UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-K

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

                    For the fiscal year ended October 3, 1998

                                       or

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

                 For the transition period from _____ to _______

                         COMMISSION FILE NUMBER 0-22632

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

                            ASANTE TECHNOLOGIES, INC.
             (Exact name of Registrant as specified in its charter)

           Delaware                                       77-0200286
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation or organization) 

                                  821 Fox Lane
                           San Jose, California 95131
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (408) 435-8388

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

           Securities registered pursuant to Section 12(g) of the Act:
                    Common Stock, par value $0.001 per share

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12 months  (or for such  shorter  period as the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past ninety days. YES _X_ NO __

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

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant,  based upon the closing  sale price of the Common  Stock on November
27,  1998  as  reported  on  the  Nasdaq  National  Market,   was  approximately
$10,269,216.  Shares of Common  Stock held by officers and  directors  and their
affiliated  entities and related persons have been excluded in that such persons
may be deemed to be affiliates.  This  determination  of affiliate status is not
necessarily conclusive for other purposes.

As of November 27, 1998,  the  Registrant  had 9,285,893  shares of Common Stock
outstanding.

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


                       DOCUMENTS INCORPORATED BY REFERENCE

Certain  sections of the  Registrant's  definitive  Proxy Statement for the 1998
Annual Meeting of  Stockholders  to be held on February 26, 1999 is incorporated
by reference in Part III of this Form 10-K to the extent stated herein.

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                                TABLE OF CONTENTS

                                                                         Page of
                                                                          Report
                                     PART I

ITEM 1.  BUSINESS                                                           3

ITEM 2.  PROPERTIES                                                        17

ITEM 3.  LEGAL PROCEEDINGS                                                 17

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               18


                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
         STOCKHOLDER MATTERS                                               21

ITEM 6.  SELECTED FINANCIAL DATA                                           22

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS                                         23

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK        32

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                       33

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE                               50


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                51

ITEM 11. EXECUTIVE COMPENSATION                                            51

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT                                                        51

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                    51


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
         FORM 8-K                                                          52

SIGNATURES                                                                 55

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This discussion, other than the historical financial information, may consist of
forward-looking  statements  that  involve  risks and  uncertainties,  including
quarterly and yearly  fluctuations  in results,  the timely  availability of new
products,  the impact of competitive  products and pricing,  and the other risks
detailed from time to time in the Company's SEC reports,  including this report.
These  forward-looking  statements speak only as of the date hereof,  and should
not be given  undue  reliance.  Actual  results may vary  materially  from those
projected.

The  Company   undertakes  no  obligation  to  publicly  update  or  revise  any
forward-looking  statements,  whether  as a result  of new  information,  future
events, or otherwise.


ITEM 1. BUSINESS

Asante Technologies, Inc. ("Asante" or the "Company"), founded in 1988, designs,
manufactures  and markets  high-performance  computer  networking  products that
address  networking  requirements at the departmental and workgroup level within
corporations  and small  businesses.  The Company  sells its products  primarily
through  distributors and supports this distribution  channel with marketing and
promotional  programs and a network of direct sales and service  personnel.  The
Company focuses much of its efforts in certain  vertical  markets,  namely,  the
educational channel,  SOHO (Small Office/Home Office) and in pre-press,  digital
graphic  communications and related markets requiring high bandwidth  solutions,
where the Company can differentiate the performance and features of its products
from those of its  competitors.  The Company is the largest third party provider
of Ethernet connectivity for the Macintosh platform.

The majority of the  Company's  products are designed to function  across either
standard Ethernet (10 Megabits per second known as 10 Mbps,  10BASE-T),  or Fast
Ethernet  (100  Megabits  per second,  known as 100 Mbps,  100BASE-T)  networks.
Ethernet is a type of network topology which determines how packets,  or message
units, are handled and sent across the network. Ethernet is the most widely used
communication standard in Local Area Networks ("LAN").

There are six primary  trends in computer  networking  that affect the Company's
business:  1) the adoption of switched Ethernet  technology,  2) the adoption of
increased speed and Fast Ethernet and Gigabit  products,  3) the use of Internet
and "Intranet"  technology in corporate local area networks,  4) the anticipated
convergence  of  voice,  data,  and  video  over  all  market  segments,  5) the
seasonality  of  certain  segments  of  the  networking  industry,  and  6)  the
commoditization of low end networking products and growth of the home office.

The first  trend is the growth in  commercialization  and  adoption  of Ethernet
switching technology,  which enables a dedicated communication between a sending
and  receiving  computer or device as opposed to  traditional  shared  Ethernet,
where multiple users share communication  lines.  Initially,  switching products
were used primarily  within larger  companies which were the first to experience
congestion in their traditional network architectures.  More recently,  adoption
of  switching  technology  has spread to smaller  companies.  Furthermore,  many
companies  are  deploying  switching at all layers of the network:  in the local
area network  backbone,  in server groups, at the workgroup level, and in direct
connections  to desktop PCs.  This is especially  applicable to those  companies
which  focus in high  bandwidth  graphics  intensive  applications.  The Company
introduced several new switching products in 1996, delivered two

                                       3

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new families of high performance switching products in 1997 designed to meet the
needs of the most  high-bandwidth  demanding  applications  and, in fiscal 1998,
announced  several new  switching  product  lines  designed to meet the needs of
those customers demanding high performance,  cost effective solutions.  In 1999,
the Company will  continue to focus  research and  development  resources on the
development  of additional  switching  products in order to complete its product
line and meet the needs of the Company's  customers  requiring high performance,
feature-rich products, and will continue to reduce the cost of existing lines as
necessary to counter declining prices.

The second trend is the adoption of Fast Ethernet (100 Mbps)  technology and the
need for Gigabit  solutions for certain  applications.  In fiscal 1997 and early
1998, users of 100Mbps  technology were  predominately  two different sectors of
the market:  large corporations seeking a solution to congestion at the "top" of
their  networks,  and  those  using  specific  vertical  applications,  such  as
publishing,  pre-press,  imaging and multimedia,  which routinely  transfer very
large files  across  their  networks.  The sharply  declining  prices the market
experienced in fiscal 1998 has accelerated the transition of the Company to Fast
Ethernet  technologies,  both shared and  switched.  The Company  believes  that
10/100 technology will continue to become the industry  standard.  Consequently,
the Company has focused the  majority of its efforts in 1998 on the  development
and  introduction of new aggressively  priced 10/100 adapters,  shared hubs, and
switches.  The  Company  offers a wide  range of 100 Mbps and  10/100  Mbps Fast
Ethernet  shared hubs,  cards and switch  products  which have  achieved  strong
recognition and critical acclaim.  In addition,  as 10/100 technology takes over
as the standard for Ethernet networking, Gigabit technology (1,000 Mbps) will be
increasingly adopted for use in the corporate backbone,  and at the server level
in order to handle the  increased  bandwidth  and speed  demands  created by the
adoption of Fast Ethernet and the  convergence of voice,  data, and video to the
desktop.

The  Company's  Fast  Ethernet  products  are  differentiated  from those of the
Company's  competitors  both  due to  their  ease  of use  (Plug-and-Play),  and
software  utilities  including  built-in  HTTP servers on many of the  Company's
newer managed switch products,  a software  enhancement  utility which optimizes
Fast Ethernet  performance  across most network  topologies  including  standard
Ethernet, Fast Ethernet, and token ring networks.  NetDoubler(TM), the Company's
network acceleration software, currently runs on Windows NT(TM),  Macintosh(TM),
Power PC(TM), and Unix operating systems.

The third trend affecting the market for local area networking  equipment is the
rapid adoption of internet  technology  into internal  corporate  networks.  The
resulting "Intranets" are based on web servers and web browser technology.  This
technology  is easily  deployed and the  development  tools offer large gains in
programmer  productivity.  This has  caused  growth in both the  development  of
in-house  corporate  applications  based on Intranet  technology  and efforts by
standard  product  software  companies  to develop  products  based on this same
technology.   Many  corporations   view  Intranet   software   technology  as  a
cost-effective  alternative to traditional client-server software architectures.
The  Company  has taken  steps to  integrate  Intranet  technology  into its new
switches  in the form of a built-in,  Java(TM)-enabled,  HTTP  server.  In early
fiscal  1999,  the  Company  plans  to  announce  several  products  to  further
capitalize on the growing trend for the needs of companies and  institutions for
both  Intranet  and  LAN-edge  technologies  with the  introduction  of WAN-edge
devices such as a Plug-and-Play ISDN router and dual analog channel routers.  In
addition,  the  Company is  developing  other  products to meet the needs of its
customers to connect both to the Internet, and corporate Intranets.

                                       4

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The fourth  trend in the local area  network  (LAN) and  LAN-edge  market is the
anticipated  convergence  of  voice,  data,  and  video  across  both  corporate
Intranets and the Internet. The greatly increased bandwidth and speed, which has
and is being created primarily due to emergence of 10/100 technology taking over
the desktop as the  networking  standard,  has created much  greater  demand and
downward  pricing  pressures as the telephone  companies  and larger  networking
companies  are  pressured  to deliver  "all-in-one"  LAN,  WAN,  Phone,  and FAX
communications centers at attractive price points.

Another  observation in the local area networking  market is the reported growth
in sales and market share for the Microsoft  Windows NT(TM) operating system and
need for  cross-platform  solutions.  The low installation and maintenance cost,
scalability,  and  compatibility  with  desktop  versions  of Windows  have made
Windows NT(TM) an effective solution for servers in corporations.

The fifth trend,  which affects the local area networking market and the Company
in particular is the  seasonality  of the Company's  business.  The first factor
which  affects the  Company  most in the market is caused by the  budgeting  and
purchasing  cycles of certain segments of the Company's  customers.  The Company
has a strong presence in the educational  market which is  characterized  by its
typically  seasonal  purchasing habits due to the nature of educational  seasons
and the ability for school administrators to more easily install network systems
during times when the majority of users (students) are not in session. Secondly,
many schools and other governmental agencies allocate spending based on seasonal
budgets and accept bids only seasonally.

The  sixth  trend  which  affects  the  local  area  networking  market  is  the
commoditization  of the lower end of the  networking  market,  including  10/100
adapters, unmanaged 10/100 hubs and switches. This commoditization is the result
of the availability of commercial chipsets that allow manufacturers to introduce
new  products  with  minimal  engineering  effort.  The Company is working  with
offshore  manufacturing  partners to develop cost competitive  products based on
these new chipsets. The Company expects to remain competitive in this segment of
the market, and believes this area to be a potential growth area for the Company
due to the expected  increase in the "home office" market segment  brought on by
the affordability of these solutions.

The Company continues to develop and sell Ethernet and Fast Ethernet adapters to
customers  who use Apple  Macintosh(TM)  and  iMAC(TM)  computers.  The  Company
historically  has been heavily  associated  with, and therefore had a dependence
on, selling products into the Apple  after-market.  While the Company  currently
designs its products to work on all computer  platforms and does not rely on new
Apple product  introductions,  a large portion of its sales in the near term are
expected  to be related to Apple  products.  Any  material  decrease in sales of
Macintoshes,  iMAC's, Power PC's, or additional developments adversely affecting
Apple's  business could have a material adverse effect on sales of the Company's
client  access  products,  which  would  materially  and  adversely  affect  the
Company's business, financial condition and results of operations.

The  Company is  dependent  on the  development  and  release  of new  products,
specifically in the switched and Fast Ethernet shared areas.  Delays in bringing
new products to market  would have a material  adverse  effect on the  Company's
financial results and condition.

The Company's success will depend in part on its ability to accurately  forecast
its future sales due to the lead time required to order  components and assemble
products.  If the  Company's  product sales  forecasts are below actual  product
demand,  there may be delays in fulfilling product orders and consequently,  the

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Company could lose current and future sales to  competitors.  Alternatively,  if
the Company's product sales forecasts are above actual product demand,  this may
result in excess orders of  components  or assembled  products and a build up in
inventory which would adversely affect working capital.

Restructuring

During the third  quarter  ended  July 4, 1998,  the  Company  restructured  its
operations.  This  restructuring of operations was necessary to re-establish the
strategic  direction of the Company and better align its operating expenses with
anticipated  revenues.  Although  the Company  expects to realize the  immediate
benefit of a reduced cost structure and other benefits from the restructuring of
operations, there is no assurance that losses will not occur in the future.

At July 4, 1998,  the  Company  recorded a $400,000  reserve for  personnel  and
related costs  associated with a company-wide  restructuring  plan.  These costs
include employee  severance costs,  benefits,  outplacement  costs,  termination
costs,  and  employee  assistance  expenses  related  to  the  realignment.  The
reduction  in force  consisted  of a reduction of  approximately  40  employees,
primarily from the sales and marketing departments.

The  Company's  action  plan  included  the  release of  proprietary  ASIC-based
switches,  development of retail  channels,  changes in the Company's  financial
model,  and  realignment  of cost  structure,  designed to better  position  the
Company  going  forward  and  which  the  Company  believes  will  leverage  its
strengths.  The  Company  plans to expand  its market  share in the SOHO  (Small
Office / Home  Office)  market  by  adding  a  retail  channel  in  addition  to
strengthening  its mail order  channel.  As part of this plan,  the  Company has
entered into new marketing  agreements with two of the nation's largest computer
retailers,  Comp USA and Fry's  Electronics  and is negotiating  agreements with
Micro Center,  and a number of regional and independent  resellers.  The Company
shipped products, including its FriendlyNet family of products to both Fry's and
Comp USA nationwide during the fourth quarter of fiscal 1998.

The Company also expanded its focus on its existing  mail order catalog  channel
including the addition of CDW,  Multiple Zones,  and Insight Direct.  Management
believes  that these  additions  will  contribute  positively  to the  Company's
results of operations in the coming quarters.

The Company  plans to focus its efforts on providing  lower cost products and to
refocus  its  research  efforts  as well as its sales and  marketing  efforts on
certain key channels for which the Company  could  leverage its  strengths.  The
Company will continue to devote significant  efforts on its educational and mail
order markets, but is also in the process of concentrating  resources to its new
retail  channel.  In  implementing  this plan, the Company found it necessary to
realign its workforce to more  effectively  focus on these channels and to bring
expenses in line with the Company's new targeted revenue and margin structure.

Industry Segment Information

Asante operates in one industry as described above.

Products

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Switch Products

Asante's  comprehensive  line of switches includes multiple families of switches
designed to meet the needs of both its vertical and horizontal market customers.
The IntraStack(TM) 10/100 6000 series dual speed switch family and the Company's
newly introduced,  feature rich  IntraSwitch(TM) 6000 series 10/100 switches are
currently Asante's highest  performance,  managed products,  designed to provide
maximum  bandwidth for those customers  requiring  solutions for high congestion
situations.  Both families  feature an integrated  HTTP  management  server with
Java(TM)-enabled   features,   as  well  as  other   advanced   functions.   The
IntraStack(TM)  family, which uses the Company's patented Goldcard(TM) connector
technology  to expand the  switching  system via a 2.1  Gigabit  PCI  backplane,
currently  includes a suite of 3 units.  The  IntraStack(TM)  6014DSB  base is a
12-port  10/100  auto-sensing  management  switch  offering two  additional  MII
expansion  slots which allow  additional  10/100 ports,  10/100 Fiber,  or 10 FL
modules to be added.  The  Intrastack(TM)  6016DSE  switch  offers an  expansion
module with 16 10/100TX ports and is fully manageable from the base module.  The
third product in this family is the IntraStack(TM)  6008FXE switch, which offers
8 100Base-FX  (fiber) ports and is fully stackable  using Asante's  Goldcard(TM)
technology  with the entire  IntraStack(TM)  family.  The  IntraSwitch(TM)  6000
series of switches currently ships in both 16 and 24 port configurations and are
based on the Company's proprietary ASIC technology.  In addition, these switches
offer the customer additional  management features such as RMON, and VLAN, and a
migration path for those customers  requiring a Gigabit  backplane.  The Company
plans to introduce additional feature rich 10/100 managed switches during fiscal
1999, including a chassis based 10/100 switch to meet the needs of the Company's
educational  customers and customers  requiring  full  featured,  high bandwidth
solutions.

The IntraSwitch(TM) 5000 series switch family currently features three products.
The  IntraSwitch(TM)  5324 is a high  performance  10 + 100 switch  featuring 24
dedicated, 10 Mbps switched ports: one fixed, dual-speed 10/100TX port featuring
NWay auto-negotiation to automatically  determine 10 or 100 Mbps operation;  and
two MII  slots  for  optional  10/100TX,  100Base-FX,  or  10Base-FL,  expansion
modules.  The  IntraSwitch(TM)  5212  introduced  in the first quarter of fiscal
1998, has 12 dedicated,  10 Mbps switched ports: one fixed, dual-speed 10/100 TX
port featuring NWay auto-negotiation; and one MII slot. The IntraSwitch(TM) 5308
introduced  in the  second  quarter of fiscal  1998,  has 8  dedicated,  10 Mbps
switched  fiber  ports;  one fixed,  dual speed  10/100TX  port  featuring  NWay
auto-negotiation,  and one  optional  MII slot for  10/100  TX,  100Base-FX,  or
10Base-FL,  expansion modules. These products feature integrated HTTP management
software, RMON, and VLAN, among other features.

