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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, 1998

[ ] 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)

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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
------------------------------------------------------------
(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, 1998, was $6,982, 030
(11,082,587 shares times $.63). As of July 8, 1998, there were 12,344,739 shares
of the Common Stock of the registrant outstanding.

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FASTCOMM COMMUNICATIONS CORPORATION

INDEX

PART I. PAGE

Item 1. Business. 3
Item 2. Properties. 11
Item 3. Legal Proceedings. 11
Item 4. Submission of Matters to Vote of Security Holders. 12

PART II. PAGE

Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters. 13
Item 6. Selected Financial Data. 16
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 17
Item 8. Financial Statements and Supplementary Data. 24
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. 25

PART III. PAGE

Item 10. Directors and Executive Officers of the Registrant. 26
Item 11. Executive Compensation. 27
Item 12. Security Ownership of Certain Beneficial Owners
and Management. 32
Item 13. Certain Relationships and Related Transactions. 33

PART IV. PAGE

Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K. 34

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PART I.

ITEM 1. BUSINESS

INTRODUCTION

FastComm Communications Corporation (the "Company" or "FastComm"), a Virginia
corporation, designs, manufactures, and sells telecommunications access devices.
These devices 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. The Company's products are
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 high quality value-added 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 third party resellers such as network
product and service dealers, systems integrators, telephone carriers, PTT's, and
original equipment manufacturers ("OEM's"). These resellers form the main
distribution channels for the Company and 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.

In May 1998, FastComm obtained an exclusive license from KG Data Systems, Inc.,
("KG Data") to manufacture, market and sell that firm's ChanlComm(R) product
line, a replacement for channel attached front end processors in mainframe
networks.

During the fiscal year ended April 30, 1998 FastComm shares were traded publicly
on the NASDAQ National Market under the symbol FSCX. On June 9, 1998, the
Company's shares were delisted from the National Market System. Effective June
16, 1998, the Company's shares have been quoted on the OTC Bulletin Board under
the same symbol.

PETITION FOR REORGANIZATION UNDER CHAPTER 11 OF THE FEDERAL BANKRUPTCY LAWS

Chapter 11 provides that, unless the court appoints a trustee, the Company has
the exclusive right to file a plan of reorganization for the first 120 days
subsequent to the filing of the petition (or for such longer or shorter period
as the Bankruptcy Court may permit). The Company plans to exercise this right
and is currently preparing its plan. Such plan is subject to the approval of the
Bankruptcy Court. The approval of the plan is dependent on the Company's ability
to demonstrate that it will be able to meet its obligations, return to
profitability and generate positive cash flow. The Company can offer no
assurance as to whether its plan will be approved, or that, if approved, the
terms and conditions of the plan will be favorable to its creditors and
shareholders.

If the Company is unable to attain approval of its plan or the exclusive period
lapses, any creditor or party in interest may file a competing plan of
reorganization. If the court approves such plan, control of the Company might
transfer to the proponents of the competing plan. The Company is unaware of any
efforts to prepare a competing plan of reorganization, however it can offer no
assurances as to whether one might be prepared in the future.

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DESCRIPTION OF BUSINESS

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 networking industry divides itself 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. 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 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.

FastComm's early products, primarily analog modems, provided access over 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 digital and 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 that frame relay service
revenues and unit counts are expected to grow at a rate of 30% or more annually
past the year 2000.

The Company's FRADs, which are functionally routers, also 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
comprised of 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 competitor currently offers, in a single product
line, all the features listed below:

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1. Automatic installation has been a key advantage, in the form of three
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(R)
access device to learn its IP addressing.

- Save and restore configurations via file transfer between the FRAD or
WEB.router(R) and a management station

2. MaximumPRIORITY(TM) and FastRATE(TM) features provide sophisticated,
multiprotocol prioritization and congestion control, a feature typically
found only in transmission switches. These features enable the Company's
FRAD and router products to combine multiple "mission critical"
applications over a single network connection while offering a 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.

3. A menu system on a port dedicated to management and configuration guides a
user 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.

A distinguishing 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 Company's equipment emulates multidrop lines, the most common
type found in over 50,000 IBM SNA (system network architecture) 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 FRADs support the protocol conversion necessary for SDLC devices 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.

Voice over frame relay became popular during fiscal 1997. In response, the
Company introduced the VoiceFRAD(TM) a 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 ("FAX") 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 72% of the Company's total
revenue for fiscal year 1998.

WEB.ROUTER(R)

The WEB.router(R) 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(R) devices were designed for
Intranet applications of World Wide Web technology (within companies) as well as
general Internet access.

ISDN

The Company offers Basic Rate Interface (BRI) module to attach to the ISDN
(Integrated Services Digital Network, a digital phone service). This module
becomes part of an EtherFRAD, for example. The BRI is an all-digital method to
access a telephone company 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

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replacement connection if for any reason the original frame relay access line is
lost. The BRI option is 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.

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 communication between legacy applications / equipment
and LAN applications. Sales of Comstat products totaled $2,274,000 during the
fiscal year ended April 30, 1998.

CHANLCOMM(R) MAINFRAME COMMUNICATIONS PROCESSOR

Under an exclusive five year license agreement with KG Data Systems, Inc., the
Company has begun to market the ChanlComm(R) product family as a replacement for
the front end processor ("FEP") in networks built around IBM mainframe
computers. The ChanlComm(R) takes its name from being "channel attached" to the
main computer, bypassing the front end processor normally installed to handle
communications lines. This product is now shipping with serial (SDLC) interfaces
for wide area network lines (point to point and multidrop). The product
development plan includes the addition of a direct frame relay interface along
with other capabilities and protocols. The current 16 port capacity will be
expanded to at least 256 ports. In most applications, the ChanlComm(R) at the
host computer will communicate with FastComm FRADs at remote sites.

The terms and conditions of this agreement call for an initial payment of
$150,000 plus $8,000 per month thereafter and a 5% royalty on all ChanlComm(R)
sales. An additional royalty of 3% is due for all revenues in excess of
$2,500,000 per year. The Company is also required to reimburse KG Data certain
expenses on a monthly basis. The agreement, which is renewable by FastComm for
two additional five year terms, also calls for additional cash payments once
certain ChanlComm(R) sales milestones are achieved.

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 1998 $2,255,000 25% of revenue
FY 1997 $2,042,000 18% of revenue
FY 1996 $1,412,000 14% of revenue

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

In May 1998, the Company obtained an exclusive license from KG Data Systems,
Inc. to sell its ChanlComm(R) product, a replacement for the front end processor
(FEP) in an IBM mainframe network. In conjunction with the license, the Company
is funding certain expenses at KG, including continuing channel attached product
development. The license includes an option whereby FastComm may acquire KG
Data.

The license from KG Data involves continuing product development on the
ChanlComm(R) communications processors. The work plan includes the addition of
several protocol variants, including a frame relay network interface, and
expansion of overall capacity.

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Product features that were finished in the past year include:

1) ISDN (Integrated Services Digital Network) basic rate interface ("BRI"), 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.

3) SNMP management. This is the defacto management for products deployed in a
LAN environment. It is a requirement of most major network users.

Competitive pressure requires aggressive pricing. 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. 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.

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. The
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 its ability 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.

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

On June 2, 1998, the Company filed a voluntary petition for reorganization under
Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court
for the Eastern District of Virginia. The Company believes that this filing has
negatively impacted its ability to sell its product in the market place in the
near term and it is unable to predict the effect this filing will have on future
sales.

DOMESTIC
FastComm sells its frame relay 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

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The Comstat Division and that portion of the Company's sales force selling the
ChanlComm(R) products do sell directly to end users as well as through a limited
number of resellers. The Company also provides direct technical support for
these customers.

As of July 1998, resellers of the Company's products include Alcatel Data
Networks, Anicom, C&L Communications, GTE Corporation and Computer Services Inc.
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 product 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/rotations and stock 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.

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 and its analysis of 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 adjustment/rotation policies as discussed above
and product warranty, the Company is not contractually obligated to accept
returned merchandise.

During fiscal year 1998, sales to Alcatel Data Networks accounted for 32.2% of
total sales. 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.

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/rotation and stock update rights. In most
cases, a distributor obtains non-exclusive rights to all FastComm products for a
specific geographic area. In 1998, 1997 and 1996, the Company had export sales
to foreign customers totaling $3,292,000, $846,000 and $1,300,000, respectively.
The majority of the sales to Alcatel Data Networks are for export, primarily to
Latin America and Asia.

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,

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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. The Comstat Division and operations related to the ChannlComm products
provide technical support either directly or through separate groups.

NCR Corp. 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 may enter into similar agreements with
others in the future.

PROMOTION

Advertising in trade publications stress the 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.

To generate interest and to identify prospects among data center managers, the
Company uses direct mail targeted at known users of mainframe computers.

COMPETITION

On June 2, 1998, the Company filed a voluntary petition for reorganization under
Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court
for the Eastern District of Virginia. At this time, the Company is unable to
predict the effect this filing will have on its ability to compete in its
marketplace.

The communications industry is highly competitive. Rapid technological change,
evolving standards and regulatory developments characterize the market for the
Company's products. 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.

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 late FY 1997. The
Company acquires VoiceFRADS from an Australian manufacturer and resells this
product under both its own name and that of customers.

