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 2, 1999

                                                        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
26,  1999,  as  reported  on the  OTC  (Over-the-Counter)  Bulletin  Board,  was
approximately $4,217,919.  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 26, 1999,  the  Registrant  had 9,302,272  shares of Common Stock
outstanding.

              -----------------------------------------------------
                       DOCUMENTS INCORPORATED BY REFERENCE

Certain  sections of the  Registrant's  definitive  Proxy Statement for the 1999
Annual Meeting of  Stockholders  to be held on February 24, 2000 is incorporated
by reference in Part III of this Form 10-K to the extent stated herein.


<PAGE>i


                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                                   <C>

                                                                                                                       Page of
                                                                                                                       Report
                                                      PART I

ITEM 1.           BUSINESS                                                                                                  1

ITEM 2.           PROPERTIES                                                                                               15

ITEM 3.           LEGAL PROCEEDINGS                                                                                        15

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                      16


                                                      PART II

ITEM 5.           MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
                  STOCKHOLDER MATTERS                                                                                      19

ITEM 6.           SELECTED FINANCIAL DATA                                                                                  20

ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS                                                                                20

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                               28

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                              30

ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE                                                                      47


                                                     PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                                       48

ITEM 11.          EXECUTIVE COMPENSATION                                                                                   48

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT                                                                                               48

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                           48


                                                      PART IV

ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
                  FORM 8-K                                                                                                 49

SIGNATURES                                                                                                                 52

</TABLE>


<PAGE>1

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,  small  businesses,  and homes.  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 believes it
is  the  largest  third  party  provider  of  Ethernet   connectivity   for  the
Macintosh(TM) platform.

The majority of the  Company's  products  are  designed  for Ethernet  networks.
Ethernet is a type of network  topology that 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").  The majority of these
Ethernet products are designed to function at speeds of either 10 Mbps (standard
Ethernet, or 10BASE-T) or 10/100 Mbps (known as "Fast Ethernet",  or 100BASE-T).
Additionally, Gigabit Ethernet has been increasingly adopted in the industry due
to  increasing  bandwidth  requirements  needed at the  backbone  of the network
brought about by the  standardization  of 10/100 Ethernet at the user level, and
also due to the present and future  convergence of voice, data, and video across
the same network infrastructure.

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, Fast Ethernet and Gigabit products,  3) the use of Internet and
"Intranet"  technology in corporate LAN, 4) the 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 that 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 LAN

<PAGE>2


backbone, in server groups, at the workgroup level, and in direct connections to
desktop PCs. This is especially applicable to those companies that focus on high
bandwidth,  graphics-intensive  applications.  Beginning  in  fiscal  1996,  the
Company  introduced  several  series of managed and  unmanaged  switch  products
designed to meet the needs of most high bandwidth demanding applications. In the
fourth  quarter of fiscal 1999, the Company  announced two new scalable  Gigabit
switch product lines designed to meet the needs of those customers requiring the
most bandwidth and sophisticated  management  capabilities.  In fiscal 2000, the
Company  will  continue  to focus  research  and  development  resources  on the
development of additional  switching  products in order to meet the needs of the
Company's customers  requiring high performance,  feature-rich  products,  while
continuing  to  reduce  the cost of  existing  lines  as  necessary  to  counter
declining  prices.  At the same time, the Company will  aggressively  pursue new
synergistic product areas.

The second trend is the adoption of Fast Ethernet (100 Mbps)  technology and the
fast growing need for Gigabit solutions for certain applications. In fiscal 1997
and early 1998,  users of 100 Mbps technology were  predominately  two different
sectors of the market:  large corporations and enterprises 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 have accelerated the transition of
the  industry  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  focused  the  majority of its efforts in
fiscal 1999 on the development  and  introduction  of new  competitively  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
that have achieved strong  recognition and critical acclaim.  Gigabit technology
(1,000 Mbps) has been 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.  In fiscal 1999,  the Company  introduced  the  industry's
first unmanaged  Gigabit products  designed to meet the needs of those customers
and  workgroups  requiring  maximum  bandwidth  to  handle  graphics,  intensive
transfers between multiple users,  converged voice,  data, video, and voice over
IP.

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   and   support   for  mixed   PC/Macintosh(TM)/Unix
environments.

The third trend  affecting the market for LAN 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
introduced  several  products to further  capitalize  on the  growing  trend for
companies and institutions needing 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

<PAGE>3


products to meet the needs of its  customers to connect both to the Internet and
corporate Intranets.

The fourth trend in the 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 been 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. With this new affordability and the emergence of newer technologies such
as wireless and PNA (Phone-Net)  technologies  allowing easy connectivity in the
home, the reality of the true home network is nearing.

The fifth trend, which affects the LAN market and the Company in particular,  is
the  seasonality  of the Company's  business.  The first factor that affects the
Company most in the market is the  budgeting  and  purchasing  cycles of certain
segments of the Company's  customers.  The Company has a strong  presence in the
educational  market that is characterized by its typically  seasonal  purchasing
habits due to the nature of  educational  seasons  and by the ability for school
administrators  to more easily install complex 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.   Therefore,  in  general,  peak  purchasing  by
educational institutions tends to occur in the June to August time period.

The sixth trend which affects the LAN market is the commoditization of the lower
end  of the  networking  market,  including  adapters  and  unmanaged  hubs  and
switches.  This trend 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 segment to be
a potential growth area for the Company due to the expected increase in the SOHO
and "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  Apple  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(TM),  iMACs(TM),  Power PCs(TM),  further  incorporation by
Apple of networking connectivity into their products, 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  unmanaged  and  advanced  managed  system  switches,  Fast
Ethernet shared areas,  connectivity and emerging home networking areas.  Delays

<PAGE>4


in bringing new products to market or penetrating  emerging  competitive markets
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;  consequently,  the
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 of
inventory that would adversely affect working capital.

Restructuring

During the third quarter of fiscal 1998, the Company restructured its operations
to  re-establish  the  strategic  direction  of the Company and better align its
operating expenses with anticipated revenues.  Although the Company has realized
the  benefit  of  a  reduced  cost   structure  and  other   benefits  from  the
restructuring of operations, these benefits have been offset somewhat by reduced
product sales and margins.

The Company also recorded  during the third  quarter of 1998 a $400,000  reserve
for personnel and related costs  associated  with a  company-wide  restructuring
plan.  These costs included  employee  severance costs,  benefits,  outplacement
costs,  termination  costs,  and  employee  assistance  expenses  related to the
realignment. The reduction in force in fiscal 1998 consisted of approximately 40
employees, primarily from the sales and marketing departments, in order to bring
the Company's operating costs in line with future expected levels of revenue. As
of October 2, 1999, the Company had utilized all of the  restructuring  reserves
recorded in fiscal 1998.

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 its cost  structure,  designed to better position the
Company  going  forward  and  which  the  Company  believes  will  leverage  its
strengths.

Products

The  Company  offers  both  advanced,  or managed,  systems  products  (hubs and
switches) and simple,  easy to use  unmanaged  systems  products.  The Company's
advanced  switches  and hubs  allow more  sophisticated  users the  ability  for
increased   administration,   system   analysis,   identification   of   network
communication  problems,  and  security  among other  functions.  The  Company's
unmanaged products feature easy to use, Plug-and-Play operation for the customer
needing  convenient  connectivity at a cost-effective  price, or just needing to
extend an existing network.

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.

<PAGE>5


The  IntraStack(TM)  6000 family of switches  is a  stackable  10/100  series of
managed switches.  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  three  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 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.  These products
feature an integrated HTTP management server with Java(TM)-enabled  features, as
well as other advanced functions.  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 (application  specific  integrated circuit, or chip)
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 IntraSwitch(TM) 5000 series switch family offers full featured manageable 10
Mbps switches for support of existing 10 Mbps networks.

In the  fall of 1999  the  Company  introduced  two new  advanced  systems,  the
IntraStack  8000  and  the  IntraChassis  9000.  The  IntraStack  8000 is a high
performance,  feature rich 10/100/1000Mbps  stackable Ethernet switch capable of
expansion  to  192  10/100  switched  Ethernet  connections  in a  single  stack
configuration.  The  IntraChassis  9000  is a  high  performance,  feature  rich
10/100/1000Mbps  stackable  Ethernet  switch  capable of expansion to 192 10/100
switched Ethernet  connections in a single chassis  configuration.  Both systems
are designed around Asante's  IntraCore  Architecture  and offer the simplicity,
high  performance and lower cost of ownership that network managers need to meet
the demands of today's multi-service networks.  Current planned availability for
these systems is scheduled for early calendar 2000.

The  FriendlyNet(TM)  4000E series switch family features cost  effective,  high
performance  10/100 Mbps unmanaged  desktop switches for the smaller and midsize
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  FriendlyNet   400/4000P  series  switch  family  features  low  cost,  high
performance  10/100 Mbps unmanaged switches for smaller networks and other users
with high  bandwidth  needs.  The  switches  feature  NWay  auto-negotiation  to
automatically determine either 10 or 100 Mbps operation and currently come in 5,
8, 16, and 24 port configurations.

The Company also offers the FS3208  FriendlyNet(TM)switch  family,  a 10 Mbps, 8
port unmanaged switch with 2 10/100 port uplinks.