The  FriendlyNet(TM)  4000 series switch family  features cost  effective,  high
performance  10/100 Mbps unmanaged switches for the smaller and midsized network
and  "power  users"  with  high  bandwidth  needs.  The  switches  feature  NWay
auto-negotiation to automatically  determine either 10 or 100 Mbps operation and
come in 2, 4, 8, and 16 port configurations.

The  Company  also  offers a 10 Mbps,  8 port  unmanaged  plus 2 10/100  uplink,
FriendlyNet(TM) Switch.

Gigabit Adapters and Other Gigabit Products

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In early fiscal 1999, the Company plans to ship its first Gigabit products.  The
Company's  first Gigabit  product,  to be introduced in the February time frame,
will be a  full-featured  Gigabit card.  The Company plans  shipping  additional
Gigabit  products in fiscal 1999 which will both  complement  its current switch
products  and  provide  those  customers  with  large  bandwidth  needs high end
solutions at  affordable  prices.  The Company  plans on investing in additional
Gigabit technology to meet the needs of its customers  requiring  implementation
of a Gigabit solution to the backbone of their networks.

10Base-T/100BASE-TX (Fast Ethernet) Systems

In addition to  switches,  the  Company  offers a complete  family of dual speed
10/100 Fast Ethernet systems and adapters to allow customers to connect personal
computers and high performance servers over a corporate Intranet.  The Company's
award-winning,  high  performance  products offer  customers with high bandwidth
needs a complete  line of products  to fulfill  their  intranet  needs and offer
those customers with existing 10BASE-T Ethernet networks a cost effective way to
transition to 100BASE-T networking.

The Company  offers a growing  family of 10/100 hub solutions for its customers.
The Company's  current products,  the FriendlyNet  10/100 Dual Speed hub family,
includes standalone 8 and 16 port 10/100 hubs. In addition, the Company offers a
stackable, unmanaged 10/100 hub as part of the FriendlyNet family. The stackable
product  includes 8 and 16 port base units, and 8 or 16 port expansion units for
departmental or workgroup sized networks.

Asante  also  offers a  stackable,  high port count  100Mb  solution  for larger
networks  under  the  AsanteFast  family  name.  The  AsanteFast  100  Hub  is a
100BASE-TX  hub providing ten times the  performance  of 10 Mbps Ethernet and is
targeted for  bandwidth  intensive  graphic,  multimedia,  and  mission-critical
applications.  The 12-port version has a stackable architecture that supports up
to 180  ports  and  comes in  intelligent  and  non-intelligent  configurations.
Features include  auto-negotiation for seamless integration of existing 10BASE-T
with new  100BASE-T  systems.  The  AsanteFast  100 Hub works with all  personal
computers equipped with a 100Mbps adapter, and supports Windows 95(TM),  Windows
NT(TM),  Novell  NetWare(TM),   Banyan  VINES(TM),  and  other  popular  network
operating systems.

The  AsanteFast  100  Management  Module  provides  network  management  of Fast
Ethernet  and  10BASE-T  networks  in order to  determine  network  performance,
traffic  bottlenecks,  collisions and other vital signs.  The Management  Module
fully  integrates with the Asante Fast 100 Hub shared backplane with a key-sized
expansion  card so that it  snaps  on top of the hub  eliminating  the  need for
external  cabling.  The module's  built-in  simple network  management  protocol
("SNMP") support enables the  interconnected hub stack to be managed as a single
logical  repeater and controlled  from any  workstation  running  AsanteView(TM)
network management software or from any SNMP-compatible or Telnet console.

Fast Ethernet Adapter Cards

The  Company's   AsanteFast  10/100  dual  speed  adapters  provide   all-in-one
compatibility  to  10BASE-T  and  100BASE-TX   Ethernet  networks  for  personal
computers  utilizing  standard PCI bus architecture.  The product plugs into the
PCI slot of the computer and  automatically  configures itself to the system. It
utilizes an "autonegotiating"  feature that senses whether the network hub speed
is 10 Mbps or 100 Mbps and sets the  adapter  speed  accordingly.  As such,  the
product allows the customer to move from the existing  10BASE-T network to a new
Fast Ethernet network. The Asante Fast 10/100 has four LED lights

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to assist with trouble shooting and to indicate connection speed, link integrity
and data traffic. The Company's PCI cards ship with Windows(TM),  Macintosh(TM),
and Power PC(TM) drivers for cross platform compatibility.

10BASE-T Systems and Adapter Cards

Along  with the trend by  customers  in the more  sophisticated  sectors  of the
networking market to move to switching and 10/100 shared technology,  the demand
for low cost 10 Mbps Ethernet  technology  from more  price-sensitive  customers
remained  consistent.  This  trend is  particularly  strong in the  kindergarten
through grade 12 education  market in which the Company has a strong  reputation
and product name recognition.  The adoption by schools of wide area links to the
worldwide  internet has led to the use of low cost 10 Mbps shared technology for
their existing local area networks.  Schools  connecting to the internet for the
first time find that they need to install an Ethernet  LAN and they have favored
low cost 10 Mbps solutions. The Company continues to hold a competitive position
in the  market  for 10 Mbps  shared  hubs,  and will  continue  to  pursue  cost
reduction objectives for its 10 Mbps product line to maintain competitiveness in
this  market.  The Company  expects that sales levels in the 10 Mbps market will
not  continue as  declining  pricing for  switching  technology  and 10/100 Mbps
shared  Ethernet   technology  are  making  adoption  of  these  standards  more
attractive.

The Company offers a broad family of 10BASE-T systems and adapters to meet needs
ranging from the  corporate  workgroup to the  departmental  workgroup and small
business user.

The   NetStacker(TM)   is  a  dual-slot,   two-segment,   intelligent   Ethernet
concentrator  that gives the user the  flexibility of a multi-slot  chassis with
the  convenience  of a stackable  hub. Up to three  NetStacker(TM)  units can be
snapped  together  to  support  up to 72 users via  10BASE-T  connections.  Each
chassis accommodates two multi-port repeater modules for 10BASE-T,  10BASE-2 and
10BASE-F  Ethernet  connectivity.  A  two-port  Ethernet  bridge  module  may be
installed in any available  chassis slot to segment and isolate network traffic.
The  NetStacker(TM)  is also  available  with an SNMP-based  network  management
module and is  manageable  with  IntraSpection(TM)  and  AsanteView(TM)  Network
Management software.

The  AsanteHub   2072,  an  expandable,   seven-slot,   chassis-based,   72-port
intelligent hub, offers departmental network managers  enterprise-level features
at a  departmental  price.  It has a  seven-slot  architecture  that  allows the
addition of a variety of multi-port  repeater  modules  (10BASE-T,  10BASE-2 and
10BASE-F),  a bridge module and an SNMP-based network management module. Network
growth can be accommodated  simply,  inexpensively  and on an as-needed basis by
inserting new modules.  A dual segment  backplane  allows the network manager to
create two completely  separate  networks within the AsanteHub 2072's chassis to
segment   traffic  and  optimize   network   efficiency.   When   combined  with
AsanteView(TM)  network  management  software,  this  hub  provides  centralized
management  and  diagnosis  which can be operated  both  locally and remotely to
configure,  control  and set alarms for the hub from a  personal  computer.  The
Company also offers dual  redundant  power  supplies for the AsanteHub  2072 for
fault-tolerant applications.

The 10T unmanaged hub family includes multiple port versions including 8, 12 and
24 port versions.  In addition,  the Company offers a 6-port, BNC unmanaged hub.
These 10T hubs form a family of inexpensive,  non-intelligent  Ethernet hubs for
connecting personal computers,  workstations  (including UNIX), network printers
and other network resources to an Ethernet  network.  These systems are used for

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creating small networks or extensions to existing  networks.  They allow network
managers to use economical  unshielded twisted pair (UTP) telephone wire instead
of coaxial cable to set up their LANs,  and support all major network  operating
systems and hardware configurations.

The  FriendlyNet(TM)  10T Hubs in 5-port and 8-port product  configurations also
comprise a family of  inexpensive,  non-intelligent  Ethernet  hubs  designed to
complement  the 10T-Hub/8,  /12 and /24 to meet the needs of the  economy-minded
user, small business,  and home network. Their smaller size makes them ideal for
small businesses and personal or home users who have limited workspace.

Adapter Cards for IBM-compatible personal computers. The Company's AsanteNIC(TM)
and  EtherPaC(TM)  line of 10BASE-T  Ethernet client access products  consist of
nine  different  cards,  which support  either PCI, ISA, EISA or MCA buses.  All
cards support Novell  NetWare(TM),  Windows  NT(TM),  and other popular  network
operating systems and protocols.

Adapter Cards for Macintosh(TM) Computers. The Company sells an Ethernet adapter
card and transceiver product line supporting all Macintosh(TM) platforms and all
Ethernet cabling options. The Company also offers AsantePrint which allows older
printers to be connected to 10 Mbps networks.

Other Client  Access  Products.  Asante offers a family of converters to connect
LocalTalk devices to an Ethernet network.  These converters  connect from 2 to 8
devices such as printers to an Ethernet network. In addition, the Company offers
FriendlyNet media adapters to connect PC and Macintosh(TM) computers or printers
with built-in Ethernet support to an Ethernet network.

Software Products

Software design and  implementation  is a key component of all Asante  products.
Separately, the Company markets several cutting edge software products.

Asante currently offers two network management  options:  IntraSpection(TM)  and
AsanteView(TM).  IntraSpection(TM) is the Company's Web-based network management
software  program,  providing  users with  customized  management  solutions and
support for every SNMP-based  network device on the market.  IntraSpection(TM)'s
customized support is available through Asante plug-in  Personality Modules that
are sold as  additions  to the basic  IntraSpection(TM)  software.  Furthermore,
because IntraSpection(TM) allows for programming in HTML and Java(TM) instead of
the customary C++,  network  managers can quickly create  customized  management
modules on their own, a capability  previously  not available in the  networking
industry. The basic  IntraSpection(TM)  software is available at no cost through
the Company's internet site at http://www.asante.com.

AsanteView(TM) is the Company's  proprietary  network  management  software that
operates with the SNMP protocol.  Using  AsanteView(TM)  with an AsanteHub 1016,
NetStacker  or  AsanteHub  2072,  a network  manager can monitor and control the
network.  AsanteView(TM)  enables  the  manager  to gather  network  statistics,
monitor  network  performance,  pinpoint  bottlenecks  and errors  and  optimize
network performance. The graphic user interface conveys network information at a
glance.  AsanteView(TM)  offers both local and remote  capabilities  and permits
management  of up to 12 Asante  hubs at the same  time from a single  management
station.

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Asante has developed  multiple  versions of its network  acceleration  software,
NetDoubler(TM).   Providing  a  high-performance  solution  for  publishing  and
pre-press  networks  when  combined  with  Asante  switched  and  Fast  Ethernet
products,  NetDoubler(TM)  runs on  Macintosh(TM)  computers  and  most  popular
servers including Windows NT(TM) Macintosh(TM) and UNIX. The Company has several
patents pending for its acceleration software and systems technology.

Technology

The Company is a provider of leading edge  products in the  Ethernet  networking
industry.  The  Company  introduced  the first  100 Mbps  stackable  hub  system
products in 1995 and has  continued to bring new  technology to the market ahead
of competition.  In line with its goal to provide its customers with value-added
features which continue to  differentiate  the Company's  products from those of
its  competitors,  the Company  has  developed  and  patented  its  GoldCard(TM)
connector  technology.  The Company's  Goldcard(TM)  connector technology allows
customers to expand the Company's switching via a 2.1 Gbps PCI backplane without
having to use  valuable  100BASE-T  ports in order to connect  the  modules in a
stack,  giving the Company a true  stackable  system  architecture  that is cost
effective for the customer.  In addition,  the Company  completed design work on
its  proprietary  10/100 ASIC  (Application  Specific  Integrated  Circuit) chip
allowing  the  Company to offer the most  competitively  priced  switches in the
industry. The Company is continuing its development of new and enhanced products
for connecting to the Internet and corporate Intranets. The Company will also be
focusing efforts to expand its Gigabit product line.

Marketing and Distribution

The Company  markets its products in three main channels:  first,  through a two
tier  distribution  channel which sells  primarily to  commercial  and corporate
users;  second,  the Company  sells  directly to a large  number of  educational
institutions; and third, through a number of OEM customers.

Asante's  major  distributors  are leading  wholesale  distributors  of computer
products in North  America.  To  supplement  the  efforts of these  distributors
overseas,  the Company has  appointed  international  distributors  for specific
territories.  All of the Company's distributors are appointed on a non-exclusive
basis.

Asante also sells its client  access and  network  system  products  directly to
major  universities  and  educational  institutions  to  take  advantage  of the
significant penetration of the Company's products in these markets.

Beginning in fiscal 1996, the Company  expanded its effort to sell more products
to  OEM  customers.  As a  result,  a  significantly  increased  portion  of the
Company's  revenue  resulted  from OEM  sales in  fiscal  1997,  due to  certain
agreements with larger OEM customers.  These  relationships  may typically cause
fluctuations in the Company's business based on the Company's ability to locate,
or maintain  various OEM  opportunities  and the ability of the Company to offer
cutting  edge,  cost  effective  technology  of interest  to its OEM  customers.
However,  sales to OEM  customers  declined in fiscal 1998 and the Company  will
continue to focus resources on obtaining  additional,  cost effective agreements
with  larger  OEM  customers,  although  there  can be no  assurance  that  such
agreements will be obtained.  OEM sales are expected to continue to constitute a
smaller portion of the Company's total sales in fiscal 1999.

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Sales to customers outside the United States accounted for approximately  22.0%,
18.0%, and 23.1% of the Company's net sales in fiscal years 1998, 1997, and 1996
respectively.  The increase in international  sales as a percentage of net sales
in fiscal 1998, was due primarily to increased sales in Europe and decreased OEM
sales.  The decrease in  international  sales as a percentage  of total sales in
fiscal 1997,  was due primarily to increased  sales of products to OEM customers
in the United States.  All sales to  international  customers are denominated in
U.S. dollars.  Accordingly,  the Company's  operating results are subject to the
risks inherent in international  transactions,  including  changes in regulatory
requirements,  exchange rate fluctuations  that may make the Company's  products
more expensive to non-U.S. purchasers, tariffs or other barriers.

The Company  believes that it has good  relationships  with its distributors and
intends to continue to introduce new products through its existing  distribution
channels.  The Company encourages the marketing efforts of its distributors with
cooperative advertising allowances and incentive-based rebates, and promotes its
products  and builds brand name  recognition  by  extensive  trade  advertising,
participation  in industry  trade  shows,  and other  marketing  efforts.  As of
October 3, 1998,  the Company  supported the sales  efforts of its  distributors
with 36 direct sales and support related employees located throughout the United
States who promote the Company's  products within assigned  territories,  and 15
outside sales representatives.

The Company's agreements with its distributors can generally be terminated after
an initial term of one year or on short notice without cause, and do not provide
for minimum  purchase  commitments  or preclude the  distributors  from offering
products that compete with those offered by the Company.

The  Company  grants  to  its  distributors  limited  rights  to  return  unsold
inventories of the Company's products in exchange for new purchases and provides
certain price  protection  to its  distributors.  Although the Company  provides
reserves for projected returns and price decreases, any product returns or price
decreases in the future that exceed the Company's reserves will adversely affect
the Company's business,  financial condition and results of operations. See Item
7:  Management's  Discussion and Analysis of Financial  Condition and Results of
Operations.

The  distribution  of  products  such as those  offered by the  Company has been
characterized   by  rapid  change,   including   consolidations   and  financial
difficulties of some distributors and the emergence of alternative  distribution
channels.  In  addition,  there is an  increasing  number of  product  suppliers
competing for access to these channels. Distributors may, at their option and at
any time,  cease  marketing the Company's  products  without prior notice to the
Company.  A  reduction  in the  sales  effort  by any  of  the  Company's  major
distributors or the loss of any one of these  distributors would have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.  There  can be no  assurance  that  future  sales  by the  Company's
distributors  will remain at current  levels or that the Company will be able to
retain its current distributors on terms that are commercially reasonable to the
Company. Although the Company believes that its major distributors are currently
adequately capitalized, there can be no assurance that in the future one or more
of  these  distributors  will  not  experience  financial   difficulties.   Such
difficulties could have a material adverse effect on the Company.

In fiscal 1997, the Company  altered a portion of its warranty  policy  limiting
coverage on certain of its high-end  switch products to 3 years. In fiscal 1998,
the  Company  adopted a limited  lifetime  warranty  of its  existing  unmanaged
products and new 10/100 6000 series managed and 4000 series unmanaged

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switches.  This  warranty  excludes from  lifetime  coverage,  the fan and power
supply  included with its products,  due to the shorter life expectancy of these
parts. The Company has not encountered material warranty claims,  although there
can be no assurance that claims will not increase  substantially  over time as a
result of the change to a lifetime  warranty  for a  majority  of the  Company's
products.  Future warranty claims exceeding the Company's  reserves for warranty
expense  could  have an  adverse  effect on the  Company's  business,  financial
condition and results of operations.

Company warranties are limited to the Company's  obligation to repair or replace
the defective  product.  The Company  attempts to further limit its liability to
end-users through disclaimers of special, consequential and indirect damages and
similar provisions in its end-user warranty.  However, no assurance can be given
that such limitations of liability will be legally enforceable.

