SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                            ________________________

                                    FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
    of 1934 for the fiscal year ended December 31, 1998.

[ ] 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 33-59598

                              DIALOGIC CORPORATION
             (Exact name of registrant as specified in its charter)

           New Jersey                                    22-2476114
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

           1515 Route 10, Parsippany, New Jersey 07054 (973) 993-3000
      (Address and telephone number, including area code, of registrant's
                          principal executive office)

        Securities registered pursuant to Section 12(b) of the Act: none.

           Securities registered pursuant to Section 12(g) of the Act:

                               Title of each class

                  Common Stock, no par value, stated value $.01

          Indicate  by check  mark  whether  the  registrant  (1) has  filed all
reports  required to be filed by Section 13 or 15(d) of the Securities  Exchange
Act of 1934 during the preceding 12 months (or for such shorter  period that the
registrant  was required to file such  reports) and (2) has been subject to such
filing requirements for the past 90 days.

                                   Yes X No __

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

          Aggregate  market value of voting stock held by  non-affiliates  as of
February 1, 1999 was approximately $292,404,000 .

          Number of shares of Common Stock  outstanding  as of February 1, 1999:
16,394,993.

          Documents incorporated by reference: Annual report to shareholders for
the year ended December  31, 1998 (Part II);  Definitive proxy statement for the
registrant's 1999 annual meeting of shareholders (Part III).

<PAGE>

                              DIALOGIC CORPORATION
                                TABLE OF CONTENTS

PART I                                                                   Page

Item 1       Business of the Company................................       3

Item 2.      Properties.............................................       23

Item 3       Legal Proceedings......................................       23

Item 4       Submission of Matters to a Vote of Security Holders....       25

Item 4A      Executive Officers of the Registrant...................       25

PART II

Item 5       Market for the Registrant's Common Equity and 
             Related Stockholder Matters............................       28

Item 6       Selected Financial Data................................       28

Item 7       Management's  Discussion  and Analysis of Results 
             of Operations  and Financial Condition.................       28

Item 7A      Quantitative and Qualitative Disclosure About Market Risk     28

Item 8       Financial Statements and Supplementary Data.............      28

Item 9       Changes in and  Disagreements  with  Accountants  on 
             Accounting  and Financial Disclosure....................      29

PART III

Item 10       Directors of the Registrant............................      30

Item 11       Executive Compensation.................................      30

Item 12       Security Ownership of Certain Beneficial Owners 
                 and Management......................................      30

Item 13       Certain Relationships and Related Transactions.........      30

PART IV

Item 14        Exhibits, Financial Statements Schedules 
                   and Reports on Form 8-K...........................      31

Signatures      .....................................................      34

<PAGE>

Item 1.  Business of the Company

Introduction

          Dialogic  Corporation was  incorporated in New Jersey in 1983, and has
its principal executive offices located at 1515 Route 10, Parsippany, New Jersey
07054.  The terms  "Company"  and  "Dialogic"  used in this report  refer to the
Registrant  and its  consolidated  subsidiaries  unless  the  context  indicates
otherwise1.
 
          On February 17, 1998, the Company sold substantially all of the assets
of its Spectron Microsystems,  Inc. subsidiary, which had been acquired in 1995,
to  Texas  Instruments  Inc.  for  approximately  $26  million  in cash  and the
assumption  by  the  buyer  of  substantially  all  of  Spectron   Microsystems'
liabilities.  Spectron  Microsystems was in the business of developing  software
for DSP operating systems.

          Certain  statements  contained  in this  Annual  Report on Form  10-K,
including,  without  limitation,  statements  containing  the words  "believes",
"anticipates",  "estimates",  "expects", and words of similar import, constitute
forward  looking  statements  within  the  meaning  of  the  Private  Securities
Litigation Reform Act of 1995  ("Forward-Looking  Statements").  Such statements
are subject to risks and uncertainties that could cause actual results to differ
materially  from those  projected in such  Forward-Looking  Statements.  Certain
factors which could materially affect such results and the future performance of
the Company are described below under "-- Risk Factors".

General

          Dialogic  designs,  manufactures  and markets  hardware  and  software
enabling technologies for "computer telephony" systems.  "Computer telephony" is
the term used to encompass a wide variety of technologies and applications  that
use the  information  processing  capabilities of a computer (often a server) to
add intelligence to telephone functions and to combine these functions with data
processing.  The Company's  products are offered as modular building blocks that
enable  its  customers--primarily   Value-Added  Resellers  ("VARs"),   Original
Equipment  Manufacturers  ("OEMs"),  systems integrators,  service providers and
applications  developers--to  design  computer  telephony  systems that meet the
applications  demands of their  end-user  customers.  Dialogic  has promoted the
acceptance of open,  non-proprietary  computer telephony  systems,  enabling its
customers  to  respond  to  end-user  demand  for  standards-based  systems  and
expanding  the  types of  systems  into  which  the  Company's  products  may be
incorporated.  The Company's customers vary in size from small ventures to major
computer and telecommunications companies worldwide.

          The Company's  hardware signal computing  products receive and process
signals  from  telecommunications  networks and perform  computing  functions to
convert the signals to data  appropriate for various types of computer  systems.
These  computing  functions are based upon algorithms for a variety of features,
including voice compression, voice storage, speech recognition, tone recognition
and facsimile compression.  Conversely,  the Company's signal computing products
also  take   computer   data  and   convert  it  to  signals   compatible   with
telecommunications  networks by using  algorithms  for  features  such as speech
synthesis,  voice  decompression,   tone  signaling  and  facsimile  generation.
Dialogic's signal computing  hardware products  typically provide one or both of
two  elements--a  signal  processing  resource and a network  interface.  Signal
processing  resources perform specific  functions.  Network interfaces connect a
system, normally a personal computer, to telephone and data networks. Dialogic's
hardware  products  are  offered in the form of circuit  boards/platforms  to be
installed  in a  variety  of  computer  chassis.  Typically,  Dialogic  hardware
products are provided  bundled with software  elements,  such as drivers,  which
enable the hardware product to work in the host environment and to be compatible
with other  elements  within the  system in which they are  installed.  Software
functionality  is  also  contained  in the  firmware  modules  of the  Company's
hardware products.

          The  Company  also  licenses  the use of various  standalone  software
products,   such  as  CT  Connect  and  CT  Media,   which  provide   middleware
functionality  within a system,  enabling an application designer to design to a
uniform Applications  Programming  Interface ("API") and provide server resource
management  and  application  interoperability.  Dialogic also provides  various
products  which include  third party  provided  technology  embedded in Dialogic
boards,  particularly  involving text to speech and voice recognition on Antares
boards.  Dialogic  services are addressed to  professional,  technical  support,
consulting, training and custom platform services.

          Dialogic  offers a broad  product  line,  allowing  its  customers  to
develop computer telephony  applications with components that are compatible and
scaleable across different ranges of density and performance. Such applications,
which are marketed by Dialogic's  customers for ultimate use in public networks,
private networks and on customer premises, include:

     o   Internet gateway and gatekeeper applications, including:
         o   Voice over the Internet
         o   Fax over the Internet
     o   Database interaction  applications,  which query and make changes to 
         databases based on touchtone or voice input, including:
          o    Audiotex - giving  24-hour  telephone  access to a  menu-selected
               database of recorded (spoken) information
          o    Fax-on-demand   -   giving   24-hour   telephone   access   to  a
               menu-selected database of printed information
          o    Interactive  voice  response - giving 24-hour  telephone  access,
               with update privileges, to an indexed database of records
          o    Interactive  fax  response - faxing  hard-copy  confirmations  of
               touchtone queries or transactions 
      o    Multimedia  applications  which store and forward  data,  fax and
               voice,  including:  

<PAGE>

          o    Voice mail 
          o    Fax   servers,   which   typically   enable   desktop   users  to
               electronically   generate,   transmit,  store  and  retrieve  fax
               messages via local area network connections
          o    Paging
          o    Unified messaging,  which presents e-mail, fax and voice messages
               through one screen  interface  and converts from e-mail to fax or
               voice for remote telephone access.  Multimedia  messaging systems
               link voice mail,  email, and fax services,  presenting  access to
               all three types of media  messages from one  workstation  screen,
               and allowing users to hear,  read, or view them in any order they
               choose. These systems can also receive messages in one medium and
               forward  them in another.  For  example,  email  messages  can be
               converted  using   text-to-speech  (TTS)  technology  into  voice
               messages that can then be accessed from a telephone.
     o    Intelligent call control  applications,  which automate  services
          that once required the intervention of an operator, including:
          o    Call  centers,  where a large  number of agents  process  inbound
               requests or outbound sales calls
          o    Help desk automation, which directs a call to the support staffer
               with the appropriate expertise
          o    Conferencing,  which  enables  more  than two  parties  to call a
               control  number,   with  active  or  passive  (i.e.,   listening)
               privileges
          o    Predictive/autodialing,   which  dials  out  to  lists  of  phone
               numbers,   screens  out  certain  calls  (e.g.,  no-answers)  and
               delivers live prospects to telemarketing agents
          o    Personal  communications  agents,  which screen and forward calls
               based on a user's itinerary and instructions
          o    PBX,  which  enables  connections  between  users both within the
               system and to parties outside the system
          o    Voice  dialing,  which  generates  a dial  sequence  based on the
               user's spoken input
     o    Voice  Processing  Applications,  which  use  speech  recognition  and
          Text-to-Speech
     o    Open  Communications  Servers,  which provide PC-based open switching,
          permitting  integration  of  call  switching  and  computer  telephony
          technologies

         Strategy

          The  first  computer  telephony  systems,  like  the  first  computing
systems,  were built using proprietary hardware and software.  Over the last few
years numerous computer telephony vendors have adopted open, or non-proprietary,
personal  computer  ("PC")  platforms and standard  operating  systems,  such as
Windows  NT,  Windows 95,  UNIX,  OS/2,  or DOS,  as elements of their  computer
telephony systems. This shift toward open platforms has been driven by the rapid
increase  in  performance  and power of  standard  microprocessors,  the general
availability  of  add-on  hardware  and  software  components,   growth  in  the
functionality of the PC and cost savings due to lower PC prices.

