SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

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

FOR THE FISCAL YEAR ENDED APRIL 30, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from to
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Commission File Number: 0-17168

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

VIRGINIA 54-1289115
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

45472 HOLIDAY DRIVE
STERLING, VIRGINIA 20166
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(Address of principal executive offices) (Zip Code)

Registrant's Telephone Number, including area code: 703/318-7750

Securities registered pursuant to Section 12(b) of the Act: None.

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

COMMON STOCK, PAR VALUE $.01 PER SHARE
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(Title of Class)

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 Common Stock of the registrant held by
non-affiliates of the registrant, computed by reference to the last sale price
of such shares as of the close of trading on July 8, 1997, was $52,363,672
(7,757,581 shares times $6.75). As of July 8, 1997, there were 10,041,513
shares of the Common Stock of the registrant outstanding.

FASTCOMM COMMUNICATIONS CORPORATION

INDEX

PART I. PAGE

ITEM 1. BUSINESS. 3
ITEM 2. PROPERTIES. 10
ITEM 3. LEGAL PROCEEDINGS. 11
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS. 11

PART II. PAGE

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 12
MATTERS.
ITEM 6. SELECTED FINANCIAL DATA. 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 16
RESULTS OF OPERATIONS.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 22
FINANCIAL DISCLOSURE.

PART III. PAGE

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. 23
ITEM 11. EXECUTIVE COMPENSATION. 24
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. 29
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. 30

PART IV. PAGE

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. 31

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PART I.

ITEM 1. BUSINESS

GENERAL

FastComm Communications Corporation (the "Company" or "FastComm"), a Virginia
corporation, designs, manufactures, and sells telecommunications access devices
that allow computer, terminal and telephone users to connect to public and
private wide area (long distance) transmission networks, as provided by common
carriers of voice, data and Internet services. Its products include a range of
devices aimed at packetized services as well as digital leased-lines, Switched
56 networks, Integrated Services Digital Network (ISDN) and Internet protocol
("IP") router networks (both private and public, i.e., the "Internet").

The Company's strategy is to produce the highest value-add network access
devices--that are the easiest to install, use, and maintain--for several market
segments: Legacy-to-LAN transition, Internet/Intranet access, and Voice/Fax
and Data integration. The Company targets business customers primarily, and
designs its products for volume sales through distribution. The Company's
strategy makes its products appealing to network product and service dealers,
systems integrators, telephone carriers, PTT's, original equipment
manufacturers ("OEM's") and other resellers who form the main distribution
channels for the Company, and who provide installation and maintenance services
in the United States and internationally.

The Company was incorporated as MicroTel, Inc. under the laws of the
Commonwealth of Virginia in May 1983. The Company changed its name to Data
Safe Incorporated in February 1984; to Electronic Vaults, Inc., in August
1984; and to FastComm Communications Corporation, in October 1987.

FastComm shares are traded publicly on the NASDAQ National Market under the
symbol FSCX.

NETWORKING INDUSTRY

The networking industry encompasses a broad range of communications services
and equipment. Communications in the form of voice, data, Internet traffic,
electronic mail, facsimile, imaging, video teleconferencing, on-line
transaction processing and other forms of information are transmitted across
wide-area communications networks. As demand for these information services
grows, the demand on communications networks is increasing in terms of the
number of sites and users, the number of formats and types of information, and
the volume and speed of information to be communicated by each user.

The wide area networking (WAN) industry divides itself into logically into two
major areas:

1. Backbone components and systems, consisting of large switches and
multiplexers, plus the wide area network (WAN) transmission lines that provide
connectivity for these devices. Public network service providers purchase
backbone components for their Central Offices. Private networks install them
at headquarters, major regional centers, and the largest branch locations.

2. Access devices, typically smaller equipment located in customer branch
offices and attached to the backbone network through a single digital telephone
line. An access device may be part of a local area network (LAN) within a
building or site.

FASTCOMM'S PRODUCTS

The Company's products are based on the second category, the access device
segment of the networking industry. The market potential for access products
(in units) is far greater than that of backbone and systems products because of
the typical ratio of branch offices to headquarters business locations. In
addition, companies are increasingly providing more networked applications and
connectivity to their branch offices. As circuit line costs decline and the
bandwidth demands increase, these sites are increasingly able to justify a
dedicated network connection (as opposed to dial-up).

The original communication networks implemented by businesses were based on
dial-up connections for branch offices, and dedicated (leased) circuits for
larger regional offices. While residential connectivity in the US remains
dial-up, the bulk of the business traffic is carried on dedicated digital
lines.

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FastComm's early products, primarily analog modems, connected to analog lines.
Starting in 1990, the Company developed and promoted new products for
connection to digital lines, responding to the needs of businesses. Digital
access devices now constitute the majority of the Company's business.

FRAME RELAY ACCESS DEVICES

The majority of the Company's revenue comes from the sale of frame relay access
devices ("FRADs") and multiprotocol access routers. Frame relay is a simple
way to transfer (relay) blocks of data (frames) on a "best effort" basis
(without error correction) across a public or private network. Frame relay
takes advantage of the high-quality (low error rate) of optical fiber
transmission lines to simplify communications by not correcting errors. Error
correction is performed by computers and terminals attached to the network, not
the network itself. Frame relay standards define the format for the data
blocks sent to the network. The Company's frame relay access devices and
routers adapt terminals, computers, telephone equipment, and facsimile machines
to the industry standard frame relay format. FRAD market studies from major
consultants such as the Yankee Group and Vertical Systems indicate a growth
rate of over 100% per year for the past three years. Frame relay service
revenues and unit counts are expected to continue to grow at or near this rate.

The Company initially displayed its frame relay technology in the Fall of 1991,
when it was the first to publicly demonstrate voice transmission over a public
frame relay network.

The Company's FRADs and routers connect PCs, workstations, local area networks
("LAN"), and host computers to a frame relay service. Data formats on FastComm
FRADs are compatible with standard routers for the most important LAN
protocols: IP, IPX, and AppleTalk(TM). A solution mixing FRADs at some sites
with routers at others is less expensive than deploying routers everywhere.
Certain Internet service providers (ISPs) offer FastComm FRADs or routers as
part of their product package, with frame relay service between the ISP site
and those customers who require full time Internet access or to maintain a
home page on the World Wide Web.

In addition to standards compatibility, FastComm relies on additional
proprietary features to add value and distinguish its products. To the best of
the Company's knowledge, no competitors currently offer, in a single product
line, all the features listed below:

1. Automatic installation has been a key advantage, in the form of two specific
features that make FastComm products easier to install than those of its
competition.

- FastConnect(TM) allows a FastComm FRAD to learn how the frame relay
network switch is configured.
- FastConfig(TM) allows an EtherFRAD(TM), RingFRAD(TM) or
WEB.router(TM) access device to learn its IP addressing.

2. MaximumPRIORITY(TM) and FastRATE(TM) features provide sophisticated,
multiprotocol prioritization and congestion control, a feature typically
found only in transmission switches.

3. A menu system on a port dedicated to management and configuration guides a
user at a terminal to select and set options for the installation process or
to perform maintenance procedures. It also offers easy access to management
information and statistics. Competitors, in contrast, typically offer only
a command line which requires the user to learn and manually enter exact
commands in the proper format and order. This is a slow, error prone and
costly process.

An appealing feature of FastComm FRADs is their ability to handle terminal
protocols with intelligence. An example of this intelligence is seen when
dealing with polled protocols like IBM's SDLC (synchronous data link control)
where more than half the data on a line may be overhead, not information.
FastComm FRADs can eliminate this polling overhead and pass only user
information. The equipment emulates multidrop lines, the most common type
found in over 50,000 SNA networks. FastComm FRADs save bandwidth, improve
response times and simplify network topologies.

Recent versions of the front end processor for IBM mainframe computers and the
midrange AS/400 are compatible with direct connections to frame relay networks.
FastComm is developing the software to support the protocol conversion
necessary to interoperate directly with a front end processor or AS/400. As
with router networks, FRADs at remote sites with terminal cluster controllers
can reduce the overall cost of a network.

Additional customer interest has been expressed in the direct Ethernet LAN port
on the EtherFRAD(TM) models, the Token Ring port in RingFRAD(TM) models, and in
the data compression hardware option that has been shipped with the
QuadFRAD(TM) models and will be offered in other models in the future based on
market demand.

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Voice over frame relay became popular during fiscal 1997. In response, the
Company introduced the VoiceFRAD(TM) a low cost multiport/multiprotocol voice
over frame relay access device. FastComm VoiceFRADs(TM) provide cost
effective data and voice access over frame relay networks and support a variety
of standard voice interfaces. Voice is digitized and compressed using a CELP
algorithm that produces high voice quality at compression ratios of 8:1 and
more. Silence suppression halves the bandwidth during the call, effectively
producing up to 16:1 compression. Frames are sent only during conversation.
Signaling is passed transparently. Facsimile is demodulated and handled as
data. A FAX call is recognized from modem / FAX tones and converted to a
digital signal. In the frame relay format, a FAX connection is treated and
carried like any other data.

Frame relay products contributed approximately 80% of total revenue for fiscal
year 1997.

WEB.ROUTER(TM)

The WEB.router(TM) product, a low cost Internet access router, provides the
Company's solution for Internet access over frame relay. The Internet and its
World Wide Web are usually accessed over a dialed up connection or a leased
line carrying the Internet Protocol (IP) in a format called Point to Point
Protocol (PPP). With the large number of new Internet users, service providers
are finding frame relay an efficient way to offer connections to many customers
over a single data line at the ISP's site. WEB.router(TM) devices were designed
for Intranet applications of World Wide Web technology (within companies) as
well as general Internet access devices.

ISDN

The Company is nearing completion of a Basic Rate Interface (BRI) to attach to
the ISDN (Integrated Services Digital Network). This module becomes part of an
EtherFRAD, for example. The BRI is an all-digital method to access the central
office. A BRI can carry frame relay and voice at the same time. Software
enhancements allow a Company product to use the BRI as its main connection, or
as a way to dial up a replacement connection if for any reason the primary
frame relay access line is lost. The BRI option will be offered in different
versions for North America and Europe.

DATA CONTROLLER

Data Controllers are small data PABX's that allow up to seven devices to be
managed with a single telephone line and modem. A management station places
one call to the data controller, then communicates with up to seven attached
devices. A typical example would be a branch office equipped with a CSU,
multiplexer, bridge or router, terminal controller, and voice PABX or key
system. In addition to supporting dial-in access, the Data Controller will
accept information from any of the managed devices, then dial out to the
central management station, through the modem, and deliver that information --
for example, an alarm message. This product is sold as the SuperView(TM)
device.

DATA COMPRESSION

FastComm put the original Time Machine data compressor into production in May
1992. It is still believed, based upon reports in industry periodicals, to be
the fastest commercially available leased line data compressor. Two inputs at
up to 6 million bits per second ("Mbit/s") are compressed into a single 2
Mbit/s line. The Time Machine consistently shows compression ratios of 2.5 or
3 to 1, and has demonstrated over 4 to 1 (exact ratio of compression depends on
the nature of the data). Compression technology has since been built into
certain FastComm FRADs, as discussed above.

ATM ACCESS

FastComm has developed an ATM Access product in conjunction with HyNET, Ltd.,
now Hynex. (see "New Product Development" below.) The LAN SARgent(TM) is a
small-site access device that connects both an Ethernet Local Area Network port
and a serial data port (normal data connection) to a public ATM service or a
private ATM network. The connection from the LAN SARgent(TM) to the ATM
network is a standard T-1 or E-1 digital line.

The Company recently completed the development of this product. The product has
achieved the required safety certifications and can now be sold commercially.

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MODEMS

The Company continues to sell its analog modems for specialized data
applications that use unusual features like multiple layers of password
protection and dial back security. No effort is made to participate in the
highly competitive consumer market for inexpensive low-end modems due to the
low margins of this business. The Company has taken advantage of its modem
expertise to offer V.35/56K modem options for its FRAD and router products.

COMSTAT DATACOMM QUICK PRODUCT LINE

In January 1997, the Company acquired Comstat Datacomm Corporation, a privately
held firm engaged in the design, manufacture and sale of networking products
for the banking services and manufacturing market segments. Comstat targets
Unisys A and C-series mainframe customers, and others, who require more
cost-effective networking solutions for communications between legacy
applications / equipment and LAN applications.

NEW PRODUCT DEVELOPMENT

The Company invests heavily in research and development ("R&D") and expects
such investment to continue. Recorded expenses for research and development
have been as follows:

FY 1997 $1,967,000 18% of revenue
FY 1996 $1,412,000 14% of revenue
FY 1995 $ 916,000 22% of revenue

The R&D plan includes new digital access products in addition to add-on
features for existing FRADs.

Announced products include:

(1) ISDN (Integrated Services Digital Network) basic rate interface
("BRI"), will offer an alternative to the integral 56 Kbps DSU/CSU
for principal access, or dial backup protection. Several telephone
companies tariffed ISDN BRI access to their frame relay networks
during 1997.

(2) Integral T-1 and E-1 (1.5 and 2 Mbps, respectively) CSU options.
These CSU interfaces are increasingly popular with customers. The
Company's ability to offer these options integral to its products,
and as a managed part of the network access device is a
distinguishing feature. The Company plans initial shipments of the
integral CSU version of its products in the first quarter of its
fiscal year 1998.

(3) MaximumPRIORITY(TM) and FastRATE(TM) software features were
completed in FY 1997. These features enable the Company's FRAD and
router products to combine multiple "mission critical" applications
over a single network connection, while offering superior quality
of service. When used in conjunction with a wide area network or
service that also offers prioritization of applications (virtual
circuits), the Company's products can be used to offer end-to-end
prioritization, a highly distinguishing feature.

Initial hardware and software design for ISDN access was completed in FY 1997.
Hardware and software work is progressing in the first quarter of fiscal year
1998 for T-1 and E-1. Software for the MaximumPRIORITY(TM) and FastRATE(TM)
software features was completed in FY 1997. In addition, the company updated
its 56 Kbps DSU/CSU design to incorporate 64 Kbps capability (DDSII(TM)).

Hardware and software design for the SARgent(TM) is under a joint development
agreement with HyNET, Ltd., now Hynex, an Israeli company. Work was financed
in part by a grant from the Binational Industrial Research and Development
Foundation (BIRD Foundation), a joint effort of the U.S. and Israeli
governments. Under the terms of BIRD grants, money they advance to fund
product development is repaid via a small royalty on those products as they are
sold. Repayment is capped at 150% of the grant amount. There is no minimum
repayment.

One goal of all FastComm products designs is that they be priced aggressively.
Product development stresses low cost, reliable components and ease of
assembly. A modular approach allows many different products to be created from
a few basic components. For example, the integral DSU/CSU for 56 Kbps is the
same in all FRADs and low end data compression products.

To keep costs low or to bring a product to market quickly, any design may be
done entirely internally, externally, jointly with another firm, or from
licensed technology.

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Larger companies, with larger engineering resources and more internal
expertise, may be able to develop a larger portion of their products without
outside technology. Not having to pay licensing fees or royalties could
provide them a cost advantage.

Research and development project schedules for high technology products are
inherently difficult to predict, and there can be no assurance that the Company
will achieve its expected initial shipment dates of products in development.
Because timely availability of new and enhanced products is critical to the
success of the Company, delays in availability of these new products, or lack
of market acceptance of such products, could adversely affect the Company.

The Company's ability to anticipate changes in technology, industry standards
and communications service provider offerings, and to develop and introduce new
and enhanced products on a timely basis that are successful in the market will
be a significant factor in the Company's competitive position and in its
prospects for growth.