<PAGE>6

Gigabit Adapters and Other Gigabit Products

The Company shipped its first Gigabit  products in February 1999. These products
had a full-featured Gigabit card. Additionally,  in the second quarter of fiscal
1999, the Company  introduced the industry's  first unmanaged  Gigabit  switches
designed to complement its current switch  products and provide those  customers
with large  bandwidth  needs,  high-end  solutions  at  affordable  prices.  The
Company's 7000 series switches feature 8, 16, and 24 port solutions. 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) Shared Systems

In addition to switches, the Company offers a strong 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's  NetStacker II family of  auto-negotiating  10/100  managed shared
hubs replaced the Company's award winning  NetStacker  family of managed 10 Mbps
stackable  hubs.  Asante's 12 and 24 port 10/100  Netstacker  II stackable  hubs
offer easy,  cost  effective  migration  to a managed  solution  via an optional
management  module.  The family  supports  up to eight  unmanaged  12 or 24 port
stacked  units for up to 192 ports and  includes  one  standard MII slot on each
unit for 100Base-FX connectivity options.

The Company  offers a growing  family of 10/100  unmanaged hub solutions for its
customers. The Company's current products, the FriendlyNet 10/100 Dual Speed hub
family,  include stand-alone 5, 8,16, and 24 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.

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 "auto-negotiating" 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 to assist with
trouble  shooting and to indicate  connection  speed,  link  integrity  and data
traffic  and  offer   Wake-on-Lan   (WoL)   operability   which  allows   system
administrators to remotely activate a particular PC, perform  maintenance,  then
place that  workstation  back in sleep mode.  The  Company's PCI cards ship with
Windows(TM),  Linux,  UNIX,  Macintosh(TM),  and Power PC(TM)  drivers for cross
platform compatibility with most significant operating systems.

The Company also offers  FriendlyNet  10/100 PC Fast Ethernet family of adapters
designed to be  price/technology  leaders for Linux,  Unix,  Windows 98/NT,  and
NetWare.

<PAGE>7

10BASE-T Systems and Adapter Cards

In fiscal 1999,  the trend for  sophisticated  users and many new businesses has
moved to 10/100 switched or 10/100 shared  technology.  However,  the demand for
low  cost 10  Mbps  Ethernet  technology  from  more  price-sensitive  and  home
customers remained static. This trend is particularly strong in the kindergarten
through grade 12 education market and the smaller SOHO user in which the Company
has a strong reputation and product name  recognition.  The Company expects that
sales  levels in the 10 Mbps  market  will  continue  to decline as pricing  for
switching  technology  and 10/100  Mbps  shared  Ethernet  technology  have made
adoption of these standards more attractive,  and the increasing use of Internet
traffic and data,  voice,  and video over the same cabling begins to necessitate
the use of faster speeds for some applications..

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 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 ultra reliable, cost effective,  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 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 to 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 that 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.

Internet Router Products

During fiscal 1999, the Company introduced a family of routers designed to allow
multiple  SOHO or home  users to  connect  to the  Internet  at the same time at
increased speeds. The Company plans to introduce  additional Internet routers to

<PAGE>8


meet the changing needs of the market. This planned introduction includes DSL as
well as other emerging technologies.

The  FriendlyNet(TM)  ISDN  router  allows up to four  users to  connect  to the
Internet via one or two ISDN lines at speeds of up to 8 times that of a standard
28.8 Kbps modem.

The  FriendlyNet(TM)Dual  56K allows multiple users to simultaneously connect at
112 Kbps, or up to 168 Kbps with additional modems.

Personal Connectivity: USB & Firewire Products

With the increase of faster PCs and LAN communications  comes the ability in the
SOHO and home  networking  market to support an advanced  environment  including
multiple printers and multimedia devices.  USB (Universal Serial Bus) technology
offers users an inexpensive  method to increase a system's  number of ports,  or
connectivity  options.  In late 1999 the  Company  introduced  a new and growing
family of USB products.  These products offer customers additional  connectivity
to networks,  peripherals,  and other devices such as digital cameras, printers,
scanners and the like. Asante currently carries four products in its USB family,
which is one of the industry's easiest to use and most flexible technologies.

USB Hubs. The Company currently offers two  FriendlyNet(TM) USB hubs to meet the
needs of its  customers.  The 4 and 7 port USB hubs are perfect for connecting a
variety  of  USB  peripheral  devices  to a USB  Macintosh(TM)  or PC  computer,
allowing sound, controller devices, cameras and the like to be connected easily.
Both  FriendlyNet(TM)  USB  hubs  offer   auto-partitioning   for  isolation  of
malfunctioning devices or ports and support a dual power mode.

USB to Ethernet  Adapter.  The Company  offers yet another way to connect a true
10Base-T network through USB.

USB to Parallel  Adapter.  The USB to parallel  adapter  allows PCs to hook up a
parallel  device to a USB port,  freeing the port on the PC for other uses, such
as a ZIP drive, scanner, video camera, or printer.

Software Products

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

In the first  quarter of fiscal 2000,  the Company  introduced  several  product
bundles  in its  FriendlyShare  family.  FriendlyShare  offers  home  and  small
business  users  a  simple  way  to  allow  Macintoshes(TM)  to  share  Internet
connections with other Macintoshes(TM) and PCs.  FriendlyShare offers simplicity
of use, automatic server configuration,  and has built-in two-way security along
with an  integrated  firewall  to  prevent  other  users and  remote  users from
accessing sensitive data.

Asante   currently   offers  two   stand-alone   network   management   options:
IntraSpection(TM)  and  AsanteView(TM).  In  addition,  to offer  its  customers
maximum  value and  cutting  edge  technology,  the  Company  has  integrated  a

<PAGE>9

built-in,  Java-enhanced,  HTTP server it all its current managed products. This
provides  customers fully  integrated  management and security  features without
added costs.

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 that 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  continued to ship  products  based on its
proprietary 10/100 ASIC chip allowing the Company to offer competitively  priced
switches. The Company is continuing its development of new and enhanced products
for connecting to the Internet and corporate Intranets. The Company has and will
continue to focus efforts to expand its Gigabit product line.

The Company is the first to ship fully integrated  management  software with its
products,  with  powerful  abilities  only found in much  costlier  third  party
software products. In addition,  the Company has continued to offer cutting edge
software  products  over the  past  several  years  such as  NetDoubler(TM)  and
FriendlyShare(TM).

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.
Despite  sales  declines to OEM  customers in fiscal 1998 and fiscal  1999,  the
Company will continue to focus resources on obtaining additional, cost effective
agreements  with larger OEM  customers,  although there can be no assurance that

<PAGE>10

such  agreements  will be  obtained.  OEM  sales are  expected  to  continue  to
constitute a smaller portion of the Company's total sales in fiscal 2000.

International sales,  primarily to customers in Europe, Canada and Asia Pacific,
accounted  for  approximately  24%,  22%, and 18% of the  Company's net sales in
fiscal years 1999,  1998,  and 1997,  respectively.  Although the  proportion of
international  sales increased in fiscal 1999, the Company  experienced  reduced
sales in all three areas, primarily in Canada where sales declined approximately
40% since fiscal 1998 due to factors similar to those encountered  domestically.
Sales in Asia Pacific declined 54% in fiscal 1999 compared to the prior year due
primarily to the  continuation  of the weak Asian economy and softness in demand
in  Macintosh(TM)  related  products  that began in fiscal 1998.  As a result of
continuing  declines,  the  Company  closed its sales  offices in Taiwan and the
United Kingdom during fiscal 1999.

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 2, 1999,  the Company  supported the sales  efforts of its  distributors
with 25 direct sales and support related employees located throughout the United
States who promote the Company's  products within assigned  territories and with
14 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 are 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.

<PAGE>11

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  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.  The Company plans on reviewing its warranty policy as it
brings new products to market to offer its customers  competitive policies while
reducing its exposure to adverse warranty claims.

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 2, 1999, the Company had 15 employees  engaged in engineering  and
product development. During the fiscal years 1999, 1998, and 1997, the Company's
engineering and product  development  expenses were  approximately $3.9 million,
$7.3 million, and $7.7 million,  respectively.  The reduction in fiscal 1999 was
due primarily to the reduction in ASIC design expenditures,  personnel costs due
to the Company's ongoing restructuring  efforts, and to the Company's transition
to  an  Original  Discount  Manufacturing  model  allowing  it to  leverage  the
engineering  expertise of certain strategic partners in bringing new products to
market.

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 1999 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

<PAGE>12

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
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"), an assembler of semiconductor and
printed  circuit boards 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  1999,  the Company
purchased  $8.4 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  experiences financial or operational difficulties that result in
a  reduction  or  interruption  in the  supply of  products  to the  Company  or
otherwise  fails 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

<PAGE>13

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 the Company's products.
These subcontractors procure and stock components and subassemblies 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

<PAGE>14


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  1999,  a smaller  portion  of the  Company's  sales  represented
products  sold to OEMs than in fiscal  1998.  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 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 2000.

A significant  percentage of the Company's  sales in fiscal 1998 and fiscal 1999
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.

<PAGE>15

Employees

As of October 2, 1999, the Company had 86 employees, including 15 in engineering
and product development,  21 in manufacturing operations, 29 in marketing, sales
and  support  services,  and  21 in  corporate  administration.  The  number  of
employees  reflects a reduction in  workforce  as a result of the  restructuring
which began in the third quarter of fiscal 1998.

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
14,700 square foot facility under a lease that expires on August 31, 2004,  with
an option to extend for an additional five years. During 1999 the Company closed
the majority of its leased sales  offices in connection  with its  restructuring
activities.   The  Company  currently  has  leased  sales  offices  in  Southern
California,  Utah, and Oregon. 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.

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  sought  unspecified  damages  in  excess  of  $75,000  and  permanent
injunctive  relief.  The  Company  filed a  response  to the  complaint  denying
liability. The case was 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.  On April 16,  1998,  the Special  Master  appointed  by the court

<PAGE>16

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 ordered dismissal of the
case and entered  judgment in favor of the  defendants.  Plaintiff  has filed an
appeal of the  judgment to the  Federal  Circuit  Court of Appeal,  which is now
pending. A ruling on the appeal is not expected until the year 2000.

