UNITED STATES
                                 
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                   FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1997.

Commission File No. 0-15205

                                 ELCOTEL, INC.
             (Exact name of registrant as specified in its charter)

        Delaware                                             59-2518405
-------------------------------                           -------------------
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                            Identification No.)

                 6428 Parkland Drive, Sarasota, Florida 34243
              ---------------------------------------------------
              (Address of principal executive offices) (Zip Code)
                                  
                                (941) 758-0389
             ----------------------------------------------------
             (Registrant's telephone number, including area code)

Securities registered under Section 12(b) of the Act:  None

Securities registered under Section 12(g) of the Act:
                                                            
                                Title of Class                                  
                                --------------

                         Common Stock, $.01 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.

                               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.  [    ]

The aggregate market value of the voting and non-voting common equity (which
consists solely of shares of Common Stock) held by non-affiliates of the
registrant as of June 16, 1997, computed by reference to the price at which
the registrant's Common Stock, as quoted by the National Market System of
NASDAQ, was sold on such date, was approximately $33,741,000.  Shares of Common
Stock held be each officer, director and holder of 5% or more of the outstanding
Common Stock have been excluded in that such persons may be deemed to be
affiliates.  This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

The number of shares of the registrant's Common Stock outstanding as of
June 16, 1997 was 8,182,216.

<PAGE>
                            PART I
                            ------

  Item 1.  Description of Business
  ---------------------------------

  Elcotel, Inc. (the "Company") has been in the public telecommunications
  industry since its founding in 1985.   The Company has been recognized as
  a leader in the development and sale of microprocessor smart phone
  products domestically.  The Company believes it is well positioned to
  continue as a leading supplier to an industry that is experiencing
  significant change and growth as a result of regulatory policies aimed at
  stimulating competition world wide.  This growth is being aided by
  improving technology in wireless communications and smart card chip
  technology.  The Company's products are sold to domestic private operators
  and regulated telephone companies and to international telephone companies
  and private operators.
  
  The Company designs, develops, manufactures and markets micro-processor
  based public communication products and software which provide services
  over both domestic and international wireline and wireless (cellular)
  telephone networks.  The principal products of the Company are coin and
  card operated intelligent payphones and management systems to support
  payphone operators.  The Company markets intelligent prepaid card systems
  internationally in support of its payphone card applications.  When the
  Company's products are combined with personal computer (PC) based payphone
  management systems, they perform substantially the same functions as
  payphones controlled by the central offices of regulated telephone
  operating companies, hereinafter referred to as Local Exchange Carriers or
  "LECs".
  
  The markets for the Company's products are both domestic and international
  private payphone operators and regulated telephone companies providing
  public communications services.  The Company is one of the leaders in
  sales of microprocessor-based payphone products to domestic private
  payphone operators.  The Company's payphones support coin, credit card and
  debit card applications and are controlled internally by a microprocessor,
  memory chips, and other electronic components which automate the call
  management functions performed by the payphone.  The microprocessor units
  provide the capability to reconfigure the operational functions of the
  payphones via PC controlled remote access.  This PC control capability
  provides the operator with a variety of management reports in order to
  manage its payphone operations.
  
  The Company's current development efforts are aimed at expanding the
  product line to address both domestic and international markets using
  wireline and wireless capability.  The applications to be supported by
  these products include commercial credit and debit card payment processes,
  service management enhancements, and retrofit upgrades for the aging
  installed base of payphones being operated by the LECs and international
  telephone companies.  The Company is also developing for international
  applications a network-based prepaid card system for prepaid card
  applications and expanding the card technology capabilities of its
  products.

<PAGE> 1

  The Company believes that the regulated telephone companies will have to
  restructure their payphone operations as a result of the
  Telecommunications Act of 1996 (the "1996 Act"), since the 1996 Act
  prevents Bell operating companies from discriminating between their pay
  telephones and private pay telephones.  The Company believes this
  restructuring will motivate the regulated telephone companies to upgrade
  their payphone operations, which will cause them to acquire technology
  similar to that used by private payphone operators and otherwise look for
  ways to become more competitive.  The Company believes it can offer the
  regulated telephone companies products that they may find more suited to
  the changing public communications market and to help them become more
  competitive.
  
  As as result of the 1996 Act, the FCC mandated compensation be paid to
  payphone providers for the large volume of access code calls (such as
  10ATT or 1 800-CALLATT) and debit card calls and the previously uncompensated
  interstate and intrastate subscriber 800 calls ("dial-around calls").
  From November 1996 until November 1997, this compensation for dial-around
  calls was fixed at the flat rate of $45.85 per payphone per month.  After
  November 1997, this compensation will change to a   fixed charge per
  dial-around call of $0.35.  The Company believes that this change may
  increase the demand by private payphone operators for additional payphones.
  
  The Company has expanded its presence in international markets and
  realized a 424% increase in sales to international customers in the fiscal
  year ended March 31, 1997 over the previous year.  International revenues
  represented approximately 30% of the Company's total revenues for the 1997
  fiscal year and established a base of international customers for
  additional sales opportunities.  The Company will continue its
  international development efforts as it addresses the growth opportunities
  presented by international markets.  The Company estimates that
  international markets may represent sales opportunities approximating $2
  billion over the next three years.
  
  The Company was organized in April 1985 as a Florida Corporation, and in
  September 1986 changed its corporate domicile to Delaware by merging into
  a newly-formed Delaware corporation created exclusively for that purpose. 
  All references to the Company include its predecessor.  The Company's
  principal offices are located at 6428 Parkland Drive, Sarasota, Florida
  34243, and its telephone number is (941) 758-0389.
  
  PRODUCTS
  
  Payphones
  ---------

  The Company's intelligent payphones operate as integral self-standing
  units of a public communications system and internally process the
  functions associated with processing, call rating and collecting data for
  future use in accounting and coin management functions.  By contrast, when

<PAGE> 2

  a call is initiated at older style payphones (typically owned by LECs),
  the call is processed through a remote central office system maintained by
  the LEC.  The older style payphone requires that the central office
  communicate with the caller, if necessary, and controls the payphone by
  external means.
  
  The Company's payphones operate by means of electronic assemblies of
  integrated circuits and other components located within the telephone
  cabinet.  The processing of all telephone functions is controlled by a
  microprocessor "chip" which utilizes the Company's copyrighted software
  operating system.  The Company's payphones communicate with a caller by
  digitized human voice messages activated by the microprocessor.  The
  Company's payphones have all of the usual features of LEC coin and credit
  card reading telephones, as well as several additional features available
  through microprocessor control.
  
  The Company began full marketing of its first payphone in January 1986. 
  Since then, the Company has introduced several improved models and a
  number of software enhancements to its various models.  The Company's
  payphones are offered with a housing and coin mechanism supplied by
  Quadrum Telecom, AT&T, or alternative suppliers providing essentially
  equivalent housings and coin mechanisms.  Certain of the Company's
  payphone products are being offered with an enhanced electronic coin
  mechanism supplied by Mars Electronics and with similar electronic coin
  mechanisms from AT&T for Western style cabinets.  The Company also offers
  its payphone product as a unique panel phone using a customized cabinet
  and has customized designs for special customer applications, such as
  airports and convention centers.  The product is available as an
  electronic board assembly which the customer can install in existing
  Quadrum, Tatung, GTE, AT&T or equivalent cabinets to replace the
  electronic board assemblies of competitors' products.  Modified versions
  of these electronic board assemblies are being used in international
  applications and can be used to retrofit regulated telephone company
  electronics.  The Company has also introduced a line of international
  products that utilize cabinets designed by the Company.
  
  The Company's payphones contain call rating software in memory which
  stores the local, intrastate and interstate rates for coin sent-paid calls
  between exchanges throughout the United States or international locations
  where the Company's payphones are sold.  The maximum rates which operators
  of privately-owned payphones can charge for local and intrastate calls are
  regulated by the various state public service commissions.  See
  "Regulation".  The Company maintains and updates on a current basis at its
  corporate offices a proprietary data base of all local, intrastate and
  interstate rates.  The Company programs and sells rate center files to be
  downloaded by the customer to each payphone purchased and put in service. 
  Rates download services are available from the Company.  The rate center
  file (or device) contains the then-current applicable rates for coin calls
  between the exchange where the payphone is to be located and all other
  exchanges throughout the United States or in international locations. 
  However, the owner/operator of a payphone is responsible for ensuring that
  the rates are kept current.  Each payphone may also be downloaded with
  various available options chosen by a customer, such as free calls for

<PAGE> 3

  emergency numbers, special charges for certain calls, and speed dial
  numbers.  The Company's current models utilize a programmable memory chip
  (EEPROM) permitting the downloading of rates and option selections from a
  personal computer, using software and rate center files provided, and
  periodically updated, by the Company.
  
  The Company's current domestic payphone models, the Series 5 and
  Olympian 5501, utilize state-of-the-art hardware and software technology
  to enable them to be powered by the very low electric current available
  from the telephone line, thereby requiring no external source of power. 
  Expensive electrical installation is thereby avoided.
  
  The Company also markets international payphone products that derive the
  capability to support prepaid card and coin applications from the same
  technology base.  These products offer an LCD display to support
  multilingual messages in languages selected by the customer through the
  keypad control.
  
  The Olympian 5501, which was introduced in fiscal 1995, incorporates a
  surface mount manufacturing process to reduce cost and, which the Company
  believes, improves quality and reliability.  This product provides an
  opportunity to address domestic and international markets due to its
  ability to function with either a standard business line or a LEC coin
  line, and allows the payphone operators to program the payphone for any
  one of three operating modes (smart, bright or coin line).  The
  Olympian 5501 board utilizes a metallic wrap around chassis to protect
  against damage to the board.
  
  The Company's current payphone products consist of:
  
     Model IPT-9100, Series 5 International line-powered payphone.
  
     Model IPT-9120, Series 5 International line-powered payphone
            with debit and credit card reader.
  
     Model 1510LP, Series 5 line-powered utilizing a hybrid payphone       
          housing  from an independent manufacturer
            (Quadrum Telecom), with certain characteristics
            of both the AT&T and GTE payphone assemblies.
  
     Model 1520LP, Series 5 line-powered payphone utilizing the GTE
            payphone housing.
  
     Model 1530LP, Series 5 line-powered panel phone.
  
     Model 1550LP, Series 5 line-powered payphone utilizing AT&T
            style payphone housings.

<PAGE> 4

     Model 1500LP, Series 5 Electronic Assembly (retrofit kit) for
            customer installation in GTE or hybrid housing.
  
     Model 1502LP, Series 5 Electronic Assembly and Keypad
            (retrofit kit) for customer installation in AT&T
            housing.
  
     Model S5501 Olympian Electronic Assembly and Keypad for AT&T
            style payphone housings.
  
     Model COT103, Card only telephone for international
            applications on wireline or wireless (cellular)
            networks.
  
     Model OCT9520, Card and coin international payphone capable of
       handling     large sized coins.
  
  The following are some of the principal features of the Company's present
  line of payphone products:
  
    -  Permit monitoring of the amount of money in the cash box, the number
       and types of calls made and the service condition of the payphone;
       and communication of such audit information through the voice
       circuitry on demand, either at the payphone or remotely from the
       owner's office, upon receipt of an owner-programmed security code.
  
    -  Contain a programmable memory chip for on-site or remote programming
       and monitoring of various options, updated rates, alarms and free
       phone numbers.
  
    -  Provide an internal modem to receive programming information, and
       transmit audit information remotely to and from an external modem
       and printer associated with a personal computer at the
       owner/operator's facility.
  
    -  Provide a clock and calendar function to calculate time-of-day
       discounts and control other timed functions.
  
    -  Provide up to seven optional alarms which can be monitored remotely.
  
    -  Provide the capability of downloading revisions of the phone's
       software operating system, eliminating the need to install new
       program chips in the phone.
  
    -  Provide debit card operation using the "103" type chip card as well
       as credit card operation.
  
    -  Provide proprietary designed "answer detection" and "answer
       supervision" functions for call timing and rating.
  
    -  Provide an optional credit card reading capability.

<PAGE> 5

  Payphone Network Manager ("PNM")
  --------------------------------

  The Payphone Network Manager is a software system designed, developed and
  sold by the Company for installation in personal computers with specified
  memory and disk capacity.  The system provides the owner/operator of the
  Company's products the ability to monitor the functional capabilities of
  the various products, permits the automatic control of the products, and
  controls the download of program files, rate files, and several other
  files which are pertinent to the operation of each phone.
  
  The Company has four versions of the Payphone Network Manager:  the
  Microsoft Windows-based PNM Plus system which contains enhanced features
  associated with the domestic market; the Microsoft Windows-based PollQuest
  system, with enhanced features for the international market; and the DOS-based
  PNM and IPNM Payphone Network Management Systems that support the
  domestic and international markets, respectively.
  
  PNM Plus and PollQuest have the ability to support over 10,000 phones, to
  communicate simultaneously with many payphones, and to provide appropriate
  reporting.  This software is currently operating at various locations in
  North America, South America, Central America, Asia, Africa, and Europe.
  
  Rate Center Files
  -----------------

  The Company installs an EEPROM memory device in the payphone and sells the
  customer rate center files on a diskette which is downloaded to the
  product after installation, using PNM or which can be downloaded from an
  electronic bulletin board which the Company maintains.   This bulletin
  board system allows the Company's customers to obtain rate center files
  24 hours per day, 7 days per week.
  
  Service Management Program
  --------------------------

  The Company's Service Management Program helps new or dependent payphone
  owners handle their routine operations.  This program provides software
  downloads, including rate center files, and generates reports of alarm
  conditions upon which the customer can then act.  The Service Management
  Program is offered on a monthly subscription basis and customer choices
  range from a basic offering to a package of services.
  
  WARRANTY AND SERVICE
  
  The Company provides the original purchaser with either two or three-year
  warranties on payphone products the Company manufactures.  When the
  Company resells products from other manufacturers, the Company passes on
  the other manufacturer's warranty to its customers.  In addition, the
  Company's customer service engineering staff at its corporate offices
  provides telephone support services without charge to customers who have
  installation or operational questions.  The Company also provides field
  engineering support services during the introductory phase of new products

<PAGE> 6

  and when customers encounter unusual problems.  After the warranty
  expires, the Company provides non-warranty service at its corporate
  offices for a fee.  The Company's distributors are also authorized to
  repair products.
  
  Owners/operators of the Company's payphones have the sole responsibility
  of ensuring that rates charged for calls made from the phone remain
  current.  The Company provides updated rating devices or rate center files
  on a bulletin board service to permit the customer to maintain control
  files for each phone and to download the rates to the phones using PNM.
  
  TRAINING
  
  The Company provides training courses given at the Company's facility or
  at the customer's premises on the installation, operation, maintenance and
  repair of the payphones and PNM, both domestic and international.  The
  Company's distributors also provide training to their customers.
  
  PRODUCTION
  
  The Company's current manufacturing facility occupies approximately 16,000
  square feet situated in a building leased by the Company located in a
  light industrial complex.  The Company's manufacturing operations are
  designed so that production volumes could be readily increased.  See
  "Properties."
  
  The Company purchases all components for its electronic and mechanical
  assemblies from external suppliers.  These suppliers must be approved by
  the Company's design engineering group and manufacturing operations. 
  Approval is based on quality, delivery, performance and cost.  Design
  engineering attempts to utilize components available from several
  manufacturers, as well as avoiding single source component restraints. 
  However, occasionally it is necessary to use a single source component and
  the Company currently has several items in this category.  While the
  Company believes that it could find alternative suppliers for its
  components, or in the case of single source components, substitute other
  components for the ones currently used in its electronic assemblies, the
  Company's operations could be adversely affected until alternative sources
  or substituted components could be obtained.  During fiscal 1998, the
  Company will purchase for one of its products complete electronic board
  assemblies from one of its two subcontractors.  That subcontractor has
  entered into agreements with the Company's suppliers and the Company will
  not be required to purchase individual components for these assemblies. 
  The Company will continue to specify and approve all components and will
  purchase the completed assemblies from the subcontractor.