BACKLOG

Because of its quarterly design and build cycle, the Company builds and fills
essentially all of its customer orders within the fiscal quarter of receipt.
Backlog of undeliverable orders is usually not significant. Management
believes that the Company's backlog as of any given date is not necessarily
indicative of actual revenues for any succeeding period.

Alcatel Data Networks ("Alcatel") and FastComm announced a partnership for
voice and data frame relay access devices on July 1, 1996. During FY 1997, the
company engaged in training of Alcatel Sales and Service personnel on a
worldwide basis. Volume shipments of the Alcatel private label versions of the
Company's FRADs began in latter half of FY 1997.

Management knows of no material effect from compliance with environmental laws
or regulations.

SEASONALITY AND INFLATION

The Company's operations have not proven to be seasonal, although quarterly
revenue and net income may vary. Although the Company cannot accurately
determine the amounts attributable thereto, the Company has been affected by
inflation through increased costs of employee compensation and other operating
expenses. The Company believes that inflation has not had a material effect
on the Company's results of operation or financial condition.

MARKETING AND SALES

DOMESTIC

FastComm sells its products primarily via indirect channels such as value added
resellers, systems integrators, major telephone companies, PTT's, OEM's and
distributors. These entities provide the installation and local maintenance
support required by end-user customers. The Company has chosen not to seek
direct sales to end users that do not provide their own field support
organization.

As of July 1997, resellers of the Company's products include Newbridge Networks
Inc., Nynex, Unisys, GTE, Ascom Timeplex, General DataComm (GDC), Optical Data
Systems (ODS) and Alcatel Data Networks. These resellers, along with others
not mentioned, issue firm purchase orders to the Company, take volume shipments
against these orders and resell the FastComm product to smaller dealers and end
users. Title to products transfers to the reseller upon shipment.

Certain Resellers may request a stock adjustment/rotation twice annually and a
stock update at any time. "Stock adjustment/rotation" and "stock update" are
agreements whereby FastComm permits a reseller, at FastComm's sole discretion,
to return already purchased but unused and still current products to FastComm.
Stock adjustments and updates, which require the approval of an officer of
FastComm, are granted for specific purposes:

- - Stock adjustment/rotation allows an exchange for other FastComm products of
equal value. At the sole discretion of FastComm, stock adjustments may be
limited to 10% or 20% of the value of product ordered and accepted by the
reseller during the prior six-month period.

- - Stock updates may be approved for either warranty revalidation and/or
software revision level changes on products that are then returned to the
dealer. At FastComm's sole discretion, returned products may be exchanged
for the same types of equipment from inventory.

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FastComm, at its sole discretion, may charge a reseller a "restocking charge"
of up to 20% to execute a stock adjustment or stock update. Stock
adjustment/rotation and stock update do not permit distributors to return
purchased merchandise for a refund.

The Company's practices concerning stock adjustment/rotation and stock updates
are believed to be consistent with those of the communications manufacturing
industry, based on management's experiences with similar companies.

Normally, payment in full is due within thirty days from date of shipment to
the reseller. The Company offers extended payment terms in certain situations.
The Company also offers prompt payment discounts. Although normal payment terms
are net 30 days from date of shipment, as a practical matter, the Company
normally receives payments on accounts receivable beyond thirty (30) days, even
from its most credit-worthy customers. Management does not believe that its
credit and collection history is substantially different from other companies
in the data-communications industry, based on management's experiences with
similar companies.

With the exception of the stock rotation policies as discussed above and
product warranty, the Company is not contractually obligated to accept returned
merchandise.

During fiscal year 1997 sales to System One Corporation and GTE Telephone
Operations accounted for 29% and 16% of sales, respectively. During fiscal year
1996 sales to System One Corporation and GTE Telephone Corporation accounted
for 31% and 21% of sales, respectively. C&L Communications Corporation
accounted for sales of 15% in fiscal year 1995.

There were no Government contracts during the fiscal year that were subject to
renegotiation of profits or termination.

INTERNATIONAL

In the international marketplace, independent distributors represent the
Company in more than 30 countries. These firms are most often locally owned
and managed, which gives them an important presence in their markets. Terms of
international distribution agreements are similar to domestic agreements and
grant to the distributor similar stock adjustment and stock update rights. In
most cases, a distributor obtains non-exclusive rights to all FastComm products
for a specific geographic area. In 1997, 1996 and 1995, the Company had export
sales to foreign customers totaling $846,000, $1,300,000 and $1,200,000
respectively.

The Company believes that the international marketplace offers excellent sales
opportunities for its products and has established a global sales and marketing
strategy. Accordingly, in September, 1996, FastComm established a regional
headquarters in Australia to serve the Asia and Pacific Rim markets. In
November, 1996, the Company hired an experienced executive to head its sales
and business development efforts in Latin America. Subsequent to the end of
the current fiscal year, the Company retained an experienced executive who will
establish a sales and marketing presence in Europe. It is anticipated that the
partnership with Alcatel Data Networks will enhance the Company's international
business in the future, although no assurance can be given that such will be
the case.

The Company's export sales may be subject to restrictions on foreign
operations, including restrictions imposed by foreign governments on imports as
well as US Government originated restrictions, and are subject to risks
associated with fluctuations in foreign exchange rates. Although substantially
all foreign contracts are denominated, and revenues are paid, in United States
dollars, to the extent the Company receives payments in foreign currencies, it
may incur gains or losses because of exchange fluctuations between currencies.
Moreover, fluctuations in currency exchange rates may cause the Company's
established prices to be relatively more or less expensive in terms of local
currencies.

CUSTOMER SUPPORT AND SERVICE

The Company maintains a technical support staff. Their work primarily supports
resellers, but end users are periodically given technical information and
assistance by telephone. For new products or features, including beta tests,
Company personnel will visit end user sites to participate in installation and
training.

Diebold, Inc. and Unisys have signed agreements with the Company whereby they
assume responsibility for installation and/or maintenance of FastComm products
sold by them or by third parties. The Company anticipates entering into
similar agreements with others in the future.

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PROMOTION

Advertising in trade publications has expanded from pure product/feature
presentations to stress unique benefits and the Company's strong points. Most
publications in which the Company advertises have international circulation,
aiding the Company's selling efforts outside the U.S.

The Company participates regularly in industry trade shows in order to meet
prospective customers, generate sales leads, communicate with the press, and to
do market research. The Company exhibits under its own name and also takes
opportunities to exhibit with its dealers and distributors who show FastComm
products.

COMPETITION

The communications industry is highly competitive. The market for the
Company's products is characterized by rapid technological change, evolving
standards and regulatory developments. Many of the Company's competitors and
potential competitors have greater financial, technological, manufacturing,
marketing and personnel resources than the Company. The Company's success
depends to a large extent on the insight, experience, and energy of its people,
and therefore on its ability to attract and retain experienced professionals.

The primary competition for each of the Company's major products is as follows:

FRAME RELAY ACCESS DEVICES: This continues to be a developing market, where
functionality differences among vendors still persist. FastComm enjoys an
advantage in its ability to handle legacy protocols as well as LAN traffic, an
integral CSU, small size, a low price, and automatic self-configuration
features that simplify installation. Other vendors with distinguishing
features focus on specific applications or market niches, with feature sets or
distribution channels. The EtherFRAD(TM), because of its compatibility with
routers, competes with the low end products of most router vendors. They
attempt to compete on name recognition, size, or backbone router features
rather than strictly as an access product.

DATA COMPRESSORS: The only competitor to the large Time Machine is Magnalink,
a subsidiary of Telco Systems, Inc., which focuses its sales force on this one
product.

ATM ACCESS DEVICES: The LAN SARgent(TM), an Ethernet bridge over T-1 ATM
service, competes in a new market segment where the competition is not clearly
defined. Competition has emerged in the form of add-in modules to existing
routers and bridges, and from new products based on ATM transmission.

VOICE OVER FRAME RELAY: Many FRAD vendors have shipped FRADs with voice
capability, and several have gained reputations for having voice. The initial
shipments of FastComm VoiceFRAD(TM) product occurred during FY 1997. The
VoiceFRAD(TM) product combines the Company's data expertise with voice
functions, and thus set a new benchmark for voice/data integration in a market
that has competed largely on voice quality or voice compression ratios.

LICENSES, PATENTS, AND TRADEMARKS

The communications industry traditionally relies more on trade secrets and
rapid obsolescence than patents. None of the Company's current products is
protected by patent except the autodialer card. This patent expires on
November 21, 2006.

Outside technology is in turn licensed by the Company for its product
development. The cost to license software from commercial vendors is less than
the loaded cost of internal developments. Licensing also speeds product
delivery. All of the software licenses currently owned by the Company are
perpetual. The Company expects to license additional software, particularly in
areas that are highly standardized and have multiple sources to minimize costs.

Microcom Networking Protocol Classes 5 and 7, which provide data compression in
modems, have been licensed permanently by the Company, on a non-exclusive
basis, for a one-time payment made in 1986.

Software related to the ISDN interface was licensed for integration into FRADs.

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MANUFACTURING

The Company's manufacturing process consists of planning, purchasing, material
management, circuit board assembly, final assembly and testing. FastComm
manufacturing personnel perform all of these functions with the exception of
circuit board assembly which for the most part is outsourced to third party
manufacturers. The Company believes that the outsourcing of manufacturing
preserves capital for other business purposes. The Company will continue this
outsourcing activity and will utilize its existing manufacturing facilities for
short runs and prototype development.

The number of components the Company purchases has declined due to its
increased use of third party manufacturers. Component parts that the Company
does purchase are normally delivered on an as-needed basis to control inventory
levels and working capital needs. In the 1994 fiscal year, the Company
negotiated reduced component prices from essentially all of its suppliers based
on a best-efforts commitment to purchase all expected quantities from the same
sources. These agreements remain in place, and in some instances, further
price reductions have been negotiated. The Company continues to negotiate with
all of its suppliers in an effort to obtain the best pricing possible.

All but a few specialized components are available from multiple sources.
Single-source items are all from large vendors with stable histories of
supplying material as needed. FastComm has established strong relationships
with key vendors to reduce the risk of significant shortages or delays relating
to availability of materials. Shortages or delays in the supply of components,
however, could adversely affect the Company's ability to meet scheduled product
shipments in any particular fiscal quarter, which could materially affect the
Company's near term operating results. Management believes the loss of any
supplier would not be materially detrimental to the Company's business in the
long term.

The Company enters into contracts with other manufacturers to acquire equipment
to resell. The Company puts its name or that of a customer on these products
for its existing distribution channels. These products include VoiceFRADs(TM)
which the Company resells under both its own name and under that of customers.

The Company employs a Quality Assurance Manager who reports directly to the
President on all quality matters.

During fiscal 1995, the Company transferred, at cost, analog modem raw
materials and subassemblies valued at $273,000 to an unaffiliated electronics
manufacturer. Under the terms of this agreement, the manufacturer will build
and resell the modems to FastComm on an as needed basis or may sell the modems
to its own customers. No revenue was recognized in connection with this
transfer of inventory.

Under the original terms of this agreement, the electronics manufacturer may at
its option, require the Company to repurchase any modem raw materials on hand
after calendar 1995. To date, the electronics manufacturer has not exercised
this option. The Company continues to purchase analog modems from this
manufacturer and resells such modems to its customers.

Management knows of no material effect on its business from compliance with
environmental laws and regulations.

EMPLOYEES

At July 8, 1997, the Company had 78 full-time employees. None of the Company's
employees is covered by a collective bargaining agreement, and the Company
believes that its employee relations are satisfactory.

ITEM 2. PROPERTIES

The Company's executive, administrative, manufacturing, research and
development and marketing operations are located in a leased 17,000 square foot
facility in Sterling, Virginia. Aggregate base rent and common charges for
this facility approximated $218,000 for the fiscal year ended April 30, 1997.
This facility lease expires in May of 1998 and contains various early
termination or extension provisions as well as options to lease additional
space.

The Company leases an additional 6,000 square foot facility in Lawrenceville,
Georgia, that supports the operation of its wholly owned subsidiary, Comstat
Datacomm Corporation. The Company entered into this agreement in February,
1997. Aggregate base rent and common charges for this facility approximated
$22,000 for the fiscal year ended April 30, 1997. Under the terms and
conditions of this lease which expires in January 1998, FastComm will be
granted the first right of refusal for two additional lease terms of two years
each.

The Company also leases a small sales office in Colorado.

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Management believes that its leased facilities adequately serve the Company's
present needs.

ITEM 3. LEGAL PROCEEDINGS

The United States Securities and Exchange Commission ("SEC") is currently
conducting an inquiry pursuant to an order directing a private investigation
relating to certain prior public disclosures and periodic reports of the
Company. This inquiry, which commenced in September, 1994, is confidential and
should not be construed as an indication by the SEC or its staff that any
violations of law have occurred. The Company is cooperating with the SEC
Staff.

The Company is a party to two lawsuits filed by a former employee and director,
Gary H. Davison. Davison commenced these actions on March 13, 1997, in the
Circuit Court of Fairfax County, Virginia. He seeks judgment and damages for
wrongful termination of employment, fraud, breach of contract and tortious
interference with contractural relations. On July 11, 1997 the claim for
wrongful termination was dismissed with Davison given leave to amend his
complaint. On May 19, 1997, the claim for fraud was non-suited and the claim
for tortious interference with contractural relations was dismissed with
prejudice.

The Company's position, as reflected in its demurrers sustained by the Court,
is that Mr. Davison's allegations with respect to wrongful termination fail to
demonstrate that his termination violated public policy. Mr. Davison's claim
for breach of contract is based upon an alleged agreement between himself and
the Company concerning the immediate vesting to him of options to purchase
100,000 shares of FastComm common stock on the date he began employment with
FastComm. The Company has provided Davison's counsel with documents signed by
Davison and filed with the U.S. Securities and Exchange Commission on which
Davison failed to report the existence of this alleged agreement, as he was
obligated to do under federal securities law. These documents appear to be
entirely inconsistent with the allegations in Davison's complaint. The Company
believes that it has meritorious defenses to these lawsuits and intends to
defend these actions vigorously.

No other material legal proceeding to which the Company is party or to which
the Company is subject is pending and no such proceeding is known by the
Company to be contemplated.

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

There were no matters submitted to a vote of security holders of the Company
during the year ended April 30, 1997.

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PART II.

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

The Common Stock of the Company is traded on the NASDAQ National Market System
under the symbol "FSCX." The following table sets forth the range of high and
low bid prices or sales prices, as applicable, of the Common Stock for each
fiscal quarter during the two most recent fiscal years, as furnished by NASDAQ.
The bid prices represent prices between dealers, do not include retail markups,
markdowns or commissions and do not necessarily represent actual transactions.

High Low
---- ---

Fiscal Year Ended April 30, 1997:

First Quarter . . . . . . . . . . . . . . . . . . . . . . . $19 7/8 $12
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . 13 7 1/2
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . 9 1/8 5 5/8
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . 7 3/8 4 1/16

High Low
---- ---

Fiscal Year Ended April 30, 1996:

First Quarter . . . . . . . . . . . . . . . . . . . . . . . $5 7/8 $4 3/4
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . 7 4 1/2
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . 7 3/8 4 5/8
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . 17 1/2 6 15/16

As of July 8, 1997, there were 202 registered holders of record of the Common
Stock and the closing sale price on such date for the Common Stock as reported
by NASDAQ was $6.75 per share.

