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

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

                                   FORM 10-KSB

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

                    For the fiscal year ended October 2, 2004

                                       or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                 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 of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                              2223 Old Oakland Road
                           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

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

Check 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 _____

Check if disclosure of delinquent  filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will 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-KSB or any  amendment to
this Form 10-KSB. [ ]

The Registrant's revenues for its most recent fiscal year were $8,622,000.

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 December
30,  2004,  as  reported  on the  OTC  (Over-the-Counter)  Bulletin  Board,  was
approximately  1,313,  521 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 December 31, 2004, the  Registrant  had 17,061,457  shares of Common Stock
outstanding.

Transitional Small Business Disclosure Format:  YES          NO   X
                                                    -----       -----

<PAGE>
<TABLE>
<CAPTION>

                                                               TABLE OF CONTENTS
                                                                                                                         Page of
                                                                                                                         Report
<S>                     <C>                                                                                                <C>
PART I......................................................................................................................1
         ITEM 1.        BUSINESS............................................................................................1
         ITEM 2.        PROPERTIES.........................................................................................11
         ITEM 3.        LEGAL PROCEEDINGS..................................................................................11
         ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................................11

PART II....................................................................................................................12
         ITEM 5.        MARKET FOR COMMON EQUITY AND RELATED  STOCKHOLDER  MATTERS AND SMALL BUSINESS ISSUER
                        PURCHASES OF EQUITY SECURITIES.....................................................................12
         ITEM 6.        MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF  OPERATIONS........................................16
         ITEM 7.        FINANCIAL STATEMENTS...............................................................................24

         ITEM 8.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON  ACCOUNTING AND FINANCIAL DISCLOSURE .............43
         ITEM 8A        CONTROLS AND PROCEDURES............................................................................43
         ITEM 8B        OTHER INFORMATION..................................................................................44
PART III...................................................................................................................45
         ITEM 9.        DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
                        OF THE EXCHANGE ACT................................................................................45
         ITEM 10.       EXECUTIVE COMPENSATION.............................................................................52
         ITEM 11.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                        MANAGEMENT AND RELATED STOCKHOLDER MATTERS.........................................................57
         ITEM 12.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................................................58
         ITEM 13.       EXHIBITS...........................................................................................59
         ITEM 14        PRINCIPAL ACCOUNTANT FEES AND SERVICES.............................................................59

SIGNATURES.................................................................................................................63

</TABLE>
                                       i


<PAGE>


Explanatory Note

On January 5, 2004,  the Company filed an amendment to its Annual Report on Form
10-K (the "Form  10-K/A") for the fiscal year ended  September 28, 2002 with the
Securities  and Exchange  Commission  (the "SEC").  For  additional  information
regarding the restatement, the reader should refer to the Form 10-K/A filed with
the SEC on January 5, 2004.

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.

Some of the  statements  contained  in this  Annual  Report on Form  10-KSB  are
forward-looking  statements,  including  but not  limited to those  specifically
identified  as such,  that  involve  risks  and  uncertainties.  The  statements
contained  in the  Report on Form  10-KSB  that are not  purely  historical  are
forward looking  statements  within the meaning of Section 27A of the Securities
Act  and  Section  21E of  the  Exchange  Act,  including,  without  limitation,
statements  regarding  our  expectations,   beliefs,  intentions  or  strategies
regarding the future. All forward looking statements  included in this Report on
Form 10-KSB are based on  information  available to us on the date hereof and we
assume  no  obligation  to update  any such  forward-looking  statements.  These
statements  involve known and unknown  risks,  uncertainties  and other factors,
which may cause our actual  results to differ  materially  from those implied by
the forward-looking  statements. In some cases, you can identify forward-looking
statements by terminology  such as "may," "will,"  "should,"  "expects,"  plans"
"anticipates,"  "believes,"  "estimates," "predicts," "potential," or "continue"
or the  negative of these  terms or other  comparable  terminology.  Although we
believe that the expectations  reflected in the  forward-looking  statements are
reasonable, we cannot guarantee future results, levels of activity,  performance
or achievements. Moreover, neither any other person nor we assume responsibility
for the accuracy and completeness of such statements. Important factors that may
cause actual  results to differ from  expectations  include  those  discussed in
"Factors  Affecting  Future  Operating  Results"  beginning  on  page __ in this
document.



<PAGE>

                                     PART I

ITEM 1.  BUSINESS


Recent Acquisition Information

On June 13, 2003, Asante Technologies,  Inc. ("Asante" or the "Company") entered
into an Agreement and Plan of Merger with Oblique, Inc. ("Oblique") (the "Merger
Agreement"),  pursuant to which  Asante  would be merged with and into  Oblique,
with Oblique  being the surviving  corporation  (the  "Merger").  The Merger was
conditioned  upon,  among other  things,  approval by holders of Asante  capital
stock.  The foregoing  description of the Merger does not purport to be complete
and is qualified in its entirety by reference to the complete text of the Merger
Agreement, a copy of which was filed with the SEC in June.

On June 13, 2003,  Asante  issued a press  release,  which was filed on June 23,
2003, with the Securities and Exchange  Commission,  announcing the execution of
the Merger Agreement.

On September 13, 2003, the Company terminated its Merger Agreement with Oblique,
Inc., and entered into a Letter of Intent with Acorn Campus,  a venture  capital
company.  The offer by Acorn Campus was superior to the offer from Oblique,  and
contained proven financing.  However,  without apparent cause, or reason,  Acorn
sent a letter to Management  on November 18, 2003,  informing the Company of its
intent  to  withdraw  its  offer.  Management  is  reviewing  its  alternatives,
including pursuing legal action against Acorn Campus for breach of contract.

On December 18, 2003, the Company signed a Letter of Intent with UNETEK, for the
private investment of funds with the Company for approximately $3.0 million. The
Letter of Intent expired and the Company is no longer  pursuing an investment by
UNETEK.

On December 23, 2003,  the Company  entered into a new,  non-binding,  Letter of
Intent to merge with Oblique,  Inc. The Merger was conditioned upon, among other
things, an expedited due diligence period, and several other factors,  including
an expedited  process to arrive at a Definitive  Merger  Agreement  with certain
minimum  acceptable  terms  including  a bridge  funding of  approximately  $1.0
million.  Due to delays in Oblique's  obtaining the necessary financing for this
transaction,  the Company discontinued merger negotiations with Oblique in June,
2004.

Overview

Founded in 1988,  Asante  Technologies,  Inc.  is a leading  provider of network
solutions  for the  small  and  medium-sized  business/enterprises  (SMB/E)  and
home-offices (SOHO). Asante's products are designed primarily for Ethernet local
area networks  (LAN).  The Company's key products are based on Layer-2,  Layer-3
and Layer-4 switching/routing technologies, including:


                                       1
<PAGE>

o        10/100/1000 L2/3/4, managed and unmanaged LAN switches/routers
o        Wireless LAN Access Points (APs)
o        Wired/wireless switches
o        TCP/IP Off-load Engine (TOE) Adapter Cards

In fiscal 2004, the high-tech  industry's  networking  sector has  experienced a
reasonable  return to growth (as compared to the downturn  since the bursting of
the technology bubble in late 2000).  While competition  continues to be fierce,
the overall market  (specifically in the Company's  targeted SME/E market space)
has returned to a more "healthy"  state of affairs,  with a more  reasonable and
sustainable growth trend.

As the  industry  outlook  continues  to improve,  Asante  anticipates  many new
business opportunities that will leverage the Company's historical strengths and
help propel its future growth. These include:

o    Increasing demand for all things digital (including information,  graphics,
     photos, video, music and voice)
o    Dramatic growth in storage and communications requires high speed storaging
     networking equipments.
o    Increasing requirements for the integration of wired and wireless switching
     solutions
o    Continued growth in broadband Internet access
o    Accelerating  growth in the  integration  of  voice,  video and data over a
     single networking solution
o    Accelerating growth in the TOE technology adoption cycle
o    April iPod Audio player and Xserv high end server have great acceptance  in
     the market which need network networking products to deliver the contents.

As these  technologies and trends evolve,  Asante's strategy is to capitalize on
these trends with a comprehensive  product and service portfolio to enable it to
differentiate itself in its targeted market focus. The combination of innovative
technologies,  strategic sales channels,  and major account partnerships provide
the optimal environment for Asante's plans in the growing SME market space.

Innovative Technologies for Growth Markets

In fiscal 2004,  Asante continued to see the return on its long-term  investment
in SMB/SME market space to support  converged,  high-speed data, voice and video
networks. Major accounts began taking delivery on the Company's Gigabit Ethernet
switches,  adapters  and  routers  during  this  period.  During  the year,  the
Company's  IntraCore and FriendlyNET  products received a multitude of favorable
reviews by industry publications and reviewers.

Synergy Research  predicts a CAGR over 11% for the periods between 2004 and 2008
for fixed port Ethernet LAN L2/3-7  switching  solutions (the Company's  focused
solution  space) - with a base of $5.4 Billion for the year 2004.  Additionally,


                                       2
<PAGE>

Dell'Oro  forecasts that the SMB/E and home networking space will grow at a CAGR
of 19% for the same period - with a base of $5.4 Billion for the year 2004.

The  Company's  technology   development  group  spends  substantial   resources
integrating  many  advanced  features  into its  products to  differentiate  its
products  and  to  offer  features   similar  to  those  of  larger   networking
corporations,  thereby  creating  a  tremendous  value-based  solution  for  its
customers.  The Company was a pioneer in the integration of Internet  technology
into its network products. The Company continues to incorporate enterprise-class
technologies  into its managed  switches and Internet  access  products and then
offer  them  to  customers  at a  value-based  pricing  structure  -  the  right
technology at the right price focused at the right market segment.

Based on its  technological  expertise,  the Company is well  positioned to take
advantage of growing markets for all-in-one  products to answer the needs of the
converged network for the SMB/E market space.

Strategic Sales Channels

The Company's  strategic  sales strategy is based upon a focused  two-tier sales
channel  approach,  augmented by key strategic  account  initiatives.  In fiscal
2004,  the Company  expanded its Value Added  Reseller  (VAR)  program  aimed at
attracting additional resellers to carry the Company's products--focusing on the
Company's  IntraCore  products by adding  service to the more  significant  VARs
while  ensuring  that this new level of VARs can offer the service and technical
support that many of the Company's end user customers need.  Going forward,  the
Company will continue to focus on the addition of IntraCore VARs that specialize
in the  Company's  key SMB/SME  market focus space,  as well as expanding it key
strategic account base.

Strategic Partnerships

In fiscal  2004,  the  Company  successfully  continued  its  process of seeking
strategic  partnerships  designed to leverage the Company's strengths in its key
focus market segment.  The Company breaks its key technology partners into three
categories:  hardware,  software and ODM. The  Company's  key hardware  partners
include, but are not limited to: Broadcom, TI, Marvell, Vitesse,  SwitchCore and
LeWiz.  The Company's  key software  partners  include,  but are not limited to:
Apple  Microsoft  and Wind River.  And finally the  Company's  key ODM  partners
include, but are not limited to: DNI, ASUS, Edimax, Accton, AMIT, Cameo, Netstar
and UNEX Technologies.

In addition,  the Company is focusing its efforts on certain strategic  business
and technical relationships to increase its strength and presence in its focused
market segment and to continue to introduce cutting-edge technologies.

                                       3
<PAGE>

Products

Asante  offers  a range  of  products  from  simple,  personal  connectivity  to
sophisticated,    enterprise-class   network   infrastructure   solutions.   The
FriendlyNET  brand is targeted at consumers,  home businesses and small business
users.  Each  product is  optimized  to deliver  outstanding  value with minimal
complexities.  The FriendlyNET family includes network adapters,  routers,  hubs
and switches (10/100 and 10/100/1000  Mbps). The IntraCore family consists of an
enterprise-class set of products (10/100 and 10/100/1000 Mbps) Ethernet switches
that support Layer 2, Layer 3 and Layer 4.

Gigabit and 10/100 Ethernet POE Switches

During  FY  2004,   Asante  focused  on  expanding  its   comprehensive  set  of
enterprise-class 10/100 Mbps and Gigabit Ethernet switching products.  During FY
2004, the Company introduced three new IntraCore products: a 10/100 Mbps (w/1000
Mbps uplinks)  Power over Ethernet (PoE) L2+ switch  (IC3624PWR),  a 24-port L2+
10/100/1000 switch (IC36240) and a 48-port 10/100/1000 L2+ switch (IC36480).

The  Company  delivered  to market the  powerful  IC3624PWR  L2+ PoE switch that
delivers  advanced quality of service (QoS) features to swiftly move data, voice
and video at speeds up to 1000 Mbps. The product was specifically  designed with
the  requirements of voice over IP (VoIP) needs in mind. It delivers some of the
best price-performance characteristics on the market today and is ideally suited
for the Company's targeted SMB/E market focus.

Additionally,  the Company delivered two core L2+ Gigabit switches,  the IC36240
and the IC36480.  Both of these products offer key feature sets and price points
that help Asante offer a comprehensive  product  portfolio of  enterprise-class,
Gigabit switching solutions for the Company's target market space.

For more  cost-sensitive  users with smaller networks,  the Company's  unmanaged
FriendlyNET GX5 Series  switches are a good complement to the managed  IntraCore
switches.  The models in this family span the spectrum  from 5 ports to 48 ports
of Gigabit  Ethernet -  including  the market  leading  GX5-800P  and  GX5-2400W
product  offerings.  Asante's  GigaNIX adapters for computers using the Windows,
Macintosh  and Linux  operating  systems  provide  the  necessary  interface  to
existing servers and desktop computers. In a move to make high-end features more
accessible   to   value-oriented   users,   the  GX5  models  offer   simplified
configuration using any standard web browser.

Wireless Internet Gateways and Adapters

With the rapid acceptance of wireless  networking in home and small  businesses,
Asante has  introduced  a number of products to  seamlessly  integrate  wireless
networks with wired networks. The Company's AeroLAN adapters conform to standard


                                       4
<PAGE>

IEEE  802.11  requirements  for  wireless  networking.  During  FY 2004,  all of
Asante's  wireless  products  migrated from the 802.11b to the 802.11g (54 Mbps)
standard.

The  Company   anticipates   expanding  its  wireless  product   portfolio  with
enterprise-grade  wireless LAN access points and switches. Some of the Company's
current   IntraCore   switches  may  be  upgraded  to  provide   802.1X   RADIUS
authentication,  an enhanced  security  for wireless  clients.  The Company also
provided wireless 802.11g adapter cards specifically for Apple Mac computers.

Internet Gateway Products (Routers)

The Company's FriendlyNET routers are designed for SMB/E and end users who share
a single  broadband  connection  among others in the same home or small  office.
Asante  has  several  routers,  ranging  from  low-cost,   entry-level  to  more
sophisticated   units  with   virtual   private   network   (VPN)  and  wireless
capabilities.

Personal Connectivity Products

In  addition to Fast  Ethernet  and Gigabit  Ethernet,  the Company  also offers
personal  connectivity  products  that  utilize the  Universal  Serial Bus (USB)
specification.  Moving data at speeds  ranging  from 12 Mbps to 480 Mbps,  these
desktop devices  frequently  connect a mouse,  keyboard,  video camera,  digital
camera or memory card reader to a single desktop.

Technology

The  Company's  core  strengths  are  attributed  to its early  dominance in the
Ethernet local area networking industry. By engineering custom chips,  firmware,
software, and systems,  Asante was able to bring feature-rich products to market
sooner than others.

The  Company  differentiates  its  products  with  advanced  features,  enhanced
usability,  ease to use, personalized technical support and an established sales
channel.  By seeking  technical and  manufacturing  partners,  Asante is able to
focus on product design and development. In the coming year, the Company expects
to grow its IntraCore line with  higher-density  Gigabit  Ethernet PoE switches,
security routers, and enterprise-class wireless solutions.

Marketing and Distribution

The Company  markets its products in three main channels:  first,  through a two
tier distribution  channel which sells primarily to VARs or DMRs (direct Mailing
Resellers),  which sell to commercial,  corporate and direct end users;  second,
the Company  sells to a  significant  number of selective  Advantage  VARs;  and
third,  through a number of Original Equipment  Manufacturer (OEM) customers and
several large corporate customers.



