SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                  FORM 10-K
    

X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

                  FOR THE FISCAL YEAR ENDED OCTOBER 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 0-27022

                          OPTICAL CABLE CORPORATION
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<CAPTION>
<S>                                                    <C>
Virginia                                               54-1237042
(State of incorporation)                               (I.R.S. Employer
                                                       Identification No.)
5290 Concourse Drive 
Roanoke, Virginia 24019                                (540) 265-0690
(Address of principal                                  (Telephone Number)
executive offices)
</TABLE>

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, no par value

   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. (1) Yes X No  (2) Yes X No 

   Indicate by check mark if disclosure of  delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X

   The aggregate  market value of shares of common stock held by  non-affiliates
at December 31, 1996 was $30,721,284.

   As of January 15, 1997,  38,675,416  shares of the Registrant's  Common Stock
were outstanding.

                      DOCUMENT INCORPORATED BY REFERENCE
 PORTIONS OF THE REGISTRANT'S NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
                                  




<PAGE>
                                    PART I

ITEM 1. BUSINESS

GENERAL

   The Company  manufactures and markets a broad range of fiber optic cables for
"high  bandwidth"  transmission  of data,  video and audio  communications  over
moderate  distances of up to approximately 10 miles. The Company's cables can be
used both indoors and outdoors,  are easy and economical to install, and provide
a high degree of reliability.  The Company believes that its products are widely
accepted  for  use  in  fiber  optic  local  area  networks   ("LANs")  and  are
increasingly  accepted  in  other  communications  applications.  The  Company's
products directly address the needs of the moderate distance market by utilizing
a tight-buffered coating that protects the optical fiber and a cable design that
achieves superior mechanical and environmental performance.

   The Company was  incorporated  in Virginia in 1983.  The Company's  executive
offices are located at 5290 Concourse Drive, Roanoke,  Virginia 24019, telephone
number (540) 265-0690.

INDUSTRY BACKGROUND AND MARKETS

APPLICATION OF FIBER OPTIC COMMUNICATIONS TECHNOLOGY

   Fiber optic  technology  was developed in the  mid-1970s as a  communications
medium offering numerous technical  advantages over metallic  conductors such as
copper.  Optical fiber is an ultrapure glass structure that has been pulled into
a hair thin strand. Optical fiber's advantages include its high bandwidth, which
permits reliable  transmission of complex signals such as multiple  high-quality
audio and video channels, high-speed data formats such as Fiber Distributed Data
Interface   ("FDDI")  and   Asynchronous   Transfer  Mode  ("ATM"),   other  LAN
transmissions, and high-definition television. Relative to copper, optical fiber
has thousands of times the  information  carrying  capacity,  occupies much less
space and operates  more  reliably over greater  distances.  Furthermore,  it is
immune to the  electromagnetic  interference  that causes  static in copper wire
transmission,  as well as to electrical  surges.  Because optical fiber does not
carry electricity, it is a safer choice in flammable environments. Additionally,
communicating  through  optical fiber is more secure than copper because tapping
into fiber optic cable without  detection is very difficult.  Optical fiber also
enjoys technical  advantages over other  communications  media such as satellite
and  microwave   communications,   particularly  in  applications  over  shorter
distances.

   Because  most of the  world's  information  storage,  reception  and  display
systems (such as  computers,  telephones  and  televisions)  are  electronically
based, various electro-optical  hardware components must be attached to each end
of an optical  fiber.  For instance,  a laser or light  emitting  diode converts
electrically  encoded  information  into light  signals,  which  travel over the
optical  fiber to the  terminal  point of  reception.  At the  terminal  point a
photodetector  converts the information back to its original form. Other passive
optical  components such as optical connectors and splices facilitate the travel
of  a  light   signal  from  one   optical   fiber  to  another  or  to  another
electro-optical  component,  while  couplers  and  splitters  combine  or divide
signals, thereby permitting simultaneous  distribution of information to or from
multiple locations. Despite early and widespread appreciation of optical fiber's
superior  technical  characteristics,  until the late 1970s the costs associated
with  the  necessary   electro-optical   transmitters  and  receivers   rendered
commercial applications prohibitively expensive.

   The Company believes there is a perception that fiber optic cable, because it
is different  from copper  cable,  is difficult  to install and  maintain.  This
perception  is being  overcome as fiber optic cable is more widely  used.  Also,
like copper cable,  fiber optic cable is restricted to  applications in which it
is possible  to lay cable  between  the point of  transmission  and the point of
reception. Wireless communication media do not have this limitation.

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<PAGE>
THE LONG DISTANCE TELEPHONE MARKET

   In the 1970s private industry began to develop optical fiber systems for long
distance commercial applications,  particularly the U.S. telephone networks. For
this application,  the expense of electro-optical  components posed a lower cost
barrier  because  relatively  few  terminal  components  were  required for long
distance  transmissions.  For the long distance telephone market,  "single mode"
optical fiber was developed.  To protect this early  generation of fiber without
adversely affecting its optical performance, fiber optic cable producers chose a
high density  (i.e.,  high fiber count)  "loose tube" cable  construction.  This
cable design was developed to put minimal  stress on the optical  fibers,  which
initially were particularly  fragile, and to put many optical fibers in a small,
relatively  inexpensive  cable.  When such  cables  proved  vulnerable  to water
penetration, manufacturers added a water-blocking but flammable gel, making them
unsuitable for indoor use.

   Once fiber  optic  technology  achieved  cost parity with copper for the long
distance  telephone  application,   U.S.  long  distance  carriers  aggressively
installed  fiber  optic  routes  across the United  States.  By the late  1980s,
optical fiber constituted nearly all of the long distance telephone network,  as
well as the interoffice  local exchange  network  connecting  central  telephone
offices in the same area.

THE MODERATE DISTANCE MARKET

   In the  1970s  the U.S.  government  made  available  substantial  funds  for
research and  development  to  determine  the  viability  of optical  fiber as a
solution to critical  communications  problems  faced by the  military and other
agencies.  In the course of addressing these challenging,  multiple  termination
point applications,  which were predominately over moderate distances, engineers
achieved  significant   technological   advances.  Such  advances  included  the
introduction   of   "multimode"   optical  fiber  and  the   development  of  an
easy-to-handle  "tight-bound"  cable  structure  that afforded the optical fiber
effective  protection against mechanical shock, water,  extreme temperatures and
other stresses likely to be encountered in a battlefield environment.

   High levels of production of optical fiber, cable and components for the long
distance  telephone  market since the mid-1980s have resulted in cost reductions
that make  fiber  optic  cable  economically  feasible  for a growing  number of
potential  customers with moderate  distance  business  application  needs. Such
applications  include  data  communications,  LANs,  telecommunications,   video
transmission,  including cable television, and military tactical communications.
Particularly in data  communications,  high performance,  rugged, and survivable
fiber  optic  cable is well suited and has become  economically  attractive  for
diverse and often unpredictable installation environments.  The Company believes
that the LAN market is  particularly  attractive.  LANs are often  installed  at
corporate  offices,  hospitals,  utilities,  academic  campuses,  factories  and
transportation management facilities.

   The  increasing   standardization   of  communications   technology  and  the
increasing  demand for high bandwidth  (i.e.,  high data capacity or volume) are
expected to  facilitate  optical  fiber's  further  penetration  of the moderate
distance market  presently  served by copper cable.  Fiber optic cable is better
able to maximize the utility of emerging LAN interface  standards,  such as FDDI
and ATM, and has  therefore  become a preferred  data  transmission  medium.  In
addition, high speed, high bandwidth  applications,  such as video conferencing,
imaging and Internet  access,  are growing and are driving  increased demand for
fiber optic cable in moderate distance applications.

   With the  movement  toward  deregulation  and  competition,  the large  cable
television  companies,  often  referred to as  Multiple  System  Operators,  the
Regional Bell Operating Companies ("RBOCs"), and other independent long distance
carriers are competing to provide  enhanced  cable  television,  data, and other
information  highway  services to homes and businesses.  Many of these companies
are conducting  field trials of optical fiber systems in the portion of the U.S.
telephone  networks which lies between telephone  companies' central offices and
subscribers'  offices and homes (the "subscriber loop"). To date, the subscriber
loop remains  overwhelmingly  copper.  Because the  subscriber  loop  represents
approximately  90% of the U.S.  telephone  system  (measured  by total length of
cable),  the potential  demand for fiber optic cable in this application is very
large, provided that cost parity with copper cable systems can be achieved.

                                3



<PAGE>
THE COMPANY'S SOLUTION

   Fiber optic cables used for moderate  distance  applications may be subjected
to many different stress environments.  Cables installed inside buildings may be
routed  through cable trays,  floor ducts,  conduits and walls and may encounter
sharp  corners or edges.  They may be pulled  without  lubricant,  resulting  in
higher pull tensions, and stressed to the breaking point if care is not used. In
the  outdoor  and  underground  environments,  cables  are  often  subjected  to
moisture,  ultra-violet  radiation and long pulling  distances  through conduits
with a variety of bends and corners,  resulting in high pulling tensions.  These
conditions  can be aggravated if installers  are not  adequately  trained in the
installation of fiber optic cable. The Company's  founders  recognized that, for
many applications, the stresses on the cables during installation are similar to
those in the military tactical  environment,  for which the Company's technology
was  initially  developed.  The Company  applied this  technology  to commercial
products  serving a market that could not be  adequately  served by  gel-filled,
loose tube cable manufactured for the long distance telephone market.

   The Company  believes  that nearly  one-half of the fiber optic cable sold in
the moderate  distance  market today is the gel-filled,  loose tube type,  which
requires  careful  installation  and extensive  preparation for termination with
connectors.  While this cable  design  has  served the long  distance  telephone
market  reasonably well, it was not designed to withstand the stress that cables
undergo  during  installation  in  the  LAN  or  subscriber  loop  environments.
Gel-filled,  loose tube  cables are  difficult  to  terminate  with  connectors,
because they cannot be  mechanically  attached  directly to the cable's  optical
fibers.  Designed  for long,  straight  outdoor  runs,  the cables are stiff and
difficult  to place in  complex  installations  and are  flammable  and thus not
suited for indoor use. When used for indoor/outdoor installations,  these cables
must be spliced near the building  entrance to flame  retardant  cables suitable
for indoor use, adding cost and complexity and reducing reliability.  Therefore,
the total  installed cost of  gel-filled,  loose tube cables is high in moderate
distance applications.

   In  contrast,  the  Company's  products  address  the  needs of the  moderate
distance market by utilizing a tight-buffered  coating that protects the optical
fiber and a cable design that achieves  superior  mechanical  and  environmental
performance.  The  Company's  products  are derived from  technology  originally
developed for military applications requiring very rugged,  flexible and compact
fiber optic cables.  Unlike gel-filled  cables, the Company's cables may be used
indoors and outdoors,  are flame  resistant,  flexible,  easy and  economical to
install,  and provide a high degree of  reliability.  The Company  believes that
because of these  features,  its products  are widely  accepted for use in fiber
optic LANs and are increasingly accepted in other applications.

THE COMPANY'S STRATEGY

   The Company's  primary  strategy is to capitalize  on its  proprietary  cable
manufacturing  processes and  technologies  to provide a  comprehensive  line of
versatile fiber optic cables with superior features and competitive pricing that
appeals  to  the  large,   diverse  and  growing   market  for  high   bandwidth
communications over moderate distances.

FOCUS ON THE MODERATE DISTANCE MARKET

   Optical  fiber has become an accepted  medium for the  transmission  of data,
video and audio in moderate  distance  applications in cities,  factories,  high
rise  buildings,  and on  campuses.  High  speed,  high  bandwidth  applications
deployed in LAN  environments  are growing in both large and small  corporations
and are driving  increased  demand for optical fiber.  Increasing  deployment of
multimedia  systems  on LANs that  utilize  protocols  such as FDDI and ATM also
enhances the demand for bandwidth.

