<PAGE>   1
================================================================================
                       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 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]

                    FOR THE FISCAL YEAR ENDED MARCH 30, 1998

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

           FOR THE TRANSITION PERIOD FROM              TO
                                          ------------    ------------
                         Commission file number: 0-27016

                              ROSS TECHNOLOGY, INC.
             (Exact name of registrant as specified in its charter)

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

                DELAWARE                        74-2507960
      (State or other jurisdiction of        (I.R.S. Employer
      incorporation or organization)         Identification No.)

                        5316 HIGHWAY 290 WEST, SUITE 500
                            AUSTIN, TEXAS 78735-8930
          (Address of principal executive offices, including zip code)

                                 (512) 436-2000
              (Registrant's telephone number, including area code)

           Securities Registered Pursuant to Section 12(b) of the Act:
                                      NONE

           Securities Registered Pursuant to Section 12(g) of the Act:
                          COMMON STOCK, $.001 PAR VALUE

                                 ---------------
     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. [X] Yes [ ] No


<PAGE>   2


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

    The aggregate market value of the voting stock held by non-affiliates of the
Registrant, as of June 30, 1998, was approximately $500,000 based upon the
last sale price reported for such date on the NASDAQ National Market System. For
purposes of this disclosure, shares of Common Stock held by persons who hold
more than 5% of the outstanding shares of Common Stock and shares held by
executive officers and directors of the Registrant have been excluded because
such persons may be deemed to be affiliates. This determination is not
necessarily conclusive.

    The number of shares of the Registrant's Common Stock outstanding as of June
30, 1998, was 23,476,965.

                       DOCUMENTS INCORPORATED BY REFERENCE

    Portions of the following documents are incorporated herein by reference in
Parts I, II and IV: Registrant's Registration Statement on Form S-1
(Registration No. 33-95878) effective as of November 6, 1995 and Registrant's
Final Prospectus dated November 6, 1995.




<PAGE>   3



                              ROSS TECHNOLOGY, INC.

                           ANNUAL REPORT ON FORM 10-K
                        FISCAL YEAR ENDED MARCH 30, 1998

<TABLE>
<CAPTION>

 CAPTION                                                                                       PAGE
 -------                                                                                       ----
<S>            <C>                                                                            <C>
                PART I
 Item 1.        Business....................................................................    1
 Item 2.        Properties..................................................................   10
 Item 3.        Legal Proceedings...........................................................   10
 Item 4.        Submission of Matters to a Vote of Security Holders.........................   10
                PART II
 Item 5.        Market for the Registrant's Common Stock and Related Stockholder Matters....   10
 Item 6.        Selected Consolidated Financial Data........................................   12
 Item 7.        Management's Discussion and Analysis of Financial Condition and Results of
                Operations..................................................................   14
 Item 8.        Financial Statements and Supplementary Data.................................   20
 Item 9.        Changes in and Disagreements with Accountants on Accounting and Financial
                Disclosure..................................................................   20
                PART III
 Item 10.       Directors and Executive Officers of the Registrant..........................   20
 Item 11.       Executive Compensation......................................................   23
 Item 12.       Security Ownership of Certain Beneficial Owners and Management..............   30
 Item 13.       Certain Relationships and Related Transactions..............................   31
                PART IV
 Item 14.       Exhibits, Financial Statement Schedules, and Reports on Form 8-K............   33

</TABLE>


                                      - i -



<PAGE>   4



CAUTIONARY STATEMENT

         This Annual Report contains forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995, with respect to
the financial condition, results of operations and business of ROSS Technology,
Inc. and its subsidiary (collectively, unless the context otherwise requires,
"ROSS", the "Company", or the "Registrant"). Such statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially and adversely from those set forth in the forward-looking statements,
including without limitation, the availability of financial resources adequate
to the Company's short-, medium- and long-term needs, including renewal of its
present loan and loan guaranty arrangements (which currently expire on December
31, 1998); the Company's ability to satisfy all debts in full and in a timely
manner; the impact on revenue, margins and inventories of the Company's recent
announcements concerning the Company's financial position and intention to
engage in an orderly shutdown of its operations; the Company's dependence on
distributors and resellers for certain product sales to end-users; competition,
downward pricing pressures and allocations of product among different
distribution channels; the effects of routine price degradation over time in
each of the Company's product lines; varying customer demand for the Company's
products; supply and manufacturing constraints and costs; the Company's
dependence on outside suppliers for wafer fabrication and raw materials,
components and certain manufacturing services; supplier disputes; customer
warranty claims; general economic conditions; and the other risks and
uncertainties described from time to time in the company's public announcements
and Securities and Exchange Commission filings, including without limitation the
Company's Current, Quarterly, and Annual Reports on Forms 8-K, 10-Q, and 10-K,
respectively. The Company cautions that the foregoing list of important factors
is not exclusive. The Company does not undertake to update any written or oral
forward-looking statement that may be made from time to time by or on behalf of
the Company.



<PAGE>   5


                                     PART I

ITEM 1. BUSINESS

RECENT DEVELOPMENTS

    As a result of the continuing and substantial deterioration of the Company's
financial position, on June 1, 1998, the Company announced that it would
commence an orderly shutdown of its operations. The decision was precipitated by
a continuing decrease in revenues from the Company's sales of its 32-bit
products. The Company is exploring certain strategic alternatives, including an
acquisition of the entire Company by a third party and the sale of various
assets, including the Viper development team and associated intellectual
property, Austin manufacturing operation and the Company's Design Center in
Israel. To date, the Company has been unable to locate a buyer for the entire
Company and believes it is highly unlikely that it will be able to do so. A
letter of intent with respect to the sale of the manufacturing operations was
entered into on June 25, 1998. In addition, the Company and Fujitsu Limited, the
Company's majority stockholder ("Fujitsu"), are negotiating an asset purchase
agreement pursuant to which Fujitsu will purchase certain intellectual property
rights from the Company (with a royalty-free license back to the Company for
some of those rights). The Company is also actively involved in discussions with
potentially interested parties, including Fujitsu, with regard to other of its
assets. There is no assurance that any further agreements will be reached or
that agreements reached will close in accordance with their terms. In the
absence of a sale of the entire Company, the Company intends to cease all of its
operations by the end of calendar 1998.

    Under the plan approved by the Company's Board of Directors, it is
anticipated that the Company will continue its operations, at a scaled back
level, through the end of calendar year 1998. Under this plan, the Company hopes
to avoid undue disruption to its customers, which will have an opportunity to
place orders for their forecasted needs, which the Company will strive to meet.
The Company believed that by endeavoring to keep its design and product
engineers in place as well as a scaled-back test site, it would have a better
chance of finding a buyer for the Company or all or part of its assets,
including its intellectual property. The Company has formed a business unit,
named BridgePoint, that contains its significantly scaled back sales, service
and manufacturing operations employees, as well as the inventory related to its
32-bit products. It is currently anticipated that BridgePoint will serve the
ROSS customers until calendar year end 1998, and may be sold separately or as a
part of the entire Company (a letter of intent with respect to the sale of the
BridgePoint operations was entered into on June 25, 1998).

    The Company at this time will seek to maximize its asset value for its
creditors. While the Company hopes to pay all of its creditors in full, its
ability to do so is dependent upon its ability to generate sufficient cash from
the sale of products and assets. The Company believes that it is highly unlikely
that there will be any funds or assets available for distribution to any
stockholders.

    As part of the preparation for the shutdown of the Company's business, the
Company has issued notices to its employees under the Federal Workers Adjustment
and Retraining Notification Act. These notices provided advance notice to all
employees of the scheduled termination of their employment in connection with
the shutdown. Approximately 93 employees, or 46% of the Company's work force
will be laid off as of July 31, 1998, excluding the approximately 30 full and
part time employees at the ROSS Design Center in Israel. The Company's 64-bit
"Viper" Development Team (including the Vice President of Engineering and the
Chief Architect), the BridgePoint operations, sales and service personnel
(including the Vice President of Manufacturing) and an administrative team
(including the Chief Executive Officer, Chief Financial Officer and Corporate
Controller), will continue to operate the smaller ROSS Company and pursue
alternatives, although the Company intends to lay-off the Viper development team
on July 31, 1998 if an agreement to sell those operations has not been reached
by that time. See Item 7 - Management Discussion and Analysis of Financial
Condition and Results of Operations and "End of Life Program."

    On May 18, 1998, the Company was informed by the Nasdaq National Market of
the Company's failure to maintain


                                       1

<PAGE>   6

certain listing requirements - failure to maintain a closing bid price of
greater than or equal to $1.00 per share and failure to maintain a market value
of public float greater than or equal to $5 million. If the Company is unable to
demonstrate compliance with these two rules before August 13, 1998, the
Company's securities will be delisted at the opening of business on August 17,
1998. The Company does not believe that it will be able to demonstrate
compliance with such rules by the August 13, 1998 deadline. The Company's Common
stock would continue to trade on the over-the-counter bulletin board market
maintained by the Nasdaq National Market.

    The description of the Company's business contained below is qualified in
its entirety by the information contained in this section ("Recent
Developments").

GENERAL

     The Company designs, manufactures and markets high-performance
microprocessors and associated semiconductor products and system boards,
workstations and servers based upon the SPARC architecture, a reduced
instruction set computing ("RISC") architecture that was originally developed by
Sun Microsystems, Inc. ("Sun"). The SPARC architecture maintains the largest
installed base, and continues to have the largest market share of new systems
sales, of all RISC workstations and servers. The Company targets its
semiconductor and system board products to manufacturers of SPARC computer
systems, including Sun, Fujitsu and other original equipment manufacturers
("OEMs"), and as upgrades to end-users of SPARC workstations. As discussed
above, in the absence of a sale of the entire Company, the Company intends to
shutdown its operations by the end of calendar 1998

    ROSS was originally incorporated in Texas in August 1988 and was acquired by
Cypress Semiconductor Corporation ("Cypress") in February 1990, at which time
the Company became a Delaware-incorporated subsidiary of Cypress. The Company
was a subsidiary of Cypress until July 1993, at which time the Company was
acquired by, and became a wholly-owned subsidiary of, Fujitsu. The Company
consummated the initial public offering of its common stock (the "Common Stock")
in November 1995, at which time it also sold a minority interest to Sun. As of
June 30, 1998, Fujitsu and Sun owned approximately 60.0% and 4.5%, respectively,
of the outstanding Common Stock and Fujitsu owns 100% of the Company's Series B
Convertible Preferred Stock. As used in this Annual Report, unless the context
requires otherwise, all references to "ROSS", the "Company", or the "Registrant"
refer to ROSS Technology, Inc., a Delaware corporation and its predecessor Texas
corporation and consolidated subsidiary.

    "ROSS" is a registered trademark of the Company in the United States, and
the marks "hyperCACHE" and "hyperSTATION" are trademarks for which the Company
has applied for registration. The names "hyperSPARC" and "SPARCplug" are
trademarks licensed for use exclusively by the Company from SPARC International,
Inc. All SPARC trademarks are trademarks or registered trademarks of SPARC
International, Inc. All other product or service names mentioned herein are
trademarks of their respective owners. Products bearing the SPARC trademarks are
based on an architecture developed by Sun.