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.  On May 17, 1999, the Company attended a mediation  hearing
with  Plaintree,  whereby an agreement  for  settlement  was made. As of July 3,
1999,  all  terms  of the  mediation  settlement  had  been  performed,  and the
settlement amount was not material to the Company.

In September 1999 certain inventory having a cost of approximately  $400,000 was
seized  by the  United  States  Customs  for  an  alleged  use of a  counterfeit
certification  mark. To contest the seizure,  it is necessary for the Company to
either file an administrative  petition or to challenge the matter in court. The
United States  Attorney's  Office is seeking the forfeiture of the  merchandise,
and the Company intends to file a claim to challenge the  forfeiture.  It is the
Company's  position that the use of this  certification  mark does not allow the
United  States  Customs to seize or forfeit  the  inventory.  The  Company  also
expects the United States  Customs to issue a penalty  separate from the seizure
under 19 U.S.C.  section  1526(f).  This statute allows issuance of a penalty in
the  amount  of the  retail  value  of the  product  had the  product  not  been
counterfeit.  The Company intends to contest such action through  administrative
and/or judicial procedures.

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 1999.

EXECUTIVE OFFICERS OF THE COMPANY

The executive  officers of the Company,  their ages as of December 10, 1999, and
certain information regarding each of them are as follows:

<PAGE>17

<TABLE>
<S>                                     <C>             <C>

   Name                                  Age                    Position with the Company
-----------------                       -----             ---------------------------------------------------
Wilson Wong                               52              President and Chief Executive Officer
Rusty Callihan                            50              Vice President of Sales, SOHO Product Division
Anthony Contos                            36              Vice President of Finance and Administration
Jim Hsia                                  37              Vice President of Marketing, SOHO Product Division
John Jeng                                 43              Vice President of Operations
Don Miller                                51              General Manager, Applied Systems Division

</TABLE>

Mr. Wilson Wong  co-founded  the Company in 1988 and has served as President and
Chief  Executive  Officer since December 1998,  when he assumed these  positions
following  the  resignation  of Jeff Lin. 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. Rusty Callihan  rejoined the Company in August 1999 and currently  serves as
Vice President of Sales for the Company's SOHO Products,  previously held by Mr.
Richard Strong.  Mr. Callihan  initially  joined the Company in October 1990 and
served in  various  sales  positions  until July 1996.  Prior to  rejoining  the
Company Mr. Callihan was the Vice President of Sales for UMAX  Corporation  from
June 1997 to July 1998.  He also held senior  sales  management  positions  with
RasterOps Corporation and Apple Computer Inc.

Mr. Anthony Contos joined the Company in June 1994, and currently serves as Vice
President  of Finance and  Administration.  In August,  Mr.  Contos  assumed the
position of Vice President of Finance and Administration  previously held by Mr.
Gans who had assumed  that  position  following  the  resignation  of Mr.  Rajiv
Matthew.   From  October  1997  to  August  1999  he  served  as  the  Company's
Controller/Director  of Finance.  Prior to joining the Company Mr.  Contos was a
financial  consultant for Electronic Arts, Inc. where he was responsible for the
international  consolidation activities.  Prior to that he was the financial and
operations analyst with Ross Stores.

Mr. John Jeng joined the Company in December 1998 and  currently  serves as Vice
President of  Operations.  Mr. Jeng  assumed the  position of Vice  President of
Operations  previously held by Mr. William Leung.  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.

Mr. Jim Hsia joined the Company in September  1999 and currently  serves as Vice
President  of Marketing  for the Company.  Mr. Hsia assumed the position of Vice
President of Marketing previously held by Mr. Bill Fenley. From February 1996 to
September 1999 Mr. Hsia was the Vice President of Marketing at ZNYX Corporation.
Prior to that he held various  marketing  positions  at National  Semiconductor,
Eagle  Technology  (a business  unit of Artisoft),  Accton  Technology  and 3Com
Corporation.

Mr. Don Miller rejoined the Company in July 1999 and currently serves as General
Manager of Advanced  Systems for the  Company.  Mr.  Miller was  previously  the

<PAGE>18

Director of Strategic Competitive Analysis at Nortel Networks.  Prior to Nortel,
Mr. Miller was chief analyst for Dataquest's Networking Service Worldwide.

<PAGE>19

                                     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.  The Company's  Common Stock traded on the NASDAQ  National Market
under the trading symbol ASNT until September 30, 1999, when the NASDAQ Listings
Qualifications  Panel removed the Company's stock from trading on the NASDAQ NMS
System as a result of the Company's  inability to maintain a net tangible  asset
value of at least $4 million as required by NASDAQ National  Market  Maintenance
Standards to maintain its listing.  Consequently,  effective September 30, 1999,
the Company's Common Stock traded on the OTC  (Over-the-Counter)  Bulletin Board
under the trading symbol ASNT.OB.  The Company has filed an appeal and is unable
to determine the ultimate outcome of this matter.


Fiscal 1999                           High                      Low
----------------                   ---------                -----------
First quarter                      $2  1/2                  $1
Second quarter                     $1 31/32                 $  13/16
Third quarter                      $1                       $   9/16
Fourth quarter                     $2  1/4                  $   3/4

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                  $   3/16

As of November 15, 1999,  there were 105 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  Common 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

<PAGE>20

intent.  As of October 2, 1999,  Dr. Lam was no longer a member of the Company's
Board of Directors.

Under a stock  repurchase  plan approved  September 16, 1998,  the Company could
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  67,000
shares of its common stock for $117,200 as of October 2, 1999 and 15,500  shares
of its common stock for $28,400 as of October 3, 1998.

<TABLE>
<S>                                          <C>               <C>               <C>             <C>               <C>

ITEM 6.       SELECTED FINANCIAL DATA

(In thousands, except per share data)                                          Year ended
                                             ---------------------------------------------------------------------------------
                                                 1999            1998             1997            1996               1995
                                                 ----            ----             ----            ----               ----
Statement of Operations Data:
Net sales                                    $    37,488     $     51,433       $  83,279       $   66,990        $  60,884

Income (loss) from operations                $   (13,863)    $    (12,450)      $   2,331       $   (1,338)       $  (6,324)

Net income (loss)                            $   (14,161)    $    (14,435)      $   1,926       $     (457)       $  (3,705)

Diluted net income (loss) per share          $     (1.53)    $      (1.57)      $    0.21       $    (0.05)       $   (0.45)

Balance Sheet Data:
Working Capital                              $       751     $     13,645       $  26,727       $   25,101        $  24,548

Total assets                                 $    13,345     $     30,359       $  40,567       $   39,966        $  36,767

Stockholders' equity                         $     1,682     $     15,850       $  29,874       $   26,909        $  26,119

</TABLE>

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

The following table sets forth certain selected financial  information expressed

<PAGE>21

as a percentage of net sales for the fiscal years ended October 2, 1999, October
3, 1998, and September 27, 1997, respectively:

<TABLE>
<S>                                                                <C>              <C>                <C>

                                                                      1999            1998               1997
                                                                     ------          ------             ------

Net sales                                                             100.0 %          100.0 %           100.0 %
Cost of sales                                                          86.8             69.9              63.7
                                                                     --------         --------          --------
Gross profit                                                           13.2             30.1              36.3
                                                                     --------         --------          --------
Operating expenses:
   Sales and marketing                                                 33.6             32.2              20.2
   Research and development                                            10.4             14.3               9.2
   General and administrative                                           6.1              7.0               4.1
   Restructuring                                                          -              0.8                 -
                                                                     --------         --------          --------
     Total operating expenses                                          50.1             54.3              33.5
                                                                     --------         -------           --------
Income (loss) from operations                                         (37.0)           (24.2)              2.8
Interest and other income (expense), net                                (.8)             0.9               0.8
                                                                     --------         --------          --------
Income (loss) before income taxes                                     (37.8)           (23.3)              3.6
Provision (benefit) for income taxes                                      -              4.8               1.3
                                                                     --------         -------           --------
Net income (loss)                                                     (37.8)%          (28.1)%             2.3 %
                                                                     =========        ========          ========
</TABLE>

The Company recorded a net loss for fiscal 1999 of $14.2 million, or $(1.53) per
diluted share,  compared to a net loss of $14.4 million,  or $(1.57) per diluted
share, in fiscal 1998.

Net Sales

Net sales  decreased 27.1% to $37.5 million in fiscal 1999 from $51.4 million in
fiscal 1998.  Net sales were $83.3  million in fiscal 1997.  The decrease in net
sales from  fiscal 1998 to fiscal  1999 was due to several  factors  including a
decrease in OEM sales of $2.1  million,  from $3.5  million to $1.3  million,  a
decline in connectivity product sales of approximately $6.7 million due to heavy
competitive price pressures and the continued incorporation of Ethernet onto the
motherboard  of Apple's  newer  computers  causing a continued  decline in older
adapter card sales, a reduction in sales for older 10 Mbps unmanaged shared hubs
of  $0.5  million  due  primarily  to  pricing   decreases,   the  reduction  of
approximately $2.0 million of sales into the distributor channel, and a decrease
of  approximately  $5.5 million due to declining  sales of the  Company's  older
managed system  products.  These decreases were partially offset by increases in
sales of the Company's 10/100 unmanaged hubs and switches of approximately  $2.0
million and an increase in print router sales of $1.2 million.

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.