   The Company's  products address the needs of the moderate  distance market by
utilizing a  tightbuffered  coating that  protects the optical fiber and a cable
design that achieves  superior  mechanical and  environmental  performance.  The
Company  believes  that because of the  outstanding  features of its fiber optic
cable,  including  suitability  for indoor and outdoor use, easy and  economical
installation  and a high degree of  reliability,  the  Company's  products  have
become well established for optical fiber LANs and are increasingly accepted for
other applications.

                                4



<PAGE>
DEVELOP HIGH PERFORMANCE PRODUCTS AND OFFER A BROAD PRODUCT LINE

   The Company believes that serving both the premium  performance and the price
competitive  parts of the moderate distance market best utilizes its development
and  manufacturing  capabilities.   The  Company's  Ultra-Fox(TM)  product  line
provides  optical fiber products that are  competitively  priced,  with features
that the Company  believes  are  superior  to its  competitors'  offerings.  The
Ultra-Fox(TM)  plus product line shares many of the  materials and features with
the Company's  military tactical cable products and is marketed to customers who
want the most reliable installations for their critical communication or control
processes.  Since January 1994, the Company's quality management system has been
certified to the internationally recognized ISO 9001 quality standard.

LEVERAGE EXISTING TECHNOLOGIES AND KNOWLEDGE

   The  Company  has  extensive   expertise  in  optical  fiber   packaging  and
applications  design,  which  it  utilizes  for new  products.  The  Company  is
responsive to, and works to anticipate the requirements  of, its customers.  Its
expertise with tight-buffered  cable technology  facilitates  development of new
products and variations of existing products.  Products that are developed for a
special application also may be introduced to the broader market.

CAPITALIZE ON PROPRIETARY, FLEXIBLE MANUFACTURING PROCESSES

   
   The Company believes that its customized,  internally developed manufacturing
processes provide a competitive advantage. The Company has developed proprietary
process control systems to ensure  consistency and uniformity at high throughput
rates and  intends to  continue  the  upgrade of its  manufacturing  capability.
Through  construction  completed  in January  1997,  the  Company  expanded  its
facilities to increase its  manufacturing  capacity.  Ample capacity,  versatile
production  processes  and a broad range of products  are intended to enable the
Company to be flexible and responsive to customer needs.     

OFFER COST EFFECTIVE SOLUTIONS TO ITS CUSTOMERS

   The Company believes that its products are rugged, easy to install, versatile
and highly  reliable,  making them attractive to distributors,  installers,  and
most  importantly,  end users.  Because the Company's  cables are  multipurpose,
distributors  can stock fewer  varieties and therefore less quantities of cable.
For  installers  and  systems   integrators,   the   multipurpose   feature  can
significantly  reduce  installation  costs by eliminating the need to transition
from indoor cable to outdoor  cable at a building  entrance.  This also enhances
reliability  by  eliminating  splices and possible high stress on optical fibers
that  could  lead to  breakage.  This  simplified  installation,  lower cost and
enhanced  reliability  are also valued by the end user,  because a long lasting,
trouble-free  cable is the basis for minimizing down time and maximizing  system
availability.

EXPAND DISTRIBUTION AND MARKETING PRESENCE

   The  Company  intends to increase  its sales and  marketing  activities  both
domestically and  internationally.  The Company distributes its products through
independent  distributors  to  supplement  the Company's  existing  distribution
channels and to provide the Company with access to a greater number of potential
customers  in  the  United  States.   Despite  limited  resources  dedicated  to
international  sales and  marketing,  revenues  from  international  sales  were
approximately 25%, 24% and 25% in fiscal 1994, 1995 and 1996, respectively.  The
Company  intends  to  hire  more  sales  personnel  to  manage  and  expand  its
international  distribution network. However, there can be no assurance that the
Company  will have the  financial  resources  required to increase its sales and
marketing  activities  domestically  or  internationally,  or to hire additional
sales personnel.

PRODUCTS AND TECHNOLOGY

PRODUCTS

   The Company manufactures and markets a broad range of fiber optic cables
that provide a high bandwidth transmission for data, video and audio
communications over moderate distances. The Com

                                5



<PAGE>
pany's  products are derived from technology  originally  developed for military
applications requiring very rugged, flexible and compact fiber optic cables. The
Company's  method of applying a  tight-buffered  coating on each  optical  fiber
before it is encased minimizes microbending, the primary cause of signal loss in
optical fibers.

   The Company has pioneered a pressure-extrusion technique for applying a cable
jacket  directly  over the fiber optic cable core  elements,  resulting  in high
cable  tensile  strength and lateral  stress  resistance.  Such  Core-Locked(TM)
jackets  allow the cable to  operate  as a single  mechanical  unit,  maximizing
resistance  to tears  during  installation  pulls  through  narrow  spaces.  The
Company's product line is deliberately diverse and flexible, in keeping with the
evolving  application  needs within the moderate  distance  market.  Most of the
Company's  cable  designs are available in both the  Ultra-Fox(TM)  Plus premium
product and the  Ultra-Fox(TM)  highly featured but cost competitive  commercial
product.

                    [THE REMAINDER OF THIS PAGE IS BLANK]

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<TABLE>
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          PRODUCT TYPE                       FEATURES/DESCRIPTION                           APPLICATIONS
--------------------------------  ------------------------------------------ -----------------------------------------
                                  O  SIMPLEX (ONE OPTICAL FIBER) AND
                                  DUPLEX (TWO OPTICAL FIBERS) CABLES         O  SHORT "PATCH CORD" CABLES
                                  O  TIGHT-BUFFERED COATING ON EACH          O  LINKS BETWEEN ELECTRONIC
                                  OPTICAL FIBER                              EQUIPMENT AND MAIN FIBER OPTIC CABLE
                                  O  ARAMID YARN STRENGTH MEMBERS            O  ROUTING CONNECTIONS IN PATCHING
<S>                               <C>                                        <C>
A-Series Simplex and Duplex       o  thermoplastic outer jacket              systems
"Assembly" Cables...............  o  flame retardant                         o  indoor use
                                  o  2 to 156 optical fibers
                                  o  tight-buffered coating on each          o  direct termination with connectors on
                                  optical fiber                              each optical fiber
                                  o  elastomeric jacket encases each         o  short and moderate distance links
                                  optical fiber and surrounding aramid yarn  between buildings or within a building,
                                  strength members (similar to an A-Series   where multiple termination points are
                                  simplex cable)                             needed
                                  o  Core-Locked(TM) outer jacket            o  installations where ease of
                                  o  rugged                                  termination and termination cost are
                                  o  flame retardant                         important factors
B-Series "Breakout" Cables .....  o  moisture and fungus resistant           o  indoor and outdoor use
                                  o  2 to 156 optical fibers
                                  o  tight-buffered coating on each
                                  optical fiber
                                  o  Core-Locked(TM) outer jacket
                                  encases the optical fibers and
                                  aramid yarn strength members
                                  o  smaller, lighter and less expensive
                                  than the B-Series cable                    o  longer distance runs where size and
                                  o  high strength to weight ratio           cable cost are more significant
                                  o  compact size                            o  can be armored for additional
                                  o  rugged                                  protection in buried and overhead
D-Series "Distribution"           o  flame retardant                         installations
Cables..........................  o  moisture and fungus resistant           o  indoor and outdoor use
                                  o  up to 864 optical fibers in various
                                  subgroup  sizes o high fiber  count  systems o
                                  multi-fiber  subcables,   each  similar  to  o
                                  subgroups  needed  to  facilitate  a  D-Series
                                  cable organization of large numbers of optical
                                  o   Core-Locked(TM)    outer   jacket   fibers
                                  surrounds  subcables  o  subcables  routed  to
                                  different o high density "micro"  construction
                                  locations o rugged o  installations  requiring
                                  several
G-Series "Subgrouping"            o  flame retardant                         different optical fiber types
Cables..........................  o  moisture and fungus resistant           o  indoor and outdoor use

</TABLE>

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<PAGE>
   A-Series Simplex and Duplex "Assembly" Cables.  Simplex and duplex cables are
round  single  fiber and "zip cord"  two-fiber  structures,  respectively.  Both
cables contain tight-buffered optical fibers, aramid yarn strength members and a
thermoplastic  outer jacket for each fiber.  They are used for "jumpers"  (short
length patch cords) and for "pigtails"  (short lengths of cable with a connector
on one end). Various outer jacket materials are offered to provide  flammability
ratings and handling  characteristics tailored to customers' needs. These cables
are  often  privately  labeled  and  sold to  original  equipment  manufacturers
("OEMs") who produce the cable assemblies.

   B-Series  "Breakout"  Cables.  The  B-Series  cables  consist  of a number of
subcables,  each  consisting of a single  optical fiber and aramid yarn strength
members similar to an A-Series simplex cable. These subcables are tight-bound in
a pressure-extruded,  high performance  Core-Locked(TM) PVC outer jacket to form
the finished  multi-fiber  cable.  Like the A-Series  cables,  the subcables are
intended to be terminated  directly  with  connectors.  This direct  termination
feature  makes  this  cable  type  particularly   suited  for  shorter  distance
installations,  where there are many terminations and termination costs are more
significant.  The  materials and  construction  of the cable permit its use both
indoors and outdoors.  These  features make the cable cost  effective for use in
campus and industrial complex installations, between and within buildings.

   D-Series  "Distribution"  Cables. The Company's D-Series cables are made with
the same tight-buffered  optical fiber and high performance  Core-Locked(TM) PVC
outer jacket as the B-Series  cable.  Unlike the B-Series cable,  however,  each
tight-buffered  optical fiber in a D-Series cable is not covered with a separate
subcable  jacket.  D-Series cable is intended for longer distance  applications,
where  termination  considerations  are less  important and often traded off for
size, weight and cost. The tightbuffered  optical fiber and  Core-Locked(TM) PVC
outer  jacket  make  D-Series  cables  rugged  and  survivable,  with  a  small,
lightweight  configuration.  The high  strength to weight  ratio of these cables
makes them well suited for  installations  where long  lengths of cables must be
pulled through duct systems.  D-Series cable is used in relatively longer length
segments of installations.

   G-Series  "Subgrouping"  Cables.  This  cable  design  combines  a number  of
multi-fiber  subcables,  each  similar to a  D-Series  cable.  Each  multi-fiber
subcable  is  tight-bound  with  an  elastomeric  jacket,   providing  excellent
mechanical and  environmental  performance.  These  subcables are contained in a
pressure extruded, high performance Core-Locked(TM) PVC outer jacket to form the
finished  cable.  This design permits the  construction of very high fiber count
cables.  These cables may be used where  groups of optical  fibers are routed to
different locations.  The Company has fabricated a developmental sub-group cable
containing over 1,000 fibers  intended for high density,  moderate length routes
such as urban telephone distribution systems.

   Other Cable Types.  The Company  produces many  variations on the basic cable
styles  presented  above  for  more  specialized   installations.   For  outdoor
applications,  both  the  B-Series  and  D-Series  cables  may be  armored  with
corrugated  steel  tape  for  further  protection  in  underground  or  overhead
installations.  For overhead  installations on utility poles, the Company offers
several self-supporting versions of the D-Series cables, with higher performance
outer jackets.  One contains additional aramid yarn strength members, to support
its weight  with wind and ice loading  over long  unsupported  lengths.  Another
style has a separate  strength  member,  either metallic or  non-metallic,  in a
figure eight  configuration,  to reduce installation costs. The Company's cables
are available in several  flammability  ratings,  including  "plenum" for use in
moving air spaces in buildings,  and "riser" for less critical  flame  retardant
requirements.  "Zero halogen"  versions of the B-Series and D-Series  cables are
available  for use in enclosed  spaces  where there is concern  over  release of
toxic gases during fire. Composite cables combining optical fiber and copper are
offered to facilitate the transition from  copper-based  to optical  fiber-based
systems without further installation of cable.