UNISYS MAINFRAME MARKET: The users of the Comstat products are those with older
Unisys mainframe computers that were designed to communicate using the
Poll/Select protocol on leased lines. Progress in computers and communications
technologies will force these networks to a more modern transmission format,
typically frame relay or Internet Protocol (IP). Comstat supports both migration
strategies, with equipment that is more flexible, reliable, and cost-effective
than the few alternatives now available.

IBM MAINFRAME MARKET: The ChanlComm(R) is one of the very few communications
devices that attach directly to the mainframe computer via the block or byte
channel (bus and tag connectors). No other FRAD vendor offers a

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channel-attached device. Among router vendors, only Cisco has announced a
channel attachment option, licensed from IBM. While new entrants may appear, the
cost to buy or design a channel interface to the mainframe will pose a
significant barrier to market entry for some years, Company management believes.

Current users of IBM front end processors ("FEP") have been advised that IBM
will discontinue support for certain older models at the end of 1998. The
ChanlComm(R) products easily replace these FEP versions. However, the Company
expects that third-party maintenance organizations will continue to offer
support for the older FEPs, allowing them to remain in service for some
additional time.

Having a channel-attached device is expected to provide a competitive advantage
to the Company as it seeks a share of the business to be generated between now
and the year 2003 when an expected 35,000 IBM networks convert from leased lines
to a frame relay transmission service. However, competitors like IBM and Cisco,
which are larger and have greater resources, are expected to compete for the
same customers so there is no assurance that revenue targets will be achieved on
schedule.

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.
To date, sales of the autodialer product have been minimal.

In May 1998, the Company entered into an exclusive license from KG Data Systems,
Inc. to manufacture, market and sell its ChanlComm(R) product, a replacement for
the front end processor (FEP) in an IBM mainframe network. The terms and
conditions of this agreement call for an initial payment of $150,000, with
$70,000 payable upon execution and the remaining $80,000 payable in four weekly
installments of $20,000 beginning May 18, 1998. The agreement calls for
royalties of 5% on net sales of the ChanlComm(R) product with minimum royalties
of $8,000 per month. Additional cash payments of $100,000 and $200,000 are due
if net revenues of ChanlComm(R) product exceed $1,500,000 and $2,500,000,
respectively. An additional royalty of 3% is due for all net revenues in excess
of $2,500,000. The initial term of the agreement is five years and is renewable
by the Company for two additional five year terms. The Company is also required
to reimburse KG Data certain expenses on a monthly basis, as specified in the
agreement. The agreement includes an option whereby FastComm may acquire KG
Data.

The Company licenses outside technology 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.

Software related to the ISDN, X.25 and SNA interfaces is licensed to the Company
and has been integrated into its FRAD product line.

MANUFACTURING

On June 2, 1998, the Company filed a voluntary petition for reorganization under
Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court
for the Eastern District of Virginia. To date, the Company believes that this
filing has negatively impacted its ability to procure components or
manufacturing services. It is unable to predict the effect this filing will have
on its ability to procure components and manufacturing services in the future.

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.

On July 30, 1997, the Company entered into a two year contract manufacturing
services agreement with Tanon Manufacturing, Inc. ("Tanon"). Under the terms and
conditions of this agreement, Tanon will manufacture, on a turnkey basis,
circuit board assemblies in accordance with FastComm's specifications. During
fiscal year 1998, virtually all data FRAD products were based on circuit board
assemblies manufactured by Tanon. Upon mutual agreement of both parties and 90
days notice, this agreement may be extended for additional one year periods. The
Company believes that its relationship with Tanon is satisfactory and plans to
use its services for the foreseeable future.

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Most of the components use in the Company's manufacturing process are available
from multiple sources. Single-source items are all from large vendors with
stable histories of supplying material as needed. FastComm and its third party
manufacturer have 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.

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

EMPLOYEES

At July 8, 1998, the Company had 63 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 $207,000 for the fiscal year ended April 30, 1998. The Company
entered into a new five year lease agreement for this space effective May 1,
1998. Expenditures under this lease agreement approximate $22,000 per month plus
annual escalation.

Effective August 1, 1998, the Company entered into a two year lease agreement
for 2,100 square feet in Duluth Georgia that supports its Comstat Datacomm
division. The base rent for this facility is $1,700 per month.

The Company also leases small sales offices in Colorado and the state of
Washington.

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") has conducted an
inquiry pursuant to an order directing a private investigation relating to
certain prior public disclosures and periodic reports of the Company. On April
7, 1998, the Company was informed by the staff of the SEC that the staff intends
to seek authorization from the Commission to file a civil injunctive action
against the Company and certain of its past and current officers for various
violations of the federal securities laws. The Company continues to work with
the SEC in an effort to settle this proposed action. No assurance can be given
that the matter will be settled.

In 1997, Gary H. Davison a former officer and director of the Company commenced
two lawsuits against the Company in the Circuit Court of Fairfax, Virginia, one
for wrongful termination and the other for breach of contract. The breach of
contract action involved claims for options to purchase 100,000 shares of stock
and a $100,000 bonus. On February 17, 1998, a jury in Fairfax County awarded Mr.
Davison $1,125,000 in damages and $163,233 in interest accrued from May 26, 1996
in this case. Accordingly, the Company recorded a loss provision for this amount
in its third fiscal quarter ended January 31, 1998. Subsequently, this award was
reduced by $100,000. The Company has filed an appeal of this decision with the
Virginia Supreme Court and believes it has sufficient meritorious issues to
overturn this verdict. The filing of the bankruptcy petition has stayed any
activity on the second case.

Following the verdict in the Davison lawsuit, another former employee filed a
similar claim, by way of a counterclaim in a lawsuit commenced to collect monies
owed by this employee to the Company's President. The Company settled this
counterclaim on May 1, 1998 for $50,000. In connection with the bankruptcy
filing, the Company may be compelled to demand that this payment be repaid to
the Company as an avoidable preference.

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right to file a plan of reorganization for the first 120 days subsequent to the
filing of the petition (or for such longer or shorter period as the Bankruptcy
Court may permit). The Company plans to exercise this right. The Company
continues to operate under bankruptcy court protection from creditors while
seeking to work out a plan of reorganization.

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

During the year ended April 30, 1998 two matters were submitted to a vote of the
Company's security holders at the Company's annual meeting on March 31, 1998.
(1) a proposal to amend the Articles of Incorporation of the Company to
authorize a serial preferred stock and (2) a proposal to approve issuance of
shares of Common Stock underlying the Company's convertible debentures and
certain warrants. Proposal one was defeated by a vote of 3,095,700 for and
670,610 against; Proposal two was defeated by a vote of 3,188,500 for and
596,589 against.

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PART II.

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

During the fiscal year ended April 30, 1998 FastComm shares were traded publicly
on the NASDAQ National Market under the symbol FSCX. On June 9, 1998, following
the Company's bankruptcy filing, the Company's shares were delisted from the
National Market System. Effective June 16, 1998, the Company's shares have been
quoted on the OTC Bulletin Board under the same symbol.

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, 1998:

First Quarter................................ $7 7/8 $5 1/4
Second Quarter............................... 6 9/16 4 1/2
Third Quarter................................ 5 3/16 2 3/32
Fourth Quarter .............................. 3 13/32 1 1/4

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

As of July 8, 1998, there were 200 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 $.63 per share.

DIVIDEND POLICY

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,
1998 and its quarterly reports on Form 10-Q previously filed with the United
States Securities and Exchange Commission.

On June 2, 1998, the Company filed a voluntary petition for reorganization under
Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court
for the Eastern District of Virginia. This filing was a direct result of
enforcement activities by a judgment creditor. (See Item 3. Legal Proceedings)
The Company has filed its Schedules and Statements of Financial Affairs in
accordance with the requirements of the Bankruptcy Code and is current with its
monthly operating reports. Chapter 11 provides that, unless a trustee is
appointed, the Company has the exclusive right to file a plan of reorganization
for the first 120 days subsequent to the filing of the petition (or for such
longer or shorter period as the Bankruptcy Court may permit). The Company plans
to exercise this right. The Company continues to operate under bankruptcy court
protection from creditors while it develops a plan of reorganization.

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 for products in
development. Because timely availability of new and enhanced products is
critical to the success of

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the Company, delays in availability of these products, or lack of market
acceptance of such products, could adversely affect the Company.

COMPETITION

On June 2, 1998, the Company filed a voluntary petition for reorganization under
Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court
for the Eastern District of Virginia. At this time, the Company is unable to
predict the effect this filing will have on its ability to compete in its
marketplace.

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 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

On June 2, 1998, the Company filed a voluntary petition for reorganization under
Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court
for the Eastern District of Virginia. As a direct result of this filing, the
Company has suffered the loss of certain key employees. At this time, the
Company is unable to predict the long term effect this filing will have on its
ability to attract and retain 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.