PRODUCTS

    The Company's principal semiconductor product line is the hyperSPARC(TM)
family of microprocessors. Microprocessors, integrated circuits that contain
millions of transistors, serve as the central processing unit ("CPU") of
computer systems such as workstations and personal computers ("PCs").
Microprocessors are responsible for controlling data flow through the
workstation or PC, manipulating such data as specified by software running on
the system, and coordinating all hardware functions within the system.

    Since its inception, the Company has developed four generations of advanced
RISC microprocessor products. The first of these products was the Company's 40
megahertz ("MHz") microprocessor, which was selected for use by Sun in its
SPARCstation(TM) 2, introduced in 1990. Among the Company's design wins have
been the inclusion of its 100 MHz hyperSPARC(TM) microprocessor in Sun's
SPARCstation(TM) 20 Model HS11 in late 1994, its 125 MHz hyperSPARC(TM)
microprocessor in Sun's SPARCstation(TM) 20 Model HS21 in early 1995, and its
150 MHz hyperSPARC microprocessor in Sun's SPARCstation(TM) 20 Models 151 and
152MP in October 1995. Other OEMs have selected the Company's advanced RISC
microprocessors for use in their products. Fujitsu, historically the Company's
second largest customer (and currently its largest customer) introduced systems
based on three new

                                       2

<PAGE>   7

derivatives of the Company's "Colorado 3" hyperSPARC(TM) microprocessor in
1996. The DS90 7500 and 7700 server systems from Fujitsu, and the S4-20H
workstations from Fujitsu and PFU Limited, incorporate the Company's single and
dual 150 MHz microprocessors with 512 kilobytes of second-level cache as well
as 142 MHz microprocessors with a full megabyte of cache.

    The Company's hyperSPARC(TM) products feature high-performance integer,
floating-point and memory-management capabilities for multi-tasking operating
environments. The hyperSPARC(TM) architecture is well-suited for applications
that are floating-point intensive, such as many scientific, computer-aided
design ("CAD"), computer-aided engineering ("CAE") and seismic modeling
applications. All hyperSPARC(TM) products conform to the SPARC Version 8
(32-bit) Architecture specification and offer complete compatibility (including
multiprocessing) with both the SunOS(TM) (Version 4.1.x) and Solaris(TM)
operating systems.

    The Company sells its hyperSPARC(TM) products as single- or dual-processor
MBus modules (plug-in "daughtercards" containing one or two multi-die packages
and other components on a small printed circuit board) and, to a lesser extent,
as single-processor multi-die packages (single integrated circuit packages
containing multiple bare semiconductor die connected by an advanced substrate).

Multi-Die Packages

    The Company's hyperSPARC(TM) multi-die packages ("MDPs") integrate multiple,
discrete die into a single pin-grid-array package. Interconnection among the die
is accomplished through a silicon or other electronic substrate, so that the
entire chipset operates as a single integrated circuit. The hyperSPARC(TM) MDPs
integrate four to ten die, including a single complete CPU chipset and a
tightly-coupled second level cache, into a single package. The hyperSPARC(TM)
second-level caches are offered in 256 kilobyte, 512 kilobyte, and one megabyte
configurations. All hyperSPARC(TM) MDPs are fully multiprocessing capable. MDPs
are purchased by OEMs on a stand-alone basis for incorporation into space- and
power-sensitive applications such as small footprint workstations, I/O
subsystems, and process control systems.

MBus Modules

    MDPs are typically sold as part of an integrated solution: the MBus CPU
module. ROSS introduced the industry's first MBus module in 1990 to facilitate
the open architectural, or "plug-and-play," advantages of the SPARC
architecture. The Company's MBus modules mount one or two hyperSPARC(TM) MDPs
onto a CPU daughtercard that plugs into one of the MBus "sockets" of the system
motherboard via a SPARC-standard MBus connector.

    The Company sells its MBus modules into both the OEM and upgrade markets.
The MBus module approach allows the Company's OEM customers to be flexible in
the machine configurations they offer to their end-user customers. The same
motherboard design, which typically contains two MBus sockets, can accommodate
one, two or four processors at a variety of speed/cache combinations to achieve
the targeted price/performance point. The installed base of MBus-based machines
also provides the foundation for the Company's upgrade business, in which
end-users of SPARCstation(TM) 10 and 20 class workstations and SPARCserver(TM)
600 class servers can preserve and enhance their system investment by adding to
or replacing the MBus modules in their existing machines with the Company's
higher performance hyperSPARC(TM) MBus modules.

    The Company's MBus support ASICs provide a high speed interface between the
CPU/cache, memory and input/output subsystems. Currently, the ASICs are capable
of 50 MHz operation, and offer performance enhancements, such as support for
larger memory subsystems. The ASICs are sold as stand-alone components, as well
as part of an integrated motherboard.

    The Colorado 4 hyperSPARC(TM) is based on .35 micron four-layer metal pure
CMOS process technology and operates at 180 and 200 MHz. In addition to the
improvement in clock frequency over the 150 MHz Colorado 3, the Colorado 4
integrates a 16 kilobyte data cache onto the processor chip and increases the
instruction cache from 8 to 16 kilobytes. In June 1997 the Company announced 200
MHz quad upgrades, providing multiprocessing upgrades for users of Sun's
SPARCstation(TM) 20 systems.



                                       3
<PAGE>   8

    SPARCplug(TM) is a SPARCstation(TM) 20-compatible workstation/server that
fits into the dual-height drive bay of a standard tower PC. Sharing system
resources with the PC, such as the power supply, monitor, keyboard, and mouse,
SPARCplug(TM) enables a single machine to combine a complete SPARC/Solaris(TM)
system with a standard PC environment, providing full "cut-and-paste" Windows
interoperability. In June 1997, the Company announced a SPARCplug(TM) Station,
which fits into a "four-high" drive bay tower, and may be used in both
workstation and server configurations. The Company will not continue offering
the SPARCplug(TM) product for sale.

    ROSS also previously offered system-level SPARC solutions including complete
workstations as well as motherboard upgrades with a range of speed and
performance solutions. Its products integrate hyperSPARC(TM) modules with the
Company's MBus support ASICs. In connection with the Company's planned
shut-down, the Company has decided to discontinue offering all system-level
products.

Dependence on SPARC Architecture

    All of the Company's products, as well as all of the Company's products
currently under development, are based on the SPARC architecture. The Company
does not anticipate continued acceptance of the 32-bit SPARC architecture by
Sun, Fujitsu and other major computer system manufacturers, as well as by the
end users of these systems. Likewise, the Company does not anticipate adoption
of the Company's new 64-bit SPARC products which are currently behind schedule
in development and will not be finished except possibly if the Company is sold
as a whole.

    In 1995 Sun introduced a new line of workstations based upon a new 64-bit
bus architecture microprocessor, UltraSPARC(TM), designed by Sun
Microelectronics ("SME"), a division of Sun Microsystems. These products are
incompatible with the MBus architecture on which all of the Company's products
are based. Sun has adopted the 64-bit architecture for its entire product line,
and accordingly Sun's purchases of product from the Company have decreased
dramatically during Fiscal 1998. Sun's decision to focus product development
efforts on 64-bit systems combined with significant market acceptance of such
systems has significantly limited the total available market for the Company's
MBus-based products and has contributed to the Company's decision to engage in
an orderly shutdown of its operations.

CUSTOMERS

    The Company sells its semiconductor and board products to manufacturers of
SPARC computer systems, including Sun, Fujitsu and other OEMs, and to
distributors, value added resellers ("VARS"), and end-users desiring to upgrade
the power and performance of their existing SPARC workstations and servers.

End of Life Program

    The Company has announced an end of life ("EOL") program for its
hyperSPARC(TM) products. Customers were notified that the Company anticipates
accepting EOL orders until July 31, 1998, while reserving the right to stop
accepting such orders at any time without notice. Also, all such orders must be
shipped on or before November 28, 1998 or earlier as may be specified by the
Company. All EOL orders will be non-cancelable and non-returnable. To date, few
EOL orders have been received by the Company and the Company does not expect to
have significant further product sales prior to completion of its orderly
shutdown. While the effects of the Company's June 1, 1998, shutdown announcement
are not yet known to the Company at this time, the Company believes that the
announcement could have a material adverse effect on the Company's business,
results of operations and financial condition.




                                       4
<PAGE>   9

OEM Customers

    The Company's semiconductor OEM customers include a number of companies in
several market segments that use the Company's SPARC products in a variety of
end products. The largest of these OEM market segments, processors for
workstations and servers, historically has accounted for a major portion of the
Company's OEM revenues. Other OEM market segments for the Company's products
include high-performance network file servers, massively parallel systems,
telecommunications, data communications and embedded systems.

    Historically, the Company's sales have been concentrated among a limited
number of large customers. Although sales to Sun increased in dollar terms in
fiscal 1997, Sun's percentage share of the Company's total net sales is
significantly below its 1992 peak. Sales to Sun decreased during fiscal 1998 in
both dollar and percentage terms. Sun accounted for 15%, 28% and 45%,
respectively, of the Company's net sales in the fiscal years ended March 30,
1998 ("Fiscal 1998") March 31, 1997, ("Fiscal 1997") and April 1, 1996 ("Fiscal
1996"), followed by Fujitsu, which accounted for 36% of net sales in Fiscal 1998
and 22% and 19%, respectively, of net sales for Fiscal 1997 and Fiscal 1996.

    The Company expects a significant portion of any future sales to remain
concentrated within a limited number of customers. Sales to the Company's major
customers have also decreased significantly and will not be replaced. In
addition, future sales to any particular customer may fluctuate significantly
from recent periods. This situation has contributed significantly to the
Company's decision to engage in an orderly shutdown of its operations.


Upgrade Customers

    The Company's upgrade customer base is composed of the end-users of
SPARCstation(TM) 5, 10 and 20 class workstations and SPARCserver(TM) 600 class
servers who wish to upgrade the performance of their existing machines. This
customer base spans a wide range of applications and industries that reflect the
variety of SPARC workstation and server users. Given the Company's EOL program,
the Company does not expect significant future sales to upgrade customers.

SALES, MARKETING AND SUPPORT

Sales and Marketing

    The Company employs various channels of sales and distribution for its
hyperSPARC(TM) product family. OEM and upgrade sales are conducted through a
direct sales force and through manufacturer representatives. Upgrade sales are
conducted through a domestic and international network of VARs and distributors.
As of March 30, 1998, the Company's internal sales force consisted of 24
individuals who shared responsibility for direct sales and the support of
manufacturer representatives and VARs, all but two of which are expected to be
laid off on July 31, 1998.

    The Company's strategy for upgrade sales had been to focus its resources on
the training and support of distributors and VARs, which the Company believed
was a cost-effective alternative to establishing a large, internal, direct sales
force.

    As is common in the semiconductor industry, the Company may grant price
protection to distributors. Under this policy, distributors receive a credit for
the difference, at the time of a price reduction, between the price they were
originally charged for products in inventory and the reduced price which the
Company subsequently charges distributors. The Company also grants some
distributors limited rights to return products. The Company reduces recognition
of net sales and profit on sales to distributors to the extent of the rights of
return and price protection.

    The Company's marketing communications activities included communications
through articles and press releases in trade magazines and journals, advertising
in technical computer publications and the business press, periodic direct
mailings and fax campaigns to customers and prospects, and attendance at trade
shows. The Company also published hyperACTIVITY(TM), a periodic newsletter which
is mailed to customers, prospective customers and others.




                                       5
<PAGE>   10

    Following the Company's shut-down announcement on June 1, 1998, marketing
activities were terminated.