PRODUCT DEVELOPMENT

   The  Company  continues  to  develop  enhancements  to its  fully  automated,
computer-controlled  production  processes  that it  believes  increase  product
quality and reduce costs. Many of the Company's  technological  advances are the
result  of  refinements   and   improvements   made  during   production   runs.
Occasionally, potential customers contact the Company to develop new products or
modified product

                                8



<PAGE>
designs  for  them,  which  ultimately  may  appeal  to  other  customers.   The
development  costs  associated  with new products and modified  product  designs
requested by the customer are included in the price charged to that customer. By
utilizing these new products and modified product designs, the Company continues
to improve its product line with minimal  direct  expenditures  for research and
development.

MAJOR MARKET APPLICATIONS

   The most common  application  of the  Company's  products  is in LANs,  where
optical fiber is widely used as the "backbone" or "trunk,"  connecting groups of
work stations and central file servers. In its typical implementation, the fiber
optic cable may be installed between wiring closets in a building,  or installed
between  buildings in a multi-building  complex.  Fiber optic cable runs between
electronic equipment that combines the signals of many workstations. Because the
combined signals may carry a large volume of critical  information,  fiber optic
cable,  which  is  immune  to  electrical  interference,  is often  desired.  In
comparison,  copper  wires  carry  less  information,  or  the  same  amount  of
information  for a shorter  distance,  in either case  remaining  susceptible to
electrical noise and  interference.  The following are typical  applications for
the Company's fiber optic cable:

   Office Facilities.  Banks, stock trading companies,  insurance companies, and
other  businesses  often  have a need to  distribute  information  among a large
number of work stations, have time-critical data and would incur severe costs as
a result of system  failures.  A LAN connected with fiber optic cable has in the
past several years been an increasingly  common way of  implementing  management
information systems for these businesses.

   Educational  Institutions.  Colleges  and  universities  have been leaders in
implementing  large  fiber  optic  networks.  More  recently,  many  states have
undertaken  large scale  projects to install  networks in high  schools and even
grade schools.  These systems link personal computers with central file servers.
As interactive learning systems require increased  transmission speeds,  optical
fiber becomes a logical medium.

   Manufacturing and Mining Facilities.  Manufacturing and mining facilities are
typically  not  air  conditioned,  are  less  clean  and  otherwise  have a less
controlled  environment  than  businesses  generally.  They often  contain heavy
electrical equipment, which causes electromagnetic  interference if conventional
copper cable is used.  The  advantages of fiber optic cable in this  environment
include immunity to electrical  noise,  ruggedness,  high  information  carrying
capacity and greater distance  capability.  The Company's products are installed
in  automotive  assembly  plants,  steel plants,  chemical and drug  facilities,
petroleum refineries, mines and other similar environments.

   Health Care  Facilities.  Hospitals  have  extensive  data transfer needs for
medical records, patient monitoring,  inventory,  billing and payroll functions.
More recently,  the transfer of electronically stored images of x-rays, MRIs and
CAT scans has  increased  to  facilitate  analysis  and  diagnosis  at  multiple
locations. These applications require high data transfer rates. Optical fiber is
a preferred  solution,  especially in  electromagnetic  environments  with heavy
electrical equipment such as x-ray machines.

   Traffic Control Systems.  Traffic system applications range from surveillance
and control of traffic flow in cities to installation of sensors, automatic toll
collection,  video monitoring and control of signs in "smart" highway  programs.
These applications often require  transmission of high bandwidth signals such as
video monitoring,  for which optical fiber is well suited.  The Company's cables
offer  ruggedness,  reliability and cost savings for termination in systems that
are near the vibrations of traffic and require many termination points.

   Telephone  Companies.  The Company has worked  with  several  RBOCs for their
business customers' requirements.  As high bandwidth services of the information
highway  are  brought  closer to more homes and  businesses,  the  bandwidth  of
optical fiber becomes more important.

SALES, MARKETING AND CUSTOMER SERVICE

   The Company's products are sold to end users, electrical contractors,  system
integrators, value-added resellers ("VARs"), OEMs and distributors. Distribution
methods are adapted to the particular needs of different types of customers. The
decision to purchase the Company's products may be made

                                9



<PAGE>
by end  users,  distributors,  electrical  contractors,  system  integrators  or
specialized  installers.  The Company attempts to reach these decision makers by
advertising in fiber optics trade journals and other  communications  magazines.
The Company also participates in numerous domestic and international trade shows
attended by customers and prospective  customers.  International  sales are made
primarily through foreign distributors, system integrators and VARs.

   The Company's field sales force consists of independent sales representatives
located in various  geographic  areas.  The field  sales  force  provides  sales
support for distributors,  system integrators and VARs and communicates with the
customer's  purchase  decision  makers.  The field sales force is  supported  by
inside sales  personnel and  supervised by regional sales  managers.  The inside
sales group  provides  quotations  and  customer  service.  The  regional  sales
managers  provide on-site sales support with major customers and are responsible
for major customers and opportunities.  For more in-depth technical support, the
sales group has access to engineering,  quality control and management personnel
who have extensive fiber optic cable expertise and industry experience.

   
   Furthermore,  the  Company  believes  that it has a  reputation  for  product
excellence  based on its  success  with  large  projects  for end users  such as
Chrysler  Corporation,  3M, Virginia Polytechnic Institute and State University,
Bankers Trust and Salomon  Brothers Inc, and for  integrators  such as Ameritech
Information  Systems  and US WEST.  The  Company  had no  single  customer  that
accounted for more than 5% of its net sales in either fiscal 1994, 1995 or 1996.
However,  in fiscal  1995 and 1996,  10% and 12%, respectively, of net sales was
attributable to one major domestic distributor. Most of the Company's revenue in
each quarter  results from orders  received in that  quarter.  Accordingly,  the
Company  does not believe  that its backlog at any  particular  point in time is
indicative  of future  sales.  The Company  believes  that its customer  base is
diverse,  crossing over many markets and regions  worldwide and believes that it
is important to maintain that  diversity to avoid  dependence on any  particular
segment of the economy or area of the world.     

MANUFACTURING AND SUPPLIERS

   The Company's  manufacturing  operations consist of applying a variety of raw
plastic materials to optical fibers.  The key raw material in the manufacture of
the Company's products is optical fiber,  which the Company currently  purchases
from four  manufacturers.  The  Company  works with its  vendors in an effort to
ensure a  continuous  supply.  The Company  utilizes two sources for the cable's
aramid yarn  strength  member and several  suppliers of coating  materials.  The
Company has not experienced difficulty in arranging alternate sources. All other
raw materials have at least one backup source.

   The Company  believes  that by  maintaining  a consistent  relationship  with
suppliers, it can obtain better quality control and emergency deliveries.  Being
able to deliver  product on time has been an important  factor in the  Company's
success.  To date, the Company has been able to obtain adequate  supplies of its
raw materials in a timely manner from existing sources or, when necessary,  from
alternate sources.  However, any disruption in the supply of raw materials could
adversely  affect the Company's  cable  production  capability and its operating
results.

   The Company  believes  that other fiber optic cable  manufacturers  generally
carry minimal amounts of raw materials and finished goods inventory. The Company
generally  holds raw materials and finished goods  inventory in amounts  greater
than  that of its  competitors  to ensure a quick  response  after  receiving  a
customer's order.

   The Company believes its quality control procedures have been instrumental in
achieving the performance and reliability of its products.  The Company produces
cable using the quality control  procedures of MIL-I-45208 (the primary standard
applicable to most government purchasers of cable).

   Since  January  1994,  the  Company's  quality  management  system  has  been
certified to the internationally  recognized ISO 9001 quality standard. ISO 9000
is a  series  of  standards  agreed  to by the  International  Organization  for
Standardization  (ISO).  ISO  9001 is the  highest  level of  accreditation  and
includes  an  assessment  of 20  elements  covering  various  aspects  of design
development, procurement,

                                10



<PAGE>
production, installation and servicing. The Company's certification was obtained
through an audit by a qualified  international  certifying  agency.  In order to
maintain  its  certification,  the  Company  must  continue  to comply  with the
standards.

PROPRIETARY RIGHTS

   None  of  the  Company's  current  manufacturing  processes  or  products  is
protected  by patents.  The Company  relies on a  combination  of trade  secret,
copyright and trademark law, nondisclosure  agreements and technical measures to
establish and protect its rights pertaining to its production  technology.  Such
protection  may  not  deter   misappropriation  or  preclude   competitors  from
developing production  techniques or equipment with features identical,  similar
or superior to the Company's. The Company believes, however, that because of the
rapid  pace of  technological  change in the data  communications  industry  and
particularly  in the  fiber  optic  cable  segment,  legal  protection  for  the
Company's  products is less  significant  to the  Company's  prospects  than the
knowledge,  ability and expertise of its management and technical personnel with
respect to the timely  development  and  production  of new products and product
enhancements.  The Company  considers its proprietary  knowledge with respect to
the  development  and  manufacture of fiber optic cable to be a valuable  asset.
This expertise enables the Company to formulate new cable compositions,  develop
special  coatings  and  coating  methods,  develop and  implement  manufacturing
improvements   and  quality  control   techniques,   and  design  and  construct
manufacturing and quality control equipment. The Company restricts access to its
manufacturing  facility  and  engineering  documentation  to maintain  security.
Employees are required to sign nondisclosure agreements.

   The  Company  believes  that  none  of  its  products,  trademarks  or  other
proprietary rights infringes upon the proprietary rights of others. There can be
no assurance,  however,  that third parties will not assert  infringement claims
against  the  Company in the future  with  respect to the  Company's  present or
future  products which may require the Company to enter into license  agreements
or result in protracted and costly litigation,  regardless of the merits of such
claims.

COMPETITION

   The market for fiber optic cable,  including the moderate  distance market in
which the Company's  products are concentrated,  is highly  competitive.  Siecor
Corp.  (a joint  venture  of  Siemens AG and  Coming)  and AT&T are the  leading
manufacturers  of fiber optic cable for both the long distance  telephone market
and the moderate distance market.  Although both manufacture  gel-filled,  loose
tube cables, a significant  portion of AT&T and Siecor Corp.'s fiber optic cable
sales are  tight-buffered  fiber optic cable  products in the moderate  distance
market.  Also,  Coming  and  AT&T  are  principal  suppliers  of  optical  fiber
worldwide. The Company's competitors,  including Siecor Corp. and AT&T, are more
established,  having  a large  business  base in the  long  distance  telephone,
gel-filled,  loose tube cable market.  Those  companies can benefit from greater
market  recognition  and  have  greater  financial,  research  and  development,
production and marketing resources than the Company.

   Additionally,  fiber optic cable competes with copper wire cable on the basis
of cost and performance  tradeoffs.  The cost of the electro-optical  interfaces
required  for  fiber  optic  systems  and  higher  speed  electronics  generally
associated with high performance fiber optic systems can make them uncompetitive
in  applications  where the advantages of optical fiber are not required.  Fiber
optic cable also competes with other  alternative  transmission  media including
wireless and satellite communications.

   The Company believes that it competes successfully against its competitors on
the basis of breadth  of product  features,  quality,  ability to meet  delivery
schedules,  technical support and service,  breadth of distribution channels and
price. Maintaining such competitive advantages will require continued investment
by the  Company in product  development,  sales and  marketing.  There can be no
assurance  that  the  Company  will  have  sufficient  resources  to  make  such
investments or that the Company will be able to make the technological  advances
necessary to maintain its competitive position. An increase in competition could
have a material adverse effect on the Company's  business and operating  results
because of price reductions and loss of market share. Competition could increase
if new  companies  enter the  market or if  existing  competitors  expand  their
product lines.

                                11



<PAGE>
EMPLOYEES

   As of  October  31,  1996,  the  Company  employed  a total  of 134  persons,
including  44 in sales,  marketing  and  customer  service,  11 in  engineering,
product development and quality control, 66 in manufacturing,  and 13 in finance
and  administration.  None of the Company's  employees is represented by a labor
union.  The Company has  experienced  no work stoppage and believes its employee
relations are excellent.  The Company has a monthly bonus plan for all employees
along with an end of year profit sharing plan.

