ACCESS BEYOND INC, S-1, 1996-08-23

ACCESS BEYOND INC
S-1, 1996-08-23

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 1996

REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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ACCESS BEYOND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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Delaware 3661 52-1987873
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
Richard D. Rose
Chief Financial Officer and Secretary
1300 Quince Orchard Blvd. 1300 Quince Orchard Blvd.
Gaithersburg, MD. 20878 Gaithersburg, MD. 20878
(301) 921-8600 (301) 921-8600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE (NAME, ADDRESS, INCLUDING ZIP CODE, AND
NUMBER, INCLUDING AREA CODE, OF TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) AGENT FOR SERVICE)
</TABLE>

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Copy to:
Irv Berliner
Douglas E. Haas
Benesch, Friedlander, Coplan & Aronoff P.L.L.
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
(216) 363-4500
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

As soon as practicable after this registration statement becomes effective.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. / /
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED(1) PRICE(1)(2) FEE
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Common Stock, par value $.01 per
share................................. 11,993,000 shares $24,675,000 $8,509.00
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</TABLE>

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(1) Based upon the maximum number of shares of Common Stock of Access Beyond,
Inc. (the "Company") estimated to be distributed to the stockholders of
Penril DataComm Networks, Inc. ("Penril"). No consideration will be paid by
Penril's stockholders for the securities.

(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933. Represents the
estimated book value of the Company as of April 30, 1996.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD, NOR
MAY OFFERS TO BUY BE ACCEPTED, PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROXY STATEMENT/PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY
SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION.

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 23, 1996

ACCESS BEYOND, INC.

COMMON STOCK
(PAR VALUE $.01 PER SHARE)

This Prospectus is being furnished by Penril DataComm Networks, Inc.
("Penril") in connection with the distribution in the form of a dividend (the
"Distribution") by Penril to holders of record of its Common Stock, par value
$.01 per share ("Penril Stock") as of the close of business on ,
1996 (the "Record Date") (which is expected to be immediately prior to the
closing of the merger described below) of all of the outstanding shares of
Common Stock, par value $.01 per share ("Company Stock"), of its subsidiary,
Access Beyond, Inc. (the "Company"). The Company will operate all businesses
owned by Penril immediately prior to the Distribution other than Penril's modem
business.

The Distribution will be made beginning on or about the Distribution Date
(defined below) to holders of record of Penril Stock as of the Record Date on
the basis of one share of Company Stock for every one share of Penril Stock
held. The Distribution will be effective on or about , 1996 (the
"Distribution Date"). The Distribution is being undertaken in connection with,
and the consummation of the Distribution is conditioned upon the consummation
of, the merger of Penril with a subsidiary of Bay Networks, Inc. ("Bay") whereby
Penril stockholders will receive shares of common stock of Bay in exchange for
their Penril Stock (the "Merger"). No consideration will be required to be paid
by Penril stockholders for the shares of Company Stock to be received in the
Distribution. Although Penril is separately seeking approval by Penril
stockholders of the Merger and the Distribution, no additional action will be
required to be taken by Penril stockholders in order to receive the shares of
Company Stock. Neither Penril nor the Company will receive any proceeds from the
Distribution. Company Stock will be traded on the Nasdaq National Market under
the symbol "ACCB".

PENRIL STOCKHOLDERS WHO WILL RECEIVE SHARES OF COMPANY STOCK IN THE
DISTRIBUTION SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER THE CAPTION
"RISK FACTORS" BEGINNING ON PAGE 9 OF THIS PROSPECTUS.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY SUCH STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

Stockholders of Penril with inquiries related to the Distribution should
contact Penril's Stockholder Relations Department, 1300 Quince Orchard
Boulevard, Gaithersburg, Maryland 20878. After the Distribution Date,
stockholders of the Company with inquiries related to the Distribution should
contact the Company or its transfer agent.

THE DATE OF THIS PROSPECTUS IS , 1996.
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Through , 1996, all dealers effecting transactions in the
securities offered hereby may be required to deliver a copy of this Prospectus.
This is in addition to the obligations of the Company to deliver this Prospectus
at the time of the initial distribution of the securities.

No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of any offer to buy any
security other than the securities offered hereby, nor does it constitute an
offer to sell or a solicitation of an offer to buy the securities by anyone in
any jurisdiction in which such offer or solicitation is not authorized, or in
which the person making such offer or solicitation is not qualified to do so, or
to any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any offer or sale made hereunder shall,
under any circumstances, create any implication that there has been no change in
the affairs of the Company since the date hereof.

AVAILABLE INFORMATION
The Company has filed a registration statement on Form S-1 ("Form S-1")
with the Securities and Exchange Commission ("Commission") under the Securities
Act of 1933, as amended (the "Securities Act") with respect to the shares of
Company Stock being received by Penril stockholders in the Distribution. This
Prospectus does not contain all of the information set forth in the Form S-1 and
the exhibits and schedules thereto. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to herein are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Form S-1, reference is made to such exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.

The Form S-1 and the exhibits and schedules thereto filed by the Company
may be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well
as at the Regional Offices of the Commission at Suite 1400, Citicorp Center, 500
West Madison Street, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such information can also be obtained
by mail from the Public Reference Branch of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. The Commission maintains a web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The Commission's web site can be accessed at http://www.sec.gov. It is
anticipated that Company Stock will also be quoted on The Nasdaq Stock Market
("Nasdaq"). Following the Distribution, such reports, proxy statements and other
information to be filed by the Company can also be inspected at the offices of
the National Association of Securities Dealers, Inc., Market Listing Section,
1735 K Street, N.W., Washington, D.C. 20006.

The Company intends to furnish to holders of Company Stock each fiscal year
an annual report which contains consolidated financial statements prepared in
accordance with United States generally accepted accounting principles and
audited and reported on, with an opinion expressed by, an independent public
accounting firm, and such other reports as may be required by law.

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.

ELECTRO-METRICS, TECHNIPOWER, ACCESS BEYOND, CONSTANT POWER, MULTIVERTER,
FORSITE, MUX/ROUTER AND SUNUPS ARE THE UNITED STATES TRADEMARKS, TRADENAMES AND
SERVICEMARKS OWNED BY THE COMPANY. THE FOREIGN TRADEMARKS, TRADENAMES AND
SERVICE MARKS OWNED BY THE COMPANY INCLUDE TECHNIPOWER IN FRANCE, THE UNITED
KINGDOM AND ITALY. THIS PROSPECTUS MAY ALSO INCLUDE TRADEMARKS, TRADENAMES AND
SERVICEMARKS WHICH ARE PROPERTY OF THEIR RESPECTIVE OWNERS.

THIS PROSPECTUS MAY CONTAIN ESTIMATES, PROJECTIONS AND OTHER
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE SUBJECT TO CERTAIN RISKS,
TRENDS AND OTHER UNCERTAINTIES, INCLUDING THOSE DISCUSSED IN THIS PROSPECTUS
THAT COULD CAUSE ACTUAL RESULTS TO VARY FROM THOSE PROJECTED. STOCKHOLDERS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS, WHICH ARE
BASED ONLY ON CURRENT JUDGMENTS AND CURRENT KNOWLEDGE.

2
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TABLE OF CONTENTS

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PAGE
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AVAILABLE INFORMATION................................................................. 2
SUMMARY............................................................................... 5
Access Beyond, Inc............................................................... 5
Transactions..................................................................... 5
The Distribution................................................................. 6
Summary Consolidated Financial Data.............................................. 7
RISK FACTORS.......................................................................... 9
Stand Alone Company.............................................................. 9
Absence of Trading Market for Company Stock...................................... 9
Dependence on Key Management..................................................... 9
Technological Changes............................................................ 9
Competition...................................................................... 10
Product Protection and Intellectual Property..................................... 10
Certain Antitakeover Effects..................................................... 10
Important Considerations Related to Forward-Looking Statements................... 10
Dividends........................................................................ 11
Certain Tax Considerations....................................................... 11
Relationship with Penril......................................................... 11
THE DISTRIBUTION...................................................................... 11
Background of the Transfer and the Distribution.................................. 11
Manner of Effecting the Distribution............................................. 12
Listing and Trading of Company Stock............................................. 12
Certain Federal Income Tax Consequences of the Distribution...................... 13
Certain Consequences of the Distribution......................................... 14
Reason for Furnishing this Prospectus............................................ 14
CAPITALIZATION........................................................................ 15
SELECTED CONSOLIDATED PROFORMA FINANCIAL DATA......................................... 16
Proforma Balance Sheet........................................................... 16
Proforma Consolidated Statements of Operations................................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF PENRIL AND THE COMPANY........................................................... 20
Results of Operations............................................................ 20
Liquidity........................................................................ 23
BUSINESS.............................................................................. 24
General.......................................................................... 24
Products......................................................................... 24
Discontinued Operations.......................................................... 25
Suppliers........................................................................ 26
Patents, Copyrights And Licenses................................................. 26
Backlog.......................................................................... 26
Competition...................................................................... 27
Sales and Marketing.............................................................. 27
Customer Support, Service and Warranty........................................... 27
Research and Development......................................................... 27
Properties....................................................................... 27
Employees........................................................................ 28
Legal Proceedings................................................................ 28
</TABLE>

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MANAGEMENT............................................................................ 29
Directors and Executive Officers................................................. 29
Committees of the Board of Directors............................................. 31
Compensation of Directors........................................................ 32
Executive Compensation........................................................... 32
Employment and Consulting Agreements............................................. 33
Penril Benefit Plans............................................................. 34
Company Benefit Plans............................................................ 37
SECURITY OWNERSHIP.................................................................... 39
DESCRIPTION OF CAPITAL STOCK.......................................................... 41
Authorized Capital Stock......................................................... 41
Company Stock.................................................................... 41
Preferred Stock.................................................................. 42
Antitakeover Provisions of the Company Certificate and Company By-laws........... 42
COMPARISON OF RIGHTS OF STOCKHOLDERS OF THE COMPANY AND PENRIL........................ 45
Business Combinations............................................................ 45
Amendments to Charters........................................................... 45
Amendments to By-laws............................................................ 46
Redemption of Capital Stock...................................................... 46
Stockholder Action............................................................... 46
Special Stockholder Meetings..................................................... 47
Number and Election of Directors................................................. 47
Antitakeover Provisions.......................................................... 47
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS OF THE COMPANY................ 48
General.......................................................................... 48
Elimination of Liability in Certain Circumstances................................ 48
Indemnification and Insurance.................................................... 48
CERTAIN TRANSACTIONS.................................................................. 50
Distribution Agreement........................................................... 50
Development and License Agreement................................................ 51
Technology License Agreement..................................................... 51
Sublease Agreement............................................................... 51
Transitional Services Agreement.................................................. 51
Indemnification Agreement........................................................ 52
LEGAL MATTERS......................................................................... 52
EXPERTS............................................................................... 52
</TABLE>

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SUMMARY

The following is a summary of certain information contained elsewhere in
this Prospectus and is qualified by the more detailed information set forth
elsewhere in this Prospectus which should be read in its entirety. Unless the
context otherwise indicates, all references to the operations of the Company in
this Prospectus shall include the operations of the Remote Access Business (as
hereinafter defined) by Penril prior to the Distribution and assumes that the
actions set forth under "The Distribution" have taken place. Capitalized terms
used in this Summary but not defined in this Summary have the respective
meanings ascribed to them elsewhere in this Prospectus.

ACCESS BEYOND, INC.

The Company is a wholly owned subsidiary of Penril, organized by Penril for
the sole purpose of effecting the Distribution and the Merger. The Company was
incorporated on July 23, 1996. The mailing address of the Company's principal
executive offices is currently 1300 Quince Orchard Boulevard, Gaithersburg,
Maryland 20878, and the phone number is (301) 921-8600.

TRANSACTIONS

Penril has entered into a Plan and Agreement of Merger dated as of June 16,
1996, as amended on August 5, 1996 (the "Merger Agreement") among Penril, Bay
and a subsidiary of Bay, pursuant to which, upon the terms and subject to the
conditions set forth therein, Penril will be merged with and into the subsidiary
of Bay. On , 1996, the Board of Directors of Penril declared a
distribution in the form of a dividend to holders of Penril Stock, as of the
close of business on the Record Date, on the basis of one share of Company Stock
for each share of Penril Stock held on the Record Date. The shares to be
distributed will constitute all of the issued and outstanding shares of Company
Stock immediately following the Distribution. Following the Distribution, the
Company will be an independent company and the Company Stock will be publicly
traded on Nasdaq. See "The Distribution" and "Description of Capital Stock." The
Distribution is intended to be tax-free to Penril stockholders for federal
income tax purposes.

Pursuant to the Merger Agreement, at the effective time of the Merger (the
"Effective Time"), each issued and outstanding share of Penril Stock (other than
shares of Penril Stock that are owned by Penril as treasury stock and other than
any shares of Penril Stock that are owned beneficially by Bay or any wholly
owned subsidiary of Bay, which will be automatically cancelled without
consideration) will be converted into the number of shares of common stock, par
value $.01 per share, of Bay (the "Bay Stock") equal to a specified ratio
determined by dividing $10 by the average closing price for Bay Stock for a
specified period prior to the Effective Time, as described under "The Merger
Agreement -- The Merger" in the Proxy Statement/Prospectus of Penril and Bay
(the "Proxy Statement/Prospectus") to which this Prospectus is Annex II.

Immediately prior to the Distribution, Penril will transfer (the
"Transfer") to the Company substantially all of its assets and liabilities other
than assets and liabilities related to Penril's modem business (the "Modem
Business"). In addition, the Company and Penril have agreed to indemnify each
other after the Distribution with respect to certain losses, damages, claims and
liabilities arising primarily from their respective businesses. See "Certain
Transactions -- Indemnification Agreement".

5
<PAGE> 7

The foregoing is a brief summary of certain terms of the Merger affecting
Penril. A more complete description of the Merger and the Merger Agreement may
be found in the Proxy Statement/Prospectus. The Distribution Agreement between
Penril and the Company is more fully described herein under "Certain
Transactions -- Distribution Agreement".

THE DISTRIBUTION

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Distributing Company.................. Penril DataComm Networks, Inc., a Delaware corporation
("Penril").
Distributed Company................... Access Beyond, Inc., a Delaware corporation (the "Com-
pany"). The Company will engage in the development and
marketing of network access devices which enable
local, remote or mobile users to access network
resources located at remote sites, central sites or
any other point in the network (the "Remote Access
Business"). In addition, Penril is currently in the
process of selling two subsidiaries, Technipower, Inc.
("Technipower"), a manufacturer of uninterruptible
power supplies and power regulating equipment, and
Electro-Metrics, Inc. ("EMI"), a manufacturer of
sophisticated high frequency instrumentation
equipment. In the event Technipower or EMI is not sold
prior to the Transfer, the assets and liabilities of
the unsold subsidiary will be transferred to the
Company as part of the Transfer. See
"Business -- Discontinued Operations."
Shares to be Distributed.............. shares of Company Stock based on shares
of Penril Stock outstanding on the Record Date. See
"Description of Capital Stock". Such shares will
constitute all of the issued and outstanding shares of
Company Stock immediately following the Distribution.
Distribution Ratio.................... One share of Company Stock for each share of Penril
Stock held on the Record Date. See "The
Distribution -- Manner of Effecting the Distribution."
Risk Factors.......................... Stockholders should consider certain factors discussed
under the heading "Risk Factors" beginning on page 9.
Relationship with Penril
After the Distribution.............. As of the Distribution Date, the Company and Penril
will enter into several agreements to define their
ongoing relationships. These agreements relate to the
provision of certain administrative services by the
Company to Penril, the license of certain trademarks,
trade names and service marks for use in the business
of the Company, indemnification for various claims and
development of certain technology.
</TABLE>

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Federal Income Tax Consequences....... The Board of Directors of Penril has received an
opinion from its tax counsel to the effect that, on
the basis of the facts, representations and
assumptions set forth in the opinion, for federal
income tax purposes, it is more likely than not that
(i) the Distribution will qualify as a tax-free
spin-off pursuant to Section 355 of the Internal
Revenue Code of 1986, as amended (the "Code") and (ii)
the Merger will qualify as a reorganization within the
meaning of Section 368(a)(1)(B) of the Code. If the
tax-free nature of the Merger in invalidated, it would
reduce the likelihood that the Distribution will
qualify as a tax- free spin-off pursuant to Section
355 of the Code. No ruling from the Internal Revenue
Service ("IRS") has been or will be sought with
respect to any aspect of the Distribution. For a more
detailed discussion of the federal income tax conse-
quences of the Distribution to the Penril
stockholders, see "Risk Factors -- Certain Tax
Considerations" and "The Distribution -- Certain
Federal Income Tax Consequences of the Distribution."
Post-Distribution Dividend Policies... The Company does not anticipate paying dividends for
the foreseeable future.
Company Stock Listing................. The Company will be traded on Nasdaq under the symbol
"ACCB."
Record Date........................... The Record Date is , 1996.
Distribution Agent, Transfer Agent
and Registrar....................... Continental Stock Transfer & Trust Company
Distribution Date..................... The Distribution Date will be on or about
, 1996. As soon as practicable thereafter, Penril
will commence mailing certificates representing shares
of Company Stock. Holders of Penril Stock will not be
required to make any payment or take any action,
including tendering stock certificates, in order to
receive Company Stock. See "The Distribution -- Manner
of Effecting the Distribution."
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA

The following Summary Consolidated Financial Data of Penril should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations of Penril and the Company" included elsewhere herein
and Penril's consolidated financial statements and the notes thereto included
herein. The statement of operations data for the years ended July 31, 1995,
1994, 1993, 1992 and 1991 and the balance sheet data as of the same dates have
been derived from the audited consolidated financial statements of Penril after
giving effect to the anticipated treatment of EMI as a discontinued operation.
The statement of operations data for the nine months ended April 30, 1996 and
1995 and the balance sheet data as of the same dates have been derived from
unaudited consolidated financial statements of Penril after giving effect to the
anticipated treatment of EMI as a discontinued operation, which statements, in
the opinion of Penril's management include all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of Penril's financial
position and results of operations for such period. Operating results for the
nine month periods are not necessarily indicative of the results that may be
expected for the entire year or any future periods.

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(IN THOUSANDS, EXCEPT PER SHARE DATA)

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NINE MONTHS
ENDED APRIL 30, FISCAL YEAR ENDED JULY 31,
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1996 1995 1995 1994 1993 1992 1991
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PENRIL -- HISTORICAL
STATEMENT OF OPERATIONS
DATA(1):
Net Revenues(2).............. $26,320 $38,861 $52,611 $61,838 $44,108 $32,966 $39,200
Net income (loss)
Continuing operations...... (8,764) (2,674) (4,614) 2,344 1,027 188 6,242
Discontinued operations.... 156 (1,136) (1,661) (828) (896) 906 676
Loss on disposal of
discontinued operations.... -- -- (1,400) -- -- -- --
Earnings (Loss) per share
Continuing operations...... (0.98) (0.35) (0.62) 0.30 0.15 0.03 0.89
Discontinued operations.... 0.02 (0.15) (0.22) (0.11) (0.13) 0.13 0.10
Loss on disposal........... -- -- (0.19) -- -- -- --
Cash dividends per share..... -- -- -- 0.02 -- 0.02 --
PENRIL -- HISTORICAL BALANCE
SHEET DATA (1):
Total assets(3).............. $40,828 $47,746 $44,388 $51,061 $49,178 $28,689 $32,962
Long-term debt............... 1,357 6,768 5,681 8,890 10,217 1,875 5,196
Shareholders' equity......... 27,117 25,563 21,723 28,580 27,501 22,177 20,901
</TABLE>

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(1) Penril anticipates that as of July 31, 1996, EMI (Penril's wholly-owned
subsidiary) will be classified as a discontinued operation. A formal
measurement date is expected to be determined and consequently the
previously reported financial statement data have been restated to reflect
EMI as a discontinued operation. Technipower has previously been reported as
a discontinued operation.

(2) Included in net revenues are the following net revenues relating to the
Modem Business:

(3) Included in total assets are the following net assets relating to the
discontinued operations (Technipower and EMI):

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RISK FACTORS

Holders of Penril Stock should be aware that the Distribution and ownership
of Company Stock involves certain risks, including those described below, which
could adversely affect the value of their holdings of Company Stock. Neither
Penril nor the Company makes, nor have they authorized any other person to make,
any representation about the future market value of Company Stock.

STAND ALONE COMPANY

The Company was recently incorporated for the purpose of effecting the
Distribution and the Merger and, as a corporation, does not have any operating
history. However, the Remote Access Business, as conducted by Penril prior to
the Distribution, has an operating history consisting of the development and
sales of local area network ("LAN") and host access products (the "LAN and Host
Access products") and the development of a new product family called Access
Beyond. See "Business -- Products".

ABSENCE OF TRADING MARKET FOR COMPANY STOCK

There is currently no established public trading market nor has there been
any established public trading market for Company Stock. The Company has applied
to have the Company Stock listed for trading on Nasdaq. There can be no
assurance as to the prices at which Company Stock will trade after the
Distribution Date. Until Company Stock is fully distributed and an orderly
trading market develops (if one does), the prices at which such stock trades may
fluctuate significantly. Prices for Company Stock will be determined in the
marketplace and may be influenced by many factors, including the operating
performance of the Company, the depth and liquidity of the market for Company
Stock, investor perception of the Company and general economic and market
conditions.

DEPENDENCE ON KEY MANAGEMENT

If the Company is to be successful, its success will be due in large part
to the performance of Ronald A. Howard, the Company's President and Chief
Executive Officer, and, to a lesser extent, of other key management personnel.
The loss of Mr. Howard's services could adversely affect the Company's ability
to achieve profitability and growth. Although the Company has an employment
contract with Mr. Howard which provides for his continued employment, no
assurance can be given that the Company will be able to retain the services of
Mr. Howard or any other key management personnel. See "Management -- Executive
Compensation" and "Management -- Employment and Consulting Agreements."

TECHNOLOGICAL CHANGES

The market for networking products is subject to rapid technological
change, evolving industry standards and frequent new product introductions, and
therefore requires a high level of expenditures for research and development.
The Company may be required to incur significant expenditures to develop new
integrated product offerings. There can be no assurance that customer demand for
products integrating network connectivity and remote access technologies will
grow at the rate expected by the Company, that the Company will be successful in
developing, manufacturing and marketing new products or product enhancements
that respond to these customer demands or to evolving industry standards and
technological change, that the Company will not experience difficulties that
could delay or prevent the successful development, introduction, manufacture and
marketing of these products (especially in light of the increasing design and
manufacturing complexities associated with the integration of technologies), or
that its new products and product enhancements will adequately meet the
requirements of the marketplace and achieve market acceptance. The Company's
business, operating results and financial condition may be materially and
adversely affected if the Company encounters delays in developing or introducing
new products or product enhancements or if such product enhancements do not gain
market acceptance. In order to maintain a competitive position, the Company must
also continue to enhance its existing products and there is no assurance that it
will be able to do so. A major portion of future revenues is expected to come
from new

9
<PAGE> 11

products and services. The Company cannot determine the ultimate effect that new
products will have on its revenues or earnings.

COMPETITION

The networking industry is highly competitive and competition is expected
to intensify. There are numerous companies competing in various segments of the
network management and remote access markets. Competitors include Ascend
Communications, Shiva Corporation, Cisco Systems, Inc., U.S. Robotics
Corporation, Microcom, Inc. and Bay, among others. Many of the Company's
competitors have greater name recognition, more extensive engineering,
manufacturing and marketing capabilities and greater financial, technological
and personnel resources than those available to the Company. In addition,
certain companies in the networking industry have expanded their product lines
or technologies in recent years as a result of acquisitions. There can be no
assurance that the Company will be able to compete successfully in the future
with existing or new competitors.

PRODUCT PROTECTION AND INTELLECTUAL PROPERTY

The Company, like many other companies in the network access industry,
anticipates it will rely upon rights granted through licenses from third parties
for a substantial amount of proprietary information used to develop its
products; however, some companies may determine not to grant such licenses and
may seek to protect their proprietary rights in such technological information.
Accordingly, there can be no assurance that the Company will be able to continue
obtaining additional rights to utilize proprietary technological information
necessary to develop its products. Because of the existence of a large number of
patents in the networking field and the rapid rate of issuance of new patents,
it is not economically practical to determine in advance whether a product or
any of its components infringe patent rights of others. In the event of any
infringement, the Company believes that, based upon industry practice, necessary
licenses or rights under such patents may be obtained on terms that should not
have a material adverse effect on the Company's consolidated financial position
or results of operations. However, there can be no assurance in this regard.

CERTAIN ANTITAKEOVER EFFECTS

The Company's Certificate of Incorporation (the "Company Certificate")
includes certain provisions that are intended to prevent or delay the
acquisition of the Company by means of a tender offer, proxy contest or
otherwise. Specifically, the Company Certificate provides for a classified Board
of Directors, classified into three classes with terms of three years each. In
addition, the Company Certificate authorizes the Board of Directors of the
Company to issue preferred stock without further stockholder approval, which
could have dividend, redemption, liquidation, conversion, voting or other rights
that could adversely affect the voting power or other rights of the holders of
Company Stock. Finally, the Company is subject to Section 203 of the Delaware
General Corporation Law (the "DGCL") which limits transactions between a
publicly held company and "interested stockholders" (generally those
stockholders who, together with their affiliates and associates, own 15% or more
of a company's outstanding capital stock). Any one of, or a combination of, the
above anti-takeover provisions could discourage a third party from attempting to
acquire control of the Company. See "Description of Capital Stock." The
Company's 1996 Long-Term Incentive Plan and the Company's Non-Employee
Directors' Plan provides for acceleration of stock options and restricted stock
awards upon a change in control of the Company, which has the effect of making
an acquisition of control of the Company more expensive. See
"Management -- Company Benefit Plans." These plans may also inhibit a change in
control of the Company. In addition, certain Company officers have severance
compensation agreements with the Company that provide for substantial cash
payments and acceleration of other benefits in the event of specified corporate
changes related to the Company, including a change in control of the Company.
See "Management -- Employment and Consulting Agreements."