Backlog

The Company  generally  ships  products  shortly  after  orders are received and
consequently  maintains very little backlog.  Accordingly,  the Company does not
believe  that its  backlog as of any  particular  date is  indicative  of future
sales.

Engineering and Product Development

The markets for the Company's client access and network system products continue
to be characterized by rapidly changing technology,  evolving industry standards
and frequent new product  introductions.  Asante  believes that  maintaining its
market  position in the  Macintosh(TM)  connectivity  market and  expanding  its
presence in the multiplatform  market requires continuing  investment to develop
new products, enhance existing products and reduce manufacturing costs.

As of October 3, 1998, the Company had 26 employees  engaged in engineering  and
product  development.  During the fiscal years ended October 3, 1998,  September
27,  1997,  and  September  28,  1996,  the  Company's  engineering  and product
development  expenses were  approximately $6.6 million,  $7.1 million,  and $6.2
million respectively.

The Company continues to invest  significant  resources in engineering  projects
and will  continue to focus  additional  resources as needed in order to develop
and bring to market additional high technology,  high demand products supporting
both its network systems and the  Intranet/Internet  markets. In particular,  in
fiscal 1998 and going forward,  the Company will focus additional efforts in the
areas of imbedded software design,  development of additional switches and other
LAN-edge devices,  WAN router products,  and on system integration.  The Company
will also direct product development efforts to expand its Gigabit product line.

The Company  believes its future success will depend upon its ability to enhance
and expand its existing product  offerings and to develop in a timely manner new
products  that  achieve  rapid  market  acceptance.  Substantially  all  of  the
Company's products are designed to provide connectivity to Ethernet LANs. If the
Company is unable for  technological  or other reasons to modify its products or
develop new products to support Fast Ethernet or Switched  Ethernet  technology,
or if Ethernet's  importance  declines as a result of alternative  technologies,
the Company's  business,  financial condition and results of operations would be

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materially  and adversely  affected.  There can be no assurance that the Company
will be  successful in  developing  and marketing  enhanced or new products in a
timely  manner,  that those  products will gain market  acceptance,  or that the
Company  will be able to respond  effectively  to  technological  changes or new
industry standards.

Manufacturing and Suppliers

The  Company's  manufacturing  operations  consist  primarily  of  managing  its
materials and inventories,  purchasing  certain  components,  performing limited
final  assembly of some products and testing and performing  quality  control of
certain   materials,   components,   subassemblies  and  systems.   The  Company
subcontracts  substantially  all of the assembly of its products.  This includes
Orient  Semiconductor  Electronics,  Ltd.  ("OSE"),  a semiconductor and printed
circuit board assembler based in Taiwan,  and several other  subcontractors  and
manufacturers  based in California,  Taiwan and China. The Company believes that
its quality control  procedures and the quality  standards of its  manufacturing
partners have been  instrumental in the high  performance and reliability of the
Company's  products.  To date, customer returns of the Company's products due to
poor  workmanship  have not  been  material.  See  Note 5 of Notes to  Financial
Statements.

OSE and the Company's other  subcontract  manufacturers  purchase or manufacture
most components,  assemble printed circuit boards, and test and package products
for Asante on a purchase  order,  turnkey  basis.  In fiscal  1998,  the Company
purchased  $8.2 million of goods from OSE. The Company does not have a long-term
supply  agreement  with  any  of  its  subcontractors.   If  any  one  of  these
subcontractors experience financial or operational difficulties that result in a
reduction or interruption in the supply of products to the Company, or otherwise
fail to deliver  products to the Company on a timely basis, the Company would be
required to procure sufficient manufacturing supply through alternative sources.
The Company believes that alternative manufacturers are available;  however, the
qualification  of such  alternative  sources  and  the  commencement  of  volume
manufacturing of the Company's products could take a significant period of time.
Accordingly,   any  reduction  or  interruption  of  supply  from  its  existing
subcontractors  would  materially and adversely  affect the Company's  business,
financial condition and results of operations.  In addition,  the use of OSE and
other  offshore   subcontractors  subjects  the  Company  to  certain  risks  of
conducting  business  internationally,  including  changes  in trade  policy and
regulatory requirements,  tariffs and other trade barriers and restrictions, and
changes in the political or economic  environment in Taiwan and other  countries
where the Company's subcontractors are located.

Although  the Company  generally  uses  standard  parts and  components  for its
products,  certain key components  used in the Company's  products are available
from only one  source and others  are  available  from only a limited  number of
sources.  Components  currently  available from only one source  include,  among
others,  custom integrated circuits used in the Company's  intelligent hubs, and
certain  ASICs used in the  Company's  10/100 and 10T  switching  products.  The
Company does not have a long-term  supply  agreement  with any of its suppliers.
The Company  believes that certain key  components  remain in short supply,  and
from time to time receives only limited  allocations  of these products which in
prior years has caused shipping delays of one or more of the Company's products.
If the Company or any of its  suppliers  experience  component  shortages in the
future or any of its competitors have long-term supply agreements under which it
is possible  for them to obtain  greater  supplies of such  components  than the
Company,  the Company's business,  financial condition and results of operations
could be materially and adversely  affected.  The Company also relies on OSE and
subcontractors to procure many of the components used in

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the Company's products. Procurement and stocking of components and subassemblies
is done by these subcontractors based on the Company's purchase orders.

Competition

The markets for the Company's products are highly  competitive,  and the Company
believes  that  such  competition  will  intensify.  Competitive  trends  in the
Company's  markets are continuing  declines in average selling  prices,  coupled
with improvements in product features and performance.  The Company expects such
trends will continue.

In the mainstream market, the Company competes with Cisco Systems, Nortel, 3Com,
Intel, and many smaller  companies.  Competition from these and other companies,
including new  entrants,  is expected to  intensify,  particularly  in the SOHO,
workgroup,  and departmental user markets.  Many of the Company's competitors in
this market are more established, enjoy significant name recognition and possess
far greater financial, technological and marketing resources than the Company.

The Company  believes  the  principal  competitive  factors in the  departmental
connectivity  market are brand  name  recognition,  value for price,  breadth of
product line,  technical features,  ease of product use,  reliability,  customer
support  and the  ability to develop  and  introduce  new or  enhanced  products
rapidly.  The Company  believes that it has established  itself as a supplier of
high quality,  reliable products and as a result,  currently  competes favorably
with respect to these  factors.  There can be no  assurance,  however,  that the
Company will be able to compete  successfully  in the future against  current or
future competitors,  or that it will be able to adapt successfully to changes in
the market for its products.  The Company's inability to compete successfully in
any  respect  or to respond timely  to market  demands  or changes  would have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

In the Macintosh(TM)  client access market,  Apple develops and markets products
that compete directly with certain of the Company's client access products.  The
Company also  competes  with a number of other  companies in this market.  Apple
provides  Ethernet  connectivity in its computers  which has adversely  affected
sales of the  Company's  client access  products.  The Company also relies on an
informal  working  relationship  with  Apple in  connection  with the  Company's
product  development   efforts.   Apple  is  likely  to  continue  to  introduce
competitive  products,  and has significantly  greater financial,  marketing and
technical  resources  than the Company.  Furthermore,  no assurance can be given
that  Apple  will  not  pursue  a  more  aggressive  strategy  with  respect  to
competitive  products,  increase the availability of Ethernet on the motherboard
of its computers or in other ways attempt to make the sale of add-on products by
third party developers and vendors such as the Company more difficult.  If Apple
takes any of such  actions,  the  Company's  business,  financial  condition and
results of operations  would be materially and adversely  affected.  See Item 7:
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations.

During  fiscal  1998,  a smaller  portion  of the  Company's  sales  represented
products  sold to OEMs than in fiscal 1997.  While the Company has pursued,  and
will continue to pursue, additional OEM agreements with larger companies,  there
can be no assurance  that  existing  OEM  agreements  will  continue or that new
agreements  will be  obtained.  In addition,  since the Company  intends to seek
additional  large product  volume  arrangements,  the  acquisition  or loss of a
single large OEM customer or several smaller OEM customers would have a material
effect on the Company's revenues.  Unless the Company signs

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additional large OEM agreements in the near future, the Company expects that OEM
sales will remain flat or decrease  slightly as a percentage of total revenue in
fiscal 1999.

A significant  percentage of the Company's sales in fiscal 1998 was derived from
products  designed  for  use  with  Macintosh(TM)  Power  PC(TM),  and  iMAC(TM)
computers.  Sales of these  products as a percentage of total  Company  revenue,
excluding OEM sales,  have steadily  declined over the last several years due to
Apple's  competition in the Company's  adapter card market and  incorporation of
Ethernet into the  motherboard  of a large portion of its products,  and Apple's
decline  in market  share.  However,  the  Company  expects  that  sales of such
products will  continue to represent a substantial  portion of its net sales for
the  foreseeable  future.  There can be no  assurance  that unit  sales of these
products will continue at their  present  levels or increase in the future.  Any
material adverse  developments in Apple's business could have a material adverse
effect on sales of the Company's client access products,  which would materially
and adversely affect the Company's business,  financial condition and results of
operations.  See Item 7:  Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations.

Proprietary Rights

The  Company  is  currently   pursuing   several  domestic  and  foreign  patent
applications relating to its acceleration software and systems technology.

The  Company   has   received  in  the  past  and  may  receive  in  the  future
communications from third parties asserting intellectual property claims against
the  Company.  Claims  made in the  future  could  include  assertions  that the
Company's products infringe,  or may infringe on the proprietary rights of third
parties or requests for indemnification against such infringement.  There can be
no assurance that any claim will not result in  litigation,  which could involve
significant  expense to the  Company.  If the  Company is  required  or deems it
appropriate  to  obtain a license  relating  to one or more  products  or future
technologies,  there can be no assurance that the Company would be able to do so
on commercially reasonable terms, or at all.

The Company  relies on a combination of patents,  trade  secrets,  copyright and
trademark law, nondisclosure  agreements and technical measures to establish and
protect its proprietary rights in its products.  Despite these  precautions,  it
may be possible for unauthorized  third parties to copy aspects of the Company's
products  or  to  obtain  and  use  information  that  the  Company  regards  as
proprietary. Policing unauthorized use of the Company's technology is difficult,
and there can be no assurance  that the measures being taken by the Company will
be successful.  Moreover,  the laws of some foreign countries do not protect the
Company's  proprietary  rights in its products to the same extent as do the laws
of the United States. See Item 3: Legal Proceedings.

Employees

As  of  October  3,  1998,  the  Company  had  130  employees,  including  26 in
engineering  and product  development,  33 in  manufacturing  operations,  46 in
marketing,  sales and support services, and 25 in corporate administration.  The
number  of  employees  reflects  a  reduction  in  workforce  as a result of the
restructuring which occurred in the third quarter of fiscal 1998.

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The  Company's   success  also  depends  to  a   significant   extent  upon  the
contributions  of  key  sales,  marketing,   engineering,   manufacturing,   and
administrative  employees,  and on the  Company's  ability to attract and retain
highly qualified  personnel,  who are in great demand. None of the Company's key
employees are subject to a  non-competition  agreement with the Company.  Unless
vacancies  are  promptly  filled,  the  loss of  current  key  employees  or the
Company's  inability  to attract and retain  other  qualified  employees  in the
future could have a material adverse effect on the Company's business, financial
condition and results of operations.

None of the Company's employees are represented by a labor organization, and the
Company is not a party to any collective bargaining  agreement.  The Company has
never had any employee  strike or work stoppage and considers its relations with
its employees to be good.


ITEM 2. PROPERTIES

The  Company's  headquarters,  including  its  executive  offices and  corporate
administration,   manufacturing,   marketing,   sales  and   technical   support
facilities,  are  located in San Jose,  California.  The Company  occupies  this
facility  under a lease that expires on August 31, 1999.  The lease  provides an
option to extend for an additional  five years.  During 1998, the Company leased
sales offices in Southern  California,  Colorado,  North Carolina,  Texas, Utah,
Washington,  Taiwan  and  England  . The  Company  believes  that  its  existing
facilities are adequate to meet its requirements for the foreseeable  future and
that suitable  additional or substitute  space will be available as needed.  See
Note 8 of Notes to Financial Statements.


ITEM 3. LEGAL PROCEEDINGS

From time to time the Company is subject to legal  proceedings and claims in the
ordinary  course of  business,  including  claims  of  alleged  infringement  of
trademarks and other intellectual property rights.

In July and August of 1994,  several  complaints  were filed against the Company
and certain of its  current  and former  officers  and  directors  in the United
States District Court,  Northern District of California,  alleging violations of
federal securities laws. The lawsuits, which purport to be class actions brought
on behalf of all  purchasers  of the  Company's  stock  during the  period  from
December 10, 1993 through July 11, 1994, were  consolidated and plaintiffs filed
a consolidated, amended class action complaint on October 21, 1994. In September
1995, the Company entered into an agreement in principle to settle the suit with
the establishment of a settlement fund of $2.6 million.  The Company contributed
$520,000,  with the remainder funded by the Company's insurance. On November 18,
1996, the Court entered an order finally approving the settlement and dismissing
the  action  against  all  defendants  with  prejudice.

On September  13, 1996, a complaint was filed by Datapoint  Corporation  against
the   Company   and  six  other   companies   individually   and  as   purported
representatives of a defendant class of all manufacturers,  vendors and users of
Fast Ethernet-compliant,  dual protocol local-area network products, for alleged
infringement of United States letters Patent Nos.  5,077,732 and 5,008,879.  The
complaint  seeks  unspecified   damages  in  excess  of  $75,000  and  permanent
injunctive  relief.  The Company has filed a response to the  complaint  denying
liability. The case has been consolidated,  for purposes of claim interpretation
only, with similar cases filed against several other defendants,  which include,
among others,

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<PAGE>


Intel  Corporation,  IBM  Corporation,  Cisco  Systems,  Bay  Networks,  and Sun
Microsystems.  Plaintiff  has served  claim charts  purporting  to set forth its
basis for its claims that products  compliant with an IEEE standard infringe its
patents.  On April 16, 1998, the Special Master  appointed by the court issued a
report agreeing in most material respects,  with the defendants'  interpretation
of the alleged  patent  claims.  Subsequently,  and by order dated  November 23,
1998,  the  District  Court  adopted  without  modification  the findings of the
Special Master and the  recommendations  of the Magistrate Judge regarding claim
interpretation of the patents-in-suit.  The Court noted that plaintiff Datapoint
had conceded that the Special  Master's claim  interpretation  would result in a
finding of no infringement for the accused  products,  and therefore ordered the
case dismissed on the merits effective December 30, 1998.

Subsequent  to the Company's  fiscal year end, on October 16, 1998,  the Company
received a collection  letter from Dunn and  Bradstreet,  Receivable  Management
Services, on behalf of Plaintree Systems Corporation  ("Plaintree").  The letter
claims that the Company owes Plaintree  $197,400 and demands immediate  payment.
The  Company  believes  Plaintree's  claim  stems  from  the  OEM  Purchase  and
Manufacturing License Agreement between Plaintree and the Company, dated June 1,
1996.  Pursuant to the Agreement,  the Company  purchased  certain products from
Plaintree.  The Company has determined the Plaintree products were defective and
has demanded arbitration against Plaintree pursuant to the Agreement, for monies
already paid to  Plaintree,  a minimum of  $300,000.  The time to respond to the
Company's  demand  has not yet  passed.  The  arbitration  will  take  place  in
Massachusetts.  Management  believes the ultimate resolution of this matter will
not have a material effect on the Company's financial position or cash flows.


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

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter of fiscal 1998.


EXECUTIVE OFFICERS OF THE COMPANY

The executive  officers of the Company,  their ages as of December 15, 1998, and
certain information regarding each of them are as follows:

       Name              Age             Position with the Company
       ----              ---             -------------------------

Wilson Wong (1)          51       President and Chief Executive Officer
Jeff Yuan-Kai Lin (2)    47       President and Chief Executive Officer
William Leung (3)        57       Vice President of Operations
Rajiv Matthew (4)        38       Vice President of Finance and Administration
Ronald Volkmar (5)       51       Vice President of Sales Americas
William Fenley (6)       51       Vice President of Product Marketing and OEM
                                   Business
Robert Sheffield (7)     49       Vice President of Finance, CFO and Secretary
Paul Smith (8)           40       Senior Vice President of Marketing and Sales
John Jeng (3)            43       Vice President of Operations
--------------------------------------------------------------------------------

                                       18

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

<PAGE>


1)   Wilson Wong  resigned as an Officer of the Company in August,  1997 and was
     rehired as Vice  President of  Engineering  on September 10, 1998. Mr. Wong
     assumed the  position  previously  held by Mr. Yen Chang.  On December  17,
     1998,  Mr. Wong  assumed  the  position of  President  and Chief  Executive
     Officer following the resignation of Mr. Lin.

2)   On December 17, 1998, Mr. Jeff Lin resigned from his positions as President
     and Chief  Executive with the Company,  but will retain his position on the
     Board of Directors.

3)   On December 7, 1998,  Mr.  William  Leung  resigned  as Vice  President  of
     Operations. His responsibilities will be assumed by Mr. Jeng.

4)   Rajiv Matthew was hired as Vice President of Finance and  Administration on
     July 6, 1998.

5)   Ronald  Volkmar  left the  Company in fiscal  1994 and was  rehired as Vice
     President of Sales-Americas on April 3, 1998.