ITEM 2. PROPERTIES

   The Company's principal administration, marketing, manufacturing, and product
development  facilities  are located in a 148,000  square foot building  located
adjacent  to  the  Roanoke,   Virginia   airport  and  major  trucking   company
facilitates.  These  facilities were expanded from 74,000 to 148,000 square feet
through  construction  which was completed in January 1997 on land  purchased by
the Company in 1994 adjacent to the Company's existing  facilities.  The Company
believes that its production  equipment is presently  operating at approximately
50% of its capacity.

ITEM 3. LEGAL PROCEEDINGS

   In the opinion of the Company's  management,  there are no legal  proceedings
pending  to which the  Company is a party or to which any of its  properties  is
subject,  other than  ordinary,  routine  litigation  incidental to the business
which is not  expected  to have a  material  adverse  effect on the  results  of
operations, financial condition or cash flows of the Company.

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

   None

                                12



<PAGE>
                                   PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

   The Company's Common Stock has traded on the Nasdaq National Market under the
symbol OCCF since April 2, 1996.  The following  table sets forth for the fiscal
periods indicated the high and low sales prices of the Common Stock, as reported
on the Nasdaq National Market.

<TABLE>
<CAPTION>
      FISCAL YEAR ENDED OCTOBER 31, 1996        HIGH   LOW
---------------------------------------------  ------ -----
                                                        2
<S>                                            <C>    <C>
Second Quarter (April 2 to April 30, 1996)* .   4 5/8 3/8
                                                        4
Third Quarter (May 1 to July 31, 1996)* .....  34     1/4
Fourth Quarter (August 1 to October 31,                 8
1996)........................................  20     1/4
</TABLE>

   
   * The  Company's  stock split 2 for 1 on May 31, 1996 and 2 for 1 on June 21,
1996.  All per share amounts  reported  have been  adjusted to give  retroactive
effect to these stock splits.     

   As of December 31, 1996,  there were an estimated  6,050 holders of record of
the Common Stock.

   Prior to  terminating  its status as an S corporation  on March 31, 1996, the
Company made cash distributions to its sole shareholder  primarily to pay income
tax  liabilities  arising from the  Company's  status as an S  corporation.  The
Company has not  otherwise  paid or declared  any cash  dividends  on its common
stock and does not  anticipate  paying any cash dividends on its common stock in
the near future.

                                13



<PAGE>
   
ITEM 6. SELECTED FINANCIAL DATA

                          OPTICAL CABLE CORPORATION
                           SELECTED FINANCIAL DATA
    

<TABLE>
<CAPTION>
                                                              YEARS ENDED OCTOBER 31,
                                              ------------------------------------------------------
                                                 1996       1995       1994       1993       1992
                                              ---------- ---------- ---------- ---------- ----------
                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                           <C>        <C>        <C>        <C>        <C>
Statement of Income Data:
 Net sales..................................  $45,152    $36,360    $26,217    $24,980    $19,774
 Cost of goods sold.........................   24,907     20,121     14,138     13,036     10,342
                                              ---------- ---------- ---------- ---------- ----------
  Gross profit..............................   20,245     16,239     12,079     11,944      9,432
 Total operating expenses...................    8,416      7,660      7,967      7,724      6,526
                                                         ---------- ---------- ---------- ----------
  Income from operations....................   11,829      8,579      4,112      4,220      2,906
 Other income (expense), net................      198       (379)      (614)      (870)    (1,100)
                                              ---------- ---------- ---------- ---------- ----------
  Income before income tax expense and
   extraordinary item.......................   12,027      8,200      3,498      3,350      1,806
 Income tax expense (1).....................    2,806            --         --         --         --
                                              ---------- ---------- ---------- ---------- ----------
  Income before extraordinary item..........    9,221      8,200      3,498      3,350      1,806
 Extraordinary item.........................          --         --    (149)           --         --
                                              ---------- ---------- ---------- ---------- ----------
  Net income................................  $ 9,221    $ 8,200    $ 3,349    $ 3,350    $ 1,806
                                              ========== ========== ========== ========== ==========
Pro forma Income Data (1):
 Net income before pro forma income tax
  provision, as reported....................  $ 9,221
 Pro forma income tax provision.............    1,747
                                              ----------
 Pro forma net income.......................  $ 7,474
                                              ==========
 Pro forma net income per share.............  $  0.19
                                              ==========
 Pro forma weighted average shares
  outstanding...............................   39,361
Balance Sheet Data:
 Working capital............................  $14,377    $ 9,076    $10,140    $ 6,322    $ 6,153
 Total assets...............................   31,127     18,819     19,056     16,465     14,964
 Long-term debt, less current maturities....          --         --   8,000      2,000      5,280
 Total stockholders' equity.................   23,572     14,952      7,832      7,161      4,682
</TABLE>

   
   (1) Through March 31, 1996,  the Company was not subject to federal and state
income  taxes since it had elected,  under  provisions  of the Internal  Revenue
Code, to be taxed as an S  Corporation.  In  connection  with the closing of the
Company's  initial public  offering (see note 11 to financial  statements),  the
Company  terminated its status as an S Corporation  effective March 31, 1996 and
became subject to federal and state income taxes. Accordingly,  the statement of
income data for the year ended October 31, 1996 includes income taxes from April
1, 1996, and for  informational  purposes,  the statement of income data for the
year ended  October 31, 1996  includes a pro forma  adjustment  for income taxes
which would have been  recorded if the Company had been  subject to income taxes
for the entire fiscal year presented.     

                                14



<PAGE>
   
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
    

GENERAL

   
Except  for the  historical  data set forth  herein,  the  following  discussion
contains certain forward-looking  information.  The Company's actual results may
differ  materially  from these  projected  results.  Factors that could cause or
contribute to such differences  include,  but are not limited to, level of sales
to key  customers,  actions  by  competitors,  fluctuations  in the price of raw
materials, the Company's dependence on a single manufacturing facility,  ability
to protect its  proprietary  manufacturing  technology,  dependence on a limited
number of suppliers and technological changes and introductions of new competing
products.     

RESULTS OF OPERATIONS

INCOME BEFORE INCOME TAX EXPENSE

Income  before  income tax  expense  increased  46.7  percent to $12 million for
fiscal 1996 from $8.2 million for fiscal 1995.  This  increase was primarily due
to increased sales volume and a reduction in interest expense.

Income  before  income tax expense  increased  134.4 percent to $8.2 million for
fiscal 1995 from $3.5 million in fiscal 1994. This increase was primarily due to
increased sales volume and reductions in royalties,  amortization of intangibles
and interest expense. These positive factors were offset by a reduction in gross
profit margin and an increase in selling, general and administrative expenses.

NET INCOME

Net income  increased  12.4  percent to $9.2  million  for fiscal 1996 from $8.2
million for fiscal 1995.  This increase was a result of a $3.8 million  increase
in income  before income tax expense which was offset by the recording of income
tax  expense  of $2.8  million  for  fiscal  1996 as a result  of the  Company's
termination of its S Corporation status effective March 31, 1996 as noted below.

Net income  increased  144.8  percent to $8.2  million for fiscal 1995 from $3.3
million for fiscal 1994.  This increase was a result of a $4.7 million  increase
in income  before  income  tax  expense  and  extraordinary  item and a $149,000
extraordinary  loss in fiscal 1994 due to an early repayment premium  associated
with certain senior subordinated notes.

NET SALES

Net sales  consists  of gross sales of  products,  less  discounts,  refunds and
returns.  Net sales  increased 24.2 percent to $45.2 million in fiscal 1996 from
$36.4 million for fiscal 1995.  This increase was  attributable to the Company's
continued  effort to reach a broader  customer base throughout the United States
and internationally with increased advertising, trade show attendance and direct
sales  presence in more  states.  This effort  resulted in greater  sales in all
market  segments  and  product  types.  Additionally,  net sales were  favorably
impacted by  increases  in both large and small  orders.  Sales from orders less
than $50,000  increased  18.5 percent to $36.5 million in fiscal 1996 from $30.8
million in fiscal 1995,  and sales from orders  $50,000 or more  increased  55.4
percent to $8.7 million from $5.6 million.

   
Net sales  increased  38.7  percent to $36.4  million in fiscal  1995 from $26.2
million  for fiscal  1994.  This  increase  was  attributable  to the  Company's
continued  effort to reach a broader  customer base throughout the United States
and  internationally  with increased  advertising,  trade show  attendance,  and
direct sales presence in more states.  This effort  resulted in greater sales in
all market  segments and product types.  Additionally,  net sales were favorably
impacted by  increases  in both large and small  orders.  Sales from orders less
than $50,000  increased  44.6 percent to $30.8 million in fiscal 1995 from $21.3
million in fiscal 1994,  and sales from orders  $50,000 or more  increased  14.3
percent to $5.6 million from $4.9 million.
    

                                15



<PAGE>
The Company's base business is projected to grow rapidly with increasing  market
share potential.  Many new markets are expected to emerge as fiber optic sensors
are developed  for  production  plant  automation,  smart  highways and security
applications,  along with a host of other  specialty  markets.  Most  electronic
communication  devices  produced  by the vast  number  of global  suppliers  are
expected to rely more  heavily on fiber optic  communications  to achieve  their
performance  goals.  Management  believes  the  Company's  unique  technological
background and specialty  market expertise should lend itself well to capture an
increasing  share of this global  market along with  expected  earnings  growth.
Optical  Cable  Corporation  also intends to make  inroads  into  various  other
markets such as single mode telecommunications and cable television.

GROSS PROFIT MARGIN

Cost of goods sold  consists of the cost of  materials,  compensation  costs and
overhead related to the Company's manufacturing operations.  The Company's gross
profit margin (gross profit as a percentage of net sales) increased  slightly to
44.8  percent in fiscal 1996 from 44.7  percent in fiscal  1995.  The  Company's
gross profit  margin  decreased to 44.7 percent in fiscal 1995 from 46.1 percent
in fiscal 1994.  This  decrease was due to the  Company's  providing  additional
discounts and incentives to its distributors, which had the effect of decreasing
prices and margins.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling,  general and administrative  expenses consist of the compensation costs
(including  sales  commissions)  for  sales  and  marketing  personnel,   travel
expenses,  customer  support  expenses,  trade show expenses,  advertising,  the
compensation cost for administration,  finance and general management personnel,
as well as legal  and  accounting  fees.  Selling,  general  and  administrative
expenses as a percentage  of net sales were 18.6 percent in fiscal 1996 compared
to 21.1 percent in fiscal 1995.  This lower  percentage was primarily the result
of the fact that net sales for fiscal 1996  increased  24.2  percent from fiscal
1995.

Selling,  general and administrative  expenses as a percentage of net sales were
21.1 percent in fiscal 1995.  Selling,  general and  administrative  expenses in
fiscal  1994  as a  percentage  of net  sales  were  22.1  percent.  This  lower
percentage  was  primarily the result of the fact that net sales for fiscal 1995
increased 38.7 percent from fiscal 1994.

ROYALTIES

On November 1, 1989, the Company  entered into a Royalty  Agreement  pursuant to
which the Company was required to pay the previously sole  stockholder an annual
royalty equal to 4.5 percent of the Company's net sales.  The Royalty  Agreement
was terminated October 31, 1994. (See note 7 to financial statements).

AMORTIZATION OF INTANGIBLES

   
Amortization  of  intangibles  consists of  amortization  of amounts  paid for a
noncompete agreement and a technologies license agreement in connection with the
Company's purchase in 1989 of all the shares held by a former  stockholder,  and
deferred financing costs associated with borrowing funds to finance the costs of
that purchase. By June 1994, these intangibles had been fully amortized.     

INTEREST EXPENSE

The  $369,000  reduction in interest  expense in fiscal 1996  compared to fiscal
1995 is due to the Company  generating  adequate amounts of cash from operations
to meet its cash needs thereby  requiring  limited use of its revolving  line of
credit during fiscal 1996. The $230,000  reduction in interest expense in fiscal
1995 compared to fiscal 1994 is due to a decrease of $9.4 million in outstanding
indebtedness in 1995.