IMPORTANT CONSIDERATIONS RELATED TO FORWARD-LOOKING STATEMENTS

With the exception of historical information, the matters discussed in this
document may include forward-looking statements that involve risks and
uncertainties. The Company wishes to caution readers that a

10
<PAGE> 12

number of important factors, including those identified in this section as well
as factors discussed elsewhere in this filing and in other filings with the
Commission, could affect the Company's actual results and cause actual results
to differ materially from those in the forward-looking statements.

DIVIDENDS

The Company does not anticipate paying dividends for the foreseeable
future.

CERTAIN TAX CONSIDERATIONS

As described below, the Board of Directors of Penril has received an
opinion from its tax counsel to the effect that, on the basis of the facts,
representations and assumptions set forth in the opinion, for federal income tax
purposes, it is more likely than not that (i) the Distribution will qualify as a
tax-free spin-off pursuant to Section 355 of the Code and (ii) the Merger will
qualify as a reorganization within the meaning of Section 368(a)(1)(B) of the
Code. No ruling from the IRS to that effect has been or will be sought. If the
tax-free nature of the Merger is invalidated, it would reduce the likelihood
that the Distribution will qualify as a tax-free spin-off pursuant to Section
355 of the Code. See "The Distribution -- Certain Federal Income Tax
Consequences of the Distribution." If the Distribution were not to qualify for
tax-free treatment under Section 355 of the Code, then, in general, although not
entirely free from doubt, for federal income tax purposes it is likely that each
Penril stockholder would be required to recognize income or gain on the receipt
of Company Stock in the Distribution in an amount up to the fair market value of
the shares of Company Stock received in the Distribution. Each member of the
Penril consolidated group (including the Company and its subsidiaries) would
remain jointly and severally liable for any tax liability of Penril or its
subsidiary incurred prior to the Merger.

RELATIONSHIP WITH PENRIL

The Company does not have a recent operating history as an independent
public company. The operations of the Company historically have relied on the
rest of Penril for certain necessary administrative services. As of the
Distribution Date, Penril and the Company will enter into several agreements for
purposes of governing certain of the ongoing relationships between the two
companies following the Distribution, including indemnification obligations.
These agreements were negotiated while the Company was owned by Penril and
consequently are not the result of arm's-length negotiations between independent
parties. Nonetheless, the Company believes that the agreements are fair to the
parties and contain terms which are generally comparable to those which would
result from arm's-length negotiations, although there can be no assurance
thereof.

THE DISTRIBUTION

BACKGROUND OF THE TRANSFER AND THE DISTRIBUTION

Because the modem business of Penril was all that Bay desired to acquire,
Penril determined to effect the Distribution, which is intended to be tax-free
to Penril stockholders for federal income tax purposes and which was a condition
to Bay's willingness to enter into the Merger Agreement. Penril believes the
Distribution will enable Penril stockholders to participate in the values and
prospects of the assets and business of the Company.

Although the Transfer and Distribution will not be effected unless the
Merger is approved and is about to occur, the Transfer and Distribution are
separate from the Merger and the Company Stock to be received by holders of
Penril Stock in the Distribution does not constitute a part of the consideration
to be received in the Merger.

Until shortly before the Merger, the Company will own no material assets
and will conduct no significant business activity. Prior to the Merger, Penril
and the Company will enter into a Distribution Agreement pursuant to which
Penril will transfer to the Company as a capital contribution all of Penril's
right, title and interest in the Remote Access Business and all of the other
assets of Penril unrelated to the Modem Business, as well as a portion of
Penril's total net operating loss carryforward; and the Company will (a) assume,
pay,

11
<PAGE> 13

perform and discharge all of the liabilities of Penril other than (i)
liabilities relating to the Modem Business; and (ii) the bank debt of Penril
(which may not exceed $4,000,000 at the Effective Time); and (b) indemnify
Penril for any and all claims and liabilities arising as a result of or in
connection with the sale by Penril (if consummated prior to the Distribution) of
either Technipower or EMI. At the time of such contributions, Penril will own
all of the Company's outstanding stock. In connection with the Transfer, the
Company and Penril will execute an indemnification agreement. See "Certain
Transactions -- Indemnification Agreement."

MANNER OF EFFECTING THE DISTRIBUTION

Pursuant to the Distribution, Penril will distribute as a dividend to its
stockholders of record as of the Record Date ("Holders") one share of Company
Stock for each share of Penril Stock then held. On the Distribution Date, Penril
will deliver to Continental Stock Transfer & Trust Company, as distribution
agent, certificates evidencing all of the issued and outstanding shares of
Company Stock owned by Penril, which will represent all of the issued and
outstanding shares of Company Stock. All shares of Company Stock distributed
will be fully paid, nonassessable and free of preemptive rights.

As a result of the Distribution, all of the issued and outstanding shares
of Company Stock will be distributed to Holders. The Record Date is
, 1996 and the Distribution Date will be on or about , 1996. It is
presently anticipated that certificates representing Company Stock will be
mailed to Holders on or about the Distribution Date. After the Distribution
Date, Holders will hold their Penril Stock (until converted into Bay Stock) as
well as Company Stock. The Distribution will not affect the number of, or the
rights attaching to, outstanding shares of Penril Stock.

No Holder will be required to pay any cash or other consideration for the
shares of Company Stock received in the Distribution nor will any action be
required to be taken by any Holder, including tendering stock certificates, in
order to receive shares of Company Stock. Penril has accounted for the
Distribution as a dividend and has reduced its stockholders' equity by the net
book value of the Company Stock distributed.

IN ORDER TO BE ENTITLED TO RECEIVE THE DISTRIBUTION OF COMPANY STOCK, A
PENRIL STOCKHOLDER RECEIVING THIS PROSPECTUS MUST HAVE BEEN A HOLDER OF RECORD
OF PENRIL STOCK ON THE RECORD DATE.

LISTING AND TRADING OF COMPANY STOCK

Company Stock will be traded on Nasdaq under the symbol "ACCB". The
transfer agent and registrar for the Company Stock is Continental Stock Transfer
& Trust Company.

No current public trading market for the Company Stock exists, although a
"when-issued" market could develop several days prior to the Distribution Date.
The extent of the market for the Company Stock and the prices at which the
Company Stock may trade prior to or after the Distribution cannot be predicted.
See "Risk Factors -- Absence of Trading Market for Company Stock."

The Company Stock distributed to Holders will be freely transferable,
except for Company Stock received by persons who may be deemed to be
"affiliates" of the Company under the Securities Act. Persons who may be deemed
to be affiliates of the Company after the Distribution generally include
individuals or entities that control, are controlled by or are under common
control with the Company and may include certain officers and directors of the
Company as well as principal stockholders of the Company. Persons who are
affiliates of the Company will be permitted to sell their Company Stock only
pursuant to an effective registration statement under the Securities Act or an
exemption from the registration requirements of the Securities Act, such as the
exemptions provided by Section 4(2) of the Securities Act or Rule 144
thereunder. It is not expected that Rule 144 will be available for the sale of
Company Stock by affiliates of the Company until at least 90 days after the
effectiveness of the Company's registration statement registering Company Stock
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). See
"Description of Capital Stock -- Company Stock."

12
<PAGE> 14

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION

General. The following is a summary of the material federal income tax
consequences of the Distribution to the holders of shares of Penril Stock. The
federal income tax discussion set forth below is for general information only
and may not apply to particular categories of holders of shares of Penril Stock
subject to special treatment under the Code, including without limitation,
foreign holders and holders whose Penril securities were acquired pursuant to
the exercise of any employee stock option or otherwise as compensation. EACH
HOLDER OF SHARES OF PENRIL STOCK AND PENRIL OPTIONS IS URGED TO CONSULT HIS TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE DISTRIBUTION,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND
OTHER TAX LAWS.

Consequences of Proposed Transaction. As described in the Summary, the
Distribution is being made in preparation for, and in conjunction with, the
Merger. The Board of Directors of Penril has received an opinion from its
counsel Benesch, Friedlander, Coplan & Aronoff P.L.L. ("Counsel") to the effect
that, on the basis of the facts, representations and assumptions set forth in
the opinion, for federal income tax purposes, it is more likely than not that
(i) the Distribution will qualify as a tax-free spin-off pursuant to Section 355
of the Code and (ii) the Merger will qualify as a reorganization within the
meaning of Section 368(a)(1)(B) of the Code. If the tax-free nature of the
Merger is invalidated, it would reduce the likelihood that the Distribution will
qualify as a tax-free spin-off pursuant to Section 355 of the Code.

The representations (among others) relied upon by Counsel in giving its
opinion contain statements or agreements to the effect that: the Modem Business
and Remote Access Business have each been actively conducted for five years and
will continue to be conducted as separate, active businesses after the proposed
transactions; certain transactions between Penril and Bay in effect prior to the
closing of the Distribution and the Merger are fair market value transactions
entered into for valid business reasons independent of the Merger, and all of
the transactions between the Company and Bay or Penril in effect after the
closing of the Distribution and the Merger (other than certain contributions
made to the Company by Penril prior to the Distribution) will also be fair
market value transactions entered into for valid business reasons; the transfer
of certain cash and liquid assets to the Company (and the retention of certain
debt by Penril) is necessitated by the ongoing business needs of the Company;
the liquid assets being received by the Company will be used in the operation of
its Remote Access Business and will not be used to make distributions to, or
redeem the shares of Company Stock held by stockholders of the Company; Penril
will be maintained as a separate corporation by Bay; and Bay owns no Penril
Stock and has no intention to reacquire any stock issued in the Merger.

The favorable tax treatment of both the Distribution and the Merger also
depends upon the historic stockholders of Penril maintaining a so-called
"continuity of interest" in both the Bay Stock received in the Merger and the
Company Stock received in the Distribution. Under Revenue Procedures issued by
the IRS, continuity of interest is maintained in each transaction if the
historic stockholders of Penril continue to maintain at least one-half their
stock investment in Penril in the modified form of each of the Company Stock and
Bay Stock received by them in the proposed transactions. Penril has represented
that it knows of no plan or intent by any stockholder to sell more than one-half
of his Bay Stock or Company Stock received in the proposed transactions. There
are no court cases or published rulings by the Service giving guidance on how to
measure the continuity of interest of historic stockholders in publicly owned
corporations, such as Penril, where 5% stockholders own, in the aggregate, less
than 50% of the stock of the corporation. However, Counsel is of the opinion,
based upon Penril's representations regarding the plans and intentions of its
stockholders, that both the Distribution and the Merger meet the continuity of
interest requirement. It should be noted that Penril has not sought
representations (as required by the Service from taxpayers seeking private
letter rulings in reorganizations) from each of its 5% stockholders as to their
plans and intentions with respect to their Penril Stock or the Bay Stock and the
Company Stock to be received in the proposed transactions.

Consequences of the Distribution to Penril Stockholders. If the
distribution qualifies as a tax-free spin-off for federal income tax purposes:

13
<PAGE> 15

1. A Penril stockholder will not recognize any income, gain or loss in
connection with the Distribution.

2. Following the Distribution, a Penril stockholder will apportion the
tax basis for his shares of Penril Stock between such Penril Stock and the
Company Stock received in the Distribution in proportion to the relative
fair market values of such Penril Stock and Company Stock on the
Distribution Date. A Penril stockholder's holding period for the Company
Stock received or deemed received in the Distribution will include the
period during which such stockholder held the Penril Stock with respect to
which the Company Stock was received or deemed received, provided that such
Penril Stock is held as a capital asset by such stockholder as of the time
of the Distribution.

Counsel's opinion with respect to the Distribution is based upon certain
representations and assumptions and represents Counsel's best legal judgment,
and is not binding upon the Service or the courts. If any representation or
assumption relied upon in rendering Counsel's opinion is inaccurate, or if the
Service were to challenge successfully the federal income tax treatment of the
Distribution set forth in Counsel's opinion, then, in general, although not
entirely free from doubt, for federal income tax purposes it is likely that each
Penril stockholder would be required to recognize income or gain on the receipt
of the shares of Company Stock in the Distribution in an amount up to the fair
market value of the shares of Company Stock received in the Distribution. In
such event (a) the tax basis of the shares of Company Stock received by a Penril
stockholder in the Distribution would be the fair market value of such shares on
the date the Distribution is consummated and (b) the holding period for such
shares of Company Stock would begin the day after the date the Distribution is
consummated.

Current treasury regulations require that each Penril stockholder who
receives Company Stock pursuant to the Distribution attach to his federal income
tax return for the year in which the Distribution occurs a detailed statement
setting forth such information as may be appropriate in order to demonstrate the
applicability of Section 355 of the Code to the Distribution. Penril or its
successor, Bay, will convey the appropriate information to each Penril
stockholder of record as of the Record Date.

CERTAIN CONSEQUENCES OF THE DISTRIBUTION

After the Distribution, Penril stockholders as of the Record Date will own
two securities (shares of Penril Stock, until they are converted into shares of
Bay Stock, and shares of Company Stock) and will be able to increase or decrease
their respective holdings in either Bay or the Company without affecting their
holdings in the other company. The Company will be an independent, publicly
traded company, owning and operating the Remote Access Business and, if not
disposed of prior to the Distribution, Technipower and EMI.

REASON FOR FURNISHING THIS PROSPECTUS

This Prospectus is being prepared in order to provide information for
Holders, each of whom will receive shares of Company Stock in the Distribution.
It is not to be construed as an inducement or encouragement to buy or sell any
securities of Penril, the Company or any other corporation. The information
contained herein is provided as of the date of this Prospectus unless otherwise
indicated. Neither Penril nor the Company will update the information contained
in this Prospectus to effect any changes that may occur subsequent to the date
hereof, except in the normal course of their respective public disclosure
practices.

14
<PAGE> 16

CAPITALIZATION

The capitalization of the Company following the Distribution will reflect
the net book value of the assets transferred to and the liabilities assumed by
the Company from Penril in connection with the Transfer. The following table
sets forth the proforma adjusted capitalization of the Company at April 30,
1996. This table has been prepared based upon the historical consolidated
balance sheet of Penril as of April 30, 1996 (i) adjusted for the anticipated
classification of EMI as a discontinued operation and (ii) giving effect to the
Transfer and the Distribution. This table also reflects adjustments to the
proforma capitalization, as referred to in the notes following the table. This
table does not reflect results of operations from and after April 30, 1996. This
table should be read in conjunction with the unaudited proforma consolidated
financial statements and notes thereto included elsewhere herein (dollars in
thousands).

<TABLE>
<CAPTION>
AS
PROFORMA ADJUSTMENTS ADJUSTED
-------- ----------- --------
<S> <C> <C> <C>
Long-term debt (capitalized lease obligations)............ $ 359 $ 359
======= =======
Shareholders equity:
Common stock, par value $.01 per share, 30,000,000
authorized, 11,993,000 outstanding................... $ 103 $ 17(1) $ 120
Additional paid-in capital.............................. 36,531 9,472(1) 24,276
(21,727)(3)
Retained earnings....................................... (11,727) (10,000)(2) --
-------- --------
21,727(3)
Total shareholders' equity................................ $ 24,907 $ 24,396
======= =======
Total capitalization...................................... $ 25,266 $ 24,755
======= =======
</TABLE>

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

(1) Adjustment for the issuance of 282,000 shares of Penril Stock in May 1996
for $2,004,000 in a private placement and for 1,407,000 employee stock
options with a value of $7,485,000 assumed to be exercised prior to the
Transfer (All options will vest prior to the Transfer).

(2) As a result of events occurring in the fourth quarter of fiscal 1996, Penril
anticipates taking a restructuring charge currently estimated to be
approximately $10 million consisting of a write-down of inventories and of
capitalized software, a write-off of costs in excess of net assets acquired
as well as a provision for estimated costs associated with the termination
of employees.

(3) Adjustment to recognize the capitalization of the Company by Penril.

15
<PAGE> 17

SELECTED CONSOLIDATED PROFORMA FINANCIAL DATA

While the Transfer and the Distribution will take place as described above,
the following unaudited pro forma condensed financial statements have been
prepared from Penril's historical financial statements to show the modem
business being sold to Bay as a pro forma adjustment and the Company, on a
proforma basis, as the continuing entity.

PROFORMA BALANCE SHEET

The following unaudited proforma condensed balance sheet for the Company
has been prepared based upon the historical consolidated balance sheet for
Penril as of April 30, 1996 adjusted for the anticipated classification of EMI
as a discontinued operation (which Penril anticipates will be classified as a
discontinued operation of Penril as of its July 31, 1996 financial statements)
and giving effect to the Transfer and the Distribution and the events that are
directly attributable to that transaction. In the opinion of Penril's
management, all material adjustments necessary to reflect the effects of the
Transfer and the Distribution have been made. Such unaudited proforma
information should be read in conjunction with Penril's financial statements and
the notes thereto included elsewhere in this Prospectus.

The unaudited proforma condensed consolidated balance sheet has been
prepared based upon assumptions deemed appropriate by the management of Penril,
does not purport to represent what the actual financial position would have been
if the Transfer and the Distribution had been consummated at April 30, 1996, may
not be indicative of actual results and does not purport to represent the future
financial position of the Company.

16
<PAGE> 18

UNAUDITED CONDENSED CONSOLIDATED PROFORMA BALANCE SHEET AS OF APRIL 30, 1996

<TABLE>
<CAPTION>
PENRIL ADJUSTMENTS PROFORMA
AS -- MODEM -- THE
REPORTED(1) BUSINESS COMPANY
----------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.......................... $ 1,663 $ $ 1,663
Accounts receivable, net........................... 8,306 (3,661)(2) 4,645
Inventories........................................ 12,647 (4,503)(3) 8,144
Deferred income taxes.............................. 1,700 (1,700)(4) --
Net assets of discontinued operations.............. 6,501 -- 6,501
Other current assets............................... 426 (141)(3) 285
----------- ----------- --------
TOTAL CURRENT ASSETS............................ 31,243 (10,005) 21,238
Property and Equipment, net........................ 2,353 (290)(3) 2,063
Excess of Cost Over
Net Assets Acquired, net........................ 5,138 -- 5,138
Other Assets....................................... 2,094 (202)(3) 1,892
----------- ----------- --------
TOTAL ASSETS.................................... $40,828 $ (10,497) $30,331
=========== =========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings.............................. $ 4,000 $ (4,000)(5) $ --
Current portion of long-term debt.................. 1,045 1,045
Accounts payable................................... 6,429 (3,800)(6) 2,629
Accrued compensation and commission................ 1,010 (85)(3) 925
Other accrued expenses............................. 120 (170)(3) (50 )
----------- ----------- --------
TOTAL CURRENT LIABILITIES....................... 12,604 (8,055) 4,549
Long-Term Debt, net of current portion............... 359 359
Other Noncurrent Liabilities......................... 748 748
----------- ----------- --------
TOTAL LIABILITIES............................... 13,711 (8,055) 5,656
Shareholders' Equity
Common stock....................................... 103 103
Additional paid-in capital......................... 36,531 36,531
Retained earnings (deficit)........................ (9,285) (2,442) (11,727 )
----------- ----------- --------
27,349 (2,442) 24,907
Equity adjustment from foreign currency
translation..................................... (232) (232 )
----------- ----------- --------
TOTAL SHAREHOLDERS' EQUITY........................... 27,117 (2,442) 24,675
----------- ----------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY............................................. $40,828 $ (10,497) $30,331
=========== =========== ========
</TABLE>

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

(1) Penril anticipates that as of July 31, 1996, EMI (Penril's wholly-owned
subsidiary) will be classified as a discontinued operation. A formal
measurement date is expected to be determined. Accordingly, the "As
Reported" figures have been adjusted from those reported by Penril at April
30, 1996 to reflect EMI as a discontinued operation.

(2) To eliminate estimated modem business receivables as of April 30, 1996 based
on assumed turnover of receivables to sales.

(3) To adjust for specifically identified modem business related assets and
liabilities to remain with Penril after the Transfer and the Distribution.

(4) Deferred income taxes and other tax benefits remain with Penril after the
Transfer and the Distribution.

(5) To adjust for the bank debt which remains with Penril after the Transfer and
the Distribution.

(6) To adjust for Modem Business related trade payables which remain with Penril
after the Transfer and the Distribution.

17
<PAGE> 19

PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS

The following unaudited proforma condensed consolidated statements of
operations for the Company have been prepared from the historical results of
operations of Penril adjusted for the anticipated discontinuance of EMI. The
statements present the income and expenses as if the Transfer and the
Distribution had been consummated August 1, 1994. These statements should be
read in conjunction with the historical financial statements of Penril including
the notes thereto, which are included elsewhere in this Prospectus, the
unaudited proforma consolidated condensed balance sheet appearing above and the
notes to these unaudited proforma consolidated condensed statements of
operations.

The unaudited proforma consolidated statements of operations have been
prepared based upon an identification of only those costs that could be directly
attributed to the Modem Business. These statements do not allocate any
administrative or other expenses that support both the Modem Business and the
Remote Access Business, consequently the expenses shown for the Company are in
excess of those that would have been incurred had the Company been a stand alone
company. These statements do not purport to represent what the actual results of
operations would have been for the Company had the Transfer and the Distribution
been consummated at the beginning of the period, are not indicative of actual
results and do not purport to represent what the results of operations of the
Company may be for future periods.

PROFORMA STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31, 1995
----------------------------------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
PENRIL, ADJUSTMENTS PROFORMA
AS -- MODEM -- THE
REPORTED(1) BUSINESS(1) COMPANY
----------- ----------- --------
<S> <C> <C> <C>
Net Revenues from Continuing Operations.............. $52,611 $ (18,974)(2) $33,637
Cost and Expenses:
Cost of revenues................................... 29,394 (11,109)(2) 18,285
Selling, general and administrative................ 18,765 (1,928)(6) 16,479
(358)(7)
Product development and engineering................ 7,438 (336)(3) 5,520
(186)(4)
(1,396)(5)
Amortization of cost over net assets acquired...... 834 834
------ ------ ------
56,431 (15,313) 41,118
Operating Income (Loss) from Continuing Operations... (3,820) (3,661) (7,481 )
Other Expenses:
Interest expenses.................................. (1,228) (1,228 )
Other, net......................................... (144) (144 )
------ ------ ------
(1,372) -- (1,372 )
Income (Loss) from Continuing Operations Before
Income Taxes....................................... (5,192) (3,661) (8,853 )
Benefit from Income Taxes............................ 578 (578) --
------ ------ ------
Income (Loss) from Continuing Operations............. (4,614) (4,239) (8,853 )
Income (Loss) from Discontinued Operations, net of
income taxes....................................... (1,661) -- (1,661 )
Loss on Disposal of Discontinued Operations, net of
income taxes....................................... (1,400) (1,400 )
------ ------ ------
Net Income (Loss).................................... $(7,675) $ (4,239) $(11,914)
====== ====== ======
Net income (loss) per common and equivalent shares
Continuing operations.............................. $ (1.17 )
Discontinued operations............................ $ (0.22 )
Loss on disposal of discontinued operations........ $ (0.19 )
------
$ (1.58 )
======
Shares used in per share calculations................ 7,559
======
</TABLE>

18
<PAGE> 20

PROFORMA STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS ENDED APRIL 30, 1996
---------------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
PENRIL, AS ADJUSTMENTS -- PROFORMA --
REPORTED(1) MODEM BUSINESS(1) THE COMPANY
----------- ----------------- -------------
<S> <C> <C> <C>
Net Revenues from Continuing Operations.......... $26,320 $ (10,884)(2) $15,436
Cost and Expenses:
Cost of revenues............................... 15,568 (7,065)(2) 8,503
Selling, general and administrative............ 13,084 (1,575)(6) 11,159
(350)(7)
Product development and engineering............ 5,299 (276)(3) 3,968
(141)(4)
(914)(5)
Amortization of cost over net assets
acquired.................................... 550 550
------ ------ ------
34,501 (10,321) 24,180
Operating Income (Loss) from Continuing
Operations..................................... (8,181) (563) (8,744)
Other Expenses:
Interest expenses.............................. (572) (572)
Other, net..................................... (11) (11)
------ ------ ------
(583) -- (583)
Income (Loss) from Continuing Operations Before
Income Taxes................................... (8,764) (563) (9,327)
Benefit from Income Taxes........................ -- -- --
------ ------ ------
Income (Loss) from Continuing Operations......... (8,764) (563) (9,327)
Income (Loss) from Discontinued Operations, net
of income taxes................................ 156 -- 156
Loss on Disposal of Discontinued Operations, net
of income taxes................................ -- --
------ ------ ------
Net Income (Loss)................................ $(8,608) $ (563) $(9,171)
====== ====== ======
Net income (loss) per common and equivalent
shares
Continuing operations.......................... $ (1.04)
Discontinued operations........................ $ 0.02
Loss on disposal of discontinued operations.... $ --
------
$ (1.02)
======
Shares used in per share calculations............ 8,964
======
</TABLE>

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

(1) Penril anticipates that as of July 31, 1996, EMI (Penril's wholly-owned
subsidiary) will be classified as a discontinued operation. A formal
measurement date is expected to be determined and consequently, the "As
Reported" figures have been restated to reflect EMI as a discontinued
operation. The adjustments for the Modem Business are only for those items
that can be directly attributed to the Modem Business.

(2) Adjustments to reflect the exclusion of the modem business revenues and
associated costs of sales due to the Transfer, the Distribution and the
Merger.

(3) Adjustments to eliminate rent expense related to modem business product
development and engineering.

(4) Adjustments to eliminate modem business related depreciation, amortization
and other operating costs.

(5) Adjustments to eliminate modem business related engineering labor.

(6) Adjustments to reflect the exclusion of expenses of subsidiaries
attributable to the modem business.

(7) Adjustments to reflect the exclusion of marketing and advertising relating
to the modem business.

19
<PAGE> 21

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF PENRIL AND THE COMPANY

Beginning in fiscal year 1994, Penril began to focus its business on remote
access connectivity products, which has been one of the fastest growing segments
of the data communications marketplace. Out of this strategy came the Company's
product line now known as Access Beyond. The first phase of Access Beyond
products includes the Ram Rack and the Access Beyond 1000 Remote Access Server.

One of the early steps taken in connection with the new focus was the
decision of Penril in July 1995 to sell its Technipower subsidiary which is
involved in the sale of power supplies and power regulating equipment. As a
result of this action, Technipower was classified as a discontinued operation in
July 1995. In July 1996, Penril signed agreements to sell Technipower. The sale
is anticipated to close in August 1996 and is expected to generate approximately
$4 million in cash.