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, 1998. The consolidated statement
of operations data for the fiscal years ended April 30, 1998, April 30, 1997 and
April 30, 1996 and the consolidated balance sheet data at April 30, 1998 and
April 30, 1997 are derived from and are qualified by reference to the
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, 1995 and 1994 and the consolidated balance sheet data at April 30,
1996, 1995 and 1994 are derived from consolidated financial statements of the
Company also audited by BDO Seidman, LLP, but 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,
-------------------------------------------------------

1998 1997 1996 1995 1994
---- ---- ---- ---- ----
($000's except per share data)

STATEMENT OF INCOME DATA:
Total revenues $8,907 $11,163 $10,009 $4,166 $5,136
------ ------- ------- ------ ------
Operating costs and expenses
Cost of goods sold 5,441 4,737 5,047 2,907 2,128

Other operating expenses 11,684 7,202 5,722 5,357 5,063
------ ----- ----- ----- -----

Total operating costs and
expenses 17,125 11,939 10,769 8,264 7,191
------ ------ ------ ----- ------
Operating income (loss) (8,218) (776) (760) (4,098) (2,055)

Other income (expense), net (871) 181 129 14 46
Income tax (expense) benefit -0- -0- -0- -0- 10
--- --- --- --- --
(9,089) (595) (631) (4,084) ($1,999)
======= ===== ===== ======= ========

Basic and diluted loss per share $(0.87) $(0.06) $(0.07) $(0.49) $(0.27)
======= ======= ======= ======== ========

Weighted average number of shares 10,391 9,961 9,522 8,409 7,521
outstanding during each period

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

BALANCE SHEET DATA:

Total assets $9,226 $12,622 $9,034 $7,577 $7,248
Total long term obligations $1,205 $3,000 $-0- $ 132 $ 152
Shareholders' equity $3,246 $7,759 $6,880 $6,149 $5,600

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.

PETITION FOR REORGANIZATION UNDER CHAPTER 11

FUTURE PROSPECTS

During the current fiscal year, the Company consolidated its manufacturing
operation and downsized its administrative overhead. Full-time headcount was
reduced from 78 employees at April 30, 1997 to 62 full-time employees at July
25, 1998. The Company's plan calls for reductions in core research and
development and advertising expenditures. During the current fiscal year, the
Company changed sales management and reorganized its sales force.

The Company anticipates that it may require additional funding requirements to
meet future expansion and research and development expenses. It is anticipated
that such funding will be generated by way of additional placements of equity,
through research and development arrangements funded by third parties or by
investments by strategic partners. The Company can give no assurance as to
whether it will be able to conclude such financing arrangements, or that, if
concluded, they will be on terms favorable to the Company.

The Company anticipates significant legal expenses associated with its
reorganization and other legal affairs, however, it is unable to estimate the
amount of such expenses at this time. The Company anticipates a return to
profitability in the latter part of its fiscal year ended April 30, 1999.

There can be no assurance that the required increased sales and improved
operating efficiencies necessary to return to profitability will materialize or
if they do, the Company will be able to raise sufficient funding to finance its
working capital needs. Absent a return to profitability or the receipt of
additional capital, FastComm is unlikely to be able to operate and meet its
obligations throughout fiscal year 1999. The Company's independent auditors have

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included an explanatory paragraph in their opinion on the fiscal 1998
consolidated financial statements related to this uncertainty. No adjustments to
the financial statements have been made to reflect these risks.

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 funded on the attainment of
predetermined revenue targets. The Company funded this acquisition through the
issuance of 146,600 shares of its common stock.

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 is being 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 fiscal year ended April 30, 1997.

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,
---------------------------

1998 1997 1996
---- ---- ----

Revenues 100% 100% 100%
---- ---- ----
Operating costs and expenses:
Cost of goods sold 61% 42% 50%
Selling, general and administrative 86% 44% 40%
Research and development 25% 18% 14%
Reserve for litigation settlement 13%
Depreciation and amortization 7% 3% 3%
-- -- --
192% 107% 107%
---- ---- ----
Operating (loss) income (92%) (7%) (7%)
Other income (expense), net (10%) 2% 1%
Income tax (expense) benefit - - -
Net (loss) income (102%) (5%) (6%)
====== ==== ====

FISCAL 1998 COMPARED TO FISCAL 1997

Total revenues decreased from $11,163,000 to $8,907,000 or by 20% during fiscal
1998 as compared to fiscal 1997. The $2,256,000 decrease was primarily
attributable to decreased unit sales volumes of data based frame relay products.
The Company did not make any significant price adjustments during the current
fiscal year. Data based frame relay product sales decreased from $8,896,000 to
$3,820,000 or by 57% during fiscal 1998 as compared to fiscal 1997. This
decrease is attributable to the completion, in fiscal 1997, of the Company's two
largest projects to date, System One and GTE. This decline was offset with
$2,493,000 in sales of voice based frame relay access devices. The voice based
FRAD product was not sold in fiscal year 1997. The sale of Comstat product
increased

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$1,499,000 to $2,274,000 when compared with that of the previous
fiscal year. This increase is attributable to the fact that the Company acquired
Comstat during the prior fiscal year and accordingly included only one quarter
of Comstat sales in that period. On a proforma basis, Comstat sales totaled
$2,610,000 during fiscal year 1997.

Frame Relay product sales, as a percentage of total product sales, decreased
from approximately 80% in fiscal 1997 to approximately 72% in fiscal 1998. The
Company believes its future growth will be achieved through the sale of frame
relay and other digital products. Accordingly, the sale of its analog based
products and data compression products declined $1,085,000 when compared with
that of the previous fiscal year.

During the fiscal year ended April 30, 1998, one customer accounted for 32.2% of
total sales.

Gross margins, as a percentage of total revenues, decreased from 58% to 39%
during fiscal 1998 as compared to fiscal 1997. The decline in gross margin is
attributable in part to the sale of voice frame relay access products. The voice
products, which were not sold in the previous fiscal year, are produced by
another manufacturer and as such generate a significantly lower gross margin
when compared with that of data products. Gross margins were also negatively
impacted by lower sales of data frame relay access products that generate higher
gross margins. This change in product mix negatively impacted gross margins by
approximately 8%. The Company anticipates continued sales of voice frame relay
products and is currently investigating alternatives that will improve gross
margins on this product.

During the current fiscal year, the Company disposed of $240,000 of obsolete
inventory while increasing its reserve for inventory obsolescence by $1,110,000
to $1,370,000. This increase relates to the year over year decline in the unit
sales of analog modem and data compression products and to a lesser degree, the
decline in unit sales of certain frame relay products. These transactions
reduced the gross margin by approximately 11%. Management believes that its
reserve for inventory obsolescence is adequate.

Selling, general and administrative expenses increased from $4,822,000 in fiscal
1997 to $7,622,000 in fiscal 1998. This 58% increase in expense is attributable
to the annualized effect of an expanded sales force ($456,000), a full year of
costs associated with the operation of Comstat ($335,000), an enhanced marketing
and advertising program ($235,000), increased legal fees associated with the
Davison litigation ($1,037,000) and increased international travel ($182,000).
Selling, general and administrative expenses were negatively affected by a
$275,000 increase in bad debt expense. The Company's reserve for bad debt totals
$300,000. Management believes that its reserve for bad debts is adequate.

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
$2,042,000 in fiscal 1997 to $2,255,000 in the current fiscal year. This 10%
increase is primarily attributable to increased research and development
manpower ($147,000), an increase in outside consulting services ($59,000) and
costs associated with the operation of Comstat ($104,000). The previous fiscal
year included a non recurring $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.

In 1997, Gary H. Davison a former officer and director of the Company commenced
two lawsuits against the Company in the Circuit Court of Fairfax, Virginia, one
for wrongful termination and the other for breach of contract. The breach of
contract action involved claims for options to purchase 100,000 shares of stock
and a $100,000 bonus. On February 17, 1998, a jury in Fairfax County awarded Mr.
Davison $1,125,000 in damages and $163,233 in interest accrued from May 26, 1996
in this case. Subsequently, this award was reduced by $100,000. Accordingly, the
Company recorded a loss provision in the amount of $1,196,000 in the current
fiscal year. (See Item 3. Legal Proceedings)

Depreciation and amortization expenses increased from $339,000 in fiscal 1997 to
$611,000 in fiscal 1998. This increase is primarily attributable to the
amortization of goodwill associated with the acquisition of Comstat ($128,000)
and depreciation associated with 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.

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Although the Company has tax net operating loss carry forwards 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 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.

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 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, the Company disposed of
approximately $80,000 in obsolete inventory.

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 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.

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.

FOURTH QUARTER ADJUSTMENTS

During the fourth quarter ending April 30, 1998, the Company recorded provisions
for obsolete inventory of $570,000 and a valuation allowance related to a note
receivable of $273,600 all of which had the effect of increasing the operating
loss and net loss by $843,600 or $.08 per share.

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.

LIQUIDITY AND CAPITAL RESOURCES

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. 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 Company funded this acquisition
through the issuance of 146,563 shares of its common stock. An additional 58,651
shares of common stock with a fair value of approximately $400,000, at the time
of the closing of this transaction, were placed in escrow to be issued upon CDC
achieving certain revenue targets for the fiscal years ended May 31, 1997 and
1998, respectively.

20
21

CONVERTIBLE DEBENTURES

In April and May of 1997, the Company issued $3,000,000 and $2,000,000
respectively, in 5.0% Convertible Debentures due April 2001. For the first 180
days following the issuance, the debentures were 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
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.

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. Based
on the foregoing, the Company recognized in the current fiscal year this
conversion discount in the form of two non cash charges to interest expense
totaling $550,000.

CONVERSION OF DEBENTURES
During the fiscal year ended April 30, 1998, debentures in the amount of
$3,794,701 plus $157,924 in accrued interest were converted into 1,997,232
shares of common stock. Subsequent to April 30, 1998 but prior to the issuance
of this report, an additional $450,000 in debentures plus $21,500 in accrued
interest have been converted into 294,689 shares of common stock.