<PAGE> 7

  All components and assemblies are identified by total inventory value and
  deliveries are scheduled consistent with meeting production schedules. 
  Material planning and scheduling is accomplished utilizing a basic
  computerized Material Requirements Planning (MRP) system.
  
  The Company's electronic boards are assembled by two qualified local
  subcontractors.  The Company believes it could use alternate
  subcontractors, if necessary, with minimal interruption to production, as
  the equipment required for these assemblies is industry standard and
  suitable subcontractors are available.
  
  The Company routes all electronic assemblies through various automated 
  in-house tests and defect-inducing processes to improve their quality and
  reliability.  After testing, the electronic board assemblies may be
  installed in and tested as a full payphone and shipped to the customer or
  packaged separately and shipped for customer installation.  The Company's
  manufacturing and service organizations were ISO 9002 certified in
  December 1995 and the Company will pursue ISO 9001 certification during
  fiscal 1998.
  
  MARKETING
  
  The markets for the Company's products are both domestic and international
  public communications services.  Domestically, these services and markets
  represent an annual $6 billion market segment, $400 million of which is in
  hardware and software sold to the independent payphone operators ("IPPs")
  and LECs of the type provided by the Company.  The Company estimates that
  international markets may represent sales opportunities approximating $2
  billion over the next three years.
  
  The Company's customers range from operators of small private payphone
  routes to large nationally recognized LECs.  Generally, customers enter
  into revenue-sharing arrangements with location owners and install the
  Company's payphones in such locations as convenience stores, city
  sidewalks and airports.  The Company provides its customers with detailed
  instruction manuals for its products, and offers training in installation
  and maintenance at its corporate offices, at regional locations  or at the
  customer's designated site.  The Company also offers such value-added
  products and services as network management systems and service management
  programs to enhance the customer's ability to increase its revenues.
  
  The Company generally enters into non-exclusive sales agreements with its
  customers, which include a non-exclusive license to use the Company's
  proprietary operating system and Payphone Network Management system.  All
  purchase orders from customers are subject to acceptance by the Company. 
  The Company's policy is to grant credit to customers that the Company
  deems creditworthy.  Products are sold by payment in advance for which the
  Company grants the customer a discount, or, if the customer otherwise
  qualifies, the Company provides 30 days credit.  In addition, the Company
  provides limited secured financing with terms generally not exceeding 24
  months and interest charged at competitive rates.

<PAGE> 8

  The Company's customers are not prohibited from using and reselling
  competing products and are not required to purchase a minimum quantity of
  products, although the Company's pricing schedules offer discounts for
  volume purchases.
  
  The Company sells its products directly to customers and to distributors. 
  The Company at present has four distributors, each with limited exclusive
  selling arrangements in assigned territories.  The Company's distributors
  currently represent approximately 11% of its total sales.
  
  The locations at which the Company's products are installed may include
  any business, organization, institution or governmental agency which
  desires to offer payphone services to customers, employees and visitors. 
  The gross revenue generated by a particular product is dependent upon many
  variables including location, traffic volume, duration and distance of
  call, visibility, as well as volume of coinless calls which are charged to
  telephone company issued calling cards, commercial credit cards, or
  collect to the destination subscriber's phone for which the
  owners/operators receive commission or dial-around compensation.  The
  profitability of public communications products also depends upon such
  other variables as LEC line charges, usage sensitive costs, the maximum
  rates permitted by state laws, compensation plans approved by the FCC,
  commissions to location owners, and maintenance and insurance costs.
  
  In fiscal 1996, the Company entered into an agreement with Lucent
  Technologies Public Terminals business unit pursuant to which the Company
  produces and sells to Lucent a private labeled Olympian 5501 payphone
  using Lucent's payphone housing, along with the Company's Payphone Network
  Management system which Lucent will incorporate into its payphone systems
  for its domestic customers.  Both companies are marketing their respective
  products to the Regional Bell Operating Companies.
  
  Prior to January 1997 Lucent also marketed to its international customers
  the Company's private label Olympian 5501 payphone.  In January 1997,
  Lucent decided to cease such international business and agreed to assign
  its customer contracts with respect to such business to the Company for
  completion of these orders. 
  
  During fiscal 1997, two customers (one of which was Lucent with respect to
  international customers) accounted for approximately 12% and 12% of the
  Company's sales, respectively.  During fiscal 1996, no customer accounted
  for 10% or more of the Company's sales.
  
  The Company is currently pursuing ISO 9001 certification and was ISO 9002
  certified in December 1995.  The Company believes it may become ISO 9001
  certified during fiscal 1998.

<PAGE> 9

  Four of the Company's executive officers, and five full-time sales
  representatives employed by the Company currently market the Company's
  products to its customers.  Sales representatives are located regionally. 
  The Company advertises its products through trade publications, routinely
  participates in trade shows and periodically hosts seminars for major
  account customers at its corporate headquarters and at regional locations.
  The Company's sales and marketing functions focus on four major markets: 
  regionally based IPP operations; regulated telephone companies; national
  accounts; and international markets.  The Company hosts an annual Customer
  Conference for all its customers covering such areas as current and future
  product development, regulatory and industry issues, and customer service. 
  In addition, the Company holds a monthly conference call with selected
  customers and representatives of the Company, to discuss product and
  service issues and other matters of mutual concern to both the Company and
  its customers.
  
  The Company's domestic equipment sales are affected by seasonal weather
  conditions throughout the United States which may reduce the sales of
  payphones  for outdoor locations during the winter months in colder
  climates.
  
  INTERNATIONAL BUSINESS DEVELOPMENT
  
  Since the Company first entered the international markets in 1991, there
  have been many changes in that market.  The international initiatives
  pursued by the Company bore fruit in fiscal 1997 as the Company's
  international sales increased by 424% over the prior year.
  
  Many countries around the world have moved in the same direction as the
  United States following the breakup of its telecommunications monopoly in
  1984.  Privatization, competition, open foreign investment and new laws
  and regulations have had a major impact on international markets,
  resulting in new players and new opportunities for the various segments of
  the telecommunications market, including public payphones.  Developing
  countries have placed a high priority on expanding telecommunication
  services and payphones are often a significant part of the capital
  expansion.
  
  In order to take advantage of these opportunities, the Company has begun
  the following international initiatives:
  
    -  Employ individuals with experience in the international
       telecommunications market.
  
    -  Continue to develop a set of products and services capable of
       handling the requirements of the international market, such as
       standard and large coins in a variety of currencies and credit card
       and debit card products, including intelligent or smart card
       technology, which are becoming widely used in electronic commerce
       applications.

<PAGE> 10

    -  Develop software and hardware that may allow the Company's products
       to be adapted to the varying requirements of different countries.
    
    -  Select and develop distribution partnerships and strategic
       alliances.
  
  The Company has sold its products to customers in Bolivia, Morocco, Chile,
  Mexico, Belize, Bermuda, Guatemala, Guam, Canada and the Philippines.  The
  Company's products are currently under evaluation in Poland, Egypt, China,
  Ukraine, Saudi Arabia, Korea, Spain, England, Ireland, and other
  countries.
  
  The Company continues its development efforts on technology for new
  applications with wireless networks and smart card technology.  The
  Company has introduced a network based  prepaid card application designed
  to work in conjunction with the Company's international card and coin
  payphone products.
  
  PRODUCT DEVELOPMENT
  
  The Company's research and development programs are currently focused on
  developing new products and product enhancements for the IPP market, the
  regulated telephone company market and international markets and an
  enhanced management system for its products.  During fiscal 1997, the
  Company incurred approximately $2,623,000 in Company sponsored research
  and development costs for payphones, Payphone Network Management systems
  and other products.  Research and development costs were $2,257,000 in
  fiscal 1996 and $1,758,000 in fiscal 1995.
  
  The major development efforts in fiscal 1997 included the release and
  continued modification of the Microsoft Windows-based Payphone Network
  Management systems (PNM Plus and PollQuest) to address large route
  operations, the enhancement of the LEC targeted Olympian 5501 payphone and
  IPP targeted Series 5 payphone.  During fiscal 1997, the Company also
  completed development of and shipped to an international customer the
  OCT9520, a large capacity coin and card payphone capable of handling large
  sized coins.  This product will be used on a world wide basis in those
  countries using coinage larger than that used in the United States.
  
  During fiscal 1998, development efforts will focus on further enhancements
  to many of the Company's current payphones and network management system. 
  In addition programs for the development of international payphones with
  modified cabinets were initiated in fiscal 1996 and are expected to be
  completed in fiscal 1998.  During fiscal 1998, the Company anticipates
  releasing products addressing the regulated telephone company market place
  and the international wireless market place.  These products would provide
  enhanced card and coin handling capabilities required for these markets.

<PAGE> 11

  BACKLOG
  
  The amount of the Company's backlog is subject to fluctuation based on the
  timing of the receipt and completion of orders.  The Company calculates
  its backlog by including only items for which there are purchase orders
  with firm delivery schedules.  At May 31, 1997, the backlog of all
  products on order from the Company was approximately $2,712,000, compared
  with a backlog of approximately $2,544,000 one year prior at May 31, 1996. 
  The current backlog is expected to be filled within approximately ninety
  days.
  
  PATENT AND PROPRIETARY SOFTWARE
  
  The Company has developed, at its expense, the software and engineering
  designs incorporated in its products.  The Company owns registered
  copyrights for its proprietary software and owns a patent on certain
  aspects of its Series 5 products.  This patent relates to its line-powered
  product and covers certain aspects of the power management of the payphone
  and the high voltage circuits utilized in coin collection and return. 
  This patent will expire in 2009.  There can be no assurance that the
  Company's products do not infringe upon valid proprietary rights which may
  be held by others.  See "Legal Proceedings."  Moreover, the Company's
  copyrights may not protect it from unauthorized duplication of its
  payphones or other products which may be marketed without the Company's
  knowledge or consent, although the Company has vigorously and successfully
  to date defended its copyrights and has stopped certain other
  organizations from continuing the unauthorized duplication of the
  Company's payphone software.  However, the copyright registrations would
  not prevent a competitor from independently creating payphones or other
  products which are functionally equivalent to those of the Company.  The
  Company licenses the use of its proprietary software and designs through
  licensing provisions in its standard sales agreement, which provisions are
  designed to prevent duplication and unauthorized use of the Company's
  software.
  
  COMPETITION
  
  The public communications industry is highly competitive.  Prior to 1984,
  the LECs held a monopoly in the pay telephone industry in the United
  States, and still continue to have a dominant share of the public
  communications market.  The Company also competes with firms that
  manufacture and market privately-owned payphones and other products
  similar to the Company's products.  In addition, there are many other

<PAGE> 12

  firms which have the resources and ability to develop and market products
  which could compete with the Company's products.  Many existing
  competitors (including the LECs) and potential competitors have financial,
  management and technical resources substantially greater than those of the
  Company.
  
  The four principal competitors currently marketing privately-owned
  payphones include Protel, TeleServices Group, Nortel and Intellicall.  The
  Company expects possible competition from other competitors and from such
  competing technologies as debit systems and wireless communications.  Some
  telecommunications companies, already established in the telephone
  industry with substantial engineering, manufacturing and capital
  resources, are positioned to enter the public communications market, some
  of which are foreign manufacturers.
  
  LECs compete with private payphone operators by making site owner
  compensation arrangements more attractive for their existing phones thus
  reducing the site owners' incentive to use private pay telephones.  The
  1996 Telecommunications Reform Act prohibits Bell operating companies from
  subsidizing their payphone service directly or indirectly from their
  telephone exchange service operations or their exchange access operations. 
  As a result, the Company believes Bell operating companies will become
  more directly competitive with private payphone operators.  Accordingly,
  LECs may initiate programs to retrofit their payphones to improve
  operational efficiency.  The Company may be  in a position to manufacture
  and sell retrofit kits to LECs and offer enhanced service management
  capabilities with products that are currently in development.
  
  Competition for payphone service also affects payphone manufacturers such
  as the Company.  The payphone industry in general competes with cellular
  or wireless communications and other Personal Communication Services and
  with paging services.  The Company believes that conventional payphones
  compete favorably with Cellular Mobile Radiotelephone Service (CMRS) in
  many respects.  While CMRS will more readily satisfy the demand for in
  transit telecommunications, conventional payphones have significant cost
  advantages.  CMRS costs typically range from $.15 to $.50 per minute for
  local calls which comprise a significant portion of CMRS calls compared to
  the $.25 cost of a local call for long periods from a payphone.  In
  addition, the large installed base of payphones compares to the limited
  but increasing market penetration of cellular phones.
  
  Paging services continue to grow and are competitive with payphones for
  sending messages.  However, display or tone and voice paging systems alert
  the user of the need to return a call which may be via a payphone.
  
  The market for international public communications is highly competitive,
  and numerous competitors are larger, better capitalized and have greater
  experience in marketing their products internationally.  In addition, the
  Company's international marketing efforts are subject to the risks of
  doing business abroad.  Consequently, there can be no assurances that the
  Company's efforts in international markets will be successful.
  
  Although the Company expects to be subject to intense competition in the
  future, the Company believes that its products and services are currently
  competitive with those of other manufacturers in such areas as equipment
  capability and quality, cost and service.  Since the telecommunications
  industry is subject to rapid technological change, the Company will be
  required to develop enhancements, new products and services in the future
  to remain competitive.

<PAGE> 13

  REGULATION
  
  Products and services offered by the Company and operated by its customers
  domestically are subject to varying degrees of regulation at both the
  federal and state levels.  There can be no assurances that changes in such
  regulation, if proposed and adopted, would not have an adverse impact on
  the operations of the Company and its customers.
  
  In June 1984, the Federal Communications Commission ("FCC") decided to
  allow the registration of privately-owned payphones for connection to the
  telephone network, while permitting the states to adopt their own
  regulations governing the installation and operation of such payphones for
  intrastate calls.  To date, 49 states and the District of Columbia have
  authorized the use of privately-owned payphones with various tariff,
  technical and operational requirements and restrictions.  The FCC decision
  and subsequent state regulations opened the market for privately-owned
  payphones which was previously available only to the regulated telephone
  operating companies.
  
  Parts 15 and 68 of the FCC rules govern the technical requirements that
  payphone and other telephone products must meet in order to qualify for
  FCC registration and interconnection to the telephone network.  The
  Company has performed those tests necessary to assure compliance with
  these technical requirements and obtained FCC registration for its various
  model payphones.
  
  The National Electric Code requires that all customer premise equipment
  manufactured after July 1, 1991, be certified by a nationally recognized
  safety laboratory.  All customer premise equipment products manufactured
  by the Company since July 1, 1991 have been approved and listed by ETL
  Testing Laboratories.
  
  Tariffs are established by the states for local and intrastate coin sent-paid 
  calls, and in many instances for Zero-Plus Calls.  Tariffs establish
  the maximum rates which the LECs may charge the public communications
  operator for line connections and calls.  These charges may be flat rated
  or variable rated.
  
  In addition to tariff restrictions, the 49 states and the District of
  Columbia which currently permit privately-owned payphones have adopted a
  variety of regulations which vary from state to state, governing technical
  and operational requirements.  These requirements include the following: 
  dialtone-first capability to allow free calls to operator, emergency,
  information and "800" numbers without a coin deposit; multi-coin
  capability; calculation of time-of-day and weekend discounts; prohibition
  of post-call charges; advisement to callers of additional charges for
  additional time before disconnecting; provisions of certain information
  statements posted on cabinets; provision of local telephone directories;
  mandatory acceptance of incoming calls; reduced charges for local calls
  from certain locations such as hospitals or rest homes; and restrictions
  as to the location and hours of operation of such payphones.