INCOME TAXES

Through March 31, 1996,  the Company was not subject to federal and state income
taxes since it had elected, under provisions of the Internal Revenue Code, to be
taxed as an S Corporation. In lieu of corporation income taxes, the stockholders
of an S  Corporation  are taxed on their  proportionate  share of the  Company's
taxable income.

                                16



<PAGE>
In connection  with the closing of the Company's  initial  public  offering (see
note 11 to  financial  statements),  the Company  terminated  its status as an S
Corporation  effective  March 31,  1996 and became  subject to federal and state
income  taxes.  Accordingly,  the statement of income for the year ended October
31,  1996  includes  income  taxes  from April 1,  1996,  and for  informational
purposes, the statement of income for the year ended October 31, 1996 includes a
pro forma  adjustment  for income  taxes which  would have been  recorded if the
Company had been subject to income taxes for the entire fiscal year presented.

The  Company  recorded a $114,000  net benefit for  deferred  income  taxes upon
termination of the Company's S Corporation  status. The adjustment  reflects the
net deferred  income tax asset balance at March 31, 1996 in accordance  with the
provisions of Statement of Financial  Accounting  Standards No. 109,  Accounting
for  Income  Taxes,  which  requires  an asset and  liability  approach  for the
accounting  and financial  reporting of income  taxes.  See note 10 to financial
statements for further details regarding income taxes.

FINANCIAL CONDITION

Total  assets at October  31,  1996 were $31.1  million,  an  increase  of $12.3
million,  or 65.4 percent over October 31, 1995. This increase was primarily due
to an increase of $3.2 million in trade accounts receivable, net, resulting from
the  increased  sales volume  during fiscal 1996, an increase of $4.2 million in
inventory  due to  anticipated  increases  in sales  volume  and  prices  of raw
materials in fiscal 1997, an increase of $3.5 million in property and equipment,
net, and an increase in cash and cash equivalents of $1.1 million resulting from
the initial public offering of the Company's common stock.

Total  stockholders'  equity at October 31, 1996  increased  $8.6  million  from
October 31, 1995 as a result of the initial  public  offering and net income for
the year ended October 31, 1996, less cash  distributions  totaling $6.2 million
to the Company's previously sole stockholder.

LIQUIDITY AND CAPITAL RESOURCES

   
The  Company  has  financed  its  cash  requirements  through  cash  flows  from
operations along with short-term  borrowings.  On March 1, 1996, the Company and
its bank executed a loan  commitment  letter  renewing its $5 million  revolving
line of credit arrangement for another year under  substantially  similar terms;
however,  the line of  credit  as  renewed  does  not  contain  the  restrictive
financial covenants contained in the previous agreement.
    

The  Company's  primary  capital  needs  have been to (i) fund  working  capital
requirements, (ii) repay indebtedness, (iii) purchase property and equipment for
expansion  and  (iv)  fund  distributions  to its  previously  sole  stockholder
primarily to satisfy his tax  liabilities  resulting from S Corporation  status.
The Company's primary sources of financing have been cash from operations,  bank
borrowings and the initial public  offering of the Company's  common stock.  The
Company believes that its cash flow from  operations,  available lines of credit
and the remaining  portion of the net proceeds from the public offering that the
Company intends to use for general  corporate  purposes will be adequate to fund
its operations for at least the next twelve months.  The Company is not aware of
any trends,  commitments  or events  that will result in or that are  reasonably
likely to result in a material increase or decrease in liquidity thereafter.  As
of the date hereof, the Company has no additional material sources of financing.

Cash flows from operations were  approximately  $4.1 million,  $11.3 million and
$4.3 million in fiscal 1996, 1995 and 1994, respectively.  For fiscal 1996, cash
flows from operations were primarily provided by operating income,  offset by an
increase in trade accounts  receivable of $3.4 million, an increase in inventory
of $4.2  million  and  income  taxes  paid  of $2.7  million.  Cash  flows  from
operations  in fiscal 1995 were  primarily  provided by  operating  income and a
decrease  in  inventory  of $2.8  million.  In 1995,  the  Company  reduced  its
inventory of optical fiber because it had additional  access to ready  supplies.
Cash flows from  operations in fiscal 1994 were primarily  provided by operating
income and decreases in inventory and amortization of intangibles.

                                17



<PAGE>
   
Net cash used in investing  activities was primarily for expenditures related to
facilities  and  equipment  and was $3.1  million,  $387,000 and $4.2 million in
fiscal 1996, 1995 and 1994, respectively. In July 1996, the Company entered into
a contract  for the  expansion  of its  headquarters  facilities  totaling  $3.2
million.  Construction  is expected to be completed by the end of January  1997.
Total  remaining   commitments  under  the  construction  contract  and  related
equipment purchases as of October 31, 1996 approximated $1.7 million.  There are
no other material  commitments for capital  expenditures as of October 31, 1996.
    

Net cash  provided  by (used in)  financing  activities  was  $193,000,  $(10.5)
million and $(114,000) in fiscal 1996, 1995 and 1994, respectively. The net cash
provided by financing activities in fiscal 1996 consisted of an increase in debt
outstanding  under the line of  credit of  $794,000  and net  proceeds  from the
issuance  of  common  stock of $5.5  million,  offset  by $6.2  million  in cash
distributions to the Company's previously sole stockholder. The net cash used in
financing  activities in fiscal 1995 consisted of a decrease in debt outstanding
under the line of credit of $5.9  million,  payments on  long-term  debt of $3.5
million and cash  distributions to the Company's  previously sole stockholder of
$1.1 million. The net cash used in financing activities in fiscal 1994 consisted
of an increase  in debt  outstanding  under the line of credit of $4.3  million,
proceeds  of $3.5  million  from a real  estate  loan  related to the  Company's
purchase of its  previously  leased  manufacturing  facility in 1994,  offset by
payments of $5.3 million from the repayment of certain senior subordinated notes
and  $2.7  million  in  cash  distributions  to the  Company's  previously  sole
stockholder.

NEW ACCOUNTING STANDARDS

   
In March 1995,  the Financial  Accounting  Standards  Board (the "FASB")  issued
Statement  of  Financial  Accounting  Standards  No.  121,  Accounting  for  the
Impairment  of  Long-lived  Assets and for Long- lived  Assets to be Disposed of
("SFAS No. 121").  SFAS No. 121 requires  companies to review  long-lived assets
and  certain  identifiable  intangibles  to be held,  used or  disposed  of, for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be  recoverable.  The Company is required to
adopt this statement in fiscal 1997.  The Company  believes the adoption of this
statement will not have a significant effect on its financial statements.

In October 1995, the FASB issued Statement of Financial Accounting Standards No.
123,  Accounting  for  Stock-based  Compensation  ("SFAS  No.  123"),  which  is
effective for transactions entered into in fiscal years beginning after December
15, 1995. The Company plans to retain the intrinsic  value method of APB Opinion
No. 25,  Accounting for Stock Issued to Employees,  for recognizing  stock-based
compensation in the financial  statements.  Management  believes the adoption of
SFAS No. 123 will not have a material impact on the Company's financial position
or results of  operations;  however,  the  Company is still  evaluating  the new
disclosure requirements under SFAS No. 123.
    

COMMON STOCK AND DIVIDEND DATA

The common stock of Optical Cable  Corporation is traded over the counter on the
NASDAQ National Market under the symbol OCCF.

   
At December 31, 1996, there were approximately  6,050 stockholders of record. No
cash  dividends  have been declared or paid since the  completion of the initial
public offering in April 1996. While there are no restrictions on the payment of
dividends,  the Company does not  anticipate  the payment of  dividends  for the
foreseeable future.     

   FISCAL YEAR        RANGE OF BID
      ENDED              PRICES
OCTOBER 31, 1996      --------------
   ------------
                    HIGH          LOW
                   ------       ------
First Quarter ...     N/A         N/A
Second Quarter ..  $ 4.63       $2.38
Third Quarter ...  $34.00       $4.25
Fourth Quarter ..  $20.00       $8.25



                                18



<PAGE>
   
ITEM 8. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

FINANCIAL STATEMENTS:
    

<TABLE>
<CAPTION>
<S>                                                                                <C>
                                                                                   Page
 Independent Auditors' Report....................................................    20
 Balance Sheets as of October 31, 1996 and 1995..................................    21
 Statements of Income for the Years ended October 31, 1996, 1995 and 1994 .......    22
 Statements of Stockholders' Equity for the Years ended October 31, 1996, 1995
  and 1994.......................................................................    23
 Statements of Cash Flows for the Years ended October 31, 1996, 1995 and 1994....    24
 Notes to Financial Statements...................................................    25

</TABLE>

   
FINANCIAL STATEMENT SCHEDULES:

   Financial  statement  schedules  have been omitted  since they are either not
required, not applicable, or the information is otherwise included herein.

                                19
    



<PAGE>
   
                         INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Optical Cable Corporation:

We have audited the accompanying  balance sheets of Optical Cable Corporation as
of  October  31,  1996  and  1995,   and  the  related   statements  of  income,
stockholders'  equity,  and cash  flows for each of the years in the  three-year
period ended October 31, 1996. These financial statements are the responsibility
of the Company' management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Optical Cable Corporation as of
October 31, 1996 and 1995,  and the results of its operations and its cash flows
for each of the years in the  three-year  period  ended  October  31,  1996,  in
conformity with generally accepted accounting principles.

                                                 /s/ KPMG Peat Marwick LLP

Roanoke, Virginia
December 13, 1996
    

                                20



<PAGE>
                          OPTICAL CABLE CORPORATION
                                BALANCE SHEETS
                          OCTOBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
                                                                               OCTOBER 31,
                                                                      -----------------------------
                                                                           1996           1995
                                                                      -------------- --------------
<S>                                                                   <C>            <C>
Assets .............................................................
Current assets:
 Cash and cash equivalents..........................................  $ 1,677,739    $   535,235
 Trade accounts receivable, net of allowance for doubtful accounts
  of $300,000 in 1996 and $200,000 in 1995..........................    9,368,476      6,186,888
 Other receivables..................................................      354,041         98,297
 Due from employees.................................................        1,475          3,225
 Inventories........................................................   10,261,437      6,033,042
 Prepaid expenses...................................................       64,863         86,553
 Deferred income taxes..............................................      155,304             --
                                                                      -------------- --------------
  Total current assets..............................................   21,883,335     12,943,240
Other assets........................................................       67,996        201,237
Property and equipment, net.........................................    9,175,871      5,674,232
                                                                      -------------- --------------
  Total assets......................................................  $31,127,202    $18,818,709
                                                                      ============== ==============
Liabilities and Stockholders' Equity ...............................
Current liabilities:
 Notes payable......................................................  $ 1,103,000    $   309,000
 Accounts payable and accrued expenses..............................    5,488,765      2,726,727
 Accrued compensation and payroll taxes.............................      676,725        831,197
 Income taxes payable...............................................      237,926             --
                                                                      -------------- --------------
  Total current liabilities.........................................    7,506,416      3,866,924
Deferred income taxes...............................................       49,227             --
                                                                      -------------- --------------
  Total liabilities.................................................    7,555,643      3,866,924
                                                                      -------------- --------------
Stockholders' equity:
 Preferred stock, no par value, authorized 1,000,000 shares; none
  issued and outstanding............................................           --             --
 Common stock, voting; no par value, authorized 50,000,000 shares;
  issued and outstanding 38,675,416 shares in 1996 and 36,000,000
  shares in 1995....................................................   18,594,116            596
 Additional paid-in capital.........................................          --         767,849
 Retained earnings..................................................    4,977,443     14,183,340
                                                                      -------------- --------------
  Total stockholders' equity........................................   23,571,559     14,951,785
Commitments and contingencies ......................................
                                                                      -------------- --------------
  Total liabilities and stockholders' equity........................  $31,127,202    $18,818,709
                                                                      ============== ==============

</TABLE>

               See accompanying notes to financial statements.