Consistent with the goal of concentrating on remote access connectivity
products, Penril anticipates classifying its EMI subsidiary, which manufactures
electronic instrumentation test equipment, as a discontinued operation as of
July 1996.

As noted above, Penril entered into the Merger Agreement with Bay whereby
Bay will acquire the Modem Business. As a result, in the fourth quarter of
fiscal 1996, Penril decided to restructure and refocus its remaining businesses.
The decision to restructure and refocus is not dependent upon consummation of
the Merger. Penril anticipates taking in the fourth quarter of fiscal 1996 a
restructuring charge currently estimated to be $10 million. This charge will
consist of a write-down of inventories ($ ) and of capitalized software
($ ), a write-off of costs in excess of net assets acquired ($ ) and
a provision for estimated costs associated with the termination of employees
($ ).

RESULTS OF OPERATIONS

While the Distribution will take place as described, the following
discussion is based on the Penril historical financial statements with a
proforma adjustment to remove the Modem Business, thereby reflecting the
Company, on a proforma basis, as the continuing entity. In the following
discussion, costs reflected as relating to modem products are only those costs
that could be directly attributed to the modem products. There was no allocation
made for any administrative or other expenses that support both the modem
products and the LAN and Host Access products, consequently the expenses for the
LAN and Host Access products are in excess of those that would have been
incurred had the Company been a stand alone company. As noted above, the
Technipower and EMI subsidiaries will be classified as discontinued operations
and are not included in this discussion unless otherwise noted. Dollar amounts
are reported in thousands.

Nine Months of Fiscal 1996 Compared to Nine Months of Fiscal 1995

<TABLE>
<CAPTION>
APRIL 30, APRIL 30,
1996 1995 CHANGE
--------- --------- --------
<S> <C> <C> <C>
Revenues:
LAN and Host Access products............... $15,436 $24,866 $ (9,430)
Modem products............................. 10,884 13,995 (3,111)
--------- --------- --------
$26,320 $38,861 $(12,541)
======== ======== ========
</TABLE>

The decrease in revenues for Penril's LAN and Host Access products was
primarily attributable to the continued declining market for terminal servers
and multiplexers and to a decrease in orders from some of Penril's customers.
The decrease in revenue from modem products was due to slower than expected
sales of Penril's V.34 modems, and a decline in sales of older modem products.

<TABLE>
<CAPTION>
APRIL 30, APRIL 30,
1996 1995 CHANGE
--------- --------- ------
<S> <C> <C> <C>
Gross Profit Margin:
LAN and Host Access products............... 45% 47% (2%)
Modem products............................. 35% 44% (9%)
</TABLE>

20
<PAGE> 22

costs of materials in the V.34 modem product line as well as pricing competition
and lower manufacturing efficiencies related to the decrease in sales.

<TABLE>
<CAPTION>
APRIL 30, APRIL 30,
1996 1995 CHANGE
--------- --------- ------
<S> <C> <C> <C>
Selling, general and administrative expenses:
LAN and Host Access products............... $11,159 $11,920 $(761 )
Modem products............................. 1,925 1,713 212
--------- --------- ------
$13,084 $13,633 $(549 )
======== ======== =======
</TABLE>

Selling, general and administrative expenses decreased for the LAN and Host
Access products primarily from lower commissions paid due to lower sales volume.
There was also a reduction in personnel costs as a result of eliminating several
administrative positions in the Gaithersburg, Maryland facilities during fiscal
1995.

<TABLE>
<CAPTION>
APRIL 30, APRIL 30,
1996 1995 CHANGE
--------- --------- ------
<S> <C> <C> <C>
Product development expenses:
LAN and Host Access products............... $ 3,968 $ 4,238 $(270 )
Modem products............................. 1,331 1,428 (97 )
--------- --------- ------
$ 5,299 $ 5,666 $(367 )
======== ======== =======
</TABLE>

Product development expenses decreased because of reductions in personnel
costs as a result of Penril's cost reduction efforts in fiscal 1995.

<TABLE>
<CAPTION>
APRIL 30, APRIL 30,
1996 1995 CHANGE
--------- --------- ------
<S> <C> <C> <C>
Interest expense............................. $ 572 $ 908 $(336 )
</TABLE>

During the first nine months of fiscal 1996, Penril sold common stock in
private placements which generated approximately $13 million in cash. A portion
of the proceeds was used to repay all term debt during fiscal 1996, which
resulted in decreased interest expense.

Fiscal 1995 Compared to Fiscal 1994

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1995 1994 CHANGE
--------- --------- -------
<S> <C> <C> <C>
Revenues:
LAN and Host Access products............... $33,637 $39,011 $(5,374)
Modem products............................. 18,974 22,827 (3,853)
--------- --------- -------
$52,611 $61,838 $(9,227)
======== ======== =======
</TABLE>

The decrease in revenues for Penril's LAN and Host Access products was
primarily attributable to the declining market for terminal servers and
multiplexers as these products were reaching the end of the product life cycle,
and to a decrease in orders from some of Penril's OEM customers. The decrease in
revenues from modem products was due to unexpected delays in shipment of the
V.34 and V.34bis modems.

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1995 1994 CHANGE
--------- --------- ------
<S> <C> <C> <C>
Gross Profit Margin:
LAN and Host Access products............... 46% 54% (8%)
Modem products............................. 41% 45% (4%)
</TABLE>

21
<PAGE> 23

The decrease in gross profit margins for LAN and Host Access products was
due to lower manufacturing efficiencies related to inventory. The decrease in
gross profit margins for modem products was due to costs associated with the
initial production of the V.34 modem product line, lower manufacturing
efficiencies and pricing competition related to the decrease in sales.

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1995 1994 CHANGE
--------- --------- -------
<S> <C> <C> <C>
Selling, general and administrative expenses:
LAN and Host Access products............... $16,479 $16,965 $ (486)
Modem products............................. 2,286 1,850 436
--------- --------- -------
$18,765 $18,815 $ (50)
======== ======== =======
</TABLE>

Selling, general and administrative expenses decreased for LAN and Host
Access products primarily because of a reduction in personnel costs as a result
of eliminating several administrative positions in the Gaithersburg, Maryland
facility during fiscal 1995 as part of Penril's cost reduction program. Selling,
general and administrative expenses for modem products increased primarily due
to additional reserves for bad debts.

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1995 1994 CHANGE
--------- --------- -------
<S> <C> <C> <C>
Product development expenses:
LAN and Host Access products............... $ 5,520 $ 6,797 $(1,277)
Modem products............................. 1,918 2,020 (102)
--------- --------- -------
$ 7,438 $ 8,817 $(1,379)
======== ======== =======
</TABLE>

Product development expenses decreased because of reductions in personnel
costs as a result of Penril's cost reduction efforts in fiscal 1995 and 1994.

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1995 1994 CHANGE
--------- --------- -------
<S> <C> <C> <C>
Interest expense............................. $ 1,228 $ 908 $ 320
</TABLE>

Interest expense increased because of the increase in the prime rate from
7% in fiscal 1994 to 9% in fiscal 1995, and because the rate charged by Peril's
principal bank was raised from prime plus 1/2% to prime plus 2%.

Fiscal 1994 Compared to Fiscal 1993

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1994 1993 CHANGE
--------- --------- -------
<S> <C> <C> <C>
Revenues:
LAN and Host Access products............... $39,011 $22,340 $16,671
Modem products............................. 22,827 21,768 1,059
--------- --------- -------
$61,838 $44,108 $17,730
======== ======== =======
</TABLE>

The increase in revenues for Penril's LAN and Host Access products and
modem products was primarily attributable to the acquisition of Datability, Inc.
at the beginning of the fourth quarter of fiscal 1993.

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1994 1993 CHANGE
--------- --------- ------
<S> <C> <C> <C>
Gross Profit Margin:
LAN and Host Access products............... 54% 57% (3%)
Modem products............................. 45% 43% 2%
</TABLE>

The decrease in gross profit margins for LAN and Host Access products was
due to lower gross profit margins related to acquired inventory. The increase in
gross profit margins for modem products was due to greater manufacturing
efficiencies with the installation of automated assembly equipment.

22
<PAGE> 24

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1994 1993 CHANGE
--------- --------- -------
<S> <C> <C> <C>
Selling, general and administrative expenses:
LAN and Host Access products............... $16,965 $13,479 $ 3,486
Modem products............................. 1,850 1,653 197
--------- --------- -------
$18,815 $15,132 $ 3,683
======== ======== =======
</TABLE>

Selling, general and administrative expenses increased for LAN and Host
Access products primarily because of the acquisition of Datability, Inc. at the
beginning of the fourth quarter of fiscal 1993. Selling, general and
administrative expenses for modem products increased due to higher commissions
related to higher revenues.

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1994 1993 CHANGE
--------- --------- -------
<S> <C> <C> <C>
Product development expenses:
LAN and Host Access products............... $ 6,797 $ 3,696 $ 3,101
Modem products............................. 2,020 1,706 314
--------- --------- -------
$ 8,817 $ 5,402 $ 3,415
======== ======== =======
</TABLE>

Product development expenses increased for LAN and Host Access products
primarily because of the acquisition of Datability, Inc. at the beginning of the
fourth quarter of fiscal 1993.

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1994 1993 CHANGE
--------- --------- -------
<S> <C> <C> <C>
Interest expense............................. $ 908 $ 334 $ 574
</TABLE>

The Datability, Inc. acquisition in the fourth quarter of fiscal 1993
resulted in Penril borrowing $6.8 million from its principal bank and assuming
another $1.4 million in subordinated debt. The increased debt load combined with
the working capital needed in fiscal 1994 to finance the increase in accounts
receivable and inventories caused the increase in interest expense in fiscal
1994.

LIQUIDITY

As part of the Transfer, the Company is to receive all the cash of Penril.
Prior to the Distribution, Penril anticipates generating cash through the sale
of Technipower and/or EMI and the exercise of the Penril stock options held by
Penril employees and directors. Although the cash on hand on the Distribution
Date is dependent upon completion of these transactions as well as the results
of operations of Penril prior to the Distribution and the costs associated with
the Distribution and the Merger, the Company anticipates there will be in excess
of $5 million of cash transferred to the Company as part of the Transfer.
Immediately following the Transfer, the Company expects its current liabilities
including the current portion of capitalized lease obligations will be
approximately $4.5 million and current assets including cash will be
approximately $14 million. The Company believes expenditures during the first 12
months following the Distribution for fixed assets and capitalized technology
purchases will be approximately $2.2 million.

Based on the Company's expectation with respect to product development and
production, the Company does not expect that cash from operations will satisfy
the Company's cash requirements during the first 12 months following the
Distribution. The Company expects that cash on hand after the Transfer (expected
to be in excess of $5 million), cash from operations and cash from other
anticipated sources will satisfy the Company's cash requirements during the
first 12 months after the Transfer. There can be no assurance that product
development will proceed at the expected pace, that the Company's sales will
achieve expected levels or that any of the other competitive factors set forth
under "Risk Factors" will not result in cash from operations being less than
expected by management. However, the Company has the ability to defer product
development and marketing expenditures if necessary to be consistent with the
Company's cash flow. The deferral of these expenditures could have a negative
impact on future sales of the Company's products. The Company believes, based on
its expected financial condition immediately following the Transfer that there
will be adequate cash flow to fund operations until a line of credit can be
established. Based on discussions it has

23
<PAGE> 25

had with lending institutions, the Company expects that it will be able to
secure a line of credit after the Transfer; however, there can be no assurance
that such line of credit will be available or that the economic terms of such
line of credit will be favorable to the Company.

BUSINESS

GENERAL

The Company, which is a wholly-owned subsidiary of Penril, was recently
formed by Penril solely for the purpose of effecting the Merger and the
Distribution. Until shortly before the Merger, the Company will own no material
assets and will not conduct any business activities other than in connection
with the Distribution and the Merger. Prior to the Merger, Penril will transfer
to the Company as a capital contribution all of the right, title and interest in
all of Penril's Remote Access Business and all other businesses and assets and
corresponding liabilities of Penril unrelated to Penril's modem business. Upon
consummation of the Merger, a subsidiary of Bay will merge with and into Penril,
Penril will become a wholly-owned subsidiary of Bay, and the Company will
continue with its own separate corporate existence unaffiliated with Penril.

While the Company is a newly formed corporate entity, the Remote Access
Business to be contributed to the Company by Penril has an operating history
consisting of the development and sales of LAN and Host Access products and the
development of Access Beyond. In connection with the Remote Access Business, the
Company engages in the development and marketing of network access devices which
enable local, remote or mobile users to access network resources located at
remote sites, central sites or any other point in the network.

PRODUCTS

The Company's product line consists largely of products which serve the LAN
and Host Access markets and a new product family called Access Beyond, serving
the remote access market.

The LAN and Host Access products currently sold by the Company include
statistical multiplexers and host access servers (VCX), Ethernet terminal
servers (CSX), Ethernet local and remote bridge routers (BRX), and a line of
CSU/DSU wide area products. The Company's new Access Beyond product family is
targeted at the remote access market, providing a scaleable, modular platform
into which a variety of connectivity options are expected to be offered. The
Access Beyond family of products is expected to replicate the function of most
of the LAN and Host Access Products, allowing the Company to phase out LAN and
Host Access Products models in favor of new Access Beyond models. Each of the
LAN and Host Access Products provides the Company with an existing revenue
stream as well as an installed base. Sales of LAN and Host Access Products will
initially provide a significant portion of the revenues of the Company.

The VCX product line of multiplexers ranges from 4-port remote site
multiplexers to enterprise solutions providing up to 304 ports or 36 trunk lines
and multipurpose communication servers that combine both wide area network
("WAN") and LAN capabilities. These products can function as a data PBX, X.25
PAD, statistical multiplexer, terminal server or any combination of these.
Although the market for these products is in decline, the Company continues to
serve the installed base and fulfill customer applications.

The CSX Ethernet communications server family provides local and dialup
access to Ethernet LANs. Available as either 8-port or 16-port stand alone units
or as a modular chassis based solution, the CSX server provides terminal and
dialup access for TCP/IP networks. The BRX family includes modular switching
routers that provide up to 16 LAN ports and 2 WAN ports. A key element to the
BRX product line is in the Constellation software which provides a scaleable
router/switching solution. The Company believes that the Constellation software
uses an innovative architecture called Logical Bridge Routing, enabling network
managers to optimize bridge/router port configurations for efficient high
performance. The Constellation software is one of the key elements in the new
Access Beyond product line.

24
<PAGE> 26

The Access Beyond product line is a scaleable, modular family of remote
access products that integrate WAN transmission and LAN access technologies into
a single modular architecture, while allowing room for growth and investment
protection.

The Company anticipates that a wide range of Access Beyond models will be
available to meet varying site requirements, with chassis sizes ranging from
small 4-port units to completely modular 196-port units, thus allowing the user
to customize the chassis-based units to provide a unique mix of local area and
wide area network interfaces that meet the specific demands of its network
environment. Interface options will include: Ethernet backbone and end user
ports, integrated wide area network interfaces, analog modems, digital modems,
CSU/DSU and ISDN interfaces. The modularity and scaleability of the Access
Beyond product family is intended to give the customer flexibility in network
configuration and expansion potential.

The first phase of Access Beyond includes Ram Rack, a high density modem
product which is currently being shipped to customers, and Access Beyond 1000
Remote Access Servers, which is expected to begin being shipped to customers in
September 1996. These products provide remote users with competitively priced
remote access to Novell, TCP/IP and Appletalk networks. The next phase of the
Access Beyond rollout is expected to include the Access Beyond 2400 and Access
Beyond 4400 modular chassis systems. These products are designed to expand the
flexibility of the product line with optional interfaces for direct terminal
connections, integrated V.34 modems and integrated ISDN terminal adapters, along
with LAN and high speed WAN (T1/E1/PRI) connectivity.

The Company anticipates that future enhancements to its remote access
software will provide integration of the remote access capabilities with full
multi-protocol routing. This combination is expected to provide additional
connectivity options and reduced access costs for corporate remote access
networks by allowing a single Access Beyond server to replace several separate
competitive devices. The software features of Access Beyond are and will be
focused on solving the problems of corporate remote LAN access. With the growth
of the Internet and the World Wide Web, corporate telecommuters and traveling
employees now require simultaneous support for multiple networking protocols
allowing access to a wide variety of applications. Networking security is
provided via a collection of security options.

All Access Beyond products will be monitored and configured with a
graphical, menu-driven Windows-based management tool that provides real-time
management control over the Access Beyond products. This management tool will be
based on the industry standard SNMP protocol to ensure interoperability with
equipment and management systems from other vendors.

The Company believes that it will deliver the industry's first unified
approach to remote access, with one comprehensive product line that can supply
both LAN and WAN technologies required in a single architecture, with complete
management control, and new levels of investment protection for end users.
Existing applications will be changed from dedicated services to faster, lower
cost and more flexible services such as Frame Relay and Ethernet. Access Beyond
is intended to provide a migration path from these older networks to the remote
access networks of the future.

DISCONTINUED OPERATIONS

Technipower. Technipower, a wholly-owned subsidiary of Penril, manufactures
uninterruptible power supplies and power regulating equipment. In July 1995, the
Penril Board decided to focus more of Penril's resources on its main business of
data communications and therefore determined to treat Technipower as a
discontinued operation. On July 16, 1996, Penril announced it had entered into
an agreement to sell Technipower. Penril anticipates that the sale of
Technipower will be completed in August 1996 and will generate approximately
$4,000,000 in net proceeds. The net proceeds from the sale will become
additional capital of the Company. In the event Technipower is not sold prior to
the Distribution, the assets and liabilities of Technipower will be contributed
to the Company as part of the Transfer.

EMI. Another wholly-owned subsidiary of Penril, EMI, specializes in the
production of sophisticated high frequency electronic instrumentation equipment.
Penril anticipates a formal measurement date will be determined, and
consequently, as of July 31, 1996, EMI will be classified as a discontinued
operation. Penril

25
<PAGE> 27

also intends to sell EMI prior to consummation of the Distribution. In the event
EMI is not sold prior to consummation of the Distribution, the assets and
liabilities of EMI will be contributed to the Company as part of the Transfer.

SUPPLIERS

Material and components for the Company's products are purchased from
outside suppliers. While most components are available from several suppliers, a
few are provided from sole-source vendors. The Company believes that in most
cases alternative sources of supply could be obtained within a reasonable time
period; however, an interruption in the supply of such components could have a
temporary adverse effect on the Company's operations.

PATENTS, COPYRIGHTS AND LICENSES

The Company owns, or is licensed or otherwise possesses legally enforceable
rights to use, several patents, patent applications, trademarks, trade names,
service marks, copyrights, schematics, technology, know-how, computer software
programs or applications, and tangible or intangible proprietary information or
material essential and necessary to the business of the Company. The Company may
desire in the future to obtain additional licenses related to its products and
believes, based on industry practice, that any necessary licenses could be
obtained. The costs of such licenses may vary significantly depending on the
nature of the technology involved.

The patents owned by the Company include patents entitled "Fiber Optic
Connector", "Uninterruptible Power Supply", and "Guard Time Elimination in a
Time-Division Multiplexed, Active Star-coupled, Half-duplex Mode, Synchronous
Communications Network."

The United States trademarks, tradenames and service marks owned by the
Company include ELECTRO-METRICS, TECHNIPOWER, ACCESS BEYOND, CONSTANT POWER,
MULTIVERTER, FORSITE, MUX/ROUTER and SUNUPS. The foreign trademarks, trade
names, and service marks owned by the Company include TECHNIPOWER in France, the
United Kingdom and Italy.

The Company currently licenses technology including integrated access
software; CSU/DSU technology; frame relay assembler disassembler technology;
PC/TCP SNMP technology; terminal emulation software; remote access software;
router card technology and software; network management software; and basic
frame relay software for LAN interconnect products.

On June 16, 1996, Penril and Bay entered into a Development and License
Agreement on behalf of the Company whereby Bay licensed to Penril, on behalf of
the Company certain intellectual property, software, and technical know-how
relating to certain 24-port Digital Modem Cards. The agreement contemplates that
Bay will develop a 24-port Digital Modem Card for the Company, train the
Company's personnel in the underlying technology, and provide technical
assistance where necessary to permit the Company to market this digital
technology.

In connection with the Transfer, Penril and the Company will enter into a
Technology License Agreement whereby Penril will license to the Company certain
intellectual property, software and technical know-how, including those relating
to a patent jointly owned by Penril and the University of Maryland. The
Technology License Agreement will also obligate Penril to use its best efforts
to obtain for the Company all rights obtained by Penril pursuant to cross
licensing agreements involving such jointly owned patent.

BACKLOG

A significant portion of data communications revenues are based on customer
purchase orders with immediate shipment requirements. Backlog, which tends not
to be significant in data communications products, is a result of the occasional
customer order with future scheduled shipment requirements or misalignment of
demand and production of a particular product. Because data communications
revenues constitute such a significant portion of the revenues of the Company,
the Company believes that the dollar amount of backlog at any given time is not
indicative of the actual level of revenues which will ultimately be

26
<PAGE> 28

realized during future periods. Consequently, the Company believes that the
amount of backlog is not a material consideration in understanding the Company's
business operations.

COMPETITION

The Company encounters substantial competition in the marketing of its
products and many of its competitors have greater financial, marketing and
technical resources. Important competitive factors in the markets for the
Company's products are established customer base, product performance and
features, service and support as well as price. The Company believes that it
competes favorably with respect to these factors. There can be no assurance that
the Company's products will compete successfully with competitive products that
may be offered in the future or that aggressive pricing will not negatively
impact the profitability of the Company.

SALES AND MARKETING

The Company's distribution channel is composed of value-added resellers
(VARs), original equipment manufacturers (OEMs) and distributors in more than 40
countries. Sales to end-user customers account for less than 10% of the
Company's revenues. This multi-channel strategy allows the Company to meet
specific customer needs while giving coverage to the worldwide markets.

Value Added Resellers. VARs integrate the Company's products with products
of other vendors, into networking systems that are sold directly to end-users.
VARs also sell the Company's products as stand-alone units. Sales to VARs are
made at discounts based on purchase volumes and other incentive programs.

Original Equipment Manufacturers. The Company also customizes its product
for sale through OEMs. This customization may range from simple private labeling
of existing products to complete customization of software and/or hardware to
fit the product lines of the OEM.

Distributors. The Company also sells its products to distributors who
generally resell to VARs and other dealers. Distributors generally provide a
minimal level of systems integration. The Company offers sales and marketing
programs to assist distributors in promoting, selling and supporting the
Company's products.

Many of the Company's VARs and distributors carry products which are
complementary to, or compete with, those of the Company, and may choose to give
higher priority to products of other suppliers or competitors of the Company.

CUSTOMER SUPPORT, SERVICE AND WARRANTY

The Company services, repairs and provides technical support for its
products. A large portion of these support activities, provided through a 24
hour United States support center, are related to software and hardware
configuration. The Company sells products with end-user warranty periods of up
to sixty months. Following the expiration of the warranty period, if any, the
Company offers services on a time and materials basis, or under maintenance
contracts.

RESEARCH AND DEVELOPMENT

Under its own sponsorship, the Company is continuously engaged in the
development of new products as well as the development and enhancement of its
existing products. The Company expensed approximately $5,520 (16% of
consolidated revenues) for product development and engineering during fiscal
1995 compared to $6,797 (17% of consolidated revenues) in fiscal 1994 and $3,696
(17% of consolidated revenues) in fiscal 1993.

PROPERTIES

The Company's executive offices are located in Gaithersburg, Maryland in
facilities which the Company subleases from Penril. The overlease between Penril
and Real Estate Income Partners III is for 54,874 square feet and expires in
September 1999. The sublease between Penril and the Company provides for the
sublease

27
<PAGE> 29

of all the premises with an expiration date of September 1999. The Company will
assume all costs and expenses under the overlease including rental payments. The
Company will have one option to extend the term of the sublease for a period of
119 months and may exercise the option by giving written notice to Penril prior
to the end of the initial term of the sublease. The Company's monthly rent under
the sublease is $ per month. See "Certain Transactions -- Sublease
Agreement". The Company is currently negotiating with the owner of the property
to enter into a direct lease of these facilities on terms more favorable to the
Company; however there can be no assurance that such lease will be entered into
or that the terms of such lease will be more favorable to the Company.

The Company will lease a research and development facility in Carlstadt,
New Jersey. The lease is for approximately 44,403 square feet and expires in
September 2001. In addition to the facilities mentioned above, the Company will
also lease several sales offices throughout the United States. The Company
believes its properties will be adequate for its needs.

In addition, EMI is a party to a lease for a manufacturing facility located
in Johnstown, New York containing approximately 40,400 square feet (the "EMI
Lease"). The EMI Lease expires in August 2005. Technipower is a party to a lease
for a manufacturing facility located in Danbury, Connecticut containing
approximately 30,000 square feet (the "Technipower Lease"). The Technipower
Lease expires in February 1998. Penril intends to sell both EMI and Technipower
prior to the Distribution. In the event either EMI or Technipower is not sold
prior to the Distribution, the aforementioned lease obligations of EMI or
Technipower, as the case may be, will be contributed by Penril to Access Beyond
as part of the Transfer.

EMPLOYEES

It is expected that the Company will employ approximately 140 employees as
of the Distribution Date. The Company believes that its future success will
depend largely on its ability to retain certain key personnel and to recruit and
retain additional highly skilled employees who are in great demand. The Company
will have employment contracts with certain officers, but does not have
employment contracts with its other employees. See "Management -- Employment and
Consulting Agreements".

LEGAL PROCEEDINGS

Penril is involved in various claims and lawsuits incidental to its
business. The Company has assumed the liabilities which may arise out of certain
lawsuits to which Penril is a party, the more significant of which lawsuits are
discussed below. All costs, expenses, liabilities and obligations of the
litigation discussed below have been assumed by the Company and all recoveries
from such litigation will be realized by the Company. In the opinion of
management, the Company is adequately reserved against such claims and lawsuits,
and any ultimate liability arising out of such claims and lawsuits will not have
a material adverse effect on the financial condition or operations of the
Company.