In connection with the conversion of debentures and in accordance with the terms
of the debenture agreement, the Company has issued warrants to purchase an
additional 746,611 common shares at a strike price set at 125% of the market
price of the Company's common stock at the time of conversion. When and if
exercised, the warrants will generate a maximum of $1,829,321 in additional cash
for the Company. However, since the warrant holders cannot be forced to
exercise, the Company can give no assurance as to whether any of the warrants
will be exercised, nor can it give assurance as to the amount of cash that will
actually be generated.

OTHER CASH REQUIREMENTS

During fiscal year 1998, the Company used approximately $4,395,000 in cash to
fund its operating activities. This amount includes $6,217,000 required to fund
the net loss, after adjusting for non-cash expenses (consisting principally of
depreciation, amortization, debenture discount and provisions for inventory
obsolescence and doubtful accounts). In addition, $168,000 was used by increases
in accounts receivable and $1,091,000 was invested in inventory. Cash was
generated by a $1,718,000 increase in accounts payable and a $1,196,000 reserve
for litigation settlement.

The Company has a $300,000 allowance for doubtful accounts at April 30, 1998.
Management believes that its allowance for doubtful accounts is adequate.

During fiscal year 1998, one customer accounted for 32.2% of total sales. These
sales were made under normal terms and conditions to an international
distributor. Subsequent to fiscal year end but prior to the date of this report,
the related accounts receivable was collected.

Inventory levels increased during fiscal year 1998. This increase is primarily
attributable increased inventory of frame relay subassemblies and to the
increase of voice based frame relay products. All of FastComm's frame relay
printed circuit assemblies ("PCA's") are manufactured outside the Company's
facilities by contract manufacturers. The PCA'a are built to forecast. Inventory
levels increase when sales do not meet forecast. The Company purchases voice
based products from another manufacturer and is required to place high volume
orders. Accordingly, the Company recorded a $1,110,000 increase in its reserve
for inventory obsolescence during the fiscal 1998. This was necessitated by the
decline in sales of analog modem and data compression products and by the
increase in the overall inventory balance. During the fiscal year, the Company
disposed of approximately $240,000 in obsolete inventory. Management believes
its $1,370,000 reserve for inventory obsolescence is adequate.

At April 30, 1998, the Company had $1.2 million in cash, $3.1 million of working
capital and a current ratio of over 1.6 to 1. None of the Company's accounts
receivable or inventories are collateralized currently.

21
22

result of enforcement activities by a judgment creditor. (See Item 3. Legal
Proceedings) The Company continues to operate under bankruptcy court protection
from creditors while it develops a plan of reorganization.

Management believes that inflation did not have a material effect on operations
during the fiscal year ended April 30, 1998.

In fiscal 1999, the Company's cash commitments include minimum payments of
$286,000 under its operating lease arrangements. Management believes that
expenditures for research and development and legal fees in fiscal 1999 will
continue to be significant. The Company anticipates capital spending for
software, computer and test equipment and furniture and fixtures in fiscal 1999.
Where possible, such capital requirements are expected to be met through lease
financing arrangements.

FISCAL 1998 COMPARED TO FISCAL 1997

Cash used in operating activities increased from $2,259,000 in fiscal 1997 to
$4,395,000 in fiscal 1998. The $2,136,000 increase in cash used in operating
activities is primarily attributable to the $8,494,000 increase in the net loss
for the year offset by changes in working capital items in fiscal 1998 compared
to fiscal 1997, including a $2,227,000 reduction in cash used to fund current
liability balances in fiscal 1998, a $1,196,000 non cash reserve for litigation
settlement and increases in other non cash expenses, primarily increases in
asset valuation accounts and non cash discount and interest on convertible
debentures.

Cash used by investing activities amounted to $318,000 in fiscal 1998 as
compared $511,000 in fiscal 1997. The $193,000 decrease is primarily
attributable to reduced fixed asset purchases.

Cash provided by financing activities decreased from $2,998,000 in fiscal 1997
to $1,889,000 in fiscal 1998. The $1,109,000 decrease is primarily attributable
to a $1,000,000 decline, in fiscal year 1998, in proceeds from convertible
debentures

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.

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

22
23

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.

Statement of Financial Accounting Standards (SFAS) 130, "Reporting Comprehensive
Income", establishes standards for reporting and display of comprehensive
income, its components and accumulated balances for periods ending after
December 15, 1997. Comprehensive income is defined to include all changes in
equity except those resulting from investments by owners and distributions to
owners. Among other disclosures, SFAS 130 requires that all items that are
required to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. Due to the recent issuance of
this standard, management has been unable to fully evaluate the impact, if any,
they may have on future financial statement disclosures.

SFAS 131, "Disclosure about Segments of a Business Enterprise," establishes
standards for the way that public enterprises report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public for periods ending after December 15, 1997. It also establishes
standards for disclosures regarding products and services, geographic areas and
major customers. SFAS 131 defines operating segments as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Due to the recent issuance of
this standard, management has been unable to fully evaluate the impact, if any,
they may have on future financial statement disclosures.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments"
("SFAS 133"). SFAS 133 establishes accounting and reporting standards for
derivative instruments and for hedging activities. SFAS 133 requires that an
entity recognize all derivatives as either assets or liabilities and measure
those instruments at fair market value. Under certain circumstances, a portion
of the derivative's gain or loss is initially reported as a component of other
comprehensive income and subsequently reclassified into income when the
transaction affects earnings. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of change.
Presently, the Company does not use derivative instruments either in hedging
activities or as investments. Accordingly, the Company believes that adoption of
FASB 133 will have no impact on its financial position or results of operations.

YEAR 2000

In accordance with the U. S. Securities and Exchange Commission's Staff Legal
Bulletin No. 5, the Company has assessed both the cost of addressing and the
costs or consequences of incomplete or untimely resolution of the Year 2000
issue. Most of the Company's major systems have already been updated or replaced
with applications, in the normal course of business, that are Year 2000
compliant. To date, the costs of such upgrades have been minimal. The Company
will need to upgrade its manufacturing system. The cost of this upgrade is not
expected to exceed $10,000. Accordingly, the Company has determined that its
estimated costs related to the Year 2000 issue are not anticipated to be
material to the Company's business, operations or financial condition.

ASIAN FINANCIAL CRISIS

The ongoing financial crisis in Asia may have a negative impact on the Company
due to lost business opportunities in that region.

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, 1998 and 1997 F-2

Statements of Operations for the Years Ended April 30, 1998, 1997 and 1996 F-4

Statements of Stockholders' Equity for the Years Ended April 30, 1998, 1997 and 1996 F-5

Statements of Cash Flows for the Years Ended April 30, 1998, 1997 and 1996 F-6

Summary of Accounting Policies F-8

Notes to Financial Statements F-14

Financial Statement Schedule: Valuation and Qualifying Accounts (Schedule II) F-30

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, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended April 30, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended April 30, 1998 in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has sustained significant
operating losses and cash flow deficits in fiscal 1998. Also, as discussed in
Note 1, in June 1998 the Company filed for protection under Chapter 11 of the
United States Bankruptcy Code. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are described in Note 1. The financial statements do not
contain any adjustments that might result from the outcome of these
uncertainties.

BDO Seidman, LLP

Washington, D.C.
August 3, 1998

F-1
26
FASTCOMM COMMUNICATIONS CORPORATION

CONSOLIDATED BALANCE SHEETS

April 30, 1998 1997
- -----------------------------------------------------------------------------------------------------------

ASSETS

CURRENT
Cash and cash equivalents $ 1,213,052 $ 4,036,336
Accounts receivable, net (Notes 4 and 11) 3,123,340 3,144,906
Receivables from related party (Note 13) 2,760 3,895
Inventories, net (Notes 3 and 14) 3,118,195 2,897,497
Prepaid expenses and other current assets 374,614 329,503
- -----------------------------------------------------------------------------------------------------------

TOTAL CURRENT ASSETS 7,831,961 10,412,137
- -----------------------------------------------------------------------------------------------------------

PROPERTY AND EQUIPMENT, at cost, less accumulated
depreciation and amortization (Note 5) 775,457 815,401
- -----------------------------------------------------------------------------------------------------------

OTHER
Deferred financing costs 76,344 190,279
Goodwill (Note 2) 482,144 569,165
Notes receivable (Notes 2 and 14) 26,400 300,000
Software license rights and other
intangibles, net - 166,474
Deposits 33,723 168,759
- -----------------------------------------------------------------------------------------------------------

TOTAL OTHER ASSETS 618,611 1,394,677
- -----------------------------------------------------------------------------------------------------------

$ 9,226,029 $12,622,215
===========================================================================================================

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

F-2
27
FASTCOMM COMMUNICATIONS CORPORATION

CONSOLIDATED BALANCE SHEETS

April 30, 1998 1997
- -----------------------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Current portion of long-term debt (Note 6) $ - $ 29,000
Accounts payable 2,427,712 1,277,541
Accrued payroll 308,109 207,290
Reserve for litigation settlement 1,195,560 -
Other current liabilities 843,178 349,666
- -----------------------------------------------------------------------------------------------------------

TOTAL CURRENT LIABILITIES 4,774,559 1,863,497
- -----------------------------------------------------------------------------------------------------------