                                21



<PAGE>
                          OPTICAL CABLE CORPORATION
                             STATEMENTS OF INCOME
                 YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                              YEARS ENDED OCTOBER 31,
                                                   --------------------------------------------
                                                        1996           1995           1994
                                                   -------------- -------------- --------------
<S>                                                <C>            <C>            <C>
Net sales........................................  $45,152,299    $36,359,953    $26,216,583
Cost of goods sold...............................   24,907,373     20,121,355     14,138,060
                                                   -------------- -------------- --------------
  Gross profit...................................   20,244,926     16,238,598     12,078,523
Operating expenses:
 Selling, general and administrative expenses....    8,415,798      7,660,100      5,797,634
 Royalties.......................................              --          --      1,177,399
 Amortization of intangibles.....................              --             --     991,470
                                                   -------------- -------------- --------------
  Total operating expenses.......................    8,415,798      7,660,100      7,966,503
                                                   -------------- -------------- --------------
  Income from operations.........................   11,829,128      8,578,498      4,112,020
Other income (expense):
 Interest income.................................       94,888            175          1,217
 Interest expense................................       (9,595)      (378,205)      (607,882)
 Other, net......................................      112,988           (377)        (7,170)
                                                   -------------- -------------- --------------
  Other income (expense), net....................      198,281       (378,407)      (613,835)
                                                   -------------- -------------- --------------
  Income before income tax expense and
   extraordinary item............................   12,027,409      8,200,091      3,498,185
Income tax expense...............................    2,806,849                --             --
                                                   -------------- -------------- --------------
  Income before extraordinary item...............    9,220,560      8,200,091      3,498,185
Extraordinary item - loss on extinguishment of
 debt............................................              --             --     148,968
                                                   -------------- -------------- --------------
  Net income.....................................  $ 9,220,560    $ 8,200,091    $ 3,349,217
                                                   ============== ============== ==============
Pro forma income data (unaudited):
 Net income before pro forma income tax
  provision, as reported.........................  $ 9,220,560
 Pro forma income tax provision..................    1,746,513
                                                   --------------
 Pro forma net income............................  $ 7,474,047
                                                   ==============
 Pro forma net income per share..................  $      0.19
                                                   ==============
 Pro forma weighted average shares outstanding...   39,360,659
                                                   ==============

</TABLE>

               See accompanying notes to financial statements.

                                22



<PAGE>
                          OPTICAL CABLE CORPORATION
                      STATEMENTS OF STOCKHOLDERS' EQUITY
                 YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                              COMMON STOCK
                                                      ----------------------------
                                                                                    ADDITIONAL                      TOTAL
                                                                                      PAID-IN      RETAINED     STOCKHOLDERS'
                                                          SHARES        AMOUNT        CAPITAL      EARNINGS         EQUITY
                                                      ------------- -------------- ------------ -------------- ---------------
<S>                                                   <C>           <C>            <C>          <C>            <C>
Balances at October 31, 1993........................  36,000,000    $       596    $ 767,849    $  6,392,754   $ 7,161,199
Cash distributions to previously sole stockholder  .          --             --           --      (2,678,722)   (2,678,722)
Net income..........................................             --             --           --    3,349,217     3,349,217
                                                      ------------- -------------- ------------ -------------- ---------------
Balances at October 31, 1994........................  36,000,000            596      767,849       7,063,249     7,831,694
Cash distributions to previously sole stockholder ..          --                --           --   (1,080,000)   (1,080,000)
Net income..........................................             --             --           --    8,200,091     8,200,091
                                                      ------------- -------------- ------------ -------------- ---------------
Balances at October 31, 1995........................  36,000,000            596      767,849      14,183,340    14,951,785
Net income - five months ended March 31, 1996 ......             --             --           --    4,243,117     4,243,117
Issuance of common stock for cash ($2.50 per share,
less issuance costs of $1,139,326)..................   2,675,416      5,549,214              --              --   5,549,214
Cash distributions to previously sole stockholder ..             --             --           --   (6,150,000)   (6,150,000)
Recapitalization....................................             --  13,044,306     (767,849)    (12,276,457)              --
Net income - seven months ended October 31, 1996 ...             --             --           --    4,977,443     4,977,443
                                                      ------------- -------------- ------------ -------------- ---------------
Balances at October 31, 1996........................  38,675,416    $18,594,116    $         -- $  4,977,443   $23,571,559
                                                      ============= ============== ============ ============== ===============

</TABLE>

               See accompanying notes to financial statements.

                                23



<PAGE>
                          OPTICAL CABLE CORPORATION
                           STATEMENTS OF CASH FLOWS
                 YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                              YEARS ENDED OCTOBER 31,
                                                    ------------------------------------------
                                                         1996          1995           1994
                                                    ------------- -------------- -------------
<S>                                                 <C>           <C>            <C>
Cash flows from operating activities:
 Net income.......................................  $ 9,220,560   $  8,200,091   $ 3,349,217
 Adjustments to reconcile net income to net cash
  provided by operating activities:
   Depreciation and amortization..................      533,445        404,469       308,778
   Amortization of intangibles....................           --             --       991,470
   Bad debt expense...............................      266,366         87,652       137,485
   Deferred income taxes..........................     (106,077)            --            --
   Loss on sale of property and equipment.........           --            381        11,469
   (Increase) decrease in:
    Trade accounts receivable.....................   (3,447,954)    (1,921,238)     (234,645)
    Other receivables.............................     (255,744)       (45,514)      (52,783)
    Due from employees............................        1,750         (2,800)        5,963
    Inventories...................................   (4,228,395)     2,813,002       372,430
    Prepaid expenses..............................       21,690        (80,721)       73,929
    Other assets..................................      116,237       (201,237)           --
   Increase (decrease) in:
    Accrued interest payable .....................           --         (8,458)     (285,875)
    Accounts payable and accrued expenses.........    1,881,379      1,603,409      (292,167)
    Accrued compensation and payroll taxes........     (154,472)       450,928       (65,885)
    Income taxes payable..........................      237,926             --            --
                                                                  -------------- -------------
    Net cash provided by operating activities.....    4,086,711     11,299,964     4,319,386
                                                                  -------------- -------------
Cash flows from investing activities:
 Purchase of property and equipment...............   (3,137,421)      (387,231)   (4,168,198)
 Proceeds from sale of property and equipment ....           --             20         3,499
                                                    ------------- -------------- -------------
    Net cash used in investing activities.........   (3,137,421)      (387,211)   (4,164,699)
                                                    ------------- -------------- -------------
Cash flows from financing activities:
 Net borrowings (payments) on notes payable.......      794,000     (5,903,238)    4,344,762
 Proceeds from long-term debt.....................           --             --     3,500,000
 Payments on long-term debt.......................           --     (3,500,000)   (5,280,000)
 Proceeds from issuance of common stock, net of
  issuance costs..................................    5,549,214             --            --
 Cash distributions to previously sole
  stockholder.....................................   (6,150,000)    (1,080,000)   (2,678,722)
                                                    ------------- -------------- -------------
    Net cash provided by (used in) financing
     activities...................................      193,214    (10,483,238)     (113,960)
                                                    ------------- -------------- -------------
Net increase in cash and cash equivalents ........    1,142,504        429,515        40,727
Cash and cash equivalents at beginning of year ...      535,235        105,720        64,993
                                                    ------------- -------------- -------------
Cash and cash equivalents at end of year .........  $ 1,677,739   $    535,235   $   105,720
                                                    ============= ============== =============
Supplemental Disclosure of Cash Flow Information:
 Cash payments for interest.......................  $     9,595   $    386,663   $   893,757
                                                                  ============== =============
 Income taxes paid................................  $ 2,675,000   $         --   $        --
                                                    ============= ============== =============
 Noncash investing activities - capital
  expenditures
  accrued in accounts payable.....................  $   880,659   $         --   $        --
                                                    ============= ============== =============

</TABLE>

   
               See accompanying notes to financial statements.
    

                                24



<PAGE>
   
   OPTICAL CABLE CORPORATION
    

   Notes to Financial Statements

                 YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 (A) DESCRIPTION OF BUSINESS

Optical Cable  Corporation (the Company)  manufactures and markets a broad range
of fiber optic cables for high bandwidth  transmission of data,  video and audio
communications  over moderate  distances.  The Company's  fiber optic cables are
sold nationwide and in over 60 foreign countries (also see note 9).

 (B) CASH EQUIVALENTS

Cash  equivalents  of  $1,397,510  at October 31, 1996  consist of money  market
mutual  funds.  Cash  equivalents  of $265,000  at October  31, 1995  consist of
collateralized  overnight repurchase agreements.  For purposes of the statements
of cash flows,  the Company  considers all highly liquid debt  instruments  with
original maturities of three months or less to be cash equivalents.

 (C) INVENTORIES

Inventories of raw materials and production  supplies are stated at the lower of
cost (specific  identification  for optical  fibers and first-in,  first-out for
other raw materials and production  supplies) or market.  Inventories of work in
process  and  finished  goods are stated at average  cost,  which  includes  raw
materials, direct labor and manufacturing overhead.

 (D) PROPERTY AND EQUIPMENT

Property and equipment are stated at cost.  Depreciation  and  amortization  are
provided for using both  straight-line  and declining  balance  methods over the
estimated  useful lives of the assets.  Estimated  useful lives are  thirty-nine
years for buildings and  improvements  and five to seven years for machinery and
equipment and furniture and fixtures.

 (E) REVENUE RECOGNITION

Revenue  is  recognized  at the time of  product  shipment  or  delivery  to the
customer, based on shipping terms.

 (F) INCOME TAXES

   
Through March 31, 1996,  the Company was not subject to federal and state income
taxes since it had elected, under provisions of the Internal Revenue Code, to be
taxed as an S Corporation. In lieu of corporation income taxes, the stockholders
of an S  Corporation  are taxed on their  proportionate  share of the  Company's
taxable income.     

In connection  with the closing of the Company's  initial  public  offering (see
note 11), the Company terminated its status as an S Corporation  effective March
31, 1996 and became subject to federal and state income taxes. Accordingly,  the
statement of income for the year ended  October 31, 1996  includes  income taxes
from April 1, 1996, and for informational  purposes, the statement of income for
the year ended October 31, 1996 includes a pro forma adjustment for income taxes
which would have been  recorded if the Company had been  subject to income taxes
for the entire fiscal year presented.

Effective  March 31, 1996,  income taxes are  accounted  for under the asset and
liability  method.  Deferred tax assets and  liabilities  are recognized for the
future tax  consequences  attributable  to  differences  between  the  financial
statement  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective tax bases and operating loss and tax credit  carryforwards.  Deferred
tax assets and

                                25



<PAGE>
liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which  those  temporary  differences  are  expected to be
recovered  or settled.  The effect on deferred tax assets and  liabilities  of a
change in tax rates is  recognized  in income in the period  that  includes  the
enactment date.

 (G) AMORTIZATION OF INTANGIBLES

Amortization of intangibles  includes the amortization of a noncompete agreement
and technology  license agreement with a former stockholder which were perfected
as part of a leveraged  settlement  agreement signed on June 22, 1989. The costs
of these two agreements were  determined  based on historical data pertaining to
royalties, salaries and bonuses paid to the former stockholder. These costs were
amortized over the lives of the agreements (five years) using the  straight-line
method.

Amortization of intangibles also includes the amortization of deferred financing
costs  incurred in connection  with the  financing of the  leveraged  settlement
agreement. These costs were amortized over the life of the outstanding long-term
debt using the straight-line method.

 (H) STOCK-BASED EMPLOYEE COMPENSATION

The  Company  sponsors  a stock  incentive  plan  for  selected  key  management
employees.  The Company accounts for this stock-based employee compensation plan
in accordance with APB Opinion No. 25.