                                       5
<PAGE>

Asante's  major  distributors  are leading  wholesale  distributors  of computer
products in North  America,  such as IMD, D&H and SYNE/EMJ.  To  supplement  the
efforts of  distributors  overseas,  the  Company  has  appointed  international
distributors for specific territories,  such as Microwarehouse and Computer 2000
in Europe.  All of the  Company's  distributors  are  generally  appointed  on a
non-exclusive basis;  however, the Company has appointed a master distributor in
China on an exclusive  basis in order to build the  Company's  channel in China.
Fulfillment of products to e-commerce  customers are typically  handled  through
the Company's  distribution  channel,  or directly from the Company to customers
within the United States.

From time to time, the Company pursues OEM opportunities  which it believes make
sense based on the Company's  current  business plan.  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. The Company will continue to focus resources on obtaining additional,
cost effective  agreements  with larger OEM customers,  although there can be no
assurance that such agreements will be obtained.

The Company  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  trade
advertising, participation in industry trade shows, and other marketing efforts.
As of  October  2,  2004,  the  Company  supported  the  sales  efforts  of  its
distributors  with eight  direct  sales and support  related  employees  located
throughout the United States who promote the Company's  products within assigned
territories and with five outside technical support 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
6: Management's Discussion and Analysis.

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  other major
distributors or the loss of any one of these  distributors would have a material


                                       6
<PAGE>

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.

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 limited  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.

Engineering and Product Development

The markets for the Company's  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 Apple
Macintosh  connectivity  market and expanding its presence in the multi-platform
SMB/E market  requires  continuing  investment to develop new products,  enhance
existing products and reduce manufacturing costs.

As of October 2, 2004,  the Company had seven  employees  engaged in engineering
and product  development.  During the fiscal years 2004 and 2003,  the Company's
engineering and product development expenses were approximately $1.7 million and
$2.1 million, respectively.

The Company continues to invest significant resources in engineering 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,  beginning in fiscal 2004 and going forward,  the Company intends to
focus additional  efforts in the areas of embedded software design,  development
of  additional  Layer  2-7  switches  and other  LAN-edge  devices,  WAN  router


                                       7
<PAGE>

products,  wireless,  security,  and system  integration.  The Company will also
continue product development efforts to expand its Gigabit product offerings.

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.   The
subcontractors include Advanced Multimedia Internet Technologies, Delta Networks
("Delta"),   Edimax  and  Cameo  Communications  ("Cameo"),  as  well  as  other
manufacturers  based  primarily in Taiwan and China.  Delta is a stockholder  of
Asante. 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 quality issues have not been material.

Delta 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.  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  services  from
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 Cameo, Delta 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.



                                       8
<PAGE>

Although  the Company  generally  uses  standard  parts and  components  for its
products,  certain key components  used in the Company's  products are available
from only one source,  and others are  available  from only a limited  number of
sources.  Components  currently  available from only one source  include,  among
others,  custom integrated  circuits used in the Company's  intelligent hubs and
certain ASICs used in the Company's  Gigabit  switching  products,.  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 many of
its  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 remain vigorous.  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 to continue.  The slow  recovery in the economy has served to magnify the
effects of the competitive pressures in the industry.

The Company competes with Cisco Systems,  HP, 3Com, Netgear,  Linksys,  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.

The Company believes the principal competitive factors in the SMB/SME market are
brand name  recognition,  value for price,  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 and results of
operations.

Proprietary Rights

Asante, FriendlyNET, IntraCore, IntraStack, IntraSwitch, NetStacker, AsanteTalk,
AsantePrint,  FriendlyStack,  AsanteFAST,  GigaNix,  and AroLAN  are  registered


                                       9
<PAGE>

trademarks  of Asante  Technologies,  Inc.  Other product and brand names may be
trademarks or registered trademarks of their respective owners.

The  Company  is  currently  evaluating  several  domestic  and  foreign  patent
applications  relating to its  software and systems  technology.  The Company is
currently filing renewals on several of its existing patents.

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

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

Employees

As of October 2, 2004, the Company had 44 employees,  including 7 in engineering
and product development,  9 in manufacturing operations, 19 in marketing,  sales
and support services, and 9 in corporate administration.  The number reflects an
overall decrease of one with no significant change in any functional area.

The Company's success 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.

                                       10
<PAGE>

ITEM 2.       PROPERTIES

In September 2004, the Company moved its  headquarters,  including its executive
offices  and  corporate  administration,  manufacturing,  marketing,  sales  and
technical  support  facilities from 821 Fox Lane to its current location at 2223
Old Oakland Road, located in San Jose, California.  The Company occupies a 7,000
square foot facility  under a lease that expires on September 1, 2005,  with two
1-year   options  to  extend  the  lease  period.   The  Company  also  occupies
approximately 4,500 square feet of warehouse space in Milpitas,  California on a
month-to-month  rental basis. The Company currently has a leased sales office in
Utah with an original lease  expiration of January 2005. The Company  intends to
negotiate  a new lease  with its  existing  landlord  for a smaller  space.  The
Company  believes  that  its  existing  facilities  are  adequate  to  meet  its
requirements for the foreseeable future and believes that suitable additional or
substitute  space will be available as needed.  See Note 9 of Notes to Financial
Statements.

ITEM 3.       LEGAL PROCEEDINGS

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

In September 1999, certain inventory having a cost of approximately $400,000 was
seized  by  the  United  States   Customs  for  the  alleged   improper  use  of
certification  marks owned by Underwriters  Laboratories  Inc. ("UL").  In March
2003,  the US Attorney  and the Company  entered into a final  settlement  under
which the seized  inventory  was  returned  to the  Company  and the Company was
obligated to pay $57,000 and remove improper marks from the product.

On May 13, 2004, the Company's former landlord,  WW&LJ Gateways,  LTD., filed an
unlawful detainer action against the Company in the Superior Court for the State
of California, County of Santa Clara. In the suit, the landlord alleged that the
Company was in default under its lease because the Company had not paid rent for
the months of April and May 2004.  At the time the suit was filed,  the  alleged
outstanding rent totaled $147,425.  On July 13, 2004, the Company entered into a
Settlement and Mutual Release  pursuant to which the Company is obligated to pay
the  sum  of  $271,186  payable  in  equal  installments  over  five  months.  A
Stipulation for Entry of Judgment and Judgment was filed with the Superior Court
on July 12,  2004.  The Company also agreed to vacate the premises at the end of
its current lease term which is August 31, 2004. As of the October 2, 2004,  the
Company had paid all but $21,000 of the settlement amount.

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 2004.


                                       11
<PAGE>
                                     PART II

ITEM 5.       MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL
              BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

The Company's Common Stock traded on the NASDAQ National Market System under the
trading symbol ASNT until September 30, 1999 at which time the Company's  Common
Stock commenced trading on the  Over-the-Counter  (OTC) Bulletin Board under the
trading  symbol  ASNT.OB.  Due to the  restatement  of  fiscal  2002  and  prior
financial statements,  the Company was late in filing its fiscal 2003 Form 10-K,
and therefore had been trading under the trading symbol  ASNT.PK.  The Company's
current trading symbol is ASNT.PK

The  following  table sets  forth the high and low bid prices for the  Company's
Common Stock for each quarter  during the last two fiscal years.  The quotations
set forth below reflect inter-dealer prices, without retail mark-up, mark-downs,
or commissions and may not represent actual transactions.

Fiscal 2004                         High                      Low
---------------------------------------------------------------------

First quarter                      $  0.45                  $  0.14
Second quarter                     $  0.20                  $  0.06
Third quarter                      $  0.20                  $  0.08
Fourth quarter                     $  0.20                  $  0.10

Fiscal 2003                         High                      Low
---------------------------------------------------------------------

First quarter                      $  0.17                  $  0.03
Second quarter                     $  0.16                  $  0.05
Third quarter                      $  0.43                  $  0.12
Fourth quarter                     $  0.48                  $  0.25

As of December 31, 2004,  there were 101 stockholders of record of the Company's
Common  Stock.  This  number does not include  shares held in street  name.  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


                                       12
<PAGE>

Common Stock.  In addition,  the market price of the Company's  Common Stock may
not be indicative of current or future performance.

Asante Equity Compensation Plan Information

<TABLE>
<CAPTION>
As of  October 2, 2004

Plan Category                 Number of securities to     Weighted-average         Number of securities
                              be issued upon exercise     exercise price of        remaining available for
                              of outstanding options,     outstanding options,     future issuance under
                              warrants and rights         warrants and rights      equity compensation
                                                                                   plans (excluding
                                                                                   securities reflected in
                                                                                   column (a) )
                              (a)                         (b)                      (c)
<S>                                     <C>                     <C>                     <C>
Equity compensation plans               1,048,150 (1)           0.2605 (1)              662,316 (1)
approved by security holders              195,000 (2)           1.0320 (2)                    0 (2)
                                           90,000 (3)           1.8806 (3)                    0 (3)
                                          935,252 (5)           1.2305 (5)                    0 (5)

Equity compensation plans                  17,000 (4)           0.8125 (4)               133,000 (4)
not approved by security
holders

Total                                   2,285,402                                       795,316
<FN>
(1)      the 2001 Stock Option Plan
(2)      the Key Executive Option Plan
(3)      the 1993 Directors' Stock Option Plan
(4)      the 2000 Non-Statutory Stock Option Plan
(5)      the 1990 Stock Option Plan
</FN>
</TABLE>

The selected  financial data set forth below should be read in conjunction  with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  and the  financial  statements  of the Company and the notes to the
financial statements included elsewhere in this Annual Report on Form 10-K.


                                       13
<PAGE>

Sales of Unregistered Securities During the Quarter

On July 27, 2004,  the Company  raised $1.7 million,  net of costs,  through the
private  placement of shares of its common stock at $0.25 per share.  Each share
also  included  a warrant  to  purchase  an  additional  share of  common  stock
exercisable  at $0.50 per share.  The shares were sold  exclusively to a limited
number  of  accredited  investors  in  the  United  States  without  any  public
solicitation or investors  residing  outside the United States and not deemed to
be a "U.S.  person" as that term is defined  under  Regulation  S. The investors
represented that they were acquiring such shares for their own account. Both the
offer and the sale of the shares were made  pursuant  to the  private  placement
exemption  provided  by Section  4(2) of the  Securities  Act of 1933 (the "1933
Act") or made outside the United States and deemed to be "offshore transactions:
as  that  term  is  defined  under  Regulation  S of the  1933  Act.  The  share
certificates  will  contain a legend  indicating  that such  shares  can only be
transferred  in compliance  with the  provisions of Regulation S or Rule 144. In
light of the  foregoing,  such  issuance  was deemed  exempt  from  registration
pursuant to Section 4(2) or  Regulation S of the 1933 Act. The shares are deemed
to be "restricted  securities" as defined in Rule 144 under the 1933 Act and the
certificate(s)  evidencing the shares bear a legend stating the  restrictions on
resale.


ITEM 6.       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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,  including  switch  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.

Recent Developments

On January 5, 2004,  the Company filed an amendment to its Annual Report on Form
10-K (the "Form  10-K/A") for the fiscal year ended  September 28, 2002 with the
SEC. For  additional  information  regarding the  restatement  the reader should
refer to the Form 10-K/A previously filed with the SEC.

Throughout the following  Management's  Discussion and Analysis,  all referenced
amounts reflect the balances and amounts on a restated basis.

                                       14
<PAGE>

Results of Operations

The following table sets forth certain selected financial  information expressed
as a  percentage  of net sales for the fiscal  years  ended  October 2, 2004 and
September 27, 2003, respectively:
<TABLE>
<CAPTION>
                                                                        2004                 2003
                                                                        ----                 ----
<S>                                                                    <C>                  <C>
              Net sales                                                100.0%               100.0%
              Cost of sales                                             68.8%                64.5%
              Gross profit                                              31.2%                35.5%
              Operating expenses:
                       Sales and marketing                              34.2%                26.2%
                       Research and development                         19.1%                17.4%
                       General and administrative                       12.3%                 9.7%
                                                                       -----                 ----
                       Total operating expenses                         65.6%                53.3%
                                                                       -----                -----
              Loss from operations                                     (34.4)%              (17.8)%
              Interest and other income (expense), net                  (1.6)%               (0.6)%
                                                                       ------               ------
              Loss before income taxes                                 (36.0)%              (18.4)%
              Provision (benefit) for income taxes                       -                    -
              Net loss                                                 (36.0)%              (18.4)%
                                                                       ======               ======
</TABLE>

Net Sales

Net sales  decreased  28% to $8.6  million in fiscal  2004,  from $12 million in
fiscal 2003.  The decrease in net sales in fiscal 2004  compared to fiscal 2003,
was due to several factors including the continued economic downturn in the high
tech industry and network industry, heavy competitive pressures particularly for
unmanaged products,  continued incorporation of Ethernet onto the motherboard of
Apple's  newer  computers  and to a reduction  in  revenues  in some  previously
stronger sales channels in which the Company sells many of its products.  During
fiscal 2004, sales of unmanaged  products decreased across most existing product
lines,  however,  sales of  managed  Gigabit  Systems  and  Layer  3/4  Switches
increased to $2.5 million from $1.8 million in the previous year.

In fiscal 2004 and 2003, one customer, a US based distributor, accounted for 25%
and 33%, respectively, of the Company's total sales.

International sales,  primarily to customers in Europe, Canada and Asia Pacific,
accounted  for 19% and 18% of net sales in fiscal  2004 and 2003,  respectively.
The  reduction in  international  sales during  fiscal 2004,  compared to fiscal
2003,  was due  primarily to financial  issues  related to one of the  Company's
primary  distributors  in Germany  and  decreased  sales in Canada.  The Company
continues  to believe  there is  potential  demand in  certain of the  Company's
foreign  target  markets,  including  broadband,   digital  media,  and  medical
equipment  providers.  To that end, the Company has focused its sales efforts in
these areas to strengthen its channels.  However,  there cannot be any assurance
that its efforts will be successful.

                                       15
<PAGE>

The Company believes that the economic  downturn  beginning just prior to fiscal
2001, will continue  during fiscal 2005, and that any improvement  will be slow.
The Company's declines in revenues have been offset partially by increased sales
of the Company's managed and unmanaged  Gigabit  switches.  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 sales of older
systems  products and adapter cards as a percentage of total sales will continue
to decline in fiscal 2005.  The Company has  continued  to focus on  introducing
newer managed  systems  products such as its new IntraCore  35516 Layer 3/4+ and
35160 Layer 2/4 switches,  which it believes  should help offset the declines in
revenues of its older  systems  products.  The Company will continue to focus on
those  markets  in which it  believes  it can  increase  its  revenues  and will
continue to seek to increase its revenues, compared to fiscal 2004.

Cost of Sales and Gross Profit

Cost of sales in fiscal 2004  decreased by 24% to $5.9 million  compared to $7.7
million in fiscal 2003.  The  decreasing  cost of sales  generally  reflects the
decreased sales revenue.

The Company's  gross profit as a percentage  of net sales  decreased to 31.2% in
fiscal 2004, from 35.5%,  in fiscal 2003. The decrease in fiscal 2004,  compared
to fiscal 2003 was due  primarily to steep  pricing  declines of  broadband  and
wireless  products  during  the  year,  which  the  Company  was not  completely
successful offsetting by reducing manufacturing costs. During fiscal 2004, sales
prices  continued  to be affected by heavy  competitive  pricing  pressures  and
reduced volumes for many of the Company's  products.  The Company has brought to
market and plans to continue to bring to market lower cost replacement  products
and is  focusing  its  product  development  efforts on  introducing  additional
unmanaged Gigabit products and managed  IntraCore  products to help offset those
products which are under the most significant margin pressure.  The Company will
continue  to  take   additional   measures   going   forward  to  maintain   its
competitiveness in the market place.

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.