CONVERTIBLE DEBENTURES (Note 6) 1,205,299 3,000,000
- -----------------------------------------------------------------------------------------------------------

TOTAL LIABILITIES 5,979,858 4,863,497
- -----------------------------------------------------------------------------------------------------------

COMMITMENTS AND CONTINGENCIES (Note 7)

STOCKHOLDERS' EQUITY (Notes 8 and 9)
Common stock, $.01 par - shares authorized,
25,000,000; issued and outstanding
12,048,753 and 10,038,022 120,488 100,380
Additional paid-in capital 20,636,197 16,079,355
Accumulated deficit (17,510,514) (8,421,017)
- -----------------------------------------------------------------------------------------------------------

TOTAL STOCKHOLDERS' EQUITY 3,246,171 7,758,718
- -----------------------------------------------------------------------------------------------------------

$ 9,226,029 $12,622,215
===========================================================================================================

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, 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------

REVENUES (Notes 11 and 13)
Product sales $ 8,672,150 $10,961,750 $ 9,720,969
Product sales to related parties 13,335 43,028 195,427
Research and development contracts and other 221,185 158,551 92,901
- -----------------------------------------------------------------------------------------------------------

TOTAL REVENUES 8,906,670 11,163,329 10,009,297
- -----------------------------------------------------------------------------------------------------------

OPERATING COSTS AND EXPENSES
Cost of goods sold 5,440,991 4,736,660 5,047,015
Selling, general and administrative 7,622,394 4,821,556 4,037,737
Research and development 2,255,097 2,042,331 1,411,503
Reserve for litigation settlement 1,195,560 - -
Depreciation and amortization 611,078 338,522 273,507
- -----------------------------------------------------------------------------------------------------------

TOTAL OPERATING COSTS AND EXPENSES 17,125,120 11,939,069 10,769,762
- -----------------------------------------------------------------------------------------------------------

OPERATING LOSS (8,218,450) (775,740) (760,465)
- -----------------------------------------------------------------------------------------------------------

OTHER INCOME (expense)
Other income (82,692) 64,966 23,218
Interest income 174,120 160,461 127,574
Interest expense (962,475) (44,721) (20,975)
- -----------------------------------------------------------------------------------------------------------

TOTAL OTHER INCOME (expense) (871,047) 180,706 129,817
- -----------------------------------------------------------------------------------------------------------

NET LOSS $ (9,089,497) $ (595,034) $ (630,648)
============================================================================================================

Basic and diluted loss per common share $ (0.87) $ (0.06) $ (0.07)
- -----------------------------------------------------------------------------------------------------------

Weighted-average number of common shares
outstanding during each year 10,390,552 $ 9,961,107 9,522,000
===========================================================================================================

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, 1998, 1997 and 1996
- -----------------------------------------------------------------------------------------------------------

Common Stock
---------------- Additional
Par Paid-in Accumulated
Shares Values Capital (Deficit) Total
- -----------------------------------------------------------------------------------------------------------

BALANCE, April 30, 1995 9,444,529 $ 94,445 $13,249,770 $ (7,195,335) $6,148,880

Shares issued for stock options 342,090 3,421 1,358,693 - 1,362,114

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

BALANCE, April 30, 1996 9,786,619 97,866 14,608,463 (7,825,983) 6,880,346

Shares issued for stock options 104,803 1,048 472,358 - 473,406

Shares issued for acquisition
of Comstat DataComm, Corp. 146,600 1,466 998,534 - 1,000,000

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

BALANCE, April 30, 1997 10,038,022 100,380 16,079,355 (8,421,017) 7,758,718

Shares issued for stock options 3,499 35 18,042 - 18,077

Shares issued on conversion of
debentures 1,997,232 19,973 3,926,400 - 3,946,373

Recognition of discount on debentures - - 550,000 - 550,000

Shares issued for compensation 10,000 100 62,400 - 62,500

Net loss - - - (9,089,497) (9,089,497)
- -----------------------------------------------------------------------------------------------------------

BALANCE, April 30, 1998 12,048,753 $120,488 $20,636,197 $(17,510,514) $3,246,171
===========================================================================================================

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, 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(9,089,497) $ (595,034) $ (630,648)
ADJUSTMENTS TO RECONCILE NET LOSS
TO CASH USED IN OPERATING ACTIVITIES
Depreciation and amortization 611,078 338,522 273,507
Compensation expenses associated with
stock options granted 26,440 20,500 -
Provision for doubtful accounts 275,421 151,000 100,000
Provision for inventory obsolescence 1,110,000 - 105,000
Amortization of imputed discount 286 3,415 14,702
Discount on convertible debentures 550,000 - -
Reserve for note and interest receivable 316,225 - -
Amortization of deferred financing costs 213,935 - -
Accrued interest converted to stock 151,672 - -
Compensation expense on shares issued 62,500 - -
CHANGES IN ASSETS AND LIABILITIES,
NET OF EFFECTS OF ACQUISITIONS
(INCREASE) DECREASE IN ASSETS
Accounts receivable (253,855) (765,576) (1,164,337)
Receivables from related party 1,135 21,430 25,661
Inventory (1,330,698) (867,234) 131,999
Prepaid expense and other current assets (87,736) (27,065) (169,440)
Deposits 135,036 (27,313) (85,736)
INCREASE (DECREASE) IN LIABILITIES
Accounts payable 1,150,171 (467,890) 874,893
Provision for litigation settlement 1,195,560 - -
Accrued payroll 74,379 48,199 (47,592)
Income taxes payable - (955) -
Other current liabilities 493,512 (90,655) 125,146
- -----------------------------------------------------------------------------------------------------------

NET CASH USED IN OPERATING ACTIVITIES (4,394,436) (2,258,656) (446,845)
- -----------------------------------------------------------------------------------------------------------

F-6
31
FASTCOMM COMMUNICATIONS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended April 30, 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (317,639) (565,749) (300,077)
Issuance of notes receivable - (300,000) -
Net proceeds assumed in acquisition - 355,084 -
Sale (purchase) of restricted investments - - 374,687
Purchase of long-term investments - - (45,328)
- -----------------------------------------------------------------------------------------------------------

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (317,639) (510,665) 29,282
- -----------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible debentures 2,000,000 3,000,000 -
Payment of deferred financing costs (100,000) (190,279) -
Net proceeds from exercise of stock options 18,077 473,406 1,362,114
Repayments of notes payable (29,286) (285,325) (242,042)
- -----------------------------------------------------------------------------------------------------------

NET CASH PROVIDED BY FINANCING ACTIVITIES 1,888,791 2,997,802 1,120,072
- -----------------------------------------------------------------------------------------------------------

NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (2,823,284) 228,481 702,509

CASH AND CASH EQUIVALENTS, beginning of year 4,036,336 3,807,855 3,105,346
- -----------------------------------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS, end of year $ 1,213,052 $ 4,036,336 3,807,855
===========================================================================================================

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, Comstat
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 and 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, 1998, 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 affected
UNCERTAINTIES by a number of factors. During fiscal 1998, 32% of
revenues were from one customer. During fiscal 1997 and
1996, 45% and 52% of revenues, respectively, 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 the time
RECOGNITION 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 estimated
DEPRECIATION useful life of the related assets (generally three to
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 research
DEVELOPMENT and development for third parties. The Company accounts
CONTRACTS for these contracts in accordance with Statement of
Financial Accounting Standards No. 68, "Accounting for
Research 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, 1998, 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 software
AND SOFTWARE license rights and amortizes them over the shorter of
LICENSE RIGHTS 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 investments with
CASH EQUIVALENTS 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 convertible
FINANCIAL debentures. Based upon the current borrowing rates
INSTRUMENTS available to the Company, estimated fair values of these
financial instruments approximate their recorded
carrying amounts.

EARNINGS PER SHARE Basic 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). The Company has excluded the
effects of outstanding options and warrants as it would
have been 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 No. 130,
PRONOUNCEMENTS Reporting Comprehensive Income ("SFAS 130"), establishes
standards for reporting and display of comprehensive
income, its components and accumulated balances.
Comprehensive income is defined to include all changes
in equity except those resulting from investments by
owners and distributions to owners. Among other
disclosures, SFAS 130 requires that all items that are
required to be recognized under current accounting
standards as components of comprehensive income be
reported in a financial statement that is displayed with
the same prominence as other financial statements.

Statement of Financial Accounting Standards (SFAS) 131,
"Disclosure about Segments of a Business Enterprise",
establishes standards for the way that public
enterprises report information about operating segments
in annual financial statements and requires reporting of
selected information about operating segments in interim
financial statements issued to the public for periods
ending after December 15, 1997. It also establishes
standards for disclosures regarding products and
services, geographic areas and major customers. SFAS 131
defines operating segments as components of an
enterprise about which separate financial information is
available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate
resources and in assessing performance. Due to the
recent issuance of this standard, management has been
unable to fully evaluate the impact, if any, they may
have on future financial statement disclosures.

In February 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
No. 132, "Employers Disclosures about Pensions and Other
Postretirement Benefits" (SFAS 132"). SFAS 132 revised
employers' disclosures about pension and other
postretirement benefit plans but does not change
measurement or recognition of those plans. Also, SFAS
132 requires additional information on changes in the
benefit

F-12
37
FASTCOMM COMMUNICATIONS CORPORATION

SUMMARY OF ACCOUNTING POLICIES

obligations and fair values of plan assets. Presently,
the Company does not offer postretirement benefits.
Adoption of SFAS 132 will not have an effect on reported
financial and operating results.