On June 1, 1993 Penril initiated a lawsuit against Standard Microsystems
Corp., SMC Massachusetts, Inc., Ashraf M. Dahad and Kwabena Akufo (the "SMC
Defendants") in the Circuit Court of Maryland for Montgomery County for breach
of contract including, among other things, failure to transfer technology,
unfair competition and false representations. Penril seeks relief in an
aggregate amount of approximately $50 million. The SMC Defendants subsequently
brought a counterclaim alleging fraud and breach of contract and seeking
recovery of amounts due under the contract which are alleged to be approximately
$1,650,000 in compensatory damages plus unspecified punitive damages. As of July
31, 1996, the discovery stage of the litigation had been completed. Trial is
scheduled to commence in January 1997.

On December 24, 1994, Penril filed a complaint against Network Systems
Corporation of Minneapolis, Minnesota ("NSC") in the Circuit Court of Maryland
for Montgomery County. The litigation arises out of a contract in which Penril
agreed to develop certain computer hardware and software to NSC's
specifications. Penril alleges breach of contract, fraudulent inducement and
defamation and is seeking specific performance, compensatory damages of
$2,000,000 and punitive damages of $5,000,000. On March 28, 1995, NSC filed an
answer and counterclaim in which NSC alleges negligent misrepresentation, fraud
and breach of contract by Penril. NSC is seeking rescission of the contract,
restitution of monies paid by NSC to Penril, compensatory

28
<PAGE> 30

damages of $5,000,000 and punitive damages in an unspecified amount. As of July
31, 1996, the litigation was in the discovery stage.

Digital Equipment Corporation ("DEC") has claimed, through a series of
written communications, that Penril has violated DEC patents related to DEC LAT
technology. Penril has taken the position that Datability, Inc., prior to its
acquisition by Penril, had a relationship with DEC that involved the development
of LAT for which Datability has not collected. Both DEC and Penril have taken
the position that it is in the best interests of both parties to work toward a
fair resolution. As of July 31, 1996 no formal claims have been filed.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Pursuant to the Company Certificate and the Company's By-laws ("By-laws"),
the Board of Directors of the Company (the "Board of Directors") is divided into
three classes with each director serving a three year term (after the initial
term). The following table sets forth certain information as to persons who will
serve as directors and executive officers of the Company after the Distribution.
The directors of Class I will hold office until the first scheduled annual
meeting of stockholders in 1997, the directors of Class II will hold office
until the annual meeting of stockholders in 1998 and the director of Class III
will hold office until the annual meeting of stockholders in 1999. Thereafter,
stockholders will elect the directors of each Class at the appropriate
succeeding annual meeting of stockholders.

Directors

<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION INFORMATION
- ---------------------------------------- ----------------------------------------------------
<S> <C>
Class I -- Term Expiring at 1997
Annual Meeting
Barbara Perrier, 41 Ms. Perrier has served as Vice President and Chief
Financial Officer of Communication Systems
Technology, Inc., a developer of software and
hardware communications and control equipment, since
March 1996. Ms. Perrier served as President of
VideoGrafects, Inc., a multimedia communications
company specializing in the production of video and
computer based material, from its founding in August
1992 until the Company was sold to French Bray in
March 1996. Prior to founding VideoGrafects, Inc.,
Ms. Perrier was a special (investing) partner with
New Enterprise Associates, a venture capital firm.
Mr. Perrier is a director of French Bray, a printing
and multimedia firm.
</TABLE>

29
<PAGE> 31

<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION INFORMATION
- ---------------------------------------- ----------------------------------------------------
<S> <C>
Class II -- Term Expiring at 1998
Annual Meeting
John Howard, 43 Mr. Howard has served as Chief Executive Officer of
Gryphon Capital Partners Corporation, an investment
firm, since February 1996. He served as Co-Chief
Executive Officer of Vestar Capital Partners, a
leveraged buyout firm, from 1990 to February 1996.
Mr. Howard is also a director of Celestial
Seasonings, Inc., a manufacturer of herbal teas,
Dyersburg Fabrics, Inc., a textile manufacturer, and
Clark Schwebel Inc., a fiberglass and Kevlar weaver.
Mr. Howard is the brother of Ronald A. Howard.
Arthur Samberg, 55 Mr. Samberg has served as President of
Dawson-Samberg Capital Management, Inc., a
registered investment advisor, since 1985. Mr.
Samberg is a General Partner and senior portfolio
manager of Pequot Partners Fund, L.P., Pequot
International Fund Inc. and Pequot Endowment Fund,
L.P.
Class III -- Term Expiring at 1999
Annual Meeting
Ronald A. Howard, 40, Prior to the Distribution, Mr. Howard will be named
Chairman of the Board, Chairman of the Board, President and Chief Executive
President and Chief Officer of the Company. Mr. Howard has served as
Executive Officer President of the Datability Networks Division of
Penril since 1994, and as Co-President of the
Division from May 1993 until November 1994. He has
held the position of Executive Vice President of
Penril from May 1993. Mr. Howard was President of
Datability Inc. from its founding in 1977 until it
was acquired by Penril in May 1993.
</TABLE>

The Company intends to name one additional member to the Board of Directors
prior to the Distribution. This director will have no prior employment or
consulting relationship with the Company or Penril and no familial relationship
with any officer or director of the Company or Penril. The additional director
will be a Class I director.

Executive Officers (other than Directors)

<TABLE>
<CAPTION>
NAME, AGE AND PRINCIPAL POSITION PRINCIPAL OCCUPATION INFORMATION
- ---------------------------------------- ----------------------------------------------------
<S> <C>
Richard D. Rose, 41, Mr. Rose was named Senior Vice President, Chief
Senior Vice President, Chief Financial Officer and Treasurer of the Company in
Financial Officer and Treasurer August 1996 after having served as Senior Vice
President and Chief Financial Officer of Penril
since April 1996 and as Chief Financial Officer of
Penril since November 1994. He held the position of
Vice President Finance of Penril from February 1994
until April 1996 and Corporate Controller from 1988
until February 1994. Mr. Rose was named Vice
President-Controller and Principal Accounting
Officer of Penril in December 1990 and served in
said capacity until February 1994.
</TABLE>

30
<PAGE> 32

<TABLE>
<CAPTION>
NAME, AGE AND PRINCIPAL POSITION PRINCIPAL OCCUPATION INFORMATION
- ---------------------------------------- ----------------------------------------------------
<S> <C>
John Clary, 50, Mr. Clary was named Vice President of Strategic
Senior Vice President and Chief Planning of Penril in August 1996. From May 1995
Operating Officer until joining Penril, he was President and
co-founder of Outsource Solutions, Inc., an
electronics manufacturing services company. For more
than five years prior to May 1995, Mr. Clary held
several senior level management positions, most
recently as Senior Vice President, Product
Operations, with Network Equipment Technologies, a
WAN equipment manufacturing company.
James P. Gallagher, 52, Mr. Gallagher was named Vice President -- Worldwide
Vice President -- Worldwide Sales Sales of the Penril Datability Networks Division of
Penril in November 1994. From May 1993, when Penril
acquired Datability, Inc, until November 1994, Mr.
Gallagher was Vice President, North and South
American Sales of the Datability Networks Division.
At Datability, Inc, he was Vice President of Sales
from April 1990 until May 1993.
Mark Silverman, 34, Mr. Silverman has been employed for more than five
Vice President -- Research and years by either the Datability Networks Division of
Development Penril or Datability, Inc. In January 1996, he was
named Vice President, Product Development for
Internetworking Products. His prior positions with
Penril and Datability, Inc. included Director of
Product Development from September 1992 to January
1996, Manager of Hardware Development from March
1990 to September 1992 and Hardware Engineer from
October 1987 to March 1990.
</TABLE>

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has established an Audit Committee and a
Compensation Committee.

The general functions of the Audit Committee include selecting the
independent auditors (or recommending such action to the Board of Directors),
evaluating the performance of the independent auditors and their fees for
services, reviewing the scope of the annual audit with the independent auditors
and the results of the audit with management and the independent auditors,
consulting with management, internal auditors and the independent auditors as to
the systems of internal accounting controls, and reviewing the nonaudit services
performed by the independent auditors and considering the effect, if any, on
their independence. The members of the Audit Committee will be outside directors
and will be determined by the full Board of Directors of the Company.

The Compensation Committee is authorized and directed to (i) review and
approve the compensation and benefits of the Company's executive officers, (ii)
review and approve the annual salary plans, (iii) review management organization
and development, (iv) review and advise management regarding the benefits,
including bonuses, and other terms and conditions of employment of other
employees, (v) administer the Incentive Plan (defined below) and the granting of
options under that plan, the Directors' Plan (defined below) and any other plans
that may be established, (vi) review and recommend for the approval of the Board
of Directors of the Company the compensation of directors, and (vii) determine
the compensation and benefits of the Chief Executive Officer and review and
approve, or modify if appropriate, the recommendations of the Chief Executive
Officer with respect to compensation and benefits of other executive officers.
The members of the Compensation Committee will be outside directors and will be
determined by the full Board of Directors.

31
<PAGE> 33

COMPENSATION OF DIRECTORS

Members of the Board of Directors of the Company who are also employees of
the Company will not receive any additional compensation for service on the
Board of Directors or any committees of the Board of Directors. Members of the
Board of Directors of the Company who are not employees will receive an annual
retainer of $5,000 plus a stipend of $1,000 for each Board meeting attended.
Non-employee directors will receive additional stipends for service on
committees of the Board of Directors of the Company of $1,000 per committee
meeting not held on the same day as a Board meeting.

EXECUTIVE COMPENSATION

The following tables show information with respect to the annual
compensation for services in all capacities to Penril for the fiscal years ended
July 31, 1996, 1995 and 1994 of those persons who will be at the Distribution
Date, (i) the chief executive officer and (ii) the other four most highly
compensated executive officers of the Company (the "named executive officers")
who were employed by Penril during fiscal 1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION AWARDS
COMPENSATION -----------------------------------
NAME AND ----------------- STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY OPTIONS(1) COMPENSATION(2)
----------------------------------- ---- -------- --------------- ---------------
<S> <C> <C> <C> <C>
Ronald A. Howard................... 1996 $221,877 250,000 $ 484
Chairman of the Board, 1995 $200,000 30,000 $ 5,458
President and Chief 1994 $203,333 -- $ 250
Executive Officer
John Clary (3)..................... -- -- -- --
Senior Vice President
and Chief Operating Officer
Richard D. Rose.................... 1996 $153,768 30,000 $ 3,446
Senior Vice President and 1995 $125,848 20,000 $ 4,547
Chief Financial Officer 1994 $115,335 5,000 $ 4,311
James Gallagher.................... 1996 $188,293 20,000 $ 300
Vice President -- Worldwide Sales 1995 $167,786 10,000 $ 250
1994 $168,858 -- $ 250
Mark Silverman..................... 1996 $109,577 15,000 $ 300
Vice President -- Research 1995 $105,674 5,000 $ 250
and Development 1994 $101,923 -- $ 250
</TABLE>

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

(1) Number of shares granted under the 1986 Incentive Plan of Penril. The
options are exercisable at prices ranging from $2.31 to $8.00 per share, the
fair market value at the date of grant. Penril does not grant SARs.

(2) Includes for fiscal 1996, $300 paid for the benefit of each of the named
executives pursuant to the Company's 401(k) Plan. Also includes $274 each
for Mr. Howard and Mr. Rose, under the Company's Split-Dollar Life Insurance
Program and for Mr. Howard and Mr. Rose, $210 and $3,172 respectively, paid
to the Exec-U-Care Medical Insurance Trust.

(3) Mr. Clary joined Penril on August 5, 1996, as Vice President of Strategic
Planning, at an annual salary of $150,000.

32
<PAGE> 34

PENRIL OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF ANNUAL RATES OF STOCK
TOTAL OPTIONS PRICE APPRECIATION FOR
GRANTED TO OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE OR MARKET PRICE ON ----------------------
GRANTED(1) FISCAL YEAR(1) BASE PRICE DATE OF GRANT EXPIRATION DATE 5% 10%
---------- -------------- ----------- --------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald A. Howard....... 250,000 44.3% $ 7.875 $ 7.875 09/08/2005 $1,238,136 $3,137,680
Richard D. Rose........ 20,000 3.5% 6.440 6.440 04/09/2006 $ 81,002 $ 205,274
Richard D. Rose........ 10,000 1.8% 5.690 5.690 11/03/2005 $ 35,784 $ 90,684
James Gallagher........ 10,000 1.8% 6.440 6.440 04/09/2006 $ 40,501 $ 102,637
James Gallagher........ 10,000 1.8% 7.875 7.875 09/08/2005 $ 49,525 $ 125,507
Mark Silverman......... 10,000 1.8% 6.440 6.440 04/09/2006 $ 40,501 $ 102,637
Mark Silverman......... 5,000 0.9% 8.000 8.000 12/19/2005 $ 25,156 $ 63,750
</TABLE>

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

(1) Reflects only options; Penril does not grant SARs.

(2) Assumed annual appreciation rates are set by the Commission and are not a
forecast of future appreciation. The actual realized value depends on the
market value of Penril Common Stock on the exercise date, and no gain to the
optionees is possible without an increase in the price of Penril Common
Stock. All assumed values are pre-tax and do not include dividends.

AGGREGATED PENRIL OPTION EXERCISES IN FISCAL YEAR 1996
AND FISCAL 1996 YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS PER SHARE OPTIONS AT
AT FISCAL YEAR-END EXERCISE PRICE OF FISCAL YEAR-END
SHARES ACQUIRED VALUE EXERCISABLE/ UNEXERCISED OPTIONS EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE(1) AT FISCAL YEAR-END UNEXERCISABLE(1)(2)
- ---------------------- --------------- -------- ------------------- ------------------- --------------------
<S> <C> <C> <C> <C> <C>
Ronald A. Howard...... 99,000 $520,875 271,000/-- $2.875-$7.875 $ 1,393,605/--
Richard D. Rose....... 96,667 $571,852 0/0 -- --
James Gallagher....... 12,000 $ 43,820 36,000/27,000 $2.310-$7.875 $ 303,375/$181,690
Mark Silverman........ 8,000 $ 14,440 13,500/18,500 $4.125-$8.000 $ 111,817/$114,818
</TABLE>

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

(1) Reflects only stock options; Penril does not grant SARs.

(2) Based on the Year-End per share closing price of $12.63 (as reported on
Nasdaq on July 31, 1996). Represents the difference between the per share
option exercise price and $12.63.

EMPLOYMENT AND CONSULTING AGREEMENTS

Upon consummation of the Distribution, Mr. Howard will enter into an
employment contract with the Company to serve as Chairman of the Board,
President and Chief Executive Officer (the "Howard Employment Agreement"). The
Howard Employment Agreement will provide, among other things, a two year term of
employment, an annual salary of $175,000, an opportunity for bonus compensation
in an amount at least equal to his annual salary pursuant to a plan to be
established by the Board of Directors, and benefits consistent with those
normally provided by the Company to its executive employees including, without
limitation, a $5,000,000 term life insurance policy. The Howard Employment
Agreement will also provide that options to purchase shares of Company
Stock are to be granted to Mr. Howard and that, upon a change of control of the
Company, Mr. Howard will receive a payment equal to times his annual base
salary.

Also upon consummation of the Distribution, Mr. Rose will enter into an
employment agreement with the Company, to serve as Senior Vice President, Chief
Financial Officer and Treasurer (the "Rose Employment Agreement"). The Rose
Employment Agreement will provide for Mr. Rose to serve as the Company's Chief
Financial Officer at an annual salary of $150,000. The Rose Employment Agreement
also

33
<PAGE> 35

will provide that options to purchase 75,000 shares of Company Stock are to be
granted to Mr. Rose, that Mr. Rose will receive a payment of times his base
salary in the event of a change in control of the Company, that Mr. Rose will
receive at least twelve months notice of termination and that Mr. Rose will
participate in any executive bonus plan and other benefits consistent with those
normally provided by the Company to its executive officers.

Upon consummation of the Distribution, an employment agreement between the
Company and Mr. Clary ("Clary Employment Agreement") will become effective. The
agreement will provide for a salary at the rate of $150,000 plus an opportunity
for bonus compensation of up to $150,000 pursuant to a plan to be established by
the Board of Directors. The term of this agreement will be terminable by either
party at will and will provide that options to purchase 125,000 shares of
Company Stock are to be granted to Mr. Clary. The agreement also will provide
for reimbursement of certain living expenses and travel expenses.

Effective as of the Distribution, Henry D. Epstein will be a consultant to
the Company under the terms of a consulting agreement (the "Epstein Agreement")
between the Company and Ideonics, a financial and technology consulting firm
owned by Mr. Epstein. The Epstein Agreement will provide, among other things,
for a four year consulting term with an annual consulting fee of $137,500. In
addition, pursuant to the Epstein Agreement, the Company will provide Ideonics
with office space, secretarial assistance and health care benefits for Mr.
Epstein. Mr. Epstein is Chairman of the Board of both Penril and the Company
until the Merger and the Distribution, respectively.

PENRIL BENEFIT PLANS

Retirement and Savings Plan. Penril's Retirement and Savings Plan ("401(k)
Plan") is a defined contribution plan including provisions of Section 401(k) of
the Internal Revenue Code. Employees of Penril who have completed 90 days of
eligibility service ("Participants") are eligible to participate in the 401(k)
Plan. The 401(k) Plan permits, but does not require Penril to make matching
contributions. In addition, Penril may make discretionary contributions to the
401(k) Plan which will be allocated to each Participant based on the ratio of
such Participant's eligible compensation to the total of all Participants'
eligible compensation. Amounts contributed by Penril vest as to 30% after 1 year
of eligible service, 60% after 2 years of eligible service and 100% after 3
years of eligible service. Participants may elect to direct the investment of
their contributions in accordance with the provisions of the 401(k) Plan. As a
part of the Transfer, the 401(k) Plan will be transferred to the Company and
active participation in the 401(k) Plan will be limited to eligible employees of
the Company. The Company intends to split up the 401(k) Plan so that the portion
of the plan representing the benefits of participants not employed by the
Company can be terminated.

The 1986 Incentive Plan of Penril. On October 8, 1986, the Board of
Directors of Penril adopted the 1986 Incentive Plan of Penril (the "1986 Plan").
The 1986 Plan is intended to encourage officers and other key employees of
Penril to acquire or increase their ownership of Penril Stock.

The 1986 Plan authorizes the grant to officers and key employees of awards
("Awards") consisting of "incentive stock options," as that term is defined
under the provisions of Section 422 of the Code, non-qualified stock options (or
a combination of the two) and restricted stock awards. There are 1,587 shares of
Penril Stock available for granting Awards under the 1986 Plan. The Stock
Option/Compensation Committee of the Board of Directors of Penril (the "Penril
Committee") administers the 1986 Plan and has sole discretion to determine those
employees to whom Awards will be granted, the number of Awards granted, the
provisions applicable to each Award and the time periods during which Awards may
be exercisable.

The exercise price of each incentive stock option may not be less than the
fair market value of Penril Stock at the date of grant. Under the 1986 Plan,
fair market value is generally the closing price of Penril Stock on the last
business day prior to the date on which the value is to be determined. Unless
the Penril Committee determines otherwise, the option price per share of any
non-qualified stock option shall be the fair market value of the shares of
Penril Stock on the date the option is granted. The exercise price of each
incentive stock option granted to any stockholder possessing more than 10% of
the combined voting power of all classes of capital stock of Penril, or, if
applicable, a parent or subsidiary of Penril, on the date of grant must not be
less

34
<PAGE> 36

than 110% of the fair market value on that date, and no such option may be
exercisable more than five years after the date of grant.

Options granted are exercisable for a term of not more than ten years from
the date of grant. No employee may be granted an incentive stock option to the
extent the aggregate fair market value, as of the date of grant, of the stock
with respect to which incentive stock options are first exercisable by such
employee during any calendar year exceeds $100,000.

Restricted stock awards are rights granted by the Penril Committee to
receive shares of Penril Stock subject to forfeiture and other restrictions
determined by the Penril Committee. Until the restrictions with respect to any
restricted stock award lapse, the shares will be held by Penril and may not be
sold or otherwise transferred by the employee. Except as otherwise determined by
the Penril Committee, until the restrictions lapse, the shares will be forfeited
if the employee's employment is terminated for any reason other than a "change
in control" or "trigger event," death, disability or retirement on or after the
employee's attainment of 65 years of age. Except as otherwise determined by the
Penril Committee, all restrictions will lapse upon the earliest of the death,
disability or retirement of the recipient employee on or after the employee's
attainment of 65 years of age. Unless the Penril Committee determines otherwise,
30% of the shares subject to a restricted stock award will vest on the first
anniversary of the date of the grant, 60% on the second anniversary and 100% on
the third anniversary of the grant.

Awards granted under the 1986 Plan are subject to adjustment upon a
recapitalization, stock split, stock dividend, merger, reorganization,
liquidation, extraordinary dividend or other similar event affecting Penril
Stock such as the Distribution. An Award will not be transferable, other than by
will or the laws of descent and distribution or, in certain circumstances,
pursuant to a qualified domestic relations order, and an Award may be exercised,
during the lifetime of the holder of the Award, only by the holder, or the
holder's personal representative in the event of disability.

In the case of a "change in control" of Penril or a "trigger event," an
option holder will generally have the right, commencing at least five days prior
to the "change in control" or "trigger event" and subject to any other
limitation on the exercise of the option in effect on the date of exercise, to
immediately exercise any options in full to the extent they previously have not
been exercised, without regard to any vesting limitations. On July 2, 1996, the
Penril Committee took action which caused all of the outstanding Penril options
held by directors and executive officers of Penril to vest.

The 1986 Plan will terminate on October 8, 1996, and Awards will not be
granted under the 1986 Plan after that date although the terms of any Award may
be amended in accordance with the 1986 Plan at any date prior to the end of the
term of such Award. Any Awards outstanding at the time of termination of the
1986 Plan will continue in full force and effect according to the terms and
conditions of the Award and the 1986 Plan.

The 1986 Plan may be amended by the Board of Directors of Penril, provided
that stockholder approval will be necessary as required under Section 422 of the
Code or Rule 16b-3 of the regulations of the Exchange Act, and provided further
the no amendment may impair any rights of any holder of an Award previously
granted under the 1986 Plan without the holder's consent.

The 1995 Long-Term Incentive Plan of Penril. On December 13, 1995, Penril
adopted the 1995 Long-Term Incentive Plan of Penril (the "1995 Plan"). The 1995
Plan is intended to encourage officers and other key employees of Penril and its
subsidiaries to acquire or increase their ownership of Penril Stock.

The 1995 Plan authorizes the grant to officers and key employees of awards
("Awards") consisting of "incentive stock options," as that term is defined
under the provisions of Section 422 of the Code, non-qualified stock options and
restricted stock awards. There are 930,000 shares of Penril Stock available for
granting Awards under the 1995 Plan. The Penril Committee administers the 1995
Plan and has sole discretion to determine those employees to whom Awards will be
granted, the number of Awards granted, the provisions applicable to each Award
and the time periods during which Awards may be exercisable.

35
<PAGE> 37

The Penril Committee may grant incentive stock options, non-qualified stock
options, or a combination of the two. The exercise price of each incentive stock
option may not be less than the fair market value of Penril Stock at the date of
grant. Under the 1995 Plan, fair market value is generally the closing price of
Penril Stock on the last business day prior to the date on which the value is to
be determined. Unless the Penril Committee determines otherwise, the option
price per share of any non-qualified stock option will be the fair market value
of the shares of Penril Stock on the date the option is granted. The exercise
price of each incentive stock option granted to any stockholder possessing more
than 10% of the combined voting power of all classes of capital stock of Penril,
or, if applicable, a parent or subsidiary of Penril, on the date of grant must
not be less than 110% of the fair market value on that date, and no such option
may be exercisable more than five years after the date of grant.

Options granted will be exercisable for a term of not more than ten years
from the date of grant. In addition, no employee may be granted an incentive
stock option to the extent the aggregate fair market value, as of the date of
grant, of the stock with respect to which incentive stock options are first
exercisable by such employee during any calendar year, exceeds $100,000.

Restricted stock awards are rights granted by the Penril Committee to
receive shares of Company Stock subject to forfeiture and other restrictions
determined by the Penril Committee. Until the restrictions with respect to any
restricted stock award lapse, the shares will be held by Penril and may not be
sold or otherwise transferred by the employee. Except as otherwise determined by
the Penril Committee, until the restrictions lapse, the shares will be forfeited
if the employee's employment is terminated for any reason other than death,
disability or retirement on or after the employee's attainment of 65 years of
age. Except as otherwise determined by the Penril Committee, all restrictions
will lapse upon the earliest of the death, disability or retirement of the
recipient employee on or after the employee's attainment of 65 years of age.
Unless the Penril Committee determines otherwise, 30% of the shares subject to a
restricted stock award will vest on the first anniversary of the date of grant,
60% on the second anniversary and 100% on the third anniversary of the grant.

Awards granted under the 1995 Plan will be subject to adjustment upon a
recapitalization, stock split, stock dividend, merger, reorganization,
liquidation, extraordinary dividend, or other similar event affecting Penril
Stock. An Award will not be transferable, other than by will or the laws of
descent and distribution or, in certain circumstances, pursuant to a qualified
domestic relations order, and an Award may be exercised, during the lifetime of
the holder of the Award, only by the holder, or the holder's personal
representative in the event of disability.

In the case of a "change in control" of Penril, an option holder will
generally have the right, commencing at least five days prior to the "change in
control" and subject to any other limitation on the exercise of the option in
effect on the date of exercise, to immediately exercise any options in full to
the extent they previously have not been exercised, without regard to any
vesting limitations. On July 2, 1996 the Penril Committee took action which
caused all of the outstanding Penril options held by directors and executive
officers of Penril to vest.

Penril, in its sole discretion, may establish procedures, subject to
certain restrictions, whereby an option holder, subject to the requirements of
Rule 16b-3, Regulation T, and certain other laws, may exercise an option or a
portion thereof without making a direct payment of the option price to Penril,
without regard to any vesting limitations.

The 1995 Plan will terminate on December 13, 2005, and Awards may not be
granted under the 1995 Plan after that date, although the terms of any Award may
be amended in accordance with the 1995 Plan at any date prior to the end of the
term of such Award. Any Awards outstanding at the time of termination of the
1995 Plan will continue in full force and effect according to the terms and
conditions of the Award and the 1995 Plan.