Sales and Marketing

Sales and  marketing  expenses were $2.9 million in fiscal 2004 compared to $3.1
million in fiscal 2003,  or a decrease of 6.5%.  As a  percentage  of net sales,
sales and  marketing  expenses  were 34.2 % and 26.2%,  in fiscal 2004 and 2003,
respectively.  The reduced  fiscal  2004  expenditures  in absolute  dollars and
increase as of percentage  of sales  reflect  reduced sales levels during fiscal


                                       16
<PAGE>

2004 and reduced expenditures for outside representative commissions,  personnel
related costs, co-operative advertising, and trade advertising activities.

The Company expects that its sales and marketing expenses will remain at current
levels, or increase slightly in fiscal 2005 in absolute dollars. As a percent of
total sales,  the Company  believes these  expenditures  will increase  slightly
compared to fiscal 2004.

Research and Development

Research and  development  expenses  decreased by 21% to $1.65 million in fiscal
2004,  from $2.1 million in fiscal 2003. As a percentage of net sales,  research
and  development  expenses  were  19.1% and  17.4%,  in fiscal  2004,  and 2003,
respectively.  The  decrease in research  and  development  expenses in absolute
dollars in fiscal 2004 compared to fiscal 2003 was due primarily to decreases in
personnel  related  expenditures as a result of salary and headcount  reductions
implemented by the Company. The increase in research and development expenses as
a percentage of sales was due to the decline in revenue.

The Company  expects that  spending on research and  development  in fiscal 2005
will remain  fairly flat or decrease  slightly in  comparison  to fiscal 2004 in
absolute  dollars,  while the  Company  continues  to leverage  the  engineering
expertise of its strategic partners.

General and Administrative

General and  administrative  expenses  decreased  to $1.1 million in fiscal 2004
from $1.2 million in fiscal  2003.  As a  percentage  of net sales,  general and
administrative  expenses  were 12.3% and 9.7% in fiscal  years  2004,  and 2003,
respectively.  The decrease in general and  administrative  expenses in absolute
dollars  in fiscal  2004 is  primarily  related  to  reduced  personnel  related
expenditures   and   professional   services.   The   increase  in  general  and
administrative  expenses  as of  percentage  of sales was due to the  decline in
revenue.

The  Company  expects  that  general  and  administrative  expenses  will remain
constant or decrease somewhat in fiscal 2005 in absolute dollars.

Off-Balance Sheet Arrangements

During  fiscal  year 2004 the Company  did not engage in any  off-balance  sheet
arrangements as defined in Item 303 (a) (4) of the SEC's Regulation S-K.

Income Taxes

The Company  recorded no provision or benefit for federal and state income taxes
for fiscal 2004 or 2003 due  principally  to the fact that the Company  incurred
losses and a full valuation  allowance was recorded against net operating losses
and other tax credits  generated in those years. The Company has recorded a full


                                       17
<PAGE>

valuation  allowance  on its  deferred  tax assets as it is more likely than not
that these assets will not be realized.

Net Loss

The Company recorded a net loss for fiscal year 2004 of $3.1 million compared to
a net loss of $2.2 million for fiscal year 2003. The larger net loss in 2004 was
due  primarily to the 28% drop in net sales.  While cost of sales and  operating
expenses  also  declined,  such  reduced  expenses  were more than offset by the
reduction in sales.  The Company will attempt to develop and sell higher  margin
products in fiscal 2005 while  continuing to implement cost cutting  programs in
order to reduce its operating losses.

Liquidity and Capital Resources

During  fiscal  2004,  the  Company's  operating  activities  used  cash of $3.0
million.  During fiscal 2003, the Company's  operating  activities  used cash of
$1.5 million.

During fiscal 2004,  net cash used in  operations  resulted  primarily  from the
Company's net operating loss of $3 million and decreases in prepaid expenses and
accrued expenses of $0.3 million and $0.5 million, respectively. These uses were
offset  primarily by increases in accounts payable and inventory of $0.7 million
and $0.2 million, respectively.

Net cash used in  investing  activities,  including  purchases  of property  and
equipment, in fiscal 2003 was insignificant.

During fiscal 2004, the Company  successfully  completed a $1.72 million private
placement of 6,880,000 shares of common stock and 6,880,000 warrants to purchase
common stock at $0.50 per share. However, the Company's access to further equity
financing  could be affected by the level of the  Company's  share price and the
Company's  listing  status.  In  fiscal  2003 net  cash  provided  by  financing
activities was insignificant.

At October 2, 2004,  the Company had cash and cash  equivalents  of $0.4 million
compared to $1.7 million at September 27, 2003,  which represents a 76% decline.
Working capital was $0.4 million at October 2, 2004, compared to $1.6 million at
September 27, 2003.

The Company has a bank line of credit that provides for maximum borrowings of up
to $2.0  million  and is  limited  to a  certain  percentage  (60%) of  eligible
accounts  receivable.  The  line  of  credit  is  subject  to  certain  covenant
requirements, including maintaining certain net tangible worth amounts. The line
of credit  agreement was set to expire in November  2003.  However,  the parties
entered  into an amendment to extend the line of credit term to January 31, 2004
during  which time the Company  negotiated  a renewal of the line of credit with
the bank.  On  February  11,  2004,  the line of credit was  renewed  with a new
maturity date of January 30, 2005.  The Company  started  drawing on its line of
credit in October  2004.  As of December  31, 2004,  approximately  $450,000 was
available  on this line of credit of which the Company had drawn down  $450,000.


                                       18
<PAGE>

As of December 31, 2004, the Company was in compliance with the covenants of the
line of credit agreement.

The  Company  has an  operating  lease for its main  facility  that  expires  on
September 1, 2005.  Future  minimum lease payments under all leases are $379,000
in fiscal 2005.

The Company  operates in a highly  competitive  market  characterized by rapidly
changing  technology,  together  with  competitors  and  distributors  that have
significantly greater financial resources than Asante.

For the fiscal  year ended  October 2, 2004,  the  Company  recorded a loss from
operations of $3 million and cash used in operating activities was $3.0 million.
In the fiscal  year 2003,  the  Company  also  incurred  substantial  losses and
negative cash flows from  operations.  As of October 2, 2004, the Company had an
accumulated deficit of $29.7 million.  Based upon the Company's operating budget
and cash flow projections the Company expects to continue to experience negative
cash flows from operations through fiscal year 2005.

The Company is currently  pursuing  additional  equity financing and has renewed
its line of credit  agreement  through  January  30,  2005.  The Company is also
considering  other  corporate  transactions  as a means of providing  additional
financing.  Failure  to  raise  additional  capital,  secure  other  sources  of
financing or enter into a corporate  transaction  in the near-term  would have a
material  adverse  effect on the  Company's  ability  to  achieve  its  intended
business  objectives and raises  substantial doubt about its ability to continue
as a going concern.

Factors Affecting Future Operating Results

The Company operates in a rapidly changing  industry,  which is characterized by
intense competition from both established companies and start-up companies.  The
market for the Company's products is extremely  competitive both as to price and
capabilities.  The Company's  success  depends in part on its ability to enhance
existing  products and  introduce  new  technology  products.  This requires the
Company to accurately  predict future  technology  trends and  preferences.  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


                                       19
<PAGE>

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.  High
employee  turnover in the technology  industry is typical.  Although the Company
has reduced its workforce  during fiscal 2003 and fiscal 2004,  vacancies in the
workforce must be promptly filled,  because 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 changes in
costs of labor and  materials,  reliability  of sources  of supply  and  general
economic  conditions  in  foreign  countries.   Unexpected  changes  in  foreign
manufacturing or sources of supply, 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  networking  industry and
technology  markets in general  continue to adjust to a widespread  reduction in
demand for products  due to  financial  problems  experienced  by many  Internet
Service  Provider's  (ISP's),  and the failure of many Internet  companies.  The
duration,  or  long-term  effect on the  Company's  operations  is  difficult to
measure,  but the inability to alter its strategic markets, or react properly to
this slowdown could have an adverse effect on the Company's financial position.

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.  Over the  years,  the speed of
Ethernet has  increased  by 100X to 1000 Mbps.  The  company's  key products are
designed  to  function  at  speeds of  10/100/1000  Mbps to  maintain  backwards
compatibility  with earlier  Ethernet  standards plus the newer Gigabit Ethernet
standard. In addition, Gigabit (1000BASE-T,  or 1000Mbps) Ethernet technology is
increasingly  being adopted in the backbone of large enterprises and educational
institutions.  In that regard,  the Company's  future  operating  results may be
dependent  on  the  market   acceptance  and  the  rate  of  adoption  of  these
technologies, as well as timely product releases. There can be no assurance that
the market will accept,  adopt,  or continue to use this new  technology or that
the Company can meet market demand in a timely manner.

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.

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


                                       20
<PAGE>

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
and cash  position.  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,  education, Multiple Tenant Unit/Multiple Dwelling Unit
(MTU/MDU),  and OEMs. Due to the relative size of the customers in some of these
markets,  particularly  the OEM market,  sales in any one market could fluctuate
dramatically on a quarter to quarter basis. Fluctuations in the OEM market could
materially  adversely  affect the Company's  business,  financial  condition and
results of  operations.  Additionally,  the  Company's  revenues  and results of
operations  could be adversely  affected if the Company were to lose certain key
distribution partners.

The Company has incurred net losses  during its last two fiscal years and has an
accumulated deficit at October 2, 2004 of $29.7 million.  These recurring losses
and accumulated  deficit raise  substantial doubt about the Company's ability to
continue as a going concern. The Company is currently pursuing additional equity
financing and has renewed its line of credit  agreement that expires January 30,
2005. The Company is also considering other corporate transactions as a means of
providing  additional  financing.  Failure to raise additional  capital,  secure
other  sources of financing or enter into a corporate  transaction  would have a
material  adverse  effect on the  Company's  ability  to  achieve  its  intended
business objectives and sustain its desired levels of operation.

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  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,  fluctuations  in channel  inventory  levels,  variations  in the mix of
product sales,  manufacturing  delays or  disruptions in sources of supply,  the
current  economic  downturn and  seasonal  purchasing  patterns  specific to the
computer and networking industries.  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.

In addition to the above,  the Company is also susceptible to other factors that
generally  affect the market for stocks of 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.


                                       21
<PAGE>

Critical Accounting Policies and Estimates

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations are based upon Asante Technologies,  Inc. financial statements, which
have been prepared in accordance with accounting  principles  generally accepted
in the United States of America.  The preparation of these financial  statements
requires  management to make estimates and assumptions  that affect the reported
amounts of assets and  liabilities  at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Management bases estimates and judgments on historical experience and on various
other factors that are believed to be reasonable  under the  circumstances;  the
results of which form the basis for making  judgments  about the carrying values
of assets and liabilities.  Actual results may differ from these estimates under
different assumptions or conditions.  Management believes the following critical
accounting  policies,  among others,  affect its more significant  judgments and
estimates used in the preparation of its financial statements.

Revenue  Recognition.  The Company  recognizes  revenue net of estimated product
returns,   expected  payments  to  resellers  for  customer  programs  including
cooperative  advertising and marketing  development funds,  volume rebates,  and
special pricing  programs.  Product returns are provided for at the time revenue
is recognized, based on historical return rates, at what stage the product is in
its expected life cycle,  and assumptions  regarding the rate of sell-through to
end  users  from our  various  channels,  which  again,  is based on  historical
sell-through  rates.  Should these  product  lives vary  significantly  from our
estimates,  or should a  particular  selling  channel  experience  a higher than
estimated return rate, or a slower sell-through rate causing inventory build-up,
then our estimated returns,  which net against revenue,  may need to be revised.
Reductions  to  revenue  for  expected  and actual  payments  to  resellers  for
cooperative  advertising  and marketing  development  funds,  volume rebates and
pricing  protection are based on actual expenses  incurred during the period and
on estimates for what is due to resellers for  estimated  credits  earned during
the period. If market conditions were to decline, the Company may take action to
increase promotional programs resulting in incremental  reductions in revenue at
the time the  incentive  is offered  based on our  estimate of  inventory in the
channel  that is subject  to such  pricing  actions.

Accounts  Receivable.  The Company  performs  ongoing credit  evaluations of its
customers'  financial  condition and generally  requires no collateral  from its
customers.  The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make required  payments.
If the financial condition of our customers should deteriorate,  resulting in an
impairment  of their  ability to make  payments,  additional  allowances  may be
required.

Inventory.  The Company records  write-downs  for estimated  excess and obsolete
inventory based on projected future  shipments using  historical  selling rates,
and  taking  into  account  market  conditions,   inventory  on-hand,   purchase
commitments,  product  development  plans and life  expectancy,  and competitive
factors. If markets for the Company's products and corresponding  demand were to
decline, then additional write-downs may be deemed necessary.

Warranty.  The Company provides for the estimated cost of warranties at the time
revenue is  recognized.  Should actual  failure rates and material  usage differ
from our estimates, revisions to the warranty obligation may be required.

                                       22
<PAGE>

Recent Accounting Pronouncements

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics of both Liabilities and Equity." The Statement
improves the accounting for certain  financial  instruments that, under previous
guidance,  issuers could account for as equity.  The new Statement requires that
those  instruments  be  classified  as  liabilities  in  statements of financial
position.  This statement is effective for interim periods  beginning after June
15,  2003.  The  adoption  of SFAS 150 did not  have a  material  effect  on the
Company's financial position.

In  December  2003,  the FASB  issued  FASB  Interpretation  No. 46 ("FIN  46"),
"Consolidation of Variable Interest Entities,  an Interpretation of ARB No. 51."
FIN 46 requires  certain  variable  interest  entities to be consolidated by the
primary  beneficiary of the entity if the equity  investors in the entity do not
have the  characteristics  of a  controlling  financial  interest or do not have
sufficient  equity at risk for the  entity to  finance  its  activities  without
additional  subordinated  financial  support  from  other  parties.  FIN  46  is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to  February  1, 2003,  the  provisions  of FIN 46 must be applied for the first
interim or annual  period  beginning  after June 15, 2003.  However,  in October
2003,  the FASB  deferred the  effective  date of FIN 46 to the end of the first
interim or annual period ending after  December 15, 2003 for those  arrangements
entered  into prior to February  1, 2003.  In December  2003,  the FASB  further
deferred the effective  date of FIN 46 to the end of the first interim or annual
reporting  period  ending  after  March 15, 2004 for those  non-special  purpose
entity  arrangements  created  prior to February 1, 2003.  The  adoption of this
standard had no material impact on the Company's financial statements.

In December 2004, the FASB issued SFAS No. 123(R),  "Share-Based Payment".  This
statement   revises  FASB  Statement  No.  123,   "Accounting   for  Stock-Based
Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees." SFAS No. 123(R) focuses primarily on the accounting for transactions
in  which  an  entity  obtains   employee   services  in   share-based   payment
transactions.  SFAS No. 123(R) requires  companies to recognize in the statement
of operations the cost of employee  services  received in exchange for awards of
equity  instruments  based on the  grant-date  fair value of those  awards (with
limited  exceptions).  This  Statement is  effective  as of the first  reporting
period that begins after June 15, 2005. Accordingly, the Company will adopt SFAS
123(R) in its fourth quarter of fiscal 2005. The Company is currently evaluating
the  provisions of SFAS 123(R) and has not yet  determined  the impact that this
Statement will have on its results of operations or financial position.


                                       23
<PAGE>
ITEM 7.       FINANCIAL STATEMENTS

              Index to Financial Statements and Financial Statement Schedule

<TABLE>
<CAPTION>
<S>                                                                                              <C>
Financial Statements:

       Report of Independent Registered Public Accounting Firm                                   25

       Balance Sheets at October 2, 2004 and September 27, 2003                                  26

       Statements of Operations for the fiscal years ended October 2, 2004 and
       September 27, 2003                                                                        27

       Statements of Stockholders' Equity for the fiscal years ended  October 2, 2004
       and September 27, 2003                                                                    28

       Statements of Cash Flows for the fiscal years ended October 2, 2004 and
       September 27, 2003                                                                        29

       Notes to Financial Statements                                                             30-44
</TABLE>

                                       24
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


November 19, 2004


The Board of Directors and Stockholders of

    Asante Technologies, Inc.