          The  Company's  strategy is to position  Dialogic to benefit  from the
growing acceptance of open call processing systems. The Company seeks to support
this strategy through the following approaches:

<PAGE>

     o    Advocate Open Systems.  The Company  believes that open  architectures
          provide many advantages to systems developers,  including (i) reducing
          the time  needed  to bring  new  products  to  market,  (ii)  reducing
          customers'   maintenance  and  continuing   engineering  costs,  (iii)
          providing  access  to  a  variety  of  technologies  from  third-party
          vendors,  (iv) enabling  customers to focus their efforts on marketing
          and end-user applications,  (v) protecting customers so that they will
          not be  dependent  upon  a  particular  technology  and  therefore  be
          precluded from accessing new technologies and (vi) enabling  customers
          and  end-users  to benefit  from the  economies  associated  with open
          architectures.  As  part  of its  commitment  to  open  architectures,
          Dialogic  designs  its  modular  components  to  satisfy   established
          industry standards. Its products work in a variety of PC platforms and
          form factors and support standard operating systems.  Furthermore,  to
          support its  international  sales  efforts,  the  Company  designs its
          products to meet international  telecommunications  standards.  At the
          same time,  Dialogic  advocates  the value to end-users of  requesting
          their  computer  telephony  vendors to provide open  systems,  thereby
          encouraging the "pull through" of open components.
     o    Develop Signal Computing  Technologies.  Dialogic believes that voice,
          image and data processing technologies are converging at a rapid rate.
          This  convergence  is  reflected  in the demand for unified  messaging
          systems in the  telecommunications  and computing  industries.  In the
          telecommunications  field, voice processing systems are being designed
          to integrate  voice, fax and e-mail  messages;  similarly,  within the
          computing industry, unified messaging may be addressed by servers that
          provide the client with access to voice, fax and e-mail  messages.  By
          focusing on signal computing  technologies,  such as the Company's DM3
          Mediastream   Architecture,   Dialogic  seeks  to  have  its  products
          incorporated in a wide variety of business computing applications that
          address one or more voice, image and data processing functions.  As PC
          platforms decline in price and continue to be widely deployed,  and as
          reliable,  user-friendly  multi-tasking  operating systems become more
          widely  accepted,  the Company  intends to provide its customers  with
          products  that  support  multi-application  uses and that benefit from
          this technological convergence. This statement regarding the Company's
          intent  constitutes a  Forward-Looking  Statement.  Actual results may
          differ  from  the  Company's  intentions  as a result  of a number  of
          factors,  including the extent to which the Company is able to respond
          to technological  developments and competitive responses.  See "--Risk
          Factors".
     o    Promote  Open  Communications  Servers:   Increasingly,   Dialogic  is
          focusing activities on enabling open communications  servers, based on
          a client/server  computing  model. The open  communications  server is
          analogous to the concept of a database server that is open to multiple
          suppliers  and  applications.   In  this  open,  client/server  model,
          telephony  becomes  a peer to  other  computing  resources.  The  open
          communications   server  can  support   traditional  and  IP  networks
          transparently,  and it can be  integrated  and  managed  with other IT
          services.   Software   interoperability   and  wider  application  and
          technology choices become key differentiating  features.  The elements
          of Dialogic's vision of an open communications server include:
          o    Interoperable applications and software tools
          o    Standards-based administration tools
          o    Choice of standard, open APIs (TAPI, S.100, CSTA)
          o    Standards-based   middleware   (CT   Media[TM]  for  Windows  NT,
               CT-Connect[TM] software)
          o    Choice of standard,  modular hardware  technologies  (voice, fax,
               Automatic  Speech   Recognition,   Text  To  Speech,   switching,
               conferencing;  T-1, E-1, ISDN, BRI, ATM interfaces;  based on the
               ECTF H.100/H.110 connection standard)
          o    Open,  standard  computing  platforms and operating systems (ISA,
               PCI, cPCI, VME; Windows NT, UNIX)
          o    Wide  range  of   technologies   delivered  on   standards-based,
               high-performance,  modular,  scalable  components  from different
               vendors
          o    Standard SPIs (based on the emerging ECTF S.300 specification)
          o    Standard  hardware  interfaces  and software  APIs that  simplify
               development and ensure  interoperability  and portability  across
               platforms
          o    Expandable  and scalable  servers  (from  2-port to  high-density
               multiport solutions)
          o    Servers that run on standard computing platforms
          o    Ease  in  adding  new  features  and   services   using   modular
               "off-the-shelf" components and applications

          These  statements  regarding  the  Company's  intent and the  eventual
elements  of  an  open   communications   server  constitute  a  Forward-Looking
Statement.  Actual results may differ from the Company's  intentions as a result
of a number of  factors,  including  the extent to which the  Company is able to
respond to technological developments and competitive responses; the development
of  industry  and de  facto  standards;  availability,  features  and  price  of
alternative  approaches and  marketplace  adoption of Dialogic's  approach.  See
"--Risk Factors" 

     o    Initiate and Promote Uniform  Standards.  Dialogic's  Signal Computing
          System Architecture  ("SCSA") reflects the Company's commitment to the
          expansion  of  existing  call  processing   technology   through  open
          architectures.  The goal of SCSA is to develop and gain broad domestic
          and  international  acceptance  for a variety  of  computer  telephony
          standards and  technologies.  The  essential  elements of SCSA are the
          development  of  (i)  software  standards  for  use  by  the  computer
          telephony industry, (ii) buses with increased bandwidth and capability
          to support  high  capacity  platforms,  (iii) a wide range of products
          available  from  multiple  vendors that enable  systems  developers to
          integrate voice, image and data technologies in order to build unified
          messaging  solutions and (iv) technologies that are designed to permit
          scalability  from  single  node  stand-alone   systems  to  multi-node
          distributed systems,  thereby allowing customers to expand from low to
          high capacity products with relative ease. SCSA  participants  include
          computer  suppliers,  component  manufacturers,   hardware  suppliers,
          algorithm and technology developers, call processing systems suppliers
          and leading telecommunications equipment manufacturers.  Substantially
          all  of  the  major  products  in  Dialogic's   current  product  line
          incorporate  one or more  aspects of SCSA.  In 1995,  Dialogic  joined
          Digital   Equipment    Corporation,    Ericsson   Business   Networks,
          Hewlett-Packard   and  Northern  Telecom  in  forming  the  Enterprise
          Computer  Telephony Forum ("ECTF").  The principal goal of the ECTF is
          to oversee the evolution of industry-wide standards implementation for
          computer  telephony.  Dialogic has  contributed  to ECTF its Telephone
          Application   Object  (TAO)  software   framework  to  assist  in  the
          development  of a series of open  interfaces.  In the Internet  field,
          Dialogic   has   been   active   in   the   International   Multimedia
          Teleconferencing Consortium, the European Telecommunications Standards
          Institute ("ETSI"),  the Internet  Engineering Task Force ("IETF") and
          the   International   Telecommunications   Union  ("ITU")   advocating
          standards for Internet  products that will enable  different  vendors'
          gateways and products to interoperate.  Dialogic's CT Media middleware
          product is an implementation of the ECTF S.100 standard. Dialogic also
          works with de facto  standards,  such as Microsoft's  TAPI  (Telephony
          Applications Programming Interface).
     o    Leverage  Technological  Expertise in Computer  Telephony.  Dialogic's
          core technical  competence is the  development  of computer  telephony
          technologies that are embedded in the Company's hardware, software and
          digital  signal  processing  algorithms.  Dialogic  believes  that its
          future  success  depends  upon its ability to  continually  expand its
          technical  capabilities and to provide technically advanced components
          that are responsive to technological  advances and changes in industry
          standards.  Dialogic  also has  increased  its  efforts in  developing
          professional  services as a business  unit drawing on this  expertise.
          Accordingly,  the  Company  spends,  and intends to continue to spend,
          substantial  amounts on research and  development.  Statements in this
          Annual  Report  regarding  future  research and  development  spending
          constitute Forward Looking Statements.  See "--Risk Factors".  Factors
          that  could  affect the level of  research  and  development  spending
          include market conditions, the nature of customer demand, competitors'
          product  announcements,  patent and/or license availability and claims
          and regulatory requirements.
     o    Provide Customers with a Broad Range of Products. Dialogic enables its
          systems  developer  customers  to develop  and offer a broad  range of
          applications  by providing its customers with building blocks that are
          designed to conform to widely accepted standards, much in the same way
          that the  standardization  of PC  platforms  has resulted in an entire
          industry of data processing software developers. The Company's modular
          approach also enables  systems  developers  and  integrators  to build
          progressively  larger systems with more  application  features without
          making significant changes in the underlying technologies.
     o    Develop Collaborative Customer  Relationships.  Dialogic believes that
          it is essential to maintain close communications with its customers in
          order to understand  their needs.  Through  contacts at both the field
          and management  levels,  the Company  reviews  application  design and
          hardware  configuration  issues and  application  objectives  with its
          customers.  Dialogic  seeks to serve as a problem solver in helping to
          construct new and enhanced call processing  systems.  The Company also
          seeks  to  educate  systems   developers  about  the  broad  range  of
          applications  that  may be  provided  through  use  of  the  Company's
          computer telephony components, in part by conducting seminars to train
          customers' engineers in the use and potential applications of Dialogic
          modules.
     o    Expand  International  Presence.  Dialogic  believes  that advances in
          voice, image and data processing  technologies,  growing international
          acceptance  of the  benefits  available  from these  technologies  and
          deregulation and  privatization  of  international  telecommunications
          networks  will  drive  increased   acceptance  of  computer  telephony
          technology  in  international  markets.  Dialogic  also  believes that
          certain  voice  processing  markets  are less mature than those in the
          United  States  and  offer  more  opportunities  for both  traditional
          products, like voice mail, and for leapfrogging technology, like voice
          over Internet.  See "--Risk  Factors." No assurances can be given with
          respect  to the pace of  deregulation  and  privatization,  which  may
          differ  significantly from country to country,  or the degree to which
          deregulation  and  privatization  may  result  in demand  for  Company
          products.  The Company's  familiarity  with  international  regulatory
          requirements has enabled it to gain approvals for its products in many
          international   markets,   thus   providing  its  customers  with  the
          opportunity  to reduce the time  necessary  to market  their  products
          internationally.
     o    Complement Internal Growth with Strategic Alliances,  Acquisitions and
          Investments.  Dialogic believes that opportunities exist to extend and
          enhance its current  lines of business and  distribution  capabilities
          through  investments in or  acquisitions of businesses in the computer
          telephony industry and related fields and through alliances with other
          entities. Management intends to analyze such opportunities that become
          available to the Company and to consider pursuing those  opportunities
          that complement or supplement its business strategies.

          Dialogic's  presentation above of its business strategies reflects the
Company's  planning  for the future and thus may  constitute  a  Forward-Looking
Statement.  No assurance can be given as to whether or as to the extent that the
Company will be  successful in the pursuit of its business  strategies.  Factors
which could impact the Company's ability to pursue such strategies are set forth
below under "--Risk Factors".

