The comparative information contained herein includes results of
operations for the Company's continuing businesses.  Certain previous components
of the Company are presented as discontinued operations in the accompanying
Consolidated Financial Statements.


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

     Product sales revenue for the quarter ended October 4, 1996 totaled
approximately $3,504,000 compared to $2,694,000 for the comparable quarter of
the prior fiscal year, an increase of 30%. Product sales revenue for the six
month period ended October 4, 1996 totaled approximately $6,529,000 compared to
$4,550,000 for the comparable period of the prior fiscal year, an increase of
44%. These increases in product sales revenue can be attributed to the Company's
sales of remote access products increasing approximately $658,000 for the
quarter and approximately $1,237,000 for the six month period.

     Cost of products sold for the quarter amounted to $2,058,000 or 72% of
product sales revenues versus $1,758,000 or 65% for the comparable quarter of
the prior year.  Cost of products sold for the six month period amounted to
$3,910,000 or 60% of product sales revenues versus $3,033,000 or 67% for the
comparable period of the prior year. The increase cost of products sold can be
attributed to the Company's increased sales of Remote Access products.

     Selling, general and administrative expenses amounted to $930,000 or 27% of
product sales revenue for the quarter versus $863,000 or 32% of product sales
revenue for the comparable quarter of the prior fiscal year.   Selling, general
and administrative expenses amounted to $1,734,000 or 27% of product sales
revenue for the six month  period versus $2,136,000 or 47% of product sales
revenue for the comparable period of the prior fiscal year.  The decrease in
expenses as a percentage  of product sales revenue can be attributed to the
Company's ability to reduce its  headcount while  providing a greater level of
service to its customers, a reduction in professional fees resulting from the
settlement of various lawsuits, and the Company's successful efforts in reducing
its day-to-day operating expenses.  Also,  the Company continues to review its
alternatives with respect to relocating to a new facility in the same general
area which will result in a significant reduction in the Company's overall
monthly occupancy costs.

     Product development expenses amounted to $265,000 or 8% of product sales
revenue for the quarter versus $231,000 or 9% of product sales revenue for the
comparable quarter of the prior fiscal year. Product development expenses
amounted to $539,000 or 9% of product sales revenue for the six month period
quarter versus $787,000 or 18% of product sales revenue for the comparable
period of the prior fiscal year.  The increase in expenses for the quarter ended
October 4, 1996 is due to a slightly higher headcount in the product development
area.  The decrease in expenses for the six month period can be attributed to a
decision made in the prior fiscal year to take a one-time charge to accelerate
the amortization of product development expenses associated with costs
capitalized prior to April 1, 1994.

                                       9
<PAGE>
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS FOR THE
        THREE AND SIX MONTHS ENDED OCTOBER 4, 1996 (CONTINUED).

RESULTS OF OPERATIONS (CONTINUED)
---------------------------------

     The Company reported income from continuing operations for the quarter
ended October 4, 1996 of $215,000 compared to loss from continuing operations of
$184,000 for the comparable quarter of the prior fiscal year.  The Company
reported income from continuing operations for the six month period of $283,000
compared to loss from continuing operations of $1,437,000 for the comparable
period of the prior fiscal year.    The increase in income is due primarily to
increased product sales revenue.

LIQUIDITY
---------

     Cash used in continuing operations amounted to $314,000 for the six months
ended October 4, 1996 compared to cash used in continuing operations of $519,000
for the comparable six months ended October 6, 1995.  The decrease in cash used
in continuing operations as compared to the prior year fiscal period primarily
reflects the net income generated during the current period versus the loss over
the same period over the prior fiscal year.

     Cash used in investing activities amounted to $109,000 for the six months
ended October 4, 1996 compared with $226,000 used in financing activities for
the comparable six months of the prior fiscal year.  This decrease from the same
period of the prior fiscal year can be attributable to the Company capitalizing
a lesser amount of software development costs and a lesser amount of capital
expenditures.

     Cash provided by  financing activities during the six months ended October
4, 1996 was $301,000  versus $580,000 of cash provided by financing activities
for the same six months of the prior fiscal year.  This change can be attributed
to the Company borrowing a lesser amount from its line of credit and its
affiliates to fund its working capital needs.

     Working capital amounted to $1,189,000 at October 4, 1996, an increase of
$496,000, since April 5, 1996.  The ratio of current assets to current
liabilities at October 4, 1996 was 1.28 to 1.00 compared to 1.18 to 1.00 at
April 5, 1996.

                                       10
<PAGE>
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS FOR THE
        THREE AND SIX MONTHS ENDED OCTOBER 4, 1996 (CONTINUED).

OUTLOOK FOR REMAINDER OF FISCAL YEAR 1997
-----------------------------------------

SALES BY PRODUCT LINE

     The Company has decided to concentrate is selling efforts in the Remote
Access market versus the Input/Output device market.  The sales information for
the quarter and the six months ended October 4, 1996 are listed below.
Management believes that the level of sales of Remote Access products as a
percentage of total net revenue will continue to increase over the remainder of
fiscal year and reach approximately 40% of total revenues by the fiscal
yearend.
                                                                
<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:  97                   1,033           30%              2,471              70%                3,504             100%
             96                     375           14%              2,319              86%                2,694             100%

YTD Info:    97                   2,039           32%              4,490              68%                6,529             100%
             96                     802           18%              3,748              82%                4,550             100%

</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

     Cash from operations is expected to enable the Company to meet its
obligations with respect to its lender and trade vendors throughout fiscal year
1997.  The Company is in negotiations with its affiliates in an effort to extend
the debt due to them beyond its current maturity date.

RESULTS OF OPERATIONS

     The Company expects continued growth in its Remote Access products and is
currently negotiating with a number of major accounts with respect to large
purchases for the remainder of the fiscal year.  Management is fairly confident
that these purchase orders will be obtained and shipped prior to the fiscal
yearend.  There are no guarantees that the orders will be received  in time to
ensure shipment prior to the fiscal yearend.

                                       11
<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-K for the year ended April 5, 1996.

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.

                                       12
<PAGE>
 
                                   SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) 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.



                               COMPUTONE CORPORATION


Date: November 18, 1996        By: /s/ Thomas J. Anderson
                                   ----------------------
                                   Thomas J. Anderson
                                   President & Chief Operating Officer
                                   (duly authorized officer and
                                   Principal Executive Officer)
 
 
                               By: /s/ Gregory A. Alba
                                   -------------------
                                   Gregory A. Alba
                                   Vice President of Finance & Administration 
                                         and Chief Financial Officer
                                   (Principal Accounting Officer)

                                       13