We have audited the accompanying balance sheets of Asante Technologies,  Inc. at
October  2,  2004  and  September  27,  2003,  and  the  related  statements  of
operations,  stockholders'  equity,  and cash  flows for the  fiscal  years then
ended.  These  financial  statements  are the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted  our audits in  accordance  with  standards  of the Public  Company
Accounting Oversight Board. Those standards require that we plan and perform the
audit to obtain reasonable  assurance about whether the financial statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

In our opinion,  the financial  statements  audited by us present fairly, in all
material  respects,  the  financial  position  of Asante  Technologies,  Inc. at
October 2, 2004 and September 27, 2003,  and the results of its  operations  and
its cash flows for the fiscal  years then ended in  conformity  with  accounting
principles generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will  continue as a going  concern.  As discussed in Note 1, the Company
has suffered recurring operating losses and negative cash flows from operations,
and has an accumulated deficit that raise substantial doubt about its ability to
continue as a going concern.  Management's  plans in regard to these matters are
also  described  in  Note  1.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.


ODENBERG, ULLAKKO, MURANISHI & CO. LLP
San Francisco, California


                                       25
<PAGE>
<TABLE>

                                                      ASANTE TECHNOLOGIES, INC.

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

                                                                                                       October 2,      September 27,
                                                                                                         2004              2003
                                                                                                        --------         --------
<S>                                                                                                     <C>              <C>
Assets

Current assets:
      Cash and cash equivalents                                                                         $    413         $  1,723
      Accounts receivable, net of allowance for doubtful accounts,
          rebates and sales returns of $814 and $1,196 in 2004
          and 2003, respectively                                                                           1,889            1,759
      Inventory                                                                                              721              930
      Prepaid expenses and other current assets                                                              366               27
                                                                                                        --------         --------
             Total current assets                                                                          3,389            4,439

Property and equipment, net                                                                                   69               51
Other assets                                                                                                  62              172
                                                                                                        --------         --------
             Total assets                                                                               $  3,520         $  4,662
                                                                                                        ========         ========

Liabilities and stockholders' equity
Current liabilities:
      Accounts payable                                                                                  $  1,787         $  1,050
      Accrued expenses                                                                                     1,367            1,779
      Payable to stockholder                                                                                   2             --
                                                                                                        --------         --------
             Total current liabilities                                                                     3,156            2,829

Long-term liabilities:
      Capital Lease                                                                                           32             --
                                                                                                        --------         --------
Total liabilities                                                                                          3,188            2,829
                                                                                                        --------         --------

Commitments and Contingencies

Stockholders' equity:
      Preferred stock, $0.001 par value; 2,000,000 shares authorized;
          no shares issued or outstanding in 2004 and 2003                                                  --               --
      Common stock, $0.001 par value; 25,000,000 shares authorized;
          17,061,457 and 10,149,521 shares issued and outstanding in 2004
          and 2003, respectively                                                                              17               10
      Additional paid-in capital                                                                          30,010           28,417
      Accumulated deficit                                                                                (29,695)         (26,594)
                                                                                                        --------         --------
             Total stockholders' equity                                                                      332            1,833
                                                                                                        --------         --------
             Total liabilities and stockholders' equity                                                 $  3,520         $  4,662
                                                                                                        ========         ========
<FN>
                        The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>

                                                                 26
<PAGE>

                            ASANTE TECHNOLOGIES, INC.

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

                                                           Year ended
                                                     ---------------------------
                                                     October 2,    September 27,
                                                       2004           2003
                                                     --------       --------
Net sales                                            $  8,622       $ 12,008
Cost of sales                                           5,930          7,757
                                                     --------       --------
Gross profit                                            2,692          4,251
                                                     --------       --------

Operating expenses:
     Sales and marketing                                2,950          3,154
     Research and development                           1,650          2,099
     General and administrative                         1,060          1,168
                                                     --------       --------
        Total operating expenses                        5,660          6,421
                                                     --------       --------

Loss from operations                                   (2,968)        (2,170)
Interest and other income (expense), net                 (133)           (75)
                                                     --------       --------

Net loss                                             $ (3,101)      $ (2,245)
                                                     ========       ========


Basic and diluted loss per share                     $  (0.27)      $  (0.22)
                                                     ========       ========

Shares used in per share calculation

     Basic and diluted                                 11,423         10,138
                                                     ========       ========


                                       27

    The accompanying notes are an integral part of these financial statements



<PAGE>
<TABLE>

                                                    ASANTE TECHNOLOGIES, INC.

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

<CAPTION>
                                                    Common Stock        Additional                         Total
                                                 ------------------      Paid-in        Accumulated     Stockholders'
                                                 Shares      Amount      Capital          Deficit          Equity
                                                 ------      ------      -------          -------          ------
<S>                                             <C>             <C>       <C>             <C>               <C>
Balances as of September 28, 2002               10,066,020     $10       $28,412         $(24,349)         $4,073
Common stock issued under stock plans               83,501       0             5                                5
Net loss                                                                                   (2,245)         (2,245)
                                                ----------     ---       -------         --------          ------
Balances as of September 27, 2003               10,149,521      10        28,417          (26,594)          1,833
Common stock issued under stock plans               31,936      --             4                                4
Issuance of common stock and warrants in
  private placement, net of costs                6,880,000       7         1,589                            1,596
Net loss                                                                                   (3,101)         (3,101)
                                                ----------     ---       -------         --------          ------
Balances as of October 2, 2004                  17,061,457     $17       $30,010         $(29,695)         $  332
                                                ----------     ---       -------         --------          ------
<FN>
                        The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>

                                       28
<PAGE>
<TABLE>

                                                   ASANTE TECHNOLOGIES, INC.

                                                    STATEMENTS OF CASH FLOWS
                                                         (in thousands)

<CAPTION>
                                                                                                            Year ended
                                                                                                 -------------------------------
                                                                                                 October 2,        September 27,
                                                                                                   2004                 2003
                                                                                                  -------             -------
<S>                                                                                               <C>                 <C>
Cash flows from operating activities:
      Net income (loss)                                                                           $(3,101)            $(2,245)
      Adjustments to reconcile net income (loss) to
        net cash provided by (used in) operating activities:
              Depreciation and amortization                                                            39                  56
              Warrant liability adjustment                                                             37
              Provision for doubtful accounts receivable                                             (383)              1,259
      Changes in operating assets and liabilities:
              Accounts receivable                                                                     253                (196)
              Inventory                                                                               209                 585
              Prepaid expenses and other current assets                                              (339)                114
              Other                                                                                   109                --
              Accrued payable                                                                         737                (968)
              Accrued expenses and other                                                             (526)               (152)
              Payable to stockholder                                                                    2                --
                                                                                                  -------             -------
                   Net cash used in operating activities                                           (2,962)             (1,547)
                                                                                                  -------             -------

Cash flows from investing activities:
         Purchases of property and equipment                                                          (58)                (17)
                                                                                                  -------             -------
                      Net cash used in investing activities                                           (58)                (17)
                                                                                                  -------             -------

Cash flows from financing activities:
         Issuance of common stock and warrants in private placement                                 1,706                --
         Issuance of common stock under stock plans                                                     4                   5
                                                                                                  -------             -------
                    Net cash provided by financing activities                                       1,710                   5
                                                                                                  -------             -------

Net increase (decrease) in cash and cash equivalents                                               (1,310)             (1,559)
Cash and cash equivalents at beginning of year                                                      1,723               3,282
                                                                                                  -------             -------
Cash and cash equivalents at end of year                                                          $   413             $ 1,723
                                                                                                  =======             =======

Supplemental disclosure of cash flow activities:
         Cash paid for interest                                                                   $    12             $  --
         Cash paid for taxes                                                                      $     1             $     1


</TABLE>

                                       29

    The accompanying notes are an integral part of these financial statements
<PAGE>

                            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,  100BASE-T ("Fast  Ethernet") and 1000BASE-T
(Gigabit  Ethernet)  network and connectivity  products.  Asante's client access
products  (which include adapter cards and media access  adapters)  connect PCs,
Macintoshes,  iMAC's 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,   internet  access  devices
(routers), and network management software for Macintoshes and PCs, interconnect
users within and between departmental networks.

The Company  operates in a highly  competitive  market  characterized by rapidly
changing  technology,  together  with  competitors  and  distributors  that have
significantly greater financial resources than Asante.

For the fiscal  year ended  October 2, 2004,  the  Company  incurred a loss from
operations  of $3.1  million  and cash  used in  operating  activities  was $3.0
million.  In fiscal years 2003 and 2002,  the Company also incurred  substantial
operating losses and negative cash flows from operations. As of October 2, 2004,
the  Company  had an  accumulated  deficit  of  $29.7  million.  Based  upon the
Company's  operating  budget and cash flow  projections,  the Company expects to
continue to experience  negative cash flows from operations  through fiscal year
2005.

At October 2, 2004,  the Company had cash and cash  equivalents  of $0.4 million
compared to $1.7 million at September 27, 2003,  which represents a 76% decline.
Working capital was $0.4 million at October 2, 2004, compared to $1.6 million at
September  27,  2003.  The  Company  has a bank line of credit  agreement  which
provides for  borrowings  of up to $2.0 million.  The line of credit  expires on
January 30, 2005.  However,  borrowings  under the line of credit are subject to
compliance  with  certain  financial  covenants  and are  limited to a specified
percentage of eligible accounts receivable.

The recurring  losses,  accumulated  deficit and expect continued  negative cash
flows from operations  raise  substantial  doubt about the Company's  ability to
continue as a going concern.

On December 23, 2003, the Company entered into a non-binding Letter of Intent to
merge with Oblique,  Inc. The merger is conditioned upon, among other things, an
expedited  due  diligence  period,  and  several  other  factors,  including  an
expedited  process  to arrive at a  Definitive  Merger  Agreement  with  certain
minimum  acceptable  terms  including  a bridge  funding of  approximately  $1.0
million.  Due to delays in Oblique's  obtaining the necessary financing for this
transaction,  the Company  discontinued merger negotiations with Oblique in June
2004.

                                       30
<PAGE>

On July 27, 2004, the Company  completed a private placement of 6,880,000 shares
of its common stock,  which raised proceeds of $1.72 million.  The proceeds were
used for working  capital.  The Company will need to raise  additional  capital,
secure other sources of financing or enter into a corporate transaction in order
to finance its operations through fiscal 2005.  However,  the Company may not be
able to complete any of these  alternative  transactions on acceptable terms, or
at all.

Fiscal Year
The  Company  operates  under a 52-53 week year ending the  Saturday  closest to
September 30. Fiscal year 2004 is comprised of a 53-week  period and fiscal year
2003 is comprised of a 52-week period.

Management estimates and assumptions
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the use of estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of contingent  assets and  contingent  liabilities at the date of the
financial  statements and the reported  amounts of revenues and expenses  during
the reporting period. The most significant assumptions are employed in estimates
used in determining accruals for sales rebates and returns, warrants,  inventory
write-downs for excess or discontinued  inventory,  legal  contingencies and the
valuation of deferred income tax assets and liabilities, as well as in estimates
used in applying the revenue  recognition  policy.  Actual  results could differ
from estimated results.

Revenue recognition
Revenue from product sales to customers is recognized, including freight charges
billed to customers,  when a definite  arrangement  exists, the product has been
shipped to the  customer,  acceptance  terms,  if any, have been  fulfilled,  no
significant  contractual  obligations remain outstanding,  the price is fixed or
determinable,  and collection is considered probable.  Reserves are provided for
estimated  returns  at the  time  the  related  revenue  is  recorded.  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 reserves for incentive rebates to
distributors,  warranty obligations and cooperative  advertising at the time the
related revenue is recorded.

Cash and cash equivalents
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.

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  and  customer   revenues.   The  Company  performs  ongoing  credit
evaluations of its customers and maintains reserves for potential credit losses;
historically, such losses have been within management's expectations. At October
2,  2004  and  September  27,  2003  four  customers  accounted  for 70% and 59%


                                       31
<PAGE>

respectively,  of the accounts  receivable  balance. In fiscal 2004 and 2003 one
customer accounted for 25% and 33%, respectively, of the Company's sales.

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

Shipping and handling costs
Shipping  and  handling  costs of $488,086 in fiscal 2004 and $476,574 in fiscal
2003 have been  allocated  to cost of sales, sales and  marketing,  research and
development and general and administrative expenses.

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.

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.

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. A
valuation  allowance  is  provided  against  deferred  tax  assets  when  it  is
considered more likely than not they will not be realizable.

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.  Software costs incurred after the  establishment  of technological
feasibility have not been material to date and therefore have been expensed.

Stock-based compensation
Statement of  Financial  Accounting  Standards  (SFAS) No. 123,  Accounting  for
Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based
Compensation - Transition  and  Disclosure,  establishes a fair-value  method of
accounting  for stock options and similar  equity  instruments.  The  fair-value
method requires that  compensation cost be measured on the value of the award at
the grant date, and recognized over the service period.  SFAS No. 123 as amended
allows  companies to either account for  stock-based  compensation  to employees
under the  provisions  of SFAS No.  123 as amended  or under the  provisions  of
Accounting   Principles   Board   (APB)   Opinion   No.   25  and  its   related
interpretations.  The  Company  accounts  for its  stock-based  compensation  to
employees in accordance with the provisions of APB Opinion No. 25.



                                       32
<PAGE>

The Company has  recorded  deferred  compensation  for the  difference,  if any,
between the exercise  price and the deemed fair market value of the common stock
for  financial  reporting  purposes of stock options  granted to employees.  The
compensation expense related to such grants is amortized over the vesting period
of the related stock options on a straight-line  basis.

The  Company  accounts  for  equity   instruments  issued  to  non-employees  in
accordance with the provisions of SFAS No. 123, as amended,  and Emerging Issues
Task Force (EITF) Issue No. 96-18  Accounting  for Equity  Instruments  that Are
Issued to Other than  Employees for Acquiring,  or in Conjunction  with Selling,
Goods or Services.

Had the  Company  determined  compensation  cost  based on the fair value at the
grant date for its employee  stock  options and  purchase  rights under SFAS No.
123, the Company's  net loss would have been  increased to the pro forma amounts
indicated below for the years ended October 2, 2004 and September 27, 2003:

                                                    October 2,     September 27,
(In thousands, except per share data)                 2004            2003
                                                    -------         -------

Net loss as reported                                $(3,101)        $(2,243)
                                                    -------         -------

Employee stock-based compensation expense
determined under the fair value method              $    26         $    81
                                                    -------         -------

            Pro forma net loss                      $(3,127)        $(2,324)
                                                    -------         -------


Net loss per share:
    As reported
        Basic and diluted                           $ (0.27)        $ (0.22)
                                                    -------         -------

     Pro forma
          Basic and diluted                         $ (0.27)        $ (0.23)
                                                    -------         -------


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

                                       33
<PAGE>
Comprehensive income (loss)
The Company had no items of other comprehensive  income (loss) during any of the
periods presented,  and accordingly  comprehensive income (loss) is equal to net
income (loss) for all periods presented.

Reclassifications
Certain  amounts   reported  in  prior  year  financial   statements  have  been
reclassified to conform to current period presentation.

Segment information
In accordance  with the  provisions of SFAS No. 131, the Company has  determined
that it operates in one business segment, networking and connectivity,  and does
not have separately reportable segments.

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

                                            2004               2003
                                            ----               ----
              United States                  81%                 82%
              Europe                         14%                 12%
              Other                           5%                  6%
                                            ---                 ---
                                            100%                100%
                                            ===                 ===

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

Recently issued accounting pronouncements

In May 2003, the FASB has issued SFAS No. 150, "Accounting for Certain Financial
Instruments with  Characteristics of both Liabilities and Equity." The Statement
improves the accounting for certain  financial  instruments that, under previous
guidance,  issuers could account for as equity.  The new Statement requires that
those  instruments  be  classified  as  liabilities  in  statements of financial
position.  This statement is effective for interim periods  beginning after June
15,  2003.  The  adoption  of SFAS 150 did not  have a  material  effect  on the
Company's financial positions.