6)   In November  1998,  Mr.  Fenley was  promoted to Vice  President of Product
     Marketing and OEM Sales.

7)   Robert  Sheffield  resigned from his positions  with the Company  effective
     June 30, 1998.

8)   Paul Smith  resigned  from his position  with the Company  effective May 1,
     1998.


Mr.  Jeff Lin  co-founded  the  Company  in 1988 and  until  recently  served as
President,  Chief Executive Officer and Chairman of the Board of Directors.  Mr.
Lin also served as Vice  President  of  Engineering  following  the death of Mr.
Tommy  Leung from  November  24,  1997 until Mr.  Wilson  Wong was hired as Vice
President of  Engineering  on September  10, 1998.  From 1993 through  1994,  he
served as Vice President, General Manager of Network Systems Business. From 1991
to 1993, he served as the Company's Chairman of the Board of Directors and Chief
Operating  Officer.  From 1988 to 1991,  Mr.  Lin served as the  Company's  Vice
President of Operations and Engineering, Chief Financial Officer and Secretary.

Mr. Wilson Wong  co-founded the Company in 1988 and currently  serves  President
and  Chief  Executive  Officer.  From  1994 to  August  1997,  he served as Vice
President and General  Manager and  Co-Chairman of the Board of Directors.  From
1993 to 1994, he served as Vice President and General  Manager for the Company's
client access products.  From 1988 to 1993, he served as the Company's President
and Chief  Executive  Officer.  Mr.  Wong  serves as a Director  of the Board of
Directors.

Mr.  William  Leung  joined the  Company  in August  1995 as Vice  President  of
Operations.  From  December  1987 to August  1995,  he was  President  and Chief
Executive  Officer of Cache Computers,  Inc., a manufacturer of motherboards for
personal  computers.  Mr.  William  Leung is not  related  to Mr.  Tommy  Leung,
previously  Vice  President  of  Engineering.  On  December 7, 1998,  Mr.  Leung
resigned his position with the Company.  The  responsibilities of Mr. Leung will
be assumed by Mr. John Jeng.

Mr. Rajiv Matthew  joined the Company in July 1998 and serves as Vice  President
of Finance and Administration and Principal Financial Officer. From January 1997
to July 1998, he was Corporate

                                       19

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

<PAGE>


Controller at Avant! Corporation,  an electronic design automation company. From
1994 to 1995, he was Treasury  Director for  Connor-Seagate,  a manufacturer  of
disk drives and other electronic storage devices. From 1992 to 1994, Mr. Matthew
was  Staff  Director-Finance  for  Airtouch   Communications   (formerly  Pactel
Corporation). Prior to Pactel Corporation, Mr. Matthew held financial management
positions with  BankAmerica  Corporation  and  PriceWaterhouseCoopers,  LLP. Mr.
Matthew  also  serves as  non-executive  director of Ibeam  Technologies,  a PCB
supplier.

Mr. Ronald Volkmar joined the Company in April 1998 and currently serves as Vice
President  of  Sales,  Americas.  From  September  1997 to  March  1998,  he was
President of Mustang  Microsystems,  a sales  consulting firm. From June 1996 to
September  1997, Mr. Volkmar was Director of Sales for Paladin  Marketing,  Inc.
From October 1995 to June 1996, he was Vice President of Sales and Marketing for
Lite-on,  a  manufacturer  of network  systems  products.  Mr.  Volkmar was also
formerly Vice  President of Sales and Marketing for Asante from December 6, 1989
to June 30, 1994.

Mr.  William  Fenley  joined the Company in January  1996,  and served as Senior
Director Of OEM Business  until  November 16, 1998,  when he was promoted to his
current position of Vice President of Product  Marketing and OEM Business.  From
December 1994 to January  1996,  he was Vice  President of OEM Sales for Zynx, a
manufacturer  of network  adapter  cards.  From June 1989 to December  1994, Mr.
Fenley  was Vice  President  of Sales  and  Marketing  for  Cache  Computers,  a
manufacturer of motherboards and network adapter cards.

Mr. John Jeng joined the Company in December 1998 and  currently  serves as Vice
President of Operations.  From December 1992 to October 1998, he was Director of
Operations  for  Diamond  Multimedia  (formerly  known  as  Micronics,  Inc),  a
manufacturer of motherboards,  computer,  and other multimedia related products.
From February 1988 to December 1992, Mr. Jeng was Director of Manufacturing  for
Eveready Industry Corp., a subcontract manufacturer.

                                       20

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

<PAGE>


                                     PART II

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

The  following  table sets forth the high and low sale prices for the  Company's
Common Stock as reported on the NASDAQ  National Market under the trading symbol
ASNT for the Company's last two fiscal years.

Fiscal 1998                         High                      Low    
---------------------------------------------------------------------
First quarter                       $5 3/4                   $3  1/8
Second quarter                       3 7/8                    2 15/16
Third quarter                        4                        2
Fourth quarter                       2 3/8                      13/16

Fiscal 1997                         High                      Low    
---------------------------------------------------------------------
First quarter                       $7 3/8                   $4 3/4
Second quarter                       5 1/2                    4 3/16
Third quarter                        5 3/8                    3 5/8
Fourth quarter                       6 9/16                   4 7/8


As of November 27, 1998,  there were 120 stockholders of record of the Company's
Common  Stock.  The Company has not paid cash  dividends on its Common Stock and
does not plan to pay cash dividends in the foreseeable future.

Factors such as announcements  of  technological  innovations or new products by
the  Company,  its  competitors  and other  third  parties as well as  quarterly
variations  in the Company's  anticipated  or actual  results of operations  and
market conditions in high technology industries generally,  may cause the market
price of the Company's Common Stock to fluctuate significantly. The stock market
has on occasion  experienced extreme price and volume  fluctuations,  which have
particularly  affected the market prices of many high  technology  companies and
have often been unrelated to the operating performance of such companies.  These
broad market fluctuations may adversely affect the market price of the Company's
Common Stock.  In addition,  the market price of the Company's  stock may not be
indicative of current or future performance.

In early fiscal 1998, the Company  issued 4,648 shares of its restricted  common
stock to Dr. David Lam as compensation for consulting  services  rendered by Dr.
Lam's  company  during  fiscal 1997 prior to his  becoming a board member of the
Company.   Such  shares  were  issued  pursuant  to  a  claimed  exemption  from
registration under section 4(2) of the Securities Act of 1933, as amended,  as a
private  placement to one  individual  who acquired such shares with  investment
intent.

                                       21

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<PAGE>


On September 23, 1998, the Company announced a stock repurchase program in which
the Company may repurchase up to 500,000 shares of its outstanding  Common Stock
over a period of up to one year.  Pursuant  to this  program,  the  Company  had
repurchased  15,500  shares of its common stock for $28,400.  As of November 27,
1998,  the Company had  repurchased  67,000  shares of its Common  Stock in open
market transactions.  Total stock repurchases will not exceed 500,000 shares, or
5.4% of the total number of shares of the Company's Common Stock outstanding.


<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
        (In thousands, except per share data)

<CAPTION>
Statement of Operations Data:                                                           Year ended
------------------------------------------------------------------------------------------------------------------------------------
                                                           1998             1997            1996             1995             1994
                                                         --------         --------        --------         --------         --------
<S>                                                      <C>              <C>             <C>              <C>              <C>     
Net sales                                                $ 51,433         $ 83,279        $ 66,990         $ 60,884         $ 79,941

Income (loss) from operations                            $(12,450)        $  2,331        $ (1,338)        $ (6,324)        $  1,818

Net income (loss)                                        $(14,435)        $  1,926        $   (457)        $ (3,705)        $  1,125

Diluted net income (loss) per share                      $  (1.57)        $   0.21        $  (0.05)        $  (0.45)        $   0.13

Balance Sheet Data:

                                                           1998             1997            1996             1995             1994
                                                         --------         --------        --------         --------         --------

Working Capital                                          $ 13,645         $ 26,727        $ 25,101         $ 24,548         $ 24,629

Total assets                                             $ 30,359         $ 40,567        $ 39,966         $ 36,767         $ 40,913

Stockholders' equity                                     $ 15,850         $ 29,874        $ 26,909         $ 26,119         $ 28,389

                                                                 22

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

</TABLE>

<PAGE>


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

This discussion, other than the historical financial information, may consist of
forward-looking  statements  that  involve  risks and  uncertainties,  including
quarterly and yearly  fluctuations  in results,  the timely  availability of new
products,  the impact of competitive  products and pricing,  and the other risks
detailed from time to time in the Company's SEC reports,  including this report.
These  forward-looking  statements speak only as of the date thereof, and should
not be given  undue  reliance.  Actual  results may vary  materially  from those
projected.

The  Company   undertakes  no  obligation  to  publicly  update  or  revise  any
forward-looking  statements,  whether  as a result  of new  information,  future
events, or otherwise.

Results of Operations

<TABLE>
The following table sets forth certain selected financial  information expressed
as a  percentage  of net sales for the  fiscal  years  ended  October  3,  1998,
September 27, 1997, and September 28, 1996 , respectively:

<CAPTION>
                                                                      1998            1997               1996
                                                                      ----            ----               ----
<S>                                                                   <C>              <C>               <C>   
Net sales                                                             100.0%           100.0%            100.0%
Cost of sales                                                          69.9             63.7              60.0
                                                                      -----            -----             ----- 
Gross profit                                                           30.1             36.3              40.0
                                                                      -----            -----             ----- 
Operating expenses:
   Sales and marketing                                                 33.7             20.8              28.4
   Research and development                                            12.8              8.6               9.3
   General and administrative                                           7.0              4.1               4.3
   Restructuring                                                        0.8               -                 -_
                                                                      -----            -----             ----- 
     Total operating expenses                                          54.3             33.5              42.0
                                                                      -----            -----             ----- 
Income (loss) from operations                                         (24.2)             2.8              (2.0)
Interest and other income (expense), net                                0.9              0.8               0.9
                                                                      -----            -----             ----- 
Income (loss) before income taxes                                     (23.3)             3.6              (1.1)
Provision (benefit) for income taxes                                    4.8              1.3              (0.4)
                                                                      -----            -----             ----- 
Net income (loss)                                                     (28.1%)            2.3%             (0.7%)
                                                                      =====            =====             ===== 
</TABLE>


The Company  recorded net loss for fiscal 1998 of $14.4 million,  or $(1.57) per
diluted  share  compared  to net income of $1.9  million,  or $0.21 per  diluted
share, in fiscal 1997.

                                       23

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

<PAGE>


Net Sales

Net sales  decreased 38.3% to $51.4 million in fiscal 1998 from $83.3 million in
fiscal 1997.  Net sales were $67.0  million in fiscal 1996.  The decrease in net
sales  from  fiscal  1997 to  fiscal  1998 was due  primarily  to a  significant
decrease in OEM sales,  and to decreases in sales of the Company's 10T (10 Mbps)
adapter  products,  10T shared  hubs as well as less  significant  decreases  in
several of the Company's  other  product lines due to a general  softness in the
networking  and computer  industries in the second and third  quarters of fiscal
1998,   delays  in  sales  to   educational   customers  due  to  the  delay  in
implementation  of the  government's new "E-Rate",  K-12 educational  networking
equipment subsidy program, and significant competitive pressures.  The decreases
were partially  offset by increased  shipments of the Company's  switch products
during the year.

Specifically,  sales of OEM  products  during  fiscal  1998  decreased  by $18.0
million to $3.5 million in fiscal 1998 from $21.5  million in fiscal  1997.  The
decrease was due primarily to the  expiration  of an agreement  regarding an OEM
Ethernet/fax modem card sold by the Company to Apple Computer in fiscal 1997.

In addition to general industry  conditions and delays in government  subsidized
educational  programs,  sales of the  Company's  networking  products by product
groups were adversely affected by the following factors. The Company experienced
continued  decline in sales of its 10T adapter  cards to $13.1 million in fiscal
1998  from  $21.9  million  in  fiscal  1997,  due in part to  Apple  Computer's
continued incorporation of Ethernet connectivity into the motherboard of certain
of its Macintosh and PowerBook computers and the transition of many customers to
10/100  adapter  products.  Sales of the  Company's  10T  shared  products  also
decreased by  approximately  $8.5 million,  to $11.4 million in fiscal 1998 from
$19.9 million in fiscal 1997,  due  primarily to sharp pricing  declines for 10T
shared products during the year and the transition of many customers,  including
educational  institutions to 10/100 shared and switched  technologies.  Sales of
the Company's  10/100 and 100 Mbps ("Fast  Ethernet")  shared  systems  products
decreased  by $2.7  million  from $4.8 million in fiscal 1997 to $2.1 million in
fiscal 1998,  due primarily to the transition of many companies to 10/100 shared
hubs and 10/100  switches.  These decreases were offset partially by an increase
of $7.1 million in sales of the Company's  switch products during fiscal 1998 to
$12.2  million from $5.1 million.  Such sales relate  primarily to the Company's
10/100 managed stackable and unmanaged switches.

During fiscal 1998, the Company continued to expand its line of 10T switched and
10/100 switched  products and introduced  10/100 switched  products based on the
Company's  own  proprietary  switch  ASIC.  The Company  continued  to focus its
efforts on certain vertical market segments where Fast Ethernet switches and hub
systems  excel over  standard  Ethernet.  Pricing  continued  to be under  heavy
competitive  pressure,  and in  response,  the  Company  continued  a number  of
programs  including  discount  programs,  value added reseller  programs,  sales
incentives,  educational specific discounts, and announced several product price
reductions during the year.

The  increase  in sales from fiscal  1996 to fiscal  1997 was due  primarily  to
increased sales of the Company's  10/100 adapter card and switch products caused
by the  increasing  need for faster  speeds  and  additional  bandwidth  by many
customers and increased  incorporation of these  technologies  into the industry
due to pricing  decreases.  In addition,  the Company  experienced a significant
increase in its OEM sales, due primarily to a combination of Ethernet/fax  modem
card sold to Apple Computer and to  significant  sales of the Company's 100 Mbps
stackable hubs to OEM customers.

                                       24

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

<PAGE>


International sales,  primarily to customers in Europe, Canada and Asia Pacific,
accounted for 22.0%,  18.0%,  and 23.1%, of net sales in fiscal 1998,  1997, and
1996,  respectively.  The  Company has sales  offices in the United  Kingdom and
Taiwan. The Company experienced  reductions in sales in Asia Pacific,  primarily
in  Japan,  due to the  weakening  of  foreign  currencies  against  the  dollar
worldwide,  the weak Asian  economy,  and in part to the  softness in demand for
Apple Macintosh(TM) related products in Asia. The Company will continue to focus
its efforts on increasing sales  internationally over the next several quarters,
but cannot be sure that its efforts will be successful.

The Company  believes heavy  competitive  pressures will continue  during fiscal
1999. Although the Company experienced  significant unit increases in several of
its product lines such as its 10/100 PCI adapter card products, pricing declines
offset the increases in unit sales. The Company believes that the competition in
the markets in which it competes has  intensified and will continue to intensify
as  existing   and   potential   competitors   introduce   competing   products.
Consequently,  the Company  anticipates  that the selling prices of its existing
products will continue to decline. The Company makes significant ongoing efforts
to develop new products and decrease its manufacturing costs faster than related
declines in selling prices. If the Company is unable to offset anticipated price
declines in its products by reducing its manufacturing  costs and by introducing
new products that gain market acceptance, its business,  financial condition and
results of operations will be materially and adversely affected.

Gross Profit

The Company's  gross profit as a percentage  of net sales  decreased to 30.1% in
fiscal  1998 from  36.3% in fiscal  1997,  and from  40.0% in fiscal  1996.  The
decrease  during fiscal 1998 was due primarily to the Company's  decreased sales
levels and increased  competitive  pricing pressures  experienced  during fiscal
1998. In addition,  the Company  discontinued a number of its products resulting
in writedowns of the related inventory. The Company's gross profit percentage in
the future will continue to be affected by competitive  pricing  pressures,  the
Company's ability to further reduce the cost of its products,  and the Company's
pursuit of certain OEM sales  opportunities  at lower  margins.  The decrease in
gross profit as a percentage  of net sales from 40.0% in fiscal 1996 to 36.3% in
fiscal 1997 was  attributable  primarily to increased  sales to OEM customers at
lower margins and was also partially affected during the year by charges against
sales due to various pricing and marketing programs.

Sales and Marketing

Sales and marketing  expenses  were at $17.3  million in fiscal 1998  consistent
with fiscal 1997.  The fiscal 1997  expenses  decreased by 8.9% to $17.3 million
from $19.0  million in fiscal  1996.  As a  percentage  of net sales,  sales and
marketing expenses were 33.7%,  20.8%, and 28.4% in fiscal 1998, 1997, and 1996,
respectively.  In the third quarter of fiscal 1998, the Company reduced the size
of its  marketing  department  and its direct sales force.  This decrease in the
direct  sales  force,   offset   partially  by  the  addition  of  a  number  of
Manufacturers  Representatives  was related to the  restructuring of the Company
and its  distribution  channels as described  below.  Management  believes  this
action  along with  efforts to reduce fixed  marketing  expenses  will allow the
Company to invest in additional  marketing and advertising  activities to aid in
future revenue growth.  The decrease in sales and marketing expenses from fiscal
1996 to fiscal 1997 was  primarily  due to the  reduction of outside sales firms
representing  the

                                       25

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

<PAGE>


Company and was also  affected by the  Company's  vertical  focus on the digital
graphics and pre-press industry.