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 $11.1 million in fiscal
1999  from  $13.1  million  in  fiscal  1998,  due in part to  Apple  Computer's

<PAGE>22

continued incorporation of Ethernet connectivity into the motherboard of certain
of its  Macintosh(TM)  and  PowerBook(TM)  computers and the  transition of many
customers to 10/100 adapter products. Sales of the Company's 10T shared products
also  decreased by  approximately  $5.6 million,  to $5.8 million in fiscal 1999
from $11.4  million in fiscal  1998,  due  primarily  to the  adoption of 10/100
technology across all markets. Sales of the Company's 10/100 and 100 Mbps ("Fast
Ethernet")  shared systems products  increased by $1.5 million from $2.1 million
in  fiscal  1998 to $3.6  million  in fiscal  1999,  due  primarily  to the late
introduction  of the  Company's new  NetStacker  II product line and  increasing
adoption  of  switching  technology.  Sales  of the  Company's  switch  products
decreased $1.9 million during fiscal 1999 to $10.3 million from $12.2 million in
fiscal  1998.  Such sales  relate  primarily  to the  Company's  10/100  managed
stackable and unmanaged switches.

International sales,  primarily to customers in Europe, Canada and Asia Pacific,
accounted  for 24%,  22%, and 18% of net sales in fiscal 1999,  1998,  and 1997,
respectively. Although the proportion of international sales increased in fiscal
1999,  the Company  experienced  reduced sales in all three areas,  primarily in
Canada where sales declined  approximately  40% since fiscal 1998 due to factors
similar to those encountered domestically. Sales in Asia Pacific declined 54% in
fiscal 1999 compared to the prior year due primarily to the  continuation of the
weak  Asian  economy  and  softness  in  demand in Apple  Macintosh(TM)  related
products  that began in fiscal 1998.  As a result of  continuing  declines,  the
Company  closed is sales offices in Taiwan and the United  Kingdom during fiscal
1999.  In  fiscal  1998  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 that began in fiscal 1998 and
extended  through 1999 will continue  during  fiscal 2000.  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 and that sales of older managed  products and adapter cards as a percent
of total  sales  will  continue  to  decline  in fiscal  2000,  but sales of new
products should offset decreasing sales of the Company's existing products.  The
Company  will  continue in its 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 13.2% in
fiscal  1999 from  30.1% in fiscal  1998,  and from  36.3% in fiscal  1997.  The
decrease  during fiscal 1999 was due primarily to the decreased sales levels and
inventory write-offs of the Company's older legacy adapter cards, managed system
products  and  component  level  inventories.  The decrease in gross profit as a

<PAGE>23

percentage of net sales in fiscal 1998 compared to fiscal 1997 was  attributable
primarily to the  Company's  decreased  sales levels and  increased  competitive
pricing pressures  experienced  during fiscal 1998,  combined with the Company's
discontinuing  a number of its products  resulting in write-downs of the related
inventory.  During the latter half of fiscal 1999 sales  prices  continued to be
affected by heavy  competitive  pricing  pressures.  In  response  to this,  the
Company has  brought to market and plans to  continue  to bring to market  lower
cost replacement products and has moved its manufacturing offshore. Although the
Company  believes it is in a competitive  position at present,  the Company will
continue  to  take   additional   measures   going   forward  to  maintain   its
competitiveness in the market place.

Sales and Marketing

Sales and  marketing  expenses  were at $12.6 million in fiscal 1999 compared to
$16.6 million in fiscal 1998,  or a decrease of 24.0%.  The fiscal 1998 expenses
were  consistent  with  fiscal 1997 with a decrease of $0.2 from $16.8 in fiscal
1997.  As a percentage of net sales,  sales and  marketing  expenses were 33.6%,
32.2%, and 20.2% in fiscal 1999, 1998, and 1997,  respectively.  The decrease in
sales and marketing expenses since fiscal 1998 was due primarily to decreases in
personnel and related costs,  tradeshow  participation,  outside service related
costs,  which were  partially  offset by  increases  in outside  representative,
advertising and product collateral related costs and a write-off of $0.7 million
in prepaid  advertising  credits.  The decrease in sales and marketing  expenses
from fiscal 1997 to fiscal 1998 was primarily due to the Company's  reduction in
the size of its  marketing  department  and its direct  sales force in the third
quarter of fiscal  1998.  This  decrease in the direct  sales  force,  which was
offset partially by the addition of a number of  Manufacturers  Representatives,
was related to the restructuring of the Company and its distribution channels.

The Company expects that its sales and marketing  expenses will decrease further
in fiscal 2000 in absolute dollars.

Research and Development

Research and development  expenses  decreased by 47.1% to $3.9 million in fiscal
1999 from $7.3 million in fiscal 1998.  Research and  development  expenses were
$7.7  million  in fiscal  1997.  As a  percentage  of net  sales,  research  and
development  expenses were 10.4%,  14.3%,  and 9.2%, in fiscal 1999,  1998,  and
1997,  respectively.  The decrease in such  expenses  from fiscal 1998 to fiscal
1999  was due to  decreases  in  prototype  materials,  personnel,  and  outside
consulting  services primarily related to the Company's  strategic  direction to
leverage the engineering expertise of certain of its key suppliers.  The reduced
spending in these areas resulted from decreased product  development  activities
for the Company's proprietary 10/100 switch ASIC and reduced recruitment related
expenses, which were partially offset by the Company's write-off of certain idle
fixed  assets  related to its  research  and  development  activities.  The $0.4
million  decrease in expenses  from  fiscal  1997 to fiscal 1998  resulted  from
reduced payroll, consulting and outside service related expenditures.

The Company  expects that  spending on research and  development  in fiscal 2000
will remain flat or decrease slightly in comparison to fiscal 1999.

<PAGE>24

General and Administrative

General and  administrative  expenses  decreased  to $2.3 million in fiscal 1999
from $3.6 million in fiscal 1998. General and administrative  expenses were $3.5
million in fiscal 1997. As a percentage of net sales, general and administrative
expenses  were  6.1%,  7.0%,  and 4.1% in fiscal  years  1999,  1998,  and 1997,
respectively.  The decrease in general and  administrative  expenses in absolute
dollars  in fiscal  1999 is  primarily  related to  reduced  consulting,  legal,
outside service related  expenditures,  and personnel related costs. General and
administrative  costs for fiscal  1998  increased  in  relation  to fiscal  1997
primarily  due to a $575,000  write-down  of  property  and  equipment  and idle
facility costs.

The Company expects that general and administrative expenses will remain flat or
increase marginally in fiscal 2000 in absolute dollars.

Restructuring

During the third quarter of fiscal 1998, the Company restructured its operations
to  re-establish  the  strategic  direction  of the Company and better align its
operating expenses with anticipated revenues.  Although the Company has realized
the  benefit  of  a  reduced  cost   structure  and  other   benefits  from  the
restructuring of operations, these benefits have been offset somewhat by reduced
product sales and margins.

The Company  also  recorded  during the third  quarter of fiscal 1998 a $400,000
reserve  for  personnel  and  related  costs   associated  with  a  company-wide
restructuring  plan. These costs included  employee  severance costs,  benefits,
outplacement costs,  termination costs, and employee assistance expenses related
to the  realignment.  The  reduction  in  force  in  fiscal  1998  consisted  of
approximately 40 employees,  primarily from the sales and marketing departments.
As of October 2, 1999, the Company had utilized all of the restructuring reserve
recorded in fiscal 1998.

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 its cost  structure,  designed to better position the
Company  going  forward  and  which  the  Company  believes  will  leverage  its
strengths.

Income Taxes

The Company  recorded no provision for federal and state income taxes for fiscal
1999  due   principally  to  a  valuation   allowance  on  deferred  tax  assets
established. The Company has recorded a full valuation allowance on its deferred
tax assets as sufficient  uncertainty exists regarding its  recoverability.  The
Company's  effective  tax rate was  (20.6%) for fiscal 1998 and 36.0% for fiscal
1997.

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

<PAGE>25

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
Company's  operating results if the Company is unable to respond effectively and
timely 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's current  manufacturing and sales structure is particularly 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,  as well  as  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 and
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,  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

<PAGE>26

OEM market could materially  adversely affect the Company's business,  financial
condition and results of operations.

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 that  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 1999 and 1998, the Company's  operating  activities  utilized $3.9
million and $4.0 million, respectively, of cash and cash equivalents as compared
to net cash provided of $1.7 million in fiscal 1997. During fiscal 1999, the net
cash utilized by operating  activities  resulted  primarily from the net loss of
$14.2 million and decreases in accounts  payable and payable to  stockholder  of
$2.7 million and $1.1 million, respectively.  Such uses were partially offset by
reductions  of inventory,  accounts  receivable  and prepaid  expenses and other
current assets of $5.0 million,  $3.9 million,  and $2.8 million,  respectively.
Depreciation and amortization and losses related to the write-off of idle assets
aggregated $1.3 million.  Days of sales outstanding in accounts receivable,  net
increased  to 45 at the end of fiscal  1999  compared to 36 at the end of fiscal
1998, which had the effect of decreasing cash from operations.

Net cash provided by or used in investing activities and financial activities in
fiscal 1999 was  insignificant.  In fiscal 1998 the Company used $0.5 million in
investing  activities,  primarily  due to purchases  of property and  equipment.
During fiscal 1998 and 1997,  the Company's  purchases of property and equipment
totaled $0.7 million and $2.3  million,  respectively.  The Company  anticipates
that capital equipment purchases in fiscal 2000 will not be material.  In 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. 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 a result of such  repurchase  program the Company  repurchased  51,500
shares for $89,000 in fiscal 1999 and 15,500 shares for $28,000 in fiscal 1998.