     Products

          Dialogic   operates  and  manages  its  business  under  one  segment,
"Computer  Telephony." "Computer Telephony" is the term used to encompass a wide
variety of technologies  and  applications  that use the information  processing
capabilities of a computer (often a server) to add intelligence functions and to
combine  those  functions  with data  processing.  Management  has  reached  the
conclusion that the Company operates as one segment after  considering a variety
of factors including the nature of products sold,  production process,  customer
base and distribution methods and determining that they are similar entity wide.
The Company primarily derives its revenue from the sale of telephony boards that
are offered as modular  building  blocks  that enable its  customers - primarily
VARs, OEMs, system integrators,  service providers and application  developers -
to design computer telephony systems that meet the application  demands of their
end-user customers. Individual products are described below.

o    Dialogic Media and Network Interface Products
     o    IP Telephony Products - DM3[TM] IPLink[TM] Platform products are a set
          of medium- to high-port  density  boards which are designed to provide
          voice and fax capability over Internet  Protocol (IP) networks.  These
          products are used in IP telephony  gateways,  corporate  WAN telephony
          traffic,  and  Web-enabled  call  centers.  IPLink  Platform  products
          feature an on-board H.323 stack,  multiple vocoding algorithm support,
          comprehensive   H.323  client  support,   standard  Internet  protocol
          support, and advanced voice and call processing features.
     o    High-Density  Voice  Products - These board  products are designed for
          public  network-based  enhanced  services,  call  centers,  and  other
          demanding  high-volume  voice  applications  in  the  enterprise.  The
          QuadSpan[TM] Series, based on Dialogic's

<PAGE>

          DM3  mediastream  architecture,  features  four  on-board  T-1  or E-1
          digital  network  interfaces for up to 120 voice ports  available in a
          single PC slot. The  SingleSpan[TM]  and  DualSpan[TM]  Series provide
          different   voice-port-per-slot   densities  for   optimizing   system
          configurations.  Dialogic  high-density  voice products feature analog
          loop start or digital  network  interfaces  and  SCbus[TM]/CT  Bus[TM]
          (ECTF H.100/H.110) connectivity.  They are available in ISA, PCI, VME,
          and cPCI form factors.
          Dialogic voice products are based on Dialogic's  SpringWare[TM]  voice
          algorithms,  which  include  PerfectVoice[TM]  enhanced  voice coding,
          PerfectDigit[TM]  DTMF and MF  signaling,  Global Tone  Detection[TM],
          Global Tone  Generation[TM],  PerfectCall[TM]  call progress analysis,
          PerfectPitch[TM]  speed  control,   PerfectLevel[TM]  volume  control,
          Global Dial Pulse  Detection[TM],  Positive Voice  Detection[TM],  and
          Positive Answering Machine Detection[TM].
     o    High-Density  Fax  Products - Dialogic's  DM3 Fax Series  products are
          facsimile  boards that  provide 24 or 30 send and receive fax ports of
          processing   power,   various   messaging   alternatives,   14.4  Kb/s
          transmission and reception rates, and T.30 connectivity,  based on DM3
          architecture.  Dialogic  high-density  fax  products  feature  digital
          network interfaces,  SCbus/CT Bus connectivity, and ISA, PCI, VME, and
          cPCI form factors.
     o    Low-Density  Voice  Products - A series of  Dialogic  voice  messaging
          products  like  the  DIALOG/4[TM],   ProLine/2V[TM],   D/21H[TM],  and
          D/41H[TM]  provide  boards  with  2- or  4-ports  of  voice  for  less
          demanding  applications.  The D/42[TM]  Series allows  integration  of
          voice messaging features with popular PBXs. Starter Kits are available
          for  beginning  CT  developers.  All  low-density  voice  products use
          SpringWare voice processing features.
     o    Low-Density  Fax  Products  -  Dialogic  CP  fax  products,  like  the
          CPi/200[TM],  CPD/220[TM] and CP4/LSI[TM],  are boards which provide a
          wide range of densities, form factors and network interfaces.
     o    Enhanced  Speech  Technology   Products  -  Dialogic  platform  speech
          technology    components   support   automatic   speech   recognition,
          text-to-speech,  speech compression, and voice verification from third
          party providers. The Antares Open Platform is a general purpose signal
          processing platform which connects to other call processing  platforms
          over a digital bus.  Various  third-parties  have  developed  enhanced
          software  for the Antares  platform.  Speech  recognition  capability,
          provided  by  companies  such as  Voice  Control  Systems,  Lernout  &
          Hauspie,  PureSpeech,   Telefonica,  CSELT  and  France  Telecom/CNET,
          enables call  processing  applications  to interpret words spoken by a
          telephone  caller.  Enhanced  capabilities  include  continuous speech
          recognition,    alphabet   recognition   and   speaker   verification.
          Text-to-speech software has been developed for the Antares platform by
          Lernout & Hauspie,  Centigram,  Telefonica  and CSELT.  These products
          convert ASCII text to  synthesized  speech,  enabling call  processing
          applications to play back selected information files.
     o    Professional  Conferencing  Products -  Dialogic's  DCB/SC[TM]  Series
          boards provide  capabilities  for high-end  professional  conferencing
          requiring  multiple  conference  support,  large  numbers of conferees
          (over 100),  and  sophisticated  features like active  talker  status,
          on-board DTMF  detection/clamping,  coaching,  and  individual  volume
          control. Less demanding business conferencing applications can use the
          MSI/SC[TM] Series for connecting analog devices to digital networks.
     o    Network Interface  Products - Dialogic has network interface  products
          supporting a variety of protocols,  including  SS7, ATM, BRI ISDN, PRI
          ISDN, analog loop start,  T-1/E-1 digital, and Internet protocol (IP).
          Some products are network  interface-only boards that can be connected
          via the SCbus/CT Bus with compatible  products.  Others are integrated
          with Dialogic media  firmware to create  combination  products  (media
          with interface  products) that have SCbus/CT Bus  connectivity  or are
          standalone (nonbus) products.

o    Dialogic Subsystem Products
     o    VoiceBrick[TM]  - An  integrated  voice  mail  platform  for the small
          office, the VoiceBrick  platform is an open,  self-contained unit with
          2- or 4-port voice,  flash memory,  a built-in  real-time clock, and a
          watch dog timer for automatic recovery from application crashes.
     o    DVM[TM] Series - Dialogic Voice  Modules[TM]  are integrated  hardware
          platforms  combining Dialogic  SpringWare voice processing  technology
          and a low-profile PC system, designed for volume OEM customers.
     o    Dialogic Software Products
          Historically,  revenue from the sale of standalone  software  products
          has not been material to the overall revenue of the Company.  Software
          products are described below.
     o    CT Media for Windows NT - CT Media  middleware  handles the details of
          resource  management and allows  applications to  interoperate  and be
          independent  of the  underlying  hardware.  CT Media  for  Windows  NT
          middleware  provides a key component for building open  communications
          servers.  Based on the SCSA Software Model, CT Media middleware allows
          application  developers to write  software to standard APIs (like TAPI
          or ECTF S.100) that can run on a common  server.  CT Media  middleware
          handles the details of resource  management  including managing system
          resources,  grouping and  providing  resources  to handle  application
          tasks,  and  transferring  calls and resources  among multiple  client
          applications,  and  allows  applications  to  interoperate  and  to be
          independent of the underlying  hardware.  CT Media middleware provides
          an open  client/server  approach for computer telephony server design.
          With CT Media middleware, systems developers can run multiple vendors'
          applications  such as  telephony  switching,  call center  automation,
          voice  mail,  and  fax  on  demand  on the  same  Windows  NT  server.
          Developers  can  also  add  new  technologies  to the  server  without
          changing existing applications.
     o    CT-Connect Call Control Server Software - CT-Connect software connects
          telephone  switches  to a  variety  of data  processing  environments.
          CT-Connect      client/server     software     technology     supports
          industry-standard  hardware,  operating systems, network services, and
          call control programming  interfaces such as TAPI, TSAPI, ActiveX, and
          DDE.  The  software  runs  under  either  Microsoft  Windows NT or Sun
          Solaris operating system environments and supports  comprehensive call
          control  and  monitoring  through  links  to  many  popular  telephone
          switches.
     o    BoardWatch[TM] - This client/server SNMP software monitors and reports
          on the status of  Dialogic  devices  installed  in a CT  system.  With
          BoardWatch  remote  administration  capabilities,   technical  support
          departments  can directly view the board model,  driver,  and firmware
          versions,  as well as other  important  configuration  and performance
          information about the machines and boards, without assistance from the
          remote  user.  BoardWatch  can  help  reduce  the cost of  owning  and
          maintaining sophisticated systems.
     o    Development Tools -PBXpert[TM]  software helps developers  integrate a
          legacy  PBX  with a voice  processing  system.  DialView[TM]  software
          enables an ISDN PRI link  between two Dialogic  systems so  developers
          can test and develop  ISDN  applications  without  using an  expensive
          protocol  emulator.  Dialogic works with many third parties to provide
          software toolkits which simplify application development. Toolkits are
          available in each of the supported operating systems.

Technologies Supported by Dialogic Products

          Dialogic's   platforms  support  a  variety  of  technologies,   whose
functionality in finished products is largely driven by application software and
middleware  supplied by the Company's customers and other  third-parties.  These
technologies include:

               o    Voice. Voice technology involves processing and manipulating
                    audio  signals  in  a  computer   telephony  system.   Voice
                    technology    functions   include   filtering,    analyzing,
                    recording, digitizing,  compressing,  storing, expanding and
                    replaying  such signals,  as well as receiving,  recognizing
                    and  generating  specific  telephone and network  tones.  In
                    addition,   this  technology   includes   multiparty   voice
                    conferencing.
               o    Network Interfaces. A call coming from the telephone network
                    to a computer  telephony  system can be carried on a variety
                    of lines, from analog loop start to digital, T-1 and E-1 and
                    primary rate  integrated  services  digital  network  (ISDN)
                    lines. These calls can be routed to analog and digital basic
                    rate  interface   (BRI)  station  devices  for  call  center
                    applications. Dialogic manufactures and sells platforms that
                    are  compatible  with  various  popular  network  interfaces
                    utilized  throughout the world. 
               o    Facsimile.  Fax  technology  transmits a copy of paper-based
                    documents  and images over  telephone  lines.  In a PC-based
                    system,   fax  technology  can  also  transmit  and  receive
                    computer-generated  files.  o Automatic  Speech  Recognition
                    ("ASR").  ASR is an algorithm that recognizes  human speech.
                    Speaker-independent  ASR can  recognize  a limited  group of
                    words and numbers from any caller. Speaker-dependent ASR can
                    identify  a large  vocabulary  of  commands  from a specific
                    speaker.
               o    Text-to-Speech  ("TTS").  TTS is an algorithm that generates
                    intelligible,  synthetic speech from text stored in computer
                    files,  designed to provide access to information that would
                    be too  expensive  or  impractical  to  record  using  voice
                    technology.
               o    Switching.  Switching  involves  routing,  transferring  and
                    connecting voice signals between multiple chassis.