Warranties

    The Company offers a warranty on its products consistent with standard
industry practice. Under the terms of this warranty, the Company is obligated to
replace or refund the purchase price of any unit that fails to operate to the
Company's published specifications when the unit is used within specified
environmental and other operating parameters. The duration of this warranty for
the Company's CPU products and for its workstation and server products is one
year for OEM customers, and two years for upgrade customers. Under its warranty
obligations, the Company could be required to recall a product that does not
conform to published specifications, and such a recall could have a material
adverse effect on the Company's business and operating results. The Company
anticipates that all of its warranty obligations will be assumed by the
purchaser of its BridgePoint manufacturing operations, if that proposed
transaction is consummated. In the absence of such consummation, the Company
will seek to outsource those obligations to a third party manufacturer. For the
EOL orders, the warranty will be honored for 12 months from the date of
shipment, or November 30, 1999, whichever is earlier.

Export Sales

    Export sales, primarily to customers in Japan and Europe, accounted for 48%,
34% and 36% of the Company's sales in Fiscal 1998, 1997, and 1996, respectively.
Substantially all of the Company's foreign sales are denominated in U.S.
dollars.

Service and Technical Support

    The Company had two distinct channels of technical support to service its
OEM and upgrade customer bases. Technical support for OEMs was provided through
the Company's Applications Engineering Department, which provided in-depth
technical expertise to assist in the design, debug, and performance analysis of
systems under development by the Company's OEM customers. The upgrade technical
support department included a 1-800-ROSS-YES line directly into the Company's
support personnel that provides phone support from 7:30 AM to 7:30 PM Central
Time. This group provided pre- and post-sales assistance to the Company's
upgrade prospects and customer base. The Applications Engineering Department was
terminated on June 1, 1998.

    The primary channel for technical support to service workstation customers
is via service providers such as Computervision.

BACKLOG

    As of March 30, 1998, the Company's total backlog was approximately $1.4
million. The Company's backlog consists of customers' purchase orders that have
been received, acknowledged by the Company and scheduled for shipment within the
next 12 months.

    Sales of the Company's products generally are made pursuant to standard
customer purchase orders that are cancelable without significant penalty subject
to certain criteria. In addition, customer purchase orders are subject to price
re-negotiations and changes in product quantities and delivery schedules caused
by changes in customers' requirements and manufacturing availability. The
Company's business, and to a large and growing extent that of the entire
semiconductor industry, is characterized by a requirement for short lead times
and quick delivery schedules. In addition, the Company's shipments depend on the
manufacturing capacity of the Company's suppliers. As a result of the foregoing
factors, the Company believes that backlog at any given time may not be a
meaningful indicator of future sales and the Company does not know what effect
the EOL program will have on its backlog.

MANUFACTURING

    The Company's microprocessor manufacturing strategy has been to outsource
the physical manufacture of its raw materials, work in process and final
products to third-parties that possess state-of-the-art process technologies,



                                       6
<PAGE>   11

while performing test and verification functions internally to ensure product
quality and yields. Specifically, the Company outsources wafer fabrication, die
packaging and daughtercard assembly. Before qualifying a third-party
manufacturer, the Company places its personnel on site, as required, to provide
technical assistance and oversight, to ensure development of processes that
conform to Company specifications and requirements. This manufacturing strategy
was intended to give the Company access to advanced manufacturing processes
while minimizing the substantial capital expenditures that would otherwise be
required to develop its own manufacturing capabilities. Furthermore, the Company
believed that this strategy enabled it to operate more efficiently with fewer
personnel, while capitalizing on the latest advances in semiconductor process
technology and manufacturing techniques.

    The Company's manufacturing strategy with respect to workstations and
servers, which is similar to its microprocessor strategy, was to outsource the
manufacturing and integration of its products to third parties that possess
state-of-the-art technologies, while performing test and verification functions
internally to ensure product quality and yields. Specifically, the Company
outsourced the manufacturing and assembling of its motherboards. Before
qualifying a third-party manufacturer, the Company's personnel were placed on
site, as required, to provide technical assistance and oversight to ensure
development of processes that conform to Company specifications and
requirements. This strategy was intended to give the Company access to advanced
manufacturing processes while minimizing the substantial capital expenditures
that would otherwise be required to develop its own manufacturing capabilities.

    The Company expects to cease all of its manufacturing operations by the end
of calendar 1998. See "Recent Developments".

Wafer Fabrication

    Wafers for the semiconductor chips utilized by the Company in its products
are fabricated by outside manufacturers. At present, Fujitsu manufactures wafers
for all of the Company's microprocessor logic chips and SRAMs pursuant to an
agreement in principle on a wafer pricing model that reflects current and future
industry pricing standards. The Company had also established a relationship with
NEC for the potential production of microprocessor logic chips, although the
program will not be implemented. During Fiscal 1998, Fiscal 1997 and Fiscal
1996, Fujitsu supplied 100% of the dollar amount of the Company's silicon wafer
purchases for production and the Company expects that Fujitsu will supply all of
the Company's silicon wafer requirements through completion of the EOL program.

Packaging and Assembly

    The Company also relies on third parties for the production of its multi-die
packages. The Company obtains a majority of its multi-die package requirements
for its current hyperSPARC(TM) products from MMS using MMS' advanced substrate
technology. The Company's multi-die packages are also manufactured by nChip and
Fujitsu on a purchase order basis. The Company's MBus modules -- which
incorporate multi-die packages, connectors, clock chips, heat sinks and other
components on a small printed circuit board -- are currently assembled by Marco,
Inc. of Austin on a purchase order basis.

Testing

    At each stage of the production cycle, the Company's work-in-process and
final products are tested for defects and functionality at the Company's Austin,
Texas, manufacturing facility. The Company believes it employs certain testing
procedures that are more sophisticated and rigorous than those generally
employed in the semiconductor industry, and believes that its commitment to
testing has enabled it to introduce products of superior reliability.

    Although the Company's products undergo extensive testing prior to their
introduction, design and manufacturing errors may be discovered after initial
product sampling or volume shipment, which may result in delays in volume
production or the recall of products sold. The occurrence of such errors could
have a material adverse effect on the Company's business and operating results.




                                       7
<PAGE>   12

COMPETITION

    The market for the Company's products is intensely competitive and
characterized by rapidly accelerating advances in processor and system
technologies. These advances result in frequent product introductions, regular
price reductions, short product life cycles, and increased product capabilities
that may result in significant performance improvements.

    Competition in the sale of microprocessor, workstation and server products
is based on price, performance, product quality and reliability, software
compatibility, marketing and distribution capability, brand recognition,
financial strength and ability to deliver in large volumes on a timely basis.
Given the Company's reliance on third parties for product manufacturing, the
Company's competitive position may also be affected by the reliability and
performance of its outside manufacturers and the availability from such
manufacturers of adequate state-of-the-art production capacity. The Company
faces competition from SME, Digital Equipment Corporation, Hewlett-Packard, IBM
and Silicon Graphics. The Company does not have the resources and capabilities
at this time to compete effectively, which has contributed to the Company's
decision to engage in an orderly shutdown of its operations.

    At this time, the Company does not offer a competitive product as evidenced
by the lack of a major design win for its latest generation hyperSPARC(TM)
microprocessor, Colorado 4, product and it is currently behind schedule to
deliver to market, on a timely basis, the Company's current 64-bit Viper
microprocessor development project. The Company does not currently have the
financial resources necessary to complete the Viper development project and does
not expect to complete this project.

RESEARCH AND DEVELOPMENT

    The Company's research and development efforts are currently focused on the
Viper development project, a 64-bit microprocessor. At this time, the project is
behind schedule as defined by a development agreement entered into between
Fujitsu and the Company (see Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operation" - "Research and Development.") and
the Company does not expect to complete development of this product. The Company
and Fujitsu are currently having discussions regarding termination of the Viper
development project.

    The Company intends to terminate employment of the members of the Viper
development team on July 31, 1998, if an agreement to sell those operations has
not been reached by that time. The Company believes that it is highly unlikely
that such an agreement will be reached by then.


    The Company's net research and development expenditures were $5.8 million,
$24.7 million and $15.9 million during Fiscal 1998, 1997 and 1996, respectively.
During Fiscal 1998, the Company received $17.0 million in contract payments
associated with two separate development contracts with Fujitsu, thereby
significantly lowering its R&D expenditures for Fiscal 1998.

PATENTS AND PROPRIETARY RIGHTS

    The Company has endeavored to protect and maintain its competitive position
by placing a high priority on the protection of its intellectual property,
including its inventions, trademarks, trade secrets and technical know-how. The
Company files and prosecutes patent applications for those key patentable
designs, innovations and inventions that it believes are most relevant to its
product line and most valuable in terms of cost and technological advantages.
The Company also takes steps to prevent the loss to competitors of valuable
proprietary information such as trade secrets and technical know-how.

    Since its inception, the Company has filed a number of patent applications
in the United States Patent and Trademark Office and counterparts to certain of
those U.S. applications in the patent offices of other countries. The Company
currently owns several issued United States patents. Of the issued patents, one
covers the Company's technology concerning the fast registering of data in a
microprocessor, another covers certain techniques for


                                       8
<PAGE>   13

automated circuit design, and a third covers the Company's proprietary RISC
superscalar microprocessor architecture.

    An assessment of the Company's patent position, as with that of any
technology company, involves complex issues of law and fact that render such an
assessment uncertain. There can be no guarantee that any of the Company's patent
applications will issue (the Company has ceased patent prosecution in connection
with its shutdown decision), nor can assurances be given as to the level of
protection that any of its issued patents will provide to the technology and/or
products intended to be covered by them. In addition, there can be no assurance
that any of the Company's issued or pending patents will create effective
barriers to entry into the markets in which the Company and its products
compete.

    The Company and Fujitsu have entered into an asset purchase agreement
pursuant to which Fujitsu will purchase certain intellectual property rights
from the Company relating to its 32-bit operations, including four patents (with
a royalty-free license back to the Company for some of those rights). See Item
13 - "Certain Relationships and Related Transactions."

    The Company's competitors have filed applications for and received issued
patents related to microprocessors, multiprocessing architectures and related
circuits as well as board and system designs and techniques. There is a
possibility that these competitors might assert claims against the Company that
their patents cover technologies employed by the Company in its current or
future products. If such claims are determined to cover technologies employed by
the Company and such claims are ultimately held to be valid, no assurance can be
given that the Company would be able to acquire the right to use such
technologies regardless of the terms, nor can any assurance be given that the
Company could acquire or develop alternative technologies that are not covered
by the asserted claims. Further, even if the grounds for such claims are without
merit or deficient, there is no guarantee that a competitor would not
nevertheless bring a suit for patent infringement against the Company, or its
customers or its affiliates. Such litigation could have a material adverse
effect on the Company's business and results of operations despite its lack of
merit or its final disposition because of its cost to, and its diversion of
effort and management time from, the Company.

    The Company requires employees, consultants and independent contractors to
execute confidentiality and invention/copyright assignment agreements prior to
engaging in any service to the Company. The Company further requires, whenever
possible, that companies engaged in sensitive discussions with the Company
involving its proprietary technologies execute nondisclosure agreements. These
agreements are intended to protect the Company's trade secrets, technical
know-how and patentable and copyrightable subject matter by restricting
disclosure and by requiring those creating intellectual property on behalf of
the Company or using the Company's resources to assign ownership of the
intellectual property to the Company. No assurance can be made, however, that
such contracts will provide the Company with adequate protection in the event
that such agreements are breached through the unauthorized disclosure or use of
such intellectual property.