In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments" (SFAS
133"). SFAS 133 establishes accounting and reporting
standards for derivative instruments and for hedging
activities. SFAS 133 requires that an entity recognize
all derivatives as either assets or liabilities and
measure those instruments at fair market value. Under
certain circumstances, a portion of the derivative's
gain or loss is initially reported as a component of
other comprehensive income and subsequently reclassified
into income when the transaction affects earnings. For a
derivative not designated as a hedging instrument, the
gain or loss is recognized in income in the period of
change. Presently, the Company does not use derivative
instruments either in hedging activities or as
investments. Accordingly, the Company believes that
adoption of FASB 133 will have no impact on its
financial position or results of operations.

F-13
38
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

1. BANK- On June 2, 1998, the Company filed a voluntary petition
RUPTCY for reorganization under Chapter 11 of the federal
FILING AND bankruptcy laws in the United States Bankruptcy Court
FUTURE for the Eastern District of Virginia. This filing was a
PROSPECTS direct result of enforcement activities by a judgment
creditor (See Note 7). The Company has filed its
Schedules and Statements of Financial Affairs in
accordance with the requirements of the Bankruptcy Code
and is current with its monthly operating reports. The
Company continues to operate under bankruptcy court
protection from creditors while it develops a plan of
reorganization.

Chapter 11 provides that, unless the court appoints a
trustee, the Company has the exclusive right to file a
plan of reorganization for the first 120 days subsequent
to the filing of the petition (or for such longer or
shorter period as the Bankruptcy Court may permit). The
Company plans to exercise this right and is currently
preparing its plan. Such plan is subject to the approval
of the Bankruptcy Court. The approval of the plan is
greatly dependent on the Company's ability to
demonstrate that it will be able to meet its
obligations, return to profitability and generate
positive cash flow. The Company can offer no assurance
as to whether its plan will be approved, or that, if
approved, the terms and conditions of the plan will be
favorable to its creditors and shareholders.

If the Company is unable to obtain approval of its plan
or the exclusive period lapses, any creditor or
party-in-interest may file a competing plan of
reorganization. If the court approves such plan, control
of the Company might transfer to the proponents of the
competing plan. The Company is unaware of any efforts to
prepare a competing plan of reorganization, however, it
can offer no assurances as to whether one might be
prepared in the future.

The Company anticipates that it may require additional
funding to meet future expansion and research and
development expenses. It is anticipated that such
funding will be generated by way of additional
placements of equity, through research and development
arrangements funded by third parties or by investments
by strategic partners. The Company can give no assurance
as to

F-14
39
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

whether it will be able to conclude such financing
arrangements, or that, if concluded, they will be on
terms favorable to the Company.

During the current fiscal year, the Company consolidated
its manufacturing operation and downsized its
administrative overhead. Full-time employees were
reduced from 78 at April 30, 1997 to 62 at July 25,
1998. The Company's plan calls for reductions in core
research and development and advertising expenditures.
During the current fiscal year, the Company changed
sales management and reorganized its sales force.

On a forward-looking basis, the Company anticipates
improved sales of data based frame relay products. It is
currently making changes to the Comstat product that
will qualify this product for a larger and enhanced
distribution channel. The Company anticipates that sales
related to its license agreement with KG Data Systems
will generate significant revenues commencing with the
latter part of fiscal 1999 (See Note 7). However, based
on preliminary sales data for the first quarter ended
July 31, 1998, the Company believes that the bankruptcy
filing has had an adverse impact on its ability to sell
its products. Consequently, the Company expects to
report a significant net loss for the quarter ended July
31, 1998.

The Company anticipates significant legal expenses
associated with its reorganization and other legal
affairs, however, it is unable to estimate the amount of
such expenses at this time. The Company anticipates a
return to profitability in the latter part of fiscal
1999.

There can be no assurance that the required increased
sales and improved operating efficiencies necessary to
return to profitability will materialize or if they do,
the Company will be able to raise sufficient funding to
finance its working capital needs. Absent a return to
profitability or the receipt of additional capital,
FastComm is unlikely to be able to operate and meet its
obligations throughout fiscal year 1999. The financial
statements do not contain any adjustments that might
result from the outcome of these uncertainties. The
foregoing matters raise substantial doubt about the
Company's ability to continue as a going concern.

F-15
40
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

2. 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, of which
43,985 shares, with a fair value at the acquisition date
of approximately $300,000, were placed in escrow as
collateral for a $300,000 note issued to the then
principle stockholder of CDC, due in fiscal 2000. As of
April 30, 1998, the fair value of these shares was
approximately $26,400. The Company established a reserve
of $273,600 at April 30, 1998 because of the uncertainty
surrounding the fair value of the common stock which
collateralizes the note receivable. An additional 58,651
shares of common stock with a fair value of
approximately $400,000, at the acquisition date, have
been placed in escrow and would be issued if CDC
achieved certain revenue targets for the fiscal years
ended May 31, 1998 and 1997.

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, 1996. The pro forma information, which is
provided for information purposes only, is based on
historical

F-16
41
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

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.

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

Net Sales $ 12,998

Net income (loss) (50)

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

3. INVENTORIES Inventories consist of the following components:

April 30, 1998 1997
-----------------------------------------------------------------------------------------------------------

Production materials $ 2,917,922 $2,115,875
Work-in-process 336,680 160,991
Finished goods 1,233,593 1,120,631
-----------------------------------------------------------------------------------------------------------

4,488,195 3,397,497

Provision for inventory obsolescence (1,370,000) (500,000)
-----------------------------------------------------------------------------------------------------------

$ 3,118,195 $2,897,497
===========================================================================================================

4. ACCOUNTS Accounts receivable consist of the following:
RECEIVABLES
April 30, 1998 1997
-----------------------------------------------------------------------------------------------------------

Trade $ 3,343,500 $3,166,735
Employee and other 79,840 88,171
-----------------------------------------------------------------------------------------------------------

3,423,340 3,254,906

F-17
42
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

April 30, 1998 1997
-----------------------------------------------------------------------------------------------------------

Allowance for doubtful
accounts (300,000) (110,000)
-----------------------------------------------------------------------------------------------------------

$ 3,123,340 $3,144,906
===========================================================================================================

5. PROPERTY AND Property and equipment consists of the following:
EQUIPMENT
April 30, 1998 1997
-----------------------------------------------------------------------------------------------------------

Manufacturing equipment $ 491,179 $ 484,909
Furniture and fixtures 316,212 297,147
Leasehold improvements 24,649 22,999
Computers and electronics 616,780 500,660
Software 391,004 264,957
Demo equipment 92,320 43,833
-----------------------------------------------------------------------------------------------------------

1,932,144 1,614,505

Less accumulated depreciation
and amortization (1,156,687) (799,104)
-----------------------------------------------------------------------------------------------------------

$ 775,457 $ 815,401
===========================================================================================================

Depreciation expense for the three years ended April
30, 1998, 1997 and 1996 was $357,583, $227,346 and
$145,550, respectively.

F-18
43
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

6. LONG-TERM Long-term debt consists of the following:
DEBT
April 30, 1998 1997
-----------------------------------------------------------------------------------------------------------

Noninterest bearing note issued
in connection with acquisition
of patent rights, due in 1998
less unamortized discount of
$0 and $286, based on
imputed interest rate of 7.25% $ - $ 29,000

5.0% Convertible debentures, due
April and May 2001. 1,205,299 3,000,000
-----------------------------------------------------------------------------------------------------------

Total 1,205,299 3,029,000

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

$ 1,205,299 $ 3,000,000
===========================================================================================================

In April 1997, the Company issued $3,000,000 in 5.0%
Convertible Debentures due April 2001. In May 1997, the
Company issued $2,000,000 in 5% convertible debentures
due May 2001. For the first 180 days following the
issuance, the debentures were 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 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.

F-19
44
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

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. During 1998, holders of the debentures
converted $3,794,701 of debentures into 1,997,232 shares
of common 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, was approximately $550,000. Since the
holders of the Convertible Debentures did not elect 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 was required to recognize on the 181st day from
issuance the amount of the conversion discount.
Recognition of the conversion discount reduced income
available to common shareholders during fiscal 1998 by
$550,000 in the form of a one-time non-cash charge to
interest expense.

Subsequent to April 30, 1998, an additional $450,000 in
convertible debentures were converted into 294,689
shares of common stock.

7. COMMITMENTS LITIGATION
AND
CONTINGENCIES In 1997, Gary H. Davison a former officer and director
of the Company commenced two lawsuits against the
Company in the Circuit Court of Fairfax, Virginia, one
for wrongful termination and the other for breach of
contract. The breach of contract action involved claims
for options to purchase 100,000 shares of stock and a
$100,000 bonus. On February 17, 1998, a jury in Fairfax
County awarded Mr. Davison $1,125,000 in damages and
$163,233 in interest accrued from May 26, 1996 in this
case. Accordingly, the Company recorded a loss provision
for this amount in its third fiscal quarter ended
January 31, 1998. Subsequently, this award was reduced
by $100,000. The Company has filed an appeal of this
decision with the Virginia Supreme Court and believes it
has sufficient meritorious issues to

F-20
45
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

overturn this verdict. The filing of the bankruptcy
petition has stayed any activity on the second case.