Research and Product Development

          The  Company  believes  that the timely  enhancement  of its  existing
products and development of new products is critical to maintain its competitive
position.   The  Company's   ongoing  product   development  goals  include  the
enhancement (in terms of performance and cost  efficiency) of current  products,
the  adaptation  of  third-party  technologies  to  Dialogic's  products and the
development of new product options and features.  Dialogic's product development
teams work closely with customers in an effort to define necessary  improvements
and  enhancements and to analyze  potential new products.  Recent major research
and  development  projects which have been announced  include the development of
the  DM3  Mediastream  Resource  architecture,  major  initiatives  in  internet
telephony and facsimile and the  development  of CT Media  middleware.  Dialogic
also uses United States and offshore contract research and development.

          No  assurance  can be given  that any of the  Company's  research  and
development  projects  will result in market  accepted  products  or  profitable
ventures.  Like any announcement in the computer telephony  industry,  each such
initiative  is  subject  to a variety  of risks,  including  the  length of time
required  for  Dialogic  to bring  products to market,  unanticipated  technical
problems,   patent  barriers,   competitive   responses,   customer  acceptance,
development  or  manufacturing  difficulties,  the  availability  of  regulatory
approvals, and general market conditions. See "--Products" above.

          Dialogic's  research and development  staff included 517 persons as of
December  31,  1998.  For the years  ended  December  31,  1996,  1997 and 1998,
research and development expenses amounted to $40.7 million,  $51.5 million, and
$ 65.4  million  respectively,  representing  19% of revenues in 1996,  19.7% of
revenues in 1997 and 22.3 % of revenues in 1998.

International Business

          Dialogic's   international   market   opportunities   are  defined  in
significant part by the nature of the telephone networks in particular countries
(which  affect  the types of  network  interfaces  that can be  utilized)  and a
variety of regulatory  issues.  Regulatory  issues affect  Dialogic  products in
several  ways.  First,  there are issues that relate to  approvals  for Dialogic
products.  These issues center around the homologation (or approval) process and
service offering  regulations that affect the ability of the Company's customers
to sell their products in particular countries. In certain countries,  approvals
can be granted at the component level. Such approvals are not dependent upon the
particular PC or application  being utilized.  Accordingly,  once such approvals
are obtained,  specific  products can be utilized by customers in the applicable
country without further interaction with regulatory  officials.  Other countries
require  platform or system level approvals.  As of December 31, 1998,  Dialogic
products had received  approvals  or are  contained in systems  approved in more
than 60 countries throughout the world. The Company believes that its success in
obtaining   component,   platform  or  system  level  approvals   constitutes  a
significant  competitive advantage, in that it permits Dialogic's products to be
sold in the applicable  countries  while the products of competitors  which have
not  successfully  completed  the  approval  process  cannot  be sold  in  those
countries.  A second set of issues  indirectly  affect Dialogic by affecting its
customers'  markets.  For example,  the regulatory  environment  for competitive
carriers,  private  networking,  international  call back or voice over internet
services  will directly  affect  customers'  ability to sell their  products and
therefore Dialogic product sales.

<PAGE>

          In 1996, 1997 and 1998,  international  sales (excluding  exports from
North America)  accounted for approximately 20%, 21% and 24%,  respectively,  of
the Company's  revenues.  See Note 9 of the Notes to the Company's  Consolidated
Financial Statements incorporated by reference herein.

          The Company conducts its  international  operations  primarily through
foreign subsidiaries.  Efforts are made to match product capabilities offered in
particular countries with local product needs, networks and infrastructures.  In
addition to sales and sales  support  activities,  Dialogic's  foreign  presence
includes headquarters  operations in Brussels,  Singapore and Tokyo and research
and development activities in the United Kingdom, Israel, and New Zealand.

          International  sales are subject to inherent risks,  including changes
in regulatory and standards  requirements,  exchange rates, economic conditions,
tariffs and other  barriers,  difficulties  in  staffing  and  managing  foreign
subsidiary   operations,   political   instability,   potentially   adverse  tax
consequences  and specialized  inventory  requirements  applicable to particular
foreign countries. There can be no assurance that these factors will not have an
adverse impact on the Company's future international sales or operating results.
As the  Company  expands  its  international  operations,  exposure to gains and
losses on international  currency  transactions may increase.  Dialogic does not
currently engage in international  currency hedging transactions.  A substantial
percentage (but not all) of the Company's  international  sales have been billed
and collected in U.S. dollars.

Sales, Marketing, Customers and Customer Support

          Dialogic  markets  its  products  primarily  to  VARs,  OEMs,  systems
integrators,  service  providers  and  applications  developers.  In the  United
States,  Dialogic  sells to these  customers  through  its own  sales  force and
distributors,   as  well  as  through  telemarketing  and  advertising  efforts.
Internationally,  the Company  utilizes its own sales force and  selected  sales
representatives  and agents. As of December 31, 1998, the Company had 175 direct
sales  employees.  Increased  reliance  has been placed on  distributors,  sales
representatives  and sales agents in recent  periods.  Such reliance may subject
the Company to the uncertainties that affect the businesses of these independent
third-parties.

          Dialogic's  United  States sales  personnel are based in various field
sales offices,  including  offices in Arizona,  California,  Georgia,  Illinois,
Massachusetts,  New Jersey, Texas and Washington. These offices are staffed with
individuals that have sales and/or customer support  backgrounds.  The Company's
international sales offices include locations in Argentina,  Australia, Belgium,
Brazil,  Canada,  China, France,  Germany,  Hong Kong, India,  Ireland,  Israel,
Italy,  Japan,  Korea,  New Zealand,  Singapore  and the United  Kingdom.  These
international   offices  also  provide   technical   support  to  the  Company's
international  customer  base and,  in certain  instances,  perform  development
activities.

          The Company's marketing  activities include  participation in industry
trade shows and seminars,  advertising  in selected trade  publications,  public

<PAGE>

relations activities with the trade and business press, publication of technical
articles and  distribution of sales literature and product  specifications.  The
Company's Internet website, http://www.dialogic.com,  has become an increasingly
important vehicle for Dialogic's marketing and customer support functions. As of
December 31, 1998, the Company's marketing group consisted of 65 employees.

          The Company sold products to more than 2,800 customers  during 1998. A
total of 65 of  these  customers  represented  approximately  50% of  Dialogic's
revenues, and no customer accounted for 5% or more of revenues in 1998.

          The Company  believes  that  customer  service and support have been a
significant  factor in distinguishing  the Company from other computer telephony
component  manufacturers.  Given the need to blend  signal  computing  component
technology with applications  software, it is important for Dialogic to maintain
close communication with its customers.  This communication  enables Dialogic to
educate  existing and potential  customers with respect to the  functionality of
the Company's  product line and new product  offerings  and enables  Dialogic to
assess and understand the needs of its customers.

          The Company's technical  developments are communicated to customers by
its sales  engineering  group,  its field  applications  engineering  group, its
technical  support  group,  its design group and its  website.  The Company also
furnishes its customers with documentation  that provides  performance and other
data regarding complex systems configurations and alerts customers to the market
opportunities  available through utilization of Dialogic's products. The Company
has begun sponsoring an annual Technology Summit for key customers and partners.
The 1998 event, in Fort Lauderdale, Florida, was attended by over 500 people and
was  cosponsored  by Alcatel,  Compaq,  Ericsson,  IBM,  Microsoft,  SCO and Sun
Microsystems. A similar event for customers in the Pacific Rim was held in Bali,
and a series of smaller events were held throughout Europe.

Competition

          The computer telephony industry is highly competitive.  Moreover,  the
Company believes that competition is likely to intensify in the future. Dialogic
believes that its principal  competitors  are (i) companies  that  specialize in
particular  computer  telephony  functions,  (ii) companies that provide a broad
range of computer  telephony  products and (iii)  companies,  many of which have
substantially  greater  resources than Dialogic,  which have chosen to, or which
may choose to, produce computer telephony components in-house. Within the second
group,  Dialogic's  principal  competitors include Brooktrout  Technology,  Inc.
(which recently purchased  Lucent's Computer  Telephony  Products Division,  the
former  Rhetorex  Corp.),  Bicom,  Inc.,  Aculab  plc,  Pika Corp.  and  Natural
Microsystems, Inc. In the future, the Company may also face competition from new
market entrants,  including those with substantially  greater resources and name
recognition than Dialogic and industry  companies in the third group which elect
to supply not only their own needs but to enter the merchant market.

          New  and  enhanced   products  can  be  expected  from  the  Company's
competitors in the future.  The  competitive  factors in the computer  telephony

<PAGE>

components industry include the time required to produce a market-ready product,
engineering  expertise,  product quality,  reliability and  performance,  price,
brand name  awareness,  customer  support and service and access to distribution
channels.  The Company  believes that it competes or may compete on the basis of
the breadth and quality of its product line,  its customer  service and support,
its technical capabilities, its name recognition and price.

          While  the  Company  believes  that its  commitment  to open  computer
telephony  architectures  positions  Dialogic as a "technology  enabler" for the
computer   telephony   industry,   this  commitment  may  reduce  the  technical
constraints  that otherwise  would limit the entry of additional  competitors to
the  market  and may  commoditize  Dialogic's  market.  The  Company  also faces
commoditization risks from software and subsystem vendors.

     Proprietary Rights

          The Company holds patents  covering  certain aspects of its technology
and has applied for additional patent  protection.  While Dialogic believes that
its technology provides it with certain competitive advantages,  there can be no
assurance  that the Company's  competitors  will not be able to develop  similar
technology.  Dialogic  currently  licenses certain technology from third parties
and  plans  to  continue  to  do so in  the  future  as  warranted  by  business
conditions. This statement regarding future licensing arrangements constitutes a
Forward-Looking  Statement. See "--Risk Factors." There can be no assurance that
in the  future  the  Company  will be able to obtain  licenses  of  intellectual
property  rights owned by third parties or that such licenses can be obtained on
terms  favorable to the Company.  If the Company is unable to obtain licenses of
protected  technology,  it could be prohibited from  manufacturing and marketing
products incorporating that technology. Factors which could affect the Company's
ability to  maintain  such  licensing  arrangements  in the future  include  the
strength  of  third-parties'   patent  protections,   the  willingness  of  such
third-parties to contract with Dialogic,  the availability of competing products
and  technologies,   the  cost  of  creating  alternative  solutions  and  other
competitors' responses.