The Company has not paid dividends on its Common Stock. The Company
anticipates that it will retain all earnings to finance the operation and
growth of its business and does not anticipate paying cash dividends on the
Common Stock in the foreseeable future.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

THE COMPANY CAUTIONS THAT CERTAIN STATEMENTS IN THIS REPORT AND IN COMPANY'S
OTHER PERIODIC REPORTS FILED PURSUANT TO THE UNITED STATES SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), IN MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE , MAY
BE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE EXCHANGE
ACT, THE "SAFE HARBOR" FOR FORWARD LOOKING STATEMENTS ENACTED IN THE PRIVATE
SECURITIES LITIGATION REFORM ACT ON 1995. THE FORWARD LOOKING STATEMENTS THAT
MAY BE CONTAINED IN THE COMPANY'S REPORTS UNDER THE EXCHANGE ACT AND IN OTHER
ORAL OR WRITTEN STATEMENTS MADE BY THE COMPANY OR BY ITS AUTHORIZED
REPRESENTATIVES INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. AS A CONSEQUENCE,
ACTUAL RESULTS MIGHT DIFFER MATERIALLY FROM RESULTS FORECAST OR SUGGESTED IN
THESE FORWARD LOOKING STATEMENTS. SOME OF THESE RISKS AND UNCERTAINTIES ARE
IDENTIFIED IN THE DISCUSSION TO FOLLOW. ADDITIONAL INFORMATION REGARDING THESE
FACTORS AND OTHER IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY MAY BE REFERRED TO AS PART OF PARTICULAR FORWARD LOOKING STATEMENTS.
THE FORWARD-LOOKING STATEMENTS MADE BY THE COMPANY OR ON ITS BEHALF ARE
QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE IMPORTANT FACTORS DISCUSSED
BELOW AND TO THOSE THAT MAY BE DISCUSSED AS PART OF PARTICULAR FORWARD-LOOKING
STATEMENTS.

THE COMPANY CAUTIONS THAT THE FOLLOWING IMPORTANT FACTORS, AMONG OTHERS, COULD
CAUSE ACTUAL RESULTS FOR THE FISCAL YEAR ENDED APRIL 30, 1998 AND FOR
SUBSEQUENT FINANCIAL REPORTING PERIODS TO DIFFER MATERIALLY FROM THOSE FORECAST
OR SUGGESTED IN ANY FORWARD-LOOKING STATEMENT MADE BY THE COMPANY OR ON ITS
BEHALF, IN THIS REPORT AND OTHERWISE. A NUMBER OF THESE IMPORTANT FACTORS HAVE
BEEN DISCUSSED IN THIS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
APRIL 30, 1997 AND ITS QUARTERLY REPORTS ON FORM 10-Q PREVIOUSLY FILED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS AND GROWTH RATE

A significant portion of the Company's sales are derived from products shipped
against firm purchase orders received in each fiscal quarter and from products
shipped against firm purchase orders released in that quarter. Unforeseen
delays in product deliveries or the closing of sales, introduction of new
products by the Company or its competitors, fluctuations in customer capital
expenditures or other conditions affecting the networking industry or the
economy during any fiscal quarter could cause quarterly revenue and net
earnings to vary greatly. Further, the Company schedules some production of
its products and budgets expenses based on forecasts of sales, which are
difficult to predict. The Company's manufacturing procedures are designed to
assure rapid response to customer demand, but may, in certain circumstances,
create risk of excess or inadequate inventory of orders do not match forecast.
Moreover, shortages or delays in the supply of manufacturing components at
shipments at acceptable prices could adversely affect the Company's ability to
meet scheduled product shipments in any particular quarter, which could
materially affect the Company's operating results. Because a substantial
portion of customer orders are filled within the fiscal quarter of receipt, and
because of the ability of customers to revise or cancel orders and change
delivery schedules without significant penalty, quarter to quarter revenues
and, to a greater degree, net earnings, may be subject to greater variability
and less predictability.

TECHNOLOGICAL CHANGES

The markets for the Company's products are characterized by continuous
technological change, evolving industry standards and frequent product
introductions. Such changes in the market may adversely affect the Company's
ability to sell its products. The Company's ability to anticipate changes in
technology, industry standards and to develop and introduce new and enhanced
products on a timely basis that are successful in the market, will be
significant factors in the Company's competitive position and its prospects for
growth. Moreover, if technologies or standards supported by the Company's
products or carrier service offerings based on the Company's products become
obsolete or fail to gain widespread commercial acceptance, the Company's
business may be adversely affected. As a result, Management believes that
significant expenditures for research and development will be required in the
future. Research and development project schedules for high technology
products are inherently difficult to predict , and there can be no assurance
that the Company will achieve its expected initial shipment dates of products
in development. Because timely availability of new and enhanced products is
critical to the success of the Company, delays in availability of these
products, or lack of market acceptance of such products, could adversely affect
the Company.

COMPETITION

The market for the Company's product is characterized by intense competition.
With the development of the worldwide communications market and the growing
demand for related equipment, numerous manufacturers such as the Company have
emerged to offer products for these markets in competition with traditional
communications equipment suppliers. Competition could further increase if new
companies enter the market or if existing competitors expand their product
lines or upgrade existing products to accommodate new technologies and
features. An increase in competition could require increased spending by the
Company on research and development and

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sales and marketing and may otherwise adversely affect the Company's business.
Many of the Company's competitors and potential competitors have greater
financial, technological, manufacturing, marketing, and personnel resources
than the Company.

DEPENDENCE ON KEY EMPLOYEES

The Company's success depends upon the continued contributions of its
employees, many of whom would be difficult to replace. FastComm believes that
its future success will depend upon its ability to attract and retain skilled
and talented engineers, sales and marketing personnel and management. Failure
to attract and retain key employees could adversely affect the Company's
business and operating results.

MARKET PRICE VOLATILITY OF COMMON SHARES

The Company's common shares have been subject to substantial market price
volatility, some of which has occurred when there have been variations between
the Company's actual or anticipated financial results and the expectations of
that of the financial community and in the aftermath of public announcements by
the Company and its competitors. Further, the stock market has experienced
extreme price and volume fluctuations from time to time which have affected the
market price of many technology companies in particular and which have often
been unrelated to the operating performance of these companies. These broad
market fluctuations, as well as general economic conditions, may adversely
affect the market price of the Company's common shares.

OTHER FACTORS

The Company further cautions that the factors referred to above and those
referred to as part of particular forward looking statements may not be
exhaustive, and that new risk factors emerge from time to time in its rapidly
changing business. The Company does not undertake to update any forward
looking statements it may make or has made on its behalf to reflect changes it
its expectations or assumptions or the risks and uncertainties referred to.

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ITEM 6. SELECTED FINANCIAL DATA

The following sets forth certain selected consolidated financial data for the
five fiscal years in the period ended April 30, 1997. The consolidated
statement of operations data for the fiscal years ended April 30, 1997, April
30, 1996 and April 30, 1995 and the consolidated balance sheet data at April
30, 1997 and April 30, 1996 are derived from and are qualified by reference to
the audited consolidated financial statements of the Company audited by BDO
Seidman, LLP, the Company's independent certified public accountants, included
elsewhere, herein. The consolidated statement of operations data for the fiscal
years ended April 30, 1994 and 1993 and the consolidated balance sheet data at
April 30, 1995, 1994 and 1993 are derived from consolidated financial
statements of the Company not included in this Report. The financial data
should be read in conjunction with the consolidated financial statements and
related notes and other financial information and Management's Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere in
this Report.

FISCAL YEAR ENDED APRIL 30,
----------------------------------------------------------
1993
----
1997 1996 1995 1994 (RESTATED)
---- ---- ---- ---- ----------
($000's except per share data)

STATEMENT OF INCOME DATA:
Total revenues $11,163 $10,009 $4,166 $5,136 $6,398
------- ------- ------ ------ ------
Operating costs and expenses
Cost of goods sold 4,737 5,047 2,907 2,128 3,163
Other operating expenses 7,202 5,722 5,357 5,063 2,810
------- ------- ------ ------ ------

Total operating costs and expenses 11,939 10,769 8,264 7,191 5,973
------- ------- ------ ------ ------
Operating income (loss) (776) (760) (4,098) (2,055) 425

Other income (expense), net 181 129 14 46 152
Income tax (expense) benefit -0- -0- -0- 10 (14)
------- ------- ------ ------ ------
(595) (631) (4,084) ($1,999) $ 563
======= ======= ====== ======= ======

Net income (loss) per share $(0.06) $(0.07) $(0.49) $(0.27) $ 0.08
======= ======= ====== ======= ======

Weighted average number of shares 9,961 9,522 8,409 7,521 6,876
outstanding during each period

Dividends -0- -0- -0- -0- -0-

BALANCE SHEET DATA:

Total assets $12,622 $9,034 $7,577 $7,248 $7,001
Total long term obligations $3,000 $-0- $ 132 $ 152 $333
Shareholders' equity $7,759 $6,880 $6,149 $5,600 $5,300

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

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED IN THIS ANNUAL REPORT. IN
ADDITION, THE COMPANY DESIRES TO TAKE ADVANTAGE OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SPECIFICALLY, THE
COMPANY WISHES TO ALERT READERS THAT THE FACTORS SET FORTH IN ITEM 5, "MARKET
FOR REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS - CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING INFORMATION", AS WELL AS OTHER FACTORS, IN
THE PAST HAVE AFFECTED AND IN THE FUTURE COULD AFFECT THE COMPANY'S ACTUAL
RESULTS, AND COULD CAUSE THE COMPANY'S RESULTS FOR FUTURE QUARTERS TO DIFFER
MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING STATEMENTS MADE BY OR ON
BEHALF OF THE COMPANY.

BUSINESS ACQUISITION

During the fiscal year ended April 30, 1997, the Company acquired Comstat
Datacomm Corporation, ("CDC or Comstat"), a Georgia corporation engaged in the
data communications business. Comstat offers various products and solutions
that serve to broaden FastComm's product line. The aggregate purchase price
amounted to $1,000,000 (subject to post closing adjustments) consisting of
$900,000 funded at closing and an additional $100,000 of contingent
consideration to be funded pending the occurrence of certain events the outcome
of which management believes is determinable beyond a reasonable doubt. The
Company funded this acquisition through the issuance of 146,600 shares of its
common stock. An additional 43,948 shares of common stock with a fair value of
approximately $300,000 have been placed in escrow and will be issued upon CDC
achieving certain revenue targets for the fiscal year ended May 31, 1998. If
such revenue targets are not met, the escrow shares will be canceled.

The acquisition was accounted for as a purchase and, accordingly, the acquired
assets and liabilities were recorded at their estimated fair market values at
the date of acquisition. The purchase price plus costs directly attributable
to the completion of the acquisition have been allocated to the assets and
liabilities acquired. The Company recorded approximately $587,000 in goodwill
related to this transaction. This goodwill will be amortized over a seven year
period.

Approximately $75,000 of the total purchase price represented the value of in
process research and development that had not reached technological feasibility
and was charged to the Company's operations. As this transaction was concluded
on the last business day of the Company's third fiscal quarter, the operating
results of Comstat are consolidated into the operating results of the Company
commencing in the fourth fiscal quarter of the current fiscal year.

CONVERTIBLE DEBENTURES

In April 1997, the Company issued $3,000,000 in 5.0% Convertible Debentures due
April 2001. For the first 180 days following the issuance, the debentures are
convertible at the option of the holder into common stock at a conversion price
equal to the average closing bid price on NASDAQ ten trading days prior to
conversion. If the conversion occurs more than 180 days after issuance, the
conversion price is the lesser of 125% of the average closing bid prices on
NASDAQ for the ten trading days prior to issuance, or, 90% of the average
closing bid prices on NASDAQ for the ten trading days prior to the conversion
date. In addition, if the conversion occurs more than 180 days after issuance,
the holder will receive one warrant for every for every five shares of common
stock received upon conversion of the debentures. If the conversion occurs
more than 360 days from the date of issuance, the holder will receive one
warrant for every 2 1/2 common shares received upon conversion of the
debentures. Each warrant will have a strike price set at 125% of the market
price of the Company's common stock at the time of conversion.

Subsequent to April 30, 1997, the Company issued an additional $2,000,000 in 5%
Convertible Debentures, in May 1997, due May 2001, under terms substantially
similar to that of the $3,000,000 issuance described above

The Company intends to seek shareholder approval for the creation of a new
class of Series A Convertible Preferred Stock and, assuming such shareholder
approval, exercise its right to convert all of the aforementioned debentures
into Series A Convertible Preferred Stock.

The terms of the Convertible Debentures provide for conversion at a discount to
the market commencing 181 days after issuance. The value of the discount,
using a conversion price of 90% of the average closing bid prices on NASDAQ for
the ten trading days prior to the conversion date, is approximately $550,000.
The value of the discount, using a conversion price of 125% of the average
closing bid prices on NASDAQ for the ten trading days prior to the issuance
date, is not determinable at this time. Based on the foregoing, assuming that
the holders of the Convertible Debentures elect not to exercise their option to
convert the debentures into common stock of the company within 180 days of
issuance (i.e. at a conversion price of 100% of market), the Company will be
required

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to determine and recognize on the 181st day from issuance the amount of the
conversion discount. The Company expects that the conversion discount will
reduce income available to common share holders during fiscal 1998 by a minimum
of $550,000 in the form of a one-time non-cash charge to either interest
expense (if the debentures remain outstanding 181 days after issuance) or
preferred dividends (if the debentures are converted into a newly, created
convertible preferred stock).

RESULTS OF OPERATIONS

The following table sets forth, for the fiscal years indicated, the percentage
of revenues represented by certain items in the Company's consolidated
statements of income.

Fiscal Year Ended April 30,
---------------------------
1997 1996 1995
---- ---- ----

Revenues 100% 100% 100%
---- ---- ----
Operating costs and expenses:
Cost of goods sold 42% 50% 70%
Selling, general and administrative 44% 40% 101%
Research and development 18% 14% 22%
Depreciation and amortization 3% 3% 5%
---- ---- ----
107% 107% 198%
---- ---- ----
Operating (loss) income (7%) (7%) (98%)

Other income (expense), net 2% 1% -

Income tax (expense) benefit - - -

Net (loss) income (5%) (6%) (98%)
==== ==== ====

FISCAL 1997 COMPARED TO FISCAL 1996

Total revenues increased from $10,009,000 to $11,163,000 or by 12% during
fiscal 1997 as compared to fiscal 1996. The $1,154,000 increase was primarily
attributable to $775,000 in sales generated by Comstat Datacomm Corporation
that was acquired by the Company during the fiscal year 1997 and increased unit
sales volumes of frame relay products. Frame relay product sales increased
from $8,553,000 to $8,896,000 or by 4% during fiscal 1997 as compared to fiscal
1996. Frame Relay product sales, as a percentage of total product sales,
decreased from approximately 85% in fiscal 1996 to approximately 80% in fiscal
1997. The Company believes its future growth will be achieved through the sale
of frame relay and other digital products and accordingly anticipates the sale
of its analog based products will decline in the future.

During the fiscal year ended April 30, 1997, two customers accounted for 29.3%
and 16.4% of total sales.

Gross margins, as a percentage of total revenues, increased from 50% to 58%
during fiscal 1997 as compared to fiscal 1996. The 58% gross margin achieved in
the current fiscal year is consistent with the Company's expectations based on
the level of business and the industry in which it operates. The eight
percentage point improvement in gross margin is primarily attributable to
improved manufacturing efficiencies through the outsourcing of certain labor
intensive manufacturing activities and reduced component costs.

The Company recorded a $100,000 reduction to its reserve for inventory
obsolescence during the fiscal 1997 to adjust the April 30, 1997 ending
allowance to $500,000. This adjustment reflects the continued sales of
analog modem and data compression products and the related reduction in such
inventories. Further, during the fiscal year,

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the Company disposed of approximately $80,000 in obsolete inventory.
Management believes that its reserve for inventory obsolescence is adequate.