In  December  2003,  the FASB  issued  FASB  Interpretation  No. 46 ("FIN  46"),
"Consolidation of Variable Interest Entities,  an Interpretation of ARB No. 51."
FIN 46 requires  certain  variable  interest  entities to be consolidated by the
primary  beneficiary of the entity if the equity  investors in the entity do not
have the  characteristics  of a  controlling  financial  interest or do not have
sufficient  equity at risk for the  entity to  finance  its  activities  without
additional  subordinated  financial  support  from  other  parties.  FIN  46  is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to  February  1, 2003,  the  provisions  of FIN 46 must be applied for the first
interim or annual  period  beginning  after June 15, 2003.  However,  in October
2003,  the FASB  deferred the  effective  date of FIN 46 to the end of the first
interim or annual period ending after  December 15, 2003 for those  arrangements
entered  into prior to February  1, 2003.  In December  2003,  the FASB  further

                                       34
<PAGE>
deferred the effective  date of FIN 46 to the end of the first interim or annual
reporting  period  ending  after  March 15, 2004 for those  non-special  purpose
entity  arrangements  created  prior to February 1, 2003.  The  adoption of this
standard had no material impact on the Company's financial statements.

In December 2004, the FASB issued SFAS No. 123(R),  "Share-Based Payment".  This
statement   revises  FASB  Statement  No.  123,   "Accounting   for  Stock-Based
Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees." SFAS No. 123(R) focuses primarily on the accounting for transactions
in  which  an  entity  obtains   employee   services  in   share-based   payment
transactions.  SFAS No. 123(R) requires  companies to recognize in the statement
of operations the cost of employee  services  received in exchange for awards of
equity  instruments  based on the  grant-date  fair value of those  awards (with
limited  exceptions).  This  Statement is  effective  as of the first  reporting
period that begins after June 15, 2005. Accordingly, the Company will adopt SFAS
123(R) in its fourth quarter of fiscal 2005. The Company is currently evaluating
the  provisions of SFAS 123(R) and has not yet  determined  the impact that this
Statement will have on its results of operations or financial position.

Note 2.       Basic and Diluted Net Loss Per Share

The  Company  computes  net  loss per  share in  accordance  with  SFAS No.  128
"Earnings  per Share"  (SFAS No.  128).  Basic net loss per share is computed by
dividing  net  loss  available  to  common   stockholders   (numerator)  by  the
weighted-average  number of common shares outstanding  (denominator)  during the
period. Diluted net 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 loss per share, the average stock price
for the  period  is used in  determining  the  number of  shares  assumed  to be
repurchased from the exercise of stock options.

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

<TABLE>
<CAPTION>
                                                                2004          2003
                                                                ----          ----
<S>                                                          <C>           <C>
       Net Loss                                              $   (3,101)   $ (2,243)
                                                             ==========    ========

       Weighted average common stock outstanding (basic)         11,423      10,150
       Dilutive effect of options                                  --          --
       Weighted average common stock outstanding (diluted)       11,423      10,150
                                                             ==========    ========

       Net loss per share:
          Basic                                              $    (0.27)   $  (0.22)
                                                             ==========    ========
          Diluted                                            $    (0.27)   $  (0.22)
                                                             ==========    ========
</TABLE>

Diluted  net loss per share  for the  fiscal  years  ended  October  2, 2004 and
September 27, 2003 excludes all dilutive potential common shares as their effect

                                       35
<PAGE>

is  antidilutive.  At October 2, 2004 and  September  27,  2003,  9,165,402  and
1,491,343  outstanding  warrants and options  respectively,  were excluded since
their effect was antidilutive.

Note 3        Balance Sheet Components
<TABLE>
<CAPTION>
                                                                 2004              2003
                                                                 ----              ----
                                                                     (in thousands)
<S>                                                          <C>                <C>
  Inventory:
     Raw materials and component parts                       $     83           $      39
     Work-in-process                                               12                  23
     Finished goods                                               626                 868
                                                             --------           ---------
                                                             $    721           $     930
                                                             ========           =========
  Property and equipment
     Computers and R&D equipment                             $  2,451           $  2,222
     Furniture, fixtures and leasehold improvements               694                508
                                                             --------           --------
                                                             $  3,145           $  2,730
     Accumulated depreciation                                  (3,076)            (2,679)
                                                             --------           --------
                                                             $     69           $     51
                                                             ========           ========
  Accrued expenses:
     Payroll-related expenses                                $    347           $    339
     Sales promotion expenses                                     154                395
     Legal and promotional fees                                   150                327
     Product warranty                                             430                430
     Warrant liability                                            147                --
     Other                                                        139                288
                                                             --------           --------
                                                             $  1,367           $  1,779
                                                             ========           ========
</TABLE>

Note 4.       Warranties

We provide for  estimated  future  warranty  costs upon  product  shipment.  The
specific  terms and  conditions  of those  warranties  vary  depending  upon the
product  sold  and  country  in which we do  business.  In the case of  hardware
manufactured by our sub-contract  manufacturers,  our warranties generally start
from the delivery date and continue as follows:

<TABLE>
<CAPTION>
Product                                                                         Warranty Periods
-------                                                                         ----------------
<S>                                                                            <C>
Managed switches                                                               Three to five years
Unmanaged Gigabit Switches, Gigabit Adapters                                    One to five years
Unmanaged switches, hubs, USB hubs, routers, fiber                              One to five years
Other - Adapters                                                                One to five years
AsantePrint and AsanteTalk print routers, Gig cables                            Limited Lifetime
</TABLE>

                                       36
<PAGE>

Longer  warranty  periods  are  provided  on  a  limited  basis  including  some
"lifetime" warranties on some of the Company's older legacy products.

From  time to  time,  some of the  Company's  products  may be  manufactured  to
customer   specifications  and  their  acceptance  is  based  on  meeting  those
specifications.  We historically have experienced minimal warranty costs related
to these products. Factors that affect our warranty liability include the number
of shipped units,  historical  experience and  management's  judgment  regarding
anticipated  rates of warranty claims and cost per claim. We assess the adequacy
of our recorded  warranty  liabilities every quarter and make adjustments to the
liability if necessary.

Changes in the Company's warranty liability, which is included as a component of
"Accrued expenses" on the Balance Sheets,  during the fiscal years ended October
2, 2004 and September 27, 2003 are as follows (in thousands):
<TABLE>
<CAPTION>
                                                                                     October 2,         September 27,
                                                                                        2004                2003
                                                                                      -----                -----
<S>                                                                                   <C>                  <C>
Balance at beginning of period                                                        $ 430                $ 430
Provision for warranty liability for sales during the fiscal year                       154                  305
Settlements made during the fiscal year                                                (154)                (305)
                                                                                      -----                -----

Balance at end of period                                                              $ 430                $ 430
                                                                                      -----                -----
</TABLE>


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 7.1% of the Company's Common Stock
as of October 2, 2004. Under the OSE Agreement,  the Company  purchases from and
sells at cost to OSE  certain  component  parts.  The  Company is  obligated  to
purchase goods only to the extent it has signed firm purchase  commitments  with
OSE. At October 2, 2004, the Company's firm purchase  commitments  under the OSE
Agreement were insignificant.

For fiscal 2003,  the Company sold, at cost,  approximately  $7,000 of component
parts to OSE and purchased $100,000 of goods from OSE.

Delta  Networks  Inc., and Delta  International  Holdings Ltd. own  collectively
500,000 shares of the Company's common stock.  During fiscal years 2004 and 2003
the Company purchased approximately $2.1 million and $2.7 million, respectively,
of goods from Delta and sold component parts totaling  approximately $85,000 and
$14,000,  respectively,  at cost to Delta.  At October 2, 2004,  the Company had
approximately $400,000 in accounts payable to Delta and approximately $43,000 in
receivables from Delta, and at September 27, 2003 the Company had  approximately
$100,000 in accounts  payable to Delta and  approximately  $9,000 in receivables
from Delta.

The Company  entered into a sublease of its executive  offices in September 2004
with OSE.  The  Company  believes  the lease rate and terms are similar to those
rates obtainable from an unaffiliated third party.

Jeff Lin  participated in the July 2004 private  placement  pursuant to which he
acquired 2,000,000 shares of common stock and 2,000,000 warrants  exercisable at
$0.50 per share for a period of two years.

                                       37
<PAGE>

Note 6.       Income Taxes

There was no provision or benefit for income taxes made in fiscal years 2004 and
2003, as the Company  incurred  losses and provided a full  valuation  allowance
against its deferred tax assets.

Deferred  tax  assets,  net,  comprise  the  following  at  October  2, 2004 and
September 27, 2003 (in thousands):

                                                           2004          2003
                                                         --------      --------
Deferred tax assets:
     Net operating losses                                $  9,542      $  7,936
     Research and development credits                       3,264         2,928
     Inventory-related reserves                               688         1,820
     Receivable and sales-related reserves                    319           510
     Compensation accruals                                     75           100
     Depreciation                                              61            98
     Other reserves and accruals                               44           128
                                                         --------      --------
         Total deferred tax assets                         13,993        13,520
         Valuation allowance                              (13,993       (13,520)
                                                         --------      --------
                                                         $    --       $     --
                                                         ========      ========

The  Company   believes  that  sufficient   uncertainty   exists  regarding  the
realizability  of the deferred tax assets such that a full  valuation  allowance
was provided as of October 2, 2004 and September 27, 2003.

At October  2, 2004,  the  Company  had  federal  and state net  operating  loss
carryforwards  of  approximately  $24.5 million and $9.5 million,  respectively,
available to offset  future  taxable  income which expire  beginning in 2018 and
2004,  respectively.  In  addition,  as of  October  2,  2004  the  Company  had
approximately  $1.9 million and approximately  $1.3 million of federal and state
research and development credits,  respectively. The federal credits will expire
beginning in 2012 if not utilized. The state tax credits will be carried forward
until utilized.

Under Internal  Revenue Code Section 382 and 383, the future  utilization of net
operating losses and tax credits may be limited in certain  circumstances  where
there is a significant ownership change. 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 follows
(in thousands):

                           `                               2004           2003
                                                         -------        -------
Tax (benefit) at U.S. statutory rate                     $(1,042)       $  (763)
State taxes, net of federal benefits                        (178)          (131)
Other                                                         24             44
Valuation allowance                                        1,196            850
                                                         -------        -------
                                                         $   --         $   --
                                                         =======        =======

                                       38
<PAGE>

Note 7        Bank Borrowings

The Company has a bank line of credit that provides for maximum borrowings of up
to $2.0  million  and is  limited  to a  certain  percentage  (60%) of  eligible
accounts  receivable.  At October 2, 2004, no borrowings were outstanding  under
the  line  of  credit.  The  line of  credit  is  subject  to  certain  covenant
requirements, including maintaining certain net tangible worth amounts. The line
of credit agreement expires on January 30, 2005.

Note 8.       Stockholders' Equity

Preferred Stock
There  are  2,000,000  shares  of  Preferred  Stock  authorized  by the Board of
Directors none of which have been issued.

Common Stock
On July 27, 2004,  the Company  raised $1.7 million,  net of costs,  through the
private  placement of shares of its common stock at $0.25 per share.  Each share
also  included  a warrant  to  purchase  an  additional  share of  common  stock
exercisable at $0.50 per share,  for a period of two years. The shares were sold
exclusively  to a limited  number of  accredited  investors in the United States
without any public  solicitation or investors residing outside the United States
and not deemed to be a "U.S. person" as that term is defined under Regulation S.

Stock Based Compensation Plans
As of October 2, 2004,  the Company had granted  options under five  stock-based
compensation plans that are described below.

The 2001 Stock Option Plan allows for  issuance of options to Company  employees
and  consultants to purchase a maximum of 1,000,000  shares of common stock plus
7% of the  outstanding  common  shares  as of the  last  day of the  immediately
preceding year  beginning in fiscal year 2002.  This plan replaces the Company's
1990 Stock Option Plan (the 1990 Plan) which allowed for the issuance of options
to Company  employees and consultants to purchase a maximum of 4,597,333  shares
of common stock. The 1990 Plan expired in May 2000, and was temporarily replaced
by the 2000 Non Statutory Stock Option Plan which allows for issuance of options
to Company  employees and consultants to purchase a maximum of 120,000 shares of
common  stock.  As of  September  27,  2003,  a total of  1,010,466  shares were
available for issuance under this plan.

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 Directors Plan expired in October 30, 2003, and the
Company is in the process of drafting a replacement plan.

                                       39
<PAGE>
The Key  Executive  Option  Plan  allows  for the  issuance  of  options  to key
employees  of the  Company who are not  recognized  under the  Directors'  Stock
Option Plan. The Key Executive Option Plan allows for the issuance of options to
Key Employees to purchase a maximum of 404,999  shares of common stock.  The Key
Executive  Option Plan  expired in July 2003.  The Company is  currently  in the
process of drafting a replacement plan.

Individuals  owning  more than 10% of the  Company's  stock are not  eligible to
participate  in the above 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 must be issued at exercise  prices no less than the fair  market  value of
the Company's  common stock 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 are granted at 100% of the fair market  value of the common stock at the
date of grant  with an  expiration  date of ten  years  from the date of  grant.
Initial option grants  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 terminate three months after an Optionee's
termination of all service with the Company and its  affiliates.  It is expected
that the  replacement  plans  will have terms  similar  to those of the  expired
plans.  Currently,  the Company may not issue new options from those plans which
expired.

Activity under the 1990 Stock Option Plan, 2000 Nonstatutory  Stock Option Plan,
2001 Stock  Option  Plan,  Directors'  Stock  Option Plan and the Key  Executive
Option Plan are summarized as follows:
<TABLE>
<CAPTION>
                                               2004                           2003
                                    -------------------------     ------------------------
                                                    Weighted                     Weighted
                                      Number         Average         Number       Average
                                        of          Price per          of        Price per
                                      Shares          Share          Shares        Share
                                      ------          -----          ------        -----
<S>                                 <C>               <C>          <C>            <C>
Beginning Balance                   1,491,343         $1.41        1,719,520      $1.58
Granted                             1,206,000         $0.28           29,000      $0.10
Exercised                                  --         $  --           (3,592)     $0.19
Canceled                             (411,941)        $1.53         (253,585)     $2.48
                                    ---------                     ===========
Ending Balance                      2,285,402         $ .79        1,491,343      $1.41
                                    =========         =====
</TABLE>

The following table summarizes  information  about stock options  outstanding at
October 2, 2004:
<TABLE>
<CAPTION>
                                                              Options Outstanding                  Options Exercisable
                                                 -----------------------------------------      ------------------------
                                                                    Weighted
                                                                     Average      Weighted                      Weighted
                                                                    Remaining      Average                       Average
             Range of                               Number         Contractual    Exercise        Number        Exercise
          Exercise Prices                        Outstanding          Life          Price       Exercisable       Price
----------------------------                     -----------          ----          -----       -----------       -----
<S>                                                 <C>                <C>        <C>               <C>          <C>
      $0.0800 - $0.1500                             140,250            8.70       $0.1319           39,900       $0.1167
      $0.2500 - $0.2500                             900,000            9.74       $0.2500          270,000       $0.2500
      $0.2700 - $0.8750                             315,810            6.10       $0.6387          241,175       $0.7078
      $0.9000 - $1.0000                              72,900            5.13       $0.9425           71,725       $0.9432
      $1.0320 - $1.0320                             600,000            4.83       $1.0320          600,000       $1.0320
      $1.8760 - $5.1404                             237,917            3.61       $2.3647          237,917       $2.3647
      $5.6250 - $6.1250                              15,000            1.80       $5.9583           15,000       $5.9583
      $6.2500 - $6.2500                               1,325            2.78       $6.2500            1,325       $6.2500
      $6.5000 - $6.5000                               1,000            1.78       $6.5000            1,000       $6.5000
      $6.8750 - $6.8750                               1,200            2.06       $6.8750            1,200       $6.8750
                                                   ---------           ----       -------        ---------       -------

      $0.0800 - $6.8750                            2,285,402           7.04       $0.7912        1,479.242       $1.0848
                                                   =========                                     =========
</TABLE>

                                       40
<PAGE>

Under SFAS No. 123, the fair value of each option grant is estimated on the date
of grant  using  the  Black-Scholes  option  pricing  model  with the  following
assumptions  used for grants during fiscal 2004,  2003, risk free interest rates
ranging at the date of grant from 2.90% to 3.08%; expected average volatility of
192%,  and 85%  respectively;  an expected  option  term of four  years,  and no
expected  dividends.  The weighted  average fair value of stock options  granted
under the plans for fiscal 2004 and 2003 was $0.19 and $0.16, 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
2000 the  Stockholders  approved an  amendment  increasing  the number of shares
available  for issuance  under the Purchase  Plan by 500,000  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 2004 and 2003,  were 31,936 and 79,909
shares of common  stock,  respectively,  at an average price of $0.13 and $0.07,
respectively.  On October 2, 2004, 232,166 shares of common stock were available
for future purchase.