The 1995 Plan may be amended by the Board of Directors of Penril, provided
that stockholder approval will be necessary as required under the Section 422 of
the Code or Rule 16b-3 of the regulations of the

36
<PAGE> 38

Exchange Act, and provided further that no amendment may impair any rights of
any holder of an Award previously granted under the 1995 Plan without the
holder's consent.

COMPANY BENEFIT PLANS

The Company's 1996 Long-Term Incentive Plan. It is expected that the Board
of Directors of the Company will adopt the Company's 1996 Long-Term Incentive
Plan (the "Company Incentive Plan"), subject to approval by the Company's
stockholders. The Company Incentive Plan will be intended to encourage ownership
of Company Stock by officers and other key employees of the Company, to
encourage their continued employment with the Company and to provide them with
additional incentives to promote the success of the Company.

The Company Incentive Plan will authorize the grant to officers and key
employees of awards ("Awards") consisting of "incentive stock options," as that
term is defined under the provisions of Section 422 of the Code and
non-qualified stock options. There will be shares of Company Stock
available for granting Awards under the Company Incentive Plan. The Compensation
Committee of the Board of Directors of the Company (the "Committee") will
administer the Company Incentive Plan and will have sole discretion to determine
those employees to whom Awards will be granted, the number of Awards granted,
the provisions applicable to each Award and the time periods during which Awards
may be exercisable; provided, however, that no employee may receive options to
acquire more than shares of Company Stock during any given year.

The Committee may grant incentive stock options, non-qualified stock
options, or a combination of the two. The exercise price of each incentive stock
option may not be less than the fair market value of the Company Stock at the
date of grant. Under the Company Incentive Plan, fair market value generally
will be the closing price of the Company Stock on Nasdaq on the last business
day prior to the date on which the value is to be determined; provided, however,
with respect to options granted on or before the Distribution Date, fair market
value means the fair market value of the shares as determined by the Committee
in its discretion. Unless the Committee determines otherwise, the option price
per share of any non-qualified stock option will be the fair market value of the
shares of Company Stock on the date the option is granted. The exercise price of
each incentive stock option granted to any stockholder possessing more than 10%
of the combined voting power of all classes of capital stock of the Company, or,
if applicable, a parent or subsidiary of the Company, on the date of grant must
not be less than 110% of the fair market value on that date, and no such option
may be exercisable more than five years after the date of grant.

Options granted will be exercisable for a term of not more than ten years
from the grant. In addition, no employee may be granted an incentive stock
option to the extent the aggregate fair market value, as of the date of grant,
of the stock with respect to which incentive stock options are first exercisable
by such employee during any calendar year exceeds $100,000.

Awards granted under the Company Incentive Plan will be subject to
adjustment upon a recapitalization, stock split, stock dividend, merger,
reorganization, liquidation, extraordinary dividend or other similar event
affecting the Company Stock. An Award will not be transferable, other than by
will or the laws of descent and distribution or, in certain circumstances,
pursuant to a qualified domestic relations order, and an Award may be exercised,
during the lifetime of the holder of the Award, only by the holder, or the
holder's personal representative in the event of disability.

In the case of a "change in control" of the Company, each Award granted
under the Company Incentive Plan will terminate 90 days after the occurrence of
such "change in control" and an option holder will generally have the right,
commencing at least five days prior to the "change in control" and subject to
any other limitation on the exercise of the option in effect on the date of
exercise, to immediately exercise any options in full to the extent they
previously have not been exercised.

The Company Incentive Plan will terminate on , 2006, and Awards
will not be granted under the Company Incentive Plan after that date although
the terms of any Award may be amended in accordance with the Company Incentive
Plan at any date prior to the end of the term of such Award. Any Awards

37
<PAGE> 39

outstanding at the time of termination of the Company Incentive Plan will
continue in full force and effect according to the terms and conditions of the
Award and the Company Incentive Plan.

The Company Incentive Plan may be amended by the Board of Directors of the
Company, provided that stockholder approval will be necessary as required under
Section 422 of the Code or Rule 16b-3 of the regulations of the Exchange Act,
and provided further that no amendment may impair any rights of any holder of an
Award previously granted under the Company Incentive Plan without the holder's
consent.

The Company's 1996 Non-Employee Directors' Stock Option Plan. It is
expected that the Board of Directors of the Company will adopt the 1996
Non-Employee Directors' Stock Option Plan (the "Directors' Plan").

The Directors' Plan is intended to encourage non-employee directors of the
Company to acquire or increase their ownership of Company Stock on reasonable
terms, and to foster a strong incentive to put forth maximum effort for the
continued success and growth of the Company. The Directors' Plan provides for
the granting of non-qualified stock options to purchase shares of Company
Stock to current and future non-employee directors of the Company. As of the
Distribution Date, the non-employee directors eligible to receive stock options
under the Directors' Plan will be Arthur Samberg, Barbara Perrier, John Howard
and .

Each of the directors identified above as being eligible to receive stock
options under the Directors' Plan will be granted an option on ,
1996 to purchase 25,000 shares of Company Stock. Each non-employee director who
subsequently joins the Board of Directors will be granted, on the first business
day following the first day of his term, an option to purchase 25,000 shares of
Company Stock. On the fifth business day after the Company's Annual Report on
Form 10-K is filed with the Commission for each fiscal year that the Directors'
Plan is in effect, each person who is a non-employee Director on such date will
receive an additional option to purchase 5,000 shares of Company Stock. If the
number of shares available for grant under the Directors' Plan on a scheduled
date of grant is insufficient to make all the grants, then each eligible
director will receive an option to purchase a pro rata number of the available
shares.

The option price per share will be the fair market value of the shares of
Company Stock on the date of grant. Under the Directors' Plan, fair market value
is generally the closing price of the Company Stock on Nasdaq on the last
business day prior to the date on which the value is to be determined; provided,
however, that with respect to the initial option grants, fair market value means
the closing price of the Company Stock.

The options granted under the Directors' Plan will be exercisable for a
term of ten years from the date of grant, subject to earlier termination, and
may be exercised at any time after three years from the date of grant.

In the event that a director ceases to be a member of the Board of
Directors of the Company (other than by reason of death or disability), an
option may be exercised by the director (to the extent the director was entitled
to do so at the time he ceased to be a member of the Board of Directors of the
Company) at any time within seven months after he ceases to be a member of the
Board of Directors of the Company, but not beyond the term of the option. If the
director dies or becomes disabled while he is a member of the Board of Directors
of the Company or within seven months thereafter, an option may be exercised (to
the extent the director shall have been entitled to exercise the option as of
the date of his death or the termination of his directorship by reason of his
disability) by a legatee of the director under his will, or by him or his
personal representative or distributees, as the case may be, at any time within
12 months after his death or disability, but not beyond the term of the option.
The Directors' Plan will be administered by the Committee. Unless the Committee
determines otherwise, 30% of the shares subject to the original option to
purchase 25,000 shares of Company Stock will vest on the first anniversary of
the date of grant, 60% on the second anniversary of the date of grant and 100%
on the third anniversary of the date of grant. Unless the Committee determines
otherwise, 100% of the shares subject to each subsequent option will vest on the
third anniversary of the date of grant.

Options granted under the Directors' Plan will be subject to adjustment
upon a recapitalization, stock split, stock dividend, merger, reorganization,
liquidation, extraordinary dividend or other similar event affecting the Company
Stock. Options will not be transferable other than by will or pursuant to the
laws of

38
<PAGE> 40

descent and distribution or pursuant to a qualified domestic relations order,
and will be exercisable during the lifetime of an option holder only by such
holder or his personal representative in the event of disability.

Upon a "change in control" of the Company (as defined in the Directors'
Plan), each option granted under the Directors' Plan will terminate on the later
of (i) 90 days after the occurrence of the "change in control" and (ii) seven
months following the date of grant of each option, and an option holder will
have the right, commencing at least five days prior to the "change in control"
and subject to any other limitation on the exercise of the option in effect on
the date of exercise, to immediately exercise any options in full, to the extent
they have not previously been exercised.

The Directors' Plan will terminate on , 2006 and options may
not be granted under the Directors' Plan after that date, although the terms of
any option may be amended in accordance with the Directors' Plan at any date
prior to the end of the term of that option. Any options outstanding at the time
of termination of the Directors' Plan will continue in full force and effect
according to the terms and conditions of the option and the Directors' Plan.

The Directors' Plan may be amended by the Board of Directors of the
Company, provided that stockholder approval will be necessary if required under
Rule 16b-3 of the General Rules and Regulations of the Exchange Act, and no
amendment may impair any of the rights of any holder of an option previously
granted under the Directors' Plan without the holder's consent.

The principal terms of the option grants are fixed in the Directors' Plan.
Therefore, the Committee will have no discretion to select which directors
receive options, the number of shares of Company stock included in any grant, or
the exercise price of options.

SECURITY OWNERSHIP

All of the outstanding Company Stock will be held by Penril until the
Distribution. The following table sets forth the projected beneficial ownership
of the Company Stock immediately following the Distribution by each director and
executive officer of the Company at that time and all directors and executive
officers of the Company at that time as a group, as well as by any person
projected to own beneficially more than 5% of the Company Stock, based upon such
person's reported ownership of Penril Stock in filings made with the Commission
pursuant to Sections 13(d) and 13(g) of the Exchange Act as of ,
1996. The information in this table was based in part on information supplied by
the named individuals. Various members of management of the Company have
indicated that they may purchase shares of Company Stock in the open market
after the Distribution Date.

39
<PAGE> 41

<TABLE>
<CAPTION>
SHARES OF COMPANY STOCK PROJECTED TO BE
BENEFICIALLY OWNED
----------------------------------------
AMOUNT AND
NAME AND ADDRESS NATURE OF BENEFICIAL PERCENTAGE
OF BENEFICIAL OWNER OWNERSHIP(1)(2) OWNERSHIP
- --------------------------------------------------- -------------------- ---------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Ronald A. Howard %
1300 Quince Orchard Boulevard
Gaithersburg, MD 20878
John Howard
80 Irving Place
New York, NY 10003
Barbara Perrier
8975 Guilford Road
Columbia, MD 21046
Arthur Samberg(3)
354 Pequot Avenue
Southport, CT 06490
Richard D. Rose
1300 Quince Orchard Boulevard
Gaithersburg, MD 20878
James Clary
1300 Quince Orchard Boulevard
Gaithersburg, MD 20878
James P. Gallagher
1300 Quince Orchard Boulevard
Gaithersburg, MD 20878
Mark Silverman
1300 Quince Orchard Boulevard
Gaithersburg, MD 20878
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP %
( ).....................................
FIVE PERCENT SHAREHOLDERS
- ---------------------------------------------------
Henry D. Epstein
1300 Quince Orchard Boulevard
Gaithersburg, MD 20878
Pequot Partners Fund, L.P.,(3) %
Pequot Endowment Fund, L.P. and
Pequot International Fund, Inc.
354 Pequot Avenue
Southport, CT 06490
Cramer Partners, L.P.(5) %
56 Beaver Street, Suite 701
New York, NY 10004
</TABLE>

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

(1) Reflects, in each case, the number of shares of Penril Stock beneficially
owned as of the Distribution Record Date. Does not include options to
purchase Company Stock.

(2) Includes, in certain instances, shares held in the name of an executive
officer's or director's spouse or minor children, the reporting of which is
required by applicable rules of the Commission, but as to which shares the
executive officer or director may have disclaimed beneficial ownership.

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<PAGE> 42

(3) Includes 18,300 shares of Common Stock to be owned by Dawson-Samberg Capital
Management, Inc., 306,500 shares of Common Stock to be owned by Pequot
Partners Fund, L.P., a Delaware limited partnership whose general partner
and investment manager is Pequot General Partners, a Connecticut general
partnership ("General Partners"), 306,500 shares of Common Stock to be owned
by Pequot Endowment Fund, L.P., a Delaware limited partnership whose general
partner and investment manager is Pequot Endowment Partners, L.P., a
Delaware limited partnership ("Endowment Partners") and 633,400 shares of
Common Stock to be owned by Pequot International Fund Inc., a British Virgin
Islands corporation, whose investment manager is DS International Partners,
L.P., a Delaware limited partnership ("International Partners"). (Pequot
Partners Fund, L.P., Pequot Endowment Fund, L.P. and Pequot International
Fund Inc. are collectively referred to as the "Funds"). General Partners,
Endowment Partners and International Partners (collectively, the "Partners")
are to be the beneficial owners, as such term is used in Rule 13d-3 of the
Exchange Act, of the shares of Common Stock to be owned by the Fund for
which they act as investment manager, respectively. The Partners may be
deemed to constitute a group as such term is used in Section 13(d) (3) of
the Exchange Act. Each of the Partners disclaims beneficial ownership of the
Common Stock to be beneficially owned by the other partners.

(4) Less than 1%.

(5) James J. Cramer, President of J.J. Cramer & Co. and Karen Cramer, Vice
President of J.J. Cramer & Co. will have shared voting and dispositive power
with respect to the 817,550 shares to be held by the Partnership and shared
dispositive power with respect to the 132,500 shares to be held by GAM.

DESCRIPTION OF CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

The authorized capital stock of the Company consists of 30,000,000 shares
of Company Stock, and 3,000,000 shares of preferred stock, $.01 par value per
share ("Company Preferred Stock"). Immediately after the Distribution, it is
estimated that shares of Company Stock will be issued and outstanding.

COMPANY STOCK

The holders of Company Stock are entitled to one vote for each share held
of record on all matters submitted to the vote of stockholders, including the
election of directors. The holders of Company Stock do not have cumulative
voting rights. Subject to any preferential rights held by holders of the Company
Preferred Stock, the holders of Company Stock are entitled to receive ratably
such dividends as may be declared from time to time by the Company's Board of
Directors out of funds legally available therefor. In the event of the
liquidation, dissolution or winding up of the Company, holders of Company Stock
will be entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of outstanding Company Preferred
Stock, if any. Holders of Company Stock do not have preemptive, conversion or
redemption rights. All the issued and outstanding shares of Company Stock are
duly authorized, validly issued, fully paid and nonassessable.

No current public trading market for the Company Stock exists, although the
Company intends to list the Company Stock on Nasdaq. The extent of the market
for the Company Stock and the prices at which the Company Stock may trade cannot
be predicted. Until the Company Stock is distributed and an orderly market
develops, the trading price may be volatile.

After the Distribution, the Company will be an independent, publicly-traded
company, owning, among other things, the Remote Access Business. The number and
identity of stockholders of the Company immediately after the Distribution
cannot currently be determined with certainty because it will be based on the
number and identity of stockholders of Penril on the Distribution Date. However,
based on the number of record stockholders and outstanding shares of Penril
Stock as of the close of business on , 1996 and the distribution
ratio of one share of Company Stock for every one share of Penril Stock, the
Company expects to have approximately holders of record of Company Stock
and shares of Company Stock issued and outstanding immediately after
the Distribution and no holders of record of Company

41
<PAGE> 43

Preferred Stock or shares of Company Preferred Stock issued and outstanding
immediately after the Distribution. In addition, as provided for in the Company
Incentive Plan and the Directors' Plan, it is anticipated that the total number
of shares of Company Stock with respect to which options may be granted and
restricted stock may be awarded under the Company Incentive Plan and the
Directors' Plan will not exceed shares, of which would be
allocated strictly to the Directors' Plan, subject to adjustment (together with
the exercise price of options and the purchase price, if any, of restricted
stock) to reflect any change in the Company's outstanding shares of Company
Stock by reason of stock dividends, stock splits, recapitalizations, mergers,
consolidations or other similar events affecting the number or kind of
outstanding shares. It is believed that directors and executive officers of the
Company will own, in the aggregate, less than percent of the outstanding
shares of Company Stock immediately after the Distribution. See "Security
Ownership."

The Company Stock distributed to Penril stockholders will be freely
transferable, except for shares received by any persons who may be deemed to be
"affiliates" of the Company under the Securities Act. Persons who may be deemed
to be affiliates of the Company after the Distribution generally include
individuals or entities that control, are controlled by, or are under common
control with the Company and may include certain officers and directors of the
Company as well as principal stockholders of the Company. Persons who are
affiliates of the Company will be permitted to sell their shares of Company
Stock only pursuant to an effective registration statement under the Securities
Act or an exemption from the registration requirements of the Securities Act,
such as the exemption provided by Section 4(1) of the Securities Act or Rule 144
thereunder. The Section 4(1) exemption allows the sale of unregistered shares by
a person who is not an issuer, an underwriter or a dealer. Rule 144 provides
persons who are not issuers with objective standards for selling restricted
securities and securities held by affiliates without registration. The rule
requires that (1) current public information be available concerning the issuer;
(2) restricted stock generally be held two years or more; (3) volume limitations
are placed on sales during any three-month period; and (4) affiliates comply
with certain manner of sale restrictions. The amount of Company Common Stock
which could be sold by a person (or persons whose shares are aggregated) under
Rule 144 during a three month period cannot exceed the greater of (1)
approximately shares, or (2) the average weekly trading volume for the
shares for a four-week period prior to the date that notice of the sale is filed
with the Commission.

The transfer agent and registrar for the Company Stock is Continental Stock
Transfer & Trust Company.

PREFERRED STOCK

The Board of Directors of the Company, without further approval or action
by the stockholders, is authorized to issue shares of Company Preferred Stock in
one or more series and to fix as to any such series the dividend rate,
redemption prices, preferences on liquidation or dissolution, sinking fund
terms, if any, conversion rights, voting rights and any other preference or
special rights and qualifications. Issuances of Company Preferred Stock may
adversely affect the rights of holders of Company Common Stock. Holders of
Company Preferred Stock might, for example, be entitled to preference in
distributions to be made to stockholders upon the liquidation, dissolution or
winding up of the Company. In addition, holders of Company Preferred Stock might
enjoy voting rights that limit, qualify or adversely affect the voting rights of
holders of Company Stock. Such rights of the holders of one or more series of
Company Preferred Stock might include the right to vote as a class with respect
to the election of directors, major corporate transactions or otherwise, or the
right to vote together with the holders of Company Stock with respect to any
such matter. The holders of Company Preferred Stock might be entitled to cast
multiple votes per share. The issuance of Company Preferred Stock could have the
effect of delaying, deferring, or preventing a change in control of the Company
without further action by the stockholders. The Company has no present plans to
issue any shares of Preferred Stock.

ANTITAKEOVER PROVISIONS OF THE COMPANY CERTIFICATE AND COMPANY BY-LAWS

Penril, as sole stockholder of the Company, has approved a Company
Certificate and Company By-laws. Such Company Certificate and Company By-laws
(i) provide for a Classified Board of Directors of the

42
<PAGE> 44

Company from which directors may only be removed by Stockholders for cause; (ii)
generally provide that only a majority of the Board of Directors of the Company
shall have the authority to fill vacancies on the Board of Directors; (iii)
restrict the right to amend certain provisions of the Company Certificate and
Company By-laws; (iv) restrict the right of stockholders to call special
meetings; (v) establish an advance notice procedure regarding the nomination of
directors by stockholders and stockholder proposals to be brought before an
annual meeting; and (vi) authorize the Company's Board of Directors to issue
Company Preferred Stock without further stockholder approval. These provisions
are designed to encourage any person who desires to take control of and/or
acquire the Company to enter into negotiations with the Board of Directors of
the Company, thereby making more difficult the acquisition of the Company by
means of a tender offer, a proxy contest or other non-negotiated means. In
addition to encouraging any person intending to attempt a takeover of the
Company to negotiate with the Board of Directors of the Company, these
provisions also curtail such person's use of a dominant equity interest to
control any negotiations with the Board of Directors of the Company. Under such
circumstances, the Board of Directors of the Company may be better able to make
and implement reasoned business decisions and protect the interests of all of
the Company's stockholders. A copy of the Company Certificate and Company
By-laws are each filed as an exhibit to the Registration Statement of which this
Prospectus is a part.

Classified Board of Directors. The Company Certificate provides for the
Board of Directors of the Company to be divided into three classes serving
staggered terms so that directors' initial terms will expire at the 1997, 1998
or 1999 annual meeting of stockholders. Starting with the 1997 annual meeting of
the Company's stockholders, one class of directors will be elected each year for
a three-year term. See "Management -- Directors and Executive Officers." The
classes will be as nearly equal in number as possible. The classification of
directors makes it more difficult for a significant stockholder to change the
composition of the Board of Directors of the Company in a relatively short
period of time and, accordingly, provides the Board of Directors of the Company
and stockholders time to review any nomination that a significant stockholder
may make and to pursue alternative courses of action which it believes are fair
to all the stockholders of the Company.

Removal of and Filling Vacancies on the Board of Directors of the
Company. The Company Certificate provides that, subject to any rights of the
holders of any class or series of the capital stock of the Company entitled to
vote generally in the election of directors, only a majority vote of the members
of the Board of Directors then in office, although less than a quorum, shall
have the authority to fill any vacancies on the Board of Directors of the
Company, including vacancies created by an increase in the authorized number of
directors. Moreover, because the Company Certificate provides for a classified
board, Delaware law provides that the stockholders may remove a member of the
Board of Directors of the Company only for cause and the Company Certificate
requires the affirmative vote of the holders of at least 80% of the voting power
of all the then-outstanding shares of the voting stock of the Company, voting
together as a single class, to remove a member of the Board of Directors. These
provisions relating to removal and filling of vacancies on the Board of
Directors of the Company preclude stockholders from enlarging the Board of
Directors of the Company or removing incumbent directors and filling vacancies
with their own nominees.

Amendment of the Company Certificate and Company By-laws. The Company
Certificate contains provisions requiring the affirmative vote of the holders of
at least 80% of the voting power of the Company Stock entitled to vote generally
in the election of directors to amend certain provisions of the Company
Certificate and Company By-laws (including certain of the provisions discussed
above). These provisions make it more difficult for stockholders to make changes
in the Company Certificate or Company By-laws, including changes designed to
facilitate the exercise of control over the Company.

Special Meetings. The Company By-laws provide that special meetings of
stockholders can be called only by the Chairman of the Board, the Vice Chairman
of the Board, the President or any Vice President, the Secretary or by the Board
of Directors of the Company. Stockholders are not permitted to call a special
meeting but may, upon a written request by stockholders owning a majority in
amount of the entire capital stock of the Company issued and outstanding and
entitled to vote, require that any of the foregoing call a

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<PAGE> 45

special meeting of stockholders. These provisions prohibit a significant
stockholder from authorizing stockholder action without a meeting at which all
stockholders would be entitled to participate.

Nominations of Directors and Stockholder Proposals. The Company By-laws
establish an advance notice procedure with regard to the nomination other than
by, or at the direction of, the Board of Directors of the Company of candidates
for election as directors (the "Nomination Procedure") and with regard to
stockholder proposals to be brought before an annual meeting of stockholders
(the "Business Procedure"). The Nomination Procedure provides that only persons
who are nominated by, or at the direction of, the Board of Directors of the
Company, or by a stockholder of the Company entitled to vote for the election of
directors who has given timely written notice to the Secretary of the Company
prior to the meeting at which directors are to be elected, are eligible for
election as directors of the Company. The Business Procedure provides that to be
properly brought before an annual meeting, business must be specified in the
notice of the annual meeting given by or at the direction of the Board of
Directors of the Company or brought before the meeting by, or at the direction
of, the Board of Directors of the Company or by a stockholder who has given
timely written notice to the Secretary of the Company of such stockholder's
intention to bring such business before such meeting. To be timely, notice for
nominations or stockholder proposals must be received by the Company not less
than 60 days prior to the annual meeting; provided, however, that in the event
that less than 70 days notice or prior public disclosure of the date of the
annual meeting is given or made to stockholders, notice by a stockholder, to be
timely, must be received no later than the close of business on the tenth day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made, whichever first occurs. In addition
to the foregoing requirements, the proxy rules under the Exchange Act set forth
certain requirements, including stockholder eligibility, timing and attendance
requirements, which must be satisfied in order for a stockholder proposal to be
included in the Company's proxy statement and form of proxy. These requirements
under the Exchange Act may differ from those set forth under the Nomination
Procedure or the Business Procedure.

Under the Nomination Procedure, notice to the Company from a stockholder
who proposes to nominate a person at an annual meeting for election as a
director must contain certain information about that person so nominated,
including age, business and residence addresses, principal occupation, the class
and number of shares of Company Stock beneficially owned, and such other
information as would be required to be included in a proxy statement soliciting
proxies for the election of the proposed nominee, and certain information about
the stockholder proposing to nominate that person. Under the Business Procedure,
notice relating to a stockholder proposal must contain certain information about
such proposal and about the stockholder who proposes to bring the proposal
before the meeting, including the class and number of shares of Company Stock
beneficially owned by such stockholder. If the officer of the Company presiding
at the meeting determines that a person was not nominated in accordance with the
Nomination Procedure, or that other business was not brought before the meeting
in accordance with the Business Procedure, such person is not eligible for
election as a director, or such business is not to be conducted as such meeting,
as the case may be.

The purpose of the Nomination Procedure is, by requiring advance notice of
nomination by stockholders, to afford the Board of Directors of the Company a
meaningful opportunity to consider the qualifications of the proposed nominees
and, to the extent deemed necessary or desirable by the Board of Directors of
the Company, to inform stockholders about such qualifications. The purpose of
the Business Procedure is, by requiring advance notice of stockholder proposals,
to provide a more orderly procedure for conducting annual meetings of
stockholders and, to the extent deemed necessary or desirable by the Board of
Directors of the Company, to provide the Board of Directors of the Company with
a meaningful opportunity to inform stockholders, prior to such meetings, of any
proposal to be introduced at such meetings, together with any recommendation as
to the Board of Directors of the Company's position or belief as to action to be
taken with respect to such proposal, so as to enable stockholders better to
determine whether they desire to attend such meeting or grant a proxy to the
Board of Directors of the Company as to the disposition of any such proposal.
Although the Company By-laws do not give the Board of Directors of the Company
any power to approve or disapprove stockholder nominations for the election of
directors or any other proposal submitted by stockholders, the Company By-laws
may have the effect of precluding a nomination for the election of directors or
precluding the conducting of business at a particular stockholder meeting if the
proper procedures

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<PAGE> 46

are not followed, and may discourage or deter a third party from conducting a
solicitation of proxies to elect its own slate of directors or otherwise
attempting to obtain control of the Company, even if the conduct of such
solicitation or such attempt might be beneficial to the Company and its
stockholders.