<PAGE> 14
         
  The 1996 Act and the FCC, in its Notice of Proposed Rulemaking on
  Section 276 of the 1996 Act, mandates compensation to payphone providers
  for the large volume of access code calls (such as 10ATT or 1 800-CALLATT)
  and debit card calls and the previously uncompensated interstate and
  intrastate subscriber 800 calls.  This compensation was fixed at
  the flat rate of $45.85 per payphone per month during the period from
  November 1996 until November 1997.  After November 1997, this 
  ("dial-around calls") will change to a fixed charge of $0.35 per dial-around
  calls.  The FCC also recognized there is a need for a national payphone
  compensation rate so that consumers would know the charges to expect when
  they access public payphones.
  
  The FCC had proposed  in 1996 the requirement that interexchange carriers
  (IXCs) offering operator services through payphones and other aggregator
  locations must disclose their rates to callers before the call is
  completed and any charges have been incurred.  The FCC had proposed the
  establishment of benchmarks for charges of operator service providers
  (OSPs), and for any associated aggregator surcharges.  The FCC had also
  proposed a requirement that OSPs that charge, or allow, rates above a
  predetermined benchmark level to disclose orally those rate to callers
  before connecting the call.
  
  Based on a recent informal inquiry made to the FCC by an industry
  association the FCC may be considering an alternative approach where OSPs
  provide rate information in response to a caller's request at the time of
  the call.
  
  The FCC is expected to issue final rules on these issues during the third
  calendar quarter of 1997, although there can be no assurance in that
  regard.
  
  In addition, the Federal government and certain states have, or are in the
  process of adopting, various regulations relating to the control of public
  communications equipment, with restrictions on call pricing, requirements
  to advise the caller of the name of the service provider, requirements
  that the caller be provided a rate quote upon request, and the requirement
  for access to the carrier of the caller's choice.  The Company will
  monitor future changes in federal and state regulations and may be
  required to modify its products to comply with additional technical
  requirements or other factors which could result in the Company's products
  not being in compliance with federal and state regulations.
  
  With respect to the use restrictions and requirements, such as restricted
  locations for payphones, informational statements on cabinets, or the
  provision of access to the carrier of choice, the owner/operators of the
  Company's products have the sole responsibility to determine and comply
  with all applicable use requirements, including the responsibility to
  ensure that the rates charged remain current and do not exceed the maximum
  rates permitted by state or federal regulations for the particular
  location of the product.

<PAGE> 15

  Most states require that owner/operators of private payphones be certified
  by the state's public utility commission and file periodic reports.  As a
  manufacturer and seller of privately-owned payphones, the Company does not
  believe that any states currently require the Company to be certified.
  
  The 1996 Act would eliminate certain restrictions placed on the Bell
  operating companies by the final judgment that broke up the Bell system. 
  Certain elements of this legislation would open up long distance service
  and manufacturing to the Bell operating companies while mandating further
  competition in the local telephone exchange business.  Pursuant to the
  1996 Act, the Bell operating companies are required to end practices that
  treat independently owned payphones differently than those they own, and
  ban cross subsidy of services by prohibiting Bell operating companies from
  subsidizing their payphone service directly or indirectly from their
  telephone exchange service operations or their exchange access operations.
  
  EMPLOYEES
  
  As of June 4, 1997, the Company employed 147 individuals of which 145 are
  full-time employees.  The Company is not a party to any collective
  bargaining agreement and believes that its relations with its employees
  are good.
  
  Item 2.  Properties
  -------------------

  The Company owns two 24,000 square foot buildings located at 6428 Parkland
  Drive, Sarasota, Florida.  These buildings were constructed in 1987 and
  1989, respectively.  The two buildings are owned subject to mortgage
  indebtedness pursuant to a promissory note with a bank.
  
  The Company utilizes one of the 24,000 square foot buildings for its own
  operations.  The other 24,000 square foot facility is leased to an
  electronics manufacturer under a lease agreement which expires on January
  31, 1998.  This agreement provides the Company with average annual lease
  income of $159,000.
  
  In addition, the Company leases a 16,000 square foot facility in the same
  industrial complex for its manufacturing operation under a three year
  lease which commenced in December 1994.  The Company believes that the
  combination of owned and leased space is adequate for its current needs.

<PAGE> 16

  Item 3.  Legal Proceedings
  --------------------------

  Nogah Bethlahmy, et al. plaintiffs v. Randy S. Kuhlmann, et al. defendants.
  ---------------------------------------------------------------------------
  San Diego Superior Court Case No. 691635.
  
  As previously reported, this putative class action was filed in the
  Superior Court of the State of California for the County of San Diego
  alleging that Amtel Communications, Inc. ("Amtel"), a former customer of
  the Company that filed for bankruptcy, conspired with its own officers and
  professionals, and with various telephone suppliers (including the
  Company) to defraud investors in Amtel by operating a Ponzi scheme.  See
  Item 3, Legal Proceedings of Part I of the Company's Form 10-KSB for the
  fiscal year ended March 31, 1996 and Item I, Legal Proceedings of Part II
  of the Company's Form 10-Q for the quarter ended September 30, 1996.
  
  On or about April 11, 1997, the case was remanded to the San Diego
  Superior Court (San Diego Superior Court Case No. 691635).  Plaintiffs
  have filed a motion in state court for leave to file a second amended
  complaint, which is expected to contain the same allegations as the second
  amended complaint that was previously filed by plaintiffs in the
  bankruptcy court.  Plaintiffs' motion for class certification is currently
  scheduled on July 19, 1997.  Discovery is still in its initial stages.  The
  Company disputes liability and intends to defend this matter vigorously,
  although the Company cannot predict the ultimate outcome of this litigation.
  
  William Polillo, et al. v. Elcotel, Inc.
  ----------------------------------------
  (U.S. District Court for the Northern District of Illinois, No. 96C 2275,
  filed April 18, 1996).

  William Polillo, Cecilia Polillo and Richard Reno filed this suit against
  the Company alleging that the Company's pay telephones infringe U.S.
  Patent No. 4,208,549 for a Coin Surveillance Apparatus.  An Amended
  Complaint was filed against the Company on May 10, 1996.  The Company
  filed an Answer and Counterclaim on May 28, 1996 denying infringement and
  asserting a counterclaim for a declaratory judgment of noninfringement and
  invalidity of the patent.  On July 2, 1996, the plaintiffs' responded to
  the Company's counterclaim by denying the claims of noninfringement and
  invalidity.  In May 1997 this case was settled and the case was dismissed
  with prejudice.
  
  While the Company is subject to various other legal proceedings arising in
  the conduct of its business, there are no pending legal proceedings which
  are material to the business of the Company.
  
  Item 4.  Submission of Matters to a Vote of Security Holders.
  -------------------------------------------------------------

  None.



<PAGE> 17
                             PART II
                             -------

Item 5.   Market for Registrant's Common Equity and
-------   Related Stockholder Matters.                       
          -----------------------------------------

From December 1, 1993 to June 12, 1995, the bid and asked quotations of the
Company's Common Stock were reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") under the symbol "ECTL".  As of
June 13, 1995, the Company's Common Stock began being reported by the NASDAQ
National Market System under the same symbol "ECTL".  The following table sets
forth the range of high and low bid quotations or high and low sales prices for
the Company's Common Stock for each of the periods indicated as reported by
NASDAQ or the NASDAQ National Market System.  Bid quotations reflect
interdealer prices, without retail markup, markdown or commission and may not
necessarily represent actual transactions.

Period                                  High          Low
------                                  ----         ----

Quarter Ended:

  June 30, 1995                      $  9-1/2      $  3-3/4

  September 30, 1995                   10-1/4         6-3/4

  December 31, 1995                     9             5-1/2

  March 31, 1996                        8-5/8         5
  
  June 30, 1996                         8             5

  September 30, 1996                    9-1/4         5-1/4

  December 31, 1996                     7-3/4         5-7/8

  March 31, 1997                        8-5/8         6
_______________________________

The approximate number of record holders of shares of the Common Stock of the
Company outstanding as of June 16, 1997, was 380.
 
No cash dividends have been declared or paid on the Company's Common Stock.

<PAGE> 18

Item 6.  Selected Financial Data.
-------  ------------------------

The following selected financial data is qualified in its entirety by
reference to the more detailed consolidated financial statements and
notes thereto included elsewhere in this report.

                                           Year ended March 31,
                                     -----------------------------

                             1997       1996       1995       1994       1993
                            ------     ------     ------     ------     ------
                                   (In thousands, except per share data)

Net Sales                 $ 26,832   $ 21,462   $ 25,090   $ 20,216   $ 10,622

Cost of Sales             $ 15,883   $ 13,238   $ 14,776   $ 12,232   $  6,561

Profit (Loss) before
  Extraordinary Items     $  1,628  ($  1,291)  $  3,524   $  2,041    $    92

Profit (Loss) before
  Extraordinary Items per
  Common and Common
  Common Equivalent Share $    .20  ($    .16)  $    .45   $    .30    $   .02

Net Profit (Loss)         $  1,628  ($  1,291)  $  3,524   $  4,002    $   123

Net Profit (Loss) per 
  Common and Common
  Equivalent Share        $    .20  ($    .16)  $    .45   $    .59    $   .02
       
Weighted Average Number 
  of Common and Common 
  Equivalent Shares
  Outstanding                8,316      7,830      7,847      6,823      5,547

Working Capital
  (Deficiency)            $  7,897   $  6,288   $  5,575   $  4,224   ($ 4,812)

Total Assets              $ 15,944   $ 14,929   $ 16,225   $ 10,234    $ 10,911

Long-term Obligations     $    232   $    432   $    782   $    95     $      -

Shareholders' Equity      $ 12,627   $ 10,558   $ 11,091   $ 6,638     $    337

<PAGE> 19

Item 7.   Management's Discussion and Analysis of
-------   Financial Condition and Results of Operations.
          -----------------------------------------------

CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995                           
-------------------------------------------------------------------------

The statements contained in this Annual Report on Form 10-K which are not
historical facts contain forward looking information with respect to plans,
projections or future performance of the Company, the occurrence of which
involve certain risks and uncertainties that could cause the Company's actual
results to differ materially from those expected by the Company, including the
risk of adverse regulatory action affecting the Company's business or the
business of the Company's customers, competition, the risk of obsolescence of
its products, changes in the international business climate, general economic
conditions, seasonality, changes in industry practices, the outcome of the
Bethlahmy class action lawsuit, and uncertainties detailed in the Company's
filings with the Securities and Exchange Commission.

Results of Operations.
----------------------
(Dollars in thousands)
 
Year ended March 31, 1997, compared to year ended March 31, 1996:

Net sales for the year ended March 31, 1997 ("fiscal 1997"), increased to
$26,832 from $21,462 for the year ended March 31, 1996 ("fiscal 1996"), an
increase of $5,370, or approximately 25%, principally as a result of an
increase in sales of complete payphones and electronic assemblies of
approximately 39% and 21%, respectively, offset by a decrease in miscellaneous
revenues of approximately 8%.  Unit sales of complete payphones increased by
approximately 40% and unit sales of electronic assemblies increased by
approximately 16%. During fiscal 1997, sales to two major customers accounted
for approximately 12% and 12% of net sales, respectively.  During fiscal 1996,
there were no sales to any customer which accounted for 10% of net sales.
Average selling prices of payphones during fiscal 1997 were approximately 1%
lower than in the preceding fiscal year.  Average selling prices of electronic
assemblies were approximately 5% higher than in the preceding fiscal year due
to fewer trade in credits given to customers who upgraded older electronic
assemblies, that they previously purchased from either the Company or other
manufacturers, for the Company's current models as compared with fiscal 1996.
Sales to international customers accounted for 30% of net sales for fiscal 1997
as compared to 7% for fiscal 1996.  This represented a 424% increase in
international sales as compared to fiscal 1996.  Certain sales to Lucent
Technologies, while sold and shipped to Lucent in the United States, are
classified by the Company as international for these purposes since these were
sales of international payphones.  For purposes of determining sales by
geographic region in the Notes to Consolidated Financial Statements, these
sales are classified as United States sales of international payphones because
of their point of delivery.

<PAGE> 20

Cost of sales as a percentage of net sales decreased from 62% to 59% for the
comparative fiscal years principally as a result of increased production and
favorable  manufacturing cost absorption and other favorable variances.

Research and development costs increased by $366, or approximately 16%, from
$2,257 in fiscal 1996 to $2,623 in fiscal 1997 principally due to an increase
in the number of employees engaged in research and development activities
($505) partially offset by a decrease in the use of consultants on certain
development projects ($345).  Selling, general and administrative expenses
decreased by $132, or approximately 2%, to  $6,358 in fiscal 1997 from $6,490
in fiscal 1996 principally as a result of a reduction in the Company's
provision for doubtful accounts due to cash collection or product return of
previously reserved amounts as well as reduced reserves with respect to current
accounts receivable during fiscal 1997, partially offset by an increase in
sales and marketing salaries and commission expense, management incentive
bonuses and legal fees.  Interest income decreased by $92, or approximately
22%, to $324 in fiscal 1997 from $416 in fiscal 1996, principally as a result
of a decrease in the Company's note receivable portfolio.  Interest expense
decreased by $82, or approximately 41%, to $119 in fiscal 1997 from $201 in
fiscal 1996 due to decreased borrowings by the Company under its line of credit
facility with its bank.

The fiscal 1997 tax expense is comprised of $253 of current tax expense and a
deferred tax provision of $623.

During fiscal 1996, one of the Company's customers, to whom the Company had
sold approximately 3,500 payphones during fiscal 1995, filed for protection
under Chapter 11 of the Bankruptcy Code.  On the date of the bankruptcy filing,
the Company was owed approximately $3,200.  In July 1996, the Company and the
debtor reached an agreement in principle with respect to the  treatment of the
Company's claims under the debtors' plan of reorganization.  The agreement in
principle resulted in an allowance of approximately $1,602 against the
Company's receivable from the debtor.  In addition, the Company has incurred
approximately $242 in legal and related expenses in connection with its claim
against the debtor.  The total charge to the Company's financial statements
relating to this matter was $1,844 during fiscal 1996.  During fiscal 1997,
the Company sold the payphones and related equipment which was in the Company's
possession and being warehoused by the Company pursuant to a prior Bankruptcy
Court order.  The amount realized by the Company from this transaction resulted
in a $413 recovery in excess of the amount anticipated during fiscal 1996.
In addition, the Company incurred approximately $82 in legal and related
expenses in connection with this matter during fiscal 1997.  The total
credit to the Company's financial statements for this matter was $331 during
fiscal 1997.

Year ended March 31, 1996, compared to year ended March 31, 1995:

Net sales for the year ended March 31, 1996 ("fiscal 1996"), decreased to
$21,462 from $25,090 for the year ended March 31, 1995 ("fiscal 1995"), a
decrease of $3,628, or approximately 15%, principally as a result of a

<PAGE> 21

decrease in sales of complete payphones and electronic assemblies of
approximately 32% and 1%, respectively, offset by an increase in miscellaneous
revenues of approximately 87%.  Unit sales of complete payphones decreased by
approximately 37% while unit sales of electronic assemblies increased by
approximately 27%.  There were no sales to any customer which accounted for 10%
or more during fiscal 1996.  During fiscal 1995, sales to one major customer
accounted for approximately 13% of net sales.  Average selling prices of
payphones during fiscal 1996 were approximately 8% higher than in the preceding
fiscal year.  Average selling prices of electronic assemblies were
approximately 22% lower than in the preceding fiscal year due to continuation
of a trade in program which began in the prior fiscal year.  The trade in
program, which initially began in conjunction with the North American Numbering
Plan ("NANP"), was continued for competitive reasons to permit customers to
receive a credit for upgrading older electronic assemblies that, either they
previously purchased from the Company or other manufacturers, for the Company's
current models. Sales to international customers accounted for 7% of net sales
for fiscal 1996 as compared to 8% for fiscal 1995.  This represented a 20%
decrease in international sales as compared to fiscal 1995.

Cost of sales as a percentage of net sales increased from 59% to 62% for the
comparative fiscal years principally as a result of decreased production and
decreased manufacturing cost absorption.