ENVIRONMENTAL MATTERS

    To the Company's present knowledge, compliance with federal, state and local
provisions enacted or adopted for protection of the environment has had no
material adverse effect upon its operations.

EMPLOYEES

As of March 30, 1998, the Company's domestic work force consisted of 236
full-time employees and 49 employees who worked on a temporary or part-time
basis. In addition, the Company had two full-time employees in its European
office, which will be closed as part of the Company's shutdown of its
operations. The Company's design subsidiary, ROSS Semiconductors (Israel), Ltd.
("ROSS Israel"), had a workforce consisting of 30 full-time and part-time
employees. The Company and Fujitsu have reached an agreement in principle on the
sale of the Company's Israeli operations to Fujitsu for $2.5 million.



                                       9
<PAGE>   14

    As previously discussed, the Company has begun an orderly shutdown of its
operations. As part of this process, the Company will reduce its domestic work
force by 46% on July 31, 1998, and has established an Employee Retention and
Severance Plan for the remainder of its work force - Viper development team,
BridgePoint operations group and an administrative team, although the Company
intends to terminate the Viper development team on July 31, 1998, in the absence
of an agreement to sell such operations by that same date. The combined cost of
the lay-off and the Employee Retention and Severance Plan totals approximately
$5.2 million, of which $3.2 million relates to prior contractual obligations of
the Company and obligations of the Company under its general severance policy.

ITEM 2. PROPERTIES

    The Company's principal administrative, sales, marketing, customer
applications support, design, product engineering, production control, quality,
manufacturing and testing facilities are currently located in Austin, Texas, in
two leased buildings containing an aggregate of 95,200 square feet. One 33,000
square foot building includes a 3,000 square foot clean room wafer processing
area, houses all manufacturing, testing and quality control facilities, and has
delivery, receipt and storage facilities for unfinished wafers, gases, chemicals
and other raw materials used by the Company. The second building, in which the
Company occupies 62,200 square feet, provides facilities for all administration,
sales and marketing personnel, design, product engineering and production
control personnel.

    The Company leases approximately 5,000 square feet in Longmont, Colorado,
for a software group that supports the Company's product development personnel.

    The Company also leases 1,100 square feet of office space in Brussels,
Belgium, for its European office.

    ROSS Israel occupies a building of approximately 4,500 square feet in
Herzelia, Israel, which provides facilities for the design and development of
electronic and computer products, as well as administrative functions.

    The Company is seeking to cancel or sublease all leases on or before the end
of calendar 1998.

ITEM 3. LEGAL PROCEEDINGS

    Rao Cherukuri et al. v. PeQuR Technology, Inc., et al., Civil No. CV757267
(Santa Clara Superior Court). On April 11, 1996, this action was filed against,
among others, the Company in the Superior Court of California (the "Action").
The Action was brought by three former employees of PeQuR Technology, Inc.
("PeQuR"), a Texas corporation which on January 4, 1995, sold substantially all
of its assets to a then wholly-owned subsidiary of the Company, ROSS Computer
Corp., now Reliance Computer Corp. ("RCC"). Plaintiffs allege, among other
causes of action, fraud, deceit, and breach of fiduciary duty in connection with
certain alleged agreements by PeQuR to provide compensation to the plaintiffs in
the form of vested PeQuR stock which agreements, in turn, allegedly would have
entitled plaintiffs to a share of the proceeds of the asset sale to RCC, to
employment with the Company or RCC, and/or to receive shares of the Company's
Common Stock. The Company transferred its entire equity interest in RCC to
Fujitsu on March 26, 1996.

     The Company believes that the plaintiffs' claims against it are without
merit and intends to defend this case vigorously. The Company successfully
demurred in whole or in part to two successive Complaints. The Company filed an
answer to the plaintiffs' Third Amended Complaint on June 4, 1997. This case is
in the early stages of discovery and no trial date has been set. Given the stage
of the proceedings, the fact that the ultimate outcome will depend upon the
resolution of disputed issues of fact and law, and the inherent uncertainties of
complex, multi-party litigation such as this, it is not possible at this time to
predict the ultimate outcome of the matter with any degree of certainty,
although based on information presently known to management, the Company does
not believe that the ultimate resolution of this lawsuit will have a material
adverse effect upon the financial condition or results of operations of the
Company, although the result of this lawsuit will not affect the Company's
decision to proceed with an orderly shutdown of its operations.

    Kris Vorm v. ROSS Technology, Inc. Cause No. 9704693 (District Court of
Travis County, Texas). On April 18, 1997, the above-referenced action was filed
against the Company in the 353rd Judicial District Court of Travis



                                       10
<PAGE>   15

County, Austin, Texas (the "Vorm Action"). The Vorm Action was brought by Kris
Vorm, a former employee of the Company, alleging that in late May 1996 the
Company, through false and material representations and promises, prevented him
from selling shares of common stock of the Company owned by him. Plaintiff
further contends that the Company misrepresented that it would provide him a low
interest loan to cover his tax liability in connection with his having purchased
his shares. Plaintiff seeks compensation in an unspecified amount which the
Company estimates, based upon Plaintiff's allegations, to approximate $500,000.
Plaintiff also seeks exemplary damages, as well as attorneys' fees, costs, and
pre-judgment and post-judgment interest.

    The Company has answered the Complaint in this matter, and has noticed
plaintiff's deposition. The Company believes that it has meritorious defenses to
the Vorm Action and intends to defend it vigorously. Given the stage of the
proceedings, the fact that the ultimate outcome will depend upon the resolution
of disputed issues of fact and law and the inherent uncertainties of litigation
such as this, it is not possible at this time to predict the ultimate outcome of
the matter with any degree of certainty, although based on information presently
known to management, the Company does not believe that the ultimate resolution
of this lawsuit will have a material adverse effect upon the financial condition
or results of operations of the Company, although the result of this lawsuit
will not affect the Company's decision to proceed with an orderly shutdown of
its operations.

    The Company is involved in routine litigation arising in the ordinary course
of business, and, while the results of such proceedings cannot be predicted with
certainty, the Company believes that the final outcome of the proceedings will
not be material.

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

    On January 30, 1998, Fujitsu, in its capacity as majority stockholder,
executed a written consent to approve an amendment to the Company's Stock Option
and Restricted Stock Purchase Plan 3.0 (the "Stock Option Plan) to (i) increase
the number of shares subject to the Stock Option Plan from 7,200,000 to
9,695,000 and (ii) increase the maximum number of options or shares of
restricted stock that an individual could receive under the Stock Option Plan in
any fiscal year from 600,000 to 1,000,000. An information statement regarding
the action taken was circulated to the Company's stockholders. Consents from
other stockholders were not solicited.

                                     PART II

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

    (a) Market Information. Since its initial public offering in November 1995,
the Common Stock has traded on the NASDAQ National Market System under the
symbol "RTEC." The following table sets forth, for the periods indicated, the
high and low sale prices for the Common Stock as reported by the NASDAQ National
Market System.

<TABLE>
<CAPTION>

                QUARTER ENDED          HIGH      LOW
             ---------------------    ------    ------
<S>                                   <C>      <C>
             June 30, 1996........    15 1/8    8  1/4
             September 30, 1996...    12 1/8    5  1/2
             December 31, 1996....     6 7/8    2 3/16
             March 31, 1997.......     5 5/8    2 3/16
             June 30, 1997........     3 1/8    1 9/16
             September 29, 1997...     2 5/8    1 7/16
             December 29, 1997....     2 5/8    1
             March 30, 1998.......     1 1/2    1
</TABLE>


    (b) Holders. As of June 30, 1998, there were approximately 211 holders of
record of the Company's Common Stock.

    (c) Dividends. The Company has never paid any dividends on its Common Stock
and does not anticipate ever paying any dividends. The Company currently intends
to retain its earnings, if any, to finance the orderly shutdown of its
operations.




                                       11
<PAGE>   16

    On May 18, 1998, the Company was informed by the Nasdaq National Market of
the Company's failure to maintain certain listing requirements - failure to
maintain a closing bid price of greater than or equal to $1.00 per share and
failure to maintain a market value of public float greater than or equal to $5
million. If the Company is unable to demonstrate compliance with these two rules
before August 13, 1998, the Company's securities will be delisted at the opening
of business on August 17, 1998. The Company does not believe that it will be
able to demonstrate compliance with such rules by the August 13, 1998 deadline.
The Company's Common stock would continue to trade on the over-the-counter
bulletin board market maintained by the Nasdaq National Market.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

    The Selected Consolidated Financial Data for Ross Technology, Inc. and
subsidiary set forth below is derived from, and should be read in conjunction
with, the Company's Consolidated Financial Statements, including the Notes
thereto, beginning at page F-1, and Item 7 -- Management's Discussion and
Analysis of Financial Condition and Results of Operations.

ROSS TECHNOLOGY, INC. AND SUBSIDIARY

SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>


                                         PREDECESSOR COMPANY(1)                               COMPANY(2)
                                       --------------------------- --------------------------------------------------------------
                                                                   PERIOD FROM
                                                      PERIOD FROM   JULY 28,
                                        YEAR ENDED    DECEMBER 29,  1993 TO      YEAR ENDED   YEAR ENDED  YEAR ENDED   YEAR ENDED
                                       DECEMBER 28,  1992 TO JULY   APRIL 4,       APRIL 3,    APRIL 1,    MARCH 31,    MARCH 30,
                                           1992        27, 1993      1994           1995        1996         1997        1998
                                       ------------  ------------- ------------  ----------   ---------- -----------   ----------
                                                             (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                    <C>          <C>          <C>            <C>          <C>         <C>          <C>

     STATEMENT OF OPERATIONS
       DATA:
     Net sales .....................    $ 38,145     $  7,023      $  10,373     $ 39,021     $100,805   $  83,104     $ 42,057
     Gross profit (loss) ...........      18,142          301          1,605       12,293       46,884     (24,847)      (1,181)
     Income (loss) from operations .      (2,272)      (9,202)       (21,222)      (8,939)      19,317     (84,280)     (36,195)
     Income (loss) before income
       taxes .......................      (2,240)      (9,223)       (21,515)     (10,581)      17,843     (85,752)     (38,271)
     Net income (loss) .............    $ (1,478)    $ (7,641)       (21,515)     (10,669)      18,160     (86,705)     (38,271)
     Basic net income (loss) per
       common share(3).........                                    $   (2.92)     $ (1.47)     $  1.23    $  (3.71)    $  (1.63)
     Weighted average shares
       outstanding(3) - Basic....                                      7,356        7,356       14,067      23,396       23,450
     Diluted net income (loss) per
       common share..............                                  $   (2.92)     $ (1.47)         .82       (3.71)       (1.63)
     Weighted average common and
       common equivalent shares
       outstanding - Diluted                                           7,356        7,356       21,033      23,396       23,450
</TABLE>


<TABLE>
<CAPTION>


                                        PREDECESSOR COMPANY                        COMPANY
                                      -----------------------     -----------------------------------------------
                                      DECEMBER 28,   JULY 27,     APRIL 4,    APRIL 3,    APRIL 1,      MARCH 31,     MARCH 30,
                                         1992          1993        1994        1995        1996           1997          1998
                                      ------------   --------     --------    --------    --------      ---------     ---------
                                                                     (IN THOUSANDS)
<S>                                   <C>           <C>          <C>         <C>         <C>          <C>           <C>
     BALANCE SHEET DATA:
     Cash and cash equivalents......  $   316       $   457      $  2,458    $  1,936    $ 17,941     $   2,811     $     787
     Working capital (deficit)......    1,881        (1,791)      (15,581)    (25,932)     44,336       (37,977)      (12,305)
     Total assets...................   14,883         9,363        24,069      39,489      97,893        54,819        18,487
     Notes payable..................       --         4,000        20,500      36,344          --        43,500        15,000
     Accumulated deficit............   (1,478)       (9,119)      (21,515)    (32,184)    (14,856)     (101,561)     (139,832)
     Total stockholders's equity                                                                                             
     (deficit)......................  $ 8,352       $ 1,638      $ (3,615)   $(14,284)   $ 66,274     $ (20,225)    $ (8,980)
</TABLE>

----------

(1) References to the "Predecessor Company" refer to ROSS prior to its
    acquisition by Fujitsu.