Issuance of Company Preferred Stock. The Company Certificate authorizes
the Board of Directors of the Company to issue Company Preferred Stock, without
further stockholder approval, which could have dividend, redemption,
liquidation, conversion, voting or other rights that could adversely affect the
voting power and other rights of holders of Company Stock. The ability of the
Board of Directors of the Company to issue Company Preferred Stock could have
the effect of delaying, deferring, or preventing a change in control of the
Company without further action by the stockholders.

COMPARISON OF RIGHTS OF STOCKHOLDERS
OF THE COMPANY AND PENRIL

Following the Distribution, holders of Penril Stock will become holders of
Company Stock and the rights of such holders will be governed by the Company
Certificate and the Company By-laws. The rights of Company stockholders differ
in certain respects from the rights of Penril stockholders. Certain of the
differences are summarized below. This summary is qualified in its entirety by
reference to the full text of such documents.

BUSINESS COMBINATIONS

Generally, under the DGCL, the approval by the affirmative vote of the
holders of a majority of the outstanding stock (or, if the certificate of
incorporation provides for more or less than one vote per share, a majority of
the votes of the outstanding stock) of a corporation entitled to vote on the
matter is required for a merger or consolidation or sale, lease or exchange of
all or substantially all of the corporation's assets to be consummated.

The Company Certificate does not contain provisions regarding business
combinations and does not impose requirements in addition to or different from
those imposed by the DGCL.

Penril's Amended and Restated Certificate of Incorporation (the "Penril
Certificate") provides that, subject to certain exceptions, the affirmative vote
of the holders of at least 80% of the voting power of all the then-outstanding
shares of capital stock of Penril entitled to vote generally in the election of
directors is required to approve every "Business Combination" (defined to
include mergers, consolidations, sales of assets of Penril having a fair market
value of $1,000,000 or more, issuances or transfers by Penril of any securities
of Penril having a fair market value of $1,000,000 or more, and certain other
transactions) between Penril and any "Interested Stockholder" (generally defined
to mean any beneficial owner of more than 10% of the voting power of the
outstanding Penril voting stock). Such 80% vote is not required if the Business
Combination is approved by a majority of the Continuing Directors (generally
defined to mean the directors who were members of the Penril Board on December
13, 1983 or a person designated as a Continuing Director by a majority of the
Continuing Directors) or if the Business Combination satisfies certain price and
procedural conditions. With respect to business combinations other than with
Interested Stockholders, the Penril Certificate does not impose requirements in
addition to or different from those imposed by the DGCL.

AMENDMENTS TO CHARTERS

Under the DGCL, unless otherwise provided in the certificate of
incorporation, a proposed amendment to the certificate of incorporation requires
an affirmative vote of a majority of the outstanding stock entitled to vote
thereon. If any such amendment would adversely affect the rights of any holders
of shares of a class or series of stock, the vote of the holders of a majority
of all outstanding shares of the class or series, voting as a class, is also
necessary to authorize such amendment. The Company Certificate provides that no
amendment to the Company Certificate shall amend, alter, change or repeal the
super majority voting provisions relating to the division of the Board of
Directors of the Company into classes; the number and removal of members of the
Board of Directors of the Company; term of office of members of the Board of
Directors of the Company; and

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<PAGE> 47

the filling of vacancies on the Board of Directors of the Company unless the
amendment, alteration, change or repeal shall have received the affirmative vote
of the holders of at least 80% of the outstanding shares of capital stock
entitled to vote thereon. The Company Certificate otherwise comports with the
DGCL.

The Penril Certificate provides that no amendment to the Penril Certificate
shall amend, alter, change or repeal any of the supermajority voting provisions
relating to business combinations; division into classes, number, removal of
members, term of office and the filling of vacancies on the Penril Board of
Directors; and Stockholder action at Stockholder meetings unless the amendment
effecting such amendment, alteration, change or repeal shall have received the
affirmative vote of the holders of at least 80% of the outstanding shares of
capital stock entitled to vote thereon.

AMENDMENTS TO BY-LAWS

Under the DGCL, the power to adopt, alter and repeal the by-laws is vested
in the stockholders, except to the extent that the certificate of incorporation
vest it in the board of directors. The Company By-laws provide that the Company
By-laws, or any one of them, may be supplemented, amended or repealed by the
Board of Directors, or by the vote of a majority in interest of the stockholders
represented and entitled to vote thereon at any meeting at which a quorum is
present; provided, however, that the affirmative vote of the holders of at least
80% of the voting power of the then-outstanding shares of the Company voting
stock, voting together as a single class, is required to amend, alter or repeal
the sections of the Company By-Laws which have the same effect as those
provisions of the Company Certificate governing (i) division of the Company
Board of Directors into three classes serving staggered three year terms; (ii)
the number of directors; (iii) term of office of directors; (iv) removal of
directors and (v) the filling of vacancies on the Board of Directors.

The Penril By-laws provide that the Penril By-laws, or any of them, may be
supplemented, amended or repealed by the Penril Board of Directors, or by the
vote of a majority in interest of the stockholders represented and entitled to
vote thereon at any meeting at which a quorum is present; provided, however,
that the affirmative vote of the holders of at least 80% of the voting power of
all the then-outstanding shares of the Penril voting stock, voting together as a
single class, is required to amend, alter or repeal the sections of the Penril
By-laws governing (i) action of stockholders without a meeting; (ii) the number
of directors; (iii) term of office of directors; (iv) quorum and voting of
directors or (v) amendment of the Penril By-laws.

REDEMPTION OF CAPITAL STOCK

Under the DGCL, subject to certain limitations, a corporation's stock may
be made subject to redemption by the corporation at its option, at the option of
the holders of such stock or upon the happening of a specified event. The DGCL
prohibits the purchase or redemption of stock when the capital of a corporation
is or would become impaired; but shares entitled to dividend or liquidation
preference may be purchased or redeemed out of capital if such shares are
retired and capital is reduced in accordance with legal requirements. The
Company Certificate does not contain any provisions relating to the right to
redeem outstanding shares of capital stock. The Penril Certificate grants the
Penril Board of Directors the authority to adopt amendments to the Penril
Certificate to provide for redemption of shares of capital stock of Penril, but
the Penril Certificate does not contain any provisions governing the right to
redeem outstanding shares of capital stock.

STOCKHOLDER ACTION

Under the DGCL, unless otherwise provided in the certificate of
incorporation, any action required or permitted to be taken at a meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a written consent or consents setting forth the action taken is signed
by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote upon such action were present and voted. The
Company Certificate and the Company By-laws provide that all elections and
questions put to stockholders shall be decided by the vote of a majority in
interest of the stockholders present in person or represented by proxy and
entitled to vote at the meeting, except as otherwise permitted or required by
the DGCL, the Company Certificate or the Company By-Laws. The Penril Certificate
provides that any action required or

46
<PAGE> 48

permitted to be taken by stockholders must be effected at an annual meeting of
stockholders and may not be effected by any consent in writing by such
stockholders.

SPECIAL STOCKHOLDER MEETINGS

The DGCL provides that a special meeting of stockholders may be called by
the board of directors or by such person or persons as may be authorized by the
certificate of incorporation or by the by-laws. The Company By-laws provide that
special meetings may be called by the Chairman of the Board, the Vice Chairman
of the Board, the President, any Vice President or by the Board of Directors and
shall be called by any of the foregoing at the request in writing of
stockholders owning a majority in amount of the entire capital stock of the
Company issued and outstanding and entitled to vote. The Penril Certificate and
By-laws provide that meetings of stockholders may be called only by the Penril
Board of Directors pursuant to a resolution adopted by a majority of the total
number of authorized directors.

NUMBER AND ELECTION OF DIRECTORS

The DGCL permits the certificate of incorporation or the by-laws of a
corporation to contain provisions governing the number and terms of directors.
However, if the certificate of incorporation contains provisions fixing the
number of directors, such number may not be changed without amending the
certificate of incorporation. The Company Certificate provides that the number
of directors shall be fixed from time to time pursuant to a resolution adopted
by a majority of the entire Board of Directors. The Penril Certificate provides
that the number of directors shall be fixed from time to time exclusively by the
Penril Board of Directors pursuant to a resolution adopted by a majority of the
total number of authorized directors (whether or not there exist any vacancies
in previously authorized directorships at the time any such resolution is
presented for adoption).

The DGCL permits the certificate of incorporation of a corporation or the
by-laws to provide that directors be divided into one, two or three classes. The
term of office of one class of directors shall expire each year with the terms
of office of no two classes expiring the same year. The Board of Directors
consists of 5 individuals divided into three classes with each director serving
a three year term (after the initial term). The Penril Certificate divides
Penril's Board of Directors into three classes with each director serving a
three year term.

ANTITAKEOVER PROVISIONS

The Company Certificate requires the affirmative vote of the holders of at
least 80% of the votes which all stockholders would be entitled to cast at any
annual election of directors or class of directors to amend or repeal, or to
adopt any provision inconsistent with certain provisions of the Company
Certificate. The provisions of the Company Certificate subject to the 80% vote
requirement include the provisions which divide the Board of Directors into
three classes serving staggered three year terms, establish the term of office
of directors and the standards for removal of directors and the filling of
vacancies on the Board of Directors. The Company Certificate also authorizes the
Board of Directors to issue Company Preferred Stock, without further stockholder
approval, which could have dividend, redemption, liquidation, conversion, voting
or other rights that could adversely affect the voting power or other rights of
holders of Company Stock. In addition, the Company By-laws contain certain
antitakeover provisions which establish an advance notice procedure regarding
the nomination of directors by stockholders and stockholder proposals to be
brought before an annual meeting and provisions which restrict the right of
stockholders to call special meetings.

The Penril Certificate requires the affirmative vote of the holders of at
least 80% of the votes which all stockholders would be entitled to cast at any
annual election of directors or class of directors to amend or repeal, or to
adopt any provision inconsistent with certain provisions of Penril's Certificate
of Incorporation. The provisions of the Penril Certificate subject to the 80%
vote requirement include those provisions which (i) divide the Penril Board of
Directors into three classes serving staggered three year terms and establish
the standards for the number, term of office, removal of directors and the
filling of vacancies on the Penril Board of Directors; (ii) prohibit
stockholders from acting by written consent in lieu of a meeting; (iii) provide
that

47
<PAGE> 49

special meetings of stockholders may be called only by the Penril Board of
Directors pursuant to a resolution adopted by a majority of the total number of
authorized directors; and (iv) require an 80% vote to approve "Business
Combinations" with "Interested Directors".

LIABILITY AND INDEMNIFICATION OF
OFFICERS AND DIRECTORS OF THE COMPANY

GENERAL

Officers and directors of the Company will be covered by certain provisions
of the DGCL, the Company Certificate, certain indemnification agreements with
the Company and insurance policies which serve to limit and/or indemnify them
against certain liabilities which they may incur in such capacities. These
various provisions and policies are described below.

ELIMINATION OF LIABILITY IN CERTAIN CIRCUMSTANCES

Under the DGCL, corporations are permitted to limit or eliminate the
personal liability of directors to corporations and their stockholders for
monetary damages for, among other things, breach of directors' fiduciary duty of
care. The duty of care requires that, when acting on behalf of the corporation,
directors must exercise an informed business judgment based on all material
information reasonably available to them. Absent the limitations now authorized
by such legislation, directors are accountable to corporations and their
stockholders for monetary damages for conduct constituting negligence or gross
negligence in the exercise of their duty of care. Although the statute does not
change directors' duty of care, it enables corporations to limit available
relief to equitable remedies such as injunction or recision. The Company
Certificate limits the liability of directors to the Company or its stockholders
to the fullest extent permitted by the DGCL. Specifically, no director of the
Company can be held personally liable for monetary damages for breach of such
director's fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the DGCL or (iv)
for any transaction from which the director derived an improper personal
benefit.

INDEMNIFICATION AND INSURANCE

Under the DGCL, the Company has the power, under specified circumstances
generally requiring the director or officer to act in good faith and in a manner
he reasonably believes to be in or not opposed to the Company's best interests,
to indemnify its directors and officers in connection with actions, suits or
proceedings brought against them by a third party or in the name of the Company,
by reason of the fact that they were or are such directors or officers, against
expenses, judgments, fines and amounts paid in settlement in connection with any
such action, suit or proceeding.

The Company Certificate provides that the Company shall indemnify the
directors and officers of the Company to the fullest extent permitted by
Delaware law.

Specifically, the Company Certificate provides that the Company shall
indemnify any person who is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Company), by reason of the fact that he (i) is or was a
director or officer of the Company, or (ii) is or was a director or officer of
the Company and is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere

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<PAGE> 50

or its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Company or, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.

The Company Certificate provides that the Company shall indemnify any
person who is or was a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Company to procure a judgment in its favor by reason of the fact that he is or
was a director or officer of the Company or is or was a director or officer of
the Company and is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Company unless and only to the extent that the Court of Chancery
of the State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
of the State of Delaware or such other court shall deem proper.

The Company Certificate provides that any indemnification under the
provisions described in the two paragraphs set forth above of a director,
officer, former director or former officer (unless ordered by a court) shall be
made by the Company only as authorized in the specific case upon a determination
that indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in the above two
paragraphs. Such determination shall be made (i) by the Board of Directors of
the Company by a majority vote consisting of directors who were not parties to
such action, suit or proceeding, even though less than a quorum, or (ii) if
there are no such directors or if such directors so direct, by independent legal
counsel in a written opinion or (iii) by the stockholders of the Company.

The Company Certificate also provides, only as authorized in the sole
discretion of the Company, for indemnification of any employee, agent, former
employee or former agent of the Company who is or was a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding or in connection with the defense or settlement of
such action, suit or proceeding to the same extent as set forth in the first two
paragraphs of this section with respect to officers and directors of the
Company. The authorization of the Company to so indemnify such employees and/or
agents shall be made (i) by a majority vote of the directors who are not parties
to such action, suit or proceeding, even though less than a quorum, or (ii) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion or (iii) by the stockholders.

The Company Certificate provides that to the extent that a director or
officer or employee or agent of the Company has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to above, or in
defense of any claim, issue or matter therein, the Company shall indemnify him
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith, without the necessity of authorization in the
specific case.

The Company Certificate further provides that expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding may be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Company as authorized in the Company Certificate. Such indemnification and
expenses incurred by other employees and agents may be so paid upon such terms
and conditions, if any, as the Board of Directors of the Company deems
appropriate.

The Company Certificate provides that the indemnification and advancement
of expenses provided by, or granted pursuant to, the Company Certificate is not
deemed exclusive of any other rights to which those

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<PAGE> 51

seeking indemnification or advancement of expenses may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or pursuant
to the direction of any court of competent jurisdiction or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office. The indemnification provided in the Company Certificate
shall not be deemed to preclude the indemnification of, and advancement of
expenses to, any person who is not specified in the Company Certificate, but
whom the Company has the power and obligation to indemnify under the provisions
of the DGCL or otherwise.

The Company intends to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Company, or
is or was a director, officer, employee or agent of the Company serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise against any liability asserted against him or incurred by him in any
such capacity, or arising out of his status as such, whether or not the Company
would have the power or the obligation to indemnify him against such liability
under the Company Certificate.

The Company will enter into indemnification agreements with each of the
Company's directors and officers. The indemnification agreements require, among
other things, the Company to indemnify the directors and officers to the fullest
extent permitted by law, and to advance to such directors and officers all
related expenses, subject to reimbursement if it is subsequently determined that
indemnification is not permitted. The indemnification agreements will require
that the Company also indemnify and advance all expenses incurred by such
directors and officers seeking to enforce their rights under the indemnification
agreements, and cover directors and officers under the Company's directors' and
officers' liability insurance. Although such indemnification agreements will
offer substantially the same scope of coverage afforded by provisions in the
Company Certificate, they provide greater assurance to directors and officers
that indemnification will be available because an indemnification agreement, as
a contract, cannot be modified unilaterally in the future by the Board of
Directors of the Company or by the stockholders to eliminate the rights provided
therein.

CERTAIN TRANSACTIONS

On or prior to the Distribution Date, the Company and Penril will enter
into certain agreements, described below, which will govern their ongoing
relationships. These agreements were structured and negotiated while the Company
was owned by Penril and consequently are not the result of arms-length
negotiations between independent parties. Nonetheless, the Company and Penril
believe that the terms are fair to the parties and contain terms which are
generally comparable to those which would result from arms-length negotiations.
In each case, the terms of these agreements have been reviewed by individuals
who will be included at a senior management level of the Company.

The agreements summarized below are filed as exhibits to the Registration
Statement. The following descriptions do not purport to be complete and are
qualified in their entirety by reference to the agreements as filed.

DISTRIBUTION AGREEMENT

Prior to the Merger, Penril and the Company will enter into a Distribution
Agreement pursuant to which Penril will transfer to the Company as a capital
contribution all of Penril's right, title and interest in the Remote Access
Business and all of the other assets of Penril unrelated to the modem business;
and the Company will (a) assume, pay, perform and discharge all of the
liabilities of Penril other than (i) liabilities relating to the modem business;
(ii) the bank debt of Penril (which may not exceed $4,000,000 at the Effective
Time); and (iii) a portion of Penril's total net operating loss carryforward and
(b) indemnify Penril for any and all claims and liabilities arising as a result
of or in connection with the sale by Penril (if consummated prior to the
Distribution) of either Technipower or EMI. At the time of such contributions,
Penril will own all of the Company's outstanding stock.

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<PAGE> 52

DEVELOPMENT AND LICENSE AGREEMENT

On June 16, 1996, Penril and Bay entered into a Development and License
Agreement on behalf of the Company whereby Bay licensed to Penril, on behalf of
the Company, certain intellectual property, software and technical know-how
relating to certain 24-port Digital Modem Cards. The agreement contemplates that
Bay will develop a 24-port Digital Modem Card for the Company, train the
Company's personnel in the underlying technology, and provide technical
assistance where necessary to permit the Company to market this digital
technology. Penril will assign all of its rights under this Development and
License Agreement to the Company.

TECHNOLOGY LICENSE AGREEMENT

SUBLEASE AGREEMENT

The Company conducts most of its operations from its corporate headquarters
located in Gaithersburg, Maryland. The Company subleases this facility from
Penril (the "Sublease"). Penril leases this property pursuant to a lease with
Real Estate Income Partners III (the "Overlease") dated March 31, 1989 as
amended pursuant to a Letter Agreement dated May 14, 1990. The Overlease
provides for the rental of approximately 54,874 square feet of office space at a
current basic monthly rent of $57,481, and, together with additional charges,
totals $66,219. The Overlease expires in August 1999; however, Penril has one
option to extend the term of the Overlease for a period of 119 months.

The Sublease provides for the rental by the Company of the entire facility
at the monthly rental specified in the Overlease. The term of the Sublease will
commence on the date of the Transfer, or upon the Company's occupancy of the
property, whichever is earlier, and will expire in August 1999 unless Penril
exercises its option to extend the term of the Overlease, in which case the term
of the Sublease will be extended for the same term. The Sublease is subject and
subordinate to the terms of the Overlease and to all amendments, modifications,
renewals, extensions and replacements of or to the Overlease. Pursuant to the
Sublease, the Company has covenanted and agreed that it will perform and observe
all of the provisions contained in the Overlease to be performed and observed by
Penril thereunder, and is bound by all of the terms, covenants and conditions of
the Overlease binding upon Penril, with the same force and effect as if such
terms, covenants and conditions were set forth in the Sublease.

The Company is currently negotiating with the owner of the property to
enter into a direct lease of these facilities on terms more favorable to the
Company; however, there can be no assurance that such lease will be entered into
or that the terms of such lease will be more favorable to the Company.

TRANSITIONAL SERVICES AGREEMENT

On , 1996, the Company and Penril entered into a Transitional
Services Agreement (the "Services Agreement") which provides that the Company
will provide Penril with certain services (the "Services") until ,
1997 in exchange for which Penril will pay the Company $1,500,000, which is to
be paid upon execution of the Services Agreement (the "Fee") plus reimbursement
for certain expenses. The Fee is intended to cover the costs incurred by the
Company in providing the Services, including, but not limited to, salary and
other administrative costs and expenses. The Services include, among other
things, (i) assisting in the preparation of federal, state, local and foreign
tax returns, (ii) certain accounting, treasury and other financial services, and
(iii) assistance in the preparation for shipping of certain equipment and
inventories.

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<PAGE> 53

INDEMNIFICATION AGREEMENT

Simultaneous with the consummation of the Distribution, Penril and the
Company will enter into an Indemnification Agreement between Penril and the
Company (the "Indemnification Agreement"). The Indemnification Agreement will
obligate the Company to indemnify and save harmless Penril and its directors,
officers, employees, agents and/or affiliates from any and all costs, expenses,
losses, damages and liabilities incurred or suffered by the indemnitees
resulting from or attributable to (i) the operation of the Company after the
Distribution and the Merger; (ii) any claim, suit or other type of proceeding
based upon or arising out of or in connection with the operation of Penril prior
to the Merger other than those based upon, arising out of or in connection with
(a) the modem business operated by Bay after the Merger, (b) the Merger, (c) the
Merger Agreement, (d) the solicitation of proxies relating to the approval of
the Merger or (e) the tax consequences of the Distribution and Transfer, but
including any claim, suit, or other type of proceeding based upon or arising out
of or in connection with the sale or transfer prior to the Merger of EMI or of
Technipower; (iii) any claim, suit or other type of proceeding relating to the
termination of employment of certain employees of Penril in connection with the
Distribution and Transfer and the Merger and (iv) any claim, suit or other type
of proceeding based upon, arising out of or in connection with any information
concerning the Company in this Prospectus or any information furnished by Penril
or the Company concerning the Company for inclusion in the Proxy
Statement/Prospectus.

Penril will indemnify and save harmless the Company and its directors,
officers, employees, agents and/or affiliates from any claims incurred or
suffered by them resulting from or attributable to, among other things, (i) the
operation of Penril from and after the Distribution and Transfer; (ii) any
claim, suit or other type of proceeding based upon, arising out of or in
connection with the operation of the modem business prior to the Merger; and
(iii) any claim, suit or other type of proceeding relating to the Merger, the
Merger Agreement, and the solicitation of proxies relating to approval of the
Merger (other than those claims based upon, arising out of or in connection with
the filing by the Company of the Registration Statement or any information
furnished by Penril or the Company concerning the Company for inclusion in the
Proxy Statement/Prospectus).

LEGAL MATTERS

The validity, authorization and issuance of the shares of Company Stock
offered hereby and the tax consequences of the Distribution will be passed upon
for the Company by Benesch, Friedlander, Coplan & Aronoff P.L.L. of Cleveland,
Ohio.

EXPERTS

The consolidated financial statements of Penril and its subsidiaries as of
July 31, 1995 and 1994, and for each of the three years in the period ended July
31, 1995 included in this Prospectus and the Registration Statement have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein and in the Registration Statement and have been so
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.

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<PAGE> 54

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Penril DataComm Networks, Inc. and Subsidiaries
Audited Financial Statements:
Independent Auditors' Report.................................................. F-2
Consolidated Statements of Operations for each of
the three years in the period ended July 31, 1995........................... F-3
Consolidated Balance Sheets as of July 31, 1995 and 1994...................... F-4
Consolidated Statements of Cash Flows for each of the
three years in the period ended July 31, 1995............................... F-5
Consolidated Statements of Shareholders' Equity for
each of the three years in the period
ended July 31, 1995......................................................... F-6
Notes to Consolidated Financial Statements for
the years ended July 31, 1995, 1994, and 1993............................... F-7-17
Unaudited Financial Statements:
Condensed Consolidated Statements of Operations for three months,
and nine months ended April 30, 1996 and 1995............................... F-18
Condensed Consolidated Balance Sheets as of April 30, 1996
and July 31, 1995........................................................... F-19
Condensed Consolidated Statements of Cash Flows for the nine
months ended April 30, 1996 and 1995........................................ F-20
Condensed Notes to Consolidated Financial Statements for
the three and nine months ended April 30, 1996 and 1995..................... F-21-22
</TABLE>

F-1
<PAGE> 55

INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
Penril DataComm Networks, Inc.
Gaithersburg, Maryland

We have audited the accompanying consolidated balance sheets of Penril DataComm
Networks, Inc. and subsidiaries as of July 31, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended July 31, 1995. These financial
statements are the responsibility of Penril'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 are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Penril DataComm Networks, Inc. and
subsidiaries as of July 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended July 31,
1995 in conformity with generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, during the
fiscal year ended July 31, 1994 Penril DataComm Networks, Inc. changed its
method of accounting for income taxes to conform with Statement of Financial
Accounting Standards No. 109.