EXCLUSIVE LICENSE AGREEMENT

In May 1998, the Company entered into an exclusive
license agreement with KG Data Systems, Inc. to
manufacture, market and sell products with
channel-attached technology known as ChanlComm. The
terms of this agreement call for an initial payment of
$150,000, with $70,000 payable upon executing the
agreement and the remaining $80,000 payable in four
weekly installments of $20,000 beginning May 18, 1998.
The agreement calls for royalties of 5% of net sales
with minimum royalties or $8,000 per month. Additional
cash payments of $100,000 and $200,000 are due if net
revenues of ChanlComm products exceed $1,500,000 and
$2,500,000, for the years ended April 30, 1999 and 2000,
respectively. An additional royalty of 3% is due for all
net revenues in excess of $2,500,000. The initial term
of the agreement is five years and is renewable by the
Company for two additional five year terms. The Company
is also required to reimburse KG Data Systems, Inc.
certain expenses on a monthly basis, as specified in the
agreement.

OPERATING LEASES

The Company leases office space and certain office
equipment under operating lease arrangements that
expires at various dates through 2003. 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, 1998, 1997,
and 1996, was approximately $662,000, $515,000 and
$308,000, respectively. Aggregate future minimum lease
payments under the operating leases are as follows:

Year ended April 30,
--------------------------------------------------------------

1999 232,938
2000 238,541
2001 229,785
2002 231,426
2003 212,140
==============================================================

F-21
46
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

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 was scheduled to
expire on January 31, 1998, however, the agreement was
automatically renewed through January 31, 1999 because
the Board of Directors did not terminate it in advance
of the expiration date.

8. STOCKHOLDERS' STOCK ISSUANCES
EQUITY

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 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.
The revenue targets were not met, and the escrow shares
will be canceled.

9. 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

F-22

47
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

canceled during 1998, 1997 and 1996, under the Plan:

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

OUTSTANDING AT
April 30, 1996 897,209 $ 2.06 to 7.88
April 30, 1997 1,165,535 $ 2.06 to 15.63
April 30, 1998 1,360,911 $ 2.06 to 15.63

GRANTED
During 1996 381,500 $ 4.00 to 7.88
During 1997 514,000 $ 6.50 to 15.63
During 1998 1,046,564 $ 2.50 to 5.88

EXERCISED
During 1996 342,090 $ 1.09 to 7.63
During 1997 104,803 $ 3.25 to 5.13
During 1998 3,499 $ 5.00 to 5.88

CANCELED
During 1996 266,169 $ 3.25 to 6.80
During 1997 140,871 $ 3.25 to 12.00
During 1998 847,689 $ 2.50 to 15.63

At April 30, 1998, 311,644 stock options are exercisable
under the plans at exercise prices ranging from $2.06 to
$15.63 with a weighted-average exercise price of $9.53
and a weighted-average contractual maturity of
approximately one year, as follows: 70,000 options
exercisable at $6.50 to $15.63, weighted at $8.89, with
a weighted maturity of one-half year; 226,871 options
exercisable at $2.06 to $7.75, weighted at $4.32, with a
weighted maturity of one and one-half years; and 14,773
options exercisable at $5.00 to $7.88, weighted at
$5.49, 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

F-23
48
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

Principles Board Opinion No. 25 and related
interpretations in accounting for its stock options
plans. Compensation expense was immaterial for fiscal
years 1998 and 1997. 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
5.77% and 6.45% and expected volatility of 65% for the
years ended April 30, 1998 and 1997, 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 $1.76 and $5.84, for 1998 and
1997, respectively. There were no adjustments made in
calculating the fair value to account for vesting
provisions or for non-transferability or risk of
forfeiture.

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) 1998 1997
-------------------------------------------------------------------------

Net income (loss) applicable
to common shareholders: as reported $ (9,089) (595)
pro forma (10,931) $ (1,605)

Earnings (loss) per share: as reported $ (0.87) $ (0.06)
pro forma (1.05) (0.16)

10. INCOME TAXES The Company has net operating loss carryforwards for
income tax reporting purposes of approximately
$18,941,000 which begin to expire in 2008. The amount of
the net operating loss carryforward related to the
compensation element of stock options is approximately
$10,156,000, which when

F-24
49
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

realizable will be a credit to paid in capital. In
addition, the Company has research and development
credit carryforwards of approximately $552,000, 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, 1998, 1997, and
1996, is as follows:

1998 1997 1996
Amount Rate Amount Rate Amount Rate
--------------------------------------------------------------------------------------

Tax provision
(benefit) at
statutory
rates $(5,817,000) (34.0%) $ (202,000) (34.0%) $(214,000) (34.0%)

Tax benefit
not recorded 5,817,000 34.0 382,000 64.0 593,000 94.0
Compensation
element of
stock
options - - (235,000) (39.5%) (390,000) (61.8)
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, 1998 and 1997. The components of deferred
income taxes are as follows:

April 30, 1998 1997
------------------------------------------------------------------------------

DEFERRED TAX LIABILITIES
Accelerated depreciation $ 113,000 $ 28,000
------------------------------------------------------------------------------

Total deferred tax liabilities $ 113,000 $ 28,000
------------------------------------------------------------------------------

F-25
50
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

April 30, 1998 1997
-----------------------------------------------------------------------------

DEFERRED TAX ASSETS
Allowance for doubtful accounts $ 120,000 $ 44,000
Inventory reserve 548,000 200,000
Tax credits 552,000 408,000
NOL carryforwards 7,577,000 6,678,000
Reserve for litigation settlement 478,000 -
Other 24,000 65,000
-----------------------------------------------------------------------------

Total deferred tax assets 9,299,000 7,395,000
-----------------------------------------------------------------------------

Net deferred tax assets 9,186,000 7,367,000
Less: Valuation allowance (9,186,000) (7,367,000)
-----------------------------------------------------------------------------

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

Management has provided a valuation allowance for
deferred tax assets as of April 30, 1998 and the benefit
of these items will be recognized in future years to the
extent that such items are available to reduce taxable
income.

11. SIGNIFICANT Certain customers accounted for 10% or more of the
CUSTOMERS AND Company's total revenue during the years ended
FOREIGN EXPORTS April 30, 1998, 1997 and 1996 as noted below:

1998 1997 1996
---------------------- ---------------------- -----------------------
Customer % of Sales Customer % of Sales Customer % of Sales

C 32 A 29 A 31
B 16 B 21

F-26
51
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

In 1998, 1997 and 1996, the Company had export sales to
foreign customers totalling approximately $3,292,000,
$846,000, and $1,310,000, respectively. At April 30,
1998 trade receivables from two customers represented
25% and 22% of total trade receivables outstanding. At
April 30, 1997 trade receivable from two customers
represented 33% and 18% of total trade receivables
outstanding. The two customers were different in 1998
and 1997.

12. SUCCESS Effective May 1, 1991, the Company established the
SHARING PLAN 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, 1998, 1997 or 1996.

13. RELATED PARTY During 1998, 1997 and 1996, the Company had sales of
TRANSACTIONS approximately $13,000, $43,000, and $158,000,
respectively, to a customer whose Board of Directors
includes the president and principle executive officer
of the Company. At April 30, 1998, 1997 and 1996,
accounts receivable includes approximately $3,000,
$4,000 and $25,000, respectively from this related party
which was paid to the Company subsequent to year end.

14. FOURTH QUARTER During the fourth quarter ended April 30, 1998, the
ADJUSTMENTS Company recorded provisions for obsolete inventory of
$570,000 and a valuation allowance related to a
note receivable of $273,600 all of which had the effect
of increasing the operating loss and net loss by
$843,600 or $0.08 per share. These additional
provisions were necessary in the fourth quarter of
fiscal 1998 due to changes in estimates caused by
decreased sales and the decline in the fair value of
the related collateral for the note receivable. 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 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

F-27
52
FASTCOMM COMMUNICATIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS

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.

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

For the Year ended April 30, 1998 1997 1996
---------------------------------------------------------------------------------------------------------

Interest $ 542 $ 35,721 $ 20,975

Income taxes $110,290 $ - $ -
==========================================================================================================

Supplemental disclosure of non-cash investing and financing activities:

For the Year ended April 30, 1998 1997 1996
---------------------------------------------------------------------------------------------------------

Issuance of stock for
convertible debentures $ 3,794,701 $ - $ -
---------------------------------------------------------------------------------------------------------

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-28
53

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE

FASTCOMM COMMUNICATIONS CORPORATION

The audits referred to in our report, which includes an explanatory paragraph
related to substantial doubt about the Company's ability to continue as a going
concern, to FastComm Communications Corporation, dated August 3, 1998 which is
contained in Item 8 of this Form 10-K, included the audit of the financial
statement schedule listed in the accompanying index for each of the three years
in the period ended April 30, 1998. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statement schedule based upon our audits.

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

BDO Seidman, LLP

Washington, D.C.
August 3, 1998

F-29

54
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, 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
============================================================================================================

Year Ended April 30, 1998

Reserves and allowances deducted
from asset accounts:
Obsolescence reserve for
inventory $500,000 1,110,000 (240,000) $ 1,370,000
Allowance for doubtful
accounts $110,000 275,421 (85,421) $ 300,000
============================================================================================================

1/ Accounts written off

2/ Inventory scrapped or disposed of

F-30
55

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

NONE.