Selling, general and administrative expenses increased from $4,038,000 in
fiscal 1996 to $4,822,000 in fiscal 1997. This 19% increase in expense is
attributable to the costs associated with the establishment of a sales office
in Australia ($140,000), costs associated with the operation of Comstat
($166,000), an enhanced marketing and advertising program ($223,000), increased
salary and related costs associated with additional employees ($100,000), and
increased international travel ($74,000).

Research and development expenditures consist primarily of hardware and
software engineering, personnel expenses, subcontracting costs and, to a lesser
degree, equipment and facilities. Research and development expenses increased
from $1,412,000 in fiscal 1996 to $2,042,000 in the current fiscal year. This
45% increase is primarily attributable increased research and development
manpower ($213,000), new product prototype development ($295,000), costs
associated with the operation of Comstat ($34,000), and a $75,000 charge
related to the acquisition of Comstat representing the value of in process
research and development that had not reached technological feasibility.

The markets for the Company's products are characterized by continuous
technological change. Management believes that significant expenditures for
research and development will continue to be required.

Depreciation and amortization expenses increased from $274,000 in fiscal 1996
to $339,000 in fiscal 1997. This 24% increase is primarily attributable to the
amortization of goodwill associated with the acquisition of Comstat ($18,000),
depreciation of Comstat fixed assets ($6,000), and depreciation associated with
other fixed asset additions.

Under Statement of Accounting Standards No. 109 (FAS 109), deferred tax assets
and liabilities are determined based on differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse. The Company has provided a full valuation allowance against its net
deferred tax assets due to uncertainties regarding their realization. Although
the Company has tax net operating loss carryforwards available, management
believes that, should the Company generate taxable income during fiscal 1998,
it will be required to make alternative minimum tax payments on earnings.

FISCAL 1996 COMPARED TO FISCAL 1995

Total revenues increased from $4,166,000 to $10,009,000 or by 140% during
fiscal 1996 as compared to fiscal 1995. The $5,843,000 increase was primarily
attributable to increased sales volumes of frame relay products. Frame relay
product sales increased from $2,923,000 to $8,522,000 or by 191% during fiscal
1996 as compared to fiscal 1995. Frame Relay access product sales, as a
percentage of total product sales, increased from approximately 70% in fiscal
1995 to approximately 85% in fiscal 1996. During the fiscal year ended April
30, 1996, two customers accounted for 31.2% and 21.2% of total sales. Analog
modem and data compression product sales, as a percentage of total product
sales, decreased from approximately 20% in fiscal 1995 to approximately 5% in
fiscal 1996.

Gross margins, as a percentage of total revenues, increased from 30% to 50%
during fiscal 1996 as compared to fiscal 1995. The 50% gross margin achieved in
the fiscal year 1996 is consistent with the Company's expectations based on the
level of business and the industry in which it operates. The twenty percentage
point improvement in gross margin is primarily attributable to a fiscal 1995
increase in the Company's reserve for inventory obsolescence (reducing margins
by eight percentage points net); a shift in product mix to frame relay products
and decreased per unit fixed overhead absorption related to the significantly
higher sales achieved in the current fiscal year.

Selling, general and administrative expenses decreased from $4,225,000 in
fiscal 1995 to $4,037,000 in fiscal 1996. This 5% decrease in expense is
attributable to the reduction in senior management staff ($283,000), an
increase in professional fees associated with the current SEC investigation
(approximately $182,000 - - See Item 3. Legal Proceedings), decreased travel
cost (51,000), increased office and occupancy costs associated with expanded
facility and communications requirements ($132,000) and a $164,000 decrease in
bad debt expense associated with a $104,000 reduction the Company's allowance
for doubtful accounts.

The Company recorded a $104,000 reduction to its allowance for doubtful
accounts during the fiscal 1996 fourth quarter to adjust the April 30, 1996
ending allowance to $100,000. This adjustment reflects improved collections
and reduced product returns related to fiscal 1996 trade accounts receivable.

Research and development expenditures consist primarily of hardware and
software engineering, personnel expenses, subcontracting costs and, to a lesser
degree, equipment and facilities. Research and development expenses increased
from $916,000 in fiscal 1995 to $1,411,000 in the current fiscal year. This
54% increase is primarily attributable increased research and development
manpower ($295,000), new product prototype development ($133,000) and increased
office and occupancy costs and communication requirements ($84,000).

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Depreciation and amortization expenses increased from $217,000 in fiscal 1995
to $274,000 in fiscal 1996. This 25% increase is primarily attributable to the
amortization of a patent.

FOURTH QUARTER ADJUSTMENTS

During the fourth quarter ended April 30, 1997, the Company reduced its reserve
for inventory obsolescence by $100,000 which had the effect of reducing the
operating loss by $100,000 or $.01 per share.

During the fourth quarter ended April 30, 1996, the Company reduced its
allowance for doubtful accounts by $104,000 which had the effect of reducing
the operating loss by $104,000 or $.01 per share.

During the fourth quarter ended April 30, 1995, the Company increased its
allowance for doubtful accounts by $200,000 ($0.02 per share) to take account
of products returned and credited to customers in the fourth quarter as well as
to provide for future sales returns and allowances. The Company also increased
its reserve for inventory obsolescence in the fourth quarter by $295,000 ($0.04
per share) primarily to take account of certain slow moving data compression
and analog modem inventory.

LIQUIDITY AND CAPITAL RESOURCES

During the fiscal year ended April 30, 1997, the Company acquired Comstat
Datacomm Corporation, ("CDC" or "Comstat"), a Georgia corporation engaged in
the data communications business. The aggregate purchase price amounted to
$1,000,000 (subject to post closing adjustments) consisting of $900,000 funded
at closing and an additional $100,000 of contingent consideration to be funded
pending the occurrence of certain events the outcome of which management
believes is determinable beyond a reasonable doubt. The Company funded this
acquisition through the issuance of 146,563 shares of its common stock. An
additional 43,985 shares of common stock with a fair value of approximately
$300,000 have been placed in escrow and will be issued upon CDC achieving
certain revenue targets for the fiscal year ended May 31, 1998. If such
revenue targets are not met, the escrow shares will be canceled

During fiscal year 1997, the Company used approximately $2,259,000 in cash to
fund its operating activities. This amount includes $82,000 required to fund
the net loss, after adjusting for non-cash expenses (consisting principally of
depreciation, amortization and provision for doubtful accounts). In addition,
$765,000 was used by increases in accounts receivable, $867,000 was invested in
inventory and $467,000 was used to fund accounts payable and other current
liabilities.

Accounts receivable increased during fiscal year 1997 due to higher revenue and
the inclusion of receivables associated with the Comstat acquisition. Product
returns from customers declined during fiscal year 1997 and management
anticipates that this trend will continue. The Company has a $110,000
allowance for doubtful accounts at April 30, 1997. Management believes that its
allowance for doubtful accounts is adequate.

During fiscal year 1997, two customers accounted for 29.3% and 16.4% of total
sales. These sales were made under normal terms and conditions to an end user
and to a large system integrator with a designated end user customer.
Subsequent to fiscal year end but prior to the date of this report, these
accounts receivable were collected.

Inventory levels increased during fiscal year 1997. This increase is primarily
attributable to inventory purchased as part of the Comstat acquisition and
increased inventory of frame relay subassemblies. Further, the Company
recorded a $100,000 reduction to its reserve for inventory obsolescence during
the fiscal 1997 to adjust the April 30, 1997 ending allowance to $500,000.
This adjustment reflects the continued sales of analog modem and data
compression products and the related reduction in such inventories. Further,
during the fiscal year, the Company disposed of approximately $80,000 in
obsolete inventory. Management believes it will be able to ship and/or
liquidate substantially all its current inventory levels profitably. Management
believes its reserve for inventory obsolescence is adequate.

During fiscal year 1997, the Company closed a $5 million private convertible
debenture offering. The securities were purchased under Regulation D by
institutional investors. The Company intends to seek shareholder approval for
the creation of a new class of Series A Convertible Preferred Stock and,
assuming such shareholder approval, exercise its right to convert all the
aforementioned debentures into Series A Convertible Preferred Stock. Both the
debenture and the related preferred stock earn a 5% dividend payable in
common stock or cash at the option of the Company. The Company received $3
million from this offering in April, 1997. The remaining $2 million was
received in May, 1997, subsequent to fiscal year end. ( See Item 7.
Convertible Debentures)

The Company believes that current levels of cash and cash equivalents
($4,036,000 at April 30, 1997) plus the $2 million in cash received in May 1997
from its private convertible debenture offering plus expected cash generated
from the ongoing collection of its current and future accounts receivable and
inventory levels in the normal course of events will be sufficient to meet the
Company's current cash requirements during fiscal 1998 and into the foreseeable
future. At April 30, 1997, the Company had over $8.5 million of working
capital and a current ratio of over 5.5 to 1. None of the Company's accounts
receivable or inventories are collateralized currently.

19
20
Management believes that inflation did not have a material effect on operations
during the fiscal year ended April 30, 1997.

In fiscal 1998, the Company's cash commitments include minimum payments of
$228,000 under its operating lease arrangements and $29,000 to retire short
term debt. Management believes that expenditures for research and development
in fiscal 1998 will continue to be significant. The Company anticipates
capital spending for software, computer and test equipment and furniture and
fixtures in fiscal 1998. Where possible, such capital requirements are
expected to be met through lease financing arrangements.

FISCAL 1997 COMPARED TO FISCAL 1996

Cash used in operating activities increased from $447,000 in fiscal 1996 to
$2,259,000 in fiscal 1997. The $1,812,000 increase in cash used in operating
activities is primarily attributable to changes in working capital items in
fiscal 1997 compared to fiscal 1996, including a $1,463,000 net change in cash
flows to fund the pay down of current liability balances in fiscal 1997 and a
$999,000 net change in cash flows to fund the increase in inventory levels.

Cash used by investing activities amounted to $511,000 in fiscal 1997 as
compared to cash provided of $29,000 in fiscal 1996. The $540,000 increase is
primarily attributable a $266,000 increase in fixed asset purchases, the
issuance of a $300,000 note receivable under the terms and conditions of the
agreement to acquire Comstat Datacomm partially offset by $355,000 in cash
assumed as part of the Comstat acquisition. In fiscal 1996, the Company
received $375,000 from the sale of restricted investments. No such sale
occurred in fiscal 1997.

Cash provided by financing activities increased from $1,120,000 in fiscal 1996
to $2,998,000 in fiscal 1997. The $1,878,000 increase is primarily
attributable to the $2,810,000 in net proceeds from the issuance of convertible
debentures as compared to $-0- in fiscal 1996, offset by reduced net proceeds
received from the exercise of stock options of $473,000 in fiscal 1997 as
compared to $1,362,000 in fiscal 1996.

FISCAL 1996 COMPARED TO FISCAL 1995

Cash used in operating activities decreased from $1,929,000 in fiscal 1995 to
$447,000 in fiscal 1996. The $1,482,000 decrease in cash used in operating
activities is primarily attributable to the $2,770,000 decrease in the net
loss, net of non cash expenditures, a $933,000 improvement with respect to
changes in current liability balances offset by a $1,567,000 decline in
changes in cash used to fund accounts receivable balances and a $483,000
increase in changes in cash used to purchase inventory.

Cash provided by investing activities amounted to $29,000 in fiscal 1996 as
compared to cash used of $109,000 in fiscal 1995. The $138,000 decline is
primarily attributable to the $375,000 proceeds received from the sale of
restricted investments offset by a $192,000 increase in asset purchases and the
purchase of a $45,000 long term investment.

Cash provided by financing activities decreased from $4,168,000 in fiscal 1995
to $1,120,000 in fiscal 1996. The $3,048,000 decrease is primarily
attributable to the $4,201,000 in funds received in fiscal 1995 from a private
placement and Regulation S stock offering as compared to $-0- in fiscal 1996,
partially offset by greater net proceeds received from the exercise of stock
options of $1,362,000 in fiscal 1996 as compared to $211,000 in fiscal 1995.

NEW ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" is effective for years beginning after December 15, 1995 and was adopted by
the Company as of May 1, 1996. This statement requires that long-lived assets,
including certain intangibles, held and used by the Company be reviewed for
potential impairment. This new pronouncement did not have a material effect on
the Company's financial statements when adopted.

SFAS No. 123, "Accounting for Stock Based Compensation" is effective for years
beginning after December 15, 1995 and was adopted by the Company as of May 1,
1996. This statement establishes financial accounting and reporting standards
for stock based employee compensation plans. SFAS No. 123 permits, but does
not require, a fair-value based method of accounting for employee stock option
plans which results in compensation expense recognition when stock options are
granted. As permitted by SFAS No. 123, the Company will provide pro forma
disclosure of net income and earnings per share, as applicable in the notes to
the consolidated financial statements.

SFAS No. 128, "Earnings Per Share" is effective for periods ending after
December 15, 1997. This statement revises the manner in which earnings per
share is calculated and requires the restatement, when first applied, of prior
period earnings per share data. The Company does not expect the adoption of
this pronouncement to have a material effect on the previously reported
earnings per share data.

20
21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following financial statements and financial statement schedules are filed
as part of this Report:

Page
----

Report of Independent Certified Public Accountants F-1

Balance Sheets at April 30, 1997 and 1996 F-2

Statements of Operations for the Years Ended April 30, 1997, 1996 and 1995 F-4

Statements of Stockholders' Equity for the Years Ended April 30, 1997, 1996 and 1995 F-5

Statements of Cash Flows for the Years Ended April 30, 1997, 1996 and 1995 F-6

Summary of Accounting Policies F-8

Notes to Financial Statements F-13

Financial Statement Schedule: Valuation and Qualifying Accounts (Schedule II) F-27

21
22
FASTCOMM COMMUNICATIONS
CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1997, 1996 AND 1995
23
FASTCOMM COMMUNICATIONS
CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1997, 1996 AND 1995
24
FASTCOMM COMMUNICATIONS CORPORATION

CONTENTS

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1

CONSOLIDATED FINANCIAL STATEMENTS

Balance sheets F-2

Statements of operations F-4

Statements of stockholders' equity F-5

Statements of cash flows F-6

Summary of accounting policies F-8

Notes to financial statements F-13

Schedule of valuation and qualifying accounts F-27

25
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
FASTCOMM COMMUNICATIONS CORPORATION

We have audited the accompanying consolidated balance sheets of FASTCOMM
COMMUNICATIONS CORPORATION AND SUBSIDIARY as of April 30, 1997 and 1996, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended April 30, 1997. We
have also audited the schedule listed in the accompanying index. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule 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 and schedule
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements and schedule. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements and schedule.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of FASTCOMM
COMMUNICATIONS CORPORATION AND SUBSIDIARY at April 30, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended April 30, 1997 in conformity with generally accepted
accounting principles.

Also, in our opinion, the schedule presents fairly, in all material respects,
the information set forth therein.

BDO Seidman, LLP

Washington, D.C.
June 27, 1997

F-1
26
FASTCOMM COMMUNICATIONS CORPORATION

CONSOLIDATED BALANCE SHEETS

April 30, 1997 1996
- ---------------------------------------------------------------------------------------------------------------------

ASSETS

CURRENT
Cash and cash equivalents $ 4,036,336 $ 3,807,855
Accounts receivable, net (Notes 3 and 10) 3,144,906 2,345,824
Receivables from related party (Note 12) 3,895 25,325
Inventories, net (Note 2) 2,897,497 1,732,151
Prepaid expenses and other current assets 329,503 289,453
- ---------------------------------------------------------------------------------------------------------------------

TOTAL CURRENT ASSETS 10,412,137 8,200,608
- ---------------------------------------------------------------------------------------------------------------------

PROPERTY AND EQUIPMENT, at cost, less accumulated
depreciation and amortization (Note 4) 815,401 435,952
- ---------------------------------------------------------------------------------------------------------------------

OTHER
Deferred financing costs (Note 5) 190,279 -
Goodwill (Note 7) 569,165 30,860
Notes receivable (Note 1) 300,000 -
Software license rights and other
intangibles, net 166,474 224,996
Deposits 168,759 141,446
- ---------------------------------------------------------------------------------------------------------------------

TOTAL OTHER ASSETS 1,394,677 397,302
- ---------------------------------------------------------------------------------------------------------------------

$12,622,215 $ 9,033,862
=====================================================================================================================

See accompanying summary of accounting policies and notes to consolidated
financial statements.