Research and development costs increased by $499, or approximately 28%, from
$1,758 in fiscal 1995 to $2,257 in fiscal 1996 principally due to an increase
in the number of employees engaged in research and development activities ($333)
and the increased use of consultants on certain development projects ($176). 
Selling, general and administrative expenses increased by $699, or
approximately 12%, from  $5,791 in fiscal 1995 to $6,490 in fiscal 1996
principally as a result of the full year impact of personnel increases made in
the prior fiscal year in support of the Company's international sales efforts
as well as other personnel increases made within the sales and marketing
functions ($261), contractor labor costs for a specific project ($137), an
increase in the Company's provision for doubtful accounts ($503), one-time
expenses incurred in connection with the Company's listing on the NASDAQ
National Market System and related investor relations costs ($92), offset by
lower sales commissions and elimination of management bonuses due to the
Company's lower sales level and lack of profitability compared to the prior
fiscal year ($277).  Interest income increased by $22, or approximately 6%,
from $394 in fiscal 1995 to $416 in fiscal 1996, principally as a result of a
higher average interest rate the Company received from its note receivable
portfolio.  Interest expense increased by $92, or approximately 84%, from $109
in fiscal 1995 to $201 in fiscal 1996 due to increased borrowings by the
Company against its line of credit facility with its bank.

The fiscal 1996 tax benefit is comprised of $186 of current tax benefit and a
deferred tax benefit or $675.  The tax benefit was generated as a result of the
current year loss.

During fiscal 1996, one of the Company's customers, to whom the Company had
sold approximately 3,500 payphones during fiscal 1995, filed for protection
under Chapter 11 of the Bankruptcy Code.  On the date of the bankruptcy filing,

<PAGE> 22

the Company was owed approximately $3,200.  In July 1996, the Company and the
debtor reached an agreement in principle with respect to the  treatment of the
Company's claims under the debtors' plan of reorganization.  The agreement in
principle resulted in an allowance of approximately $1,602 against the
Company's receivable from the debtor.  In addition, the Company has incurred
approximately $242 in legal and related expenses in connection with its claim
against the debtor.  The total charge to the Company's financial statements
relating to this matter was $1,844 during fiscal 1996.

Effects of Inflation.
---------------------

In general, inflation and changing prices have not had a material impact on the
Company's operations.

Effects of New Accounting Standards
-----------------------------------

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), Earnings per share.  The
objective of SFAS 128 is to simplify the computation of earnings per share and
to make the U.S. standard for computing earnings per share more compatible with
the earnings per share standards of other countries.  This statement will be
effective for financial statements for both interim and annual periods ending
after December 15, 1997 and is required to be retroactively applied to all
periods presented.  It is anticipated that SFAS 128 will not have a significant
impact on the Company's earnings per share in the periods presented.

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 129 ("SFAS 129"), Disclosure of Information
about Capital Structure.  The objective of SFAS 129 is to establish standards
for disclosing information about an entity's capital structure.  The statement
is effective for financial statements for periods ending after
December 15, 1997.  It is anticipated that SFAS 129 will not have a
significant impact on the Company's disclosures of information about capital
structure.

Liquidity and Capital Resources.
--------------------------------
(Dollars in thousands)

The Company recorded an increase in cash of $777 for fiscal 1997 compared to a
decrease in cash of $134 for fiscal 1996.  During fiscal 1997, $2,813 of cash
was provided by operations compared to $108 used by operations during fiscal
1996.  This change resulted principally from a net operating profit for fiscal
1997 as compared with a net operating loss in fiscal 1996.  During fiscal 1997,
net cash of $477 was used in investing activities compared to $253 used during
fiscal 1996.  During both years, investing activities principally represented
additions to property, plant and equipment.  During fiscal 1997, net cash of
$1,559 was used in financing activities consisting principally of payments
against net long and short term borrowings ($1,776) offset by proceeds from
employee and director exercises of stock options ($217), compared to $227
provided by financing activities in fiscal 1996, which principally represented
long term borrowings and proceeds from the exercise of employee and director
stock options offset by payments against long and short term borrowings.
         
<PAGE> 23

Current assets increased by $755, or approximately 7%, from $10,227 at
March 31, 1996 to $10,982 at March 31, 1997, predominantly from a decrease in
the Company's deferred tax asset of $640, an increase in accounts  receivable
of $1,735 and cash of $777 due to the Company's increased sales volume,
partially offset by a decrease in the Company's short term notes receivable of
$920 and a decrease in refundable income taxes of $412.  Long term notes
receivable increased by $65, or approximately 10%, to $711 at March 31, 1997
from $646 at March 31, 1996, predominantly from the Company's increased sales
volume.  The long term portion of the Company's deferred tax asset increased
by $17, or approximately 2%, from $782 at March 31, 1996 to $799 at
March 31, 1997.  Current liabilities decreased by $854, or approximately 22%,
from $3,939 at March 31, 1996 to $3,085 at March 31, 1997, predominantly from
an increase in accounts payable and accrued expenses of $722 offset by a
decrease in short term borrowings under the Company's line of credit with its
bank of $965 and a decrease in the current portion of long-term debt of $611.
Long-term debt decreased from $432 at March 31, 1996 to $232 at March 31, 1997
due predominantly to payments made against the Company's mortgage note with its
lender.  Common Stock and Paid-In Capital increased by $441, or approximately
4%, from $10,801 at March 31, 1996 to $11,242 at March 31, 1997 due primarily
to exercise of stock options by employees and directors of the Company and
compensation costs for stock options granted to non-employee directors.

Since August 31, 1994 the Company has had a $2,000 working capital line of
credit collateralized by the Company's accounts receivable, notes receivable
and inventories.  Interest on amounts borrowed on the line of credit is at
the bank's floating 30 day libor rate plus 2.75%.  The Company borrows against
and repays the line of credit throughout the year depending upon its working
capital needs and cash generated from operations, with the outstanding amount
under the line of credit during fiscal 1997 ranging from zero to $1,270.  The
Company believes its lender will renew the line of credit when it matures on
August 31, 1997.

In addition, on August 31, 1995, the Company borrowed $1,000 from the same
lender for an eighteen month term with interest at the bank's floating 30 day
libor rate plus 2.75%.  That note was paid in full in February 1997.  The
Company also refinanced its mortgage note with its lender on August 31, 1995.
The Company's former mortgage note, in the original principal amount of $1,000,
was for a 15 year term with a five year balloon with an interest rate of prime
plus one-half percent.  The Company had been making its monthly principal
payments based upon a five year amortization schedule.  By refinancing the
note, but not changing the maturity date of May 23, 1999, the Company was able
to lower its interest rate to a fixed rate of 8.50% from the floating rate of
9.25% as of the closing date for the remainder of the original five year term.

The Company believes that its current cash and temporary investments and its
anticipated cash flow from operations will be sufficient to fund its expected
working capital and capital expenditure requirements and its short and long
term note obligations through March 31, 1998.

<PAGE> 24

Item 8.   Financial Statements and Supplementary Data.
-------   --------------------------------------------

          Independent Auditors' Report, page F-2. 

          Consolidated Balance Sheets as of March 31, 1997 and 1996, pages F-3
          and F-4.

          Consolidated Statements of Operations for the years ended March 31,
          1997, 1996, and 1995, page F-5.

          Consolidated Statements of Shareholders' Equity for the years ended
          March 31, 1997, 1996, and 1995, page F-6.

          Consolidated Statements of Cash Flows for the years ended March 31,
          1997, 1996, and 1995, pages F-7 and F-8.

          Notes to Consolidated Financial Statements, pages F-9 through F-24.

Item 9.   Changes in and Disagreements with Accountants on Accounting and
-------   Financial Disclosure.                                              
          ---------------------------------------------------------------

          None.





<PAGE> 25
                             PART III
                             --------

Item 10.  Directors and Executive Officers of the Registrant.
--------  ---------------------------------------------------

The following table sets forth the names and ages of all directors
and executive officers of the Company, as well as positions and
offices within the Company.

     Name                     Age       Position                  
     ---------------------    ---       ---------------------------------       

     C. Shelton James          57       Chief Executive Officer and 
                                        Chairman of the Board

     Tracey L. Gray            65       President, Chief Operating Officer     
                                        and Director

     Dwight Jasmann            61       Director

     Charles H. Moore          67       Director

     Thomas E. Patton          56       Director

     T. Raymond Suplee         50       Director

     Thomas R. Wiltse          73       Director

     Ronald M. Tobin           54       Vice President, Finance
                                        Chief Financial Officer, Secretary
                                             and Treasurer

     Hugh H. Durden            49       Vice President, Domestic Sales

     Eduardo Gandarilla        47       Vice President, International Sales
                                             and Marketing

     Frederick O. Hawkes       51       Vice President, Marketing and
                                             Business Development

     Kenneth W. Noack          59       Vice President, Operations

     Henry W. Swanson          60       Vice President, Engineering
                                             and Development
                                        
     __________________________

<PAGE> 26

Mr. James has served as Chief Executive Officer of the Company
since May 1991 and has been a director of the Company since
December 1990.  Mr. James is currently an investor in and business
advisor to a number of companies.  While he has devoted a
substantial amount of time to the Company since May 1991, he has
also served as Executive Vice President of Fundamental Management
Corporation, an investment management company, since April 1990,
and was appointed President of that company in April 1993.  He is
a member of the boards of Cyberguard Corporation, Concurrent
Computer Corporation, NAI Technologies, Fundamental Management
Corporation, CSPI and SK Technologies, Inc.  From 1980 to 1989, Mr.
James had been Executive Vice President of Gould, Inc., a
diversified electronics company, and President of Gould's Computer
Systems Division.

Mr. Gray has served as President and Chief Operating Officer of the
Company since July 1991 and has been a director of the Company
since August 1991.  From June 1986 until joining the Company, Mr.
Gray had been a Vice President of the Government Systems Division,
Network Systems Division and Federal Systems Division,
respectively, of Sprint in Washington, DC.  Prior to that, Mr. Gray
served in numerous assignments with AT&T in corporate staff
functions and retired as Vice President, Government Systems in
1985.  He served as Chief Executive Officer and a member of the
board of Access Engineering Corporation from 1985 to 1986.  Mr.
Gray has served in various positions with industry professional
associations.

Mr. Jasmann has been a director of the Company since December 1993. 
Since August 1996 Mr. Jasmann has been President and General
Manager for COMSAT International Ventures in Bethesda, Maryland, a
business unit of COMSAT Corporation that manages telecommunications
companies in thirteen overseas markets serving the needs of
national and multinational operators for digital network solutions. 
From January 1995 to July 1996, Mr. Jasmann had been Vice President
of Human Resources for AirTouch Communications in San Francisco, a
domestic and international operator of wireless services.  From
August 1992 to December 1994, he was an international
telecommunications advisor for various U.S. and foreign
telecommunications operators including COMSAT Corporation and Fax
International, Inc.  From February 1959 to May 1992, Mr. Jasmann
held various positions with AT&T, most recently as President and
Managing Director of AT&T Communications Pacific based in Hong
Kong.  He previously served on the boards of the Pacific
Telecommunications Council in Hawaii, the Information Communication
Institute of Singapore and Philcom, a Philippines telephone
company.  He currently serves as chairman of the board of COMSAT
Argentina and as a director of both COMSAT Max in India and COMSAT
Brazil.

Mr. Moore has been a director of the Company since December 1993. 
Mr. Moore has been Director of Athletics for Cornell University
since November 1994.  From November 1992 to October 1994 Mr. Moore
was  Vice Chairman of Advisory Capital Partners, Inc., an
investment advisory firm.  From July 1988 to October 1992, Mr.

<PAGE> 27

Moore served as President and Chief Executive Officer of Ransburg
Corporation, a producer of industrial coating systems and
equipment, and from August 1991 to October 1992 as Executive Vice
President of Illinois Tool Works, Inc., a multinational
manufacturer of highly engineered components and systems. Mr. Moore
is currently a director of The Turner Corporation and is Chairman
of the Audit Committee of the United States Olympic Committee.

Mr. Patton has been a director of the Company since July 1989.  Mr.
Patton has been a partner in the Washington, D.C. law firm of
Tighe, Patton, Tabackman & Babbin, engaged in civil and criminal
business litigation, securities law enforcement matters, corporate
finance and corporate compliance, since August 1994.  From 1979
until July 1994, Mr. Patton was a partner in the Washington, D.C.
law office of Schnader, Harrison, Segal & Lewis, engaged in civil
and criminal securities litigation and general business litigation. 
Mr. Patton also serves on the board of directors of Infomation
Exchange, Inc., a financial services marketing database company.

Mr. Suplee has been a director of the Company since September 1986. 
Since 1982, Mr. Suplee has been the Senior Partner and President of
Suplee & Shea, P.A., a certified public accounting firm located in
Sarasota, Florida.  Mr. Suplee is currently a director of First of
America Bank (Florida) and serves on its audit committee, and is
also a director and treasurer of Plymouth Harbor adult retirement
facility.  He formerly was a director of Presidential Bank.  Mr.
Suplee serves as a discussion leader for the Florida Institute of
Certified Public Accountants.

Mr. Wiltse has been a director of the Company since July 1990. 
Since 1985 Mr. Wiltse has been active as a private investor.  For
more than thirty years, until his retirement in 1985, Mr. Wiltse
served in a variety of managerial and executive capacities with
General Motors Corporation's worldwide foundry operations.

Mr. Tobin has served as Vice President, Chief Financial Officer,
Secretary and Treasurer of the Company since July 1992.  Prior to
joining the Company he held various financial positions with
SmithKline Beecham Corporation in Philadelphia since September
1970, and most recently had been Corporate Controller of SmithKline
Beecham Clinical Laboratories in King of Prussia, PA since February
1982.

Mr. Durden rejoined the Company in June 1991 as Vice President of
Domestic Sales after having previously served as district sales
manager for the Company from March 1987 until August 1989.  From
August 1989 until rejoining the Company, Mr. Durden founded and
served as Chief Executive Officer and President of two privately-held
telecommunications companies.  From November 1984 until
February 1987, Mr. Durden was President of Communications Central,
Inc., a privately-held operator of payphones.

Mr. Gandarilla has served as Vice President of International Sales
and Marketing since  October 1996, having joined the Company in
April 1996.  From June 1995 until April 1996, he was an
international marketing consultant for Compression Laboratories,
Inc., a company which manufactures video conferencing equipment. 

<PAGE> 28

From July 1993 until June 1995, Mr. Gandarilla was managing
director of the business communication systems division of AT&T,
based in Mexico.  From 1990 until July 1993, he was a managing
director for Gestetner, a distributor of office equipment, also
located in Mexico.  His previous employment included managerial
positions with various computer system companies located in Latin
America and Paris.

Mr. Hawkes has served as Vice President of Marketing and Business
Development since December 1996.  Prior to that he served as Vice
President of Engineering and Development since October 1993 when he
rejoined the Company, having previously served in the same capacity
from August 1991 to April 1992.  From April 1992 until October
1993, Mr. Hawkes was a consultant to Harris Corporation and from
September 1989 until May 1991, he was a director of a product
division of Harris.

Mr. Noack has served as Vice President of Operations since January
1993, having joined the Company in July 1992 as Director of
Operations.  Prior to joining the Company he was with AT&T Paradyne
Corporation in Largo, Florida since 1973, and most recently was
Vice President and Director of Operations Planning and Materials.

Mr. Swanson has served as Vice President of Engineering and
Development since December 1996.  Prior to joining the Company, he
was a consultant for Texas Microsystems, Inc., a computer hardware
manufacturer, since March 1996.  From April 1994 until November
1995, Mr. Swanson was Vice President of Engineering for Arrowsmith
Technologies, a computer systems developer.  From 1989 until April
1994 he was Director of PC Systems Development for Dell Computer
Corporation, also in Austin.  His previous employment included
engineering management positions with several computer hardware and
software companies.

Section 16 Compliance
----------------------

Based solely upon a review of certain reports required to be filed
by the Company's current or former directors and officers and
beneficial owners of more than 10 percent of the outstanding Common
Stock pursuant to Section 16(a) of the Securities Exchange Act of
1934, the following person failed to file, on a timely basis,
reports so required to be filed during the fiscal year ended
March 31, 1997.