          Dialogic  has  received  from  time to time,  and may  receive  in the
future, communications from third parties asserting intellectual property rights
relating to certain of the Company's products and technologies. To date, most of
these  claims have been based on  application-oriented  patents that the Company
would not directly infringe. However,  application-oriented  patents may be used
by the holder to restrict the types of markets in which  Dialogic or  Dialogic's
customers are able to compete.  Application-oriented patents may also be used to
induce  customers  and  potential   customers  to  purchase  computer  telephony
components from  competitors of the Company that are affiliated with the holders
of such patents.

          The   Company   has   received   certain   claims   from   holders  of
application-oriented  patents  asserting that Dialogic,  as opposed to customers
using the  Company's  components  to build  applications,  may violate  existing
patent  rights.  There can be no  assurance  that in the future,  other  similar
claims will not be made  against  Dialogic.  Further,  there can be no assurance
that the Company will be able to resolve such claims,  either by convincing  the
claimants that the Company's  technology is non-infringing,  obtaining a license
on terms  favorable to the Company,  redesigning  its products or defending  any

<PAGE>

legal  action  taken  against  it. The costs that may be incurred by Dialogic in
pursuing any such response  could have a material  adverse effect upon Dialogic.
Should the Company or its customers be found to infringe the proprietary  rights
of others,  the  Company  could be required  to pay  substantial  damages to the
infringed  party,  which in turn  could  have a  material  adverse  effect  upon
Dialogic.

          From  time to time,  the  Company  considers  steps  to be taken  with
respect  to  outstanding  patents  prior to any claim  being  made by the patent
holder  against  Dialogic or its customers.  Such steps may include  obtaining a
license or joining or  sponsoring  litigation  to  challenge  the validity of an
outstanding patent. No assurances can be given that the commencement of any such
litigation  will not result in  counterclaims  being made directly or indirectly
against the Company.

          For information  regarding legal  proceedings  involving  Dialogic and
Brooktrout Technology, Inc., see "Legal Proceedings".

     Manufacturing

          The Company utilizes  contract  manufacturing for substantially all of
its manufacturing processes, thereby allowing Dialogic to focus resources on its
product development and customer support efforts. During 1998, Dialogic moved an
increasing  percentage of its manufacturing to a turnkey contract  manufacturer,
Jabil Circuit, Inc. The Company also employs other suppliers.  The activities of
these  suppliers are  coordinated  by Dialogic's  manufacturing  personnel.  The
Company's  internal   manufacturing-related   operations  consist  primarily  of
production of prototypes, test engineering, materials purchasing and inspection,
final product configuration and testing, quality control and service repair.

          At present,  Dialogic does not have a long-term  supply  contract with
any of its  manufacturing  subcontractors,  turnkey  manufacturer  or  component
suppliers.  Certain  key  components  incorporated  in  the  Company's  products
(including the digital signal  processors  used  throughout  Dialogic's  product
lines) are supplied by only one source,  and others are  available  from limited
sources.  To date,  Dialogic  has been able to obtain  supplies of products  and
components in a timely manner, in part because Dialogic's  principal sole source
products  are  acquired  from   well-established   vendors  with   long-standing
relationships with Dialogic.  However,  in the event that any of its sole source
suppliers  or  contract  manufacturers  were  unable or  unwilling  to  perform,
Dialogic's results of operations could be materially  affected until the Company
establishes  alternative  sources.  The Company owns all of the  engineering and
sourcing  documentation  and functional test equipment used in the manufacturing
of its principal  products and believes that it could shift product  assembly to
alternate suppliers or in-house if it experienced difficulties with its contract
manufacturers. This statement regarding the availability of alternate approaches
to contract manufacturing may constitute a Forward Looking Statement.

          The Company could be materially adversely affected by several factors,
including  the  demands  imposed  upon,  and the  sophistication  of,  alternate
suppliers, the lead time available to such suppliers, unanticipated difficulties
in transferring  production and market  acceptance of the products made by means

<PAGE>

of  such  alternate  approaches.   Accordingly,   actual  results  could  differ
materially from the Company's expectations. See "-- Risk Factors."

         Subsequent Events

          On March 2, 1999, the Company and Microsoft Corporation  ("Microsoft")
announced  that  they  have  entered  into  a  strategic  alliance  relating  to
Dialogic's  CT  server  initiative  and  Dialogic's  CT  Media  for  Windows  NT
middleware product.

          Under the terms of a license and development agreement, Microsoft will
become a nonexclusive  licensee of Dialogic's CT Media for Windows NT middleware
product. Dialogic will enter into development activities for Microsoft to create
specific  applications  in the telephony  space which will be owned by Microsoft
and to provide other  support and  development  services.  Under the license and
development agreement, Microsoft's payments to Dialogic over the next four years
are expected to be $20 million for the initial licenses for CT Media for Windows
NT, the development  services and certain  support.  Microsoft and Dialogic have
agreed to work  jointly to assure a single  code base for CT Media in the future
and Dialogic will continue to own CT Media.  Microsoft's  license to CT Media is
subject to certain  contractual  limitations,  and Dialogic will continue to own
and remains free to license CT Media.

          In a separate  transaction,  also occurring  March 2, 1999,  Microsoft
agreed,  for an aggregate  purchase price of $24.2 million,  to acquire  860,681
newly issued shares of Dialogic common stock and a warrant  entitling  Microsoft
to purchase  279,869 shares of Dialogic common stock.  The warrant has a term of
four years and is  exercisable  at a price of $35.19 per share.  Both the issued
shares and the shares  resulting from the exercise of the warrant are subject to
a lockup period beginning on the transaction  date. During the first year of the
lockup period,  Microsoft may sell none of the shares,  and may only sell 50% of
the shares in the second year of the lockup period. Thereafter all shares may be
freely  sold.  On March 2, 1999,  Dialogic  issued  the  shares  and  warrant to
Microsoft.

Risk Factors

          This Annual  Report  contains,  and  Dialogic  may make in the future,
certain  Forward-Looking  Statements.  Such  statements are subject to risks and
uncertainties  that could cause actual results to differ  materially  from those
projected in such Forward-Looking Statements. Risks and uncertainties applicable
to Dialogic include the following:

          Risks  Relating  to  Technological  Developments.  The  market for the
Company's products is characterized by rapid technological advances,  changes in
customer  requirements and frequent new product  introductions and enhancements.
Dialogic's  future  success  will  depend  upon its  ability to (i)  enhance its
current  products,  (ii) achieve the objectives of its DM3 Mediastream  Resource
Architecture, (iii) develop and introduce new products that keep pace with rapid
technological  developments and evolving industry and regulatory standards, (iv)

<PAGE>

respond to changes in customer  requirements and (v) achieve market  acceptance,
including  a  perception  that  the open  switch  model  and CT Media  represent
industry standard platforms to which developers should work. In particular,  the
Company  believes  it must  continue  to respond to  customers'  needs for broad
functionality  and multiple  platform  support.  There can be no assurance  that
Dialogic will be successful in developing  and marketing new products or product
enhancements  on a  timely  basis  or  that  the  Company  will  not  experience
significant delays in the introduction of new products.  In addition,  there can
be no  assurance  that new  products or product  enhancements  developed  by the
Company will achieve market acceptance. An additional technology risk may result
from  companies  in adjacent  fields  integrating  CT  functionality  into their
products,  making it more difficult for the Company to compete, or commoditizing
its products.  Among other risks are system companies taking increasing portions
of manufacture of product in house or DSP or software  manufacturers  increasing
the functionality of their products,  thereby commoditizing Dialogic products or
eliminating the needs for functionality.  Moreover, while the dramatic growth of
the Internet and Internet based technologies may provide new opportunities, they
are disruptive  technologies which may also negatively affect Dialogic customers
and the market for Dialogic technologies.

          Year 2000.  The Year 2000 issue is  primarily  the result of  computer
programs or databases using a two-digit  format,  as opposed to four digits,  to
represent a calendar  year.  Some  computer  systems will be unable to correctly
interpret  dates  beyond the year 1999,  which could  cause a system  failure or
other computer  errors,  leading to a disruption in the operation or accuracy of
such  systems.  The  Company has  undertaken  a  company-wide  study and testing
program to locate and cure any Year 2000  issues in the  products  or systems on
which it relies and in the  products it offers for sale or license.  The Company
believes  its  internal   systems,   including  both  its  financial   operating
(information technology) systems and non-information technology systems are Year
2000 compliant.  The Company's financial operating systems have been upgraded to
a Year 2000  compliant  release  within  the  context  of its  normal  operating
environment.  Such  upgrade was not  accelerated  in  anticipation  of Year 2000
issues.  No material  additional  costs were incurred in upgrading the Company's
internal systems. This phase of the Company's Year 2000 study is completed.  The
Company has been and  anticipates  continuing  to work  jointly  with  strategic
vendors and  business  partners to identify any Year 2000 issues that may impact
the Company.  The Company anticipates that evaluation and corrective actions, if
any, will be on going  throughout  1999. To date the Company has not  identified
any such  problems  requiring  corrective  action that will result in a material
adverse  impact on the  Company.  However,  there can be no  assurance  that the
companies with which the Company does business will achieve Year 2000 compliance
in a timely fashion,  or that such failure to comply by another company will not
have a material adverse effect on the Company. The Company believes the products
it currently  offers for sale or license are all Year 2000  compliant,  and that
the  cost to  remediate  any  previously  sold  product  that is not  Year  2000
compliant will be insignificant.

          The Company has and will incur  internal  staff costs  related to this
aspect of its initiative.  The Company maintains a web site and has responded to
many inquiries from  customers  regarding Year 2000  compliance of its products.
These  costs are not  considered  to have a  material  impact  on the  Company's
operating results and have not been quantified.

          Based on the  assessment  effort to date, the Company does not believe
that the Year 2000 issue will have a material  adverse  effect on its  financial

<PAGE>

condition,   results  of   operations,   or  cash  flows.   This   represents  a
forward-looking  statement under the Private Securities Litigation Reform Act of
1995.  Actual  results could differ  materially  from the  Company's  belief and
expectations  which,  are based on certain  assumptions  and  expectations  that
ultimately may prove to be inaccurate. Potential sources of risk include (a) the
inability  of principal  suppliers to be Year 2000 ready,  which could result in
delays  in  product  deliveries  from  such  suppliers;  (b)  disruption  of the
distribution channel,  including  transportation  vendors; (c) customer problems
which could affect revenue demand;  and (d) undiscovered  issues related to Year
2000  compatibility  which could have a material  adverse impact.  The Company's
Year 2000 assessment is ongoing and the  consideration of contingency plans will
continue to be evaluated as new information  becomes  available.  At this stage,
however,  the Company  has not  developed a  comprehensive  contingency  plan to
address  situations  that may result if any of the third  parties upon which the
Company is  dependent is unable to achieve  Year 2000  compliance.  The need for
such a contingency plan will be evaluated throughout 1999.