Deloitte & Touche LLP

Washington, D.C.
October 17, 1995
(February 9, 1996 as to the
first three paragraphs of Note 12;
June 16, 1996 as to the
fourth paragraph of Note 12)

F-2
<PAGE> 56

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
NET REVENUES FROM CONTINUING OPERATIONS...................... $ 58,219 $ 67,842 $ 50,576
COSTS AND EXPENSES
Costs of revenues.......................................... 32,529 33,822 26,172
Selling, general and administrative........................ 20,326 20,715 16,531
Product development and engineering........................ 8,260 9,567 6,373
Amortization of cost over net assets acquired.............. 834 816 308
-------- -------- --------
61,949 64,920 49,384
OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS........... (3,730) 2,922 1,192
OTHER EXPENSE
Interest expense........................................... (1,227) (907) (330)
Other, net................................................. (113) (120) (60)
-------- -------- --------
(1,340) (1,027) (390)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES...................................................... (5,070) 1,895 802
BENEFIT FROM INCOME TAXES.................................... 578 513 66
-------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS..................... $ (4,492) $ 2,408 $ 868
LOSS FROM DISCONTINUED OPERATIONS,
net of income taxes........................................ (1,783) (891) (737)
LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS,
net of income taxes........................................ (1,400) -- --
-------- -------- --------
NET INCOME (LOSS)............................................ $ (7,675) $ 1,517 $ 131
======== ======== ========
Net income (loss) per common and common
equivalent share
Continuing operations...................................... $ (.60) $ .31 $ .13
Discontinued operations.................................... (.24) (.12) (.11)
Loss on disposal of discontinued operations................ (.18) -- --
-------- -------- --------
$ (1.02) $ .19 $ .02
======== ======== ========
Shares used in per share calculations........................ 7,559 7,809 6,950
======== ======== ========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 57

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

<TABLE>
<CAPTION>
JULY 31,
--------------------
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Current Assets
Cash.................................................................. $ 1,087 $ 995
Accounts receivable, less allowance for doubtful accounts of
$1,134 in 1995 and $997 in 1994.................................... 14,766 17,150
Inventories........................................................... 14,080 14,995
Deferred income taxes................................................. 1,700 539
Net assets of discontinued operations................................. 1,376 3,468
Other current assets.................................................. 803 506
-------- --------
TOTAL CURRENT ASSETS.......................................... 33,812 37,653
Property and Equipment, net............................................. 3,122 4,703
Excess of Cost Over Net Assets Acquired, net............................ 5,689 6,577
Other Assets............................................................ 2,509 2,890
-------- --------
TOTAL ASSETS............................................................ $ 45,132 $ 51,823
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings................................................. $ 5,095 $ 3,225
Current portion of long-term debt..................................... 5,164 3,153
Accounts payable...................................................... 8,673 6,856
Accrued compensation and commissions.................................. 1,081 1,291
Deferred revenue...................................................... 1,245 861
Other accrued expenses................................................ 892 1,291
-------- --------
TOTAL CURRENT LIABILITIES..................................... 22,150 16,677
Long-Term Debt, net of current portion.................................. 517 5,737
Other Noncurrent Liabilities............................................ 742 829
-------- --------
TOTAL LIABILITIES....................................................... 23,409 23,243
-------- --------
Commitments and Contingencies
Shareholders' Equity
Serial preferred stock, $.01 par value; authorized,
100,000 shares; issued, none....................................... -- --
Common stock, $.01 par value; authorized, 20,000,000 shares; issued
and outstanding, 7,542,815 shares in 1995 and 7,442,368 shares in
1994............................................................... 76 74
Additional paid-in capital............................................ 22,384 21,704
Retained earnings (deficit)........................................... (677) 6,998
-------- --------
21,783 28,776
Equity adjustment from foreign currency translation................... (60) (196)
-------- --------
TOTAL SHAREHOLDERS' EQUITY.............................................. 21,723 28,580
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............................. $ 45,132 $ 51,823
======== ========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 58

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM CONTINUING OPERATIONS
Net income (loss) from operations............................. $(4,492) $ 2,408 $ 868
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 4,621 3,837 2,755
Benefit from deferred taxes................................ (578) (538) --
Other...................................................... (105) 136 (326)
(Increase) decrease in assets:
Accounts receivable........................................ 2,384 (1,508) (3,347)
Inventories................................................ 915 (1,924) (2,809)
Other current assets....................................... (297) (68) (116)
Increase (decrease) in liabilities:
Accounts payable........................................... 1,817 (788) 1,280
Other liabilities.......................................... (332) 730 (111)
------- ------- -------
Net cash provided by (used in) continuing operating
activities.................................................... 3,933 2,285 (1,806)
CASH FLOWS FROM DISCONTINUED OPERATIONS
Loss from discontinued operations............................. (3,183) (891) (737)
Non-cash charges and changes in working capital............... 824 539 (116)
Provision for loss on disposal of discontinued operations..... 1,400 -- --
------- ------- -------
Net cash used in discontinued operations........................ (959) (352) (853)
Net cash provided by (used in) operations....................... 2,974 1,933 (2,659)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition costs............................................. -- -- (208)
Expenditures for purchased technology......................... (1,049) (1,126) (973)
Expenditures for property, equipment and other................ (690) (1,261) (1,190)
------- ------- -------
Net cash used in investing activities........................... (1,739) (2,387) (2,371)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under line of credit........................... 1,870 2,740 485
Borrowings on long-term debt.................................. -- 1,724 9,500
Payments on long-term debt.................................... (3,300) (4,184) (6,755)
Issuance of common stock...................................... 193 319 908
Dividends paid................................................ -- (147) --
Other......................................................... 94 221 (110)
------- ------- -------
Net cash provided by (used in) financing activities............. (1,143) 673 4,028
CASH AND CASH EQUIVALENTS
AT THE BEGINNING OF THE YEAR.................................. 995 776 1,778
------- ------- -------
CASH AND CASH EQUIVALENTS
AT THE END OF THE YEAR........................................ $ 1,087 $ 995 $ 776
======= ======= =======
SUPPLEMENTAL INFORMATION
Cash payments for income taxes................................ $ 113 $ 59 $ 127
======= ======= =======
Cash payments for interest.................................... $ 1,103 $ 795 $ 260
======= ======= =======
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 59

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED JULY 31, 1995, 1994 AND 1993

(IN THOUSANDS, EXCEPT SHARES)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
-------------------- PAID-IN UNEARNED EARNINGS CURRENCY
SHARES AMOUNT CAPITAL COMPENSATION (DEFICIT) ADJUSTMENT
--------- ------ ---------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AUGUST 1, 1992.................. 5,940,993 $ 59 $ 16,538 $ -- $5,497 $ 83
Net income............................ 131
Issuance of common stock for
acquisition of Datability, Inc..... 1,050,000 11 4,583
Upon exercise of stock options........ 56,663 1 115
For employee stock award program...... 63,080 245 (143)
Upon exercise of warrants............. 220,000 2 790
Foreign currency translation
adjustment......................... (411)
--------- ------ ---------- ------------ -------- ----------
BALANCE JULY 31, 1993................... 7,330,736 73 22,271 (143) 5,628 (328)
Net income............................ 1,517
Dividends paid........................ (147)
Issuance of common stock Upon exercise
of stock options................... 132,700 1 367
Upon exercise of warrants............. 180,000 2 400
Shares retired in connection with the
exercise of options and warrants... (66,840) (1) (458)
Shares returned in conjunction with
the valuation of Datability,
Inc................................ (124,388) (1) (828)
Shares returned in conjunction with
employee stock award program (9,840) (32) 21
Amortization of unearned income....... 106
Foreign currency translation
adjustment......................... 132
--------- ------ ---------- ------------ -------- ----------
BALANCE JULY 31, 1994................... 7,442,368 74 21,720 (16) 6,998 (196)
Net loss.............................. (7,675)
Issuance of common stock Upon exercise
of stock options................... 33,067 1 73
Upon exercise of warrants............. 80,000 1 194
For acquisition of patent rights...... 50,000 1 118
Shares retired in connection with
options, warrants, and awards...... (62,620) (1) (194) 16
Deferred tax benefit from exercise of
options............................ 473
Foreign currency translation
adjustment......................... 136
--------- ------ ---------- ------------ -------- ----------
BALANCE JULY 31, 1995................... 7,542,815 $ 76 $ 22,384 $ -- $ (677) $(60)
======== ======= ========= ============ ======== ==========
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 60

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED JULY 31, 1995, 1994 AND 1993

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of Penril and its subsidiaries, all of which are wholly owned. All
significant intercompany accounts and transactions have been eliminated. Penril
operates in the high technology electronics equipment industry. It designs,
develops and manufactures products for three distinct business segments: data
communications, uninterruptible power supplies and radio frequency
communications products.

ACCOUNTING ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles (GAAP) requires
management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

REVENUE RECOGNITION: Revenues are recognized at the time of shipment of
the product or performance of product-related services.

INVENTORIES: Inventories are stated at the lower of cost (first-in,
first-out method) or market. The inventories include the cost of material and,
when applicable, labor and manufacturing overhead.

PROPERTY, EQUIPMENT AND DEPRECIATION: Additions to property and equipment
are recorded at cost. Penril provides depreciation for financial reporting
purposes using primarily the straight-line method over the estimated useful
lives of the assets.

Leasehold improvements are amortized over the term of the related lease or
their estimated useful lives, whichever is shorter.

EXCESS OF COST OVER NET ASSETS ACQUIRED: The excess of cost over net
assets acquired is amortized using the straight-line method over ten years.
Penril periodically evaluates the intangible assets in relation to the operating
performance and future contribution to the underlying business and makes
adjustments, if necessary, for any impairment of these assets.

INCOME TAXES: During fiscal 1994, Penril changed its method of accounting
for income taxes to comply with the provisions of Statement of Financial
Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes." Deferred
income tax assets and liabilities are computed annually for differences between
the financial statement and tax bases of assets and liabilities that will result
in taxable or deductible amounts in the future. A valuation allowance is
established to reduce deferred tax assets to the amount expected to be realized.

EARNINGS PER SHARE: Earnings per share for fiscal 1995 are calculated
based on the weighted average common shares outstanding. Earnings per share for
previous years are calculated using the modified treasury stock method, which
limits the assumed purchase of treasury shares to 20% of the outstanding common
shares. Any remaining proceeds are assumed first to retire debt, with any
remaining proceeds invested in commercial paper. The difference between fully
diluted and primary earnings per share was not significant in any year. On
September 22, 1995, Penril completed the sale of 1,465,000 shares of its common
stock and used $1,500,000 of the proceeds to pay down its term debt. If this
transaction had occurred at the beginning of fiscal 1995, the unaudited proforma
net loss per share on continuing operations for the year would have been $.55.

SOFTWARE DEVELOPMENT COSTS: Certain acquired software development costs
are being amortized over their estimated economic life, principally five years,
commencing when each product is available for general release. Internal software
development and any other costs of development are expensed as incurred.

F-7
<PAGE> 61

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FAIR VALUES OF FINANCIAL INSTRUMENTS: The carrying values of cash and cash
equivalents, marketable securities, accounts receivable and accounts payable
approximate fair value due to the short maturities of such instruments.
Long-term debt is carried at amounts approximating fair values based on current
rates offered to Penril for debt with similar collateral and guarantees, if any,
and maturities.

RECLASSIFICATIONS: Certain reclassifications have been made to prior
period consolidated financial statements to conform to the July 31, 1995
presentation.

2. BUSINESS SEGMENT REPORTING

Penril's consolidated operations are made up of three business segments:
Data Communications, Electronic Instrumentation, and Uninterruptible Power
Supplies ("UPS"). The UPS segment manufactures uninterruptible power supplies
and power regulating equipment. The results of the UPS segments' operations have
been reported as discontinued operations in Penril's consolidated financial
statements. Intersegment sales are not material.

The Data Communications segment designs, develops and manufactures high
performance modems, modem channel banks, bridges, routers and multiplexors, for
accessing Wide Area Networks (WAN's) and Local Area Networks (LAN's).

The Electronic Instrumentation segment designs and manufactures equipment
and systems for analysis of electromagnetic interference and communications
security including applications in satellite communications.

The table below does not include net assets of discontinued operations
within Identifiable Assets for the year presented. Net assets for discontinued
operations were $1,376,000, $3,468,000, and $3,859,000 for fiscal years 1995,
1994 and 1993 respectively (amounts in thousands).

<TABLE>
<CAPTION>
YEAR DATA ELECTRONIC
ENDED COMMUNICATIONS INSTRUMENTATION TOTAL
----- -------------- --------------- -------
<S> <C> <C> <C> <C>
Revenues..................................... 1995 $ 52,610 $ 5,609 $58,219
1994 61,965 5,877 67,842
1993 44,158 6,418 50,576
Income (Loss) from Continuing Operations..... 1995 (5,191) 121 (5,070)
1994 1,892 3 1,895
1993 1,045 (243) 802
Identifiable Assets.......................... 1995 39,243 4,514 43,757
1994 44,231 4,124 48,355
1993 41,879 4,265 46,144
Depreciation Amortization.................... 1995 4,421 200 4,621
1994 3,676 161 3,837
1993 2,659 96 2.755
Capital Expenditures......................... 1995 1,702 37 1,739
1994 2,207 180 2,387
1993 2,212 159 2,371
</TABLE>

3. DISCONTINUED OPERATIONS

In July 1995, the Board of Directors decided to focus more of Penril's
resources on its main business of data communications and therefore decided to
sell Technipower, Inc., a subsidiary manufacturing uninterruptible power
supplies and power regulating equipment. As a result of this action, Penril
recorded estimated costs relating to the disposition of Technipower of
$1,400,000.

F-8
<PAGE> 62

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Previously reported financial statements have been restated to reflect
Technipower as a discontinued operation and discontinued business segment. The
following is a summary of operating and segment information for Technipower(in
thousands):

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Revenues......................................... $ 3,351 $ 5,991 $ 6,226
Loss from operations before income taxes......... (1,783) (891) (737)
Loss on disposal before income taxes............. (1,400) -- --
------- ------- -------
Total loss from discontinued operations.......... $(3,183) $ (891) $ (737)
======= ======= =======
Depreciation and Amortization.................... $ 215 $ 308 $ 266
======= ======= =======
Capital Expenditures............................. $ 130 $ 261 $ 177
======= ======= =======
Identifiable Assets at year end.................. $ 3,437 $ 3,988 $ 5,020
======= ======= =======
</TABLE>

Because Penril expects to retain the tax benefits associated with the
discontinued operations, no income tax benefit has been recorded for any year.

The loss from operations before income taxes for fiscal 1995 includes an
accrual of approximately $1,000,000 in operating losses through the anticipated
disposal date of Technipower.

Net assets of the discontinued operations consist of the following (in
thousands):

<TABLE>
<CAPTION>
JULY 31,
-------------------
1995 1994
------- -------
<S> <C> <C>
Current assets.......................... $ 2,784 $ 3,128
Current liabilities..................... 650 495
------- -------
Net current assets...................... 2,134 2,633
Property, plant and equipment, net...... 375 474
Other non-current tangible assets,
net................................... 22 62
Non-current liabilities................. 10 25
------- -------
Net tangible assets..................... 2,521 3,144
Intangible assets, net.................. 255 324
------- -------
2,776 3,468
Estimated loss on disposal.............. (1,400) --
------- -------
$ 1,376 $ 3,468
======= =======
</TABLE>

4. ACQUISITIONS

On May 6, 1993, Penril acquired all of the outstanding stock of Datability,
Inc. The acquisition was accounted for by the purchase method, and accordingly,
the results of operations of Datability are included in the Consolidated
Statements of Operations from the date of acquisition. Datability has been
consolidated with Penril's data communications operations located in
Gaithersburg, Maryland.

The acquisition was accomplished through the issuance of 1,050,000 shares
of Penril's common stock. The purchase price totalled $4,980,000 including
acquisition costs of $386,000. At the acquisition date, the purchase price
exceeded net assets acquired by $8,169,000. Under terms of the agreement, the
final purchase price was dependent upon the valuation of the net assets
acquired. During fiscal 1994, a valuation adjustment of $829,000 resulted in
124,388 shares of Penril's common stock being returned to Penril thereby
reducing the excess of cost over net assets acquired.

F-9
<PAGE> 63

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The unaudited proforma results from continuing operations of Penril for the
fiscal year ended July 31, 1993, assuming the acquisition of Datability had
occurred at the beginning of the year, is as follows (in thousands except per
share amounts):

<TABLE>
<S> <C>
Net revenues......................... $62,651
Net income (loss).................... (1,402)
Earnings (loss) per common and
equivalent share................... (.20)
</TABLE>

The unaudited proforma results reflect proforma adjustments for the
amortization of goodwill, recognition of interest expense and the issuance of
1,050,000 shares of Penril's stock. The unaudited proforma results do not
purport to represent what the actual results would have been had the acquisition
occurred at the beginning of the year nor do they purport to represent the
future results of the combined entity.

5. BALANCE SHEET DETAIL

<TABLE>
<CAPTION>
JULY 31,
-------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Inventories:
Raw material.......................... $ 6,930 $ 6,133
Work in process....................... 1,458 1,768
Finished goods........................ 5,692 7,094
------- -------
Total inventories..................... $14,080 $14,995
======= =======
Property and equipment, net:
Machinery and equipment............... $11,734 $11,236
Purchased software and technology..... 5,486 5,466
Leasehold improvements................ 980 981
------- -------
Total property and equipment, at cost... 18,200 17,683
Less accumulated depreciation and
amortization....................... 15,078 12,980
------- -------
Total property and equipment, net....... $ 3,122 $ 4,703
======= =======
Excess of cost over net assets acquired,
net Cost.............................. $ 8,090 $ 8,144
Less accumulated amortization......... 2,401 1,567
------- -------
$ 5,689 $ 6,577
======= =======
</TABLE>

6. FINANCING

BANK FINANCING: In conjunction with the sale of common stock as described
more fully in Note 8, Penril amended the credit agreement with its principal
bank subsequent to July 31, 1995. The agreement as amended, provides for a
working capital facility of $5,500,000 with borrowings based on qualified
accounts receivable and inventory. Interest accrues at the bank's prime rate
plus 2% with a commitment fee of 3/8% assessed on the unused portion of the
facility. The agreement expires December 31, 1995. At July 31, 1995, Penril had
utilized $5,192,000 of which $97,000 was for outstanding letters of credit.
Average monthly borrowings under the working capital facility were $4,621,000 at
a weighted average interest rate of 9.6% for fiscal 1995, $1,475,000 at a
weighted average interest rate of 7.2% for fiscal 1994, and $471,000 at a
weighted average interest rate of 6.0% for fiscal 1993.

F-10
<PAGE> 64

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In addition, Penril at July 31, 1995 had $3,848,000 in term loans with its
principal bank which expire December 1996 through September 1997. These notes
require monthly payments with interest at the bank's prime rate plus 2%. The
agreement as amended in September 1995, requires $1,500,000 of the proceeds from
the equity financing be applied to reduce the principal balance of the term
loans. In addition, Penril is required to repay the remaining term loans by
December 31, 1995 with proceeds from the sale of assets.

The amended bank facility requires Penril to maintain a ratio of current
assets to current liabilities of at least 1.6 to 1, a ratio of adjusted earnings
to interest expense of (4.2) to 1 at July 31, 1995 and (4.9) to 1 at October 31,
1995, and a ratio of adjusted earnings to fixed charges of (1.2) to 1 at July
31, 1995 and (2.0) to 1 at October 31, 1995.

SUBORDINATED DEBT: In April 1995, as part of the bank financing
arrangements, Penril was required to amend its subordinated debt agreement. This
amendment reduced the principal payment due May 6, 1995 to $75,775 with
additional principal payments allowed only after the bank term loans have been
reduced by $3,000,000. Interest, which is payable monthly, accrues at the prime
rate plus 1%. The outstanding principal balance is due on May 6, 1996. Principal
and interest payments must be suspended in the event Penril is in default of its
loan agreement with its principal bank. At July 31, 1995, Penril had outstanding
subordinated debt of $979,000.

LONG-TERM DEBT: Long-term debt at July 31, 1995 and 1994 consisted of (in
thousands):

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Term Loans...................................................... $ 3,848 $ 6,668
Subordinated Debt............................................... 979 1,054
------- -------
4,827 7,722
Capital leases and other........................................ 854 1,168
------- -------
5,681 8,890
Less current portion............................................ (5,164) (3,153)
------- -------
Long-term debt.................................................. $ 517 $ 5,737
======= =======
</TABLE>

Future maturities of long-term debt (of which $1,847,000 was paid by
October 17, 1995) are as follows:

<TABLE>
<S> <C>
Year Ending July 31,
1996............................................................. $5,164
1997............................................................. 201
1998............................................................. 151
1999............................................................. 165
------
Total............................................................ $5,681
======
</TABLE>

7. INCOME TAXES

Effective August 1, 1993, Penril changed its method of accounting for
income taxes to comply with the provisions of Statement of Financial Accounting
Standards No. 109 (FAS 109), "Accounting for Income Taxes." The provisions of
FAS 109 change the asset recognition of net operating loss and tax credit
carryforwards. There was no cumulative effect of adopting this accounting
change. The differences between the tax provision (benefit) from continuing
operations calculated at the statutory federal income tax rate and the actual
tax benefit for each year is shown in the table below.

F-11
<PAGE> 65

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Tax provision at federal statutory rate................ $(1,724) $ 644 $ 273
Amortization of nondeductible intangibles.............. 283 283 192
State & foreign taxes, net of federal benefit.......... (218) 236 78
Utilization of net operating loss carryforward......... -- (1,195) (668)
Change in valuation allowance.......................... 1,134 (538) --
Other.................................................. (53) 57 59
------- ------- -------
Income tax benefit..................................... $ (578) $ (513) $ (66)
======= ======= =======
</TABLE>

The primary components of temporary differences which give rise to Penril's
deferred tax asset are shown in the table below. At July 31, 1995 Penril had
federal net operating loss carryforwards of approximately $6,691,000 of which
$1,505,000 expires in 2007 and $5,186,000 expires in 2010 and general business
and other tax credits of $1,248,000 to reduce future tax liabilities through
2008.

<TABLE>
<CAPTION>
AS OF JULY 31,
------------------
1995 1994
------- -------
<S> <C> <C>
Deferred tax assets:
Reserves and other contingencies................................ $ 1,838 $ 1,152
Depreciation and amortization................................... 16 201
Other........................................................... -- 199
Net operating loss.............................................. 2,854 264
General business and other tax credits.......................... 1,248 1,302
Loss on discontinued operations................................. 582 --
Valuation reserve............................................... (4,454) (2,148)
------- -------
Total deferred tax assets....................................... 2,084 970
Deferred tax liabilities:
Amortization of technologies.................................... (384) (431)
------- -------
Net deferred tax assets......................................... $ 1,700 $ 539
======= =======
</TABLE>

8. COMMITMENTS AND CONTINGENCIES

Penril leases office and manufacturing facilities and equipment under lease
agreements, certain of which are renewable at Penril's option and/or provide for
increases in rent related to increases in the Consumer Price Index and other
factors. Rent expense for the fiscal years 1995, 1994 and 1993 was $1,941,000,
$1,754,000, and $1,370,000, respectively.

Approximate aggregate future minimum rentals applicable to operating leases
in effect at July 31, 1995 are as follows (in thousands):

<TABLE>
<S> <C>
Year Ending July 31,
1996............................................................. $1,762
1997............................................................. 1,717
1998............................................................. 1,777
1999............................................................. 1,824
2000............................................................. 934
Beyond 2000...................................................... 1,539
------
Total minimum rentals............................................ $9,553
======
</TABLE>

Penril initiated a lawsuit in December 1994 against Network Systems
Corporation ("NSC") for breach of contract, fraudulent inducement and
defamation. The suit is seeking specific performance, compensatory

F-12
<PAGE> 66

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

damages of $2,000,000 and punitive damages of $5,000,000. The litigation arises
out of a contract in which Penril agreed to develop certain computer hardware
and software to NSC's specifications. NSC subsequently brought a counterclaim
alleging negligent misrepresentation, fraud and breach of contract by Penril.
NSC is seeking rescission of the contract, restitution of monies paid by NSC to
Penril, compensatory damages of $5,000,000 and punitive damages in an
unspecified amount. As of July 31, 1995, the litigation was in the discovery
stage.

Penril has initiated a lawsuit against Standard Microsystems Corp. ("SMC")
for breach of contract including failure to transfer technology, unfair
competition and false representations. The suit seeks damages of $8 million. SMC
subsequently brought a counterclaim alleging breach of contract and recovery of
amounts due under the contract which are approximately $1 million. As of July
31, 1995, the litigation was in the discovery stage.

In April 1994, Penril was involved in a jury trial in which a former
employee in Penril's Chicago sales office alleged employment discrimination
based on sex. The suit sought compensatory damages and punitive damages together
with attorney's fees, costs and interest thereon. The court entered judgement in
favor of the plaintiff in the amount of $240,000 plus attorney's fees and costs
in the amount of $146,000. These judgements have been appealed. On September 8,
1995, oral arguments were presented to the Court of Appeals and the Court has
taken the case under advisement. Management believes Penril's position is sound
and that Penril should prevail on the appeal.

Penril is involved in other routine litigation.

Management believes none of the litigation will have a material adverse
effect on Penril's financial position or results of operations.

9. SHAREHOLDERS' EQUITY

SUBSEQUENT EVENT: On September 22, 1995, Penril issued an aggregate
1,465,000 shares of its unregistered common stock to Pequot Partners Fund, L.P.,
Pequot Endowment Fund, L.P and Pequot International Fund, Inc. (collectively the
"Investors") for $7,325,000 in a private transaction. Penril is required to file
a shelf registration with the SEC prior to December 31, 1995 covering the shares
issued in the transaction and keep the shelf registration effective for three
years. The Investors may request one public registration after the three years
until the later of September 22, 1999 or 30 days after Penril files its annual
report on form 10-K for the fiscal year ended July 31, 1999. If Penril does not
keep the shelf registration effective for the required three years, the
Investors are entitled to require Penril to effect up to two public
registrations during that time. As part of the transaction, Penril has agreed to
increase the Board of Directors of Penril by one and, so long as the Investors
collectively own in the aggregate not less than 10% of the issued and
outstanding common stock, the Investors are entitled to fill such vacancy by
designating one person to the Board of Directors.

SERIAL PREFERRED STOCK: Penril's Serial Preferred Stock may be issued in
one or more series. The shares of any series may be convertible into Common
Stock, may have priority over Common Stock in the payment of dividends and in
the distribution of assets in the event of liquidation or dissolution of Penril,
and may have preferential or other voting rights, all as determined by the Board
of Directors at the time it approves the series.

EMPLOYEE STOCK OPTIONS AND STOCK AWARDS: On October 8, 1986, Penril
adopted the 1986 Incentive Plan (the "1986 Plan"). Under the 1986 Plan, which
will terminate on October 8, 1996, awards may be granted to key employees of
Penril and its subsidiaries in one or more of the following forms: (i) Incentive
Stock Options; (ii) Non-qualified Stock Options; and (iii) Restricted Stock
Awards. The option price of shares of Common Stock subject to options granted
under the 1986 Plan will not be less than 100% (110% in

F-13
<PAGE> 67

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the case of Incentive Stock Options granted to optionees holding more than ten
percent of the voting stock of Penril at the date of grant) of the fair market
value of shares of Common Stock at the date of grant. No option will be
exercisable more than ten years (five years in the case of Incentive Stock
Options granted to optionees holding more than ten percent of the Voting Stock
of Penril on the date of grant) from the date it is granted. An aggregate of
1,503,822 shares were reserved for issuance under the 1986 Plan at July 31,
1995.