At October 2, 1999,  the  Company  had cash,  cash  equivalents  and  short-term
investments  of $4.8  million as  compared  to $8.9  million at October 3, 1998.
Working  capital was $0.8 million at October 2, 1999,  compared to $13.6 million

<PAGE>27

at October 3, 1998. In October 1999,  subsequent to the end of fiscal 1999,  the
Company  obtained a bank line of credit that provides for maximum  borrowings of
$5.0 million,  primarily  limited to a certain  percentage of eligible  accounts
receivable  and eligible  inventory and bears  interest at the bank's prime rate
plus 2.0% to 2.75%  dependent  upon the Company's  performance by the end of the
first quarter of fiscal 2000. The Company's ability to borrow under this line is
subject to  compliance  with  covenants  related to  financial  performance  and
condition. The line of credit expires on October 26, 2000.

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 2000. However, the Company has incurred substantial operating losses over
the last two years and may seek additional  financing.  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.

On September  30, 1999,  the  Company's  stock ceased being traded on the NASDAQ
National  Market  System  and was moved to the OTC (Over The  Counter)  Bulletin
Board.  The NASD Appeal  Committee  will review the Company's  position in April
2000.  At present  Company  cannot  determine  the effect  this will have on the
Company's  ability  to raise  additional  funding or  investment,  though at the
present time, the Company believes the effect will be minimal.

Year 2000 Issue

Computer  programs  and systems that make use of dates  represented  by only two
digits (99 rather than 1999) may not operate properly starting in 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  program with project team to address this
issue and achieve  Year 2000 (Y2K)  readiness.  The program  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 has systematically performed an enterprise-wide risk
assessment and developed  contingency  plans to mitigate risks.  The Company has
also  communicated  with  its  customers,   suppliers,  employees  to  reinforce
awareness  and 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  has done this  through a variety  of media,  including
updates to the Y2K area of the Company's web site.

The  Company's Y2K program is comprised of 3 phases;  Awareness and  Assessment,
Renovation,  and Product  Readiness.  The Awareness and Assessment phases of the
project has been completed,  and the Renovation  phase commenced in May 1998 and
was completed in November 1999.  Regarding  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.  Regarding  Customer  Readiness,  the  Company

<PAGE>28

commenced making Year 2000 compliant updates to its customers' systems through a
standard  Service  Update Plan process which was  completed in December  1999. A
Monitoring  phase of the program is in place and provides for the contingency of
customers  experiencing issues with the validation and implementation  phases of
the  Supplier  Readiness  component.  The  Supplier  Readiness  component 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 have  substantially  been developed based upon
this assessment.  Supplier issues that potentially affect the Company's products
that are mission critical were resolved by December 1999.

Internal  Infrastructure  Readiness:  The Company has completed an assessment of
its IT and non-IT applications and its business processes. Most applications and
processes have already been made Y2K  compliant,  while  remaining  applications
have been prioritized and assigned  resources based upon their importance to the
Company's ability to conduct business. All mission critical implementations were
completed by November 1999. The Company estimates that the total Year 2000 costs
will not be significant. The Company is continuing its assessment and developing
alternatives  that will result in a further  refinement of this estimate through
the end of the fiscal  year.  Although  the  Company  is fairly  certain it will
achieve its goals of  minimizing  costs,  there can be no assurance  that actual
costs will not differ  materially  from the current  estimate due to potentially
unforeseen  circumstances.  If  computer  systems  used  by the  Company  or its
suppliers, or the software applications used in systems manufactured and sold by
the Company, fail or experience significant difficulties,  the Company's results
of operations could be materially affected.

Recent Accounting Pronouncements

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments  and Hedging  Activities".  The new standard  requires  companies to
record  derivatives on the balance sheet as assets or  liabilities,  measured at
fair  value.  Gains or losses  resulting  from  changes  in the  values of those
derivatives  will be reported in the  statements  of operations or as a deferred
item, depending on the use of the derivatives and whether they qualify for hedge
accounting.  The key criterion for hedge  accounting is that the derivative must
be highly effective in achieving  offsetting changes in fair value or cash flows
of the hedged  items  during the term of the hedge.  The Company will adopt SFAS
No. 133 in fiscal year 2001.  Although the Company can not determine the impact,
if any,  that  the  adoption  of SFAS  No.  133  will  have on its  consolidated
financial  statements,  the Company  believes  that the effect on its  financial
statements will be immaterial.

Item 7A.      Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk. As of October 2, 1999,  the  Company's  cash and  investment
portfolio did not include fixed-income securities.  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.  Since the Company has the ability to liquidate  this  portfolio,  it

<PAGE>29

does 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 investment 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.


<PAGE>30


ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Index to Financial Statements and Financial Statement Schedule

Financial Statements:

<TABLE>
<S>                                                                                                                       <C>

           Report of Independent Accountants                                                                               31

           Balance Sheets at October 2, 1999 and October 3, 1998                                                           32

           Statements of Operations for the years ended October 2, 1999,
                  October 3, 1998, and September 27, 1997                                                                  33

           Statements of Stockholders' Equity for the years ended
                  October 2, 1999, October 3, 1998, and September 27, 1997                                                 34

           Statements of Cash Flows for the years ended October 2, 1999, October 3, 1998,
                  and September 27, 1997                                                                                   35

           Notes to Financial Statements                                                                                   36

           Quarterly Results of Operations (unaudited)                                                                     47

Financial Statement Schedule:

           Report of Independent Accountants on Financial Statement Schedule                                               54

           Schedule II - Valuation and Qualifying Accounts and Reserves                                                    55
</TABLE>

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.


<PAGE>31


                        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 2, 1999 and October 3, 1998,  and the results of its  operations and its
cash flows for each of the three years in the period ended  October 2, 1999,  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 that 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
November 4, 1999



<PAGE>32



                            ASANTE TECHNOLOGIES, INC.

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

<TABLE>
<S>                                                                                    <C>                     <C>

                                                                                            October 2,          October 3,
                                                                                               1999                1998
                                                                                           ------------        -----------
ASSETS
Current assets:
   Cash and cash equivalents                                                                $   4,808          $   8,852
   Accounts receivable, net of allowance for doubtful accounts,
     rebates and sales returns of $5,771 and $4,144 in 1999
      and 1998, respectively                                                                    4,414               8,328
Inventory                                                                                       2,663               7,673
Prepaid expenses and other current assets                                                         529               3,301
                                                                                            ---------          ----------
      Total current assets                                                                     12,414              28,154
                                                                                            ---------          ----------

  Property and equipment, net                                                                     713               2,004
  Other assets                                                                                    218                 201
                                                                                            ---------          ----------
      Total assets                                                                          $  13,345          $   30,359
                                                                                            =========          ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                                         $   5,027          $    7,714
   Accrued expenses                                                                             5,705               4,799
   Payable to stockholder                                                                         931               1,996
                                                                                            ---------          ----------
     Total current liabilities                                                                 11,663              14,509
                                                                                           ---------          ----------

Commitments and contingencies (See Notes 8 and 9)

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;
     9,301,272 and 9,270,393 shares issued and outstanding in 1999
     and 1998, respectively                                                                         9                   9
Additional paid-in capital                                                                     26,873              26,791
Treasury stock                                                                                   (117)                (28)
Accumulated deficit                                                                           (25,083)            (10,922)
                                                                                            ----------         -----------
     Total stockholders' equity                                                                 1,682              15,850
                                                                                            ----------         -----------
     Total liabilities and stockholders' equity                                             $  13,345          $   30,359
                                                                                            ==========         ===========
</TABLE>


The accompanying notes are an integral part of these financial statements.


<PAGE>33



                            ASANTE TECHNOLOGIES, INC.

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

<TABLE>
<S>                                                                    <C>                <C>                 <C>

                                                                                             Year Ended
                                                                           -----------------------------------------------
                                                                            October 2,       October 3,      September 28,
                                                                               1999             1998              1997
                                                                           -----------       -----------      -----------

Net sales                                                                  $    37,488       $    51,433      $    83,279
Cost of sales                                                                   32,557            35,959           53,040
                                                                           -----------       -----------      -----------
Gross margin                                                                     4,931            15,474           30,239
                                                                           -----------       -----------      -----------
Operating expenses:
   Sales and marketing                                                          12,609            16.587           16,777
   Research and development                                                      3,883             7,346            7,680
   General and administrative                                                    2,302             3,591            3,451
   Restructuring                                                                     -               400                -
                                                                           -----------       -----------      -----------
     Total operating expenses                                                   18,794            27,924           27,908
                                                                           -----------       -----------      -----------
Income (loss) from operations                                                  (13,863)          (12,450)           2,331
Interest and other income (expense), net                                          (298)              477              678
                                                                           -----------       -----------      -----------
Income (loss) before income taxes                                              (14,161)          (11,973)           3,009
Provision for income taxes                                                           -             2,462            1,083
                                                                           -----------       -----------      -----------
Net income (loss)                                                          $   (14,161)      $   (14,435)     $     1,926
                                                                           ===========       ===========      ===========

Basic net income (loss) per share                                          $     (1.53)      $    (1.57)      $      0.21
                                                                           ===========       ==========       ===========
Diluted net income (loss) per share                                        $     (1.53)      $    (1.57)      $      0.21
                                                                           ===========        =========       ===========

Weighted average common shares and equivalents outstanding:
   Basic                                                                         9,282            9,206            8,992
                                                                           ===========       ===========      ===========
   Diluted                                                                       9,282            9,206            9,202
                                                                           ===========       ===========      ===========

</TABLE>

The accompanying notes are an integral part of these financial statements.



<PAGE>34


                            ASANTE TECHNOLOGIES, INC.