The Company  expects  that its sales and  marketing  expenses  will  increase in
fiscal 1999 in absolute dollars.

Research and Development

Research and  development  expenses  decreased by 7.0% to $6.6 million in fiscal
1998, from $7.1 million in fiscal 1997.  Research and development  expenses were
$6.2  million  in fiscal  1996.  As a  percentage  of net  sales,  research  and
development  expenses were 12.8%, 8.6%, and 9.3% in fiscal 1998, 1997, and 1996,
respectively.  The $0.5 million  decrease in expenses from fiscal 1997 to fiscal
1998 resulted  from reduced  payroll,  consulting  and outside  service  related
expenditures.

Research and development  expenses increased by $0.9 million from fiscal 1996 to
fiscal  1997 due  primarily  to the  Company's  commitment  to focus  additional
resources on research and  development in order to bring more Fast Ethernet (100
Base-T,  or 100 Mbps) products,  switching  products,  and software  products to
market.  As a result,  the Company  increased  expenses relating to salaries and
wages to recruit additional  engineering  personnel,  non-recurring  engineering
expense charges, as well as other research related expenses.

The Company  expects that  spending on research and  development  in fiscal 1999
will remain flat or decrease in comparison to fiscal 1998.

General and Administrative

General and  administrative  expenses  increased  to $3.6 million in fiscal 1998
from $3.5 million in fiscal 1997. General and administrative  expenses were $2.9
million in fiscal 1996. As a percentage of net sales, general and administrative
expenses  were 7.0%,  4.1%,  and 4.3%,  in fiscal  years 1998,  1997,  and 1996,
respectively. Such costs include a $575,000 write-down of property and equipment
and idle facility  costs.  The increase in general and  administrative  expenses
from fiscal 1996 to fiscal 1997 was related  primarily to the increased  outside
service and  consulting  related fees and to  increased  salary and wage related
expenses.

The Company  expects that general and  administrative  expenses will decrease in
fiscal 1999 in absolute dollars.

Restructuring

During the third  quarter  ended  July 4, 1998,  the  Company  restructured  its
operations.  This  restructuring of operations was necessary to re-establish the
strategic  direction of the Company and better align its operating expenses with
anticipated  revenues.  Although  the Company  expects to realize the  immediate
benefit of a reduced cost structure and other benefits from the restructuring of
operations, there is no assurance that losses will not occur in the future.

                                       26

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

<PAGE>


At July 4, 1998,  the  Company  recorded a $400,000  reserve for  personnel  and
related costs  associated with a company-wide  restructuring  plan.  These costs
include employee  severance costs,  benefits,  outplacement  costs,  termination
costs,  and  employee  assistance  expenses  related  to  the  realignment.  The
reduction  in force  consisted  of a reduction of  approximately  40  employees,
primarily  from the sales and marketing  departments.  Through  October 3, 1998,
approximately  $376,000  of the  reserve  was paid in cash and  $24,000  remains
accrued at October 31, 1998.

The Company's  plan  included the release of  proprietary  ASIC-based  switches,
development of retail  channels,  changes in the Company's  financial model, and
realignment  of cost  structure,  designed to better  position the Company going
forward and which the Company believes will leverage its strengths.  The Company
plans to expand its market share in the SOHO (Small Office / Home Office) market
by adding a retail channel in addition to strengthening  its mail order channel.
As part of this plan,  the Company has entered into new  agreements  with two of
the nation's largest computer  retailers,  Comp USA and Fry's Electronics and is
negotiating agreements with a number of regional and independent resellers.  The
Company shipped products,  including its FriendlyNet  family of products to both
Fry's and Comp USA nationwide during the fourth quarter of fiscal 1998.

The Company also expanded its focus on its existing  mail order catalog  channel
including the addition of CDW,  Multiple Zones,  and Insight Direct.  Management
believes  that these  additions  will  contribute  positively  to the  Company's
results of operations in the coming quarters.

The Company  plans to focus its efforts on providing  lower cost products and to
refocus  its  research  efforts  as well as its sales and  marketing  efforts on
certain key channels for which the Company  could  leverage its  strengths.  The
Company will continue to devote significant  efforts on its educational and mail
order markets, but is currently  emphasizing support for its new retail channel.
In  implementing  this plan,  the  Company  found it  necessary  to realign  its
workforce to more  effectively  focus on these channels and to bring expenses in
line with the Company's new targeted revenue and margin structure.

Income Taxes

The  Company  recorded  a  provision  for  federal  and  state  income  taxes of
approximately $2.5 million for fiscal 1998. The provision relates principally to
establishing a valuation  allowance on previously  recorded  deferred tax assets
offset,  in part, by the tax benefit related to losses which the Company carried
back to prior years. The Company has recorded a full valuation  allowance on its
remaining  deferred tax assets as sufficient  uncertainty  exists  regarding its
recoverability.  The Company's  effective tax rate was 36.0% for fiscal 1997 and
(37.7%) for fiscal 1996.

Factors Affecting Future Operating Results

The  Company  operates in a rapidly  changing  and  growing  industry,  which is
characterized  by  vigorous  competition  from both  established  companies  and
start-up  companies.   The  market  for  the  Company's  products  is  extremely
competitive both as to price and capabilities.  The Company's success depends in
part on its  ability  to  enhance  existing  products  and  introduce  new  high
technology  products.  The  Company  must also bring its  products  to market at
competitive  price  levels.   Unexpected  changes  in  technological  standards,
customer demand and pricing of competitive  products could adversely  affect the

                                       27

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

<PAGE>


Company's  operating  results if the Company is unable to effectively and timely
respond to such  changes.  The  industry is also  dependent to a large extent on
proprietary  intellectual  property  rights.  From time to time the  Company  is
subject to legal  proceedings  and claims in the  ordinary  course of  business,
including  claims of  alleged  infringement  of  patents,  trademarks  and other
intellectual property rights. Consequently,  from time to time, the Company will
be required to prosecute or defend against alleged infringements of such rights.

The  Company's   success  also  depends  to  a   significant   extent  upon  the
contributions  of  key  sales,  marketing,   engineering,   manufacturing,   and
administrative  employees,  and on the  Company's  ability to attract and retain
highly qualified  personnel,  who are in great demand. None of the Company's key
employees are subject to a  non-competition  agreement with the Company.  Unless
vacancies  are  promptly  filled,  the  loss of  current  key  employees  or the
Company's  inability  to attract and retain  other  qualified  employees  in the
future could have a material adverse effect on the Company's business, financial
condition and results of operations.

The Company is subject to various risks associated with international operations
including  currency  exchange rate  fluctuations,  changes in costs of labor and
material,  reliability of sources of supply and general  economic  conditions in
foreign  countries.  Unexpected  changes in foreign  manufacturing or sources of
supply, fluctuations in monetary exchange rates and changes in the availability,
capability or pricing of foreign  suppliers could adversely affect the Company's
business, financial condition and results of operations.

The 10/100 Mbps and 100 Mbps Ethernet technology (100BASE-T, or "Fast-Ethernet")
has  become a  standard  networking  topology  in the  networking  and  computer
industries.  This standard has been adopted widely by end-user customers because
of its ability to  increase  the  efficiency  of LANs and because of its ease of
integration into existing 10BASE-T  networks.  Because of the importance of this
standard,   the  Company  has  focused  its  ongoing  research  and  development
activities on introducing future products  incorporating  100BASE-T  technology.
The  Company  realizes  the  importance  of  bringing  more  10BASE-T  (10 Mbps)
switching and 100BASE-T  switching to market in order to complement its existing
100BASE-T  shared  products.  In that regard,  the  Company's  future  operating
results may be  dependent on the market  acceptance  and the rate of adoption of
this new technology,  and on timely product  release.  There can be no assurance
that the market  will accept and adopt this new  technology  or that the Company
can meet market demand in a timely manner.

The Company commits to expense levels,  including manufacturing costs, investing
in advertising and promotional programs, based in part on expectations of future
net sales levels. If future net sales levels in a particular quarter do not meet
the Company's  expectations or the Company does not bring new products timely to
market,  the Company may not be able to reduce or reallocate such expense levels
on a timely basis, which could adversely affect the Company's operating results.
There can be no assurance that the Company will be able to achieve profitability
on a quarterly or annual basis in the future.

The Company's target markets include  end-users,  value-added  resellers (VARs),
systems  integrators,  retailers,  and  OEMs.  Due to the  relative  size of the
customers in some of these markets,  particularly  the OEM market,  sales in any
one  market  could  fluctuate  dramatically  on  a  quarter  to  quarter  basis.
Fluctuations in the OEM market could  materially  adversely affect the Company's
business, financial condition and results of operations.

                                       28

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

<PAGE>


In summary,  the  Company's net sales and  operating  results in any  particular
quarter may fluctuate as a result of a number of factors,  including competition
in the markets for the Company's products,  delays in new product  introductions
by the Company, market acceptance of new products incorporating 100BASE-T by the
Company  or its  competitors,  changes  in product  pricing,  material  costs or
customer  discounts,  the size and timing of customer  orders,  distributor  and
end-user   purchasing   cycles,   variations  in  the  mix  of  product   sales,
manufacturing   delays  or  disruptions  in  sources  of  supply,  and  economic
conditions  and  seasonal  purchasing  patterns  specific  to the  computer  and
networking industries as discussed above. The Company's future operating results
will depend,  to a large extent,  on its ability to anticipate and  successfully
react to these and other factors.  Failure to anticipate and successfully  react
to these and other  factors  could  adversely  affect  the  Company's  business,
financial condition and results of operations.

Successfully  addressing the factors discussed above is subject to various risks
discussed in this report,  as well as other factors which  generally  affect the
market for stocks of high technology  companies.  These factors could affect the
price of the Company's stock and could cause such stock prices to fluctuate over
relatively short periods of time.

Liquidity and Capital Resources

During fiscal 1998, the Company's operating  activities utilized $4.0 million of
cash and cash  equivalents  as compared to net cash provided of $1.7 million and
$0.9 million in fiscal 1997, and 1996, respectively. During fiscal 1998, the net
cash utilized by operating  activities resulted primarily from the net operating
loss of $14.4 million, increases of prepaid expenses and other current assets of
$2.8 million,  partially offset by the non-cash charge related to the reserve of
$3.6 million related to the deferred tax assets,  depreciation  and amortization
expense of $1.4 million, the decrease in inventory of $4.4 million, and increase
in accounts payable of $2.8 million.  Days of sales outstanding  increased to 36
at the end of fiscal 1998  compared to 32 at the end of fiscal  1997,  which had
the effect of decreasing cash from operations.

Net cash used in investing activities was $0.5 million in fiscal 1998, which was
due primarily to purchases of property and equipment.  During fiscal 1998, 1997,
and 1996,  the  Company's  purchases  of property  and  equipment  totaled  $0.7
million, $2.3 million, and $1.3 million,  respectively.  The Company anticipates
that capital equipment purchases in fiscal 1999 will not be material.

During fiscal 1998,  the Company  generated  cash from  financing  activities of
approximately  $0.4 million from the exercise of employee  stock options and the
Company's employee stock purchase plan. Cash generated from financing activities
in fiscal 1997 was  approximately  $1.0  million,  comprised  primarily of stock
option  exercises.  On September  23,  1998,  the  Company's  Board of Directors
approved a stock  repurchase  program  whereby  up to  500,000 of the  Company's
outstanding  common  stock may be  repurchased  in the open  market from time to
time. As of October 3, 1998,  15,500 shares have been  repurchased  for $28,000.
The Company intends to continue to repurchase common stock in the future, but is
under no obligation to do so.

At October 3, 1998,  the  Company  had cash,  cash  equivalents  and  short-term
investments  of $8.9 million as compared to $12.9 million at September 27, 1997.
Working capital was $13.6 million at October 3, 1998,  compared to $26.7 million
at September  27, 1997.  The Company has a bank line of credit that

                                       29

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<PAGE>


provides for maximum borrowings of $5.0 million, limited to a certain percentage
of eligible accounts receivable, and bears interest at the bank's base rate. The
Company's  ability  to borrow  under this line is  subject  to  compliance  with
covenants related to financial performance and condition.  As of October 3, 1998
there  were no  borrowings  under the line of  credit,  and the  Company  was in
compliance with all such  covenants.  The line of credit expires on February 15,
1999.

The Company believes that its current cash and cash  equivalents,  together with
cash expected to be generated by operations and existing credit facilities, will
be  sufficient  to fund its  operations  and meet capital  requirements  through
fiscal 1999. However, if additional funds are required there can be no assurance
that such funds will be  available  at all or on terms  favorable to the Company
and its stockholders.

                                       30

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<PAGE>


Year 2000 Issue

Computer  programs  and systems that make use of dates  represented  by only two
digits  (98  rather  than 1998) may not  operate  properly  after the year 2000.
Two-digit fields can cause problems with sorting,  mathematical calculations and
comparisons  when working with years outside the range of 1900 through 1999. The
problem also potentially extends to any systems or devices that include embedded
technology, such as microchips.

The Company has  established a formal  project with project team to address this
issue and achieve  Year 2000 (Y2K)  readiness.  The project  focuses on four key
readiness areas: 1) Product  readiness,  addressing  product  functionality;  2)
Supplier readiness,  addressing the preparedness of the Company's key suppliers;
3)  Internal  infrastructure  readiness,  addressing  mission-critical  internal
information  technology  (IT) and non-IT  systems;  and 4)  Customer  readiness,
addressing  customer  preparedness and the Company's customer support.  For each
readiness area, the Company is systematically performing an enterprise-wide risk
assessment,  and  developing  contingency  plans to mitigate  unknown risk.  The
Company  is also  communicating  with its  customers,  suppliers,  employees  to
reinforce  awareness  and to  inform  them  of its  progress  toward  Year  2000
readiness and to gather information as to the Year 2000 product readiness of its
customers,  and suppliers. The Company is doing this through a variety of media,
including updates to the Y2K area of the corporate web site.

The  Company's Y2K project is comprised of 3 phases;  Awareness and  assessment,
Renovation,  and Product  Readiness.  The Awareness and Assessment phases of the
project have been substantially  completed and the Renovation phase commenced in
May 1998. Product Readiness:  The Company has made a thorough  evaluation of its
products  and  believes its products do not cause Year 2000 issues to arise and,
therefore,  feels that its year 2000 product  readiness  phase is complete.  The
Company has  communicated  to its customers the current  status of its products.
Customer  Readiness:  The Company plans to commence  making Year 2000  compliant
updates to its customers' systems through a standard Service Update Plan process
by January 1999, with completion  estimated by June 1999. A Monitoring  phase of
the program is planned as well,  which provides for the contingency of customers
experiencing  issues  with  the  validation  and  implementation  phases  of the
Supplier Readiness project:  This aspect of the program is focused on minimizing
risk associated with the Company's suppliers in two areas: first, the supplier's
capability to provide Y2K compliant products and second, the supplier's business
capability  to continue to provide  the  required  products  and  services.  The
Company has corresponded  with its suppliers to receive  assurance as to the Y2K
readiness of each key supplier. A supplier action list and contingency plans are
being developed  based upon this  assessment.  Supplier issues that  potentially
affect the Company's products are targeted to be resolved by February 1999.

Internal  Infrastructure  Readiness:  The Company has completed an assessment of
its IT and non-IT applications and its business processes. Some applications and
processes  have  already  been  made  Y2K  compliant,  while  others  are  being
prioritized and assigned  resources based upon their importance to the Company's
ability to conduct business.  All  implementations are scheduled to be completed
no later than July 1999.  The Company  estimates  that the total Year 2000 costs
will not be material,  with the  majority of costs to be incurred  over the next
six fiscal  quarters.  The Company is continuing  its  assessment and developing
alternatives  that will result in a further  refinement  of this  estimate  over
time.  There can be no assurance  that actual  costs will not differ  materially
from the  current  estimate.  If  computer  systems  used by the  Company or its
suppliers, or the software applications used in systems manufactured and sold by

                                       31

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

<PAGE>


the Company, fail or experience significant difficulties,  the Company's results
of operations could be materially affected.

Recent Accounting Pronouncements

In June 1997, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS 130), "Reporting  Comprehensive Income."
SFAS 130  establishes  standards  for  reporting  comprehensive  income  and its
components in a financial  statement.  Comprehensive  income as defined includes
all  changes in equity (net  assets)  during a period  from  non-owner  sources.
Examples of items to be included in  comprehensive  income,  which are  excluded
from net income,  include foreign currency translation adjustment and unrealized
gain/loss on available for sale  securities.  The disclosure  prescribed by SFAS
130 must be made  beginning  with the first  quarter  of fiscal  1999 and is not
anticipated  to have a material  impact on the Company's  financial  position or
results of operations.

In June 1997,  the FASB  issued  SFAS 131,  "Disclosures  about  Segments  of an
Enterprise and Related  Information." This statement  establishes  standards for
the  way  companies  report  information  about  operating  segments  in  annual
financial  statements.  It also  establishes  standards for related  disclosures
about products and services,  geographic areas, and major customers. The Company
has not yet  determined the impact,  if any, of adopting this new standard.  The
disclosures prescribed by SFAS 131 are effective in fiscal 1999.