          Competition.  The computer telephony  industry is highly  competitive.
Moreover,  the Company  believes that  competition is likely to intensify in the
future. In addition,  as the Company tries to expand its addressable markets, it
directly faces new larger competitors such as telephony equipment  manufacturers
with far greater resources For information  regarding such competition,  see "--
Competition". No assurance can be given that the Company will be able to compete
successfully  in the  future  or that  price  competition  will not  affect  the
Company's consolidated results of operations and financial condition.

          Fluctuations  in Quarterly  Operating  Results.  The  Company's  total
revenues  may vary  significantly  from  quarter to quarter  due to a variety of
factors,  including  the  timing  of  customer  orders,  changes  in  Dialogic's
products,  geographic and customer mix, the  introduction of new products by the
Company  or  its  competitors,   pricing  pressures,   regulatory  developments,
unanticipated  development and/or  manufacturing  difficulties or expenses,  and
worldwide or regional economic  conditions.  The Company typically operates with
relatively  little backlog and substantially all of its revenues in each quarter
ordinarily result from orders received in that quarter. In addition, the Company
often  incurs   significant   development,   sales  and  marketing  expenses  in
anticipation  of future  revenues.  A shortfall in revenues or earnings from the
levels  anticipated by analysts could have an adverse impact on the market price
of Dialogic's Common Stock.

          Uncertainties   Relating  to  Proprietary   Matters.  For  information
regarding  risks  relating  to the  availability  of licenses to the Company and
relating to potential intellectual property and related claims by third parties,
see "-- Proprietary Rights."

          Dependence  on Sales by Third  Parties.  The  Company's  revenues  are
dependent  upon the  ability of its OEM and VAR  customers  to develop  and sell
computer  telephony  systems that  incorporate  Dialogic's  modular  components.
Factors, including worldwide economic conditions,  patent positions,  regulatory
requirements  and  other  marketing  restrictions,  that  adversely  affect  the
revenues of Dialogic's OEM and VAR customers can have an adverse impact upon the
Company's  financial results. No assurances can be given that Dialogic's OEM and

<PAGE>

VAR customers  will not  experience  financial or other  difficulties  that will
materially and adversely  affect their purchases from Dialogic and, in turn, the
results of operations and financial condition of the Company.

          Risks   Associated  with   International   Operations.   International
operations  are subject to certain  risks,  including  changes in regulatory and
standards  requirements,  exchange  rates,  worldwide and regional  economic and
political conditions,  tariffs and other barriers,  difficulties in staffing and
managing foreign subsidiary operations, potentially adverse tax consequences and
specialized inventory  requirements  applicable to particular foreign countries.
There can be no assurance  that these factors will not have an adverse impact on
the Company's future  international  sales or operating  results.  A substantial
percentage (but not all) of the Company's  international  sales have been billed
and  collected  in  U.S.  dollars.  As  the  Company  continues  to  expand  its
international  operations,  exposures  to  gains  and  losses  on  international
currency  transactions  may  increase.  Dialogic  does not  currently  engage in
international  currency hedging  transactions.  The Company is unable to predict
with accuracy the impact on Dialogic of recent Asian economic problems.

          Dependence on  Third-Party  Suppliers.  The Company  contracts a large
percentage of its manufacturing to a turnkey  manufacturer,  Jabil Circuit, Inc.
Dialogic  also  employs  other  domestic  manufacturing  subcontractors  in  the
manufacture of its remaining production.  Certain key components incorporated in
the Company's  products  (including the DSPs used throughout  Dialogic's product
lines) are supplied by only one source,  and others are  available  from limited
sources.  The  Company  does not have a  long-term  agreement  with any of these
suppliers  of services or  components.  The Company is currently  negotiating  a
written  agreement  with  Jabil  Circuit,  Inc.  Although  the  Company  has not
experienced  any material  difficulties  in obtaining  supplies in the past, any
reduction or interruption  in supply from these  third-party  contractors  could
materially  and  adversely  affect   Dialogic's   results  of  operations  until
alternative  sources  are  established.  Moreover,  operating  results  could be
materially  and  adversely  affected by the receipt of defective  components  or
products,  an increase in prices from  suppliers or the inability of Dialogic to
obtain lower prices in response to competitive price reductions.

          Uncertainties  Regarding  Regulatory  Matters.  Applications  that are
enabled by  Dialogic's  products  are  affected by  governmental  policy in each
country in which they may be deployed around the world.  Modifications to public
policy,  including,  but not limited to,  regulation  of use of the Internet and
restrictions  on  alternative  forms  of  call  completion,  may  positively  or
adversely affect  Dialogic's  business.  The Company seeks to obtain  regulatory
approvals  for its products as a means of enabling its  customers to bring their
systems  to  market  as  rapidly  as  possible.  Changes  in  regulations  or in
interpretations  of  regulations  or delays in  deregulation  may  substantially
hamper end-users and Dialogic's  customers and may cause such customers to delay
or cancel orders.

          Dependence on Key Personnel.  The Company depends substantially on key
personnel involved in engineering,  research and development,  marketing, sales,
finance  and  administration.  The loss of the  services  of key  persons in any
functional  area could  have a material  adverse  effect on  Dialogic's  current
operations and on new product  development  efforts.  Dialogic's success depends
upon its  ability to attract and retain  skilled  employees.  Its  success  also
depends  upon the ability of  Dialogic's  officers  and key  employees to manage

<PAGE>

growth   successfully  and  to  continue   successful   development  of  product
enhancements  and new products.  There can be no assurance that the Company will
be able to hire or retain  sufficient  qualified  staff to meet its  goals.  The
Company does not maintain key-person life insurance for any of its personnel.

          Risks Associated with Potential  Acquisitions.  The Company's business
strategy  contemplates  that Dialogic  will  continue to seek to complement  its
internal growth with additional acquisitions of and investments in businesses in
the computer telephony industry and related fields.  Although management expects
to  carefully  analyze any such  opportunity  before  committing  the  Company's
resources,  there can be no  assurance  that such  transactions  will  result in
long-term benefits to Dialogic or that  unanticipated  liabilities may not arise
with respect to acquired entities.

          Excess or Obsolete  Inventory.  Dialogic's  customers typically expect
delivery of the Company's hardware and software products from stock. Because the
manufacturing  lead-time for several of Dialogic's  products can be significant,
the Company builds its products to meet forecasted demand. Although a portion of
customer  demand  is  ascertainable  from  volume  purchase  arrangements,   the
Company's forecasts also depend upon management's estimates of sales to existing
and  potential  customers.  Several  factors  could  affect the accuracy of such
estimates,  including unanticipated changes in customer demand, new developments
in  the  computer  telephony  industry,  unanticipated  development  delays  and
competitive inroads into the Company's business. Should management's predictions
prove to be inaccurate, the Company could have excess or obsolete inventory.

          Volatility of Stock Price. The market price of Dialogic's Common Stock
has fluctuated  significantly  since its initial public  offering in April 1994.
Factors such as:  announcements of technological  innovations or new products by
Dialogic,  its  competitors  or other third parties;  consolidations  within the
computer telephone industry;  quarterly variations in the Company's consolidated
results of operations,  shortfalls in the Company's  revenues,  gross margins or
earnings relative to analysts'  expectations;  regulatory conditions;  worldwide
economic conditions;  capital market conditions; and general industry conditions
may all affect the market  price of the Common  Stock and cause it to  fluctuate
significantly.  In addition,  in recent years,  the stock market in general,  as
well as the market  prices of the stocks of many high  technology  companies  in
particular,  have experienced wide fluctuations  which have not necessarily been
related to the operating  performance of individual  companies.  There can be no
assurance that the market price of the Company's  Common Stock will not continue
to experience significant volatility.

<PAGE>

Backlog

          Because the Company's  products are typically shipped within one month
of receipt of the order, the Company does not believe that its backlog as of any
particular date is indicative of future sales levels.

Employees

          As of December 31, 1998,  the Company had 1,247  full-time  employees.
The Company's  continued success will depend in part upon its ability to attract
and retain  skilled  employees.  Dialogic  has never had a work  stoppage and no
employees are  represented by a labor  organization.  The Company  considers its
employee relations to be good.

Environmental Factors

          Federal,  state and local laws or regulations  which have been enacted
or adopted  regulating the discharge of materials into the environment  have not
had, and under  present  conditions  the Company does not foresee that they will
have,  a material  adverse  effect on  capital  expenditures,  earnings,  or the
competitive position of the Company.

Item 2.  Properties

          The Company's  corporate  headquarters are located in Parsippany,  New
Jersey, in two leased facilities which cover  approximately  262,000 square feet
of space.  There are two separate leases for the  facilities.  The primary lease
covers  220,000  square feet and expires in 2005,  with options to renew for two
subsequent  five-year  terms.  The first  lease was  amended to provide  for the
construction  of a 67,000  square foot  addition to the existing  building.  The
construction of this addition is scheduled to be completed by December 1999. The
second  lease  covers  19,000  square feet and expires in 2002,  with options to
renew for two subsequent three-year terms. The second lease was amended to cover
an additional  23,000 square feet. The amendment  covering this additional space
expires in 2005 with an option to renew for one subsequent  three-year term. The
Company also leases all of its domestic and foreign  offices.  See Note 8 of the
Notes  to  the  Company's  Consolidated  Financial  Statements  incorporated  by
reference herein.


Item 3.  Legal Proceedings 

          In June 1995,  the Company  entered into a settlement  agreement  that
resulted in the dismissal of various legal proceedings involving,  among others,
the Company and Brooktrout Technology,  Inc.  ("Brooktrout").  In November 1995,
Brooktrout  filed a  complaint  in the  United  States  District  Court  for the
District of Massachusetts  naming the Company,  its GammaLink  subsidiary (since
merged  into the  Company)  and its  Chairman  of the Board as  defendants.  The
complaint  sought to rescind the  settlement  agreement  and obtain  unspecified

<PAGE>

compensatory  and  punitive  damages  on  the  basis  of  allegations  that  the
defendants   fraudulently  induced  Brooktrout  to  enter  into  the  settlement
agreement.  Dialogic denied the claims as baseless, moved to dismiss and filed a
counterclaim.  In December  1996, the District Court entered an order of summary
judgment against Brooktrout dismissing its fraud claims. Subsequently Brooktrout
amended  its  complaint  to add a claim for breach of the  implied  duty of good
faith and fair dealing. On February 9, 1999, the parties reached a settlement in
this  litigation in which  Brooktrout  dismissed all  remaining  claims  against
Dialogic and its chairman with prejudice,  Brooktrout granted certain additional
patent  rights to Dialogic,  and Dialogic  dismissed  its  counterclaim  against
Brooktrout with prejudice. Neither Dialogic nor its chairman made any payment to
Brooktrout in this matter.