                                                                Number of
                                                               Transactions
                                                 Number of   Not Reported on a
  Name                  Title                  Late Reports     Timely Basis 
  --------------    -----------------------    ------------  -----------------

  Tracey L. Gray    President,                      1                 1
                    Chief Operating Officer
                    and Director

  __________________

<PAGE> 29

Item 11.  Executive Compensation
--------  ----------------------
             COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON
             -------------------------------------------------
                           EXECUTIVE COMPENSATION
                           ----------------------

This report, prepared by the Company's Compensation and Stock
Option Committee (the "Compensation Committee"), reflects executive
compensation policy and philosophy applicable to fiscal year 1997. 
All members of the Compensation Committee are non-employee
directors.

The Company's executive compensation plans have been structured to
attract, retain and incentivize talented executives capable of
executing the strategies and plans essential to a fast growth,
technology-based company in the traditional and emerging
competitive telecommunications markets.  The policies and plans are
designed to ensure individual executives receive compensation in
direct relationship to their contribution to key corporate
financial and strategic goals that are focused on short term and
long term business success while increasing shareholder values. 
The plans are designed to be equitable and to recognize the balance
between short term operating performance and stock performance.

For fiscal year 1997, the Compensation Committee adopted an
incentive compensation bonus plan for the senior executive
officers:  C. Shelton James, CEO and Tracey L. Gray, President/COO,
related to overall corporate financial performance.  Discretionary
bonuses up to 50% of base salary would be paid based on the
Company's performance as measured against key financial factors,
revenues, operating profits and increasing profitability.  The
Compensation Committee determined the appropriate level of bonus
based on overall consideration of the Company's performance for the
fiscal year.  The Compensation Committee awarded a $33,930 bonus to
Mr. James and a $60,450 bonus to Mr. Gray.

For fiscal year 1997, the Compensation Committee adopted a
discretionary incentive compensation bonus plan for corporate
officers other than Mr. James and Mr. Gray.  Maximum bonus levels
of 20% to 25% of base salary would be paid based on the Company
achieving operating performance goals established for revenues,
gross margins, operating profits and personal objectives related to
each officer's area of responsibility.  Recommendations regarding
the bonus payment to each officer were presented by Mr. Gray once
final results were available.  No bonus is payable under the plan
unless the Company reports profits.  All bonuses awarded under the
plan are paid out in equal amounts over four years.  The corporate
performance goals and the personal objectives of each officer are
approved at the beginning of each fiscal year following the fiscal
year business plan approval.

In October of 1996, the Compensation Committee authorized
adjustments in all corporate officers' base compensation.  This
adjustment represented the first increase in officer base
compensation since July of 1995.  The adjustments represented a

<PAGE> 30

combination of annual salary review adjustments as well as
structural adjustments to address industry and competitive issues
faced by the Company as it attempts to attract a more talented and
experienced executive team.  The Committee was briefed on
comparable officer compensation in the industry from a variety of
salary survey reports and competitors' officer compensation
structure and also considered data provided by Towers Perrin which
had been commissioned by the Committee to advise on compensation
issues.

Mr. James and Mr. Gray's base compensation was adjusted from
$80,000 to $87,000 and from $141,000 to $155,000, respectively, at
the recommendation of the Compensation Committee effective
October 1, 1996.

The Compensation Committee recognizes the merits and value of stock
ownership by the Company's executives as a basis for retention and
aligning the executive's interests with the stockholders of the
Company.  The use of stock option grants has become a key element
of the equity based compensation plans designed to increase the
equity interest of the Company's executives and combined with
performance based incentive compensation ensures a balanced
perspective focused on these two objectives.

The Committee also recognizes that in time of general economic
distress, it may not be economically practical to maintain total
compensation, particularly for senior managers, within the targeted
ranges.

To ensure Executive Compensation is appropriately aligned with
performance and the financial interest of stockholders, and that
senior managers share with those associates subject to layoff and
shorter work weeks the financial impact of difficult economic
conditions, it has been the practice of the Committee to recommend
salary freezes or temporary salary reduction for senior managers
during periods of general economic distress and poor corporate
performance.

                                             Respectfully submitted,

                                             Thomas R. Wiltse, Chairman
                                             
                                             Dwight Jasmann

                                             Charles H. Moore

                                             T. Raymond Suplee




<PAGE> 31


                         SUMMARY COMPENSATION TABLE
                         ---------------------------
<TABLE>

The following table sets forth certain information covering the
compensation paid or accrued by the Company during the fiscal years
indicated to its Chief Executive Officer, to each of its four most
highly compensated executive officers, other than the Chief
Executive Officer, whose salary and bonus exceeded $100,000 during
the fiscal year ended March 31, 1997 and who were serving as
executive officers as of March 31, 1997 and to one additional
executive officer who would have so qualified if he had been an
executive officer on March 31, 1997 ("named executive officers"):

                                                                                           Long Term
<CAPTION>                                                                                Compensation
                                                                                            Awards  
					   -----------------------------------------         ------
	    (a)                (b)            (c)             (d)            (e)              (g)              (i)
			      Fiscal                                        Other            Number
			       Year                                        Annual        of Securities  
			      Ended                                     Compensation       Underlying       All Other
Name and Principal Position  March 31,     Salary ($)       Bonus ($)        ($)          Options <F1>    Compensation  ($)
---------------------------  ---------     ----------       ---------   ------------     -------------    -----------------

<S>                            <C>           <C>             <C>        <C>                  <C>             <C>
C. Shelton James               1997          $83,338         $33,930                              0          $2,030 <F2>
Chairman of the Board and      1996           78,654               0                         25,000           1,838 <F2>
Chief Executive Officer        1995           73,004          35,450                         40,000           1,555 <F2>

Tracey L. Gray                 1997          148,928          60,450                              0           3,656 <F2>
President and                  1996          138,039               0                         25,000           3,463 <F2>
Chief Operating Officer        1995          127,461          60,450                         40,000           2,738 <F2>

Ronald M. Tobin                1997          100,063          17,640                              0           2,182 <F2>
Vice President,                1996           92,846               0                          9,000           2,146 <F2>
Chief Financial Officer        1995           85,318          14,805                         12,000           1,651 <F2>
Secretary and Treasurer

Alvaro R. Quiros <F3>          1997          123,160               0                              0           3,253 <F2>
Executive Vice President       1996          104,000               0                          7,000           2,761 <F2>
                               1995          102,295               0                         10,000           2,404 <F2>

Hugh H. Durden                 1997          148,452           9,525                              0           2,869 <F2>
Vice President                 1996          184,876               0                          7,500           3,173 <F2>
                               1995          201,859           8,100                         10,000           3,369 <F2>

Eduardo Gandarilla <F4>        1997          162,123          12,000    $44,617 <F5>         50,000           1,762 <F2>
Vice President                 1996                0               0                              0               
                               1995                0               0                              0

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

<FN>

<F1>   Represents options granted under the Company's 1991 Stock Option
       Plan.  No options were granted during the fiscal year ended March
       31, 1997, except for Mr. Gandarilla who received options upon
       joining the Company.

<F2>   Includes taxable portion of Company paid Group Term Life Insurance
       and the Company's matching contribution to the 401(k) savings plan
       (see Note P to the Company's financial statements).  Such Group Term
       Life Insurance for Messrs. James, Gray, Tobin, Quiros, Durden and
       Gandarilla, respectively, for Fiscal 1997 is $450, $702, $288, $702,
       $174 and $174, for Fiscal 1996 is $450, $702, $288, $702 and $174
       and for Fiscal 1995 is $450, $702, $288, $702 and $174.  401(k)
       savings plan matching contributions for Messrs. James, Gray, Tobin,
       Quiros, Durden and Gandarilla, respectively, for Fiscal 1997 are
       $1,580, $2,954, $1,894, $2,551, $2,695 and $1,588,  Fiscal 1996 are
       $1,388, $2,761, $1,858, $2,059 and $2,999 and for Fiscal 1995 are
       $1,105, $2,036, $1,363, $1,702 and $3,195.

<PAGE> 32

<F3>   Mr. Quiros retired effective December 31, 1996.  The Company
       continued to pay Mr. Quiros' regular salary through June 30, 1997. 
       $25,846 of his 1997 salary was paid to him pursuant to such
       arrangement during the quarter ended March 31, 1997.

<F4>  Mr. Gandarilla joined the Company on April 1, 1996 and was appointed
      Vice President on October 15, 1996.

<F5>  $39,217 of this amount represents reimbursement of relocation expenses
      to Mr. Gandarilla during the fiscal year ended March 31, 1997.

</FN>
</TABLE>

Stock Option Grants
-------------------

The following table sets forth information with respect to stock option
grants to named executive officers who received options during the fiscal
year ended March 31, 1997.



                Option Grants in Last Fiscal Year                
                ---------------------------------

                                                                 Potential
                                                            Realizable Value at
                                                              Assumed Annual
                                                            Rates of Stock Price
                                                               Appreciation
                    Individual Grants                        for Option Term
                                                                       
-------------------------------------------------------------------------------
                           
     (a)               (b)     (c)          (d)      (e)      (f)      (g)
     
               
                              % of
                              Total                         
                              Options
                              Granted to  Exercise
                     Options  Employees   or Base               
                     Granted  in Fiscal   Price   Expiration
     Name            (#) (1)  Year       ($/Sh)   Date        5% ($)    10% ($)
-------------------------------------------------------------------------------

Eduardo Gandarilla   50,000    51.6%    $5.2500   4/1/01     $72,524   $160,259
     
     
     (1)       Options granted upon joining the Company which become
               exercisable one fourth each year, cumulatively, beginning
               on April 1, 1997, and expire on April 1, 2001.  No other
               options were granted during the fiscal year ended
               March 31, 1997 to the named executive officers.




<PAGE> 33

Stock Option Exercises and Holdings
------------------------------------

The following table sets forth the number of exercisable and
unexercisable options as of March 31, 1997 and the value of such
options for the named executive officers.

         AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
             AND FISCAL YEAR END OPTIONS VALUE TABLE

   (a)               (b)             (c)          (d)            (e)
                                                Number of
                                                Securities     Value of
                                                Underlying     Unexercised
                                                Unexercised    In-the-Money
                                                Options at     Options at
                                                FY-End (#)     FY-End ($)

           
                  
                Shares Acquired      Value      Exercisable/   Exercisable/
 Name           on Exercise (#)   Realized ($)  Unexercisable  Unexercisable
-------------------------------------------------------------------------------

C. Shelton James        74,227       $372,542   6,250/43,750   $781/$81,105

Tracey L. Gray          35,000       $183,163   6,250/43,750   $781/$81,105

Ronald M. Tobin          -               -      10,550/14,750  $27,511/$26,723

Alvaro R. Quiros         -               -      17,000/0       $29,000/$0

Hugh H. Durden           -               -      6,875/13,125   $18,521/$26,021

Eduardo Gandarilla       -               -      0/50,000       $0/$53,125


Directors' Compensation
-----------------------

Directors who are not employees of the Company receive an annual
retainer fee of $5,000 per year plus $1,500 for each Board meeting
attended, and $500 for each committee meeting attended.  Directors
are also reimbursed for expenses in attending Board and Board
committee meetings.

During the fiscal year ended March 31, 1997, options were granted
to the Company's non-employee directors (Messrs. Jasmann, Moore,
Patton, Suplee and Wiltse), pursuant to the Company's Directors'
Stock Option Plan, in the amount of 2,000 shares, 3,000 shares,
2,000 shares, 4,000 shares and 6,000 shares, respectively, at
$6.3125 per share.  These options are fully exercisable on March
31, 1998 and expire on March 31, 2002.

<PAGE> 34

                     STOCK PERFORMANCE CHART
                     -----------------------           
                                
The following chart compares the yearly percentage change in
cumulative total stockholder return on the Company's common stock
during the five years ended March 31, 1997, with the cumulative
total return of (i) Standard & Poors 500 Composite Index, (ii) the
Standard & Poors Telephone Index and (iii) the Standard & Poors
Technology Index.  The comparison assumes $100 was invested on
March 31, 1992 in the Company's common stock and in each of the
other indices and assumes reinvestment of dividends.  The Company
paid no dividends during the five year period.

[The following table was representd by a line graph in the printed material]


                      3/31/92   3/31/93   3/31/94   3/31/95   3/31/96   3/31/97
                      -------   -------   -------   -------   -------   -------
Elcotel, Inc.            $100      $338      $938    $1,015    $1,292    $1,538
S&P 500 Index             100       115       117       135       177       213
S&P Telephone Index       100       136       133       147       186       201
S&P Technology Index      100       147       189       243       334       493

<PAGE> 35

Item 12.   Security Ownership of Certain Beneficial Owners and Management
--------   --------------------------------------------------------------

The following table sets forth, at June 9, 1997, the number and
percentage of shares of Common Stock which, according to
information supplied to the Company, are beneficially owned by: (i)
each person who is the beneficial owner of more than 5% of the
Common Stock; (ii) each of the directors, and named executive
officers of the Company individually; and (iii) all current
directors and executive officers of the Company as a group.  Under
rules adopted by the Securities and Exchange Commission, a person
is deemed to be a beneficial owner of Common Stock with respect to
which he has or shares voting power (which includes the power to
vote or to direct the voting of the security), or investment power
(which includes the power to dispose of, or to direct the
disposition of, the security).  A person is also deemed to be the
beneficial owner of shares with respect to which he could obtain
voting or investment power within 60 days of June 9, 1997, such as
upon the exercise of options or warrants.

                                           Number of
   Name and Address                         Shares  (1)       Percentage
-----------------------------------       -------------       ----------

C. Shelton James. . . . . . . . . . . .   1,566,663 (2)           19.1%
6428 Parkland Drive
Sarasota, Florida 34243

Fundamental Management Corporation. . .   1,439,223               17.6%
4000 Hollywood Boulevard
Suite 610N
Hollywood, Florida 33021

Alvaro R. Quiros. . . . . . . . . . . .     513,577 (3)            6.3%
6428 Parkland Drive
Sarasota, Florida 34243

Thomas R. Wiltse. . . . . . . . . . . .     406,000 (4)            4.9%
6428 Parkland Drive
Sarasota, Florida 34243

Tracey L. Gray. . . . . . . . . . . . .     150,284 (5)            1.8%
6428 Parkland Drive
Sarasota, Florida 34243

T. Raymond Suplee . . . . . . . . . .        32,300 (6)            0.4%
6428 Parkland Drive
Sarasota, Florida 34243

<PAGE> 36

Thomas E. Patton. . . . . . . . . . .        11,000 (7)            0.1%
6428 Parkland Drive
Sarasota, Florida 34243

Dwight Jasmann. . . . . . . . . . . .         9,890 (8)            0.1%
6428 Parkland Drive
Sarasota, Florida 34243

Charles H. Moore. . . . . . . . . . .        14,100 (9)            0.2%
6428 Parkland Drive
Sarasota, Florida 34243

Ronald M. Tobin . . . . . . . . . . .        52,700 (10)           0.6%
6428 Parkland Drive
Sarasota, Florida 34243

Eduardo Gandarilla. . . . . . . . . .        12,500 (11)           0.2%
6428 Parkland Drive
Sarasota, Florida 34243

Hugh H. Durden. . . . . . . . . . . .        11,875 (12)           0.1%
6428 Parkland Drive
Sarasota, Florida 34243


All directors and executive officers as
  a  group (13 persons) . . . . . . .     2,331,374 (13)          27.8%

 _______________________________________


          (1)  Unless otherwise indicated, each shareholder has sole voting
               and investment power with respect to all listed shares.     

          (2)  Includes 1,439,223 shares held by Fundamental Management
               Corporation, as to which shares Mr. James disclaims
               beneficial ownership, and 21,250 shares which may be issued
               upon exercise of stock options within 60 days.
             
          (3)  Includes 17,000 shares which may be issued upon the exercise
               of stock options within 60 days.
             