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments  and  Hedging  Activities"  (SFAS  133).  SFAS 133  establishes  new
standards of accounting  and reporting for  derivative  instruments  and hedging
activities.  SFAS 133 requires that all  derivatives be recognized at their fair
value in the  statement of financial  position  and the  corresponding  gains or
losses be either  reported in the  statement of  operations or as a component of
comprehensive income, depending on the type of hedging relationship that exists.
The Company has not yet  determined  the effect of adopting SFAS 133, which will
be effective for the Company's fiscal year 2000.


Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk. As of October 3, 1998,  the  Company's  cash and  investment
portfolio  includes  fixed-income  securities.  These  securities are subject to
interest rate risk and will decline in value if interest rates increase.  Due to
the short-term nature of the Company's  investment  portfolio,  an immediate 10%
increase in interest  rates would not have a material  effect on the fair market
value of the Company's portfolio.  The Company has the ability to liquidate this
portfolio or hold its fixed income investments until maturity, and therefore the
Company  would not expect its  operating  results or cash flows to be materially
affected to any  significant  degree by the effect of a sudden  change in market
interest rates on its securities portfolio.

Foreign  Currency  Exchange Risk. All of the Company's  sales are denominated in
U.S.  dollars  and as a result,  the  Company  has  little  exposure  to foreign
currency  exchange risk. The effect of an immediate 10% change in exchange rates
would not have a material impact on the Company's  future  operating  results or
cash flows.

                                       32

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<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Index to Financial Statements and Financial Statement Schedule

Financial Statements:

     Report of Independent Accountants                                        34

     Balance Sheets at October 3, 1998 and September 27, 1997                 35

     Statements of Operations for the years ended October 3, 1998,
       September 27, 1997, and September 28, 1996                             36

     Statements of Stockholders' Equity for the years ended
       October 3, 1998, September 27, 1997, and September 28, 1996            37

     Statements of Cash Flows for the years ended October 3, 1998,
       September 27, 1997, and September 28, 1996                             38

     Notes to Financial Statements                                            39

     Quarterly Results of Operations (unaudited)                              50

Financial Statement Schedule:

     Report of Independent Accountants on Financial Statement Schedule       S-1

     Schedule II - Valuation and Qualifying Accounts and Reserves            S-2

All  other  schedules  are  omitted,  because  they  are not  required,  are not
applicable,  or  the  information  is  included  in the  consolidated  financial
statements and notes thereto.

                                       33

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

<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Stockholders of
  Asante Technologies, Inc.

In our opinion,  the accompanying  balance sheets and the related  statements of
operations,  of  stockholders'  equity and of cash flows present fairly,  in all
material  respects,  the  financial  position  of Asante  Technologies,  Inc. at
October 3, 1998 and September 27, 1997,  and the results of its  operations  and
its cash flows for each of the three years in the period ended  October 3, 1998,
in conformity with generally  accepted  accounting  principles.  These financial
statements   are  the   responsibility   of  the   Company's   management;   our
responsibility  is to express an opinion on these financial  statements based on
our audits.  We conducted  our audits of these  statements  in  accordance  with
generally accepted auditing standards which 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,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audits  provide a reasonable  basis for the opinion  expressed
above.



PRICEWATERHOUSECOOPERS LLP

San Jose, California
October 30, 1998, except as to Note 10, which is as of December 30, 1998

                                       34

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<PAGE>


<TABLE>
                                                      ASANTE TECHNOLOGIES, INC.

                                                           BALANCE SHEETS
                                                     (in thousands, except share
                                                       and per share amounts)

<CAPTION>
                                                                                                       October 3,      September 27,
                                                                                                          1998              1997
                                                                                                        --------          --------
<S>                                                                                                     <C>                 <C>     
Assets

Current assets:
     Cash and cash equivalents                                                                          $  8,852            $ 12,931
     Accounts receivable, net of allowance for doubtful
        accounts, rebates and sales returns of $4,144 and $4,722                                           8,328               8,313
     Inventory                                                                                             7,673              12,080
     Prepaid expenses and other                                                                            3,301               4,096
                                                                                                        --------            --------
            Total current assets                                                                          28,154              37,420


Property and equipment, net                                                                                2,004               2,768
Other assets                                                                                                 201                 379
                                                                                                        --------            --------
            Total assets                                                                                $ 30,359            $ 40,567
                                                                                                        ========            ========


Liabilities and stockholders' equity

Current liabilities:
     Accounts payable                                                                                   $  7,714            $  4,958
     Accrued expenses                                                                                      4,799               4,858
     Payable to stockholder                                                                                1,996                 877
                                                                                                        --------            --------
            Total current liabilities                                                                     14,509              10,693
                                                                                                        --------            --------


Commitments and contingencies (Notes 8, 9 and 10)


Stockholders' equity:
     Preferred stock, $0.001 par value; 2,000,000 shares authorized;
        no shares issued or outstanding                                                                     --                  --
     Common stock, $0.001 par value; 25,000,000 shares authorized;
        9,270,393 and 9,121,601  shares issued and outstanding                                                 9                   9
     Additional paid-in capital                                                                           26,791              26,352
     Treasury Stock                                                                                          (28)               --
     Retained earnings (Accumulated deficit)                                                             (10,922)              3,513
                                                                                                        --------            --------
            Total stockholders' equity                                                                    15,850              29,874
                                                                                                        --------            --------
            Total liabilities and stockholders' equity                                                  $ 30,359            $ 40,567
                                                                                                        ========            ========

<FN>

                             The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>

                                                                 35

<PAGE>


<TABLE>
                                                      ASANTE TECHNOLOGIES, INC.

                                                      STATEMENTS OF OPERATIONS
                                              (in thousands, except per share amounts)

<CAPTION>
                                                                                                   Year ended
                                                                               October 3,          September 27,       September 28,
                                                                                 1998                  1997                 1996
                                                                               --------              --------             --------
<S>                                                                            <C>                   <C>                  <C>     
Net sales                                                                      $ 51,433              $ 83,279             $ 66,990
Cost of sales                                                                    35,959                53,040               40,220
                                                                               --------              --------             --------
Gross profit                                                                     15,474                30,239               26,770
                                                                               --------              --------             --------

Operating expenses:
     Sales and marketing                                                         17,342                17,322               19,007
     Research and development                                                     6,591                 7,135                6,198
     General and administrative                                                   3,591                 3,451                2,903
     Restructuring                                                                  400                  --                   --
                                                                               --------              --------             --------
          Total operating expenses                                               27,924                27,908               28,108
                                                                               --------              --------             --------

Income (loss) from operations                                                   (12,450)                2,331               (1,338)
Interest and other income (expense), net                                            477                   678                  605
                                                                               --------              --------             --------
Income (loss) before income taxes                                               (11,973)                3,009                 (733)
Provision (benefit) for income taxes                                              2,462                 1,083                 (276)
                                                                               --------              --------             --------

Net income (loss)                                                              $(14,435)             $  1,926             $   (457)
                                                                               ========              ========             ========


Basic earnings (loss) per share                                                $  (1.57)             $   0.21             $  (0.05)
                                                                               ========              ========             ========
Diluted earnings (loss) per share                                              $  (1.57)             $   0.21             $  (0.05)
                                                                               ========              ========             ========

Weighted average common
     shares and equivalents

     Basic                                                                        9,206                 8,992                8,997
                                                                               ========              ========             ========
     Diluted                                                                      9,206                 9,202                8,997
                                                                               ========              ========             ========

<FN>
                              The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>

                                                                 36

<PAGE>


<TABLE>
                                                      ASANTE TECHNOLOGIES, INC.

                                                 STATEMENTS OF STOCKHOLDERS' EQUITY
                                                (in thousands, except share amounts)

<CAPTION>
                                                                                                          Retained
                                                                              Additional                  Earnings /       Total
                                                        Common Stock           Paid-in       Treasury   (Accumulated   Stockholders'
                                                    Shares        Amount       Capital        Stock        Deficit)       Equity
                                                  ----------    ----------    ----------    ----------    ----------    ----------
<S>                                                <C>          <C>           <C>           <C>           <C>           <C>       
Balances as of September 30, 1995                  8,612,420    $        9    $   24,066    $     --      $    2,044    $   26,119

Common Stock issued under stock plans                247,570          --             995                                       995
Amortization of deferred compensation                                                  2                                         2
Tax benefit from employee stock
     transactions                                                                    250                                       250
Net loss                                                                                                        (457)         (457)
                                                  ----------    ----------    ----------    ----------    ----------    ----------

Balances as of September 28, 1996                  8,859,990             9        25,313          --           1,587        26,909

Common Stock issued under stock plans                256,963          --             996                                       996
Compensation expense upon issuance
     of common stock                                   4,648          --              20                                        20
Tax benefit from employee stock
     transactions                                                                     23                                        23
Net income                                                                                                     1,926         1,926
                                                  ----------    ----------    ----------    ----------    ----------    ----------

Balances as of September 27, 1997                  9,121,601             9        26,352          --           3,513        29,874

Common Stock issued under stock plans                164,292          --             430                                       430
Tax benefit from employee stock
     transactions                                                                      9                                         9
Repurchase of common stock                           (15,500)         --                           (28)                        (28)
Net loss                                                                                                     (14,435)      (14,435)
                                                  ----------    ----------    ----------    ----------    ----------    ----------

Balances as of October 3, 1998                     9,270,393    $        9    $   26,791    $      (28)   $  (10,922)   $   15,850
                                                  ==========    ==========    ==========    ==========    ==========    ==========

<FN>
                              The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>

                                                                 37

<PAGE>


<TABLE>
                                                      ASANTE TECHNOLOGIES, INC.

                                                      STATEMENTS OF CASH FLOWS
                                                           (in thousands)

<CAPTION>
                                                                                                        Year ended
                                                                                         ------------------------------------------
                                                                                        October 3,      September 27,  September 28,
                                                                                           1998             1997             1996
                                                                                         --------         --------         --------
<S>                                                                                      <C>              <C>              <C>      
Cash flows from operating activities:
     Net income (loss)                                                                   $(14,435)        $  1,926         $   (457)
     Adjustments to reconcile net income to
       net cash provided by (used in) operating activities:
         Depreciation and amortization                                                      1,417            1,062            1,092
         Compensation expense upon issuance of common stock                                  --                 20
         Deferred income taxes                                                              3,606             (634)             719
     Changes in operating assets and liabilities:
         Accounts receivable                                                                  (15)           1,725           (1,534)
         Inventory                                                                          4,407           (2,229)          (2,842)
         Prepaid expenses and other current assets                                         (2,811)           2,463            1,498
         Accounts payable                                                                   2,756           (2,242)           3,983
         Accrued expenses and other                                                           (59)             435             (651)
         Due to affiliate                                                                   1,119             (805)            (865)
                                                                                         --------         --------         --------
                 Net cash provided by (used in) operating activities                       (4,015)           1,721              943
                                                                                         --------         --------         --------

Cash flows from investing activities:
     Purchases of property and equipment                                                     (653)          (2,305)          (1,252)
     Maturities of marketable securities                                                     --               --              1,700
     Other                                                                                    178             (142)              (6)
                                                                                         --------         --------         --------
                 Net cash provided by (used in) investing activities                         (475)          (2,447)             442
                                                                                         --------         --------         --------

Cash flows from financing activities:
     Issuance of common stock                                                                 439              996              995
     Repurchase of common stock                                                               (28)            --               --
     Other                                                                                   --                (32)             (58)
                                                                                         --------         --------         --------
                 Net cash provided by financing activities                                    411              964              937
                                                                                         --------         --------         --------

Net increase (decrease) in cash and cash equivalents                                       (4,079)             238            2,322
Cash and cash equivalents at beginning of year                                             12,931           12,693           10,371
                                                                                         --------         --------         --------
Cash and cash equivalents at end of year                                                 $  8,852         $ 12,931         $ 12,693
                                                                                         ========         ========         ========


Supplemental disclosures of cash flow information:
     Interest paid during the year                                                       $   --           $      7         $     11
                                                                                         ========         ========         ========
     Income taxes paid (refunded) during the year                                        $    147         $   (143)        $ (1,835)
                                                                                         ========         ========         ========

<FN>
                              The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>

                                                                 38

<PAGE>


                            ASANTE TECHNOLOGIES, INC.

                          NOTES TO FINANCIAL STATEMENTS


Note 1. The Company and Summary of Significant Accounting Policies

Asante  Technologies,  Inc. (the "Company") designs,  manufactures and markets a
broad family of 10BASE-T  and  100BASE-T  ("Fast  Ethernet")  client  access and
network system products.  Asante's client access products (which include adapter
cards and media  access  adapters)  connect  PCs,  Macintoshes,  and  peripheral
devices (such as printers) to Ethernet  networks.  The Company's  network system
products,  which include intelligent and non-intelligent  switches, hubs, bridge
modules,  and network management software for Macintoshes and PCs,  interconnect
users within and between departmental networks.

Management estimates and assumptions

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

Revenue recognition

Revenue from product sales to customers is recognized upon shipment and reserves
are provided for estimated returns.  Sales to distributors are generally subject
to  agreements  allowing  certain  rights of return  and price  protection  with
respect to unsold merchandise held by the distributor.  Reserves for distributor
returns are established based on historical  returns  experience at the time the
related revenue is recorded. Reserves for price protection are established based
on actual price reduction programs. Additionally, the Company provides a reserve
for incentive  rebates to  distributors,  warranty  obligations  and cooperative
advertising at the time the related revenue is recorded.

International  sales as a percentage of net sales by  geographic  region were as
follows:

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

United States                          78%               82%              77%
Europe                                 14                10               11
Canada and Asia Pacific                 8                 8               12  
                                      ----             -----             ----
                                      100%              100%             100% 
                                      ====              ====             ====

                                       39

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<PAGE>


Cash, cash equivalents and short-term investments

Cash  equivalents  consist  primarily  of  highly  liquid  investments  in  U.S.
government and corporate debt securities with  insignificant  interest rate risk
and  original  maturity  periods  of  three  months  or  less  at  the  date  of
acquisition. The Company considers all investments with initial maturity periods
of greater than 90 days to be short-term  investments.  The Company accounts for
short-term investments in accordance with the provisions of Financial Accounting
Standard  No.  115,  "Accounting  for  Certain  Investments  in Debt  or  Equity
Securities"  ("FAS 115"). At October 3, 1998 and September 27, 1997, the Company
did not hold any short-term investments.

Concentration of credit risk

Financial instruments which potentially subject the Company to concentrations of
credit risk consist  principally of cash  equivalents and accounts  receivables.
Accounts  receivable  are  typically  unsecured  and are derived from  worldwide
distributor  revenues.  The Company performs  ongoing credit  evaluations of its
customers and maintains reserves for potential credit losses; historically, such
losses have been insignificant and within management's expectations.  At October
3, 1998 and  September  27, 1997,  four  customers  accounted  for 49%, and 45%,
respectively,  of the accounts  receivable balance. In fiscal 1998, one customer
accounted for 33% of the Company's  sales. In fiscal years 1997 and 1996,  sales
to  the  Company's  two  largest   distributors   accounted  for  44%  and  37%,
respectively of the Company's sales.

Inventory

Inventory is stated at the lower of standard  cost,  which  approximates  actual
cost (on a first-in, first-out basis), or market. Appropriate adjustments of the
inventory  values are provided for slow moving and  discontinued  products based
upon future expected sales and committed inventory purchases.

Property and equipment

Property  and  equipment  are  recorded at cost.  Depreciation  of property  and
equipment is based on the straight-line  method for financial reporting purposes
over the estimated  useful lives of the related assets,  generally three to five
years.  Equipment  under  capital  leases is  amortized  over the shorter of its
estimated useful life or lease term and included in depreciation expense.

Income taxes

Income  taxes are  computed  using the  liability  method.  Under the  liability
method, deferred income tax assets and liabilities are determined based upon the
differences  between  the  financial  reporting  and tax  bases  of  assets  and
liabilities and are measured using the currently enacted tax rates and laws.

Research and development costs

Research  and  development   costs  are  expensed  as  incurred.   Research  and
development  of new software  products  and  enhancements  to existing  software
products  are  expensed as incurred  until  technological  feasibility  has been
established. The Company believes its current process for developing software is
essentially  completed  concurrently  with the  establishment  of  technological
feasibility;  accordingly,  software costs incurred after the  establishment  of
technological feasibility have not been material to date and therefore have been
expensed.

Stock-based compensation

The Company follows Accounting  Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees"  (APB 25) and related  interpretations  in accounting
for its employee stock options and stock  purchase  plan. Pro forma  information
regarding net income and net income per share is disclosed as

                                       40

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

<PAGE>


required by Statement  of  Financial  Accounting  Standards  Statement  No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123).

Fair value of financial instruments

For certain of the Company's  financial  instruments,  cash  equivalents,  trade
accounts receivable, receivable from related party, accounts payable and capital
lease  obligations,  the  carrying  amounts  approximate  fair  value due to the
relatively short maturity of these instruments.