F-2
27

FASTCOMM COMMUNICATIONS CORPORATION

CONSOLIDATED BALANCE SHEETS

April 30, 1997 1996
- ------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Current portion of long-term debt (Note 5) $ 29,000 $ 130,585
Accounts payable 1,277,541 1,637,635
Accrued payroll 207,290 159,091
Other current liabilities 349,666 226,205
- ------------------------------------------------------------------------------------------------------------------------

TOTAL CURRENT LIABILITIES 1,863,497 2,153,516
- ------------------------------------------------------------------------------------------------------------------------

CONVERTIBLE DEBENTURES (Note 5) 3,000,000 -
- ------------------------------------------------------------------------------------------------------------------------

TOTAL LIABILITIES 4,863,497 2,153,516
- ------------------------------------------------------------------------------------------------------------------------

COMMITMENTS AND CONTINGENCIES (Note 6)

STOCKHOLDERS' EQUITY (Notes 7 and 8)
Common stock, $.01 par - shares authorized,
25,000,000; issued and outstanding
10,038,022 and 9,786,619 100,380 97,866
Additional paid-in capital 16,079,355 14,608,463
Deficit (8,421,017) (7,825,983)
- ------------------------------------------------------------------------------------------------------------------------

TOTAL STOCKHOLDERS' EQUITY 7,758,718 6,880,346
- ------------------------------------------------------------------------------------------------------------------------

$12,622,215 $ 9,033,862
========================================================================================================================

See accompanying summary of accounting policies and notes to consolidated
financial statements.

F-3
28
FASTCOMM COMMUNICATIONS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Year ended April 30, 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------

REVENUES (Notes 10 and 12)
Product sales $ 10,961,750 $ 9,720,969 $ 3,689,817
Product sales to related parties 43,028 195,427 414,580
Research and development contracts and other 158,551 92,901 61,665
- ----------------------------------------------------------------------------------------------------------------------------

TOTAL REVENUES 11,163,329 10,009,297 4,166,062
- ----------------------------------------------------------------------------------------------------------------------------

OPERATING COSTS AND EXPENSES
Cost of goods sold 4,736,660 5,047,015 2,906,577
Selling, general and administrative 4,821,556 4,037,737 4,224,641
Research and development 2,042,331 1,411,503 916,003
Depreciation and amortization 338,522 273,507 217,326
- ----------------------------------------------------------------------------------------------------------------------------

TOTAL OPERATING COSTS AND EXPENSES 11,939,069 10,769,762 8,264,547
- ----------------------------------------------------------------------------------------------------------------------------

OPERATING LOSS (775,740) (760,465) (4,098,485)
- ----------------------------------------------------------------------------------------------------------------------------

OTHER INCOME (expense)
Other income 64,966 23,218 9,750
Interest income 160,461 127,574 33,142
Interest expense (44,721) (20,975) (28,546)
- ----------------------------------------------------------------------------------------------------------------------------

TOTAL OTHER INCOME 180,706 129,817 14,346
- ----------------------------------------------------------------------------------------------------------------------------

LOSS BEFORE INCOME TAXES (595,034) (630,648) (4,084,139)

PROVISION (BENEFIT) FOR INCOME TAXES (Note 9) - - (10,000)
- ----------------------------------------------------------------------------------------------------------------------------

NET LOSS $ (595,034) $ (630,648) $(4,084,139)
============================================================================================================================

Net loss per common share $ (0.06) $ (0.07) $ (0.49)
- ----------------------------------------------------------------------------------------------------------------------------

Weighted-average number of common shares
outstanding during each year 9,961,107 9,522,000 8,409,000
============================================================================================================================

See accompanying summary of accounting policies and notes to consolidated
financial statements.

F-4
29
FASTCOMM COMMUNICATIONS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Years ended April 30, 1997, 1996 and 1995
- -------------------------------------------------------------------------------------------------
Common Stock
--------------------- Additional
Par Paid-in
Shares Values Capital
- -------------------------------------------------------------------------------------------------

BALANCE, April 30, 1994 8,010,688 $ 80,107 $ 8,643,761
Shares issued through private placement
and Regulation S sales (net of costs) 1,105,458 11,054 4,190,408
Shares issued for stock options 316,400 3,164 207,959
Shares issued for acquisition of
ZyBel Microsystems, Inc. 25,000 250 219,750
Treasury stock retired (Note 16) (13,017) (130) (12,108)
Net loss - - -
- -------------------------------------------------------------------------------------------------

BALANCE, April 30, 1995 9,444,529 94,445 13,249,770

Shares issued for stock options 342,090 3,421 1,358,693

Net loss - - -
- -------------------------------------------------------------------------------------------------

BALANCE, April 30, 1996 9,786,619 97,866 14,608,463

Shares issued for stock options 104,803 1,048 472,358

Shares issued for acquisition of Comstat
DataComm, Corp. 146,600 1,466 998,534

Net loss - - -
- -------------------------------------------------------------------------------------------------

BALANCE, April 30, 1997 10,038,022 $100,380 $16,079,355
=================================================================================================

Years ended April 30, 1997, 1996 and 1995
- --------------------------------------------------------------------------------------------------------

Treasury
Stock (Deficit) Total
- --------------------------------------------------------------------------------------------------------

BALANCE, April 30, 1994 $(12,238) $ (3,111,196) $ 5,600,434
Shares issued through private placement
and Regulation S sales (net of costs) - - 4,201,462
Shares issued for stock options - - 211,123
Shares issued for acquisition of
ZyBel Microsystems, Inc. - - 220,000
Treasury stock retired (Note 16) 12,238 - -
Net loss - (4,084,139) (4,084,139)
- --------------------------------------------------------------------------------------------------------

BALANCE, April 30, 1995 - (7,195,335) 6,148,880

Shares issued for stock options - - 1,362,114

Net loss - (630,648) (630,648)
- --------------------------------------------------------------------------------------------------------

BALANCE, April 30, 1996 - (7,825,983) 6,880,346

Shares issued for stock options - - 473,406

Shares issued for acquisition of Comstat
DataComm, Corp. - - 1,000,000

Net loss - (595,034) (595,034)
- --------------------------------------------------------------------------------------------------------

BALANCE, April 30, 1997 $ - $ (8,421,017) $ 7,758,718
========================================================================================================

See accompanying summary of accounting policies and notes to consolidated
financial statements.

F-5
30
FASTCOMM COMMUNICATIONS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended April 30, 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (595,034) (630,648) $(4,084,139)
ADJUSTMENTS TO RECONCILE NET LOSS
TO CASH USED IN OPERATING ACTIVITIES
Depreciation and amortization 338,522 273,507 217,326
Compensation expenses associated with
stock options granted 20,500 - -
Provision for doubtful accounts 151,000 100,000 204,000
Provision for inventory obsolescence - 105,000 401,889
Amortization of imputed discount 3,415 14,702 -
CHANGES IN ASSETS AND LIABILITIES,
NET OF EFFECTS OF ACQUISITIONS
(INCREASE) DECREASE IN ASSETS
Accounts receivable (765,576) (1,164,337) 497,411
Receivables from related party 21,430 25,661 285,543
Inventory (867,234) 131,999 615,340
Refundable income taxes - - 10,000
Prepaid expense and other current assets (27,065) (169,440) (21,051)
Deposits (27,313) (85,736) (75,631)
INCREASE (DECREASE) IN LIABILITIES
Accounts payable (467,890) 874,893 (136,010)
Accrued payroll 48,199 (47,592) 88,980
Income taxes payable (955) - -
Other current liabilities (90,655) 125,146 66,906
- --------------------------------------------------------------------------------------------------------------------------

NET CASH USED IN OPERATING ACTIVITIES (2,258,656) (446,845) (1,929,436)
==========================================================================================================================

F-6
31
FASTCOMM COMMUNICATIONS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended April 30, 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (565,749) (300,077) (108,170)
Issuance of notes receivable (300,000) - -
Net proceeds assumed in acquisition 355,084 - -
Sale (purchase) of restricted investments - 374,687 (412)
Purchase of long-term investments - (45,328) -
- -----------------------------------------------------------------------------------------------------------------------

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (510,665) 29,282 (108,582)
- -----------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible debentures 3,000,000 - -
Payment of deferred financing costs (190,279) - -
Net proceeds from exercise of stock options 473,406 1,362,114 211,123
Proceeds from note payable to bank - - 80,000
Repayments of notes payable (285,325) (242,042) (324,970)
Net proceeds from issuance of common stock
through private placement - - 4,201,462
- -----------------------------------------------------------------------------------------------------------------------

NET CASH PROVIDED BY FINANCING ACTIVITIES 2,997,802 1,120,072 4,167,615
- -----------------------------------------------------------------------------------------------------------------------

NET INCREASE IN CASH AND CASH EQUIVALENTS 228,481 702,509 2,129,597

CASH AND CASH EQUIVALENTS, beginning of year 3,807,855 3,105,346 975,749
- -----------------------------------------------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS, end of year $ 4,036,336 $ 3,807,855 $ 3,105,346
=======================================================================================================================

See accompanying summary of accounting policies and notes to consolidated
financial statements.

F-7
32
FASTCOMM COMMUNICATIONS CORPORATION

SUMMARY OF ACCOUNTING POLICIES

ORGANIZATION FastComm Communications Corporation (the
"Company") was incorporated in Virginia in May
1983. The Company designs, manufactures, and
markets data communications equipment for
high-speed data transmission over public and
private telephone networks.

The Company's fiscal year ends on April 30. For
interim financial reporting purposes the interim
fiscal quarters are closed on the first weekend
following the calendar quarter end date, unless the
calendar quarter end date falls on a weekend, in
which case such weekend is used as the interim
fiscal quarter end.

PRINCIPLES OF The consolidated financial statements include the
CONSOLIDATION accounts of FastComm Communications Corporation
(the "Company") and its wholly-owned subsidiary,
Commstat Datacomm Corporation. All material
intercompany accounts and transactions have been
eliminated.

USE OF ESTIMATES The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates
and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of
contingent assets and liabilities at the date of
the financial statements and the reported amounts
of revenues and expenses during the reporting
period. Actual results could differ from those
estimates. Certain estimates used by management are
particularly susceptible to significant changes in
the economic environment. These include estimates
of inventory obsolescence, valuation allowances for
trade receivables, deferred tax assets, and
evaluation of the recoverability of goodwill. Each
of these estimates, as well as the related amounts
reported in the financial statements, are sensitive
to near term changes in the factors used to
determine them. A significant change in any one of
those factors could result in the determination of
amounts different than those reported in the
financial statements. Management believes that as
of April 30, 1997, the estimates used in the
financial statements are adequate based on the
information currently available.

F-8
33
FASTCOMM COMMUNICATIONS CORPORATION

SUMMARY OF ACCOUNTING POLICIES

RISKS AND The Company's future operating results may be
UNCERTAINTIES affected by a number of factors. During fiscal
1997 and 1996, 45% and 52% of revenues were derived
from two customers. The risk to the Company is
that a loss of one or two customers could have a
significant negative impact on revenues and
operating results.

The Company sells primarily to domestic and foreign
dealers and distributors. Generally sales are on
credit and no collateral is required, although the
Company reserves the right to have the products
returned in the event of default. The Company
provides an allowance for estimated sales returns
and uncollectible accounts. The Company's
concentration of sales to certain customers,
discussed above, exposes the Company to a
relatively greater risk of loss than would be the
case with greater diversification.

The Company operates in a highly volatile industry
that is characterized by fierce industry-wide
competition resulting in aggressive pricing
practices, continually changing customer demand
patterns, growing competition from well-capitalized
high technology and consumer electronics companies,
and rapid technological development. The Company's
operating results could be adversely affected
should the Company be unable to anticipate customer
demand accurately, to maintain short design cycles
while meeting evolving industry performance
standards, to manage its product transactions,
inventory levels, and manufacturing processes
efficiently, to distribute its product quickly in
response to customer demand, to differentiate its
products from those of its competitors, or to
compete successfully in the markets for its new
products.

REVENUE Revenues from product sales are recognized at
RECOGNITION the time of product shipment. An allowance is
provided for estimated sales returns and
uncollectible accounts.

F-9
34
FASTCOMM COMMUNICATIONS CORPORATION

SUMMARY OF ACCOUNTING POLICIES

INVENTORY Production materials are valued using standard
costs which approximate the first-in, first-out
(FIFO) method. Work-in-process represents direct
labor, materials and overhead incurred on products
not delivered to date. Finished goods are valued
at the lower of cost or market, cost being
determined on the specific identification method.

PROPERTY, Property and equipment is recorded at cost and
EQUIPMENT AND depreciated on a straight-line basis over the
DEPRECIATION estimated useful life of the related assets
(generally five years). Leasehold improvements are
amortized over the lesser of the lease term or the
useful life of the property.

RESEARCH AND All costs incurred to establish the technological
DEVELOPMENT COSTS feasibility of products are considered research
and development costs which are charged to expense
as incurred.

RESEARCH AND The Company enters into contracts to perform
DEVELOPMENT research and development for third parties.
CONTRACTS The Company accounts for these contracts in
accordance with Statement of Financial Accounting
Standards No. 68, "Accounting for Re search and
Development Arrangements" (FASB 68). Under FASB
68, research and development contracts with fixed
obligations to repay the contracting party
irregardless of the outcome are treated as loans.
Contracts without fixed obligations to repay are
treated as obligations to perform contractual
services and revenue is recognized as expenses are
incurred and in accordance with the contracts
provisions. As of April 30, 1997, no research and
development contracts have fixed obligations to
repay, accordingly, revenue is recognized as
expenses are incurred.

MANUFACTURING The Company capitalizes the cost of acquiring
AND SOFTWARE software license rights and amortizes them
LICENSE RIGHTS over the shorter of the expected product life
or the license period, not to exceed 5 years.

F-10
35
FASTCOMM COMMUNICATIONS CORPORATION

SUMMARY OF ACCOUNTING POLICIES

GOODWILL The Company has recorded goodwill based on the
difference between the cost and the fair value of
certain purchased assets and it is being amortized
on a straight-line basis over the estimated period
of benefit, which ranges from 3 to 7 years. The
Company periodically evaluates the goodwill for
possible impairment. The analysis consists of a
comparison of future projected cash flows to the
carrying value of the goodwill. Any excess
goodwill would be written off due to impairment.

INCOME TAXES The Company files Federal and State income tax
returns. Certain income and expense items are
recognized in different periods for income tax
purposes than for financial reporting purposes.

CASH AND The Company considers all highly liquid
CASH EQUIVALENTS investments with an original maturity of three
months or less to be cash equivalents. The Company
invests its excess cash principally in overnight
repurchase accounts and short-term government
securities. The Company maintains amounts in
excess of the federal deposit insurance limitation
of $100,000 in its bank accounts.

FAIR VALUE OF Financial instruments of the Company include
FINANCIAL convertible debentures. Based upon the current
INSTRUMENTS borrowing rates available to the Company,
estimated fair values of these financial
instruments approximate their recorded carrying
amounts.

EARNINGS PER SHARE Primary earnings (loss) per share of common stock
have been calculated by dividing earnings (loss) by
the weighted average number of common shares
(including shares held in escrow). Fully diluted
earnings (loss) per common share has not been
presented for 1997, 1996 or 1995 because the effect
is anti-dilutive.