                                       12
<PAGE>   17


(2) Effective July 28, 1993, the Company's fiscal year was changed to end on the
    Monday closest to March 31 to coincide with the fiscal year of its parent,
    Fujitsu. As used in this Annual Report, "Fiscal 1995," "Fiscal 1996,"
    "Fiscal 1997" and "Fiscal 1998" refer to the Company's fiscal years ended
    April 3, 1995, April 1, 1996, March 31, 1997, and March 30, 1998,
    respectively. The Company's operating results for Fiscal 1998 are included
    in Fujitsu's consolidated financial statements for Fujitsu's "Fiscal 1997."
    Under Japanese convention, the fiscal year is denominated by the calendar
    year in which the fiscal year commences; under United States convention it
    is denominated by the calendar year in which the fiscal year ends. Thus the
    Company's "Fiscal 1998" and Fujitsu's "Fiscal 1997" both refer to the year
    ended on or about March 30, 1998.

(3) See Note 1 of Notes to Consolidated Financial Statements for an explanation
    of the computation of net income (loss) per common share. The Predecessor
    Company's net income (loss) per common share for the periods ended prior to
    Fujitsu's acquisition of the Company is not comparable to subsequent periods
    due to the different capitalization of the Predecessor Company and,
    therefore, has not been presented.



                                       13
<PAGE>   18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

    The following tables set forth, in dollars and as a percentage of net sales,
the historical results of operations for the fiscal year ended April 1, 1996
("Fiscal 1996"), the fiscal year ended March 31, 1997 ("Fiscal 1997"), and the
fiscal year ended March 30, 1998 ("Fiscal 1998").

<TABLE>
<CAPTION>

                                           FISCAL         FISCAL         FISCAL
                                            1996           1997           1998
                                         ----------     ----------     ----------
                                                     (IN THOUSANDS)
<S>                                       <C>            <C>            <C>
 STATEMENT OF OPERATIONS DATA:
 Net sales .................................    $  100,805     $   83,104     $   42,057
 Cost of sales .............................        53,921        107,951         43,238
                                                ----------     ----------     ----------
   Gross profit (loss) .....................        46,884        (24,847)        (1,181)
                                                ==========     ==========     ==========
 Operating expenses:
   Research and development, net ...........        15,906         24,659          5,842
   Selling, general and administrative .....        10,495         31,137         16,889
   Write-down of property and equipment.....            --             --         11,203
   Write-down of investment in subsidiary...            --             --          1,080
   Amortization of goodwill ................         1,166          3,637             --
                                                ----------     ----------     ----------
      Total operating expenses .............        27,567         59,433         35,014
                                                ----------     ----------     ----------
 Income (loss) from operations .............        19,317        (84,280)       (36,195)
 Interest expense, net .....................        (1,474)        (1,472)        (2,076)
                                                ----------     ----------     ----------
 Income (loss) before income taxes .........        17,843        (85,752)       (38,271)
 Income tax provision (benefit) ............          (317)           953             --
                                                ----------     ----------     ----------
 Net income (loss) .........................    $   18,160     $  (86,705)    $  (38,271)
                                                ==========     ==========     ==========

   (As a percentage of net sales)

 Net sales .................................         100.0          100.0          100.0
 Cost of sales .............................          53.5          129.9          102.8
                                                ----------     ----------     ----------
   Gross profit (loss) .....................          46.5          (29.9)          (2.8)
                                                ----------     ----------     ----------
 Operating expenses:
   Research and development, net ...........          15.8           29.7           13.9
   Selling, general and administrative .....          10.4           37.5           40.2
   Write-down of property and equipment.....            --             --           26.6
   Write-down of investment in subsidiary...            --             --            2.6
   Amortization of goodwill ................           1.2            4.3             --
                                                ----------     ----------     ----------
      Total operating expenses .............          27.4           71.5           83.3
                                                ----------     ----------     ----------
 Income (loss) from operations .............          19.1         (101.4)         (86.1)
 Interest expense, net .....................          (1.5)          (1.8)          (4.9)
                                                ----------     ----------     ----------
 Income (loss) before income taxes .........          17.6         (103.2)         (91.0)
 Income tax expense (benefit) ..............          (0.3)           1.1
                                                ----------     ----------     ----------
 Net income (loss) .........................          17.9         (104.3)         (91.0)
                                                ==========     ==========     ==========
</TABLE>

    General Overview -- 1998. In Fiscal 1998, the Company recorded $42.1 million
in revenues versus $83.1 million and $100.8 million in Fiscal 1997 and Fiscal
1996, respectively. The reduction in sales reflected the migration of the
Company's primary customers away from the Company's 32-bit products to 64-bit
products sold by the Company's competitors, primarily Sun. As a result, despite
the Company's cost reduction efforts and its successful negotiation of a $34.5
million development agreement with Fujitsu, the Company incurred a net loss of
$38.3 million. The continued reduction in the level of sales resulted in a
continued percentage increase in the manufacturing overhead associated with
parts assembled by the Company, keeping the Company's gross profit below
expectations. The aggregate losses incurred by the Company were primarily funded
by bank loans guaranteed by Fujitsu. On September 30, 1997, the Company and
Fujitsu concluded a recapitalization transaction, whereby the Company issued
500,000 shares of a new Series B Convertible Preferred Stock to Fujitsu and
Fujitsu paid $50 million on behalf of the Company to The Dai-Ichi Kangyo Bank
("DKB") in partial payment of the Company's outstanding indebtedness to DKB in
satisfaction of Fujitsu's obligation pursuant to certain loan guaranties
provided by Fujitsu to DKB.

      As a result of the Company's continuing and substantial deterioration of
its financial position, on June 1, 1998, the Company announced that it would
commence an orderly shutdown of the its operations. As part of the preparation
for the shutdown of the Company's business, the Company issued notices to its
employees under the



                                       14
<PAGE>   19

Federal Workers Adjustment and Retraining Notification Act. Approximately 46% of
the Company's domestic work force will be laid off as of July 31, 1998. In
addition, in the absence of an agreement to sell the Company's Viper design
operations on or before July 31, 1998, the Company intends to terminate such
employees on July 31, 1998, as well. Due to the Company's continued financial
deterioration and its inability to provide positive cash flow from operations,
the Company recorded an $11.2 million charge for the write-down of certain 
property and equipment as circumstances indicate that the carrying amount of 
such assets may not be recoverable.


    Net Sales. Net sales decreased to $42.1 million in Fiscal 1998 from $83.1
million in Fiscal 1997, which decreased from $100.8 million in Fiscal 1996. The
successive decrease in net sales in Fiscal 1998 and Fiscal 1997 from the level
of sales achieved in Fiscal 1996 is primarily attributable to a continued
decrease in sales to OEM microprocessor chip customers reflecting the lack of a
major design win for the Company's Colorado 4 microprocessor products and to a
lack of new products to match Sun's introduction of 64-bit products. Sales
levels were also negatively impacted in Fiscal 1997 by turnover in sales and
executive management. In 1997 the Company entered the systems market for
workstations and servers in addition to its traditional business of providing
microprocessor components. Sales of such systems were below the Company's
expectations for 1997. The Company has ceased to offer system products for sale.

    During Fiscal 1998, 69% of the Company's net sales were derived from OEM
customers (with Sun, Fujitsu and other OEMs accounting for 15%, 36%, and 18%,
respectively, of total net sales). During Fiscal 1997, 66% of the Company's net
sales were derived from OEM customers (with Sun, Fujitsu and other OEMs
accounting for 28%, 22%, and 16%, respectively, of total net sales). During
Fiscal 1996, 81% of the Company's net sales were derived from OEM customers
(with Sun, Fujitsu and other OEMs accounting for 45%, 19% and 17%, respectively,
of total net sales). The change in OEM sales mix for both Fiscal 1998 and 1997
reflect the continued reduced demand from Sun first experienced in Fiscal 1997
and the Company's diversification into other markets, including the systems
market which the Company recently exited. Sales to Fujitsu decreased by 75%
during the fourth quarter of Fiscal 1998 versus the quarterly average for the
first three quarters of Fiscal 1998. As Sun and Fujitsu have historically
accounted for a significant percentage of the Company's sales, the loss of such
sales had a material adverse effect on the Company's business, financial
condition and operating results.

    Gross Profit (Loss). The Company's gross profit as percentage of sales
increased to a loss of 2.8% in Fiscal 1998 from a loss of 29.9% in Fiscal 1997.
This increase primarily reflects the absence of a large charge for the
write-down of inventory like that which was recorded in Fiscal 1997 and efforts
to improve yields. During Fiscal 1998, the Company continued to incur, on a
percentage basis, a high level of manufacturing overhead associated with parts
assembly by the Company as a result of the continued reduction in the level of
sales. Also, as a result of the Company's deteriorating financial position, in
Fiscal 1998, the Company recorded a $7.3 million charge to write-off excess
levels of inventory. The Company's gross profit as a percentage of net sales
decreased to a loss of 29.9% in Fiscal 1997 from a profit of 46.5% in Fiscal
1996. This decrease is primarily the result of a $38.9 million charge for the 
write-down of inventory associated with lower speed microprocessor chips and
associated semiconductors and MBus modules, including routine price degradation
on older products; and to reductions in the valuation of inventory associated
with workstation and server products which were ordered in anticipation of
customer acceptance, which did not materialize to the degree anticipated by the
Company, as well as a $5.2 million charge for the costs to cancel excess
inventory purchase orders. In addition, gross profit was materially adversely
affected by the Company's lack of new, higher-margin microprocessor and upgrade
subsystem products, and also by an increase in manufacturing overhead associated
with the assembly of fewer units in the later quarters of Fiscal 1997 in a
larger manufacturing space occupied during the fourth quarter of Fiscal 1996.