Recently issued accounting pronouncements

In June 1997, the Financial  Accounting  Standards Board (FASB) issued Statement
of  Financial  Accounting  Standards  (SFAS) No. 130,  "Reporting  Comprehensive
Income." SFAS 130 establishes  standards for reporting  comprehensive income and
its  components  in a financial  statement.  Comprehensive  income,  as defined,
includes  all changes in equity  (net  assets)  during a period  from  non-owner
sources.  Examples of items to be included in  comprehensive  income,  which are
excluded from net income,  include foreign currency translation  adjustments and
unrealized  gains/losses  on  available  for  sale  securities.  The  disclosure
prescribed by SFAS 130 must be made  beginning  with the first quarter of fiscal
1999 and is not anticipated to have a material impact on the Company's financial
position or results of operations.

In June 1997,  the FASB issued SFAS No. 131,  "Disclosures  about Segments of an
Enterprise  and  Related  Information"  (SFAS 131). This  statement  establishes
standards for the way companies report  information about operating  segments in
annual  financial   statements.   It  also  establishes  standards  for  related
disclosures about products and services,  geographic areas, and major customers.
The Company has not yet  determined  the  impact,  if any, of adopting  this new
standard. The disclosures prescribed by SFAS 131 are effective in fiscal 1999.

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments  and  Hedging  Activities"  (SFAS  133).  SFAS 133  establishes  new
standards of accounting  and reporting for  derivative  instruments  and hedging
activities.  SFAS 133 requires that all  derivatives be recognized at their fair
value in the  statement of financial  position  and the  corresponding  gains or
losses be either  reported in the  statement of  operations or as a component of
comprehensive income, depending on the type of hedging relationship that exists.
The Company has not yet  determined  the effect of adopting SFAS 133, which will
be effective for the Company's fiscal year 2000.


Note 2. Basic and Diluted Net Income (Loss) Per Share

The Company  computes net income  (loss) per share in  accordance  with SFAS No.
128,  "Earnings per Share" (SFAS 128).  SFAS 128 requires  presentation  of both
basic and diluted earnings per share (EPS) on the face of the income  statement.
Basic EPS is computed by dividing net income  available  to common  stockholders
(numerator)  by  the  weighted  average  number  of  common  shares  outstanding
(denominator)  during  the  period.  Diluted  EPS gives  effect to all  dilutive
potential common shares  outstanding  during the period including stock options,
using the treasury stock method,  and  convertible  preferred  stock,  using the
if-converted  method.  In computing Diluted EPS, the average stock price for the
period is used in determining  the number of shares assumed to be purchased from
the exercise of stock options.

                                       41

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

<PAGE>


<TABLE>
Following is a  reconciliation  of the numerators and  denominators of the Basic
and Diluted EPS  computations  for the periods  presented  below: (in thousands,
except per share data)

<CAPTION>
                                                                                  1998                  1997                  1996
                                                                                --------               -------              -------
<S>                                                                             <C>                    <C>                  <C>     
Net income (loss) available to common shareholders                              $(14,435)              $ 1,926              $  (457)
                                                                                ========               =======              =======

Weighted average common stock outstanding (basic)                                  9,206                 8,992                8,997

Effect of dilutive warrants and options                                             --                     210                 --
                                                                                --------               -------              -------
Weighted average common stock Outstanding (diluted)                                9,206                 9,202                8,997
                                                                                ========               =======              =======

Net income (loss) per share:

Basic                                                                           $  (1.57)              $  0.21              $ (0.05)
                                                                                ========               =======              =======

Diluted                                                                         $  (1.57)              $  0.21              $ (0.05)
                                                                                ========               =======              =======

</TABLE>


         Diluted EPS for the years ended  October 3, 1998 and September 28, 1996
excludes all dilutive  potential  common shares as their effect is antidilutive.
At October 3, 1998,  September  27, 1997,  and  September  28, 1996,  there were
1,584,539,   1,919,607  and   1,955,786,   options  and  warrants   outstanding,
respectively,  to purchase common stock at weighted  average  exercise prices of
$4.93, $5.72 and $5.57, respectively, per share.


Note 3. Balance Sheet Components

                                                         1998            1997
                                                        --------       --------
                                                             (in thousands)
Inventory:
      Raw materials and component parts                 $  2,727       $  3,065
      Work-in-process                                        604          2,220
      Finished goods                                       4,342          6,795
                                                        --------       --------
                                                        $  7,673       $ 12,080
                                                        ========       ========
Property and equipment:
      Computers and R&D equipment                       $  7,632       $  7,161
      Furniture and Fixtures                               1,562          1,456
                                                        --------       --------
                                                           9,194          8,617
      Accumulated depreciation                            (7,190)        (5,849)
                                                        --------       --------
                                                        $  2,004       $  2,768
                                                        ========       ========
Accrued expenses:
      Payroll-related expenses                          $  1,186       $  1,197
      Sales promotion expenses                             1,119          1,469

                                       42

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<PAGE>


      Warranty                                               572            572
      Other                                                1,922          1,620
                                                        --------       --------
                                                        $  4,799       $  4,858
                                                        ========       ========


Note 4.  Restructuring and Other Costs

During the third  quarter  ended  July 4, 1998,  the  Company  restructured  its
operations.  This  restructuring of operations was necessary to re-establish the
strategic  direction of the Company and better align its operating expenses with
anticipated revenues.  The Company's  restructuring plan included the release of
proprietary ASIC-based switches,  development of retail channels, changes in the
Company's financial model, and realignment of cost structure, designed to better
position the Company going forward and which the Company  believes will leverage
its strengths.  Although the Company expects to realize the immediate benefit of
a  reduced  cost  structure  and  other  benefits  from  the   restructuring  of
operations, there is no assurance that losses will not occur in the future.

At July 4, 1998,  the  Company  recorded a $400,000  reserve for  personnel  and
related costs  associated with a company-wide  restructuring  plan.  These costs
include employee  severance costs,  benefits,  outplacement  costs,  termination
costs,  and  employee  assistance  expenses  related  to  the  realignment.  The
reduction  in force  consisted  of a reduction of  approximately  40  employees,
primarily  from the sales and marketing  departments.  Through  October 3, 1998,
approximately  $376,000  of the  reserve  was paid in cash and  $24,000  remains
accrued at October 3, 1998.

In addition, the Company recorded a charge of $550,000 for inventory write-downs
related to the  discontinuation  of several of the  Company's  adapter  card and
transceiver  products,  and a $575,000 charge related to write-downs of property
and equipment and idle facilities costs.  These charges were recorded in cost of
sales and general and administrative expenses, respectively.


Note 5. Related Party Transactions

The  Company  has  a  supply   agreement  (the  "OSE   Agreement")  with  Orient
Semiconductor  Electronics,   Ltd.,  ("OSE").  OSE  and  one  of  its  principal
shareholders own, in aggregate,  approximately 13% of the Company's Common Stock
as of October 3, 1998. Under the OSE Agreement,  the Company  purchases from and
sells to OSE certain  component  parts,  at cost.  The Company is  obligated  to
purchase goods only to the extent it has signed firm purchase  commitments  with
OSE. At October 3, 1998, the Company had firm purchase commitments under the OSE
Agreement of approximately $4.3 million.

For fiscal 1998,  1997,  1996,  the Company  sold, at cost,  approximately  $2.5
million, $3.3 million, and $5.5 million, respectively, of component parts to OSE
and purchased $8.2 million, $16.8 million, and $17.9 million,  respectively,  of
goods from OSE.


Note 6. Income Taxes

The provision for income taxes comprises the following (in thousands):

                                       43

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

<PAGE>


                                             1998          1997           1996
                                            -------       -------       -------
Current:
       Federal                              $(1,008)      $ 1,389       $  (995)
       State                                   (136)          328          --   
                                            -------       -------       -------
            Total current                    (1,144)        1,717          (995)
                                            -------       -------       -------
Deferred:
       Federal                                2,689          (574)          780
       State                                    917           (60)          (61)
                                            -------       -------       -------
            Total deferred                    3,606          (634)          719
                                            -------       -------       -------
                                            $ 2,462       $ 1,083       $  (276)
                                            =======       =======       =======


Deferred  tax  assets,  net,  comprise  the  following  at  October  3, 1998 (in
thousands):

                                                            1998           1997
                                                           -------       -------
Deferred tax assets:
     Net operating losses                                  $ 2,643       $  --
     Research and development credits                        2,106          --
     Receivable- and sales-related reserves                  1,698         1,837
     Inventory-related reserves                                431           453
     Compensation accruals                                     432           322
     Depreciation                                              408           448
     Other                                                     967           546
                                                           -------       -------
         Total deferred tax assets                           8,685         3,606
         Valuation allowance                                (8,685)         --
                                                           -------       -------
                                                           $  --         $ 3,606
                                                           =======       =======


The  Company   believes  that  sufficient   uncertainty   exists  regarding  the
realizability of the deferred tax assets such that a full valuation allowance is
required as of October 3, 1998.

At October  3, 1998,  the  Company  had  federal  and state net  operating  loss
carryforwards  of  approximately  $6.3 million and  approximately  $3.9 million,
respectively,  available to offset future taxable income which expire  beginning
in 2018 and 2003 respectively. Approximately $5.4 million of losses in 1998 were
carried back to fiscal 1997  resulting in a federal tax refund of  approximately
$0.9 million.

In addition,  as of October 3, 1998, the Company had approximately  $1.3 million
and  approximately  $0.8 million, respectively  of  available  federal and state
research and development credits.  Such credits will expire beginning in 2009 if
not utilized.

A  reconciliation  between the  Company's  income tax  provision  and the amount
computed by applying the  statutory  federal rate to income before taxes follows
(in thousands):

                                       44

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<PAGE>


                                                   1998       1997        1996
                                                  -------    -------    -------
Tax expense/(benefit) at U.S. statutory rate      $(4,071)   $ 1,023    $  (249)
State taxes, net of federal benefits                 (537)       176        (45)
Research and development credits                   (1,551)      (264)      --
Other                                                 (64)       148         18
Valuation allowance                                 8,685       --         --   
                                                  -------    -------    -------
                                                  $ 2,462    $ 1,083    $  (276)
                                                  =======    =======    =======


Note 7. Stockholders' Equity

Preferred Stock

There  are  2,000,000  shares  of  Preferred  Stock  authorized  by the Board of
Directors.  No  shares  of  Preferred  Stock  have  been  outstanding  since the
Company's public offering in December 1993.

Stock Repurchase Program

In September 1998, the Company's Board of Directors  approved a stock repurchase
program  whereby  up to  500,000  shares of the  Company's  common  stock may be
purchased  in the open market from time to time.  As of October 3, 1998,  15,500
shares have been repurchased for $28,000.

Stock Based Compensation Plans

As of October 3, 1998, the Company had four stock-based compensation plans which
are  described   below.   The  Company   applies  APB  Opinion  25  and  related
Interpretations  in accounting  for its plans and complies  with the  disclosure
provisions of SFAS 123 "Accounting for Stock-Based Compensation".

The 1990  Stock  Option  Plan  allows  for the  issuance  of  options to Company
employees and  consultants  to purchase a maximum of 4,597,333  shares of common
stock.

The Directors' Stock Option Plan allows for the issuance of options to directors
of the Company who are not employees of, or  consultants  to, the Company or any
affiliate  of the  Company.  The  Directors'  Stock  Option  Plan allows for the
issuance of options to  Non-Employee  Directors to purchase a maximum of 300,000
shares of common stock.

The Key  Executive  Option  Plan  allows  for the  issuance  of options to "Key"
employees  of the  Company who are not  recognized  under the  Directors'  Stock
Option Plan. The Key Executive Option Plan allows for the issuance of options to
Key Employees to purchase a maximum of 404,999 shares of common stock.

Individuals  owning  more than 10% of the  Company's  stock are not  eligible to
participate in the Plans unless the option's  exercise price is at least 110% of
the fair market value of the common stock at the date of grant.  Incentive stock
options  issued to  holders  of less than 10% of the  Company's  stock  shall be
issued at no less than fair market value per share on the date of grant and with
expirations not to exceed ten years from the grant date.  Under the terms of the
Plans,  options issued are granted at prices of 100% of the fair market value of
the  common  stock at the date of grant with  expirations  of ten years from the

                                       45

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<PAGE>


date of grant.  Initial options granted generally become vested over a period of
four years from the date of hire, commencing on the date one year after the date
of grant of the initial option.  Unexercised options will terminate three months
after such  Optionee's  termination  of all  service  with the  Company  and its
affiliates.

<TABLE>
Activity under the 1990 Stock Option Plan,  Directors' Stock Option Plan and the
Key Executive Option Plan are summarized as follows:

<CAPTION>
                                            1998                               1997                             1996
                                ----------------------------        --------------------------        --------------------------
                                                    Weighted                          Weighted                          Weighted
                                  Number            Average         Number            Average         Number            Average
                                    of             Price per          of             Price per          of             Price per
                                  Shares             Share          Shares             Share          Shares             Share
                                ----------          --------      ----------          --------       ---------          --------
<S>                              <C>                <C>            <C>                <C>            <C>                <C>     
Beginning Balance                1,919,607          $   5.72       1,955,786          $   5.58       1,532,608          $   4.77

Granted                            743,010          $   3.03         606,296          $   5.81       1,048,938          $   6.47

Exercised                          (27,978)         $   4.61        (138,776)         $   3.81        (165,983)         $   3.76

Canceled                        (1,050,100)         $   5.08        (503,699)         $   5.80        (459,777)         $   5.37
                                ----------                        ----------                        ----------

Ending Balance                   1,584,539          $   4.93       1,919,607          $   5.72       1,955,786          $   5.58
                                ==========                        ==========                        ==========
</TABLE>


<TABLE>
The following table summarizes  information  about stock options  outstanding at
October 3, 1998:

<CAPTION>
                                            Options Outstanding                        Options Exercisable
                              --------------------------------------------         ----------------------------
                                                  Weighted
                                                   Average         Weighted                             Weighted
                                                  Remaining         Average                              Average
Range of                         Number          Contractual       Exercise          Number             Exercise
Exercise Prices               Outstanding       Life in Years        Price         Exercisable            Price
---------------               -----------       -------------        -----         -----------            -----
<S>                            <C>                  <C>             <C>              <C>                <C>
$0.105 - $0.165                    2,000            2.6             $0.135             2,000            $0.135
$1.875 - $2.344                  328,196            9.7             $1.910            74,146            $1.905
$3.000 - $4.250                  285,087            7.5             $4.048           169,373            $4.167
$4.563 - $6.625                  671,563            7.5             $5.560           446,444            $5.466
$6.875 - $9.000                  297,693            6.6             $7.697           245,723            $7.772
                               ---------                                             -------

$0.105 - $9.000                1,584,539            7.8             $4.927           937,686            $5.542
                               =========                                             =======

                                                      46

==============================================================================================================
</TABLE>

<PAGE>


Under SFAS No. 123, the fair value of each option grant is estimated on the date
of grant using the Black-Scholes  model with the following  assumptions used for
grants during fiscal 1998,  1997 and 1996, risk free interest rates ranging from
5.39% to 6.79% respective of grant date;  expected average volatility of 67%; an
expected option life of 4 years, and no expected dividends. The weighted average
fair value of stock options  granted under the plans for fiscal 1998,  1997, and
1996 was $1.68, $3.02 and $3.35, respectively.

In 1993,  the Company  adopted the Employee  Stock  Purchase Plan (the "Purchase
Plan")  covering  an  aggregate  of 500,000  shares of common  stock.  Under the
Purchase  Plan, the Board of Directors may authorize  participation  by eligible
employees,  including officers, in periodic offerings following the commencement
of the Purchase Plan. Employees who participate in the Purchase Plan can have up
to 10% of their earnings withheld and used to purchase shares of common stock on
specified dates as determined by the Board.  The price of common stock purchased
under the Purchase Plan is equal to 85% of the lower of the fair market value of
the common stock  determined by the closing price on the Nasdaq  National Market
System,  at the commencement  date or the ending date of each six month offering
period.

Sales  under the  Purchase  Plan in  fiscal  1998,  1997 and 1996 were  136,314,
118,187 and 81,587 shares of common stock, respectively,  at an average price of
$2.27, $3.85 and $4.68 respectively. On October 3, 1998, 58,979 shares of common
stock were available for future purchase.

The fair value of the  employee's  purchase  rights  under  SFAS 123,  which was
estimated using the Black-Scholes model with the following  assumptions used for
grants during fiscal 1998 and 1997:  risk free interest rates ranging from 5.42%
to 6.40%,  respective  of  commencement  date of the offering  period,  expected
volatility  of 60%, an expected  option life of 6 months for both years,  and no
expected dividends. The weighted average fair value of stock purchased under the
Purchase Plan for fiscal 1998 and 1997, was $2.27 and $3.85, respectively.

                                       47

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

<PAGE>


If compensation  expense under these plans had been determined  pursuant to SFAS
No. 123, the  Company's  net income  (loss) and net income  (loss) per share for
fiscal 1998, 1997 and 1996  would have been as follows (in thousands, except per
share amounts):

                                          1998            1997           1996
                                        --------        --------       -------- 
Net income (loss):
         As reported                    $(14,435)       $  1,926       $   (457)
         Pro forma                      $(15,433)       $    891       $ (1,165)

Net income (loss) per share
         As reported
             Basic                      $  (1.57)       $   0.21       $  (0.05)
             Diluted                    $  (1.57)       $   0.21       $  (0.05)
         Pro forma
              Basic                     $  (1.68)       $   0.10       $  (0.13)
              Diluted                   $  (1.68)       $   0.10       $  (0.13)

The pro forma amounts include  compensation expense related to fiscal 1998, 1997
and 1996 stock option  grants and sales of common stock under the Purchase  Plan
only. In future years, the annual compensation expense will increase relative to
the fair value of stock options granted in those future years.