          Separately,  the Company's Spectron subsidiary had sued Brooktrout for
patent infringement. This case was transferred to the District of Massachusetts.
Dialogic  believes it has retained the rights to maintain  this lawsuit  despite
the February 1998 sale of the Spectron  assets.  Brooktrout has moved to dismiss
this case  claiming that Dialogic no longer has standing to enforce the patents.
Trial in this case is now scheduled for June 1999.

          During the third  quarter of 1996, a complaint was filed in New Jersey
Superior  Court against the Company and certain of its  directors  alleging that
the  defendants  breached  principles  of common  law fraud in  connection  with
certain  public  statements  made prior to the  Company's  July 8,  1996,  press
release announcing  preliminary results for the quarter ended June 30, 1996. The
complaint  sought monetary  damages on behalf of a purported class of purchasers
of  the  Company's  Common  Stock.  On  February  18,  1998,  on  motion  by the
defendants,  the complaint was  dismissed by the court with  prejudice.  Time to
appeal the dismissal has expired.

          The Company is also engaged in other legal proceedings  arising in the
ordinary course of business,  the results of which  proceedings are not expected
to have a  material  adverse  effect  on the  Company's  consolidated  financial
condition, results of operations or liquidity. Management intends to defend each
of the above-mentioned legal proceedings vigorously.


<PAGE>

Item 4.  Submission of Matters to a Vote of Security Holders

     Not applicable.


Item 4A.  Executive Officers of the Registrant

          The Company's executive officers, their respective ages (as of January
31, 1999) and their positions with the Company are set forth below:


          Name                      Age            Title

      Nicholas Zwick                46       Chairman of the Board

      Howard G. Bubb                44       President and Chief Executive 
                                             Officer; Director

      John G. Alfieri               39       President, the Americas

      Thomas G. Amato               53       Vice President, Chief Financial 
                                             Officer and Treasurer

      Kenneth J. Burkhardt, Jr.     53       Executive Vice President, New 
                                             Business Development; Director

      William Warner                54       Executive Vice President, Signal 
                                             Computing Products

      Charles House                 58       Executive Vice President, Core-
                                             Systems Development

      Steve Krupinski               45       Vice President, Human Resources

      John E. Landau                45       Vice President, Product Marketing

      Gary Marks                    41       Vice President, Corporate Marketing

      Theodore M. Weitz             52       Vice President, General Counsel and
                                             Secretary

      Jean M. Beadle                48       Chief Accounting Officer and 
                                             Controller

          Mr.  Zwick,  a co-founder  of the Company,  has been a Director of the
Company since  Dialogic's  inception in 1983, its President and Chief  Executive
Officer from 1985 to May 1993 and its Chairman of the Board since March 1993.

          Mr. Bubb joined the Company as an  Executive  Vice  President  in July
1991. In August 1992, Mr. Bubb was promoted to Chief Operating Officer.  In June
1993, he was promoted again to President and Chief Executive  Officer.  Prior to
joining the Company,  Mr. Bubb was a consultant  from February 1991 to July 1991
and Senior Vice  President  and General  Manager of Lexar  Business  Systems,  a
marketer of PBX products and an affiliate of Telenova,  Inc., from December 1989
to January 1991. He served as Vice President of the telecommunications  business
of Memorex Telex, N.V. from January 1986 to December 1989. Mr. Bubb is currently
on the Board of Directors of Pairgain Technologies, Inc.

          Mr.  Alfieri was named  President,  The Americas in June 1998.  He has
been employed by the Company since 1988, first as the Eastern Regional  Manager,
then (in  1990)  as  Manager  of  North  American  Sales  and (in  1993) as Vice
President,  Sales and Services,  the Americas.  Prior to joining  Dialogic,  Mr.
Alfieri held various sales and marketing positions within IBM from 1983 to 1988.

          Mr. Amato was hired by Dialogic as its Vice President, Chief Financial
Officer and Treasurer in April of 1997. Prior to joining Dialogic,  he served as
Senior Vice President and Chief Financial Officer of Symbol Technologies,  Inc.,
from 1990 to 1997. From 1979 to 1990 he served as Senior Vice President, Finance
and Administration of Amcast Industrial Corporation.  From 1971-1979,  Mr. Amato
held various financial positions with Rockwell International Corporation.

          Dr.  Burkhardt,  a co-founder of the Company,  served as the Executive
Vice  President of  Operations  of the Company  through  October  1992,  when he
assumed his  current  position  as  Executive  Vice  President  of New  Business
Development. He has been a Director of the Company since 1983.

          Mr. Warner was hired by Dialogic as Executive Vice  President,  Signal
Computing Products,  in September of 1998. Prior to joining Dialogic,  he served
as Senior Vice President, Product Management and Development, at Banyan Systems,
Inc. from 1997 until 1998.  From 1996 to 1997, Mr. Warner was Vice President and
General Manager,  Platform Software Business,  at SystemSoft  Corporation.  From
1969 to 1996,  Mr. Warner held various  positions at IBM Corp.,  including  Vice
President, Systems Management.

          Mr.  House  was  named   Executive  Vice  President  of  Core  Systems
Development in February 1998. He has been employed by the Company since December
of 1995 as Vice President and General  Manager for Spectron  Microsystems,  Inc.
Prior to  joining  Dialogic,  he served as Senior  Vice  President  and  General
Manager of Veritas  Software  from 1993 to 1995 and Senior  Vice  President  for
Product  Management and Development at Informix Software from 1991 to 1993. From
1962 to 1991,  Mr. House held various  management  positions at  Hewlett-Packard
including General Manager at both the Software  Engineering Systems Division and
Logic  Systems  Operation.  Mr.  House is currently on the Board of Directors of
Applied Microsystems, Incorporated.

          Mr.  Krupinski was named Vice  President,  Human  Resources in January
1998. Prior to joining  Dialogic,  he served as Vice President,  Human Resources
for Dun & Bradstreet  from 1992 to 1998.  From 1988 to 1992,  Mr.  Krupinski was
Assistant Vice President,  Human Resources for Crum & Forster Personal Insurance
Co. Between 1979 to 1988, Mr. Krupinski held various Human Resources  management
positions with Engelhard Corporation, AT&T Corp. and Allstate Insurance Company.

          Mr.  Landau was named Vice  President,  Product  Marketing in February
1999. He was previously Vice President,  Strategic Marketing of the Company from
1997 until 1999, Vice President and General Manager, Dialogic Architecture Labs,
from 1995 until 1997 and Vice President,  Marketing of the Company from February
1993 until 1995. Mr. Landau was an area sales manager for Dialogic from May 1988
until  February  1989.  From  February  1989 to  1990,  he was the  Director  of
Marketing at Benchmarq Microelectronics ( a semiconductor manufacturer) and from
1990 until he rejoined Dialogic in February 1993, Mr. Landau was Vice President,
Marketing at Benchmarq  Microelectronics.  From November 1983 until May 1988, he
held various  marketing  positions at Advanced  Micro  Devices (a  semiconductor
manufacturer) and from June 1978 until November 1983, he held various operations
and product marketing  responsibilities  at Mostek  Corporation (a semiconductor
manufacturer).

          Mr. Marks joined Dialogic in August 1998 as Vice President,  Corporate
Marketing.  Prior to joining Dialogic,  he served as Executive Vice President of

<PAGE>

Marketing for SyQuest  Technologies,  Inc. from 1996 to 1998. From 1994 to 1996,
Mr. Marks was Vice President of Marketing for Conner  Peripherals.  From 1987 to
1994, Mr. Marks was Vice President of Marketing at Western Digital Corp.

          Mr. Weitz  joined the Company in January  1997 as its General  Counsel
and was named a Vice President and Secretary in February 1997.  Prior to joining
the Company,  he served in senior counsel positions for Lucent Technologies Inc.
in 1996,  for AT&T from 1993 to 1996, for UNIX System  Laboratories  and Novell,
Inc. from 1991 to 1993 and for various AT&T affiliates from 1978 to 1991.

          Ms.  Beadle  joined  Dialogic in March of 1997 as  Controller  and was
named  Chief  Accounting  Officer in  February  of 1998.  Prior to  joining  the
Company,  she was employed at Dynatech  Corporation  as Director of Finance from
1995 to 1997,  as  Director of  Taxation  from 1990 to 1995 and as an  Assistant
Corporate  Controller  from 1985 to 1990.  From 1972 to 1985,  Ms.  Beadle  held
various financial  positions at General Electric  Corporation and Metcalf & Eddy
Engineering, Inc.

          Executive  officers  of the  Company  are  appointed  by the  Board of
Directors  on an annual  basis and serve until their  successors  have been duly
elected  and  qualified.  There  are no  family  relationships  among any of the
executive officers or directors of the Company.

<PAGE>

                                     PART II

Item 5.   Market for the  Registrant's  Common  Equity and  Related  Stockholder
          Matters

          The registrant  incorporates by reference herein information set forth
in its Annual Report to Shareholders  for the year ended December 31, 1998, that
is responsive to the information required with respect to this Item.

Item 6.   Selected Financial Data

          The registrant  incorporates by reference herein information set forth
in its Annual Report to Shareholders  for the year ended December 31, 1998, that
is responsive to the information required with respect to this Item.

Item 7.   Management's Discussion and Analysis of Dialogic's Financial Condition
          and Results of Operations

          The registrant  incorporates by reference herein information set forth
in its Annual Report to Shareholders  for the year ended December 31, 1998, that
is responsive to the information required with respect to this Item.

Item 7A.  Quantitative and Qualitative Disclosure About Market Risk.

          The Company  was not a party to any  agreements  involving  derivative
financial  instruments at December 31, 1998.  The Company's  primary market risk
exposures are in the areas of interest rate risk and foreign  currency  exchange
rate risk. The Company's  investment portfolio of cash equivalents is subject to
interest rate fluctuations, but the Company believes this risk is immaterial due
to  the  short-term  nature  of  these  investments.  The  Company's  investment
portfolio of marketable  debt  securities  is comprised  primarily of fixed rate
municipal  bonds.  The  Company  has  classified  all  of  these  securities  as
available-for-sale,  which reduces  income  statement  exposure to interest rate
risk. The Company  mitigates  risk in its  investment  portfolios by placing its
investments  with  high-quality  issuers  it  believes  are credit  worthy.  The
Company's   exposure  to  foreign  currency   exchange  rate   fluctuations  has
historically been modest.  The majority of the Company's revenue and receivables
are  denominated  in US  dollars.  Based on the  foreign  currency  exposure  of
nonfunctional  currency  denominated  receivables  and  payables at December 31,
1998, a 10% adverse  change in currency  rates would not  materially  affect the
Company's  financial  position,  results of  operations,  or cash flows.  As the
Company  continues  to  expand  its  presence  internationally,  there can be no
assurance that foreign currency exposures will remain insignificant.