    Research and Development. Research and development ("R&D") expense includes
costs associated with the definition, design and development of new products.
Net R&D expenses decreased to $5.8 million (13.9% of sales) in Fiscal 1998 from
$24.7 million (29.7% of sales) in Fiscal 1997. This decrease was primarily
attributable to a net reimbursement of $15.3 million in expenses relating to the
Company's 64-bit Viper microprocessor development project, pursuant to a
Development Agreement between the Company and Fujitsu (the "Viper Development
Agreement"), as well as application of $2.0 million of payments from Fujitsu
against R&D expenses pursuant to an additional development agreement between the
Company and Fujitsu to produce a 32-bit processor "core." The



                                       15
<PAGE>   20

Company actually received $17.0 million from Fujitsu during Fiscal 1998 for its
design efforts, but due to delays in its design schedule may be subject to a
$1.2 million penalty and such penalty is reflected in the Company's financial
statements (see discussion of Viper Development Agreement under "Future
Operating Results"). To a lesser degree, this decrease also reflects the
decrease in expenses in Fiscal 1998 related to the Company's 1997 entrance into
the systems business. This decrease was partially offset by increases due to the
addition of new personnel and related overhead and outside contractor expenses
in the areas of new product design and new product development related to the
Company's 32-bit "Colorado 4" and "Colorado 5" hyperSPARC(TM) and 64-bit "Viper"
microprocessor designs. R&D expenses increased to $24.7 million (29.7% of sales)
in Fiscal 1997 from $15.9 million (15.8% of sales) in Fiscal 1996. The increase
in R&D expenses was primarily attributable to the addition of new personnel and
related overhead in the areas of new product design, new product development and
increased pre-production cost associated with qualifying new generation
microprocessor products for production, and for new personnel and related
overhead and outside contractor expenses for new product design and development
related to the Company's Colorado 5 hyperSPARC(TM) and next generation Viper
microprocessor designs. In Fiscal 1997, $2 million of payments from Fujitsu
pursuant to a development agreement were applied against R&D expenses.

    Selling, General and Administrative. Selling, general and administrative
("SG&A") expenses decreased to $16.9 million (40.2% of sales) in Fiscal 1998
from $31.1 million (37.5 % of sales) in Fiscal 1997, which was an increase from
$10.5 million (10.4% of sales) in Fiscal 1996. The increase in SG&A expenses
during Fiscal 1997 and the subsequent decrease in Fiscal 1998 was primarily
attributable to approximately $16.5 million in write-offs and increase in
reserves associated with uncollectable accounts recorded in Fiscal 1997. In both
Fiscal 1998 and 1997, the Company also experienced increases in legal and
consulting expenses related to the negotiation of significant contracts and the
hiring of new executive management.

    Write-down of Property and Equipment. As a result of the Company's continued
financial deterioration, in accordance with Generally Accepted Accounting
Principles, the Company recorded an $11.2 million write-down for long-lived
assets since events and circumstances indicated that the assets were impaired.
The impairment charge was the difference between the Company's carrying value
and the estimated fair value of the assets. The Company estimated fair value
through the use of a third party appraisal of the assets.

    Write-down of Investment in Subsidiary. As a result of the Company's
continued financial deterioration and the Company's intention to close its
Israeli operations, the Company recorded a $1.1 million charge for the
write-down of its investment in its Israeli subsidiary.

    Amortization of Goodwill. Goodwill of $6.5 million arose in connection with
the Company's acquisition by Fujitsu in 1993 and $0.6 million arose from the
acquisition of the assets of PeQuR by RCC. These amounts are amortizable over
six years resulting in $1.2 million of amortization in Fiscal 1996. During the
fourth quarter of Fiscal 1996, the Company transferred its entire interest in
RCC to Fujitsu resulting in the removal of $0.5 million of goodwill related to
the acquisition of the assets of PeQuR. In Fiscal 1997, the Company amortized
the remainder of the goodwill ($2.5 million) after reviewing its value in light
of the losses incurred by the Company in Fiscal 1997 and cash flow projections.

    Net Interest Expense. Net interest expense of $2.1 million in Fiscal 1998
was higher than that which was incurred in both Fiscal 1997 and 1996, $1.5
million and $1.5 million, respectively, reflecting the higher debt levels
incurred by the Company during the first six months of Fiscal 1998. See
"Liquidity and Capital Resources."

    Income Tax Expense. Consistent with Fiscal 1997, in Fiscal 1998 the Company
has established a 100% reserve against its deferred income tax asset in the
amount of $41.2 million and will not record income tax expense or benefit until
such time as the Company achieves sustained profitability (which is not
expected). In Fiscal 1997 the Company incurred a significant loss. Based on the
Company's losses in Fiscal 1997, the Company determined that it was more likely
than not that it would not be able to use its entire income tax benefit in
subsequent years. The Company also determined that it could not reasonably
forecast the amount of such benefit it could use due to the significant changes
being made with respect to its management and products. Accordingly, the Company
applied a reserve of approximately $27.9 million against its deferred income tax
asset. As of April 1, 1996, the Company had completely utilized its net
operating loss carryforwards to that point for federal income tax purposes and,
as a result,




                                       16
<PAGE>   21

began accruing and paying regular federal income taxes. Current income tax
expense for Fiscal 1996 was $1.9 million. Due to timing differences between book
income and tax income, the Company recognized a deferred tax benefit of $2.2
million for book purposes during Fiscal 1996.

    Future Operating Results. As a result of the continuing and substantial
deterioration of the Company's financial position, on June 1, 1998, the Company
announced that it would commence an orderly shutdown of its operations. The
decision was precipitated by a continuing decrease in revenues from the
Company's sales of the its 32-bit products. The Company is exploring certain
strategic alternatives, including an acquisition of the entire Company by a
third party and the sale of various assets, including the Viper development team
and associated intellectual property, Austin manufacturing operations and the
Company's Design Center in Israel. To date, the Company has been unable to
locate a buyer for the entire Company and believes it is highly unlikely that it
will be able to do so. A letter of intent with respect to the sale of the
manufacturing operations was entered into on June 25, 1998. In addition, the
Company and Fujitsu are negotiating an asset purchase agreement pursuant to
which Fujitsu will purchase certain intellectual property rights from the
Company (with a royalty-free license back to the Company for some of those
rights). Also, Fujitsu and the Company have reached an agreement in principle on
the sale of the Company's Design Center in Israel to Fujitsu. There is no
assurance that any further agreements will be reached or that agreements reached
will close in accordance with their terms. In the absence of a sale of the
entire Company, the Company intends to cease all of its operations by the end of
calendar 1998.

    Under the plan approved by the Company's Board of Directors, it is
anticipated that the Company will continue its operations, at a scaled back
level, through the end of calendar year 1998. Under this plan, the Company hopes
to avoid undue disruption to its customers, which will have an opportunity to
place orders for their forecasted needs, which the Company will strive to meet.
The Company believed that by endeavoring to keep its design and product
engineers in place as well as a scaled-back test site, it would have a better
chance of finding a buyer for the Company of all or part of its assets,
including its intellectual property. The Company has formed a business unit,
named BridgePoint, that contains its significantly scaled back sales, service
and manufacturing operations employees, as well as the inventory related to its
32-bit products. It is currently anticipated that BridgePoint will serve the
ROSS customers until year end and may be sold separately or as a part of the
entire Company (a letter of intent with respect to the sale of the Bridgepoint
operations was entered into on June 25, 1998).

      The Company at this time will seek to maximize its asset value for its
creditors. While the Company hopes to pay all of its creditors in full, its
ability to do so is dependent upon its ability to generate sufficient cash from
the sale of products and assets. The Company believes that it is highly unlikely
that there will be any funds or assets available for distribution to any
stockholders.

    As part of the preparation for the shutdown of the Company's business, the
Company has issued notices to its employees under the Federal Workers Adjustment
and Retraining Notification Act. These notices provided advance notice to all
employees of the scheduled termination of their employment in connection with
the shutdown. Approximately 93 employees, or 46% of the Company's work force
will be laid off as of July 31, 1998, excluding the approximately 30 full and
part time employees at the ROSS Design Center in Israel. The Company's 64-bit
"Viper" Development Team (including the Vice President of Engineering and the
Chief Architect), the BridgePoint operations, sales and service personnel
(including the Vice President of Manufacturing) and an administrative team
(including the Chief Executive Officer, Chief Financial Officer and Corporate
Controller), will continue to operate the smaller ROSS Company and pursue
alternatives, although the Company intends to lay-off the Viper development team
on July 31, 1998 if an agreement to sell those operations has not been reached
by that time.

   Historically, the Company depended solely upon its majority stockholder,
Fujitsu, for additions to capital necessary to continue its operations. On
September 30, 1997, the Company concluded a recapitalization transaction with
Fujitsu whereby the Company issued 500,000 shares of a new Series B Convertible
Preferred Stock to Fujitsu and Fujitsu paid $50 million on behalf of the Company
to DKB in partial payment of the Company's outstanding indebtedness to DKB and
in satisfaction of Fujitsu's obligation pursuant to certain loan guaranties
provided by Fujitsu to DKB. In connection



                                       17
<PAGE>   22

with the recapitalization transaction, Fujitsu provided a guaranty for a $20
million line of credit from DKB, which expired on March 31, 1998. Both the
credit facility and the guaranty have been extended to December 31, 1998. All of
such line of credit had been borrowed by the Company as of June 15, 1998. There
is no assurance that Fujitsu will agree to extend or renew the guaranty on its
existing terms or otherwise. In the absence of a renewal or extension of the
guaranty, the Company will default on the repayment of the line of credit as the
Company does not have the capability to pay off the line of credit in the
foreseeable future, if at all. See "Liquidity and Capital Resources."

   On June 25, 1997, the Company and Fujitsu entered into a Development
Agreement, pursuant to which, among other things, Fujitsu would pay the Company
an aggregate of $34.5 million in partial funding for the Company's Viper 64-bit
microprocessor chip development project and for a license of associated
intellectual property. The resulting technology will be co-owned by the Company
and Fujitsu, and each company will have the right to exploit the technology into
its own derivative products and to grant sublicenses on a limited basis.
Payments are to be made periodically through March 31, 1999, upon the attainment
of certain milestones, and are subject to reduction, and the contract is subject
to cancellation under certain conditions, if milestones are not met.

   During Fiscal 1998, the Company failed to timely meet certain of the
milestones set forth in the Viper Development Agreement. Fujitsu and the Company
amended such Agreement to provide for a redefinition of the deliverables
associated with such milestones. The Company does not anticipate attaining
future milestones and is in potential default of the Agreement.

   The Company believes that the development of the Viper product is over 120
days behind the schedule provided in the Viper Development Agreement. If Fujitsu
accepts any milestone set forth in the Viper Development Agreement more than
thirty days later than the due date set forth in that Agreement, the Company
must accrue a penalty of 10% of the payment from Fujitsu to the Company for
milestone achievement, subject to modification under certain circumstances.
Should the Company achieve First Customer Ship ("FCS") on or before the date set
forth in the Agreement, all penalties are waived. Since the Company will not
achieve FCS on or before the agreed date, it has accrued penalties aggregating
$1.2 million for late deliveries in Fiscal 1998, which are reflected in the
accompanying financial statements. Penalties for later milestones may also be
accrued if the Company cannot accelerate its development activities. Pursuant to
the Viper Development Agreement, Fujitsu may also terminate the Agreement if its
acceptance of a milestone, as defined in the Agreement, is more than 120 days 
later than specified in the Agreement. The Company and Fujitsu are in 
negotiations to terminate the Viper Development Agreement and the Company 
believes it is likely that such penalties will be waived.