F-11
36
FASTCOMM COMMUNICATIONS CORPORATION

SUMMARY OF ACCOUNTING POLICIES

RECLASSIFICATION Certain amounts as previously reported for prior
periods have been reclassified to conform with
presentations in the current year. The
reclassifications have no effect upon previously
reported results of operations.

NEW ACCOUNTING Statement of Financial Accounting Standards
PRONOUNCEMENTS ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of" is effective for years
beginning after December 15, 1995 and was adopted
by the Company as of May 1, 1996. This statement
requires that long-lived assets, including certain
intangibles, held and used by the Company be
reviewed for potential impairment. This new
pronouncement did not have a material effect on the
Company's financial Statements when adopted.

SFAS No. 123 "Accounting for Stock Based
Compensation" is effective for years beginning
after December 15, 1995 and was adopted by the
Company as of May 1, 1996. This statement
establishes financial accounting and reporting
standards for stock based employee compensation
plans. SFAS No. 123 permits, but does not require,
a fair-value based method of accounting for
employee stock option plans which results in
compensation expense recognition when stock options
are granted. As permitted by SFAS No. 123, the
Company will provide pro forma disclosure of net
income and earnings per share, as applicable in the
notes to the consolidated financial statements.

SFAS No. 128, "Earnings Per Share" is effective for
periods ending after December 15, 1997. This
statement revises the manner in which earnings per
share is calculated and requires the restatement,
when first applied, of prior period earnings per
share data. The Company does not expect the
adoption of this pronouncement to have a material
effect on the previously reported earnings per
share data.

F-12
37
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS On January 31, 1997, the Company acquired Comstat
ACQUISITION Datacomm Corporation, ("CDC"), a Georgia
corporation engaged in the data communications
business. The aggregate purchase price amounted to
$1,000,000 (subject to post closing adjustments)
consisting of $900,000 funded at closing and an
additional $100,000 of contingent consideration to
be funded pending the occurrence of certain events
the outcome of which management believes is
determinable beyond a reasonable doubt. The
Company funded this acquisition through the
issuance of 146,600 shares of its common stock. An
additional 43,985 shares of common stock with a
fair value of approximately $300,000 have been
placed in escrow and will be issued upon CDC
achieving certain revenue targets for the fiscal
year ended May 31, 1998. If such revenue targets
are not met, the escrow shares will be canceled.

The acquisition was accounted for as a purchase
and, accordingly, the acquired assets and
liabilities were recorded at their estimated fair
market values at the date of acquisition. The
purchase price plus costs directly attributable to
the completion of the acquisition have been
allocated to the assets and liabilities acquired.
The Company recorded $587,388 goodwill related to
this transaction. This goodwill is being amortized
over a seven year period.

The following unaudited pro forma summary presents
information as if the acquisition of CDC had
occurred at May 1, 1995. The pro forma
information, which is provided for information
purposes only, is based on historical information
and does not necessarily reflect the actual results
that would have occurred, nor is it necessarily
indicative of future results of operations of the
combined entities.

F-13
38
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

Proforma information (unaudited): Year Ended April 30,
(in thousands, except per share data) 1997 1996
--------------------------------------------------------------------------

Net Sales $ 12,998 $ 12,345

Net income (loss) (50) (490)

Earnings (loss) per share (0.01) (0.05)
==========================================================================

In connection with the CDC acquisition, the Company
advanced $300,000 to the then principal stockholder
of CDC under a note receivable, which is
collateralized by Company stock held in escrow,
above, and due in fiscal 2000.

The acquisition was accounted for as a purchase
and, accordingly, the acquired assets and
liabilities were recorded at their estimated fair
market values at the date of acquisition. The
purchase price plus costs directly attributable to
the completion of the acquisition have been
allocated to the assets and liabilities acquired.
The Company recorded $587,388 goodwill related to
this transaction. This goodwill will be amortized
over a seven year period.

2. INVENTORIES Inventories consist of the following components:

April 30, 1997 1996
--------------------------------------------------------------------------

Production materials $2,115,875 $1,618,417
Work-in-process 160,991 176,818
Finished goods 1,120,631 536,916
--------------------------------------------------------------------------

3,397,497 2,332,151

Provision for inventory obsolescence (500,000) (600,000)
--------------------------------------------------------------------------

$2,897,497 $1,732,151
==========================================================================

F-14
39
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

3. RECEIVABLES Receivables consist of the following:

April 30, 1997 1996
--------------------------------------------------------------------------

Trade $3,166,735 $2,382,892
Employee and other 88,171 62,932
--------------------------------------------------------------------------

3,254,906 2,445,824
Allowance for doubtful
accounts (110,000) (100,000)
--------------------------------------------------------------------------

$3,144,906 $2,345,824
==========================================================================

4. PROPERTY AND Property and equipment consists of the following:
EQUIPMENT

April 30, 1997 1996
----------------------------------------------------------------------------

Manufacturing equipment $ 484,909 $ 444,876
Furniture and fixtures 297,147 168,514
Leasehold improvements 22,999 17,494
Automobiles - 22,917
Computers and electronics 500,660 135,687
Software 264,957 207,211
Demo equipment 43,833 -
----------------------------------------------------------------------------

1,614,505 996,699

Less accumulated depreciation
and amortization (799,104) (560,747)
----------------------------------------------------------------------------

$ 815,401 $ 435,952
============================================================================

F-15
40
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

Depreciation expense for the three years ended
April 30, 1997, 1996 and 1995 was $227,346,
$145,550 and $130,874, respectively.

5. LONG-TERM Long-term debt consists of the following:
DEBT

April 30, 1997 1996
------------------------------------------------------------------------------

Noninterest bearing note issued
in connection with acquisition
of patent rights, due in 1998
less unamortized discount of
$286 and $3,415, based on
imputed interest rate of 7.25% $ 29,000 $ 130,585

5.0% Convertible debentures, due
April 2001. 3,000,000 -
------------------------------------------------------------------------------

Total 3,029,000 130,585

Less current maturities (29,000) (130,585)
------------------------------------------------------------------------------

$ 3,000,000 $ -
==============================================================================

In April 1997, the Company issued $3,000,000 in
5.0% Convertible Debentures due April 2001. For
the first 180 days following the issuance, the
debentures are convertible at the option of the
holder into common stock at a conversion price
equal to the average closing bid prices on NASDAQ
for the ten trading days prior to conversion. If
the conversion occurs more than 180 days after the
issuance, the conversion price is the lesser of
125% of the average closing bid prices on NASDAQ
for the ten trading days prior to the issuance
date, or, 90% of the average closing bid prices on
NASDAQ for the ten trading days prior to the
conversion date. In addition, if the conversion
occurs more than 180 days after the issuance, the
holder will receive one warrant for every five
shares of common stock received upon conversion of

F-16
41
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

the debentures. If the conversion occurs more than
360 days from the issuance, the holder will receive
one warrant for every 2 1/2 common shares received
upon conversion of the debentures. Each warrant
will have a strike price set at 125% of the market
price of the Company's common stock at the time of
conversion.

Subsequent to April 30, 1997, the Company issued an
additional $2,000,000 in 5% Convertible Debentures
in May 1997, due May 2001, under terms and
conversion features which are substantially similar
to those relating to the $3,000,000 issuance
described above.

The Company intends to seek shareholder approval
for the creation of a new class of Series A
Convertible Preferred Stock and, assuming such
shareholder approval, exercise its right to convert
all of the aforementioned debentures into Series A
Convertible Preferred Stock.

The terms of the Convertible Debenture provide for
conversion at a discount to the market commencing
181 days after issuance. The value of the
discount, using a conversion price of 90% of the
average closing bid prices on NASDAQ for the ten
trading days prior to the conversion date, is
approximately $550,000. The value of the discount,
using a conversion price of 125% of the average
closing bid prices on NASDAQ for the ten trading
days prior to the issuance date, is not
determinable at this time. Based on the foregoing,
assuming that the holders of the Convertible
Debentures elect not to exercise their option to
convert the debentures into common stock of the
Company within 180 days of issuance (i.e., at a
conversion price of 100% of market), the Company
will be required to determine and recognize on the
181st day from issuance the amount of the
conversion discount. The Company expects that the
conversion discount will reduce income available to
common shareholders during fiscal 1998 by a minimum
of $550,000 in the form of a one-time non-cash
charge to either interest expense (if the
debentures remain outstanding 181 days after
issuance) or preferred dividends (if the debentures
are converted into a newly created convertible
preferred stock).

F-17
42
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

6. COMMITMENTS OPERATING LEASES
AND
CONTINGENCIES The Company leases office space and certain office
equipment under operating lease arrangements that
expires at various dates through 1998. The main
office lease provides for scheduled rent increases
in the future which are being amortized over the
lease period. Rent expense for the years ended
April 30, 1997, 1996, and 1995, was approximately
$355,000, $308,000 and $245,000, respectively.
Aggregate future minimum lease payments under the
operating leases are $228,454 in fiscal 1998; and
$16,886 in fiscal 1999.

REPURCHASE COMMITMENT

During fiscal 1995, the Company transferred at
cost, analog modem raw materials and subassemblies
valued at $273,000 to an electronics manufacturer.
Under the terms of the agreement, the manufacturer
will build and resell the modems to FastComm on an
as needed basis or may sell the modems to its own
customers. No revenue was recognized in connection
with this transfer of inventory.

Under the original terms of this agreement, the
electronics manufacturer may, at its option,
require the Company to repurchase any modem raw
materials on hand after calendar 1995. To date,
the electronics manufacturer has not exercised this
option. The Company continues to purchase analog
modems from this manufacturer.

RESEARCH AND DEVELOPMENT CONTRACTS

During fiscal 1994, the Company entered into a
contract to perform research and development
activities for a third party. In 1995, revenues
recognized and costs incurred in connection with
the contract were $31,774, and $108,091. During
1997 and 1996, no revenues or expenses were
recorded related to this contract. Under the
agreement, the Company is required to pay royalties
to the third party for sales of products developed
from funded research and development activities.

F-18
43
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

If no products are sold, the Company is not
obligated to repay the funds. As of April 30, 1997,
no royalties have been paid as the products have
just recently completed development.

COMPENSATION

The Company maintains an employment agreement
with its President and Principal Executive
Officer. This agreement provides for a base
salary, bonus and incentive compensation as may be
deemed appropriate by the Board of Directors. The
agreement expired on January 31, 1997, and was
renewed through January 31, 1998.

7. STOCKHOLDERS' STOCK ISSUANCES
EQUITY
On March 15, 1994 the Company purchased assets and
assumed certain liabilities of ZyBel Microsystems,
Inc. (ZyBel). The total purchase price of $220,000
was paid through the issuance of common stock based
on the stock value at the date of the agreement.
The stock was not issued until fiscal 1995;
therefore, the 1994 financial statement reflected a
payable for this amount. ZyBel owned 1,100 shares
of the Company's stock which were included in the
purchased assets. These shares were included in
treasury stock at April 30, 1994 at their allocated
cost and were canceled during fiscal 1995.
Goodwill in the amount of approximately $102,000
was recorded as a result of the purchase.

In March 1995, the Company completed the sale of
405,460 unregistered shares of common stock in a
private placement and received net cash proceeds of
$1,294,000. Also, in March 1995, the Company
completed a Regulation S placement of 700,000
shares of common stock and received net cash
proceeds of $2,907,500.

On January 31, 1997, the Company acquired Comstat
Datacomm Corporation, ("CDC"), a Georgia
corporation engaged in the data communications
business. The aggregate purchase price amounted to
$1,000,000 (subject to

F-19
44
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

post closing adjustments) consisting of $900,000
funded at closing and an additional $100,000 of
contingent consideration to be funded pending the
occurrence of certain events the outcome of which
management believes is determinable beyond a
reasonable doubt. The Company funded this
acquisition through the issuance of 146,600 shares
of its common stock. An additional 43,985 shares
of common stock with a fair value of approximately
$300,000 have been placed in escrow and will be
issued upon CDC achieving certain revenue targets
for the fiscal year ended May 31, 1998. If such
revenue targets are not met, the escrow shares will
be canceled.

8. STOCK OPTIONS In 1991 and 1992, the Board of Directors approved
the 1991 Non-Qualified, 1992 Non-Qualified and 1992
Incentive Stock Option Plans (the Plans) under
which options to purchase up to 2,260,000 shares of
common stock may be granted to officers, directors
and other key employees of the Company.

The exercise price of each option may not be less
than 100% of the fair market value of the stock on
the date of grant for incentive stock options or
85% of such fair market value for non-qualified
stock options, as determined by the Board. Options
vest over a three year period and expire five years
from the date of grant and, in most cases, upon
termination of employment.

The following table relates to options outstanding,
granted, exercised, and canceled during 1997, 1996
and 1995, under the Plan:

Option
Number Price
Options of Shares Per Shares
------------------------------------------------------------------------------

OUTSTANDING AT
April 30, 1995 1,123,968 $ 1.09 to 5.88
April 30, 1996 897,209 $ 2.06 to 7.88
April 30, 1997 1,165,535 $ 2.06 to 15.63

GRANTED
During 1995 956,367 $ 3.25 to 5.88
During 1996 381,500 $ 4.00 to 7.88
During 1997 514,000 $ 6.50 to 15.63

F-20
45
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

Option
Number Price
Options of Shares Per Shares
------------------------------------------------------------------------------

EXERCISED
During 1995 316,400 $ .01 to 5.13
During 1996 342,090 $ 1.09 to 7.63
During 1997 104,803 $ 3.25 to 5.13

CANCELED
During 1995 712,184 $3.25 to 11.88
During 1996 266,169 $3.25 to 6.80
During 1997 140,871 $3.25 to 12.00

At April 30, 1997, 102,072 stock options are
exercisable under the plans at exercise prices
ranging from $2.06 to $7.75, with a
weighted-average exercise price of $4.45 and a
weighted-average contractual maturity of
approximately one year, as follows: 28,330 options
exercisable at $2.06 to $3.25, weighted at $2.20,
with a weighted maturity of one-half year; 63,742
options exercisable at $4.37 to $5,87, weighted at
$4.95, with a weighted maturity of one and one-half
years; and 10,000 options exercisable at $7.75,
weighted at $7.75, with a weighted maturity of one
year.

The Company has adopted the disclosure-only
provisions of SFAS-No. 123 "Accounting for Stock
Based Compensation", but applies Accounting
Principles Board Opinion No. 25 and related
interpretations in accounting for its stock options
plans. Compensations expense was immaterial for
fiscal years 1997 and 1996. For SFAS No. 123
purposes, the weighted average fair value of each
option grant has been estimated as of the date of
grant using the Black-Scholes option pricing model
with the following weighted average assumptions:
risk-free interest rate of 6.45% and 5.72% and
expected volatility of 65% for the years ended
April 30, 1997 and 1996, respectively, a dividend
payout rate of zero for each year and an expected
option life of 5 years. Using these assumptions,
the weighted average fair value of the stock
options granted is $5.84 and $4.01, for 1997 and
1996, respectively. There were no adjustments made
in calculating the fair value to account for
vesting provisions or for non-transferability or
risk of forfeiture.

F-21
46
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

If the Company had elected to recognized
compensation cost based on the fair value at the
grant dates for options issued under the plans
described above, consistent with the method
prescribed by SFAS No. 123, net income (loss)
applicable to common shareholders and earnings
(loss) per share would have been changed to the pro
forma amounts indicated below:

Year ended April 30,
(in thousands, except per share data) 1997 1996
---------------------------------------------------------------------------------

Net income (loss) applicable to
common shareholders: as reported (595) (631)
pro forma (1,605) (886)

Earnings (loss) per share: as reported (0.06) (0.07)
pro forma (0.16) (0.10)

9. INCOME TAXES The Company has net operating loss carryforwards
for regular tax purposes of approximately
$16,695,000 which begin to expire in 2008. The
amount of the net operating loss carryforward
related to the compensation element of stock option
is approximately $10,148,000, which when realizable
will be a credit to paid in capital. In addition,
the Company has research and development credit
carryforwards of approximately $408,000, which
begin to expire in 2006.