Note 8. Debt Obligations, Commitments and Contingencies

The Company has a bank line of credit that  provides for maximum  borrowings  of
$5.0 million,  limited to a certain percentage of eligible accounts  receivable,
and bears  interest at the bank's  base rate.  The  Company's  ability to borrow
under this line is subject to  compliance  with  covenants  related to financial
performance and condition. As of October 3, 1998, there were no borrowings under
the  line of  credit  and the  Company  was in  compliance  with  all  financial
covenants. The line of credit expires on February 15, 1999.

The Company has entered  into an  operating  lease for its main  facility  which
expires on August 31,  1999.  Various  other  leases  for sales  offices  expire
through  1999.  Rent expense under  operating  leases  aggregated  approximately
$1,012,000,   $912,000,   and  $901,000,   for  fiscal  1998,  1997,  and  1996,
respectively.  Certain  leases  require the Company to pay a portion of facility
operating expenses.

The Company collected approximately $226,200 and $217,000 during fiscal 1998 and
1997, respectively,  under a sublease agreement which expired in September 1998.
The Company continues to sublease the same portion of its headquarters  building
on a month to month basis.


Note 9. Litigation

                                       48

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<PAGE>


From time to time the Company is subject to legal  proceedings and claims in the
ordinary  course of  business,  including  claims  of  alleged  infringement  of
trademarks and other intellectual property rights.

On September  13, 1996, a complaint was filed by Datapoint  Corporation  against
the   Company   and  six  other   companies   individually   and  as   purported
representatives of a defendant class of all manufacturers,  vendors and users of
Fast Ethernet-compliant,  dual protocol local-area network products, for alleged
infringement of United States letters Patent Nos.  5,077,732 and 5,008,879.  The
complaint  seeks  unspecified   damages  in  excess  of  $75,000  and  permanent
injunctive  relief.  The Company has filed a response to the  complaint  denying
liability. The case has been consolidated,  for purposes of claim interpretation
only, with similar cases filed against several other defendants,  which include,
among others, Intel Corporation,  IBM Corporation,  Cisco Systems, Bay Networks,
and Sun Microsystems.  Plaintiff has served claim charts purporting to set forth
its basis for its claims that products  compliant with an IEEE standard infringe
its patents. On April 16, 1998, the Special Master appointed by the court issued
a report agreeing in most material respects, with the defendants' interpretation
of the alleged  patent  claims.

On October 16,  1998,  the Company  received a letter from Dunn and  Bradstreet,
Receivable  Management  Services,  on behalf of  Plaintree  Systems  Corporation
("Plaintree").  The letter claims that the Company owes  Plaintree  $197,400 and
demands immediate payment. The Company believes Plaintree's claim stems from the
OEM Purchase and  Manufacturing  License  Agreement  between  Plaintree  and the
Company, dated June 1, 1996, under which the Company purchased certain products.
The  Company  has  determined  the  products  were  defective  and has  demanded
arbitration against Plaintree pursuant to the Agreement, for monies already paid
to Plaintree, a minimum of $300,000. Management believes the ultimate resolution
of this  matter  will not have a  material  effect  on the  Company's  financial
position or cash flows.


Note 10. Subsequent Events

Through  December 15, 1998,  the Company had  repurchased  67,000  shares of its
common stock for $117,000 under its stock repurchase  program  described in Note
7.

On November  16, 1998,  the Board of Directors  approved a repricing of its then
outstanding  options  issued  pursuant to the 1990 Stock Option Plan and the Key
Executive  Option Plan.  The  repricing  includes a new 4 year vesting  schedule
commencing  on November  23, 1998 for those who elect to reprice.  Such  options
were repriced to the closing price on November 23, 1998.

In connection with the Datapoint  litigation described in Note 9, by order dated
November 23, 1998, the District Court adopted without  modification the findings
of the Special Master and the  recommendations of the Magistrate Judge regarding
claim  interpretation  of the  patents-in-suit.  The Court noted that  plaintiff
Datapoint  had conceded that the Special  Master's  claim  interpretation  would
result in a finding of no infringement for the accused  products,  and therefore
ordered the case dismissed on the merits effective December 30, 1998.

                                       49

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<PAGE>


<TABLE>
Unaudited Quarterly Results of Operations (in thousands except net income (loss)
per share):

<CAPTION>
Fiscal 1998                                                                            Quarter Ended
------------------------------------------------------------------------------------------------------------------------------------
                                                             October 3           July 4             April 4            December 27
                                                             ---------          --------            -------            -----------
<S>                                                          <C>                <C>                 <C>                 <C>     
Net sales                                                    $ 14,516           $  9,314            $ 10,083            $ 17,520
Gross profit                                                 $  4,686           $  1,040            $  2,614            $  7,134
Net income (loss)                                            $     12           $ (9,110)           $ (5,507)           $    170
Net income (loss) per share                                  $   0.00           $  (0.99)           $  (0.60)           $   0.02


Fiscal 1997                                                                            Quarter Ended
------------------------------------------------------------------------------------------------------------------------------------
                                                           September 27         June 28             March 29          December 28
                                                           ------------         --------            --------          -----------
Net sales                                                    $ 22,010           $ 22,602            $ 21,187            $ 17,480
Gross profit                                                 $  8,123           $  7,826            $  7,533            $  6,757
Net income                                                   $    710           $    617            $    448            $    151
Net income per share                                         $   0.08           $   0.07            $   0.05            $   0.02
</TABLE>


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

Not applicable.

                                       50

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<PAGE>


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Pursuant to General  Instruction G(3) to Form 10-K, the information  required by
this Item concerning the Company's directors is incorporated by reference to the
information  contained  in  the  section  captioned  "Proposal  One-Election  of
Directors"  in the  Company's  definitive  Proxy  Statement  for the 1998 Annual
Meeting of Stockholders (the "Proxy  Statement") to be filed with the Commission
within  120 days after the end of the  Company's  fiscal  year ended  October 3,
1998.

The information  required by this Item concerning the executive  officers of the
Company is incorporated by reference to the information set forth in the section
titled  "Executive  Officers  of the  Company" at the end of Part I of this Form
10-K.

Information  with respect to Directors  and Officers of the Company  required by
Item 405 of Regulation S-K is incorporated  herein by reference from information
set forth under the caption "Filing of Reports by Directors and Officers" in the
Proxy Statement.


ITEM 11. EXECUTIVE COMPENSATION

Pursuant to General  Instruction G(3) to Form 10-K, the information  required by
this Item is  incorporated  by  reference  to the  information  contained in the
section captioned "Executive Compensation" in the Proxy Statement.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Pursuant to General  Instruction G(3) to Form 10-K, the information  required by
this Item is  incorporated  by  reference  to the  information  contained in the
section captioned "Security Ownership" in the Proxy Statement.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to General  Instruction G(3) to Form 10-K, the information  required by
this Item is  incorporated  by  reference  to the  information  contained in the
section captioned "Certain  Relationships and Related Transactions" in the Proxy
Statement.

                                       51

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<PAGE>


                                     PART IV

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

         (a)      (1)  Financial  Statements - See Index to Financial Statements
                         and  Financial  Statement  Schedule  at page 33 of this
                         Form 10-K.

                  (2)  Financial  Statement  Schedules - See Index to  Financial
                         Statements and Financial Statement  Schedule at page 33
                         of this Form 10-K.

                  (3)  Exhibits - See  Exhibit  Index at page 53-54 of this Form
                         10-K.

         (b)      The  Registrant  did not file or amend any reports on Form 8-K
                  during the last  quarter of the fiscal  year ended  October 3,
                  1998.

         (c)      See Exhibit Index at page 53-54 of this Form 10-K.

         (d)      See Index to Financial  Statements,  Financial  Statements and
                  Financial Statement Schedule at page 33 of this Form 10-K.

                                       52

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

<PAGE>



EXHIBIT INDEX

         Number   Description of Document
         ------   -----------------------
         2.1      Agreement  and Plan of Merger  between  Registrant  and Asante
                  Technologies,   Inc.,  a  California  corporation,   effective
                  October 12, 1993.(1)
         3.1      Certificate of Incorporation of Registrant. (1)
         3.1A     Certificate of Amendment of Certificate  of  Incorporation  of
                  Registrant. (1)
         3.1B     Certificate of Retirement of Stock of Registrant.
         3.2      By Laws of Registrant. (1)
         4.1      Form of Common Stock certificate.(1)
        10.1*     1990 Stock Option Plan and form of Option Agreement.(1)
        10.2*     1993   Directors'   Stock  Option  Plan  and  form  of  Option
                  Agreement.(1)
        10.3*     1993 Employee  Stock  Purchase  Plan and form of  subscription
                  agreement thereunder.(1)
        10.4*     Form of Key Executive Stock Plan Agreement.(1)
        10.5*     Employment Agreement between Registrant and Ralph S. Dormitzer
                  dated June 2, 1993.(1)
        10.5A     Option and Note  Extension  Agreement  between  Registrant and
                  Ralph S. Dormitzer dated August 22, 1994.(5)
        10.6      Form  of   Indemnification   Agreement  entered  into  between
                  Registrant and its directors and officers.(1)
        10.7      Registration  Rights  Agreement  dated July 10,  1992  between
                  Registrant  and certain  holders of Common  Stock and Series E
                  Preferred Stock.(1)
        10.8      Lease  dated July 16, 1992 for  facilities  located at 821 Fox
                  Lane in San Jose, California.(1)
        10.9      Loan Agreement between Registrant and Comerica Bank California
                  for $10,000,000 line of credit dated July 20, 1993, as amended
                  as of July 20, 1993.(1)
        10.9A     First  Modification  dated  February 15, 1994, to the Loan and
                  Security Agreement dated July 20, 1993.(2)
        10.9B     Third Modification,  dated September 30, 1994, to the Loan and
                  Security Agreement dated July 20, 1993.(5)
        10.9C     Fourth Modification, dated September 30, 1994, to the Loan and
                  Security Agreement dated July 20, 1993.(4)
        10.9D     Sixth   Modification   Agreement  to  the  Loan  and  Security
                  Agreement dated July 10, 1993.(6)
        10.9E     Seventh  Modification  Agreement  to  the  Loan  and  Security
                  Agreement dated July 20, 1993.(6)
        10.10     Manufacturing  Payment Agreement dated October 1, 1990 between
                  Registrant and Orient Semiconductor Electronics, Ltd.(1)
        10.11     Distribution   Agreement   dated   November  2,  1989  between
                  Registrant and Ingram Micro, Inc., as amended.(1)(3)
        10.12     Distribution  Agreement dated June 19, 1989 between Registrant
                  and Merisel, Inc. (formerly Macamerica), as amended.(1)(3)

                                       53

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

<PAGE>


        10.13     Distribution   Agreement   dated   August  30,  1990   between
                  Registrant and TechData Corporation, as amended.(1)(3)
        10.14     Volume  Purchase   Agreement  dated  April  15,  1992  between
                  Registrant and National Semiconductor Corporation.(1)(3)
        10.15     Sublease  agreement  dated  August  21,  1995  for  facilities
                  located  at  821  Fox  Lane  in  San  Jose,  California,   and
                  amendments pertaining thereto.(1)(3)
        10.16     Extension of Sublease Agreement dated June 10, 1997 (3)
        10.17     Distribution  Agreement dated 09/30/92 between  Registrant and
                  MicroWarehouse
        23.1      Consent of Independent Accountants.
        27.1      Financial Data Schedule.

                  * The item listed is a compensatory plan.
                  (1)  Previously  filed  as  an  Exhibit  to  the  Registrant's
                       Registration Statement on Form S-1 (No. 33-70300).
                  (2)  Previously  filed  as  an  Exhibit  to  the  Registrant's
                       Quarterly  Report on Form 10-Q for the  quarterly  period
                       ended March 31, 1994.
                  (3)  Confidential  treatment granted as to certain portions of
                       these exhibits.
                  (4)  Previously  filed  as  an  Exhibit  to  the  Registrant's
                       Quarterly  Report on Form 10-Q for the  quarterly  period
                       ended April 1, 1995.
                  (5)  Previously filed as an Exhibit to the  Registrant's  Form
                       10-K for the fiscal year ended September 30, 1994.
                  (6)  Previously  filed  as  an  exhibit  to  the  Registrant's
                       Quarterly  Report on Form 10-Q for the  quarterly  period
                       ended March 30, 1996.

                                       54

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

<PAGE>


                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this  Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized.

       December 30, 1998


                                                 ASANTE TECHNOLOGIES, INC.

                                                 By: /s/ JEFF YUAN-KAI LIN
                                                     ---------------------------
                                                     Jeff Yuan-Kai Lin,
                                                     President and Chief
                                                     Executive Officer, and
                                                     Secretary


                                                 By: /s/ RAJIV MATTHEW
                                                     ---------------------------
                                                     Rajiv Matthew
                                                     Vice President of Finance
                                                     and Administration

                                       55

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

<PAGE>


                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE  PRESENTS,  that each person whose  signature  appears
below constitutes and appoints Jeff Yuan-Kai Lin and Rajiv Matthew,  and each of
them,  jointly  and  severally,  his  attorneys-in-fact,  each with the power of
substitution,  for him in any and all capacities, to sign any and all amendments
to this  Report on Form 10-K and to file the same,  with  exhibits  thereto  and
other  documents  in  connection  therewith,  with the  Securities  and Exchange
Commission,   hereby   ratifying   and   confirming   all  that   each  of  said
attorneys-in-fact,  or his substitute or substitutes, may do or cause to be done
by virtue hereof.

<TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
on Form 10-K has been signed by the following  persons in the  capacities and on
the dates indicated:

<CAPTION>
                  Signature                                        Title                                         Dates
                  ---------                                        -----                                         -----
<S>                                            <C>                                                         <C>
/s/ JEFF YUAN-KAI LIN                          President, and Chief Executive Officer                      December 30, 1998
--------------------------------------         (Principal Executive Officer) and Director
   (Jeff Yuan-Kai Lin)              


/s/ RAJIV MATTHEW                              Vice President of Finance and  Administration               December 30, 1998
--------------------------------------         (Principal Finance and Accounting Officer)
   (Rajiv Matthew)                  

/s/ MICHAEL KAUFMAN                            (Director)                                                  December 30, 1998
--------------------------------------
   (Michael Kaufman)


/s/ DAVID LAM                                  (Director)                                                  December 30, 1998
--------------------------------------
   (David Lam)


/s/ EDMOND TSENG                               (Director)                                                  December 30, 1998
--------------------------------------
   (Edmond Tseng)


/s/ CYRUS TSUI                                 (Director)                                                  December 30, 1998
--------------------------------------
   (Cyrus Tsui)


/s/ WILSON WONG                                (Director)                                                  December 30, 1998
--------------------------------------
   (Wilson Wong)

                                                             56

============================================================================================================================
</TABLE>


<PAGE>


                      REPORT OF INDEPENDENT ACCOUNTANTS ON
                          FINANCIAL STATEMENT SCHEDULE


To the Board of Directors of
Asante Technologies, Inc.

Our audits of the financial  statements  referred to in our report dated October
30, 1998  appearing  in this Form 10-K also  included an audit of the  Financial
Statement  Schedule listed in Item 14(a) of this Form 10-K. In our opinion,  the
Financial  Statement  Schedule  presents fairly, in all material  respects,  the
information  set  forth  therein  when  read in  conjunction  with  the  related
financial statements.


PricewaterhouseCoopers LLP

San Jose, California
October 30, 1998

                                       57

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

<PAGE>


<TABLE>
                                                                S-1
                                                      ASANTE TECHNOLOGIES, INC.
                                     SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                                                           (IN THOUSANDS)

<CAPTION>
                                                                            Balance at     Charged to                       Balance
                                                                            Beginning       Costs and                      at End of
                  Description                                               of Period        Expenes       Deductions        Period
-------------------------------------------------                           ---------        -------       ----------        ------
<S>                                                                           <C>            <C>             <C>             <C>    
Year ended September 30, 1996:
   Allowance for doubtful accounts, price protection
             and distributor rebates                                          $ 1,783        $ 2,406         $(2,032)        $ 2,157
   Allowance for sales return                                                     908            242            (133)          1,017
                                                                              -------        -------         -------         -------
                                                                              $ 2,691        $ 2,648         $(2,165)          3,174
                                                                              =======        =======         =======         =======

Year ended September 27, 1997:
   Allowance for doubtful accounts, price protection
            and distributor rebates                                           $ 2,157        $ 3,056         $(1,896)        $ 3,317
   Allowance for sales return                                                   1,017            754            (366)          1,405
                                                                              -------        -------         -------         -------
                                                                                3,174          3,810          (2,262)          4,722
                                                                              =======        =======         =======         =======

Year ended October 3, 1998:
   Allowance for doubtful accounts, price protection
            and distributor rebates                                           $ 3,317        $ 3,408         $(3,740)        $ 2,985
   Allowance for sales return                                                   1,405            (17)           (229)          1,159
                                                                              -------        -------         -------         -------
                                                                              $ 4,722        $ 3,391         $(3,969)        $ 4,144
                                                                              =======        =======         =======         =======

                                                                 58

====================================================================================================================================
</TABLE>