          (4)  Includes 30,000 shares which may be issued upon the exercise
               of stock options within 60 days.

          (5)  Includes 21,250 shares which may be issued upon exercise of
               stock options within 60 days.

          (6)  Includes 7,000 shares held by a revocable trust in which Mr.
               Suplee has a pecuniary interest and of which he is a co-trustee.
               Includes 23,000 shares which may be issued upon the exercise 
               of stock options within 60 days.

<PAGE> 37


          (7)  Includes 500 shares held jointly with Mr. Patton's wife. 
               Includes 10,000 shares which may be issued upon the exercise
               of stock options within 60 days.
             
          (8)  Includes 7,000 shares which may be issued upon the exercise
               of stock options within 60 days.
             
          (9)  Includes 75 shares held by Mr. Moore's wife and 25 shares
               held by Mr. Moore's daughter.  Includes 13,000 shares which
               may be issued upon the exercise of stock options within 60
               days.
               
         (10)  Includes 150 shares held by Mr. Tobin's son.  Includes 15,550
               shares which may be issued upon the exercise of stock options
               within 60 days.
             
         (11)  Includes 12,500 shares which may be issued upon the exercise
               of stock options within 60 days.
             
         (12)  Includes 11,875 shares which may be issued upon the exercise
               of stock options within 60 days.

         (13)  Includes a total of 1,439,223 shares held by Fundamental
               Management Corporation and shares held by family members as
               to which shares the respective officers and directors
               disclaim beneficial ownership.  Also includes 203,947 shares
               which may be issued upon exercise of stock options within 60
               days.

Item 13.  Certain Relationships and Related Transactions.
--------  -----------------------------------------------

As of March 31, 1997, the Company is owed approximately $325,000 from
Aditel, a Mexican corporation ("Aditel"), arising out of loans and
sales of payphones to Aditel.  This amount is represented by a
promissory note which matures on September 30, 1997, payment of which
is secured by a security interest in certain payphones and operating
agreements of Aditel.  Mr. Alvaro R. Quiros, a holder of
approximately 6.3 percent of the Company's Common Stock as of June
9, 1997, is the owner of approximately 25 percent of the equity of
Aditel.

<PAGE> 38

                                    PART IV
                                    -------

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
--------  -----------------------------------------------------------------

            (a)     (1)  Financial Statements:

                    The Financial Statements are listed in the index to
                    Consolidated Financial Statements on page F-1.

                    (2) Financial Statement Schedules:

                    All supporting schedules have been omitted because they
                    are not required or the information required to be set
                    forth therein is included in the financial statements or
                    the notes thereto.

                    (3) Exhibits:

                    The Exhibits are listed in the Index to Exhibits on
                    pages E-1 through E-3.

            (b)     Reports on Form 8-K.
                    --------------------

                    No reports on Form 8-K were filed during the quarter
                    ended March 31, 1997.







<PAGE> 39

                            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.
			      
					ELCOTEL, INC.

Dated:  June 30, 1997                   By:   /s/ Ronald M. Tobin
					-------------------------
					Ronald M. Tobin
					Chief Financial 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 and on the dates indicated.

Signature                     Title

/s/ C. Shelton James           Chairman of the Board, Chief Executive Officer
-------------------------      (Principal Executive Officer and Director)
C. Shelton James                   
Date:  June 30, 1997

/s/ Tracey L. Gray             President, Chief Operating Officer and Director
-------------------------
Tracey L. Gray                
Date:  June 30, 1997

/s/ Dwight Jasmann             Director
-------------------------
Dwight Jasmann           
Date:  June 30, 1997

/s/ Charles H. Moore           Director
-------------------------
Charles H. Moore         
Date:  June 30, 1997

/s/ Thomas E. Patton           Director
-------------------------
Thomas E. Patton              
Date:  June 30, 1997

/s/ T. Raymond Suplee          Director
-------------------------
T. Raymond Suplee             
Date:  June 30, 1997

/s/ Thomas R. Wiltse           Director
-------------------------
Thomas R. Wiltse         
Date:  June 30, 1997

/s/ Ronald M. Tobin            Vice President and Chief Financial Officer
-------------------------      (Principal Financial and Accounting Officer)     
Ronald M. Tobin                    
Date:  June 30, 1997
         
         
<PAGE> 40
                                ELCOTEL, INC.
                                -------------

                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                 ------------------------------------------

Independent Auditors' Report..............................................F-2

Consolidated Financial Statement

        Consolidated Balance Sheets.......................................F-3

        Consolidated Statements of Operations.............................F-5

        Consolidated Statements of Shareholders' Equity...................F-6

        Consoldiated Statements of Cash Flows.............................F-7

        Notes to Consolidated Financial Statements........................F-9










<PAGE> F-1
			 
			 [LETTERHEAD OF DELOITTE & TOUCHE LLP]

INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
Elcotel, Inc.
Sarasota, Florida

We have audited the accompanying consolidated balance sheets of Elcotel, Inc. 
and subsidiaries (the "Company") as of March 31, 1997 and 1996, and the 
related consolidated statements of operations, shareholders' equity and cash 
flows for each of the three years in the period ended March 31, 1997.  These 
consolidated financial statements are the responsibility of the Company's 
management.  Our responsibility is to express an opinion on these consolidated 
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 audit 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, such consolidated financial statements present fairly, in 
all material respects, the financial position of Elcotel, Inc. and 
subsidiaries as of March 31, 1997 and 1996, and the results of their 
operations and their cash flows for each of the three years in the period 
ended March 31, 1997 in conformity with generally accepted accounting 
principles.

As discussed in Note J to the consolidated financial statements, in 1997 the
Company changed its method of computing compensation expense related to
stock-based compensation plans for non-employee directors.

/s/ Deloitte & Touche LLP
-------------------------
DELOITTE & TOUCHE LLP
Tampa, Florida

June 23, 1997




          

<PAGE> F-2

<TABLE>

				ELCOTEL, INC. AND SUBSIDIARIES
				 CONSOLIDATED BALANCE SHEETS


					 ASSETS
				     (In thousands)

<CAPTION>
							     March 31,
					       ----------------------------------
                                                      1997               1996
						  -----------        -----------
						
<S>                                               <C>                <C>

CURRENT ASSETS:
   Cash and temporary investments                 $     1,009        $       232
   Accounts receivable, less allowance
     for doubtful accounts of $817
     and $1,115, respectively                           4,678              2,943
   Notes receivable, less allowance
     for doubtful accounts of $387
     and $1,922, respectively                           1,318              2,238
   Inventories                                          2,733              2,800
   Refundable income taxes                                 95                507
   Deferred tax asset                                     692              1,332
   Prepaid expenses and other current assets              457                175
						  -----------        -----------
        TOTAL CURRENT ASSETS                           10,982             10,227

PROPERTY, PLANT AND EQUIPMENT, net                      3,184              3,103

NOTES RECEIVABLE, less allowance
     for doubtful accounts of $97
     and $69, respectively                                711                646

DEFERRED TAX ASSET                                        799                782

OTHER ASSETS                                              268                171
						  -----------        -----------
                                                  $    15,944        $    14,929
						  ===========        ===========



                                 

</TABLE>
<PAGE> F-3



<TABLE>

				ELCOTEL, INC. AND SUBSIDIARIES
				 CONSOLIDATED BALANCE SHEETS

				       (continued)

			    LIABILITIES AND SHAREHOLDERS' EQUITY                                     (In thousands)
				   (Dollars in thousands)


<CAPTION>
							     March 31,
					       ----------------------------------
                                                      1997               1996
						  -----------        -----------                                                          1996              1995
<S>                                               <C>                <C>

CURRENT LIABILITIES:
   Accounts payable, trade                        $     1,271        $     1,030
   Accrued expenses and other current
     liabilities                                        1,615              1,134
   Line of credit                                           -                965
   Current portion of long-term debt                      199                810
						  -----------        -----------
        TOTAL CURRENT LIABILITIES                       3,085              3,939
						  -----------        -----------
LONG TERM DEBT, less current portion                      232                432

COMMITMENTS AND CONTINGENCIES (see Note L)

SHAREHOLDERS' EQUITY:
   Common stock, $0.01 par value:
     Authorized 20,000,000 shares,
     Issued 8,234,216 shares and 8,060,503
     shares, respectively                                  82                 81
   Additional paid-in capital                          11,160             10,720
   Retained earnings (deficit)                          1,562                (66)
   Less cost of 52,000 shares of common
     stock in treasury                                   (177)              (177)
						  -----------        -----------
TOTAL SHAREHOLDERS' EQUITY                             12,627             10,558
						  -----------        -----------
                                                  $    15,944        $    14,929
						  ===========        ===========








<FN>
			   See Notes to Consolidated Financial Statements


                                 
</TABLE>
<PAGE> F-4
<TABLE>

				     ELCOTEL, INC. AND SUBSIDIARIES
				  CONSOLIDATED STATEMENTS OF OPERATIONS
				(In thousands, except per share amounts)


<CAPTION>
							Year ended March 31,
					    ---------------------------------------
                                                1997          1996          1995
                                            ----------     ---------     ---------
<S>                                         <C>           <C>           <C>       

NET SALES                                   $   26,832    $   21,462    $   25,090

COSTS AND EXPENSES:
  Cost of sales                                 15,883        13,238        14,776
  Research and development                       2,623         2,257         1,758
  Selling, general and administrative            6,358         6,490         5,791
  Other charges (see Note B)                      (331)        1,844             -
					    ----------     ---------     ---------
  TOTAL COSTS AND EXPENSES                      24,533        23,829        22,325
					    ----------     ---------     ---------
PROFIT (LOSS) FROM OPERATIONS                    2,299        (2,367)        2,765
					    ----------     ---------     ---------
INTEREST:
  Interest income                                  324           416           394
  Interest expense                                (119)         (201)         (109)
					    ----------     ---------     ---------
INTEREST, net                                      205           215           285

PROFIT (LOSS) BEFORE INCOME TAXES                2,504        (2,152)        3,050

INCOME TAX PROVISION (BENEFIT)                     876          (861)         (474)
					    ----------     ---------     ---------

NET PROFIT (LOSS)                           $    1,628     $  (1,291)    $   3,524
					    ==========     =========     =========
NET PROFIT (LOSS) PER COMMON AND
  COMMON EQUIVALENT SHARE                   $     0.20     $   (0.16)     $    0.45
					    ==========     =========     =========
WEIGHTED AVERAGE NUMBER OF COMMON AND
  COMMON EQUIVALENT SHARES OUTSTANDING           8,316         7,830         7,847
                                            ==========     =========     =========

<FN>
			     See Notes to Consolidated Financial Statements


                                  
</TABLE>
<PAGE> F-5

<TABLE>

				       ELCOTEL, INC. AND SUBSIDIARIES
			      CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                  YEARS ENDED MARCH 31, 1997, 1996 AND 1995
			      ------------------------------------------------
					   (Amounts in thousands)
<CAPTION>

			      Common Stock   
			     --------------  Additional  Retained
			     Shares            Paid-in   Earnings    Treasury
			     Issued  Amount    Capital   (Deficit)     Stock       Total
			     ------  ------   --------   ---------   --------   --------
<S>                           <C>     <C>     <C>        <C>         <C>        <C>

BALANCE, March 31, 1994       7,083      71      9,043     (2,299)      (177)      6,638

EXERCISE OF OPTIONS             113       1        108          -          -         109

EXERCISE OF WARRANT             539       5        749          -          -         754

TAX BENEFIT FROM                  
  EXERCISE OF OPTIONS             -       -         66          -          -          66 

NET PROFIT                        -       -          -      3,524          -       3,524
			     ------   -----   --------   ---------   --------   ---------   
BALANCE, March 31, 1995       7,735      77      9,966      1,225       (177)     11,091

EXERCISE OF OPTIONS             326       4        290          -           -        294

TAX BENEFIT FROM
  EXERCISE OF OPTIONS             -       -        464          -           -        464

NET LOSS                          -       -          -     (1,291)          -     (1,291)
			     ------   -----   --------   ---------   --------   ---------   
BALANCE, March 31, 1996       8,061   $  81   $ 10,720   $    (66)   $  (177)   $ 10,558

EXERCISE OF OPTIONS             173       1        216          -           -        217

TAX BENEFIT FROM
  EXERCISE OF OPTIONS             -       -        175          -           -        175

FAIR VALUE OF OPTION ISSUED
  AS COMPENSATION TO NON-
  EMPLOYEE DIRECTORS              -       -         49          -           -         49
                   
NET PROFIT                        -       -          -      1,628           -      1,628
			     ------   -----   --------   ---------   --------   ---------   
                                                                    
BALANCE, March 31, 1997       8,234   $  82   $ 11,160   $  1,562   $   (177)   $ 12,627
			     ======   =====   ========   =========   ========   =========






<FN>                   See Notes to Consolidated Financial Statements



                                          
</TABLE>
<PAGE> F-6
<TABLE>

				 ELCOTEL, INC. AND SUBSIDIARIES
			      CONSOLIDATED STATEMENTS OF CASH FLOWS
			      -------------------------------------         
				       (In thousands)

<CAPTION>

							   Year ended March 31,
						 --------------------------------------
                                                        1997         1996         1995
						 ------------ ------------ ------------
<S>                                              <C>          <C>          <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net profit (loss)                               $    1,628   $   (1,291)  $    3,524
  Adjustments to reconcile net profit (loss) to net
    provided by (used in) by operating activities:
      Depreciation and amortization                      437          363          318
      Provision for doubtful accounts                   (520)       2,392          287
      (Gain) Loss on disposal of equipment                (1)           -           12
      Fair value of options issued as compensation
        to non-employee directors                         49            -            -
      Change in operating assets and
	liabilities:
          Accounts receivable                         (1,519)        (956)      (1,136)
          Notes receivable                             1,159        1,530       (3,950)
          Deposits                                         -            -          721
          Inventories                                     67         (446)        (319)
          Refundable income taxes                        412         (330)        (177)
          Deferred tax asset                             798         (675)        (975)
	  Prepaid expenses and other
            current assets                              (282)         121         (205)
          Other assets                                  (137)        (120)         (39)
          Accounts payable, trade                        241         (718)         314
	  Accrued expenses and other
            current liabilities                          481           22          (50)
                                                 ------------ ------------ ------------
        Net cash flow provided by (used in)
          operating activities                         2,813         (108)      (1,675)
                                                 ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and
    equipment                                           (478)        (255)        (709)
  Proceeds from disposal of equipment                      1            2            -
                                                 ------------ ------------ ------------
    Net cash flow used in investing
      activities                                        (477)        (253)        (709)
                                                 ------------ ------------ ------------






                                 


</TABLE>
<PAGE> F-7


<TABLE>                                 
				 
				 ELCOTEL, INC. AND SUBSIDIARIES
			      CONSOLIDATED STATEMENTS OF CASH FLOWS
			      -------------------------------------         
				       (In thousands)

					 (continued)

<CAPTION>
							   Year ended March 31,
						 --------------------------------------
                                                        1997         1996         1995
						 ------------ ------------ ------------
<S>                                              <C>          <C>          <C>

CASH FLOWS FROM FINANCING ACTIVITIES:
  Issuance of common stock                       $       217  $       294  $       929
  Net (payments) proceeds related to
    short-term borrowings                               (965)        (460)       1,425
  Proceeds from long-term borrowings                       -        1,000            -
  Payments on long-term debt                            (811)        (607)        (151)
						 ------------ ------------ ------------
    Net cash flow provided by
      (used in) financing activities                  (1,559)         227       (2,203)
						 ------------ ------------ ------------ 
    Net increase (decrease) in cash
      and temporary investments                          777         (134)        (181)

    Cash and temporary investments
      at beginning of year                               232          366          547
						 ------------ ------------ ------------ 
    Cash and temporary investments
      at end of year                             $     1,009  $       232  $       366
						 ============ ============ ============

ADDITIONAL CASH FLOW INFORMATION:
    Cash Paid (Received) During the Year for:
      Interest                                   $       122  $       218  $       123
      Income taxes                                      (383)         144          610

NON-CASH INVESTING AND FINANCING
  ACTIVITIES:                                                       
  Tax benefit from exercise of options           $       175  $       464  $         -








<FN>
				See Notes to Consolidated Financial Statements.