The terms of Restricted Stock Awards ("Stock Awards") granted under the
1986 Plan are determined at the time of issuance and are evidenced by a written
Restricted Stock Agreement. Any Stock Awards granted are subject to approval by
a majority of all "disinterested directors" as defined in Rule 16b-3 of the
General Rules and Regulations under the Securities Exchange Act of 1934. Of the
total shares reserved under the 1986 Plan, a maximum of 400,000 shares are
available for grant in the form of Stock Awards.

On October 1, 1992, Penril granted Stock Awards for 71,220 common shares of
Penril to all manufacturing, engineering, marketing and administrative employees
of the Gaithersburg, Maryland facility. The Stock Awards granted vested over two
years and employees had to be employed by Penril when the vested shares were
issued. Of the total shares awarded, 53,020 were issued. Penril issued 29,560
shares on October, 1993, which represented 50% of the Stock Awards outstanding
on that date and the remaining 23,460 shares on October 1, 1994. Compensation
related to the Stock Award Program was amortized over the vesting period.

NON-EMPLOYEE DIRECTOR STOCK OPTIONS: On December 9, 1987, Penril adopted
the Non-Employee Directors' Stock Option Plan ("Directors Plan"). Under the
Directors Plan an option to purchase 24,000 shares is automatically granted to
each non-employee director on the first day of his initial term. In addition,
options to purchase shares are automatically granted to each non-employee
director on the fifth business day after the Annual Report on Form 10-K is filed
with the Securities and Exchange Commission as follows: in each of the first two
successive years after the initial grant an option to purchase 6,000 shares is
granted, and in each of the next five successive years an option to purchase
3,000 shares is granted. The option price per share of any option granted under
the Directors Plan is the fair market value of a share of Common Stock on the
date the option is granted. No option will be exercisable more than ten years
from the date of grant. An aggregate of 273,333 shares were reserved for
issuance under the Directors Plan at July 31, 1995.

F-14
<PAGE> 68

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of stock option transactions during the three years ended July
31, 1995 is as follows:

<TABLE>
<CAPTION>
1986 INCENTIVE PLAN DIRECTORS PLAN
----------------------- ---------------------
NUMBER AVERAGE NUMBER AVERAGE
OF PRICE OF PRICE
SHARES PER SHARE SHARES PER SHARE
--------- --------- ------- ---------
<S> <C> <C> <C> <C>
OUTSTANDING AUGUST 1, 1992....................... 617,168 $4.01 180,000 $3.02
Granted.......................................... 635,250 4.28 15,000 3.75
Exercised........................................ (26,666) 2.60 (30,000) 1.53
Canceled......................................... (33,000) 3.79 -- --
--------
-
--------- ---- ----
OUTSTANDING JULY 31, 1993........................ 1,192,752 4.15 165,000 3.35
Granted.......................................... 81,500 4.76 39,000 4.84
Exercised........................................ (132,700) 2.77 -- --
Canceled......................................... (104,133) 4.67 -- --
--------
-
--------- ---- ----
OUTSTANDING JULY 31, 1994........................ 1,037,419 4.15 204,000 3.64
Granted.......................................... 348,000 3.12 18,000 3.25
Exercised........................................ (33,067) 2.23 -- --
Canceled......................................... (233,617) 4.15 -- --
--------
-
--------- ---- ----
OUTSTANDING JULY 31, 1995........................ 1,118,735 $3.89 222,000 $3.61
========= ==== ========= ====
Exercisable Options at July 31, 1995............. 531,968 $4.14 158,000 $3.37
========= ==== ========= ====
</TABLE>

WARRANTS:

In March, 1987, Henry D. Epstein joined Penril as President and Chief
Executive Officer and was sold Class A warrants to purchase 400,000 shares of
Common Stock at $2.23 per share and Class B warrants to purchase 80,000 shares
of Common Stock at $2.34 per share. Mr. Epstein exercised 220,000 Class A
warrants in January 1993, 80,000 Class A warrants in January 1994 and 100,000
Class A warrants in February 1994. In February 1995, Mr. Epstein exercised all
80,000 Class B warrants. All exercises were accomplished by delivery of shares
previously held.

In October 1992, Penril issued a warrant to purchase 166,000 shares of common
stock at $4.50 per share, the fair market value on the date of issuance, to
Coast Federal Savings Bank ("Coast") in settlement of a law suit brought against
Penril. In addition, Penril issued Class E warrants to purchase 25,000 shares of
common stock at $3.625 per share, the fair market value on the date of issuance,
to Mr. Henry Epstein in consideration for Mr. Epstein, in his capacity as a
stockholder of Penril, assisting Penril in settling the litigation with Coast.
The Coast warrant expired June 7, 1995. The Class E warrants were exercised
subsequent to July 31, 1995.

CASH DIVIDENDS: Penril declared a $.02 per share cash dividend to the
holders of record on December 16, 1993 and paid December 30, 1993. There were
7,332,296 shares outstanding on the record date. No cash dividends are allowed
under the current banking arrangement.

10. RETIREMENT AND SAVINGS PLAN

Penril's Retirement and Savings Plan ("401(k) Plan") is a defined
contribution plan including provisions of section 401(k) of the Internal Revenue
Code. Employees of Penril who have completed 90 days of service ("Participants")
are eligible to participate in the 401(k) Plan. The 401(k) Plan permits, but
does not require, Penril to match employee contributions. In addition, Penril
may make discretionary contributions to the 401(k) Plan which will be allocated
to each Participant based on the ratio of such Participant's eligible
compensation to the total of all Participants' eligible compensation. Amounts
contributed by Penril vest as to 30% after 1 year of eligible service, 60% after
2 years of eligible service and 100% after 3 years of eligible

F-15
<PAGE> 69

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

service. Participants may elect to direct the investment of their contributions
in accordance with the provisions of the 401(k) Plan. Penril made matching
contributions of $55,000, $46,000 and $45,000 during fiscal 1995, 1994 and 1993,
respectively. There were no additional Penril contributions in any year. Penril
provides no post-employment or post-retirement benefits.

11. GEOGRAPHIC AREA INFORMATION

Penril's foreign operations consist principally of sales and marketing
activities through subsidiaries located in Hong Kong and the United Kingdom.
Certain information, including the effect of intercompany transactions, relating
to Penril's operations on a geographic basis is as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
REVENUES
U.S. Revenue
Domestic.................................................... $33,338 $41,397 $28,152
Exports:
Europe................................................... 6,780 11,129 9,738
Pacific Rim.............................................. 7,195 5,257 4,989
Central and South America................................ 3,503 4,581 4,120
Other International...................................... 4,600 5,495 2,778
------ ------ ------
Total Exports............................................... 22,078 25,562 21,625
Total U.S. Revenue............................................ 55,416 66,959 49,777
Revenue from foreign subsidiaries............................. 6,839 7,876 5,032
Adjustments and eliminations.................................. (4,036) (6,993) (4,233)
------ ------ ------
Total Revenues................................................ $58,219 $67,842 $50,576
====== ====== ======
INCOME (LOSS) BEFORE TAXES
U.S........................................................... $(5,021) $ 2,520 $ 1,219
Foreign....................................................... 688 1,479 443
Eliminations.................................................. (737) (2,104) (860)
------ ------ ------
Total Income (Loss) from continuing operations before taxes... $(5,070) $ 1,895 $ 802
====== ====== ======
IDENTIFIABLE ASSETS
U.S........................................................... $41,691 $47,975 $47,497
Foreign subsidiaries.......................................... 3,441 3,848 2,506
------ ------ ------
Total Identifiable Assets..................................... $45,132 $51,823 $50,003
====== ====== ======
</TABLE>

12. SUBSEQUENT EVENTS

On December 21, 1995, Penril amended the credit agreement with its
principal bank to extend the credit agreement to March 31, 1996 and eliminate
Penril's obligations to comply with the financial covenants for the fiscal
quarter ended January 31, 1996.

In February, 1996, Penril issued an aggregate of 750,000 shares of its
unregistered common stock for approximately $5,100,00 in private transactions.
Penril may be requested by the holders to file a shelf registration with the SEC
covering the shares issued in the transaction and keep the shelf registration
effective for up to three years.

In November, 1995, Penril filed an amended complaint in its suit against
SMC which increased the amount of damages from $8 million to $50 million.

F-16
<PAGE> 70

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On June 16, 1996, Penril signed a definitive agreement with Bay Networks,
Inc. ("Bay") whereby Bay will acquire the Digital Signal Processing ("DSP")
modem business of Penril. Under the terms of the agreement, Bay will exchange
$10.00 payable in Bay's common stock according to an exchange value determined
by averaging Bay's closing stock prices over a specified period prior to
closing, for each share of Penril's common stock. The agreement is subject to
regulatory approval and Penril's shareholders approval.

F-17
<PAGE> 71

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED -- IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
APRIL 30, APRIL 30,
-------------------- --------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET REVENUES FROM CONTINUING OPERATIONS........... $10,540 $14,053 $31,180 $42,935
COSTS AND EXPENSES
Cost of revenues................................ 6,676 7,868 18,518 23,390
Selling, general and administrative............. 4,736 4,764 14,311 14,730
Product development and engineering............. 1,944 1,983 5,791 6,268
Amortization of cost over net assets acquired... 183 212 550 636
------ ------ ------ ------
13,539 14,827 39,170 45,024
OPERATING LOSS.................................... (2,999) (774) (7,990) (2,089)
------ ------ ------ ------
OTHER EXPENSE
Interest expense................................ (96) (374) (572) (908)
Other income (expense), net..................... (50) (18) (46) (97)
------ ------ ------ ------
(146) (392) (618) (1,005)
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES............................. (3,145) (1,166) (8,608) (3,094)
Benefit from Income Taxes......................... -- -- -- 528
------ ------ ------ ------
NET LOSS FROM
CONTINUING OPERATIONS........................... $(3,145) $(1,166) $(8,608) $(2,566)
Loss from Discontinued Operations net of income
taxes........................................... -- (532) -- (1,244)
------ ------ ------ ------
Net Loss.......................................... $(3,145) $(1,698) $(8,608) $(3,810)
====== ====== ====== ======
Net Income (loss) per common and equivalent
share
Continuing operations........................ $ (.31) $ (.15) $ (.96) $ (.34)
Discontinued operations...................... -- (.07) -- (.17)
------ ------ ------ ------
$ (.31) $ (.22) $ (.96) $ (.51)
====== ====== ====== ======
SHARES USED IN PER SHARE CALCULATIONS............. 10,134 7,534 8,964 7,504
====== ====== ====== ======
</TABLE>

See notes to condensed consolidated financial statements.

F-18
<PAGE> 72

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

<TABLE>
<CAPTION>
JULY 31,
1995
APRIL 30, --------
1996 (AUDITED)
---------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................................. $ 1,675 $ 1,087
Accounts receivable, net............................................... 9,143 14,766
Inventories
Raw materials....................................................... 8,250 6,930
Work in process..................................................... 1,810 1,458
Finished goods...................................................... 5,978 5,692
------ ------
16,038 14,080
Deferred income taxes.................................................. 1,700 1,700
Net assets of discontinued operations.................................. 2,728 1,376
Other current assets................................................... 446 803
------ ------
TOTAL CURRENT ASSETS........................................... 31,730 33,812
Property, equipment, and technology, net................................. 2,754 3,122
Excess of cost over net assets acquired, net............................. 5,138 5,689
Other assets............................................................. 2,120 2,509
------ ------
TOTAL ASSETS............................................................. $ 41,742 $ 45,132
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings.................................................. $ 4,000 $ 5,095
Current portion of long-term debt...................................... 1,045 5,164
Accounts payable....................................................... 6,990 8,673
Deferred revenue....................................................... -- 1,245
Other accrued expenses................................................. 1,483 1,973
------ ------
TOTAL CURRENT LIABILITIES...................................... 13,518 22,150
Long-term debt, net of current portion................................... 359 517
Other noncurrent liabilities............................................. 748 742
------ ------
TOTAL LIABILITIES.............................................. 14,625 23,409
SHAREHOLDERS' EQUITY:
Common Stock, $.01 par value........................................... 103 76
Additional paid-in capital............................................. 36,531 22,384
Retained earnings (deficit)............................................ (9,285) (677)
Equity adjustments..................................................... (232) (60)
------ ------
TOTAL SHAREHOLDERS' EQUITY............................................... $ 27,117 $ 21,723
====== ======
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................... $ 41,742 $ 45,132
====== ======
</TABLE>

See notes to condensed consolidated financial statements.

F-19
<PAGE> 73

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED -- IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED APRIL
30,
-------------------
1996 1995
------- -------
<S> <C> <C>
CASH FLOWS FROM CONTINUING OPERATIONS
Net loss from operations............................................... $(8,608) $(3,810)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization....................................... 2,790 3,546
Benefit for income tax.............................................. -- (528)
Other............................................................... (493) (392)
Decrease in accounts receivable........................................ 5,623 2,673
Increase in inventories................................................ (1,958) (577)
Decrease (Increase) in other current assets............................ 357 (65)
Increase (decrease) in accounts payable................................ (1,683) 972
Decrease in other current liabilities.................................. (1,735) (939)
------ ------
Net cash provided by (used in) continuing operations..................... (5,707) 880
CASH FLOWS FROM DISCONTINUED OPERATIONS
Loss from discontinued operations...................................... (1,054) (1,244)
Non-cash charges and changes in working capital........................ (298) 1,715
------ ------
Net cash provided by (used in) discontinued operations................. (1,352) 471
------ ------
Net cash provided by (used in) operations.............................. (7,059) 1,351
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property and equipment................................ (981) (1,183)
------ ------
Net cash used in investing activities.................................. (981) (1,183)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under line of credit.................................... (1,095) 1,900
Payments on long-term debt............................................. (4,278) (2,204)
Issuance of common stock............................................... 14,174 133
Other.................................................................. (173) 169
------ ------
Net cash provided by financing activities.............................. 8,628 (2)
CASH AT THE BEGINNING OF THE PERIOD...................................... 1,087 995
------ ------
CASH AT THE END OF THE PERIOD............................................ $ 1,675 $ 1,161
====== ======
</TABLE>

See notes to condensed consolidated financial statements.

F-20
<PAGE> 74

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS

ENDED APRIL 30, 1996 AND 1995

1. The accompanying condensed consolidated financial statements, which
should be read in conjunction with the Annual Report on Form 10-K/A for the
fiscal year ended July 31, 1995, apply to Penril and its wholly owned
subsidiaries and reflect all adjustments which are, in the opinion of
management, necessary for a fair presentation of Penril's consolidated financial
position as of April 30, 1996 and the results of operations for the nine months
ended April 30, 1996 and 1995. The results of operations for such periods,
however, are not necessarily indicative of the results to be expected for a full
fiscal year.

Certain reclassifications have been made to prior period consolidated
financial statements to conform to the April 30, 1996 presentation.

Penril's policy is to maintain its uninvested cash at minimal levels. Cash
and cash equivalents include highly liquid debt instruments purchased with a
maturity of three months or less.

2. On September 22, 1995, Penril issued an aggregate of 1,465,000 shares of
its unregistered common stock to Pequot Partners Fund, L.P., Pequot Endowment
Fund, LP and Pequot International Fund, Inc. (collectively the "Investors") for
$7,325,000 in a private transaction. As required by the Purchase Agreement
between the Investors and Penril, a shelf registration was filed with the
Securities and Exchange Commission which became effective on February 28, 1996.
See footnote 9 to the financial statements of Penril's Annual Report on form
10-K/A for details of the transaction. In addition, on October 5, 1995, Penril
completed the sale of 50,000 shares of its unregistered common stock to Cramer
Partners, L.P. for $250,000.

In the third quarter of fiscal 1996, Penril issued 810,000 of its
unregistered common stock in private placements which generated $5,496,000. In
the fourth quarter of fiscal 1996, Penril issued 282,267 shares of its
unregistered common stock in private placements which generated $2,004,000.

3. Previously reported financial statements have been restated to reflect
Penril's wholly-owned subsidiary, Technipower, Inc. ("Technipower") as a
discontinued operation. The following is a summary of operating information for
Technipower (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS
ENDED NINE MONTHS ENDED
APRIL 30, APRIL 30,
--------------- -----------------
1996 1995 1996 1995
------ ---- ------ ------
<S> <C> <C> <C> <C>
Revenues.............................. $1,234 $782 $3,101 $2,542
Loss from operations before income
taxes............................... (422) (532) (1,054) (1,244)
</TABLE>

Because Penril expects to retain the tax benefits associated with the
discontinued operation, no income tax benefit has been recorded for any year.

The loss from operations for the first nine months of fiscal 1996 was
included in the loss on disposal of discontinued operations in fiscal 1995.

F-21
<PAGE> 75

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net assets of the discontinued operations consist of the following (in
thousands):

<TABLE>
<CAPTION>
APRIL 30, JULY 31,
1996 1995
--------- --------
<S> <C> <C>
Current assets......................................... $ 3,591 $ 2,784
Current liabilities.................................... (1,055) (650)
------ ------
Net current assets..................................... 2,536 2,134
Property, plant and equipment, net..................... 304 375
Other non-current tangible assets, net................. 36 22
Non-current liabilities................................ (6) (10)
------ ------
Net tangible assets.................................... 2,870 2,521
Intangible assets, net................................. 205 255
------ ------
3,075 2,776
Estimated loss on disposal............................. (347) (1,400)
------ ------
$ 2,728 $ 1,376
====== ======
</TABLE>

4. In August 1995, Henry D. Epstein, Chairman, exercised 25,000 Class E
warrants issued in October 1992. These warrants were issued with a per share
exercise price of $3.625, the fair market value of Penril's common shares on the
date the warrants were issued. Mr. Epstein exercised the warrants by remitting
12,719 shares with a fair market value of $7.125 per share on the date of the
exercise.

On December 13, 1995, Penril adopted the 1995 Long-Term Stock Option
Incentive Plan (the "1995 Plan") to replace the 1986 Incentive Plan which
expires on October 8, 1996. The stockholders of Penril approved the 1995 Plan at
the Annual Meeting held April 10, 1996. Under the 1995 Plan, which will
terminate December 13, 2005, awards may be granted to key employees of Penril
and its subsidiaries in one or more of the following forms: (i) Non-qualified
stock options; (ii) Incentive Stock Options; and (iii) Restricted Stock Awards.
The option price of shares of Common Stock will not be less than 100% (110% in
the case of Incentive Stock Options granted to optionees holding more than 10%
of the voting stock of the Company at the date of grant) of the fair market
value of shares of Common Stock on the date of grant. No option will be
exercisable more than ten years (five years in the case of Incentive Stock
Options granted to optionees holding more than 10% of the voting stock of the
Company on the date of grant) from the date it is granted. Penril has reserved
1,000,000 shares for issuance under the 1995 Plan.

5. On March 15, 1996 Penril amended the credit agreement with its principal
bank. The new agreement provides for a maximum working capital facility of
$5,500,000 with borrowings based on qualified accounts receivable and secured by
substantially all Penril's assets. Interest accrues at the bank's prime rate
plus 2% with a commitment fee of 3/8% assessed on the unused portion of the
facility. In the event the facility is cancelled prior to its expiration, there
is a fee due the bank equal to 3% of the total facility. The agreement expires
March 31, 1997. As of April 30, 1996, the Company had $5,412,000 available of
which Penril had utilized $4,090,000.

As of March 7, 1996, Penril had repaid all outstanding term debt with its
principal bank.

Subsequent to April 30, 1996, Penril repaid all outstanding subordinated
debt of $805,000. This amount was included in the current portion of long-term
debt as of April 30, 1996.

F-22
<PAGE> 76

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth expenses in connection with the issuance of
the Common Stock being registered. All of the amounts shown are estimates,
except the registration fee:

<TABLE>
<S> <C>
SEC registration fee........................................................ $8,509
Listing fee................................................................. *
Accounting fees and expenses................................................ *
Legal fees and expenses..................................................... *
Blue Sky fees and expenses.................................................. *
Printing expenses........................................................... *
Miscellaneous............................................................... *
-------
-
Total..................................................................... *
========
</TABLE>

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

* To be filed by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law ("DGCL") permits the
indemnification of the directors and officers of the Company. The By-laws of the
Company do not contain any provisions on indemnification.

The Company's Certificate of Incorporation provides for the indemnification
of directors and officers and employees of the Company, and persons who serve or
served at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred with respect to any action, suit
or proceeding, if such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The indemnification provisions set forth in the
Certificate of Incorporation do not preclude the indemnification of, and
advancement of expenses to, any other person to whom the Company has the power
or obligation to indemnify under the provisions of the DGCL, or otherwise. The
right to indemnification conferred in the Certificate of Incorporation is a
contract right and shall include the right to have paid by the Company the
expenses incurred in defending any such proceeding in advance of its final
disposition. The Company maintains insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Company against any such
expense, liability or loss, whether or not the Company would have the power or
the obligation to indemnify such person against such expense, liability or loss
under state law or under the terms of the Certificate of Incorporation. Each
director of the Company will enter into an indemnification agreement with the
Company (the "Indemnification Agreements"). The Indemnification Agreements will
provide that, subject to certain exclusions, the Company will indemnify each
director against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with any threatened, pending or completed action, suit or proceeding to which
such director is or is threatened to be made a party by reason of his position
as an officer or director of the Company or who serves or served at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, to the extent of the
highest and most advantageous of the indemnification provisions set forth in the
Company's Certificate of Incorporation, the Company's By-laws, the DGCL, the
laws of the jurisdiction under which the Company exists, the terms of any
liability insurance or any other benefits available to such director.

II-1
<PAGE> 77

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Not applicable.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<C> <S>
*2.1 Form of Distribution Agreement dated as of , 1996 between Access Beyond,
Inc. (the "Company") and Penril DataComm Networks, Inc. ("Penril")
*2.2 Plan and Agreement of Merger dated as of June 16, 1996, as amended August 5, 1996,
among Penril, Bay Networks, Inc. and Beta Acquisition Corp.
*3.1 Restated Certificate of Incorporation of the Company.
*3.2 By-Laws of the Company.
*5. Opinion of Benesch, Friedlander, Coplan & Aronoff P.L.L.
*8. Opinion of Benesch, Friedlander, Coplan & Aronoff P.L.L. as to tax matters.
*10.1 Employment Agreement, dated as of , 1996, between the Company and
Richard D. Rose.
*10.2 Employment Agreement, dated as of , 1996, between the Company and Ronald
A. Howard.
*10.3 Consulting Agreement dated as of , 1996, between the Company and
Ideonics.
*10.4 Technology License Agreement, dated as of , 1996 between Penril and the
Company.
*10.5 Development and License Agreement dated as of June 16, 1996 between Bay Networks,
Inc. and Penril, on behalf of the Company.
*10.6 Indemnification Agreement dated as of , 1996 between Penril and the
Company.
*10.7 Sublease Agreement, dated as of , 1996 between the Company and Penril.
*10.8 Form of the Company's 1996 Long-Term Incentive Plan.
*10.9 Form of the Company's 1996 Non-Employee Directors' Stock Option Plan.
*10.10 Form of Transitional Services Agreement dated as of , 1996 between the
Company and Penril.
*21. List of Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP.
*23.2 Consent of Benesch, Friedlander, Coplan & Aronoff P.L.L. (contained in its
Opinions filed as Exhibit 5 and 8 hereto).
24. Powers of Attorney for the Company (set forth on page II-4).
99.1 Consent of Director-Elect - Arthur Samberg
99.2 Consent of Director-Elect - Barbara Perrier
99.3 Consent of Director-Elect - John Howard
</TABLE>

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

*To be filed by amendment.

(b) Financial Statement Schedule -- None

All schedules specified under Regulation S-X for the Company have been
omitted because they are either not applicable, not required or because
the information required is included in the consolidated financial
statements or notes thereto.

II-2
<PAGE> 78

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrants
have been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of their counsel the
matter has been settled by the controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by them is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

II-3
<PAGE> 79

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF GAITHERSBURG, STATE OF
MARYLAND, ON AUGUST 23, 1996.

ACCESS BEYOND, INC.

By: /s/ RICHARD D. ROSE

Name: Richard D. Rose

Its: Chief Financial Officer and
Secretary

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENCE, that each person whose signature appears
below constitutes and appoints Ronald A. Howard, Henry D. Epstein and Richard D.
Rose, or any of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes and
he might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact, agent or their substitutes may lawfully do or cause to be done
by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED ON BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
NAME TITLE DATE
- ----------------------------------- ---------------------------------------- ----------------
<C> <S> <C>
/S/ HENRY D. EPSTEIN Chairman of the Board and President August 23, 1996
- -----------------------------------
Henry D. Epstein
/S/ RONALD A. HOWARD Executive Vice President and Director August 23, 1996
- -----------------------------------
Ronald A. Howard
Director August , 1996
- -----------------------------------
Michael H. Newlin
/S/ RICHARD D. ROSE Chief Financial Officer and Secretary August 23, 1996
- -----------------------------------
Richard D. Rose
</TABLE>

II-4

<PAGE> 1

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Access Beyond, Inc. on
Form S-1 of our report dated October 17, 1995 (February 9, 1996 as to the first
three paragraphs of Note 12; June 16, 1996, as to the fourth paragraph of Note
12) relating to the financial statements of Penril DataComm Networks, Inc.,
appearing in the Prospectus, which is part of this Registration Statement. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.

DELOITTE & TOUCHE LLP

Washington, DC
August 23, 1996

<PAGE> 1

EXHIBIT 99.1

CONSENT OF DIRECTOR-ELECT

I consent to my being named as a director-elect of Access Beyond, Inc. in
the Registration Statement on Form S-1 of Access Beyond, Inc. dated August 23,
1996 and in all amendments thereto.

/s/ARTHUR SAMBERG
Arthur Samberg

<PAGE> 1

EXHIBIT 99.2

CONSENT OF DIRECTOR-ELECT

I consent to my being named as a director-elect of Access Beyond, Inc. in
the Registration Statement on Form S-1 of Access Beyond, Inc. dated August 23,
1996 and in all amendments thereto.

/s/BARBARA PERRIER
Barbara Perrier

<PAGE> 1

EXHIBIT 99.3

CONSENT OF DIRECTOR-ELECT

I consent to my being named as a director-elect of Access Beyond, Inc. in
the Registration Statement on Form S-1 of Access Beyond, Inc. dated August 23,
1996 and in all amendments thereto.

/s/JOHN HOWARD
John Howard