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 April 30, 1998:

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

Peter C. Madsen(1)(2) 47 President, Chief Executive Officer and Chairman of the Board
Robert C. Abbott 54 Vice President - Engineering, Secretary
William A. Flanagan 55 Vice President - Technology
Mark H. Rafferty(1) 43 Vice President - Finance, Treasurer, and Director
Edward C. Bursk 39 Vice President - Marketing
Richard L. Apel 53 Vice President - General Manager Comstat Division
William A. Grant 45 Vice President - Global Sales
Edward R. Olson(1)(2) 57 Director
Thomas G. Amon(1)(2) 51 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 served as
a director of Newbridge Networks Corporation from September, 1987 until June,
1998.

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 served as Vice President, Chief Financial Officer and Treasurer
of the Company since August 1993 and as a director of the Company since March
1998. 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 was Vice President, Sales and Marketing of the Company from
November 1996 to July 1998 at which time he resigned. 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 was 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. Mr. Apel's employment with the Company terminated in June,
1998. (See Item 10, Employment and Control Arrangements)

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

26
57

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 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.

William A. Grant has served as Vice President - Global Sales for the Company
since November, 1997. From October 1996 through October 1997, Mr. Grant served
as Vice President - Global Sales for Memotec Communications Corporation. From
January 1994 through September 1996, Mr. Grant was Vice President - Business
Development for FastComm. Prior to this time, Mr. Grant was President of
Inteletouch Corporation, a telecommunications equipment company.

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, 1998, 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 , Edward R. Olson and Mark H.Rafferty. 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 has been 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 has felt
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 have been consistent
with that of the telecommunications industry.

The Board establishes compensation levels based on experience and
responsibility.

On June 2, 1998, the Company filed a voluntary petition for reorganization under
Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court
for the Eastern District of Virginia. At this time, the Company is unable to
predict the effect this filing will have on its ability to attract and retain
skilled and talented engineers, sales and marketing personnel and management.

The Board granted two executive officers options during fiscal 1998. One of
these grants were determined by the individuals performance, responsibility,
seniority. The remaining grant was a condition 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.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the year, Peter C. Madsen, Edward R. Olson, Thomas G. Amon and Mark H.
Rafferty 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 1998. During the
fiscal year ended April 30, 1998, the Company sold approximately $13,000 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 was a director of
Newbridge during the current fiscal year.

SUMMARY COMPENSATION TABLE

The following table sets forth information regarding compensation paid by the
Company to the seven named executives (the "Named Executive Officers") for
services furnished in all capacities to the Company during the fiscal year ended
April 30, 1998, 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) 1998 98,077 0 7,320 0
President, CEO and Chairman 1997 101,757 0 6,613 0
of the Board of Directors 1996 104,196 0 6,219 0

Mark H. Rafferty (3) 1998 116,732 0 8,075 0
Vice President and 1997 108,503 0 5,824 25,000
Chief Financial Officer 1996 106,207 0 5,824 0

Robert C. Abbott (4) 1998 86,999 0 0 0
Vice President - Engineering 1997 98,639 0 0 15,000
Corporate Secretary 1996 95,552 0 0 0

William A. Flanagan (5) 1998 106,645 0 2,220 10,000
Vice President - 1997 109,417 0 2,511 0
Technology 1996 106,715 0 6,632 15,000

Edward C. Bursk (6) 1998 116,250 15,000 4,800 0
Vice President- 1997 52,532 0 2,400 55,000
Sales and Marketing

Richard L. Apel (7) 1998 110,000 0 5,800 0
Vice President 1997 25,853 0 1,200 50,000

William A. Grant 1998 64,098 30,000 3,000 100,000

(1) Automobile benefit.

(2) At April 30, 1998, Mr. Madsen held 813,086 restricted shares of Common
Stock with a market value of $1,496,078 at that date.

(3) At April 30, 1998, Mr. Rafferty held 30,087 restricted shares of Common
Stock with a market value of $55,360 at that date.

28
59

(4) At April 30, 1998, Mr. Abbott held 192,408 restricted shares of Common
Stock with a market value of $354,031 at that date.

(5) At April 30, 1998, Mr. Flanagan held 219,421 restricted shares of Common
Stock with a market value of $403,735 at that date.

(6) At April 30, 1998, Mr. Bursk held 500 restricted shares of Common Stock
with a market value of $920 at that date.

(7) At April 30, 1998, Mr. Apel held 146,563 restricted shares of Common Stock
with a market value of $269,673 at that date.

FISCAL 1998 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, 1998:

Stock Option Grants in Fiscal Year 1998

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 0 - - - - -

Robert C. Abbott 0 - - - - -

William A. Flanagan 10,000 0.96% $5.88 7/14/02 $16,250 $35,950

Thomas G. Amon 10,000 0.96% $5.88 7/14/02 $16,250 $35,950

Edward R. Olson 10,000 0.96% $5.88 7/14/02 $16,250 $35,950

Edward C. Bursk 0 - - - - -

Richard L. Apel 0 - - - - -

William A. Grant 50,000 4.78% $2.50 12/15/02 $34,500 $78,500

William A. Grant 50,000 4.78% $2.59 3/13/03 $36,000 $81,500

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.

29
60

FISCAL 1998AGGREGATE 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, 1998 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 - - 55,000 10,000 $0 $0

William A. Flanagan - - 10,000 15,000 $0 $0

Thomas G. Amon - - 10,000 16,667 $0 $0

Edward R. Olson - - 23,333 16,667 $0 $0

Mark H. Rafferty - - 91,667 16,667 $0 $0

Edward C. Bursk - - 37,033 36,667 $0 $0

Richard L. Apel - - 16,667 33,333 $0 $0

William A. Grant - - - 100,000 $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, 1999, is renewable thereafter on a year to year basis.

In connection with the acquisition of Comstat, the Company entered into a three
year Employment and Non Competition Agreement on February 13, 1997 with Richard
Apel. The Agreement provided that Mr. Apel be employed by the Company in a
senior management capacity at a salary of $110,000 per annum. The Agreement
provided for termination by the Company on six months notice. On June 29, 1998,
the Company exercised this termination right.

30
61

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 1998, the Company granted 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, 1998. The information below is based on an
investment of $100, on April 30, 1993, 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.

On June 9, 1998, the Company shares were delisted from the National Market
System. Effective June 16, 1998, the Company's shares have been quoted on the
OTC Bulletin Board.

Research Data Group Peer Group Total Return Worksheet

Fastcomm Communications Corp (FSCX)

CUMULATIVE TOTAL RETURN
-------------------------------------------------------------
4/30/93 4/30/94 4/30/95 4/30/96 4/30/97 4/30/98

Fastcomm Communications Corp FSCX 100 116 69 209 60 22
NASDAQ STOCK MARKET (U.S.) 100 111 129 104 195 292
NASDAQ TELECOMMUNICATIONS 100 119 124 170 154 295

31
62
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

At July 8, 1998, there were 12,344,739 shares of Common Stock of the Company
issued and outstanding. As of such date, options to purchase 1,360,911 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." On
June 9, 1998, the Company's shares were delisted from the National Market
System. Effective June 16, 1998, the Company's shares have been quoted on the
OTC Bulletin Board under the same symbol.

The following table sets forth information regarding ownership of Common Stock
of the Company at July 8, 1998, 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) 813,086 7.09%
Sterling, Virginia

Robert C. Abbott 252,408 (2) 2.19%
Reston, Virginia

William A. Flanagan 234,421 (3) 2.04%
Sterling, Virginia

Edward R. Olson (1) 30,000 (4) 0.26%
Reston, Virginia

Thomas G. Amon (1) 23,317 (5) 0.20%
New York, New York

Edward C. Bursk 37,533 (6) 0.33%
Centreville, Virginia

Mark H. Rafferty (1) 121,754 (7) 1.05%
Centreville, Virginia

Richard L. Apel 163,250 (8) 1.42%
Lawrenceville, Georgia
------------- -------------
1,675,769 14.58%

(1) Director
(2) Gives effect to 60,000 options owned by Abbott exercisable within 60 days.
(3) Gives effect to 15,000 options owned by Flanagan exercisable within 60
days.

32
63

(4) Gives effect to 30,000 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 16,667
options owned by Amon exercisable within 60 days.
(6) Gives effect to 37,033 options owned by Bursk exercisable within 60 days.
(7) Gives effect to 91,667 options owned by Rafferty exercisable within 60
days.
(8) Gives effect to 16,667 options owned by Apel exercisable within 60 days.
(9) Based upon 12,344,739 shares outstanding at July 8, 1998.

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, 1998, the Company sold approximately
$13,000 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
was a director of Newbridge through June, 1998.

The Company paid the law firm of Amon & Sabatini $188,000 in the fiscal
year ended April 30, 1998. 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 $87,000 to Mr. Apel in the
fiscal year ended April 30, 1998. Also, in connection with the fiscal 1997
acquisition of Comstat, Mr Apel was loaned $300,000. The loan bears
interest at 2 1/2 % above the prime lending rate.

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.

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, 1998
relating to the outcome of the Davison litigation.

34
65

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 August 13, 1998.

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 August 13, 1998.

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, Treasurer and Director
Mark H. Rafferty (Principal Financial and Accounting Officer)

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

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

66
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.

*** 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