The fair  value of the  employee's  purchase  rights  under  SFAS No.  123,  was
estimated using the Black-Scholes model with the following  assumptions used for
grants during fiscal 2004 and 2003,  risk free interest rates ranging from 2.90%
to 3.08%, respectively,  expected volatility of 192% and 85% respectively,  with
an expected option term of six months for all years, and no expected  dividends.
The weighted  average fair value of stock  purchased under the Purchase Plan for
fiscal 2004 and 2003, was $0.13 and $0.43, respectively.

If  compensation  expense  under these plans had been  recorded in the Company's
financial  statements  pursuant to SFAS No. 123, the  Company's net loss and net
loss per  share  for  fiscal  2004 and  2003  would  have  been as  follows  (in
thousands, except per share amounts):

                                       41
<PAGE>
<TABLE>
<CAPTION>
                                                                                      2004         2003
                                                                                   ---------    ---------
<S>                                                                                <C>          <C>
Net loss:
     As reported                                                                   $  (3,101)   $  (2,243)
     Pro forma                                                                     $  (3,127)   $  (2,324)

Net loss per share
     As reported
         Basic and diluted                                                         $   (0.27)   $   (0.22)
     Pro forma
         Basic and diluted                                                         $   (0.27)   $   (0.23)

</TABLE>


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 9.       Commitments

The Company has an operating lease for its main facility that expires  September
1, 2005. The Company has options to renew the lease for two 1 year periods.  The
Company also leases a sales office under a lease expiring in January 2005, and a
warehouse on a month to month lease.  Rent expense under such  operating  leases
aggregated  approximately  $740,000  and  $720,000  for  fiscal  2004 and  2003,
respectively.  Certain  leases  require the Company to pay a portion of facility
operating expenses.

Future  minimum  lease  payments  under  these  leases at October 2, 2004 are as
follows (in thousands): $379 in fiscal 2005.


Note 10.      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. The Company does not believe
that any of these  legal  proceedings  or claims  are  likely to have a material
adverse effect on the Company's  results of operations,  financial  condition or
cash flows.

In September 1999, certain inventory having a cost of approximately $400,000 was
seized  by  the  United  States   Customs  for  the  alleged   improper  use  of
certification  marks owned by Underwriters  Laboratories  Inc. ("UL").  In March
2003,  the US Attorney  and the Company  entered into a final  settlement  under
which the seized  inventory  was  returned  to the  Company  and the Company was
obligated to pay $57,000, and remove improper marks from the product.

On May 13, 2004, the Company's former landlord,  WW&LJ Gateways,  LTD., filed an
unlawful detainer action against the Company in the Superior Court for the State
of California, County of Santa Clara. In the suit, the landlord alleged that the
Company was in default under its lease because the Company had not paid rent for
the months of April and May 2004.  At the time the suit was filed,  the  alleged
outstanding rent totaled $147,425.  On July 13, 2004, the Company entered into a
Settlement and Mutual Release  pursuant to which the Company is obligated to pay
the  sum  of  $271,186  payable  in  equal  installments  over  five  months.  A
Stipulation for Entry of Judgment and Judgment was filed with the Superior Court
on July 12,  2004.  The Company also agreed to vacate the premises at the end of
its current lease term which is August 31, 2004. As of the October 2, 2004,  the
Company had paid all but $21,000 of the settlement amount.



                                       42
<PAGE>
ITEM 8.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
              ACCOUNTING AND FINANCIAL DISCLOSURE

As previously reported on Form 8-K filed with the SEC on August 5, 2003, on July
28,  2003,  the  Company  dismissed  PricewaterhouseCoopers  LLP  ("PWC") as its
independent  accountants  subject  to  completion  of  services  related  to the
restatement of the Company's  financial  statements as of September 28, 2002 and
September  29, 2001 and for each of the three  fiscal  years in the period ended
September  28,  2002.  The  Company's  amended  Form 10-K for  fiscal  year 2002
reflecting  the  restatement  was filed with the SEC on  January  5,  2004.  The
Company's  Audit  Committee  participated in and approved the decision to change
independent accountants.

The reports of  PricewaterhouseCoopers  LLP on the financial  statements for the
past two fiscal years  contained no adverse opinion or disclaimer of opinion and
were not  qualified  or modified as to  uncertainty,  audit scope or  accounting
principle.

In connection  with its audits for the two most recent fiscal years prior to and
through   July   28,   2003,   there   have   been   no    disagreements    with
PricewaterhouseCoopers  LLP on any matter of accounting principles or practices,
financial  statement   disclosure,   or  auditing  scope  or  procedure,   which
disagreements if not resolved to the satisfaction of PricewaterhouseCoopers  LLP
would  have  caused  them to make  reference  thereto  in  their  report  on the
financial statements for such years.

The Company engaged Odenberg,  Ullakko,  Muranishi & Co. LLP ("OUMC") as its new
independent  accountants as of July 28, 2003.  During the two most recent fiscal
years prior to and through July 28,  2003,  the Company has not  consulted  with
OUMC  regarding  either  (i)  the  application  of  accounting  principles  to a
specified  transaction,  either  completed  or  proposed;  or the  type of audit
opinion  that might be  rendered  on the  Company's  financial  statements,  and
neither a written report was provided to the Company or oral advice was provided
that the Company  concluded was an important factor considered by it in reaching
a decision as to the accounting,  auditing or financial reporting issue; or (ii)
any  matter  that was  either the  subject  of a  disagreement,  as that term is
defined in Item 204(a)(1)(iv) of Regulation S-K and the related  instructions to
Item 304 of Regulation  S-K, or a reportable  event,  as that term is defined in
Item 304(a)(1)(v) of Regulation S-K.

ITEM 8A       CONTROLS AND PROCEDURES

(a)  Disclosure  controls  and  procedures.  Based  on their  evaluation  of the
Company's  disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended,  (the "Exchange
Act")) as of the end of the period covered by this Annual Report on Form 10-KSB,
the Company's  principal  executive officer and principal financial officer have
concluded that the Company's disclosure controls and procedures,  as modified by
the changes  discussed in subparagraph  (b) below,  are effective to ensure that
information  required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded,  processed,  summarized and reported
within the time periods  specified in Securities and Exchange  Commission  rules
and  forms,  and  include  controls  and  procedures  designed  to  ensure  that


                                       43
<PAGE>

information  required  to be  disclosed  by  the  Company  in  such  reports  is
accumulated  and  communicated  to  the  Company's  management,   including  the
principal  executive officer and principal  financial officer, as appropriate to
allow timely decisions regarding disclosure.

ITEM 8B.      OTHER INFORMATION

On  July  1,  2004,  the  Company  filed a Form  8-K  reporting  an Item 5 event
regarding Mr. Lin assuming the positions of President and Chairman of the Board.

On July  27,  2004  the  Company  filed  a Form  8-K  reporting  an Item 5 event
regarding the Company's private sale of 6,880,000 shares of common stock.

Subsequent to the Company's  2004 fiscal year end, the Company hired Raj Matthew
as its Chief Financial Officer.  Robert Pendergrass,  the Company's Interim CFO,
now becomes the Company's Corporate Controller.



                                       44
<PAGE>

                                    PART III

ITEM 9.       DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
              COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The directors and executive officers of the Company, their ages as of October 2,
2004, and certain information regarding each of them are as follows:

<TABLE>
<CAPTION>
         Name                       Age              Position with the Company                     Director Since
         ----                       ---              -------------------------                     --------------
<S>                                 <C>              <C>                                                 <C>
Wilson Wong                         57               Director                                            1988
Jeff Lin                            54               Chairman, President and Chief Executive
                                                     Officer                                             1988
Edmond Y. Tseng                     57               Director                                            1989
Rajiv Matthew                       44               Chief Financial Officer
Steven Dix*                         45               General Manager and Senior Vice President Sales
                                                        and Marketing
Jim Hsia *                          42               Vice President of Product Marketing and Business
                                                         Development
Chiu K. Fung*                       57               Vice President of Operations
Craig Johnson                       45               Vice President of Marketing
David Kichar                        56               Vice President of Operations
Phil Berkowitz                      40               Vice President of Sales
<FN>
----------------------
* Mr. Dix left the Company in July 2004.  Mr. Hsia and Mr. Fung left the Company
  in September 2004.
</FN>
</TABLE>

Mr.  Wong  co-founded  the  Company  in 1988,  and  served as  President,  Chief
Executive Officer and Chairman of the Board of Directors from January 1, 1999 to
July 1, 2004 at which time he remained a Director.  Mr. Wong also  continues  to
serve as Vice  President of  Engineering.  Prior to his return to the Company as
Vice  President  of  Engineering  on  September  10,  1998,  Mr.  Wong was Chief
Executive Officer of Pixo Arts Corporation.  From 1994 to August 1997, he served
as Vice  President  and General  Manager for the Company.  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. Lin  co-founded  the Company in 1988, and has been a director of the Company
since 1988. He rejoined the Company as an executive  officer in June 2002 and on
July 1, 2004 assumed the  positions of Chief  Executive  Officer and Chairman of
the Board of Directors.  Mr. Lin is also a General Partner of Proton  Management
Consulting located in San Jose, a venture management company. Prior to that, Mr.
Lin served as Chairman and Chief  Executive  Officer of United Optical  Networks
International,  a  supplier  of  fiber  optic  components,  and as  Chairman  of
FITGlobal,  an online transaction company.  Prior to that, Mr. Lin was President
and Chief Executive Officer of Lite-On Communications  Corporation,  which is an
internetworking   company  located  in  Taiwan.   Lite-on  Communications  is  a
subsidiary of Lite-On Group, which is one of Asante's OEM suppliers in Asia. Mr.
Lin served as Asante's  President,  Chief Executive  Officer and Chairman of the
Board of Directors from July 1994 until December 31, 1998. After his resignation
as President and Chairman of the Board of Directors of Asante, Mr. Lin continued


                                       45
<PAGE>

to serve as a Director of the  Company.  Mr. Lin also held the  position of Vice
President of  Engineering  from November 1997 until August 1998.  From June 1993
through  July  1994,  he served as Vice  President,  General  Manager of Network
Systems Business for the Company.  From 1991 to 1993, he served as the Company's
Chairman of the Board of Directors  and Chief  Operating  Officer.  From 1988 to
1991,  Mr.  Lin  served  as the  Company's  Vice  President  of  Operations  and
Engineering, Chief Financial Officer and Secretary.

Mr. Tseng has served as President and Chief  Executive  Officer of OSE,  Inc., a
semiconductor  products  company  which serves as the exclusive  North  American
sales representative for Orient Semiconductor  Electronics,  Ltd., since January
1990. Orient Semiconductor Electronics,  Ltd. is one of Asantes OEM suppliers in
Asia.  See  "Security  Ownership of Directors,  Officers and Certain  Beneficial
Owners" and  "Certain  Relationships  and Related  Transactions."  Prior to that
time, Mr. Tseng was the Director of Engineering at Condata, Inc., an electronics
products and engineering consulting company.

Rajiv  Matthew  joined the  Company as its Chief  Financial  Officer in December
2004.  Mr.  Matthew,  a veteran  of the  networking  and  emerging  technologies
industries,  brings almost 20 years of management experience to Asante. He leads
a team of seasoned  financial and human  resources  professionals.  Mr.  Matthew
served as chief  financial  officer at BuildPoint  Corporation  and at PeopleWeb
Communications,  where he was also chief  operating  officer and has held senior
management   positions   of   increasing   responsibility   at   Conner-Seagate,
PriceWaterhouseCoopers, BankAmerica, and Pacific Telesis Group.

Mr. Robert  Pendergrass joined the Company in May 1999 and has served as Interim
Vice President of Finance and  Administration  since February 2004 after Anthony
Contos, the Company's former Vice President of Finance and Administration,  left
the Company for medical  reasons.  Upon the  appointment  of Mr.  Matthew as the
Company's  new CFO in December  2004,  Mr.  Pendergrass  assumed the position of
Controller.  Mr.  Pendergrass  previously  worked at Trimble  Navigation and DSP
Technologies.

Mr.  Steven Dix  rejoined  the Company in October 2003 and served as Senior Vice
President and General Manager until July 2004 when he left the Company.  Mr. Dix
initially  joined the  company in 1993 and served as Director of Int'l Sales and
Marketing until 1994. Prior to rejoining the company Mr. Dix was the VP of Sales
and  Marketing  for NETGEAR,  Inc.  from Feb 1996 until March 2003.  He has held
senior  sales  management  positions  with  Borland,   SysKonnect  and  Farallon
Computing

Mr. Jim Hsia joined the Company in September  1999 and served as Vice  President
of Marketing for the Company until September 2004 when he left the Company.  Mr.
Hsia now serves as Vice President of Product Marketing and Business Development.
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.



                                       46
<PAGE>

Mr. Chiu K. Fung (C.K.) joined the Company in October  2000,  and served as Vice
President of Operations  from October 2001 until September 2004 when he left the
Company. Before that Mr. Fung held the position of Senior Director of Operations
with the  Company.  From June 1998 to June  2000,  Mr.  Fung  served as  Monitor
Service Manager for Nakamichi  America  Corporation where he was responsible for
management of service and repair  operations.  From December 1995 to March 1998,
Mr. Fung served as Technical  Director at Orient Power Holding Ltd. where he was
responsible for management of their audio business unit. Prior to that, Mr. Fung
held other management positions in operations.

Craig  Johnson  joined  the  Company  in  October  2004 and  serves  as the Vice
President  of  Marketing.   Mr.  Johnson  leads  Asante's   marketing,   product
management,  and technical  support and brings extensive  industry and marketing
knowledge  to the Asante  team.  Previously  Mr.  Johnson  held  senior  analyst
positions at the PITA Group, Current Analysis, and  Gartner/Dataquest,  where he
was responsible for its Network  Infrastructure  Service. Prior to that, he held
senior - and  mid-level  management  positions - including  marketing,  straight
planning,  and  worldwide   service/support  -  at  Xylan,  Retix,  LANNET,  and
SynOptics.

David Kichar joined the Company in October 2004 and serves as the Vice President
of Operations.  Mr.  Kichar's  extensive  experience  includes  global  material
management,  sourcing supplier relations,  logistics, and program management for
tier-one and tier-two companies.  Previously,  he held executive-level positions
in supply chain management at Celestica  Solectron,  A-Plus  Manufacturing,  and
CMAC Industries.  Past distributor  employment  includes Director of Value Added
Services at Pioneer  Technology,  General Sales Manager at Tin Electronics  (now
Avnet), and Area Sales Manager for Arrow Electronics.

Philip R.  Berkowitz  joined the  Company  in October  2003 and in June 2004 was
promoted to Vice President of Sales. Mr. Berkowitz brings over 16 years of sales
managerial  experience  in the network  computer  industry to Asante.  He joined
Asante in October  2003 as Director of Channels  where he helped  architect  the
current  sales  channel  strategy for the  Company.  Previously  Berkowitz  held
various sales management positions - including Director of North America Channel
Sales  - at  NETGEAR.  Before  that,  he held  various  management  positions  -
including sales,  marketing,  and product development - in the computer hardware
industry.   Mr.   Berkowtiz   received   a   Bachelor's   degree   in   Business
Administration-Finance from San Jose State University.

There are no family  relationships among the directors and executive officers of
the Company.