 (I) PRO FORMA NET INCOME PER SHARE

Pro forma net income per share was  computed by dividing pro forma net income by
the pro forma weighted  average number of common shares  outstanding  during the
period (as adjusted for the  recapitalization)  and by deeming to be outstanding
the number of shares  (1,800,000)  the Company would have needed to issue at the
initial  public  offering  price  per share  ($2.50)  to pay a $1  million  cash
distribution  to the  previously  sole  stockholder  in December 1995 and a $3.5
million cash distribution to the previously sole stockholder out of the proceeds
of the initial public offering.

 (J) USE OF ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the reported  amounts of assets and  liabilities  and the  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from these estimates.

(2) ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE

A summary of changes in the allowance for doubtful  accounts  receivable for the
years ended October 31, 1996, 1995 and 1994 follows:

<TABLE>
<CAPTION>
                                     YEARS ENDED OCTOBER 31,
                              ------------------------------------
                                  1996        1995        1994
                              ----------- ----------- ------------
<S>                           <C>         <C>         <C>
Balance at beginning of
year........................  $ 200,000   $ 250,000   $ 350,000
Bad debt expense............    266,366      87,652     137,485
Losses charged to
allowance...................   (166,366)   (137,652)   (237,485)
                              ----------- ----------- ------------
Balance at end of year .....  $ 300,000   $ 200,000   $ 250,000
                              =========== =========== ============

</TABLE>

                                26



<PAGE>
(3) INVENTORIES
INVENTORIES AT OCTOBER 31, 1996 AND 1995 CONSIST OF THE FOLLOWING:

<TABLE>
<CAPTION>
                              OCTOBER 31,
                      ---------------------------
                           1996          1995
                      ------------- -------------
<S>                   <C>           <C>
Finished goods......  $ 2,465,659   $2,331,995
Work in process.....    3,104,339    1,594,193
Raw materials.......    4,645,843    2,067,949
Production supplies        45,596       38,905
                      ------------- -------------
                      $10,261,437   $6,033,042
                      ============= =============

</TABLE>

(4) PROPERTY AND EQUIPMENT

Property and equipment at October 31, 1996 and 1995 consist of the following:

<TABLE>
<CAPTION>
                                   OCTOBER 31,
                                                 ----------------------------
                                                      1996          1995
                                                 ------------- --------------
<S>                                              <C>           <C>
Land...........................................  $ 2,745,327   $ 1,362,595
Building and improvements......................    3,401,997     3,401,997
Machinery and equipment........................    3,982,889     2,969,263
Furniture and fixtures.........................      428,742       403,631
Construction in progress ......................    1,596,611               --
                                                 ------------- --------------
  Total property and equipment, at cost........   12,155,566     8,137,486
Less accumulated amortization and depreciation    (2,979,695)   (2,463,254)
                                                 ------------- --------------
  Property and equipment, net..................  $ 9,175,871   $ 5,674,232
                                                 ============= ==============

</TABLE>

   
In July 1996,  the Company  entered  into a contract  for the  expansion  of its
headquarters  facilities  totaling $3.2 million.  Construction is expected to be
completed by the end of January  1997.  Total  remaining  commitments  under the
construction  contract  and related  equipment  purchases as of October 31, 1996
approximated $1.7 million.     

(5) NOTES PAYABLE

The Company has a revolving line of credit  arrangement with a bank that expires
February  28,  1997.  The  arrangement  permits  the Company to borrow a maximum
amount of  $5,000,000.  The line of credit is limited to 80 percent of  eligible
accounts  receivable  and  50  percent  of  raw  materials  and  finished  goods
inventories. The line of credit bears interest at 1.50 percent above the monthly
LIBOR rate not to exceed the lender's  prime rate less 1.0 percent (6.94 percent
as of  October  31,  1996)  payable  daily and is  collateralized  by all of the
Company's  accounts  receivable,  contract  rights,  inventories,  property  and
equipment,  and  general  intangibles.  The  outstanding  balance on the line of
credit was $1,103,000  and $309,000 at October 31, 1996 and 1995,  respectively.
While the line of credit does not require a  compensating  balance  that legally
restricts the use of cash amounts, at the bank's request, the Company has agreed
to maintain an unrestricted target cash balance of $125,000.

The Company was previously  obligated  under senior  subordinated  notes payable
which were subject to an early repayment  premium.  On June 1, 1994, the Company
repaid the remaining  $2,000,000 annual installment  originally due June 1, 1995
and  recognized  an  extraordinary  loss of  $148,968  for the  early  repayment
premium.

                                27



<PAGE>
(6) LEASES

In August  1994,  the  Company  entered  into a  four-year  operating  lease for
computerized  mailing and  shipping  equipment  with an  unrelated  party.  Rent
expense under this lease  amounted to $25,030,  $25,030 and $5,729 for the years
ended  October 31, 1996,  1995 and 1994,  respectively.  Future  minimum  rental
payments required under the lease are as follows:

<TABLE>
<CAPTION>
YEARS ENDING OCTOBER 31,
-------------------------
<S>                        <C>
1997.....................  $25,030
1998.....................   18,772
                           ----------
                           $43,802
                           ==========

</TABLE>

On May 1, 1990,  the  Company  entered  into a ten-year  operating  lease of its
manufacturing  facility.  The lessor was a  partnership  in which the  Company's
previously sole  stockholder was the limited  partner.  On October 20, 1994, the
Company  exercised  its option under the lease  agreement to purchase the leased
premises at fair market value, based on an independent  appraisal.  The purchase
price  paid  to the  partnership  for  the  leased  premises  was  approximately
$4,000,000.  Rent  expense  under this lease  amounted to $428,263  for the year
ended October 31, 1994.

(7) RELATED PARTY AGREEMENTS

Through October 31, 1994, Optical Cable Corporation had a royalty agreement with
its previously sole stockholder in which the stockholder granted the Company the
exclusive  license to use certain cable  manufacturing  techniques and equipment
designs without  restriction.  Royalty payments were equal to 4.5 percent of net
sales.  Royalties under this agreement amounted to $1,177,399 for the year ended
October 31, 1994.

Effective  November 1, 1994,  the Company  entered  into two  separate  one-year
employment  agreements with its previously sole stockholder.  Total compensation
under the  agreements  consisted  of salary  payments  equal to 6 percent of the
previous fiscal year's net sales.  Effective  February 1, 1995, these agreements
were replaced by an employment  agreement that expires October 31, 1997 and that
reduces the salary payment  percentage  from 6 percent to 1 percent and provides
for sales commissions equal to 1 percent of the positive  difference between the
current  fiscal  year's  net  sales  and the  prior  fiscal  year's  net  sales.
Compensation  under these  agreements  amounted to $451,523 and $672,371 for the
years ended October 31, 1996 and 1995, respectively.

Effective November 2, 1994, the Company entered into a services agreement to pay
sales  commissions of 4 percent of net foreign sales to OCC-VI,  Inc., a foreign
sales corporation. All of the outstanding shares of common stock of OCC-VI, Inc.
are beneficially  owned by the Company's  previously sole  stockholder.  For the
year ended  October  31,  1995,  the  Company  recorded  commissions  expense of
$343,290  (of which  $261,382 is included  in accrued  compensation  and payroll
taxes at October 31, 1995)  related to the services  agreement.  As of September
28, 1995, the Company terminated this services agreement.

(8) EMPLOYEE BENEFITS

The Company's independently administered  self-insurance program provides health
insurance  coverage for employees and their  dependents on a  cost-reimbursement
basis. Under the program,  the Company is obligated for claims payments.  A stop
loss  insurance  contract  executed with an insurance  carrier  covers claims in
excess of $30,000 per covered individual and $510,935 in the aggregate per year.
During the years ended October 31, 1996, 1995 and 1994,  total claims expense of
$876,481,  $545,543 and $477,423,  respectively,  was incurred, which represents
claims processed and an estimate for claims incurred but not reported.

                                28



<PAGE>
Effective January 1, 1994, the Company adopted a 401(k) retirement savings plan.
To become eligible for the plan, an employee must complete six months of service
and be at least 21 years of age.  The plan  allows  participants  to  contribute
through  salary  reduction  up to 6 percent of their  annual  compensation  on a
pretax  basis.  Company  matching  contributions  are two  dollars for every one
dollar  contributed  by an  employee  up to 4 percent of the  employees'  annual
compensation.  The Company made matching  contributions to the plan of $233,072,
$205,011  and  $157,216  for the years ended  October 31,  1996,  1995 and 1994,
respectively.

The Company and its previously sole stockholder adopted on March 1, 1996 a stock
incentive  plan  which is  called  the  Optical  Cable  Corporation  1996  Stock
Incentive  Plan  (the  "Plan").  The Plan is  intended  to  provide  a means for
selected key management  employees to increase their personal financial interest
in  the  Company,  thereby  stimulating  the  efforts  of  these  employees  and
strengthening  their desire to remain with the Company  through the use of stock
incentives.  The  Company  has  reserved  4,000,000  shares of common  stock for
issuance  pursuant to  incentive  awards under the Plan.  Under the Plan,  stock
options may be granted at not less than fair market value on the date of grant.

The aggregate number of shares under option pursuant to the Plan is as follows:

<TABLE>
<CAPTION>
                                           NUMBER OF    OPTION PRICE
                                             SHARES      PER SHARE
                                          ----------- ---------------
<S>                                       <C>         <C>
Options outstanding at October 31,
1995....................................         --      --
Granted.................................    460,000   $2.50
Forfeited ..............................    (18,000)  $2.50
                                          ----------
Options outstanding at October 31, 1996     442,000   $2.50
                                          ==========
Options exercisable at October 31,
1996....................................         --
                                          ==========
Available for grant at October 31,
1996....................................  3,558,000
                                          ==========

</TABLE>

The options vest 25 percent after two years,  50 percent  after three years,  75
percent after four years and 100 percent after five years.

(9) BUSINESS AND CREDIT CONCENTRATIONS

The  Company  provides  credit,  in the normal  course of  business,  to various
commercial enterprises,  governmental entities and not-for-profit organizations.
Concentration of credit risk with respect to trade receivables is limited due to
the Company's  large number of customers.  The Company also manages  exposure to
credit risk through credit approvals,  credit limits and monitoring  procedures.
Management  believes  that  credit  risks at October 31, 1996 and 1995 have been
adequately provided for in the financial statements.

For the years ended October 31, 1996, 1995 and 1994, 75 percent,  76 percent and
75 percent, respectively, of net sales were from customers located in the United
States,  while 25 percent,  24 percent and 25 percent,  respectively,  were from
international  customers.  No foreign geographic area accounted for more than 10
percent of net sales for the years ended October 31, 1996,  1995 and 1994. As of
October 31, 1996 and 1995, there were no significant amounts receivable from any
one customer other than those described below.

                                29



<PAGE>
For the year ended October 31, 1996,  12 percent of net sales were  attributable
to one major domestic  distributor.  The related trade  accounts  receivable for
this distributor at October 31, 1996 totaled approximately $2,468,000. No single
customer or other distributor accounted for more than 5 percent of net sales for
the year ended October 31, 1996.  As of October 31, 1996, no single  customer or
other distributor had an outstanding balance payable to the Company in excess of
5 percent of total stockholders' equity.

   
For the year ended October 31, 1995,  10 percent of net sales were  attributable
to one major domestic  distributor.  The related trade  accounts  receivable for
this distributor at October 31, 1995 totaled  approximately  $841,000. No single
customer or other distributor accounted for more than 5 percent of net sales for
the year ended October 31, 1995.  As of October 31, 1995, no single  customer or
other distributor had an outstanding balance payable to the Company in excess of
5 percent of total stockholder's equity.
    

For the year ended October 31, 1994, no single customer  accounted for more than
5 percent of net sales.