The difference between the Federal Tax rate and the
effective tax rate realized as a percent of pretax
earnings for the years ended April 30, 1997, 1996,
and 1995, is as follows:

F-22
47
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

1997 1996 1995
AMOUNT RATE Amount Rate Amount Rate
--------------------------------------------------------------------------------------------

Tax provision
(benefit) at
statutory
rates $ (202,000) (34.0%) $(214,000) (34.0%) $(1,388,000) (34.0%)

Tax benefit
not recorded 382,000 64.0 593,000 94.0 1,777,800 43.3
Compensation
element of
stock
options (235,000) (39.5%) (390,000) (61.8) (389,800) (9.3)
Other (55,000) (9.5%) 11,000 1.7%
--------------------------------------------------------------------------------------------

$ - - $ - - $ - -
============================================================================================

The primary differences between income (loss) for
financial reporting and income tax purposes is the
recognition of reserves for uncollectible accounts
receivable and obsolete inventory, the compensation
element of stock options and research and
development expenses, which are not currently
deductible for income tax purposes.

No deferred taxes have been recognized in the
accompanying consolidated financial statements as
of April 30, 1997 and 1996. The components of
deferred income taxes are as follows:

April 30, 1997 1996
---------------------------------------------------------------

DEFERRED TAX LIABILITIES
Accelerated depreciation $ 28,000 $ 4,000
---------------------------------------------------------------

Total deferred tax liabilities $ 28,000 $ 4,000
---------------------------------------------------------------

F-23
48
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

April 30, 1997 1996
---------------------------------------------------------------------

DEFERRED TAX ASSETS
Allowance for doubtful accounts 44,000 40,000
Inventory reserve 200,000 240,000
Tax credits 408,000 369,000
NOL carryforwards 6,678,000 6,130,000
Other 65,000 85,000
---------------------------------------------------------------------

Total deferred tax assets 7,395,000 6,864,000
---------------------------------------------------------------------

Net deferred tax assets 7,367,000 6,860,000
Less: Valuation allowance (7,367,000) (6,860,000)
---------------------------------------------------------------------

TOTAL $ - $ -
=====================================================================

Management has provided a valuation allowance for
deferred tax assets as of April 30, 1997 and the
benefit of these items will be recognized in future
years to the extent that such items are available
to reduce taxable income.

10. SIGNIFICANT Certain customers accounted for 10% or more of the
CUSTOMERS AND Company's total revenue during the years
FOREIGN EXPORTS ended April 30, 1997, 1996 and 1995 as noted
below:

1997 1996 1995
--------------------- ---------------------- -----------------------
Customer % of Sales Customer % of Sales Customer % of Sales

A 29 A 31 C 15
B 16 B 21 D 10

F-24
49
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

In 1997, 1996 and 1995, the Company had export
sales to foreign customers totalling approximately
$846,000, $1,310,000 and $1,200,000, respectively.
At April 30, 1997 trade receivable from two
customers represented 33% and 18% of total trade
receivables outstanding. At April 30, 1996 trade
receivable from one customer represented 49% of
total trade receivables outstanding.

11. SUCCESS Effective May 1, 1991, the Company established
SHARING PLAN the FastComm Communications Corporation Success
Sharing Plan, a defined contribution plan that
covers substantially all of its employees. Employer
contributions are determined using an actuarially
determined factor based on the employee's age and
compensation level. No employer contributions were
made for the years ended April 30, 1997, 1996 or
1995.

12. RELATED PARTY During 1997, 1996 and 1995, the Company had
TRANSACTIONS sales of approximately $43,000, $158,000 and
$415,000, respectively, to a customer whose Board
of Directors includes the president and principle
executive officer of the Company. At April 30,
1997, 1996 and 1995, accounts receivable includes
approximately $4,000, $25,000 and $51,000,
respectively from this related party which was paid
to the Company subsequent to year end.

13. FOURTH QUARTER During the fourth quarter ended April 30, 1997,
ADJUSTMENTS the Company reduced its reserve for inventory
obsolescence by $100,000 which had the effect of
reducing the operating loss and net loss by
$100,000 or $0.01 per share.

During the fourth quarter ended April 30, 1996, the
Company reduced its allowance for doubtful accounts
by $104,000, which had the effect of reducing the
operating loss and net loss by $104,000 or $0.01
per share.

During the fourth quarter ended April 30, 1995, the
Company recorded adjustments to its reserve for
inventory obsolescence ($295,000) and allowance for
doubtful accounts ($200,000) which, in the
aggregate, had the

F-25
50
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

effect of increasing both the operating loss and
the net loss by approximately $495,000 or by $0.06
per share.

14. SUPPLEMENTAL Supplemental information on interest and
CASH FLOW income taxes paid is as follows:
INFORMATION

For the Year ended April 30, 1997 1996 1995
---------------------------------------------------------------------------

Interest $ 35,721 $ 20,975 $ 24,019

Income taxes $ $ - $ -
===========================================================================

Supplemental disclosure of non-cash investing and financing activities:

For the Year ended April 30, 1997 1996 1995
---------------------------------------------------------------------------

Incurrence of debt in connection
with acquisition of patent rights,
net of repayments $ - $ - $ 160,883
---------------------------------------------------------------------------

Incurrence (settlement) of debt
in connection with acquisition
of assets of another company - - (220,000)
---------------------------------------------------------------------------

Issuance of stock in connection
with acquisition of assets of CDC:
Fair value of assets acquired 1,482,536 - -
Fair market value of common
stock issued 1,000,000 - -

---------------------------------------------------------------------------
Liabilities assumed $482,536 - -

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

F-26
51
FASTCOMM COMMUNICATIONS CORPORATION

SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II

Balance Charged to Balance
at Beginning Costs and at End
Description of Period Expenses Deductions of Period
- -----------------------------------------------------------------------------------------------

Year Ended April 30, 1995

Reserves and allowances deducted
from asset accounts:
Obsolescence reserve for
inventory $ 93,111 $ 401,889 $ - $495,000
Allowance for doubtful
accounts $ 275,000 204,000 (275,000)1/ $204,000

===============================================================================================

Year Ended April 30, 1996

Reserves and allowances deducted
from asset accounts:
Obsolescence reserve for
inventory $ 495,000 $ 105,000 $ - $600,000
Allowance for doubtful
accounts $ 204,000 100,000 (204,000)1/ $100,000

===============================================================================================

Year Ended April 30, 1997

Reserves and allowances deducted
from asset accounts:
Obsolescence reserve for
inventory 600,000 - (100,000)2/ $500,000

Allowance for doubtful
accounts $ 100,000 151,000 (141,000)1/ $110,000

===============================================================================================

1/ Accounts written off

2/ Inventory scrapped or disposed of

F-27
52
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

NONE.

22
53
PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following lists the directors and executive officers of the Company, their
ages, descriptions of their business experience and positions held with the
Company as of July 8, 1997:

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

Peter C. Madsen(1) (2) 46 President, Chief Executive Officer and Chairman of the Board
Robert C. Abbott 53 Vice President - Engineering, Secretary
William A. Flanagan 54 Vice President - Technology
Mark H. Rafferty 42 Vice President - Finance, Treasurer
Edward C. Bursk 38 Vice President - Sales and Marketing
Richard L. Apel 52 Vice President - General Manager Comstat Division
Edward R. Olson(2) 57 Director
Thomas G. Amon(2) 50 Director

(1) Member Stock Option Committee.
(2) Member Audit Committee.

All directors hold office until the next annual meeting of the shareholders and
the election and qualification of their successors. The officers are elected
by and serve at the discretion of the Board of Directors. See "Employment and
Control Arrangements" under Item 11.

Peter C. Madsen has been President, Chief Executive Officer and a director of
the Company since September 1992. Mr. Madsen is also President of Professional
Marketing Corporation, a telecommunications equipment distributor. From
November 1986 to January 1992, he was an officer of the Newbridge Networks
Corporation, a Canadian telecommunications company, most recently as Vice
President and General Manager, United States Region, and President of Newbridge
Networks Inc., Newbridge Networks Corporation's United States subsidiary. Mr.
Madsen currently serves as a director of Newbridge Networks Corporation.

Robert C. Abbott has served as Vice President - Engineering and as Secretary of
the Company since 1984. From December 1980 until joining the Company, he
served as product manager, VF Products, for the Telesystems Division of Comsat
Corporation in Fairfax, Virginia.

William A. Flanagan has served as Vice President - Technology since September
1991. Prior to that, from 1987 through September 1991, he was Vice President -
Network Marketing and Vice President - Technology for Newbridge Networks Inc.
Mr. Flanagan is the author of a variety of best selling books on digital
communications technology.

Mark H. Rafferty has been Vice President, Chief Financial Officer and Treasurer
of the Company since August 1993. From August 1992 to August 1993, Mr.
Rafferty was Vice President, Finance at Newbridge Networks Inc. From August
1987 through August 1992, Mr. Rafferty was Controller of Newbridge Networks
Inc.

Edward C. Bursk has been Vice President, Sales and Marketing of the Company
since November 1996, From September 1995 to October 1996, Mr. Bursk was
President of the U.S. Division of Ouest Standard Telematique S.A. , a French
telecommunications manufacturer. From May 1994 to September 1995, Mr. Bursk
served as Assistant Vice President, Marketing for FastComm. Mr. Bursk served
as General Manager, Packet Switching for Dynatech Communications from June 1993
to May 1994 and as Director of Small Switching Systems for Netrix Corporation
from September 1990 to June 1993.

Richard L. Apel has been Vice President of the Company and President of the
Company's wholly owned subsidiary, Comstat Datacomm Corporation since February
1997. For five years prior to this time, Mr. Apel was President of Comstat
Datacomm Corporation.

Edward R. Olson has served as a director since January 1989. From 1990 to
April 1997, Mr. Olson has served as the President, Chief Executive Officer and
Chairman of M-C Industries, Inc., a fluid hydraulics equipment manufacturer.
Commencing July 1, 1995, Mr. Olson became a principal in KPMG Baymark
Strategies LLC, an independent consulting firm in a strategic alliance with
KPMG Peat Marwick, LLP. KPMG Baymark Strategies LLC has since become Dominion
Management LLC. From 1992 to 1993, Mr. Olson was Senior Vice President,
Operations of Audiovox Corp., a company concentrating in the marketing and
distribution of consumer electronic

23
54
devices. Mr. Olson was President and COO of Porta Systems Corporation from
November 1995 to January 1997. Mr. Olson is also Chairman of S&L Metal
Products Corporation, Queens, NY.

Thomas G. Amon has served as a director since December 1994. Mr. Amon has been
a partner in the law firm of Amon & Sabatini for the past five years.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and with the National Association of Securities Dealers, Inc. Automated
Quotations (NASDAQ) system. Officers, directors and greater than ten percent
shareholders are required by regulation to furnish the Company with copies of
all Section 16(a) forms they file.

Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons. The Company believes that during its fiscal year
ended April 30, 1997, all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with.

ITEM 11. EXECUTIVE COMPENSATION

BOARD REPORT ON EXECUTIVE COMPENSATION

The Company does not have a formal compensation committee. Compensation levels
for executive officers are approved by the Board of Directors. The Board of
Directors is presently comprised of the following individuals: Peter C.
Madsen, Thomas G. Amon and Edward R. Olson. Salaries are reviewed periodically
and are based on individual performance, the extent of individual
responsibility and comparisons with salaries paid in the industry.

The Company recruits for its executive officer positions from within the
communications industry. In most instances, the source Company is significantly
larger than the Company. It is the policy of the Board of Directors of
FastComm to hire executive officers at levels below that of their current
salaries along with a stock option package intended to make up for the
differentiation and to provide a performance incentive. The Company feels that
stock options are an attractive benefit in that they enhance performance and
loyalty at little cost. The Company believes the compensation packages offered
to its current employees and prospective employees are consistent with that of
the telecommunications industry.

The Board establishes compensation levels based on experience and
responsibility. No executive officer has received a salary increase during
fiscal year 1997.

The Board granted four executive officers options during fiscal 1997. Two of
these grants were determined by these individuals performance, responsibility,
seniority and the number of options currently held by these officers. The two
remaining grants were conditions of employment.

The Board adheres to a policy of granting options to executive officers based
upon performance and responsibility. In addition, the Board also considers the
relative importance of the job function being performed and the number of
options currently held by the executive officer.

/s/ Thomas G. Amon, /s/ Edward R. Olson, /s/ Peter C. Madsen

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the year, Peter C. Madsen, Edward R. Olson, and Thomas G. Amon as
directors participated in deliberations of the Company's Board of Directors
concerning executive officer compensation and stock option grants, including
their own. Other than the foregoing, none of such directors was party to any
reportable interlock or participation during fiscal 1997. During the fiscal
year ended April 30, 1997, the Company sold approximately $43,000 of product
under normal terms and conditions to Newbridge Networks Inc. ("Networks") a
United States subsidiary of Newbridge Networks Corporation, a Canadian
Telecommunications Company ("Newbridge"). Peter C. Madsen, President, Chief
Executive Officer and a director of the Company is also a director of
Newbridge.

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SUMMARY COMPENSATION TABLE

The following table sets forth information regarding compensation paid by the
Company to the six named executives (the "Named Executive Officers") for
services furnished in all capacities to the Company during the fiscal year
ended April 30, 1997, as well as such compensation paid by the Company to the
Named Executive Officers during the Company's two previous fiscal years:

LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------------------- ------------
SHARES OF
OTHER ANNUAL COMMON STOCK
COMPENSATION UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS
- --------------------------- ---- --------- -------- ------ -------

Peter C. Madsen (2) 1997 101,757 0 6,613 0
President, CEO and Chairman 1996 104,196 0 6,219 0
of the Board of Directors 1995 113,344 0 6,219 0

Mark H. Rafferty (3) 1997 108,503 0 5,824 25,000
Vice President and 1996 106,207 0 5,824 0
Chief Financial Officer 1995 110,825 0 5,824 125,000

Robert C. Abbott (4) 1997 98,639 0 0 15,000
Vice President - Engineering 1996 95,552 0 0 0
Corporate Secretary 1995 100,750 0 0 50,000

William A. Flanagan (5) 1997 109,417 0 2,511 0
Vice President - 1996 106,715 0 6,632 15,000
Technology 1995 113,943 0 6,632 0

Edward C. Bursk (6) 1997 52,532 0 2,400 55,000
Vice President-
Sales and Marketing

Richard L. Apel (7) 1997 25,853 0 1,200 50,000
Vice President

The options listed with respect to fiscal year 1995 long-term compensation
awards include options granted upon repricing (and consequent cancellation) of
previously granted options. Options to purchase the following number of shares
granted to the following persons in fiscal year 1995 were issued as a result of
the repricing on September 9, 1994 of previously granted options: Mr.
Rafferty - 75,000 (all of which were originally granted in fiscal year 1994);
Mr. Abbott - 50,000 (all of which were originally granted in fiscal year 1994.
The repriced options were conditioned upon waiver of previously vested and
acceptance of a new vesting period.

(1) Automobile benefit.

(2) At April 30, 1997, Mr. Madsen held 751,086 restricted shares of Common
Stock with a market value of $3,755,430 at that date.

(3) At April 30, 1997, Mr. Rafferty held 28,088 restricted shares of Common
Stock with a market value of $140,435 at that date.