Board Meetings and Committees

The Board of Directors of the Company held a total of eleven  meetings and acted
by written  consent  six times  during the  fiscal  year ended  October 2, 2004.
During fiscal 2004, no director  attended  fewer than 75% of the meetings of the
Board of Directors and its committees upon which such director served. The Board
of Directors has an Audit Committee and a Compensation  Committee.  The Board of
Directors  has no  nominating  committee  or any  committee  performing  similar
functions.


                                       47
<PAGE>

The information  contained in the following  sections entitled "Audit Committee"
and "Audit Committee Report" shall not be deemed to be "soliciting  material" or
to be  "filed"  with the  Securities  and  Exchange  Commission,  nor shall such
information  be  incorporated  by  reference  into any future  filing  under the
Securities Act of 1933, as amended,  or the Securities  Exchange Act of 1934, as
amended,  except to the extent that the Company  specifically  incorporates such
information by reference into such filing.

Audit Committee

The Audit  Committee  of the Board of  Directors  consisted  of Mr.  Lin and Mr.
Tseng,  until  July 1,  2004 at  which  time Mr.  Lin  resigned  from the  Audit
Committee and Mr. Wong was appointed to the Audit Committee. The Audit Committee
met two times during the last fiscal year of the Company.  The Company's  Common
Stock trades on the OTC (Over-the-Counter) Bulletin Board, and, accordingly, the
Company is not subject to the rules of the Nasdaq Stock Market.  During the last
fiscal  year,  the Audit  Committee  did not  consist  solely of members who are
independent directors within the meaning of Rule 4200(a)(14) of the Market Place
Rules of the Nasdaq Stock  Market.  The Board of Directors has adopted a written
charter for the Audit Committee,  the functions of the Audit Committee  include,
among  others:   recommending  to  the  Board  of  Directors  the  retention  of
independent public accountants,  subject to stockholder approval;  reviewing and
approving  the  planned  scope,  proposed  fee  arrangements  and results of the
Company's  annual audit;  reviewing  and  evaluating  the  Company's  accounting
principles  and its system of internal  accounting  controls;  and reviewing the
independence of the Company's independent accountants.

Audit Committee Report for the Fiscal Year ended October 2, 2004

The Audit Committee has reviewed and discussed the audited financial  statements
of the  Company  for the fiscal  year ended  October 2, 2004 with the  Company's
management. The Audit Committee has discussed with Odenberg,  Ullakko, Muranishi
& Co. LLP, the Company's independent public accountants, the matters required to
be discussed by Statement on Auditing Standards No. 61, Communication with Audit
Committees.

The Audit  Committee  has also received the written  disclosures  and the letter
from Odenberg,  Ullakko,  Muranishi & Co. LLP required by Independence Standards
Board  Standard No. 1,  Independence  Discussion  with Audit  Committees and the
Audit Committee has discussed the independence of Odenberg, Ullakko, Muranishi &
Co. LLP with that firm. The Audit Committee reviewed non-audit services provided
by its  independent  accountants  for the last fiscal year, and determined  that
those services did not impair the accountants' independence. The Audit Committee
is also responsible for handling  disagreements  with the Company's  independent
accountants or the termination of their engagement.

                                       48
<PAGE>

Based on the Audit  Committee's  review and discussions  noted above,  the Audit
Committee  recommended  to the Board of  directors  that the  Company's  audited
financial  statements be included in the Company's  Annual Report on Form 10-KSB
for the fiscal  year ended  October 2, 2004 for filing with the  Securities  and
Exchange Commission.  In addition,  the Audit Committee reviewed and recommended
to the Board that Odenberg,  Ullakko, Muranishi & Co. be retained by the Company
for the fiscal year ending October 1, 2005.

                                             Submitted by The Audit Committee
                                             Wilson Wong
                                             Edmond Y. Tseng

Compensation Committee

The  Compensation  Committee of the Board of Directors,  which during the fiscal
year ended October 2, 2004,  consisted of Mr. Tseng,  did not meet during fiscal
year 2004.  The  Compensation  Committee or the Board of  Directors  reviews and
approves the Company's executive compensation policy, including the salaries and
target  bonuses  of  the  Company's   executive  officers.   In  addition,   the
Compensation  Committee  administers the Company's  stock plans,  which includes
recommending  or approving  the grant of options to new and  existing  employees
(including officers and employee directors).

Compensation Committee Interlocks and Insider Participation

For the fiscal year ended October 2, 2004, the Compensation  Committee consisted
of Mr. Tseng, who is not an officer of the Company.

Mr. Tseng is the President and Chief Executive Officer and Dr. Duh is a director
of OSE,  Inc., a  semiconductor  products  company which serves as the exclusive
North American sales representative for Orient Semiconductor  Electronics,  Ltd.
("OSE").  The Company subcontracts the manufacturing of a substantial portion of
its products through OSE. Under the Company's  arrangement with OSE, the Company
purchases certain components from third party vendors and sells these components
to OSE at cost.  OSE  purchases  or  manufactures  other  components,  assembles
printed  circuit  boards,  and tests and packages  products for the Company on a
purchase order basis. The Company is obligated to purchase  products only to the
extent it has signed firm purchase  commitments with OSE. During fiscal 2003 and
2004,  the  Company's  purchases  from OSE totaled  $0.1 million and $0 million,
respectively.  The Company's  arrangement with OSE provides for payment terms of
45 days from date of receipt of product.  The Company  sells  certain  component
parts to OSE with payment terms similar to those granted to the Company. OSE and
its affiliates are  significant  stockholders  of the Company.  A portion of the
purchases  from OSE included  payments to OSE, Inc. See  "Security  Ownership of
Directors, Officers and Certain Beneficial Owners."

                                       49
<PAGE>

             COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

In fiscal 2004, the Compensation Committee ("Committee") consisted of Mr. Tseng,
who is not or has  not  been  an  employee  of the  Company.  The  Committee  is
responsible  for  reviewing  the  compensation  and benefits  for the  Company's
executive  officers,  as well as supervising and making  recommendations  to the
Board on  compensation  matters  generally.  The Committee also  administers the
Company's stock option and purchase plans and makes grants to executive officers
under the Company's Key Executive Stock Plan and 2001 Stock Option Plan.

The  Committee  held no meetings  during fiscal 2004.  The  following  report is
submitted on behalf of the Compensation Committee.

Compensation Policies

The Company  operates in the high technology  industry,  characterized  by rapid
changes  and extreme  competition.  The Board's  compensation  philosophy  is to
provide cash and equity incentives to the Company's executive officers and other
employees  to  attract  highly  qualified  personnel  in order to  maintain  the
Company's competitive  position.  The Board's compensation program goals are to:
attract,  retain and motivate  qualified  executive  officers and  employees who
contribute  to the  Company's  long-term  success;  align  the  compensation  of
executive officers with the Company's business  objectives and performance;  and
align  incentives for executive  officers with the interests of  stockholders in
maximizing value.

Compensation Components

The compensation for executive  officers  generally  consists of salary,  annual
incentives and stock option awards.

Base Salary.  The salaries of each of the executive  officers of the Company are
generally based on salary levels of similarly sized  companies,  primarily those
located in Silicon Valley. The Committee reviews generally available surveys and
other published  compensation data. The compensation of the executive  officers,
including the Chief Executive  Officer,  are generally  reviewed annually by the
Committee  and/or  the  Board and  adjusted  on the  basis of  performance,  the
Company's results for the previous year and competitive  conditions.  Due to the
Company's   recurring   operating  losses  and  beginning  in  April  2001,  the
Compensation  Committee  recommended  and the  Company  implemented  a temporary
salary reduction program which effects all salaries over certain minimum levels.
Such salary reduction program affects primarily  executive officer  compensation
and was implemented as part of the Company's cost cutting efforts.

Bonuses. The Company's intention is to develop bonus compensation plans designed
to reward the Company's  executive  officers  based on the  Company's  financial
performance. There is no bonus plan in place for officers at this time.

                                       50
<PAGE>

The Company has a profit sharing plan approved by the Board of Director's during
fiscal 2001. However, there were no bonuses earned under the profit sharing plan
during fiscal year 2004. This plan covers all active, full-time employees of the
Company  who have been with the  Company  for a  certain  minimum  period of the
applicable fiscal year. Cash payments under the plan shall be made subsequent to
the Company's applicable fiscal year and be based on yearly net income.

Equity-Based Compensation. The Company enables all eligible employees, including
executive  officers  other than Mr. Wong and Mr. Lin, to purchase the  Company's
Common Stock at a discount by participating in the Company's 1993 Employee Stock
Purchase  Plan. In addition,  the Company  periodically  grants to its executive
officers  stock options under the 2001 Stock Plan,  and the Key Executive  Plan,
and grants to other  employees stock options under the 2001 Stock Plan, in order
to provide  additional  incentive for such persons.  The Committee believes that
such incentive promotes the long-term  interests of the Company's  stockholders.
Options  generally vest over a four-year  period to encourage  option holders to
continue employment with the Company.  In granting options,  the Committee takes
into account each individual's  level of  responsibility  within the Company and
such individual's expected future contribution,  as well as the number of shares
and outstanding options already held by the individual.  The Board has adopted a
stock option  grant  policy,  pursuant to which  employees  (including  officers
except for Mr. Wong) may receive annual stock option grants,  generally on their
review date with the Company,  in amounts  based on certain  criteria  including
continuous  time with the Company,  current  salary,  responsibilities,  and job
performance.  Employees may also be entitled to receive additional option grants
where the employee's job has significantly  changed through growth or promotion.
The exercise price of all options is the market price on the date of grant.

Compensation of Chief Executive Officer

The process of determining  the  compensation  for the Company's Chief Executive
Officer and the  factors  taken into  consideration  in such  determination  are
generally  the  same  as  the  process  and  factors  used  in  determining  the
compensation  of all of the executive  officers of the Company.  In fiscal 2004,
the  Company  decreased  the  pay  rates  of  most  employee's,   including  the
compensation of Mr Wong and Mr. Lin, as part of the Company's  salary  reduction
program.

Tax Deductibility of Executive Compensation

Section  162(m) of the Code  limits  the  federal  income tax  deductibility  of
compensation  paid to the Company's Chief  Executive  Officer and to each of the
other four most highly compensated  executive  officers.  The Company may deduct
such   compensation  only  to  the  extent  that  during  any  fiscal  year  the
compensation  paid to any such  individual  does not exceed  $1,000,000,  unless
compensation  is  performance-based   and  meets  certain  specified  conditions
(including  stockholder  approval).  Based on the Company's current compensation
plans and  policies,  the Committee  does not  anticipate,  for the  foreseeable
future,  that the Company will lose any  significant tax deduction for executive
compensation.

                                       51
<PAGE>

This report presented herein was approved by a motion of the Board of Directors.

                                             FOR THE COMPENSATION COMMITTEE

                                                  Edmond Tseng


Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities  Exchange Act of 1934, as amended,  requires the
Company's executive officers and directors, and persons who own more than 10% of
the Company's  Common Stock,  to file reports of ownership on Form 3 and changes
in ownership on Form 4 or 5 with the  Securities  and Exchange  Commission  (the
"SEC").  Such  executive  officers,  directors  and 10%  stockholders  are  also
required by SEC rules to furnish the  Company  with copies of all Section  16(a)
forms they file.  Based solely upon its review of copies of such forms  received
by it, or on written  representations  from  certain  reporting  persons that no
other filings were required for such persons,  the Company believes that, during
the fiscal year ended October 2, 2004, its executive officers, directors and 10%
stockholders complied with all applicable Section 16(a) filing requirements.

ITEM 10.      EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

The following table sets forth all  compensation  received by the Named Officers
for services  rendered to the Company in all  capacities  for fiscal years ended
September 28, 2002 and September 27, 2003 and October 2, 2004:

                                       52
<PAGE>
<TABLE>
<CAPTION>
                                                                                          Long-Term
                                                  Annual Compensation                 Compensation Awards
                                          -------------------------------------       -------------------
                                                                                               Number
                                                                               Restricted    of Shares
                                                                Other Annual     Stock       Underlying    LTIP       All Other
Name and Principal Position       Year      Salary     Bonus    Compensation     Awards       Options     Payouts  Compensation (1)
---------------------------       ----      ------     -----    -------------    ------       -------     -------  ---------------
                                              $          $           ($)
<S>                                <C>      <C>         <C>      <C>             <C>         <C>          <C>         <C>
Wilson Wong                        2004      76,077      -           -             -            -          -           482
Former President and Chief         2003      84,000      -           -             -            -          -           609
Executive Officer,  Chairman of    2002     114,108      -           -             -            -          -           920
the Board
Jeff Lin (2)                       2004     100,504      -           -             -         900,000       -           285
President and Chief                2003      84,000      -           -             -            -          -           326
Executive Officer,  Chairman of    2002      49,002      -           -             -            -          -           132
the Board
Jim Hsia                           2004     113,153                                                                    173
Vice President of Marketing        2003     114,216      -           -             -            -          -           208
                                   2002     131,721      -           -             -           2,500       -           256

Phil Berkowitz                     2004      92,850      -        41,871           -          70,000       -           364

<FN>
(1)   Amount  consists  of  premiums  paid by the  Company  for life  insurance, including  compensation  relating  to  over
      $50,000  Life  Insurance  and Executive Life.
(2)   Mr. Jeff Lin rejoined the Company as an officer on June 1, 2002 and became President and Chairman on July 1,
      2004.
</FN>
</TABLE>


Stock Based Compensation Plans

As of October 2, 2004,  the Company had granted  options under five  stock-based
compensation plans that are described below.

The 2001 Stock  Option  Plan  allows  for  issuance  of  options to the  Company
employees and  consultants  to purchase a maximum of 1,000,000  shares of common
stock  plus  7% of the  outstanding  common  shares  as of the  last  day of the
immediately preceding year beginning in fiscal year 2002.

The 2000 Non-Statutory Stock Option Plan which allows for issuance of options to
the Company employees and consultants to purchase a maximum of 120,000 shares of
common stock.

The Directors' Stock Option Plan is described under the section "Compensation of
Directors"

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


                                       53
<PAGE>

Executive  Option Plan  expired in July 2003.  The Company is  currently  in the
process of redrafting a new plan to replace it.

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
2000 the  Stockholders  approved an  amendment  increasing  the number of shares
available  for issuance  under the Purchase  Plan by 500,000  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 2004, 2003 and 2002 were 31,936,
79,909 and 62,839 shares of common stock,  respectively,  at an average price of
$0.13,  $0.07 and $0.15,  respectively.  On October 2, 2004,  232,166  shares of
common stock were available for future purchase.

Option Grants in Last Fiscal Year

The following table sets forth certain information with respect to stock options
granted to each of the Named  Officers  during the fiscal year ended  October 2,
2004. In accordance  with the rules of the Securities  and Exchange  Commission,
also shown below is the potential  realizable  value over the term of the option
(the period from the grant date to the  expiration  date) based on assumed rates
of stock  appreciation  of 5% and 10%,  compounded  annually.  These amounts are
based  on  certain  assumed  rates  of  appreciation  and do not  represent  the
Company's estimate of future stock price.  Actual gains, if any, on stock option
exercises will be dependent on the future performance of the Common Stock.


                                       54
<PAGE>
<TABLE>
                                                Option Grants in Last Fiscal Year

                                                        Individual Grants
<CAPTION>
                                                                                                 Potential Realizable
                                                                                                   Value at Assumed
                                                                                                   Annual Rates of
                            Number of        % of Total                                              Stock Price
                             Shares            Options                                               Appreciation
                           Underlying         Granted to         Exercise                         for Option Term (3)
                            Options          Employees in         Price                          ---------------------
         Name              Granted (1)      Fiscal Year (2)     Per Share    Expiration Date         5%         10%
         ----              -----------      ---------------     ---------    ---------------      --------    -------
<S>                         <C>                 <C>               <C>            <C>  <C>         <C>         <C>
Phil Berkowitz               40,000              3.32%            0.440          11/3/13          $11,069     $ 28,050
Phil Berkowtiz               30,000              2.49%            0.15           8/20/14          $ 2,830     $  7,172
Stephen Dix                 200,000             16.58%            0.440          11/3/13          $55,343     $140,249
Jeff Lin                    900,000             74.63%            0.25           6/30/14                0     $ 55,124
---------------------------------------------------------------------------------------------------------------------
<FN>
(1)  All options were granted  under either the Company's  2001 Stock Option Plan or the Company's Key Executive  Stock
     Plan and have  exercise  prices  equal to the fair  market  value on the grant date.  All options  vest and become
     exercisable over a four-year  period,  generally at the rate of 25% on the first  anniversary of the date of grant
     and 1/48 per month thereafter,  subject to the option holder's  continued  employment with the Company.  Under the
     foregoing plans, the Board retains discretion to modify the terms, including the prices, of outstanding options

(2)  Based on options to purchase an aggregate of 1,206,000 shares granted in fiscal 2004.