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

<TABLE>
<S>                                      <C>           <C>          <C>          <C>           <C>             <C>

                                                                                                Retained
                                                   Common Stock       Additional                 Earnings/
                                             ---------------------     Paid-in     Treasury    (Accumulated
                                              Shares        Amount     Capital       Stock        Deficit)        Total
                                            ------------   --------  ------------  ---------  ---------------  -----------

  Balances as of
    September 28, 1996                       8,859,990     $     9   $    25,313   $    -       $    1,587     $   26,909
  Common stock issued under
    stock plans                                256,693                       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
  Common stock issued under
    stock plans                                 82,379                        82                                       82
  Repurchase of common stock                   (51,500)                               (89)                            (89)
  Net loss                                                                                         (14,161)       (14,161)
                                            ------------   --------  ------------  ---------  ---------------  -----------
  Balances as of
    October 2, 1999                          9,301,272     $     9   $    26,873   $ (117)      $  (25,083)    $    1,682
                                            ============   ========  ============  =========  ===============  ============

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

<PAGE>35



                            ASANTE TECHNOLOGIES, INC.

                            STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<S>                                                                        <C>               <C>               <C>

                                                                                              Year Ended
                                                                            ----------------------------------------------
                                                                             October 2,       October 3,      September 28,
                                                                                1999             1998             1997
                                                                            ----------        ----------       ----------
Cash flows from operating activities:
   Net income (loss)                                                        $  (14,161)       $  (14,435)      $    1,926
   Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
       Depreciation and amortization                                               986             1,417            1,062
       Provision for doubtful accounts receivable                                  341               528              117
       Provision for losses on inventory                                         6,670             1,665            1,000
       Loss due to write-off of idle assets                                        425                 -                -
       Compensation expense upon issuance
         of common stock                                                             -                 -               20
       Deferred income taxes                                                         -             3,606             (634)
   Changes in operating assets and liabilities:
       Accounts receivable                                                       3,573              (543)           1,608
       Inventory                                                                (1,660)            2,742           (3,229)
       Prepaid expenses and other current assets                                 2,755            (2,811)           2,463
       Accounts payable                                                         (2,687)            2,756           (2,242)
       Accrued expenses and other                                                  906               (59)             435
       Payable to stockholder                                                   (1,065)            1,119             (805)
                                                                            ----------        ----------       ----------
         Net cash provided by (used in) operating activities                    (3,917)           (4,015)           1,721
                                                                            ----------        ----------       ----------

Cash flows from investing activities:
   Purchases of property and equipment                                            (120)             (653)          (2,305)
   Other                                                                             -               178             (142)
                                                                            ----------        ----------       ----------
         Net cash used in investing activities                                    (120)             (475)          (2,447)
                                                                            ----------        ----------       ----------

Cash flows from financing activities:
   Issuance of common stock                                                        82                439              996
   Repurchase of common stock                                                      (89)              (28)               -
   Other                                                                             -                 -              (32)
                                                                            -----------       ----------      -----------
         Net cash provided by (used in) financing activities                        (7)              411              964
                                                                            ----------        ----------       ----------

Net increase (decrease) in cash and cash equivalents                            (4,044)           (4,079)             238
Cash and cash equivalent at beginning of year                                    8,852            12,931           12,693
                                                                            ----------        ----------       ----------
Cash and cash equivalent at end of year                                     $    4,808        $    8,852       $   12,931
                                                                            ==========        ==========       ==========


Supplemental disclosures of cash flow information:
   Interest paid during the year                                            $        -        $        -       $        7
                                                                            ==========        ==========       ==========
   Income tax paid (refunded) during the year                               $     (960)       $      147       $     (143)
                                                                            ==========        ==========       ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.


<PAGE>36


                            ASANTE TECHNOLOGIES, INC.

                          NOTES TO FINANCIAL STATEMENTS


Note 1.       The Company and Summary of Significant Accounting Policies

Asante Technologies,  Inc. (the "Company" or "Asante") 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(TM),  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(TM) 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.

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".  At October 2, 1999 and  October 3, 1998,  the Company did not hold
any short-term investments.

Concentration of credit risk
Financial  instruments that potentially subject the Company to concentrations of
credit risk consist  principally of cash  equivalents  and accounts  receivable.
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

<PAGE>37

2,  1999 and  October  3,  1998,  four  customers  accounted  for 63%,  and 49%,
respectively,  of the accounts  receivable balance. In fiscal 1999 and 1998, one
customer  accounted for 44% and 33%,  respectively,  of the Company's  sales. In
fiscal year 1997, sales to the Company's two largest distributors  accounted for
44% of the Company's sales.

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

<TABLE>
         <S>                                                 <C>               <C>            <C>

                                                              1999              1998             1997
                                                              ----              ----             ----

         United States                                          76 %              78 %             82 %
         Europe                                                 18                14               10
         Other                                                   6                 8                8
                                                              ----              ----             ----

                                                               100 %             100 %            100 %
                                                               ===               ===              ===
</TABLE>

Substantially all of the Company's assets are located in the United States.

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.

Loss due to write-off of idle assets
In fiscal 1999 the Company  identified  certain  assets  used for  research  and
development  activities  that were no longer  being used and the  Company had no
plans to use the assets in the foreseeable future. Accordingly,  the assets were
removed from service and are currently held for resale. The Company recognized a
loss due to  write-off  of these idle assets of  $425,000,  which was charged to
research  and  development  expense,   being  the  previous   classification  of
depreciation expense arising from these assets. The loss reflects the difference
between the carrying  value and the expected net proceeds from sale. The Company
estimated the net proceeds based on the market value of similar used  equipment,
less  the cost of  disposal.  In the  event  that a buyer  can not be found  the
equipment  will be scrapped.  The Company does not expect the net proceeds  from
sale or the scrap value of the assets to be significant.

Long-lived assets
The Company  periodically  evaluates the recoverability of its long-lived assets
based upon undiscounted  cash flows and recognizes  impairment from the carrying
value of long-lived assets, if any, based on the fair value of such assets.

<PAGE>38


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"  and related  interpretations  in accounting  for its
employee stock options and stock purchase plan. Pro forma information  regarding
net income  (loss) and net income  (loss) per share is  disclosed as required by
Statement of Financial  Accounting  Standards Statement No. 123, "Accounting for
Stock-Based Compensation" (SFAS No. 123).

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

Comprehensive income
In June 1997, the Financial  Accounting Standards Board ("FASB") issued SFAS No.
130, "Reporting  Comprehensive  Income".  SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components as is effective
for period  beginning after December 15, 1997. The Company had no items of other
comprehensive income during any of the periods presented.

Reclassifications
Certain  previously  reported  amounts in the fiscal 1998 and 1997 statements of
operations have been reclassified to conform to the 1999 presentation.

Segment information
In June 1997 the FASB  issued SFAS No. 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,  geographical  areas  and  major  customers.  In
accordance with provisions of SFAS No. 131, the Company  determined that it does
not have separately reportable operating segments.

Recently issued accounting pronouncements
In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments  and Hedging  Activities".  The new standard  requires  companies to
record  derivatives on the balance sheet as assets or  liabilities,  measured at
fair  value.  Gains or losses  resulting  from  changes  in the  values of those
derivatives  will be reported in the  statements  of operations or as a deferred
item, depending on the use of the derivatives and whether they qualify for hedge

<PAGE>39

accounting.  The key criterion for hedge  accounting is that the derivative must
be highly effective in achieving  offsetting changes in fair value or cash flows
of the hedged  items  during the term of the hedge.  The Company will adopt SFAS
No. 133 in fiscal year 2000.  Although the Company can not determine the impact,
if any,  that  the  adoption  of SFAS  No.  133  will  have on its  consolidated
financial  statements,  the Company  believes  that the effect on its  financial
statements will be immaterial.

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 No.  128).  Basic net  income  (loss) per share is
computed  by  dividing  net  income  (loss)  available  to  common  stockholders
(numerator)  by  the  weighted-average   number  of  common  shares  outstanding
(denominator)  during the  period.  Diluted  net income  (loss) per share  gives
effect to all dilutive  potential  common shares  outstanding  during the period
including stock options,  using the treasury stock method.  In computing diluted
net income  (loss) per share,  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.

The following is a  reconciliation  of the  numerators and  denominators  of the
basic and  diluted  net income  (loss) per share  computations  for the  periods
presented below (in thousands, except per share data):

<TABLE>
<S>                                                                    <C>                     <C>                <C>

                                                                            1999                 1998                1997
                                                                         -----------          -----------          --------

Net income (loss) available to common shareholders                       $   (14,161)         $   (14,435)            1,926
                                                                         ============         ============          ========

Weighted average common stock outstanding (basic)                              9,282                9,206             8,992
Effect of dilutive warrants and options                                            -                    -               210
                                                                         -----------          -----------          --------
Weighted average common stock outstanding (diluted)                            9,282                9,206             9,202
                                                                         ===========          ===========          ========

Net income (loss) per share:
     Basic                                                               $     (1.53)         $     (1.57)        $    0.21
                                                                         ===========          ===========          ========
     Diluted                                                             $     (1.53)         $     (1.57)        $    0.21
                                                                         ===========          ===========          ========

</TABLE>

Diluted  net  income  (loss) per share for the years  ended  October 2, 1999 and
October 3, 1998 excludes all dilutive potential common shares as their effect is
antidilutive.  At October 2, 1999,  October 3, 1998,  and  September  27,  1997,
options  and  warrants  outstanding  of  1,762,512,  1,584,539,  and  1,127,606,
respectively, were excluded since their effect was antidilutive.