Item 8.   Financial Statements and Supplementary Data

          The registrant  incorporates by reference herein information set forth
in its Annual Report to Shareholders  for the year ended December 31, 1998, that
is responsive to the information required with respect to this Item.

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure

          Not applicable.

<PAGE>

                                    PART III

Item 10.  Directors of the Registrant

          The registrant  incorporates by reference herein information set forth
in its definitive  proxy  statement for its 1999 annual meeting of  shareholders
that is responsive to the information required with respect to this Item.

Item 11.  Executive Compensation

          The registrant  incorporates by reference herein information set forth
in its definitive  proxy  statement for its 1999 annual meeting of  shareholders
that is responsive to the information required with respect to this Item.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

          The registrant  incorporates by reference herein information set forth
in its definitive  proxy  statement for its 1999 annual meeting of  shareholders
that is responsive to the information required with respect to this Item.

Item 13.  Certain Relationships and Related Transactions

          The registrant  incorporates by reference herein information set forth
in its definitive  proxy  statement for its 1999 annual meeting of  shareholders
that is responsive to the information required with respect to this Item.

<PAGE>

                                     PART IV

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

          (a)  The  following  financial   statements  and  related  report  are
incorporated  by reference  into Item 8 of this Annual Report on Form 10-K (page
references are to the Company's Annual Report to Shareholders for the year ended
December 31, 1998):

                                                                           Page

      Independent Auditors' Report......................................... 10
      Consolidated Balance Sheets as of December 31, 1997 and
          1998..............................................................11
      Consolidated Statements of Income for the Years Ended
          December 31, 1996, 1997 and 1998..................................12
      Consolidated Statements of Comprehensive Income for the
          Years Ended December 31, 1996, 1997 and 1998                      12
      Consolidated Statements of Shareholders' Equity
          for the Years Ended December 31, 1996, 1997 and 1998..............13
      Consolidated Statements of Cash Flows for the Years Ended
          December 31, 1996, 1997 and 1998..................................14
      Notes to Consolidated Financial Statements............................15

          (b) The  following  financial  statement  schedule is filed as part of
this Annual Report:

          Schedule              Description                            Page

             I         Independent Auditors' Report                     S-1

            II         Valuation and Qualifying Accounts                S-2

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

          (c) The following  exhibits are  incorporated  by reference  herein or
annexed to this Annual Report:

             Exhibit                        Description

                3.1     Restated Certificate of Incorporation is incorporated by
                        reference   to   Exhibit   3.1   to   the   Registrant's
                        Registration Statement on Form S-1 (No. 33-59598).

                3.2     By-laws,  as amended,  are  incorporated by reference to
                        Exhibit 3.2 to the Registrant's  Registration  Statement
                        on Form S-1 (No. 33-59598).
<PAGE>

                10.1    1988  Incentive   Compensation   Plan,  as  amended  and
                        restated  through  March 28,  1997 (the "1988  Plan") is
                        incorporated   by  reference  to  Exhibit  10.2  of  the
                        Registrant's  Annual  Report  on Form  10-K for the year
                        ended December 31, 1996.

                10.2    Proposed  amendments  to the 1988  Plan as  amended  are
                        incorporated   by  reference  to  Exhibit  10.3  of  the
                        Registrant's  Annual  Report  on Form  10-K for the year
                        ended December 31, 1996.

                10.3    1993 Non-Employee  Director Stock Option Plan (the "1993
                        Plan") is  incorporated  by reference to Exhibit 10.4 of
                        the Registrant's Registration Statement on Form S-1 (No.
                        33-59598).

                10.4    Amended  and  Restated  1993  Plan  is  incorporated  by
                        reference  to Exhibit  10.5 of the  Registrant's  Annual
                        Report  on Form  10-K for the year  ended  December  31,
                        1996.

                10.5    1997   Director   Stock    Election/Deferral   Plan   is
                        incorporated   by  reference  to  Exhibit  10.6  of  the
                        Registrant's  Annual  Report  on Form  10-K for the year
                        ended December 31, 1996.

                10.6    Employment  Agreement  between the Registrant and Howard
                        G. Bubb,  as amended is  incorporated  by  reference  to
                        Exhibit 10.6 of the  Registrant's  Annual Report on Form
                        10-K for the year ended December 31, 1997.

                10.7    Registrant's loan agreements, as amended is incorporated
                        by reference to Exhibit 10.7 of the Registrant's  Annual
                        Report on Form 10-K for the year ended December 31, 1997

                10.8    Registrant's  headquarters lease, dated August 31, 1993,
                        as amended, is incorporated by reference to Exhibit 10.9
                        to the  Registrant's  Annual Report on Form 10-K for the
                        year ended December 31, 1996.

                10.9    Sixth  Amendment to headquarters lease November 21, 1997
                        is incorporated by reference  to  Exhibit  10.9  to  the
                        Registrant's  Annual  Report  on Form  10-K for the year
                        ended December 31, 1997.

<PAGE>

                10.10   Seventh  Amendment  to  headquarters  lease  dated as of
                        September 30, 1998

                10.11   Lease  dated as of  September  30, 1998 for the annex to
                        the headquarters

                10.12   Amended  and  Restated  1997  Incentive   Benefit  Plan,
                        amended and restated through February 22, 1999.

                10.13   Asset Purchase  Agreement,  by and among the Registrant,
                        Texas    Instruments     Incorporated    and    Spectron
                        Microsystems, Incorporated, dated as of January 22, 1998
                        is  incorporated  by reference  to Exhibit  10.11 of the
                        Registrant's  Annual  Report  on Form  10-K for the year
                        ended December 31, 1997.

                10.14   Stock  Purchase  Agreement  dated as of  March  1,  1999
                        between the Registrant and Microsoft Corporation.

                11.1    Calculation of Income Per Share.

                13.1    Incorporated   portions   of  the   Annual   Report   to
                        Shareholders for the year ended December 31, 1998.

                21.1    Principal subsidiaries of the Registrant.

                23.1    Independent Auditors' Consent.

                24.1    Power of Attorney.

                27.1    Financial Data Schedule.


          (d) During the quarter  ended  December 31, 1998,  the Company did not
file any Current Reports on Form 8-K.

<PAGE>

                                   SIGNATURES

          Pursuant to the  requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its  behalf by the  undersigned,  thereunto  duly  authorized,  this 26th day of
March, 1999.

                                  DIALOGIC CORPORATION
                                   By: /s/ Thomas G. Amato



                                   ___________________________
                                   Thomas G. Amato, Vice President,
                                   Chief Financial Officer and Treasurer

          Pursuant to the  requirements of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.


      Signatures                      Title                          Date

/s/Howard G. Bubb*             President,  Chief  Executive      March 26, 1999
   Howard G. Bubb              Officer and Director

/s/Nicholas Zwick*             Director                          March 26, 1999
   Nicholas Zwick

/s/Kenneth J. Burkhardt, Jr.*  Director                          March 26, 1999
   Kenneth J. Burkhardt, Jr.

/s/ Thomas G. Amato            Vice President,  Chief            March 26, 1999
    Thomas G. Amato            Financial Officer and 
                               Treasurer

/s/ Jean M. Beadle             Chief Accounting Officer 
    Jean M. Beadle             and Controller                    March 26, 1999

/s/Masao Konomi*               Director                          March 26, 1999
   Masao Konomi

/s/John N. Lemasters*          Director                          March 26, 1999
   John N. Lemasters

/s/Francis G. Rodgers*         Director                          March 26, 1999
   Francis G. Rodgers

/s/James J. Shinn*             Director                          March 26, 1999
   James J. Shinn


* By    /s/Theodore M. Weitz*
        ______________________
           Theodore M. Weitz Attorney in Fact

<PAGE>

                                       S-1
INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholders
of Dialogic Corporation
Parsippany, New Jersey

We have audited the consolidated  financial  statements of Dialogic  Corporation
and  Subsidiaries  as of December  31, 1998 and 1997,  and for each of the three
years in the period ended  December 31, 1998, and have issued our report thereon
dated  January 27,  1999  (except for Note 10, as to which this date is March 2,
1999);  such  financial  statements  and report are included in your 1998 Annual
Report to Shareholders and are incorporated herein by reference. Our audits also
included the financial  statement  schedule of Dialogic  Corporation,  listed in
Item  14.  This  financial  statement  schedule  is  the  responsibility  of the
Company's  management.  Our responsibility is to express an opinion based on our
audits. In our opinion,  such financial statement  schedule,  when considered in
relation to the basic financial statements taken as a whole,  presents fairly in
all material respects the information set forth therein.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Parsippany, New Jersey
March 2 , 1999

<PAGE>
<TABLE>
                                      S-2

                 SCHEDULE II - Valuation and Qualifying Accounts
                             (Dollars in thousands)

<CAPTION>


                   Column A                        Column B         Column C                            Column D          Column E
----------------------------------------------- --------------- ------------------ ---------------- ----------------- --------------
<S>              <C>                              <C>              <C>               <C>               <C>              <C>       
                                                  Balance at       Charged to        Charged to
                                                  beginning         costs and           other                            Balance at
                 Description                       of year          expenses          accounts         Deductions(1)     end of year

       Allowance for Doubtful Accounts

December 31, 1996                                       894            724                57               846                829
December 31, 1997                                       829          1,272               (27)              794              1,280
December 31, 1998                                     1,280          1,483                 1               893              1,871

(1)  Amounts represent write-offs of accounts receivable deemed uncollectible.

</TABLE>

<PAGE>

                                  EXHIBIT INDEX


 EXHIBIT                              DESCRIPTION

  10.10                       Seventh Amendment to  headquarters   lease  dated
                              September 30, 1998.

  10.11                       Lease dated  September  30, 1998 with respect to 
                              the annex to the headquarters

  10.13                       Amended and Restated 1997 Incentive  Benefit Plan
                              amended and restated through February 22, 1999.

  10.14                       Stock Purchase Agreement dated as of March 1, 1999
                              between the Registrant and Microsoft Corporation.

  11.1                        Calculation of Income Per Share

  13.1                        Incorporated portions  of  the  Annual  Report  to
                              Shareholders for the Year ended December 31, 1998

  21.1                        Subsidiaries of the Registrant

  23.1                        Independent Auditors' Consent

  24.1                        Power of Attorney

  27.1                        Financial Data Schedule