(10) INCOME TAXES

The  Company  recorded a $114,045  net benefit for  deferred  income  taxes upon
termination of the Company's S Corporation  status. The adjustment  reflects the
net deferred  income tax asset balance at March 31, 1996 in accordance  with the
provisions of Statement of Financial  Accounting  Standards No. 109,  Accounting
for  Income  Taxes,  which  requires  an asset and  liability  approach  for the
accounting  and financial  reporting of income taxes.  The components of the net
deferred tax asset at March 31, 1996 were  substantially the same as the October
31, 1996 components presented below.

Income tax expense for the year ended October 31, 1996 consists of:

<TABLE>
<CAPTION>
                   CURRENT     DEFERRED       TOTAL
                ------------ ------------ -------------
<S>             <C>          <C>          <C>
U.S. Federal .  $2,556,601   $ (93,490)   $2,463,111
State ........     356,325     (12,587)      343,738
                ------------ ------------ -------------
Totals........  $2,912,926   $(106,077)   $2,806,849
                ============ ============ =============

</TABLE>

Reported income tax expense for the year ended October 31, 1996 differs from the
"expected" tax expense,  computed by applying the U.S. Federal  statutory income
tax rate of 35 percent to income  before  income tax expense  and  extraordinary
item, as follows:

<TABLE>
<CAPTION>
<S>                                                               <C>
"Expected" tax expense..........................................  $ 4,209,593
Increase (reduction) in income tax expense resulting from:
 S Corporation taxable income for the five months ended March
  31, 1996......................................................   (1,485,091)
 Net deferred income tax asset balance at March 31, 1996........     (114,045)
 Foreign Sales Corporation benefit..............................      (98,473)
 State income taxes, net of federal benefits....................      215,967
 Other differences, net ........................................       78,898
                                                                  --------------
Reported income tax expense.....................................  $ 2,806,849
                                                                  ==============

</TABLE>

                                30



<PAGE>
The tax effects of temporary  differences that give rise to significant portions
of the  Company's  net deferred  tax asset as of October 31, 1996 are  presented
below:

<TABLE>
<CAPTION>
<S>                                                                        <C>
Deferred tax assets:
 Accounts receivable, due to allowance for doubtful accounts.............  $ 113,775
 Inventories, due to additional costs inventoried for tax purposes
  pursuant to the Tax Reform Act of 1986.................................     91,781
 Self-insured health care costs, due to accrual for financial reporting
  purposes ..............................................................     43,780
                                                                           ------------
Total gross deferred tax assets..........................................    249,336
Less valuation allowance.................................................         --
                                                                           ------------
Net deferred tax assets..................................................    249,336

Deferred tax liabilities:
 Plant and equipment, due to differences in depreciation and capital gain
  recognition............................................................    (49,227)
 Other receivables, due to accrual for financial reporting purposes .....    (94,032)
                                                                           ------------
Total gross deferred tax liabilities.....................................   (143,259)
Net deferred tax asset, including current net tax asset of $155,304 and
 noncurrent net tax liability of $49,227.................................  $ 106,077
                                                                           ============

</TABLE>

Based on the  Company's  historical  and  current  pretax  earnings,  management
believes  that it is more likely than not that the recorded  deferred tax assets
will be realized.

(11) RECAPITALIZATION AND INITIAL PUBLIC OFFERING

The  Company's  Board of  Directors  authorized  the  filing  of a  registration
statement  for a public  offering of the Company's  common stock.  In connection
with the public offering, the Board and the previously sole stockholder approved
an  increase  in the number of  authorized  shares of common  stock from  50,000
shares to 50,000,000  shares,  a  recapitalization  involving an exchange of all
outstanding $1 par value common stock (596 shares) on a  60,403-for-1  basis for
no par value common stock (36,000,000 shares) and the authorization of 1,000,000
shares of preferred stock, no par value, issuable in multiple series.

On April 1, 1996, the Company completed a public offering of 2,675,416 shares of
the Company's  common stock from which it received net proceeds of approximately
$5.5 million.

At October 31, 1995,  included in  noncurrent  other  assets are deferred  costs
related to the public  offering in the amount of $201,237.  These deferred costs
were charged against the gross proceeds of the public offering.

In connection with the recapitalization,  additional paid-in capital as of March
31, 1996 has been  reclassified to no par value common stock,  and the amount of
the undistributed  taxable S Corporation earnings remaining as of March 31, 1996
has been reclassified to no par value common stock.

                                31



<PAGE>
(12) STOCK DIVIDENDS

On May 14, 1996, the Board of Directors  declared a 2-for-1 stock split effected
in the form of a one hundred  percent (100%) stock dividend paid on May 31, 1996
to  stockholders  of record at the close of business on May 15, 1996. On June 5,
1996, the Board of Directors declared a 2-for-1 stock split effected in the form
of a one  hundred  percent  (100%)  stock  dividend  paid  on June  21,  1996 to
stockholders  of record at the close of business on June 6, 1996.  All share and
per share data have been adjusted to reflect these stock dividends.

(13) FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial  Accounting  Standards  No. 107,  Disclosures  About Fair
Value of  Financial  Instruments  ("SFAS  No.  107"),  requires  the  Company to
disclose  estimated  fair  values of its  financial  instruments.  SFAS No.  107
defines  the fair  value of a  financial  instrument  as the amount at which the
instrument could be exchanged in a current  transaction between willing parties.
The carrying amounts  reported in the balance sheet for cash, cash  equivalents,
trade accounts receivable,  other receivables,  notes payable,  accounts payable
and accrued  expenses  approximate  fair value because of the short  maturity of
these instruments.

(14) NEW ACCOUNTING STANDARDS

In March 1995,  the Financial  Accounting  Standards  Board (the "FASB")  issued
Statement  of  Financial  Accounting  Standards  No.  121,  Accounting  for  the
Impairment  of  Long-lived  Assets and for  Long-lived  Assets to Be Disposed of
("SFAS No. 121").  SFAS No. 121 requires  companies to review  long-lived assets
and  certain  identifiable  intangibles  to be held,  used or  disposed  of, for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be  recoverable.  The Company is required to
adopt this statement in fiscal 1997.  The Company  believes the adoption of this
statement will not have a significant effect on its financial statements.

In October 1995, the FASB issued Statement of Financial Accounting Standards No.
123,  Accounting  for  Stock-Based  Compensation  ("SFAS  No.  123"),  which  is
effective for transactions entered into in fiscal years beginning after December
15, 1995. The Company plans to retain the intrinsic  value method of APB Opinion
No. 25,  Accounting for Stock Issued to Employees,  for recognizing  stock-based
compensation in the financial  statements.  Management  believes the adoption of
SFAS No. 123 will not have a material impact on the Company's financial position
or results of  operations;  however,  the  Company is still  evaluating  the new
disclosure requirements under SFAS No. 123.

                                32



<PAGE>
(15) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the unaudited  quarterly results of operations for
the years ended October 31, 1996 and 1995:

<TABLE>
<CAPTION>
                                  QUARTER ENDED
                                --------------------------------------------------------
 YEAR ENDED OCTOBER 31, 1996      JANUARY 31     APRIL 30      JULY 31      OCTOBER 31
------------------------------  ------------- ------------- ------------- --------------
<S>                             <C>           <C>           <C>           <C>
Net sales.....................  $10,342,472   $10,183,960   $10,862,064   $13,763,803
Gross profit..................    4,707,021     4,096,839     4,953,023     6,488,043
Income before income taxes ...    2,774,994     2,252,228     2,983,232     4,016,955
Net income....................    2,774,994     2,068,288     1,858,823     2,518,455
Pro forma net income..........    1,709,397     1,387,372     1,858,823     2,518,455
Pro forma net income per
share.........................         0.04          0.04          0.05          0.06

</TABLE>

<TABLE>
<CAPTION>
                                                  QUARTER ENDED
                              -----------------------------------------------------
YEAR ENDED OCTOBER 31, 1995    JANUARY 31    APRIL 30      JULY 31     OCTOBER 31
----------------------------  ------------ ------------ ------------ --------------
<S>                           <C>          <C>          <C>          <C>
Net sales...................  $8,132,636   $9,500,186   $8,697,155   $10,029,976
Gross profit................   3,481,233    3,975,250    3,976,376     4,805,739
Income before income taxes .   1,435,750    2,028,848    1,877,586     2,857,907
Net income..................   1,435,750    2,028,848    1,877,586     2,857,907

</TABLE>

   
                                33
    



<PAGE>
   
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

   None.

                                   PART III

   The information  called for by Items 10--13 is incorporated by reference from
the Optical Cable Corporation  Notice of 1997 Annual Meeting and Proxy Statement
-- to be filed  pursuant  to  Regulation  14A not later  than 120 days after the
close of the fiscal year.

Item 10.  Directors and Executive Officers of the Registrant

Item 11.  Executive Compensation

Item 12.  Security Ownership of Certain Beneficial Owners and Management

Item 13.  Certain Relationships and Related Transactions

                                34
    



<PAGE>
   
                                   PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Index of Financial Statements

   Information with respect to this Item is contained in the Company's financial
statements indicated in the Index on Page 19 of this Annual Report on Form 10-K.

2. Index of Financial Statement Schedules

None.

3. Exhibits

The exhibits listed on the  accompanying  index of exhibits are filed as part of
this Annual Report on Form 10-K.

(b)  Reports on Form 8-K

No  reports on Form 8-K were  filed  during  the last  quarter of the period for
which this Annual Report is filed.

(c) Index of Exhibits
    

<TABLE>
<CAPTION>
  EXHIBIT
   NUMBER                                             DESCRIPTION
-----------  ---------------------------------------------------------------------------------------------
<S>          <C>
*3.1.......  Amended and Restated Articles of Incorporated of Optical Cable Corporation
*3.2.......  Bylaws of Optical Cable Corporation, as amended
*4.1.......  Form of certificate representing Common Stock
             Royalty Agreement, dated November 1, 1993, by and between Robert Kopstein and Optical Cable
*10.1......  Corporation
             Loan Agreement dated June 1, 1994, as amended by and between Optical Cable Corporation and
*10.2......  First Union National Bank of Virginia
             Employment Agreement by and between Optical Cable Corporation and Robert Kopstein, effective
*10.3......  February 1, 1995
             Tax Indemnification Agreement, dated as of October 19, 1995, by and between Optical Cable
*10.4......  Corporation and Robert Kopstein
             Assignment of technology rights from Robert Kopstein to Optical Cable Corporation, effective
*10.5......  as of October 31, 1994
*10.6......  Proposed form of Letter Agreement by and between Optical Cable Corporation and the Agents
***10.7....  Optical Cable Corporation 1996 Stock Incentive Plan
23.........  Consent of KPMG Peat Marwick LLP (filed herewith)
27.........  Financial Data Schedule
**99.1.....  Registration Statement on Form S-1, as amended (File No. 33-96476)

</TABLE>

   
     * Filed as an exhibit to the Company's Registration Statement on Form
S-1, as amended (File No.  33-96476) and incorporated herein by reference.

    ** Incorporated herein by reference.

   *** Filed as an exhibit for the Company's Registration Statement on Form
S-8 filed on August 2, 1996 (File No. 333-09433) and incorporated herein by
reference.

                                35
    



<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.
                                                       OPTICAL CABLE CORPORATION

Date: January 29, 1997                                    By /s/ Robert Kopstein

                                                                 Robert Kopstein
                                                           Chairman of the Board
                                                             President and Chief
                                                               Executive Officer

   Pursuant to the  requirements  of the Securities  Exchange Act of 1934,  this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities indicated as of January 29, 1997.
    

<TABLE>
<CAPTION>
<S>                          <C>
/s/ Robert Kopstein          Chairman of the Board, President, Chief Executive
Robert Kopstein              Officer and Director
                             (principal executive officer)

/s/ Luke J. Huybrechts       Senior Vice President of Sales and Director
Luke J. Huybrechts     

/s/ Kenneth W. Harber        Vice President of Finance, Treasurer, Secretary and
Kenneth W. Harber            Director
                             (principal financial and accounting officer)

/s/ Randall H. Frazier       Director
Randall H. Frazier    

/s/ John M. Holland          Director
John M. Holland    

</TABLE>

                                36