<PAGE>40


Note 3.       Balance Sheet Components

<TABLE>
<S>                                                                     <C>                 <C>

                                                                            1999                 1998
                                                                          ----------          -----------
                                                                                  (in thousands)
Inventory:
     Raw materials and component parts                                    $     177            $   2,727
     Work-in-process                                                            173                  604
     Finished goods                                                           2,313                4,342
                                                                          ---------            ---------

                                                                          $   2,663            $   7,673
                                                                          =========            =========
Property and equipment:
     Computers and R&D equipment                                          $   6,246            $   7,632
     Furniture and Fixtures                                                   1,480                1,562
                                                                          ---------            ---------
                                                                              7,726                9,194
     Accumulated depreciation                                                (7,013)              (7,190)
                                                                          ---------               ------

                                                                          $     713            $   2,004
                                                                          =========            =========
Accrued expenses:
     Payroll-related expenses                                             $   1,227            $   1,186
     Sales promotion expenses                                                 2,059                1,119
     Warranty                                                                   572                  572
     Other                                                                    1,847                1,922
                                                                          ---------            ---------

                                                                          $   5,705            $   4,799
                                                                          ==========            =========
</TABLE>

Note 4.       Restructuring and Other Costs

During the third quarter of fiscal 1998, the Company restructured its operations
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  realignment  of cost  structure  designed to better  position the
Company going forward.

The Company  also  recorded  during the third  quarter of fiscal 1998 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.
As of  October  2, 1999,  the  Company  had  utilized  all of the  restructuring
reserves recorded in fiscal 1998.

In  addition,  the  Company  recorded in fiscal  1998  charges of  $550,000  for
inventory write-downs related to the discontinuation of several of the Company's
adapter card and transceiver  products and $575,000 for  write-downs  related to
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  13.6% of the  Company's  Common

<PAGE>41


Stock as of October 2, 1999. 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 2, 1999, the Company had firm purchase commitments under the OSE
Agreement of approximately $1.2 million.

For fiscal 1999,  1998, and 1997 the Company sold, at cost,  approximately  $0.8
million, $2.5 million, and $3.3 million, respectively, of component parts to OSE
and purchased $8.4 million,  $8.2 million, and $16.8 million,  respectively,  of
goods  from  OSE.  Amounts   classified  as  "payable  to  stockholder"  in  the
accompanying  balance  sheets are solely  related to the  purchases of inventory
from OSE.


Note 6.       Income Taxes

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

<TABLE>
<S>                                                                     <C>                  <C>                   <C>
                                                                              1999               1998                1997
                                                                           ---------           ---------           --------
Current:
     Federal                                                               $       -           $   1,008           $  1,389
     State                                                                         -                (136)               328
                                                                           ---------           ---------           --------

         Total current                                                             -              (1,144)             1,717
                                                                           ---------           ---------           --------
Deferred:
     Federal                                                                       -               2,689               (574)
     State                                                                         -                 917                (60)
                                                                           ---------           ---------           --------

         Total Deferred                                                            -               3,606               (634)
                                                                           ---------           ---------           --------


                                                                           $       -           $   2,462           $  1,083
                                                                           =========           =========           ========
</TABLE>


Deferred tax assets,  net, comprise the following at October 2, 1999 and October
3, 1998 (in thousands):

<TABLE>
<S>                                                                        <C>                <C>

                                                                              1999               1998
                                                                           ---------           ---------
Deferred tax assets :
     Net operating losses                                                  $   5,554           $   2,643
     Research and development credits                                          2,131               2,106
     Receivable- and sales-related reserves                                    2,277               1,698
     Inventory-related reserves                                                2,180                 431
     Compensation accruals                                                       206                 432
     Depreciation                                                                109                 408
     Other                                                                     1,478                 967
                                                                           ---------           ---------
         Total deferred tax assets                                            13,935               8,685
         Valuation allowance                                                 (13,935)             (8,685)
                                                                           ----------          ---------
                                                                           $       -           $       -
                                                                           ==========          =========
</TABLE>

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 2, 1999.

At October  2, 1999,  the  Company  had  federal  and state net  operating  loss
carryforwards of  approximately  $14.8 million and  approximately  $9.7 million,
respectively,  available to offset future taxable income which expire  beginning

<PAGE>42


in 2018 and 2003, respectively.  In addition, as of October 2, 1999, the Company
had  approximately  $1.3 million and  approximately  $0.8 million of federal and
state research and development credits,  respectively.  The federal credits will
expire beginning in 2012 if not utilized.

Under  the Tax  Reform  Act of 1986,  the  amount  of and the  benefit  from net
operating  losses  that  can be  carried  forward  may be  impaired  in  certain
circumstances. Events which may cause changes include, but are not limited to, a
cumulative ownership change of more than 50% over a three year period.

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

<TABLE>
<S>                                                                   <C>           <C>    <C>    <C>    <C>    <C>

                                                                           1999                 1998                1997
                                                                         ----------            ----------          --------

Tax expense/(benefit) at U.S. statutory rate                             $   (4,815)           $   (4,071)        $   1,023
State taxes, net of federal benefits                                           (776)                 (537)              176
Research and development credits                                                (25)               (1,551)             (264)
Other                                                                           366                   (64)              148
Valuation allowance                                                           5,250                 8,685                 -
                                                                         ----------            -----------        ----------
                                                                         $        -            $   2,462          $   1,083
                                                                         ==========            ===========        ==========
</TABLE>

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  2, 1999 and
October  3, 1998,  67,000  shares and  15,500  shares,  respectively,  have been
repurchased for $117,000 and $28,000, respectively.

Stock Based Compensation Plans
As of October 2, 1999, the Company had four stock-based  compensation plans that
are described below.

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

<PAGE>43

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 above three Plans unless the exercise price of the option 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 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.

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 20, 1998.

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

<TABLE>
<S>                                <C>              <C>           <C>           <C>             <C>              <C>

                                               1999                           1998                          1997
                                     ------------------------    ------------------------     --------------------------
                                                    Weighted                     Weighted                       Weighted
                                      Number         Average         Number       Average        Number          Average
                                        of          Price per          of        Price per         of           Price per
                                      Shares          Share          Shares        Share         Shares           Share
                                     -----------  ------------    ------------  ------------  -------------   -----------
Beginning Balance                     1,584,539       $4.93         1,919,607      $5.72         1,955,786        $5.58
Granted                               1,663,005       $1.45           743,010      $3.03           606,296        $5.81
Exercised                                     -           -           (27,978)     $4.61          (138,776)       $3.81
Canceled                             (1,485,032)      $4.48        (1,050,100)     $5.08          (503,699)       $5.80
                                     -----------                    ---------                   -----------
Ending Balance                        1,762,512       $2.03         1,584,539      $4.93         1,919,607        $5.72
                                     ===========                    =========                    =========
</TABLE>

<PAGE>44

The following table summarizes  information  about stock options  outstanding at
October 2, 1999:

<TABLE>
     <S>                                        <C>           <C>                 <C>          <C>             <C>

                                                               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
      ------------------                        --------------    -------------- ----------      ------------ ----------
      $0.1650 - $0.8750                             221,400            9.57       $0.8718            2,041      $0.5271
      $0.9375 - $0.9375                             209,320            9.81       $0.9375              206      $0.9375
      $1.0320 - $1.0320                             600,000            9.83       $1.0320           75,000      $1.0320
      $1.8750 - $2.3443                             179,716            8.94       $1.9052           57,086      $1.9086
      $2.3750 - $2.5000                             265,358            8.37       $2.4748           95,156      $2.4920
      $3.8750 - $8.0000                             286,718            5.77       $5.4714          260,286      $5.4595

      $0.1650 - $8.0000                           1,762,512            8.82       $2.0291          489,775      $3.7686

</TABLE>

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 1999, 1998, and 1997, risk free interest rates ranging from
4.6% to 6.79% respective of grant date; expected average volatility of 57%, 67%,
and 60%,  respectively;  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 1999, 1998, and 1997 was $0.73, $1.68, and $3.02, respectively.

In 1993,  the Company  adopted the Employee  Stock  Purchase Plan (the "Purchase
Plan")  covering an aggregate of 500,000  shares of common stock.  During Fiscal
1999 the  Stockholders  approved an  amendment  increasing  the number of shares
available  for issuance  under the Purchase  Plan by 100,000  shares.  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  1999,  1998,  and 1997 were  82,380,
136,314, and 118,187 shares of common stock,  respectively,  at an average price
of $1.00, $2.27, and $3.85, respectively.  On October 2, 1999, 143,600 shares of
common stock were available for future purchase.

The fair value of the employee's  purchase  rights under SFAS No. 123, which was
estimated using the Black-Scholes model with the following  assumptions used for
grants during fiscal 1999, 1998, and 1997: risk free interest rates ranging from
4.55% to 6.40%, respective of commencement date of the offering period, expected
volatility  of 57%,  60%, and 60%,  respectively,  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 1999, 1998, and 1997
was $1.00, $2.27, and $3.85, respectively.

<PAGE>45


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 1999, 1998, and 1997 would have been as follows (in thousands, except per
share amounts):
<TABLE>
<S>                                                                    <C>                 <C>                   <C>
                                                                            1999                 1998                1997
                                                                         -----------          -----------          --------
Net income (loss):
     As reported                                                         $   (14,161)         $   (14,435)         $  1,926
     Pro forma                                                           $   (14,614)         $   (15,433)         $    891

Net income (loss) per share
     As reported
         Basic                                                           $     (1.53)         $     (1.57)         $   0.21
         Diluted                                                         $     (1.53)         $     (1.57)         $   0.21
     Pro forma
         Basic                                                           $     (1.57)         $     (1.68)         $   0.10
         Diluted                                                         $     (1.57)         $     (1.68)         $   0.10
</TABLE>

The pro forma amounts include compensation expense related to fiscal 1999, 1998,
and 1997 stock option  grants and sales of common stock under the Purchase  Plan
only.  Such  pro  forma   disclosures  may  not  be   representative  of  future
compensation  cost because options vest over several years and additional grants
are made each year.