(4) At April 30, 1997, Mr. Abbott held 192,408 restricted shares of Common
Stock with a market value of $962,040 at that date.

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(5) At April 30, 1997, Mr. Flanagan held 218,451 restricted shares of Common
Stock with a market value of $1,097,255 at that date.

(6) Mr. Bursk commenced working for the Company in November, 1996. At April
30, 1997, Mr. Bursk held 500 restricted shares of Common stock with
a market value of $2,500.

(7) Mr. Apel commenced working for the Company in February, 1997 At April
30, 1997, Mr. Apel held 146,600 shares of Common stock with a market
value of $733,000.

FISCAL 1996 OPTION GRANTS

The following table sets forth information concerning grants of stock options
to the Named Executive Officers made pursuant to the Company's 1992 Stock
Option Plan during the fiscal year ended April 30, 1997:

Stock Option Grants in Fiscal Year 1997

INDIVIDUAL GRANTS

Securities Percent of Potential Realizable Value
Underlying Total Options Exercise at Assumed Annual Rates
Options Granted to or of Stock Price Appreciation
Granted Employees in Base Price Expiration For Option Term
Name (#) Fiscal Year ($/sh) Date 5%($) 10%($)
- ---- --- ----------- ------ ---- ----- ------

Peter C. Madsen 0 - - - - -

Mark H. Rafferty 25,000 4.86% $6.50 12/23/01 $44,750 $99,250

Robert C. Abbott 15,000 2.92% $12.00 7/14/01 $49,800 $109,950

William A. Flanagan 0 - - - - -

Thomas G. Amon 10,000 1.95% $15.63 5/8/01 $43,150 $95,450

Edward R. Olson 10,000 1.95% $15.63 5/8/01 $43,150 $95,450

Edward C. Bursk 55,000 10.70% $6.50 12/23/01 $98,450 $218,350

Richard L. Apel 50,000 9.73% $6.82 1/30/02 $94,000 $208,000

The exercise price of each option may not be less than 100% of the fair market
value of the stock on the date of the grant for incentive options or 85% of
such fair value for non-qualified stock options, as determined by the Board of
Directors. Options vest over a three year period and expire five years from
date of grant and, in most cases, upon termination of employment.

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FISCAL 1997 AGGREGATE OPTION EXERCISES AND YEAR-END OPTION VALUES

The following table sets forth information concerning each exercise of stock
options during the fiscal year ended April 30, 1997 by each of the Named
Executive Officers and the fiscal year-end value of unexercised options held by
such persons:

Shares Value of
Underlying Unexercised
Unexercised in-the-money
Options at Options at
Fiscal Year- Fiscal Year-
Shares Value End (#) End ($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
- ---- ------------ -- ------------- -------------

Peter C. Madsen - - - - $0 $0

Robert C. Abbott - - 33,333 31,667 $20,833 $10,417

William A. Flanagan - - 5000 10,000 $0 $0

Thomas G. Amon - - 3333 13,334 $5,833 $5,835

Edward R. Olson - - 16,666 13,334 $11,666 $5,835

Mark H. Rafferty - - 41,667 66,667 $26,042 $26,042

Edward C. Bursk 11,600 89,125 3,699 70,001 $208 $7,500

Richard L. Apel - - - 50,000 $0 $0

EMPLOYMENT AND CONTROL ARRANGEMENTS

Effective September 18, 1992, the Company, Mr. Robert N. Dennis and Mr. Edward
R. Olson, as the "Current Directors" therein, and Mr. Peter C. Madsen entered
into an employment agreement (the "Employment Agreement") regarding the terms
of Mr. Madsen's employment by the Company and the scope of the relationships
among the parties to the Employment Agreement.

Pursuant to the Employment Agreement, (i) Mr. Madsen was elected President and
Chief Executive Officer of the Company for an initial term expiring on January
31, 1995 at an initial base salary of $100,000 per year, (ii) Mr. Madsen was
granted an option to purchase up to 425,000 shares of Common Stock of the
Company at an exercise price of $1.09375 per share upon certain terms and
conditions, and (iii) Mr. Madsen and Mr. Peter Sommerer were elected directors
of the Company to fill two vacancies then existing on the Board of Directors.

Under the Employment Agreement, Mr. Madsen has been granted full control of and
authority over the operations of the Company, subject to the general oversight
of the Board, and the Current Directors agreed not to take any action
inconsistent with their respective obligations thereunder. The Employment
Agreement and the related actions resulted in an effective change in control of
the Company away from Mr. Dennis to Mr. Madsen. The agreement, which currently
expires on January 31, 1998, is renewable thereafter on a year to year basis.

DIRECTOR COMPENSATION

Directors receive no cash compensation for their services as such, however, the
Board of Directors has authorized payment of reasonable expenses incurred by
non-employee directors in connection with attendance at meetings of the Board
of Directors. Further, members of the Company's Board of Director are granted
options to purchase common shares pursuant to the Company's 1992 Stock Option
Plan. During fiscal year 1997, the Company granted

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options to purchase 10,000 shares of its common stock to both Edward R. Olson
and Thomas G. Amon. The Chairman of the Board receives no compensation for
serving in such capacity.

SHAREHOLDER RETURN PERFORMANCE GRAPH

The following graph compares the yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock with that of the
cumulative total return of the NASDAQ Stock Market - US Index ("NASDAQ STOCK
MRKT - US") and the NASDAQ Telecommunications Index ("NASDAQ TELECOM") for the
five year period ended on April 30, 1997. The information below is based on
an investment of $100, on April 30, 1992, in the Company's Common Stock, the
NASDAQ STOCK MRKT - US and the NASDAQ TELECOM. The Company's Management
consistently cautions that the stock price performance shown in the graph below
should not be considered indicative of potential future stock price
performance.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG FASTCOMM COMMUNICATIONS CORP., THE NASDAQ STOCK MARKET-US
INDEX AND THE NASDAQ TELECOMMUNICATIONS INDEX

FASTCOMM COMMUNICATIONS CORP. NASDAQ STOCK MRKT (US) NASDAQ TELECOM.

4/92 100 100 100
4/93 583 115 130
4/94 678 128 154
4/95 400 149 161
4/96 1217 212 221
4/97 348 199 225

*$100 invested on 4/30/92 in stock index - including reinvestment of dividends.
Fiscal Year Ending April 30.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

At July 8, 1997, there were 10,041,513 shares of Common Stock of the Company
issued and outstanding. As of such date, options to purchase 1,165,535 shares
of Common Stock were outstanding.

Each holder of shares of Common Stock, but not holders of unexercised options,
is entitled to one vote per share on each matter which may be presented at a
meeting of shareholders. Cumulative voting is not allowed. The Company's
Common Stock is traded on the NASDAQ National Market System under the symbol
"FSCX."

The following table sets forth information regarding ownership of Common Stock
of the Company at July 8, 1997, by each person who is known by management of
the Company to own beneficially more than five percent of the Common Stock
(setting forth the address of each such person), by each director, by the Named
Executive Officers of the Company identified beneath "Item 11. Executive
Compensation," and by all directors and executive officers of the Company as a
group. Shares issuable on exercise of warrants or options exercisable within
60 days are deemed to be outstanding for the purpose of computing the
percentage ownership of persons beneficially owning such warrants or options,
but have not been deemed to be outstanding for the purpose of computing the
percentage ownership of any other person. Except as otherwise indicated, the
persons indicated below have sole voting and investment power with respect to
the shares indicated as owned by them except as otherwise stated in the notes
to the table.

Amount and Nature
Name and address of Beneficial Owner of Beneficial Ownership Percent of Class
- ------------------------------------ ----------------------- ----------------

Peter C. Madsen (1) 751,086 7.48%
Sterling, Virginia

Robert C. Abbott 225,741 (2) 2.24%
Reston, Virginia

William A. Flanagan 224,451 (3) 2.23%
Sterling, Virginia

Edward R. Olson (1) 20,000 (4) 0.20%
Reston, Virginia

Thomas G. Amon (1) 13,317 (5) 0.13%
New York, New York

Edward C. Bursk 3,833 (6) 0.04%
Centreville, Virginia

Mark H. Rafferty 69,754 (7) 0.69%
Centreville, Virginia

Richard L. Apel 146,563 (8) 1.46%
Lawrenceville, Georgia

Susquehanna Financial Group 829,187 (9) 7.63%
Bala Cynwyd, Pennsylvania --------- -----

2,283,932 22.10%

(1) Director

(2) Gives effect to 33,333 options owned by Abbott exercisable within
60 days.

(3) Gives effect to 5,000 options owned by Flanagan exercisable within
60 days.

(4) Gives effect to 20,000 options owned by Olson exercisable within 60
days.

(5) Shares are owned by the Thomas G. Amon Pension and Profit Sharing
Plans as to which Mr. Amon has no voting or investment power.
Gives effect to 6,667 options owned by Amon exercisable within 60
days.

(6) Gives effect to 3,333 options owned by Bursk exercisable within 60
days.

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(7) Gives effect to 41,667 options owned by Rafferty exercisable within
60 days.

(8) In connection with the acquisition of Comstat Datacomm Corporation
("CDC"), the Company issued 146,600 shares of restricted common
shares, $.01 par value (the "Exchange Shares") and 43,948 of its
restrictive common shares, $.01 par value (the "Adjustment Shares")
in exchange for all the issued and outstanding shares of CDC which
were owned by Richard L. Apel. (See Item 7. Business Acquisition).

(9) Reflects shares issuable upon conversion of securities issued under
$5 million private convertible debenture offering. (See Item 7.
Convertible Debentures).

(10) Based upon 10,041,513 shares outstanding at July 8, 1997.

The Company is unaware of any arrangement the operation of which
could at a subsequent date result in a change in control of the
Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

During the fiscal year ended April 30, 1997, the Company sold
approximately $43,000 of product under normal terms and conditions
to Newbridge Networks Inc. ("Networks") a United States subsidiary
of Newbridge Networks Corporation, a Canadian Telecommunications
Company ("Newbridge"). FastComm sells to Newbridge Networks
Corporation under net 30 day terms with prompt payment discounts.
Such terms are consistent with that of similar customers. Title
passes on shipment of product. Under the terms of the contract,
Newbridge may return purchased and paid for (during the previous
six month period) but unused products to FastComm for either
warranty revalidation and/or revision level change (hardware or
firmware). Peter C. Madsen, President, Chief Executive Officer and
a director of the Company is also a director of Newbridge.

The Company paid the law firm of Amon & Sabatini $183,000 in the
fiscal year ended April 30, 1997. Thomas G. Amon, a Director of
the Company, since December 1994, is a partner of Amon and
Sabatini.

On February 13, 1997, FastComm entered into an agreement whereby it
leased a facility in Georgia that is owned by Richard L Apel. Mr.
Apel is a Vice President of the Company. The Company paid $22,000
to Mr. Apel in the fiscal year ended April 30, 1997. Also in
connection with the acquisition of Comstat, Mr Apel was loaned
$300,000. The loan bears interest at 2 1/2 above the prime
lending rate and is secured by a pledge of certain shares of the
Company's stock issued to him in connection with this transaction.

The terms of the transactions described above were negotiated at
arms length such that the terms were as favorable to the Company as
could have been obtained from an unaffiliated third party.

The Company has entered into separate indemnification agreements
with each of its directors and executive officers that may require
the Company, among other things, to indemnify them against certain
liabilities that may arise by reason of their status or service as
directors or officers.

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PART IV.

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

(a)(1) and (a)(2) Financial Statements and Schedules.

The consolidated financial statements and financial statement schedules filed
as a part of this Report are listed beneath Item 8 of this Report.

(a)(3) Exhibits.

The exhibits filed as a part of this Report are listed on the Exhibit Index at
page 33 of this Report.

(b) Reports on Form 8-K.

The Company filed one report on Form 8-K during the quarter ended April 30,
1997 relating to the acquisition of Comstat Datacomm Corporation.

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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, on July 29, 1997.

FASTCOMM COMMUNICATIONS CORPORATION

By: /s/ Peter C. Madsen
-------------------
Peter C. Madsen
President

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 in the capacities indicated on July 29, 1997.

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Peter C. Madsen and Mark H. Rafferty, his
attorney-in-fact, with the power of substitution, for him in any and all
capacities, to sign any amendments to this Report on Form 10-K, and to file the
same, with the exhibits thereto and other documents in connection therewith
with the Securities and Exchange Commission, hereby ratifying and confirming
all that said attorney- in-fact, or his substitute or substitutes may do or
cause to be done by virtue hereof.

/s/ Peter C. Madsen
------------------------- President (Principal Executive Officer)
Peter C Madsen and Director

/s/ Mark H. Rafferty
------------------------- Vice President - Finance and Treasurer
Mark H. Rafferty (Principal Financial and Accounting
Officer)

/s/ Thomas G. Amon
------------------------- Director
Thomas G. Amon

/s/ Edward R. Olson
------------------------- Director
Edward R. Olson

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EXHIBIT INDEX

Sequential
Exhibit Page
No. Description Number
- --- ----------- ------

3.1* Amendment to Restated Articles of Incorporation

3.2** By-laws, as amended

4.1**** Form of Securities Purchase Agreement between the Company and
Capital Ventures, International, Nelson Partners, Olympus
Securities, Ltd. and CC Investments, LDC.

4.2**** Registration Rights Agreement between the Company and Richard L.
Apel.

4.3**** Registration Rights Agreement between the Company and Capital
Ventures, International, Nelson Partners, Olympus Securities, Ltd.
and CC Investments, LDC.

4.4**** Form of Convertible Debenture

4.5**** Form of Warrant

4.6**** Proposed Form of Certificate of Designations, Preference and
Rights

10.0** Employment Agreement between the Company and Robert C. Abbott

10.1** October 15, 1987 License Agreement between
the Company and Data Race, Inc.

10.2*** February 27, 1991 Lease Agreement between the Company and
Dulles/Route 28 Limited Partnership with respect to the premises
at 45472 Holiday Drive, Sterling, VA 22110

10.3*** Employment Agreement between the Company and William Flanagan

10.4*** Technology Transfer Agreement with Sigma Technology

10.5*** Agreement in Principle with Watch Hill Research

10.6*** Technology License Agreement with Protocom Devices

10.7*** Loan Agreement with Sovran Bank

10.8*** Employment Agreement among the Company, Robert N. Dennis and
Edward R. Olson, as the "Current Directors," and Peter C. Madsen.

10.9*** Option Agreement by the Company in favor of Charles L. Deslaurier.

10.10*** Option Agreement by the Company in favor of Rick Sampley.

10.11*** Amended and Restated Employment Agreement
between the Company and Robert N. Dennis.

10.12* Exclusive Master Distribution Agreement for FastComm Products
between FastComm Communications Corporation and Daitel Technologies

10.13* Distribution Agreement for products between FastComm
Communications Corporation and C&L Communications, Inc.

10.14* Distributor Agreement for FastComm products between FastComm
Communications Corporation and Tadiran, Ltd.

10.15* Distribution Agreement between the Company and Sumitronics, Inc.

10.16* Consulting Agreement between Gary H. Davison and Newbridge
Networks Inc.

10.17* Agreement between the Company and ZyBel Microsystems, Inc.

11.0* Statement re: Computation of per share earnings.

- -----------
* Filed with revised form 10KA filed August 12, 1994.

** These exhibits are incorporated by reference from the corresponding
exhibits to the Company's Form S-18 Registration Statement, SEC File
Number 333-19758.

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64

*** These exhibits are incorporated by reference from the corresponding
exhibits to the Company's Form S-3 Registration Statement, SEC File No.
333-43374.

**** These exhibits are incorporated by reference from the corresponding
exhibits to the Company's Form S-3 Registration Statement, see File
No. 333-26459