LIQUIDITY AND CAPITAL RESOURCES

    The Company experienced significant negative cash flows during Fiscal 1998.
Historically, the Company has been dependent on Fujitsu for its capital 
requirements. In November 1996 the Company established a "New Credit Facility"
with DKB for a maximum principal amount of $25 million; in February 1997 such
New Credit Facility was increased to a maximum of $50 million. The New Credit
Facility was scheduled to expire on March 31, 1998, and was guaranteed by
Fujitsu until that date. In September 1997, a separate $10 million "Additional
Credit Facility" was established with DKB. This Additional Credit Facility
expired on September 30, 1997. On September 29, 1997, the principal amount
outstanding under both credit facilities was $56.0 million, with $50 million due
on December 31, 1997, and $6 million due on September 30, 1997. On September 30,
1997, the Company concluded a recapitalization transaction with Fujitsu, whereby
the Company issued 500,000 shares of a new Series B Convertible Preferred Stock
to Fujitsu and Fujitsu paid $50 million on behalf of the Company to DKB in
partial payment of the Company's outstanding indebtedness to DKB in satisfaction
of Fujitsu's obligation pursuant to certain loan guarantees provided by Fujitsu
to DKB. In connection with the recapitalization, Fujitsu provided a guarantee
for a replacement credit facility with DKB for a maximum principal amount of $20
million (which replaces the previous "New Credit Facility"). As noted above
under "Future Operating Results", the line of credit and guaranty was scheduled
to expire on March 31, 1998, but have been extended to December 31, 1998. As of
June 15, 1998, the Company has borrowed the maximum $20 million of available
credit provided by the existing credit facility. There is no assurance that DKB
will renew the line of credit or that Fujitsu will agree to extend or renew the
guaranty, on their existing terms or otherwise. In addition, there can be no
assurance that the Company will not experience negative cash




                                       18
<PAGE>   23

flow from operations and the Company may in the future be required to seek
additional external sources of financing to fund the shutdown of its operations,
which it does not believe it will be able to obtain from Fujitsu or any other
third party. Although the Company hopes it will have sufficient funds from sales
of its inventory and assets to fund an orderly shutdown of its operations, the
Company may be forced to seek protection under Federal bankruptcy laws.

    On May 18, 1998, the Company was informed by the Nasdaq National Market of
the Company's failure to maintain certain listing requirements - failure to
maintain a closing bid price of greater than or equal to $1.00 per share and
failure to maintain a market value of public float greater than or equal to $5
million. If the Company is unable to demonstrate compliance with these two rules
before August 13, 1998, the Company's securities will be delisted at the opening
of business on August 17, 1998. The Company does not believe that it will be
able to demonstrate compliance with such rules by the August 13, 1998 deadline.
The Company's Common Stock would continue to trade on the over-the-counter
bulletin board market maintained by the Nasdaq National Market.

    The Company's principal source of liquidity as of March 30, 1998, consisted
of $.8 million of cash and $5.0 million of unused credit availability pursuant
to its loan with DKB (the Company currently has no availability under this
credit facility). As of March 30, 1998, the Company had negative working capital
of $12.3 million, an accumulated deficit of $139.8 million and stockholders'
deficit of $9.0 million.

    During both Fiscal 1998 and Fiscal 1997, the Company extended payment terms
with many suppliers in order to increase the availability of on-hand cash. As a
result, the Company experienced difficulty in procuring inventory and
subcontract manufacturing services from some suppliers. Although relations with
some suppliers have improved given the more standard payment terms adhered to by
the Company during the last six months of Fiscal 1998, there can be no assurance
that the Company's various suppliers will continue to ship supplies to the
Company or that if they will ship supplies to the Company, that the associated
purchase terms will be favorable to the Company

    During Fiscal 1998, operating activities used cash of $16.9 million,
compared with $52.5 million of cash in Fiscal 1997, due primarily to a net loss
of $86.7 million in Fiscal 1997 compared with a net loss of $38.3 million in
Fiscal 1998. In Fiscal 1998, net inventory decreased $8.5 million primarily as a
result of a write-down for excess inventory. Accounts payable decreased $13.1
million due to the Company's substantial borrowing during Fiscal 1998. The
Company's payable to Fujitsu decreased similarly.

    The Company's investing activities in Fiscal 1998 used $6.2 million of cash,
a decrease from approximately $6.3 million for Fiscal 1997.

    Cash generated by financing activities decreased by $22.7 million in Fiscal
1998 from $43.7 million in Fiscal 1997. In Fiscal 1997 the Company borrowed
$43.5 million under the New Credit Facility from DKB.

    The Company's payment terms with Fujitsu for purchases of silicon wafers and
MDPs are longer than those generally available from other suppliers. Although
the Company believes that such payment terms will not change in the near future,
there can be no assurance that Fujitsu will continue to extend such favorable
terms to the Company. Shorter payment terms would increase the Company's cash
requirements.

    The Company projects that total payments under all operating leases
currently in place will be approximately $1.9 million and $1.1 million for each
of Fiscal 1999 and 2000, respectively. These leases primarily cover the
Company's existing administrative and test facilities. The Company anticipates
canceling or subleasing all of its leases on or before the end of calendar 1998.

    The Company does not intend to incur any significant additional capital
expenditures during the next 12 months.

    The Company's consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. However, the Company has
experienced recurring losses from operations and is experiencing difficulty in
generating sufficient cash flow to meet its obligations and sustain its
operations, which raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.



                                       19
<PAGE>   24

    As previously stated, the Company has begun an orderly shutdown of its
operations. As part of the shut down process, the Company intends to generate
cash from EOL sales of inventory and assets and does not believe that it will be
able to obtain any other type of financing for the shutdown of its operations.
The Company's failure to obtain sufficient additional cash could make it
impossible to conduct an orderly shutdown of its operations, forcing the Company
to seek protection under the Federal bankruptcy laws.

IMPACT OF YEAR 2000 ISSUE

    The Year 2000 issue results from the fact that many computer programs were
previously written using two digits rather than four to define the applicable
year. Programs written in this manner may recognize a date ending in "00" as the
year 1900 rather than the year 2000. As the Company intends to complete an
orderly shutdown of its operations by the end of calendar 1998, this issue is
not expected to impact upon its internal operations. As a manufacturer of
microprocessors, the Company does not sell any software and accordingly, does
not provide any warranty for the Year 2000. The Company formerly sold system
products and as part of such sales acted as a reseller of certain third party
software. The Company provided no warranties regarding Year 2000 compliance on
any products it resold.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The Consolidated Financial Statements of ROSS Technology, Inc. and
Subsidiary, and the report of independent auditors, are listed at Item 14 and
are included beginning on page F-1.

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

Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

    The following is a list of certain biographical information for the persons
currently serving as Board of Directors and or Executive Officers of the
Company. All ages are as of June 26, 1998.

    FRED T. MAY, 61, has served as Chairman of the Board of the Company since
March 1997, and served as Acting President and Chief Executive Officer from
March 1997 until May 1997. Mr. May has served as a Director of the Company since
1991 (except for the period from July 1993, when Fujitsu acquired the Company,
to December 1993), and served as Secretary of the Board from February 1994 until
October 1995. He retired from IBM in 1987 after serving 26 years in various
positions including Vice President of Engineering and Vice President of Product
Development for the Office Products Division, Development Laboratory Director in
Austin, Texas, and Development Engineering Manager for Advanced IBM
Workstations. Mr. May was on the staff of the Electrical and Computer
Engineering Department of the University of Texas at Austin from 1987 to 1993.
Mr. May holds as B.S. in Electrical Engineering from the University of Kentucky
and a M.S. in Electrical Engineering from the University of Tennessee, and has
over 30 years of experience in the computer industry. He has also been
self-employed as a management consultant since 1987.

    RYUSUKE HOSHIKAWA, 55, has served as Director of the Company since 1993. He
joined Fujitsu in 1968 and is presently a Director of Fujitsu and the Group
President of Fujitsu's LSI Products Group. Prior to holding that position, Mr.
Hoshikawa held various engineering and management positions with Fujitsu
including that of Group Senior Vice President of its Logic LSI Group, General
Manager of its Logic LSI Design Division and Manager of the IC Design Group. Mr.
Hoshikawa graduated from Hokkaido University with a Masters degree in
Electronics.

    MASAHIRO SAIDA, 53, has served as a Director of the Company since 1993. He
joined Fujitsu in 1967 and is presently the Senior Vice President, Computer
Systems Group and General Manager, File Systems Division. Prior to holding that
position, Mr. Saida held various engineering and management positions with
Fujitsu including that




                                       20
<PAGE>   25

of Deputy Group Manager of Fujitsu's Computer Systems Group, Manager of
Workstation Development and General Manager of its Open Systems Division. Mr.
Saida graduated from Kyoto University with a degree in Electronics.

    JACK W. SIMPSON, Sr., 56, has served as President and Chief Executive
Officer and a Director of the Company since May 1997. Mr. Simpson was the
President of the Network Systems Group of Scientific-Atlanta, Inc., an
electronics company, from October 1993 until May 1997. He was President of
Infobyte, Inc., a consulting firm, from December 1992 until October 1993. He
served as President of Mead Data Central (now Lexis-Nexis, Inc.), a wholly owned
subsidiary of the Mead Corporation from 1982 to 1992. Mr. Simpson graduated from
the University of Kentucky with an B.S. and a M.S. in Electrical Engineering.

    YASUSHI TAJIRI, 52, has served as a Director of the Company since 1993. He
joined Fujitsu in 1970 and is presently Senior Vice President of Amdahl
Corporation, a wholly owned subsidiary of Fujitsu. Prior to holding that
position, Mr. Tajiri held various management positions with Fujitsu including
that of General Manager of Fujitsu's Strategy and Planning Division Marketing
group and General Manager of its Business Development Division, International
Computer Business Group, Manager of its Information Systems Division,
International Operations Group, and Manager of its Business Development
Department II, International Operations Group. Mr. Tajiri graduated from Otaru
Business College with a degree in Commerce.

    EDWARD F. THOMPSON, 60, has served as a Director of the Company since 1995.
He also serves as a Senior Advisor to Fujitsu and acts as an independent board
member for or advisor to various other Fujitsu subsidiaries. From 1976 to 1994,
Mr. Thompson was employed by Amdahl Corporation (a manufacturer of mainframe
computers which is wholly owned by Fujitsu) in Sunnyvale, California, where he
held various management positions including Chief Financial Officer and
Corporate Secretary, as well as Chairman of the Board of its subsidiary, Amdahl
Capital Corporation. Mr. Thompson presently serves on the Boards of Directors of
HaL Computer Systems, Inc. and Fujitsu Computer Products of America, Inc., each
of which is a subsidiary of Fujitsu. He also serves as Chairman of the Board of
Directors of Systems Integrators Incorporated, which is not affiliated with
Fujitsu. Mr. Thompson has over 30 years experience in the computer and high
technology fields. Mr. Thompson holds a B.S. in Aeronautical and Astronautical
Engineering from the University of Illinois and an M.B.A. from Santa Clara
University.

    SEIICHI YOSHIKAWA, 52, has served as a Director of the Company since 1996.
He joined Fujitsu in 1969 and is presently the Group Senior Vice President of
Legal and Industry Relations. Prior to holding that position, Mr. Yoshikawa
served in a number of positions with Fujitsu, including Group Senior Vice
President of Fujitsu's Legal and Industry Relations Group. Mr. Yoshikawa
graduated from Tokyo University with a degree in law.