Note 8.       Commitments and Contingencies

The Company has an operating  lease for its main facility that expires on August
31, 2004.  Various other leases for sales  offices  expire  through  2001.  Rent
expense  under  such  operating  leases   aggregated   approximately   $970,800,
$1,012,000, and $912,000 for fiscal 1999, 1998, and 1997, respectively.  Certain
leases require the Company to pay a portion of facility operating expenses.

Approximate future minimum lease payments under these leases at October 2, 1999,
are as follows (in thousands):

             Year
             ----
             2000                                                      $   1,114
             2001                                                          1,118
             2002                                                          1,101
             2003                                                          1,134
             2004                                                          1,068
                                                                       ---------
                                                                       $   5,535
                                                                       =========

The Company  recorded income of  approximately  $150,800,  $226,200 and $217,000
during fiscal 1999, 1998 and 1997, respectively,  under sublease agreements, the
last of which expired in June 1999.  None of the Company's  existing  facilities
are being subleased.

<PAGE>46


Note 9.       Litigation

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  sought  unspecified  damages  in  excess  of  $75,000  and  permanent
injunctive  relief.  The  Company  filed a  response  to the  complaint  denying
liability. The case was 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.  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 ordered dismissal of the
case and entered  judgment in favor of the  defendants.  Plaintiff  has filed an
appeal of the  judgment to the  Federal  Circuit  Court of Appeal,  which is now
pending. A ruling on the appeal is not expected until sometime next year.

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.  On May 17, 1999,  the Company  attended a
mediation hearing with Plaintree,  whereby an agreement for settlement was made.
As of July 3, 1999, all terms of the mediation  settlement  had been  performed,
and the settlement amount was not material to the Company.

In September 1999 certain inventory having a cost of approximately  $400,000 was
seized  by the  United  States  Customs  for  an  alleged  use of a  counterfeit
certification  mark. To contest the seizure,  it is necessary for the Company to
either file an administrative  petition or to challenge the matter in court. The
United States  Attorney's  Office is seeking the forfeiture of the  merchandise,
and the Company intends to file a claim to challenge the  forfeiture.  It is the
Company's  position that the use of this  certification  mark does not allow the
United  States  Customs to seize or forfeit  the  inventory.  The  Company  also
expects the United States  Customs to issue a penalty  separate from the seizure
under 19 U.S.C.  section  1526(f).  This statute allows issuance of a penalty in
the  amount  of the  retail  value  of the  product  had the  product  not  been
counterfeit.  The Company intends to contest such action through  administrative
and/or judicial procedures.

<PAGE>47

Note 10.      Subsequent Event

In October 1999,  subsequent to the end of fiscal 1999,  the Company  obtained a
bank line of credit  that  provides  for  maximum  borrowings  of $5.0  million,
primarily limited to a certain  percentage of eligible  accounts  receivable and
eligible  inventory.  Borrowings  under the line of credit bear  interest at the
bank's prime rate plus 2.0% to 2.75% dependent upon the Company's performance by
the end of the first quarter of fiscal 2000, and interest shall not be less than
$5,000 per month.  Furthermore,  borrowings  are  collateralized  by  inventory,
equipment, receivables, and bank balances. The Company's ability to borrow under
this  line  is  subject  to  compliance  with  covenants  related  to  financial
performance and condition. The line of credit expires on October 26, 2000.


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

<TABLE>
<S>                                       <C>              <C>       <C>         <C>

Fiscal 1999                                                Quarter Ended
--------------------                        --------------------------------------------------

                                            October 2       July 3     April 3    January 2
                                            ---------     ---------  ----------   ---------

Net sales                                   $   9,102      $ 7,914   $  8,867     $ 11,605
Gross profit                                $   3,108      $  (629)  $  1,000     $  1,452
Net loss                                    $    (432)     $(4,641)  $ (4,670)    $ (4,418)
Net loss per share                          $    (.05)     $  (.50)  $   (.50)    $   (.48)



Fiscal 1998                                               Quarter Ended
--------------------                        --------------------------------------------------

                                            October 3      July 4      April 4     December 27
                                            ---------     ---------  ----------   ------------

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

</TABLE>

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

Not applicable.


<PAGE>48

                                    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 1999 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 2,
1999.

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.


<PAGE>49



                                     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 30 of
                      this Form 10-K.
              (2)   Financial  Statement  Schedules  - See Index to  Financial
                      Statements and Financial  Statement Schedule at page 30 of
                      this Form 10-K.
              (3)   Exhibits - See Exhibit Index at page 50 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 2, 1999.

         (c)        See Exhibit Index at page 50 of this Form 10-K.

         (d)        See Index to Financial  Statements, Financial Statements and
                    Financial Statement Schedule at page 30 of this Form 10-K.


<PAGE>50


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        Form  of  Indemnification  Agreement  entered  into between
                     Registrant  and its  directors  and  officers.(1)
         10.6        Registration  Rights  Agreement dated July 10, 1992 between
                     Registrant and certain holders of Common Stock and Series E
                     Preferred Stock.(1)
         10.7        Lease dated July 16, 1992 for  facilities located at 821
                     Fox Lane in San Jose,  California.(1)
         10.8        Manufacturing Payment Agreement dated October 1, 1990
                     between Registrant and Orient  Semiconductor Electronics,
                     Ltd.(1)
         10.9        Distribution  Agreement  dated  November 2, 1989 between
                     Registrant  and Ingram Micro,  Inc., as  amended.(1)(2)
         10.10       Distribution  Agreement  dated June 19, 1989  between
                     Registrant  and  Merisel,  Inc.  (formerly  Macamerica), as
                     amended.(1)(2)
         10.11       Distribution  Agreement  dated August 30, 1990 between
                     Registrant and TechData  Corporation,  as   amended.(1)(2)
         10.12       Volume  Purchase  Agreement  dated April 15, 1992 between
                     Registrant and National  Semiconductor Corporation.(1)(2)
         10.13       Sublease  agreement  dated  August 21, 1995 for  facilities
                     located at 821 Fox Lane in San Jose, California, and
                     amendments pertaining thereto.(1)(2)
         10.14       Extension of Sublease Agreement dated June 10, 1997.(2)
         10.15       Distribution Agreement dated September 30, 1992 between
                     Registrant and MicroWarehouse.(4)
         23.1        Consent of Independent Accountants.
         27.1        Financial Data Schedule.

<PAGE>51

*    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)  Confidential treatment granted as to certain portions of these exhibits.
(3)  Previously filed as an Exhibit to the Registrant's Form 10-K for the fiscal
     year ended September 30, 1994.
(4)  Previously  filed as an exhibit to the  Registrant's  Annual Report on Form
     10-K for the fiscal year ended October 3, 1998.

<PAGE>52


                                   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 31, 1999

                                                  ASANTE TECHNOLOGIES, INC.


                                                 By: /s/ WILSON WONG
                                                         ----------------------
                                                         Wilson Wong,
                                                         President and
                                                         Chief Executive Officer


                                                By: /s/  ANTHONY CONTOS
                                                         -----------------------
                                                         Anthony Contos
                                                         Vice President of
                                                         Finance and
                                                         Administration, and
                                                         Secretary


<PAGE>53

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE  PRESENTS,  that each person whose  signature  appears
below constitutes and appoints Wilson Wong and Anthony Contos, 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.

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:

<TABLE>
<S>                                           <C>                                                     <C>

                  Signature                                        Title                                         Dates
--------------------------------------         ----------------------------------------------           ---------------------

/s/  WILSON WONG                               President, and Chief Executive Officer                     December 15, 1999
--------------------------------------
     (Wilson Wong)                             (Principal Executive Officer) and Director


/s/ ANTHONY CONTOS                             Vice President of Finance and Administration               December 15, 1999
--------------------------------------
     (Anthony Contos)                           (Principal Finance and Accounting Officer)


/s/ MICHAEL KAUFMAN                            (Director)                                                 December 15, 1999
--------------------------------------
     (Michael Kaufman)


/s/ EDMOND TSENG                               (Director)                                                 December 15, 1999
--------------------------------------
     (Edmond Tseng)


/s/ JEFF YUAN KAI LIN                          (Director)                                                 December 15, 1999
--------------------------------------
     (Jeff Yuan Kai Lin)


</TABLE>

<PAGE>54


        REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE


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

Our audits of the financial  statements referred to in our report dated November
4, 1999,  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
November 4, 1999


<PAGE>55



                                                                   SCHEDULE II

                            ASANTE TECHNOLOGIES, INC.

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (In thousands)


<TABLE>
<S>                                                          <C>                <C>            <C>                <C>

                                                                                  Additions
                                                                Balance at        Charge to                        Balance at
                                                                 Beginning        Costs and                          End of
Description                                                    of Period          Expenses         Deductions       Period
---------------------------------------------------            -----------     -------------     -------------     ----------
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 returns                                    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 returns                                    1,405              (17)             (229)         1,159
                                                                ---------         ---------       ----------       --------
                                                                $   4,722         $  3,391        $   (3,969)      $  4.144
                                                                =========         ========        ==========       ========


Year ended October 2, 1999:
     Allowance for doubtful accounts,
       price protection and distributor rebates                 $   2,985         $  3,128        $   (1,506)      $  4,607

     Allowance for sales returns                                    1,159              927              (922)         1,164
                                                                ---------         --------        ----------       --------
                                                                $   4,144         $  4,055        $   (2,428)      $  5,771
                                                                =========         ========        ==========       ========
</TABLE>