(3)  Potential gains are net of exercise price,  but before taxes  associated  with exercise.  These amounts  represent
     certain assumed rates of appreciation only, based on the Securities and Exchange  Commission rules.  Actual gains,
     if any, on stock option  exercises are dependent on the future  performance  of the Common Stock,  overall  market
     conditions and the option holders' continued  employment through the vesting period. The amounts reflected in this
     table may not necessarily be achieved.
</FN>
</TABLE>

Option Exercises and Holdings

The following  table provides  information  with respect to option  exercises in
fiscal 2004, by the Named Officers and the value of such  officers'  unexercised
options at October 2, 2004:


                                       55
<PAGE>

Aggregated  Option  Exercises  in Last  Fiscal Year and Fiscal  Year-End  Option
Values

<TABLE>
<CAPTION>
                                                       Number of Shares
                                                     Underlying Unexercised             Value of Unexercised
                                                          Options at                   In-the-Money Options at
                                                     Fiscal Year-End (1)                  Fiscal Year-End
                                                     -------------------               -----------------------
                        Shares
                       Acquired        Value
Name                  on Exercise    Realized      Exercisable    Unexercisable     Exercisable     Unexercisable
----                  -----------    --------      -----------    -------------     -----------     -------------
<S>                      <C>           <C>           <C>             <C>               <C>              <C>
Phil Berkowitz            --            --              -             70,000            $ -              $ 300
Jeff Lin                                             287,500         632,500            $ -              $ -
Wilson Wong               --            --           600,000            -               $ -              $ -
Jim Hsia                                              52,888           2,962            $ 269            $ 656

<FN>
(1)  Market value of unexercised  options is based on the price of the last reported sale of the Company's Common Stock
     on the OTC  (Over-the-Counter)  Bulletin  Board of $0.16 per share on  October 1, 2004 (the last  trading  day for
     fiscal 2004), minus the exercise price. Does not include options that had an exercise price greater than $0.16.
</FN>
</TABLE>


Compensation of Directors

Directors who are employees of the Company receive no fees for services provided
as members  of the Board of  Directors,  but are  reimbursed  for  out-of-pocket
expenses  incurred in  connection  with  attendance  at meetings of the Board of
Directors and its committees.

Directors who are not employees of the Company  receive a fee of $1,000 for each
meeting attended and are also reimbursed for out-of-pocket  expenses incurred in
connection  with their  attendance at meetings of the Board of Directors and its
committees.

Non-employee  Directors are also entitled to  participate  in the Company's 1993
Directors' Stock Option Plan (the "Directors' Plan"). The Directors' Plan, which
was adopted by the Board of  Directors in  September  1993,  and approved by the
stockholders  in October  1993,  authorizes a total of 300,000  shares of Common
Stock for issuance  pursuant to options  granted under the Directors'  Plan. The
Directors' Plan provides for an automatic grant of 40,000 shares of Common Stock
to each non-employee Director on the date on which such individual first becomes
a  director.  As  approved  by  stockholders  at the 1996  Annual  Shareholder's
Meeting,   an  amendment  to  the  Directors'   Plan  also  provides  that  each
non-employee  Director  will be granted  additional  options for the purchase of
10,000  shares of Common Stock at the Board  meeting  immediately  following the
annual anniversary date of the non-employee  Director's  commencement of service
on the Board of Directors.

Initial  options  granted  under this plan have terms of ten years and typically
the shares  underlying the option vest over four years at the rate of 25% on the
one year  anniversary  date, with the remaining  shares vesting monthly in equal


                                       56
<PAGE>

increments over the remaining three years. Subsequent options granted under this
plan have a term of ten years and typically vest over the four years at the rate
of 25% annually from the  anniversary  date.  The exercise  price of each option
granted  equals 100% of the fair market  value of the Common  Stock on the grant
date,  based on the  closing  price of the Common  Stock as  reported on the OTC
(Over-the-Counter)  Bulletin  Board.  Options  granted under the Directors' Plan
must be exercised within three months following the end of the optionee's tenure
as a director of the Company,  or within six months after the  termination  of a
director's tenure due to death or disability;  options not so exercised are then
cancelled and may be reissued pursuant to the 1993 Directors' Stock Option Plan.
The Directors' Plan is designed to work automatically,  without  administration;
to the extent  administration is necessary,  however, such services are provided
by those who administer the Company's stock plans.  The Directors' Plan has been
structured so that options  granted to  non-employee  Directors  will qualify as
transactions  exempt from Section 16(b) of the Securities  Exchange Act of 1934,
as amended,  pursuant to Rule 16b-3 promulgated thereunder.  The Director's Plan
expired on October 30, 2003 and the  Company is in the process of  redrafting  a
new plan to replace it.


ITEM 11.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
              MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The  following  table sets forth certain  information  known to the Company with
respect to beneficial ownership of the Company's Common Stock as of December 31,
2004,  by (i) each  beneficial  owner of more  than 5% of the  Company's  Common
Stock,  (ii) the Company's  Chief  Executive  Officer and each of the four other
most highly compensated  executive officers during the fiscal year ended October
2, 2004 (collectively, the "Named Officers"), (iii) each director of the Company
and (iv) all directors and executive officers of the Company as a group.  Except
as otherwise  indicated,  each person has sole voting and investment  power with
respect to all shares shown as beneficially owned, subject to community property
laws where applicable.
<TABLE>
<CAPTION>
                                                            Shares              Percentage
                                                         Beneficially          Beneficially
Beneficial Owner                                             Owned                Owned
----------------                                             -----                -----
<S>                                                        <C>                    <C>
Jeff Yuan-Kai Lin (1)                                      5,575,500              31.7%
Wilson Wong (2)                                            1,774,250               6.7%
Dr. Eugene C.Y. Duh (3)                                    1,191,073               6.8%
OSE, Ltd.(4)(5)                                               25,293               0.1%
Edmond Tseng (6)(7)                                          105,833               0.6%
Rajiv Matthew(8)                                              80,000               *
Jim Hsia (9)                                                   5,411               *
Richard Lee (10)                                           1,600,000               9.1%
David Lee, Trustee (11)                                      960,000               5.5%
Leadtek Research, Inc. (12)                                4,000,000               22.8%
All directors and executive officers as a group            6,855,583(13)           39.0%
(5 persons)

</TABLE>

                                       57
<PAGE>


*Represents less than one percent of the outstanding Common Stock.
-------------------------------------------------
(1)  The  address  for Mr. Lin is 2223 Old Oakland  Road,  San Jose,  California
     95131.  Includes  437,500 shares issuable under stock options and 2,000,000
     shares issuable under warrants  exercisable  within 60 days of December 31,
     2004.
(2)  The address for Mr. Wong is 11842 Shasta Spring Ct., Cupertino,  California
     95014
(3)  The address for Dr. Duh is Orient Semiconductor Electronics, Ltd., No. 12-2
     Nei Huang S. Rd., NEPZ Kaohsiung 81120, Taiwan, ROC.
(4)  Dr. Duh is a Director  of OSE Ltd.  As such,  Dr. Duh may be deemed to be a
     beneficial owner of these shares.
(5)  Dr. Duh is a Director and Mr. Tseng is President of OSE, Inc. As such,  Dr.
     Duh, Mr. Tseng, and OSE Ltd. may be deemed to be beneficial owners of these
     shares.
(6)  The  address  for  Edmond  Tseng is Orient  Semiconductor,  Inc.,  2221 Old
     Oakland Rd, San Jose, CA 95131.
(7)  Includes 62,500 shares issuable under stock options  exercisable  within 60
     days of December 31, 2004.
(8)  Mr.  Matthew owns stock options to purchase  80,000 shares of the Company's
     common stock which are not currently exercisable
(9)  Includes 52,800 shares issuable under stock options  exercisable  within 60
     days of December  31, 2005
(10) The address  for Mr.  Richard  Lee is 6F-2 NO 106  Chang-An W Road,  Taipei
     Taiwan  103,  ROC.   Includes   800,000  shares   issuable  under  warrants
     exercisable within 60 days of December 31, 2004.
(11) The  address  for Mr.  David Lee and  Chi-Ming  Lee as  Trustees of the Lee
     Family  Trust is 1400  Tracy  Court,  Los Altos  Hills,  California  94022.
     Includes 480,000 shares issuable under warrants  exercisable within 60 days
     of December 31, 2004.
(12) The address for Leadtek  Research,  Inc. is 18F NO 166 Chien Yi Road, Chung
     Ho, Taipei Hsien,  Taiwan,  ROC.  Includes  800,000  shares  issuable under
     warrants exercisable within 60 days of December 31, 2004.
(13) Amount includes 4,355,583 shares currently outstanding and 2,500,000 shares
     issuable upon exercise of outstanding options and warrants


ITEM 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Delta Electronics Group of Companies includes Delta Networks, Inc. and Delta
International Holdings, Ltd. who owns 166,667 and 333,333,  respectively, of the
Company's  common stock,  which together  represents  approximately  5.0% of the
common stock of the Company.  The Company  subcontracts  the  manufacturing of a
substantial  portion of its products  through Delta  Networks,  Inc.  ("Delta").
Under the  Company's  arrangement  with  Delta,  the Company  purchases  certain
components from third party vendors and sells these components to Delta at cost.
Delta  purchases or manufactures  other  components,  assembles  printed circuit
boards,  and tests and  packages  products  for the Company on a purchase  order
basis.  The Company is obligated to purchase  products only to the extent it has
signed firm purchase  commitments  with Delta.  During fiscal 2003 and 2004, the
Company's   purchases   from  Delta  totaled  $2.7  million  and  $2.1  million,
respectively. The Company's arrangement with Delta provides for payment terms of
90 days from date of receipt of product.  The Company  sells  certain  component
parts to Delta with payment terms similar to those granted to the Company. Delta
and  its  affiliates  own in  aggregate  approximately  5% of the  Company.  See
"Security Ownership of Certain Beneficial Owners and Management".

                                       58
<PAGE>

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 ___% of the Company's Common Stock
as of October 2, 2004. Under the OSE Agreement,  the Company  purchases from and
sells at cost to OSE  certain  component  parts.  The  Company is  obligated  to
purchase goods only to the extent it has signed firm purchase  commitments  with
OSE. At October 2, 2004, the Company's firm purchase  commitments  under the OSE
Agreement were insignificant.

The Company  entered into a sublease of its executive  offices in September 2004
with OSE.  The  Company  believes  the lease rate and terms are similar to those
rates obtainable from an unaffiliated third party.

Jeff Lin  participated in the July 2004 private  placement  pursuant to which he
acquired 2,000,000 shares of common stock and 2,000,000 warrants  exercisable at
$0.50 per share for a period of two years.

ITEM 13.      EXHIBITS

See Exhibit Index at page 63 of this Form 10-KSB.


ITEM 14       PRINCIPAL ACCOUNTANT FEES AND SERVICES

During the Company's  fiscal years ended September 27, 2003 and October 2, 2004,
the  Company  was billed the  following  aggregate  fees by  Odenberg,  Ullakko,
Muranishi Co. LLP ("OUMC").

Audit Fees.
-----------

The  aggregate  fees  billed by OUMC to the Company  for  professional  services
rendered  for the audit of the  Company's  financial  statements  for the fiscal
year, for reviews of the financial  statements  included in the Company's  Forms
10-QSB for the fiscal year, and for services provided by OUMC in connection with
statutory or regulatory  filings for the fiscal year,  were $70,000 for the 2003
fiscal year and $70,000 for the 2004 fiscal year.

Tax Fees
--------

The  aggregate  fees  billed by OUMC to the Company  for  professional  services
rendered  for the audit of the  Company's  federal and state tax returns for the
two fiscal years 2004 and 2003 were $7,515 and $8,000, respectively.

                                       59
<PAGE>

All Other Fees.
---------------

OUMC billed the Company  $6,000 in fiscal 2004 and $6,000 in fiscal 2003 for the
audit of the Company's retirement plan.

All of the  services  performed  by OUMC  during 2004 were  pre-approved  by the
Company's  Board  of  Directors,  which  concluded  that  the  provision  of the
non-audit   services   described  above  is  compatible  with   maintaining  the
accountant's independence.

Pre-Approved Policies and Procedures

Prior to retaining  OUMC to provide  services in any fiscal  year,  the Board of
Directors first reviews and approves OUMC's fee proposal and engagement  letter.
In the fee proposal,  each category of services (Audit,  Audit Related,  Tax and
All Other) is broken down into  subcategories  that  describe  the nature of the
services to be rendered,  and the fees for such services.  Asante's pre-approval
policy  provides that the Board of Directors must  specifically  pre-approve any
engagement  of OUMC for  services  outside  the  scope of the fee  proposal  and
engagement letter.

                                       60
<PAGE>
                                  EXHIBIT INDEX

      Number                Description of Document
      ------                -----------------------

        2.1       Agreement  and Plan of Merger  between  Registrant  and Asante
                  Technologies,   Inc.,  a  California  corporation,   effective
                  October 12, 1993.(1)

        3.1       Certificate of Incorporation of Registrant. (1)

        3.1A      Certificate of Amendment of Certificate  of  Incorporation  of
                  Registrant. (1)

        3.1B      Certificate of Retirement of Stock of Registrant. (1)

        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)



                                       61
<PAGE>

       23.1       Consent of Odenberg, Ullakko, Muranishi & Co. LLP

       23.2       Consent of PricewaterhouseCoopers LLP(5)

       31.1       Certification   by  CEO   pursuant   to  Section  302  of  the
                  Sarbanes-Oxley Act of 2002.

       31.2       Certification   by  CFO   pursuant   to  Section  302  of  the
                  Sarbanes-Oxley Act of 2002.

       32.1       Certification   by  CEO   pursuant   to  Section  906  of  the
                  Sarbanes-Oxley Act of 2002.

       32.2       Certification   by  CFO   pursuant   to  Section  906  of  the
                  Sarbanes-Oxley Act of 2002

                  * 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.

                  (5)   Previously  filed  as an  exhibit  to  the  Registrant's
                        Annual  Report on Form 10-K for the  fiscal  year  ended
                        September 27, 2003.


                                       62
<PAGE>

                                   SIGNATURES

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

January 18, 2005
                                 ASANTE TECHNOLOGIES, INC.



                                 By: /s/ Jeff Yuan Kai Lin
                                     -------------------------------------------
                                     Jeff Yuan Kai Lin
                                     President and Chief Executive Officer


                                 By: /s/ Rajiv Matthew
                                     -------------------------------------------
                                     Rajiv Matthew
                                     Chief Financial Officer


                                       63
<PAGE>

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE  PRESENTS,  that each person whose  signature  appears
below  constitutes  and appoints  Jeff Lin and Robert  Pendergrass,  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-KSB 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>
<CAPTION>

               Signature                                         Title                                     Dates
---------------------------------------- ------------------------------------------------------ ----------------------------
<S>                                      <C>                                                          <C>
    /s/  Jeff Yuan Kai Li                President and Chief Executive Officer (Principal              January 18, 2005
------------------------------------     Executive Officer) and Director
        (Jeff Yuan Kai Lin)

   /s/   Rajiv Matthew                   Chief Financial Officer, (principal Finance and               January 18, 2005
------------------------------------     Accounting Officer)
        (Rajiv Matthew)

   /s/    Edmond Tsen                    Director                                                      January 18, 2005
------------------------------------
         (Edmond Tseng)

   /s/    Wilson Wong                    Director                                                      January 18, 2005
------------------------------------
         (Wilson Wong)


</TABLE>

                                       64