  
                                    

</TABLE>
<PAGE> F-8

<PAGE>

ELCOTEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1997, 1996, AND 1995
-----------------------------------------------
(Dollars in thousands, except for share amounts)



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Nature of Business
--------------------

The Company designs, develops and markets public communication products 
for sales in the United States and international markets.

Principles of Consolidation
-----------------------------

The accompanying consolidated financial statements include the accounts 
of Elcotel, Inc. and its wholly-owned subsidiaries (the "Company").  All 
material intercompany accounts and transactions have been eliminated in 
consolidation.

Revenue Recognition
---------------------

Revenue is recognized at the point at which title to such goods sold 
passes to the customer.

Credit Policy
------------------

Credit is granted to customers that the Company deems creditworthy.  
Sales are made to customers upon their payment of cash in advance or 
cash on delivery, for which the Company grants the customer a discount, 
or, if the customer otherwise qualifies, the Company provides 30 days 
credit.  In addition, the Company provides limited secured financing 
with terms generally not exceeding 24 months and interest charged at 
competitive rates.

Warranty Policy
------------------

The original purchaser of the Company's products receives a two or 
three-year warranty on products the Company manufactures.  Where the 
Company resells products from other manufacturers, the Company will pass 
on the other manufacturers' warranty to its customer.

<PAGE> F-9

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 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 those 
estimated.

Temporary Investments
----------------------

Temporary investments consist of short-term, highly liquid investments 
which are readily convertible into cash.

Advertising
-------------

Advertising expenses are charged to operations during the period 
incurred.  The Company incurred advertising expense of approximately 
$91, $90 and $100 for the years ended March 31, 1997, 1996, and 1995, 
respectively.

Inventories
---------------

Inventories are stated at the lower of cost (first-in, first-out) or 
market.

Property, Plant and Equipment
-------------------------------

Property, plant and equipment are recorded at cost.  Depreciation is 
computed by the straight-line method based upon the estimated useful 
lives of the related assets, which generally range from three years for 
computers to 35 years for buildings.

Stock Based Compensation Plans
--------------------------------

The Company applies APB 25 and related interpretations in accounting for 
its employee stock-based compensation plans.  Accordingly, no 
compensation cost has been recognized for its employee stock-based 
compensation plan.  The Company applies SFAS 123 in accounting for its 
non-employee directors stock-based compensation plan beginning in fiscal 
1997.

<PAGE> F-10

Income Taxes
--------------

The liability method is used in accounting for income taxes.  Deferred 
income taxes reflect the net tax effects of temporary differences 
between the carrying amounts of assets and liabilities for financial 
reporting purposes and the amounts used for income tax purposes, and are 
measured using the enacted tax rates and laws that are expected to be in 
effect when the differences are expected to reverse.  The deferred tax 
asset is reduced by a valuation allowance when, on the basis of 
available evidence, it is more likely than not that all or a portion of 
the deferred tax asset will not be realized.

Net Profit (Loss) per Common and Common Equivalent Share
----------------------------------------------------------

Net profit per common and common equivalent share for the years ended 
March 31, 1997 and 1995 have been computed based upon the weighted 
average number of common and common equivalent shares outstanding.

Net loss per common share for the year ended March 31, 1996 has been 
computed based upon the weighted average number of common shares 
outstanding.  Common equivalent shares have not been included as the 
effect would be antidilutive.


NOTE B - OTHER CHARGES

In late 1994 and early 1995, the Company sold Amtel Communications, Inc. 
and four related entities ("Amtel") on credit approximately 
3,500 payphones and related equipment.  To secure Amtel's obligations to 
pay the Company for the payphones and related equipment pursuant to five 
promissory notes, Amtel granted the Company a security interest in 
payphones sold to Amtel and collateral assignments of agreements between 
Amtel and the owners of certain sites where those payphones had been or 
were to be installed (collectively, the "Collateral").

On August 3, 1995, Amtel filed voluntary petitions for relief under 
Chapter 11 of the Bankruptcy Code, which were administratively 
consolidated under the case name of In re ACI-HDT Supply Company, United 
States Bankruptcy Court for the Southern District of California, 
Administratively Consolidated Case No. 95-08253-A11.  On the date of the 
bankruptcy filing, the Company was owed approximately $3,200,000 by 
Amtel.

On August 29, 1996, the Bankruptcy Court approved the sale of Amtel's 
pay phone assets and business to PhoneTel Technologies, Inc. for 
approximately $13 million, payable $7 million in cash and $6 million in 
publicly tradeable shares of PhoneTel stock.  

<PAGE> F-11

Pursuant to an order entered October 10, 1996, the Bankruptcy Court 
approved the settlement agreement between the Company and Amtel 
regarding the treatment of the Company's claims against Amtel.  Pursuant 
to that settlement agreement, the Company was allowed a fully secured 
claim in all of its collateral and received in satisfaction of its claim 
payment of $1.7 million  and the transfer to the Company of certain pay 
phones (approximately 1,350) and related equipment in the Company's 
possession and being warehoused by the Company pursuant to a prior 
Bankruptcy Court order.  The Company and  Amtel also exchanged mutual 
releases of all other claims subject to certain exceptions.  On 
October 30, 1996, the Company received a check for $1.7 million from 
Amtel and Amtel released its interest in the warehoused pay phones and 
equipment.

During the year ended March 31, 1996, the Company reviewed the carrying 
value of its notes receivable from Amtel and provided a specific 
allowance of $1,602 against such notes receivable.  This charge of 
$1,602, in addition to approximately $242 in other costs associated with 
the bankruptcy proceeding, was included as Other Charges in the 
Consolidated Statement of Operations for the year ended March 31, 1996.  
During fiscal 1997, the Company sold the payphones and related equipment 
which was in the Company's possession and being warehoused by the 
Company pursuant to a prior Bankruptcy Court order.  The amount realized 
by the Company from this transaction resulted in a $413 recovery in 
excess of the amount anticipated.  In addition, the Company incurred 
approximately $82 in legal and related expenses in connection with this 
matter during fiscal 1997.  The net credit related to this matter was 
$331 during fiscal 1997 which has been included as Other Charges in the 
Consolidated Statement of Operations for the year ended March 31, 1997.

<PAGE> F-12

NOTE C - RECEIVABLES:

Accounts receivable consist of the following:



                                                   March 31,
                                         -------------------------             
                                                1997         1996
                                            --------     --------
     Accounts receivable, trade             $  5,449     $  3,978
     Call revenue receivables                     46           80
     Less allowance for doubtful accounts     (  817)      (1,115)
                                            --------     --------
                                            $  4,678     $  2,943
                                            ========     ========

Changes in the allowance for doubtful accounts consist of the following:


                                          Years ended March 31,
                                      ----------------------------
                                         1997      1996      1995
                                      --------  --------  --------
     Balance at beginning of period   ($1,115)  ($  345)  ($  171) 
     Recovery (Provision) for
        doubtful accounts                 216   (   822)  (   181)
     Charge-off of uncollectible
        accounts, net of recoveries        82        52         7 
                                      --------  --------  --------
                                      ($  817)  ($1,115)  ($  345)
                                      ========  ========  ========

Notes receivable are principally comprised of interest-bearing trade 
notes receivable from customers with remaining maturities of twenty-four 
months or less and collateralized by operating pay stations.  The notes 
receivable of $1,550, as described in Note B, are included in the 
balance as of March 31, 1996.

Changes in the allowance for doubtful notes receivable consist of the 
following:


                                          Years ended March 31,
                                      ----------------------------
                                         1997      1996      1995
                                      --------  --------  --------
     Balance at beginning of period   ($1,991)  ($  430)  ($  390) 
     Recovery (Provision) for
        doubtful Notes                    304   ( 1,570)  (   106)
     Charge-off of uncollectible
        notes, net of recoveries        1,203         9        66
                                      --------  --------  --------
                                      ($  484)  ($1,991)  ($  430)
                                      ========  ========  ========

<PAGE> F-13

NOTE D - INVENTORIES:

Inventories by stage of completion are as follows:


                                                   March 31,
                                         -------------------------             
                                                1997         1996
                                            --------     --------
     Finished Products                      $    569     $    470
     Work-in Process                             248          240
     Purchased Components                      1,916        2,090
                                            --------     --------
                                            $  2,733     $  2,800
                                            ========     ========

NOTE E - PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment is comprised of the following:

                                                   March 31,
                                         -------------------------             
                                                1997         1996
                                            --------     --------
     Land and improvements                  $    372     $    372
     Buildings                                 2,697        2,672
     Engineering and manufacturing eqt.        1,583        1,347
     Furniture, fixtures and office eqt.       1,077          864
                                            --------     --------

                                               5,729        5,255

     Less accumulated depreciation
        and amortization                       2,545        2,172
                                            --------     --------

                                            $  3,184     $  3,103
                                            ========     ========

            
Depreciation expense for the fiscal years ended March 31, 1997, 1996, 
and 1995, respectively, was $397, $255, and $276.

NOTE F - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:

Accrued expenses and other current liabilities consist of the following:

                                                   March 31,
                                         -------------------------             
                                                1997         1996
                                            --------     --------
     Payroll, payroll taxes and severance   $    773     $    480
     Professional fees                           157          100
     Commissions to international
        representative                           188            6
     Interest expense                              3            6
     Warranty                                    295          311
     Income and other taxes                      798            7
     Customer advances                           144          214
     Other                                        10           10
                                            --------     --------
                                            $  2,368     $  1,134
                                            ========     ========
<PAGE> F-14

NOTE G - INCOME TAXES:

The Company's income tax (benefit) provision for the years ended March 
31, 1997, 1995 and 1995 is comprised of the following:


                                          Years ended March 31,
                                      ----------------------------
                                         1997      1996      1995
                                      --------  --------  --------
     Current tax expense (benefit)    
        Federal                        $  253   ($  186)   $  475
        State                               -         -        26
                                      --------  --------  --------
                                          253   (   186)      501
                                      --------  --------  --------

     Deferred tax expense (benefit)
        Federal                           593   (   627)  (   848)
        State                              30   (    48)  (    27)
                                      --------  --------  --------

                                          623   (   675)  (   975)
                                      --------  --------  --------
                                                                              
     Net tax provision (benefit)       $  876   ($  861)  ($  474)
                                      ========  ========  ========

	
The significant components of the deferred tax assets as of March 31, 
1997 and March 31, 1996 are as follows:

                                                   March 31,
                                         -------------------------            
                                                1997         1996
                                            --------     --------
Deferred tax assets:

     Accounts and notes receivable          
        reserves                            $    468     $  1,170
     Inventory reserves                           58           55
     Warranty and other accruals                 201          184
     Tax credit carryforwards                    647          583
     NOL carryforwards                           219          220
                                            --------     --------

                                               1,593        2,212
                                            --------     --------      

Deferred tax liabilities:
                         
     Property, plant and equipment                95           91
     Deferred patent costs                         7            7
                                            --------     --------

                                                 102           98      
                                            --------     --------

Net deferred tax asset                         1,491        2,114

Less current portion                             692        1,332
                                            --------     --------

Net deferred tax asset,
         less current portion               $    799     $    782
                                            ========     ========

<PAGE> F-15

As of March 31, 1997, the Company has available net operating loss 
carryforwards for state tax purposes of approximately $3,986, expiring 
in the years 2006 to 2009.  In addition, the Company has available 
approximately $647 in research and other tax credit carryforwards, 
expiring in varying amounts between the years 2001 and 2009.

The effective tax rate on income before taxes differs from the United 
States statutory rate.  The following summary reconciles taxes at the 
United States statutory rate with the effective rate.


                                          Years ended March 31,
                                      ----------------------------
                                         1997      1996      1995
                                      --------  --------  --------
     U.S. statutory rate                 34.0%     34.0%     34.0%

     Increases (decreases)
        resulting from:

        Business credits earned          (2.9)      1.3      (2.9)
        Business credits restored           -       7.5         -
        Other                             3.9      (2.8)     (2.2)
        Reversal of valuation
           allowance                        -         -     (44.4)
                                      --------  --------  --------

     Effective rate                      35.0%     40.0%    (15.5)%
                                      ========  ========  ========

<PAGE> F-16

NOTE H - LONG TERM DEBT:


                                                   March 31,
                                         -------------------------           
                                                1997         1996
                                            --------     --------
Long term debt consists of the following:

     Promissory note with a bank, expiring
        May 23, 1999, with interest fixed
        at 8.50%                            $    431     $    631

     Promissory note with a bank, expired
        February 28, 1997, with variable
        interest (8.06% at March 31, 1996)         -          611
                                            --------     --------

     Total long term debt                        431        1,292

        Less current protion                     199          810
                                            --------     --------

                                            $    232     $    432
                                            ========     ========

The promissory note, expiring May 23, 1999, arose from refinancing a 
note on August 31, 1995 which was due on May 23, 1996.  Interest on the 
previous note was at prime plus one-half percent with monthly payments 
based on a fifteen year amortization and a balloon payment after five 
years.  Principal payments on the new note are based on equal monthly 
installments over a five year period.  Final payment of all unpaid 
principal and interest is due on May 23, 1999.  The note is secured by a 
mortgage on the Company's facility.  Payments due on the note are as 
follows:

                   Due in fiscal 1998        $   199
                   Due in fiscal 1999            199
                   Due in fiscal 2000             33
                                             -------

                                             $   431
                                             =======

The Company had a $1,000 promissory note secured by the Company's 
accounts receivable, notes receivable and inventories.  Interest on the 
note was based on the Libor rate plus 2.75 percentage points (8.06% at 
March 31, 1996).  Principal payments are based on eighteen equal monthly 
installments and expired on February 28, 1997.

NOTE I - LINE OF CREDIT:

The Company has a $2,000 working capital line of credit secured by the 
Company's accounts receivable, notes receivable and inventories.  
Interest on amounts borrowed on the line of credit is at the Libor rate 
plus 2.75 percentage points  (8.4375% at March 31, 1997).  The balance 
on this line of credit as of March 31, 1997 and 1996 was $-0- and $965, 
respectively.

<PAGE> F-17

NOTE J - STOCK OPTIONS AND WARRANTS:

Accounting for Stock-based compensation:  In October 1995, Statement of 
Financial Accounting Standards No. 123, "Accounting for Stock-based 
Compensation" ("SFAS No. 123") was issued by the Financial Accounting 
Standards Board.  The statement requires the fair value of stock options 
and other stock-based compensation issued to employees to either be 
included as compensation expense in the income statements of companies 
or the pro-forma effect on net income and earnings per share of such 
compensation expense to be disclosed in the footnotes to the company"s 
financial statements beginning in fiscal years beginning after December 
15, 1995.  Additionally, SFAS 123 requires companies to recognize 
expense for stock options issued to non-employees for goods and services 
based upon the fair value of the options at the date of grant.  During 
the year ending March 31, 1997, the Company adopted SFAS 123 and recognized
$49 of compensation expense related to the Directors Stock Option Plan.  The 
Company has elected to adopt SFAS No. 123 on a disclosure basis only for 
employee compensation.  Had compensation cost for the Company's stock 
option plan been determined based on the fair market value at the grant 
dates for awards under the plan consistent with the method provided by 
SFAS No. 123, the Company's net income (loss) and net income (loss) per 
common share would have been reflected by the following proforma amounts 
for the years ended March 31, 1997 and 1996:


                                                  Year Ended March 31,
                                               --------------------------
                                                  1997             1996
                                               --------        ----------

Net income (loss)    As reported               $  1,628        $  (1,291)
                     Proforma                  $  1,456        $  (1,714)

Primary net income   As reported               $   0.20        $   (0.16)
  (loss) per share   Proforma                  $   0.18        $   (0.22)

The fair value of each grant is estimated on the date of grant using the 
Black-Scholes Option pricing model with the following weighted-average 
assumptions used for grants during the years ended March 31, 1997 and 
1996:


                                                  Year Ended March 31,
                                               --------------------------
                                                  1997             1996
                                               --------        ----------
                Dividend yield                     -                -
                Expected Volatility              54.90%           67.31%
                Risk free interest rate           6.20%            6.20%
                Option Term                     3.4 years       3.4 years

The weighted average fair value for all options granted in 1997 and 1996 
was $2.78 and $3.30, respectively.

<PAGE> F-18

STOCK OPTION PLANS: 

1991 Stock Option Plan
-----------------------

On July 2, 1991, the Company adopted a stock option plan (the "1991 
Plan") which provides for the grant of incentive and non-qualified stock 
options to key employees, including officers and directors, of the 
Company.  The option price per share may not be less than 100% of the 
fair market value of such shares on the date such option is granted, or 
$ .75.  In May 1994, the Board approved, and in October 1994 the 
shareholders approved, a 350,000 share increase in the number of shares 
reserved under the Plan.  In August 1996, the Board approved, and in 
October 1996 the shareholders approved an additional 500,000 share 
increase in the number of shares reserved under the Plan.  Options to 
acquire up to 1,600,000 shares of common stock may be granted pursuant 
to the 1991 Plan

Information with respect to options under the above plans is as follows:



					 Number of      Option Price
					  Shares         Per Share
					-----------     ------------

Outstanding at March 31, 1994              647,633      $  .75-$3.50
     Granted                               319,700      $1.00-$3.625
     Exercised                           ( 108,353 )    $ .75-$1.81
     Cancelled                           ( 115,138 )    $1.00-$3.50
					 ---------
Outstanding at March 31, 1995              743,842      $ .75-$3.625
     Granted                               193,950      $6.1875-$9.1875
     Exercised                           ( 333,607 )    $ .75-$3.625
     Cancelled                           (  45,483 )    $1.36-$3.50
					 ---------
Outstanding at March 31, 1996              558,702      $ .75-$9.1875
     Granted                                97,OOO      $5.25-$7.375
     Exercised                           ( 178,729 )    $ .75-$3.50
     Cancelled                           (  85,525 )    $1.81-$9.1875
					 ---------
Outstanding at March 31, 1997              391,448      $1.3125-$7.50
					 =========
                                                                             
All options outstanding, both non-qualified and incentive stock options,  
were granted to key employees and officers of the Company on 
May 12, 1993, August 8, 1994, and February 20, 1996  and are exercisable 
cumulatively in four installments of one-fourth each year beginning one 
year from the date of grant and expire five years from the date of 
grant.  As of March 31, 1997, 101,454 options are exercisable.  As of 
March 31, 1997, options to acquire 538,496 shares were available for 
future grant under the 1991 Plan.  The weighted average exercise price 
of options outstanding is $5.3463 and the weighted average remaining 
contractual life is 4.12 years.

<PAGE> F-19

Directors Stock Option Plan
----------------------------

On July 2, 1991, the Company adopted a Directors Stock Option Plan which 
provides for the automatic annual grant of non-qualified stock options 
to outside directors of the Company.  The option price per share may not 
be less than 100% of the fair market value of such shares on the date 
such option is granted, or $2.00. In May 1994, the Board approved, and 
in October 1994 the shareholders approved, a 75,000 share increase in 
the number of shares reserved under the Plan.  Options to acquire up to 
175,000 shares of common stock may be granted pursuant to the Plan. 
Accordingly, for the fiscal years ended March 31, 1997, 1996, and 1995, 
options to purchase 17,000 shares, 16,000 shares and 16,000 shares, at 
an exercise price of $6.3125, $5.25 and $3.9375, per share, 
respectively, were granted under the Directors Stock Option Plan.  The 
options are exercisable commencing one year from the date of grant and 
expire five years from the date of grant.  During fiscal 1997, 1996 and 
1995, there were 15,000, 5,000 and 5,000 shares exercised, respectively, 
all at an option price of $2.00.  As of March 31, 1997, 83,000 options 
are exercisable.  As of March 31, 1997, options to acquire 38,000 shares 
were available for future grant under the Directors Stock Option Plan.  
The weighted average exercise price of options outstanding is $4.6244 
and the weighted average remaining contractual life is 4.57 years.


Other Options
---------------

The Company has issued 26,000 other options to its existing and former 
directors.  The options have an exercise price of $2.00 per share and 
expire on July 2, 1996. During fiscal 1997 and 1996, there were 8,000 
and 12,000 shares exercised, respectively, all at an option price of 
$2.00.  During fiscal 1995, none of those options were exercised.  There 
are no more remaining other options  exercisable as of March 31, 1997.

<PAGE> F-20

NOTE K - RELATED PARTY TRANSACTIONS:

As of March 31, 1997, the Company is owed approximately $325,000 from 
Aditel, a Mexican corporation ("Aditel"), arising out of loans and sales 
of payphones to Aditel.  This amount is represented by a promissory note 
which matures on September 30, 1997, payment of which is secured by a 
security interest in certain payphones and operating agreements of Aditel.  
Mr. Alvaro R. Quiros, a holder of approximately 6.3 percent of the 
Company's Common Stock as of June 9, 1997, is the owner of approximately 
25 percent of the equity of Aditel.

Legal fees amounting  to approximately $73 for the fiscal year ended 
March 31, 1995, were incurred by the Company to Schnader, Harrison, 
Segal & Lewis, of which Mr. Patton, a director of the Company, was a 
partner until July 1994, for legal services rendered to the Company and 
its subsidiaries.  These services included the work of several partners 
and associates of the firm in litigation matters, corporate and 
financial matters, and other types of legal matters incident to the 
representation of the Company.

NOTE L - COMMITMENTS AND CONTINGENCIES:

Nogah Bethlahmy, et al. plaintiffs v. Randy S. Kuhlmann, et al.defendants.
--------------------------------------------------------------------------
San Diego Superior Court Case No. 691635.

This putative class action was filed in the Superior Court 
of the State of California for the County of San Diego 
("State Court") but not initially served on the Company.  On 
November 17, 1995, the first amended complaint was filed and 
served on the Company.

On December 28, 1995, a co-defendant removed the case to the 
United States Bankruptcy Court for the Southern District of 
California.  On January 26, 1996, plaintiffs moved to remand the
case to State Court.  On April 11, 1997, the case was remanded to
the San Diego Superior Court (San Diego Superior Court Case No. 691635.)
     
On May 20, 1996, plaintiffs filed a second amended complaint 
for (1) unlawful business practices; (2) fraudulent and 
unfair business practices; (3) false and misleading 
advertising; (4) fraud and deceit; (5) conspiracy to 
defraud; (6) negligence and negligent misrepresentation; (7) 
violations of California Corporations Code section 25110; (8) 
violations of California Corporations Code section 25400; (9) 
professional negligence and legal malpractice; and (10) 
spoliation of evidence.  The gravamen of the complaint is 
that Amtel conspired with its own officers and 
professionals, and with various telephone suppliers 
(including the Company), to defraud investors in Amtel by 
operating a Ponzi scheme.  Plaintiffs have filed a motion in state
court for leave to file a second amended complaint, which is expected
to contain the same allegations as the second amended complaint that
was previously filed by the plaintiffs in the bankruptcy court.  Plaintiffs'

<PAGE> F-21

motion for class certification is currently scheduled on July 19, 1997.
Discovery is still in its initial stages.  The Company disputes liability 
and intends to defend this matter vigorously, although the Company cannot
predict the ultimate outcome of this litigation.

William Polillo, et al. v. Elcotel, Inc.
----------------------------------------
(U.S. District Court for the Northern District of Illinois, No. 96C 2275,
filed April 18, 1996).

William Polillo, Cecilia Polillo and Richard Reno filed this suit 
against the Company alleging that the Company's pay telephones infringe 
U.S. Patent No. 4,208,549 for a Coin Surveillance Apparatus.  An Amended 
Complaint was filed against the Company on May 10, 1996.  The Company 
filed an Answer and Counterclaim on May 28, 1996 denying infringement 
and asserting a counterclaim for a declaratory judgment of 
noninfringement and invalidity of the patent.  On July 2, 1996, the 
plaintiffs' responded to the Company's counterclaim by denying the 
claims of noninfringement and invalidity.  In May 1997 this case was 
settled and the case was dismissed with prejudice.

The Company is subject to legal proceedings and claims which arise in 
the ordinary course of its business.  In the opinion of management, the 
amount of ultimate liability, if any , with respect to these actions 
will not materially affect the financial position or results of 
operations of the Company.

NOTE M - MAJOR CUSTOMERS:

For the year ended March 31, 1997, the Company had two customers which 
accounted for approximately 24% of net sales.  For the year ended March 
31, 1996, there were no customers which individually accounted for more 
than 10% of net sales.  During the year ended March 31, 1995, the 
Company had one customer which accounted for approximately 13% of net 
sales.

NOTE N - CONCENTRATION OF CREDIT RISK:

Financial instruments that potentially subject the Company to 
significant concentrations of credit risk consist principally of notes 
receivable.  In order to minimize this risk, the Company performs 
ongoing credit evaluations of its customers' financial condition and 
requires collateral, primarily the phone and related enclosures.  At 
March 31, 1997, the Company had three customers with accounts receivable 
totalling $1,333, $628, and $589, respectively.  At March 31, 1996, the 
Company had one customer with notes receivable totalling approximately 
$1,550, net of a specific allowance (see Note B).

<PAGE> F-22

NOTE O - SHAREHOLDERS' EQUITY:

During the year ended March 31, 1997, shareholders' equity increased as 
a result of a net profit of $1,628, by the exercise of 201,729 stock 
options less 28,046 shares surrendered at prices between $.75 and $3.50 
per share for a total of $217, $175 related to the tax benefit from 
exercise of stock options, and $49 for the fair value of options granted 
to directors.
                      
NOTE P - SAVINGS PLAN:

During fiscal 1994, the Company began a 401(k) savings plan whereby 
eligible employees may voluntarily contribute a percentage of their pre-
tax earnings.  The Company will match 50% of the employees' 
contribution, up to an additional 2% of the eligible employees' 
compensation.  An employee begins vesting after having completed two 
years of employment with the Company, at the rate of 25% per year, and 
is 100% vested after having completed five years of employment with the 
Company.  Total plan expense was approximately $104, $79 and $57, 
respectively for the fiscal years ended March 31, 1997, 1996 and 1995.

NOTE Q - SALES BY GEOGRAPHIC LOCATION:

The Company sells its payphone products both in the United States and 
internationally.  United States sales of international payphones 
includes products sold to United States customers for resale in 
international markets.  In fiscal 1997, 1996, and 1995, the Company's 
revenues by geographic regions were as follows:
 

                                          Years ended March 31,
                                     ----------------------------
                                        1997      1996      1995
                                     --------  --------  --------

     United States                   $ 18,792  $ 19,834  $  3,200
     United States sales of
          international payphones       2,796       285         - 
     Canada and Latin America           1,763       521     1,520
     Europe, Middle East and Africa        99       397        11
     Asia, Pacific and Other Areas      3,382       425       359
                                     --------  --------  --------

          Total export sales         $ 26,832  $ 21,462  $ 25,090 
                                     ========  ========  ========

<PAGE> F-23

NOTE R - FAIR VALUE OF FINANCIAL INSTRUMENTS:

Cash and short-term investments
--------------------------------

The carrying amount approximates fair value because of the short 
maturity of those instruments.

Long-term debt
----------------

The fair value of the Company's long term debt is estimated based on the 
borrowing rates available to the Company for bank loans with similar 
terms and average maturities.  The carrying value at March 31, 1997 and 1996 
approximates fair value.





<PAGE> F-24

  
		    INDEX TO EXHIBITS



Exhibit 
Number  Description                  Incorporated by Reference to
----- ----------------------------   ------------------------------

3.1   Certificate of Incorporation   Exhibit 3.1 to Registration 
				     Statement on Form S-18, File No. 33-8565.  
				     
3.2   By-Laws (as amended).          Exhibit 3.2 to Annual Report on 
				     Form 10-K for year ended March 31, 1987.

10.1  1991 Stock Option Plan.        Exhibit 10.2 to Annual Report on 
				     Form 10-K for year ended March 31, 1992.
				     
10.2  Directors Stock Option Plan.   Exhibit 10.3 to Annual Report on 
				     Form 10-K for year ended March 31, 1992.
				     
10.3  Mortgage and Security          Exhibit 10.6 to Annual Report on 
      Agreement between Registrant   Form 10-KSB for year ended March 31, 1994.
      and NationsBank of Florida, 
      N.A. dated January 20, 1994.        
      
10.4  Loan Agreement between         Exhibit 10.8 to Annual Report on 
      Registrant and NationsBank of  Form 10-KSB for year ended March 31, 1994.
      Florida, N.A. dated 
      May 23, 1994.  
     
10.5  Amendment to Loan Agreement    Exhibit 10.1 to Quarterly Report
      and Second Amendment to        on Form 10-QSB for the quarter ended
      Collateral Assignment and      September 30, 1995.
      Security Agreement between 
      Registrant and NationsBank 
      of Florida, NA dated 
      August 31, 1995.Exh
		   

          
<PAGE> E-1
				     
Exhibit 
Number  Description                  Incorporated by Reference to
----- ----------------------------   ------------------------------

10.6  Mortgage Note between          Exhibit 10.6 to Quarterly Report on Form
      Registrant and Carl G.         10-QSB for quarter ended
      Santangelo, as Trustee of      September 30, 1993
      Elcotel Mortgage Trust dated 
      September 28, 1993.

      (a) Mortgage Modification      Exhibit 10.9(a) to Annual Report on Form
	  Agreement between          10-KSB for the year ended March 31, 1994.
	  Registrant and 
	  NationsBank of Florida,
	  N.A. dated May 23, 1994.

      (b) Assignment of Note and     Exhibit 10.9(b) to Annual Report on Form   
	  Mortgage between Carl G.   10-KSB for the year ended March 31, 1994.
	  Santangelo, as Trustee of
	  Elcotel Mortgage Trust and
	  NationsBank of Florida, N.A.
	  dated May 23, 1994.

      (c) Mortgage Modification      Exhibit 10.4 to Quarterly Report on Form
	  Agreement between          10-QSB for the quarter ended September 30,
	  Registrant and             1995.
	  NationsBank of Florida,
	  N.A. dated August 31, 1995.

10.7  Replacement Promissory Note    Exhibit 10.5 to Quarterly Report on Form
      between Registrant and         10-QSB for the quarter ended September 30,
      NationsBank of Florida, N.A.   1995.
      dated August 31, 1995.

                                  
 
<PAGE> E-2

Exhibit 
Number  Description                  Incorporated by Reference to
----- ----------------------------   ------------------------------
10.8  Consolidation Promissory Note  Exhibit 10.4 to Quarterly Report on Form
      between Registrant and         10-QSB for the quarter ended September 30,
      NationsBank of Florida, N.A.   1994.
      dated August 31, 1994.

10.9  Renewal Promissory Note        Exhibit 10.2 to Quarterly Report on Form
      between Registrant and         10-QSB for the quarter ended September 30,
      NationsBank of Florida         1995.
      N.A. dated August 31, 1995.

10.10 Second Amendment to Loan       Exhibit 10.1 to Quarterly Report on
      Agreement and Third            Form 10-Q for the quarter ended
      Amendment to Collateral        September 30, 1996.
      Assignment and Security
      Agreement between Registant
      and NationsBank, N.A. (South)
      effective August 28, 1996.

10.11 Renewal Promissory Note        Exhibit 10.2 to Quarterly Report on
      between Registrant and         Form 10-Q for the quarter ended
      NationsBank, N.A. (South),     September 30, 1996.
      effective August 28, 1996.

21.1  Subsidiaries of the            Included in this Report
      Registrant.

23.1  Independent Auditors'          Included in this Report 
      Consent.

27    Financial Data Schedule        Included in this Report.


				  
          
<PAGE> E-3