    FRANCIS S. (KIT) WEBSTER III, 52, joined the Company in April 1997 as the
Chief Financial Officer and Secretary of the Company. Mr. Webster was President
of Nirvana Systems, Inc., a PC-based securities analysis software developer in
Austin, from 1995 to 1997. Prior to joining Nirvana Systems, Mr. Webster served
as President and Chief Operating Officer of U.S. Medical Products, Inc., an
Austin-based manufacturer and distributor of orthopedic implants from 1992 to
1994, and from 1984 to 1994 as Senior Vice President and Chief Financial Officer
of the Continuum Company, Inc., an Austin-based provider of software and
services to the insurance industry. Mr. Webster is a Certified Public Accountant
and graduated from Rice University with a M.E.E. in Electrical Engineering in
1968.

    MICHELL K. ALSUP, 45, the Company's Chief Architect, joined the Company in
1991 and since that time has been responsible for architectural development of
the latest generation of hyperSPARC(TM) microprocessors and the Company's next
generation "Viper" microprocessor. Prior to joining the Company, Mr. Alsup spent
10 years at Motorola, Inc., where he acted as, among other things, the principal
designer of Motorola's 88000 line of microprocessors. Mr. Alsup spent three
years at NCR where he served as a project leader. Mr. Alsup graduated from
Carnegie-Mellon University in 1975 with a B.S. in Electrical Engineering.

    FRANK A. BAFFI, 47, joined the Company as the Vice President of Sales in
April 1997. Mr. Baffi was the Vice President, Worldwide Sales, of Crystal
Semiconductor, a manufacturer of semiconductor chips based in Austin,




                                       21
<PAGE>   26

Texas, from 1994 to 1997. From 1993 to 1994, Mr. Baffi was Western Regional
Sales Manager of Quality Semiconductor of San Jose, California, a manufacturer
of semiconductor chips, and from 1991 to 1993 Mr. Baffi was Southwest Regional
Vice President for Bell Microproducts of Milpitas, California, an electronics
distributor. Mr. Baffi graduated from Long Island University with an M.S. in
Electrical Engineering. Mr. Baffi has been laid off effective July 31, 1998.

    JOE D. JONES, 40, joined the Company in 1991 as the Director of Quality
Assurance, in 1993 assumed the position of Vice President of hyperSPARC(TM)
Operations and in 1995 became Vice President of Operations. Mr. Jones performs
production control, outside manufacturing management and customer quality
engineering functions for the Company. Prior to joining the Company, Mr. Jones
served as Qualilty Assurance Manager with Cypress Semiconductor, a producer of
semiconductor electronic devices, for five years, and in addition spent four
years with Advanced Micro Devices in various engineering and management
positions. Mr. Jones holds a B.S. in Chemical Engineering from the University of
Texas at Austin and has approximately 15 years of experience in the
semiconductor industry.

    TREVOR S. SMITH, 45, is one of the founders of the Company and served as its
Vice President of Design from its inception in 1988 until 1996 and Vice
President of Development from 1996 until June 1997, when be became Vice
President of Engineering. Prior to founding the Company, he spent three years
with Motorola, serving as, among other things, manager of MPU standard cell
cores and cell library development, and three years at ICL Limited, a European
computer design and manufacturing company, where he served as manager of CPU
development for Emitter Coupled Logic and CMOS mainframe CPUs. Mr. Smith holds a
B.Sc. in Physics and Electronic Engineering from the University of Manchester,
England, and has over 19 years of experience in the computer and microprocessor
industry.

    CARTER L. GODWIN, 32, joined the Company is 1992 as a financial analyst and
has since held various other positions with the Company including Accounting
Manager and his current position of Chief Accounting Officer and Corporate
Controller. From 1988 to 1991, Mr. Godwin worked as a staff accountant for Price
Waterhouse LLP. Mr. Godwin is a Certified Public Accountant and graduated from
the University of Texas at Austin with a B.B.A. in Accounting.



                                       22
<PAGE>   27



SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

    Under Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Directors and officers of the Company and persons who
beneficially own more that 10% of the Company's Common Stock are required to
file with the Securities and Exchange Commission and the Company reports of
ownership, and changes of ownership, of the Company's Common Stock. Based solely
on a review of the reports received by it, the Company believes that, during
Fiscal 1998, all Directors, officers and greater than 10% beneficial owners
complied with all applicable filing requirements under Section 16(a), except
that (i) Fujitsu Limited did not file an Annual Statement of Changes in
Beneficial Ownership of Securities for Fiscal 1998 and (ii) the Annual Statement
of Changes in Beneficial Ownership of Securities for each of the Company's
directors and executive officers was filed one day late. For the Company's
directors and executive officers, the number of transactions which were reported
late was (i) one, in the case of Messrs. Hoshikawa, Saida, Simpson, Tajiri,
Thompson and Yoshikawa (relating, in Mr. Simpson's case to an option grant, and,
in the case of the others, to the yearly automatic director option grant); (ii)
two, in the case of Messrs. Alsup, Godwin, Jones and Smith (relating to option
repricing and a single new option grant); (iii) three, in the case of Messrs.
Baffi and May (relating, in Mr. Baffi's case, to one stock purchase, one option
grant and option repricing,and, in Mr. May's case, to the yearly automatic
director option grant, one option grant and option repricing; and (iv) four, in
the case of Mr. Webster (relating to three option grants and option repricing).

ITEM 11. EXECUTIVE COMPENSATION

    The following Summary Compensation Table sets forth the compensation earned
by each person who served as the Company's President and the four other most
highly compensated executive officers of the Company whose annual salaries and
bonus exceeded $100,000 in total during Fiscal 1998 (collectively, the "Named
Officers") for services rendered in all capacities to the Company and its
subsidiaries for that and the previous year:

                           SUMMARY COMPENSATION TABLE


<TABLE>
<CAPTION>
                                                             ANNUAL                           LONG-TERM
                                                        COMPENSATION ($) (*)                 COMPENSATION
                                                      ----------------------                 ------------
                                                                                    SECURITIES
                                                                                    UNDERLYING            ALL OTHER
    NAME AND PRINCIPLE POSITION       FISCAL YEAR     SALARY       BONUS (1)        OPTIONS (2)          COMPENSATION
    ---------------------------       -----------     ------       ---------        -----------          ------------
<S>                                  <C>             <C>          <C>               <C>                 <C>
Fred May (3).......................       1998          --             --               182,000             150,667 (8)
    Chairman of the Board .........       1997          --             --                 2,000              70,083 (9)
Jack W. Simpson, Sr................       1998        266,189       200,000 (4)       1,000,000             479,564 (5)
    President and CEO..............       1997          --             --                --                   --
 Frank A. Baffi....................       1998        156,923       110,458             250,000               --
    Vice President of Sales........       1997          --             --                --                   --
 Trevor S. Smith (10)..............       1998        220,100        30,000             144,445              38,729 (6)
    Vice President of Engineering..       1997        208,426       208,426 (7)          44,444               --
 Mitchell K. Alsup (10)............       1998        217,508        30,000             135,556               --
    Chief Architect................       1997        217,508       217,508 (7)          35,556               --
Francis S. (Kit) Webster III.......       1998        158,154        75,000             250,000               --
    Chief Financial Officer and ...       1997          --             --                --                   --
    Secretary
</TABLE>

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

(*)      Certain of the Named Officers received personal benefits in addition to
         salary and cash bonuses, including car allowances. However, the
         aggregate amount of such personal benefits for any Named Officer did
         not exceed the lesser of $50,000 and 10% of the total of the annual
         salary and bonus reported for such Named Officer.

(1)      Except as otherwise noted, reflects bonuses earned based upon
         attainment of goals established by the Company's Board of Directors.




                                       23
<PAGE>   28

(2)      Messrs. Alsup and Smith option grants include replacement options to
         purchase 35,556 shares and 44,444 shares of Common Stock, respectively,
         which were originally issued in February 1997. This action was part of
         the implementation process to reprice the Company's outstanding stock
         options as authorized by the Company's Board of Directors. All other
         grants in Fiscal 1998, represent options authorized by the Company's
         Board of Directors in accordance with the Company's Stock Option Plan.
         For Messrs. Webster and Baffi a portion of their Fiscal 1998 grants
         were both issued and repriced during Fiscal 1998.

(3)      Compensation information is included regarding Mr. May because he
         served as the Company's Acting President and Chief Executive Officer
         from March 3, 1997 to May 21, 1997. Includes compensation earned by Mr.
         May in his capacity as a Director.

(4)      Includes $130,000 designed to replace the bonus Mr. Simpson would have
         received from his former employer.

(5)      Consists of (i) $374,071 for the funding of a deferred annuity designed
         to replace the SERP plan of his former employer; (ii) $79,662 for life
         insurance premiums for the purpose of replacing Mr. Simpson's prior
         policy with his former employer and (iii) $25,831 for temporary living
         expenses.

(6)      Consists of payment of accrued vacation balance.

(7)      Reflects bonuses earned pursuant to then-existing employment
         agreements.

(8)      Consists of (i) $50,000 paid to Mr. May as a consulting fee for his
         services during Fiscal 1998 as Acting President and Chief Executive
         Officer of the Company and (ii) $100,667 of Directors and Chairman
         fees. Mr. May's compensation for his services as Acting President and
         Chief Executive Officer was in lieu of any Directors' fees he would
         have been otherwise entitled to during the period of such services.

(9)      Consists of (a) $25,000 paid to Mr. May as a consulting fee for his
         services during Fiscal 1997 as Acting President and Chief Executive
         Officer of the Company and (b) $45,083 of Directors' fees. Mr. May's
         compensation for his services as Acting President and Chief Executive
         Officer was in lieu of any Directors' and Chairman fees he would have
         been otherwise entitled to during the period of such services.

(10)     Messrs. Alsup and Smith received the above-described compensation for
         Fiscal 1996 and a portion of Fiscal 1997 pursuant to employment
         agreements with the Company, which expired in accordance with their
         terms on June 30, 1996. Messrs. Alsup and Smith continue to be employed
         by the Company without employment agreements.


EMPLOYEE RETENTION AND SEVERANCE PLAN

    As previously discussed, the Company has commenced an orderly shutdown of
its operations. In conjunction with this process and in order to provide certain
employees with an incentive to continue his or her employment with the Company,
the Company adopted an Employee Retention and Severance Plan (the "Retention
Plan"). Also as part of the orderly shutdown, the Company provided severance
packages to all eligible terminated employees as required by its general
severance policy. All of the executive officers, excluding Frank Baffi, have
been retained pursuant to individual retention agreements. Given the Company's
uncertain financial position, retention agreements were provided by the Company
to such executive officers to provide incentive so that the key personnel
necessary to effect the sale of the Company's assets remained with the Company
until such time that their services are no longer required. The total cost of
the Retention Plan and severance packages totals $5.2 million, of which $3.2
million related to prior contractual obligations of the Company and obligations
of the Company under its general severance policy. The retention amounts
applicable to the Named Officers are set forth in the following table, excluding
any amounts otherwise due under employment agreements (see "Employment
Agreements and Change-in-Control Arrangements"):


                        EXECUTIVE RETENTION AND SEVERANCE

             Jack W. Simpson ...............    $       576,854
             Francis S. (Kit) Webster III ..    $       185,000
             Mitchell K. Alsup .............    $       250,000
             Trevor S. Smith ...............    $       250,000

    In general, the individual retention letters issued to the Company's
executive officers and other eligible employees (namely, the members of the
Company's "Viper" development design team, the BridgePoint manufacturing,
operations and customer service personnel and certain administrative personnel)
entitle such officer or employee to receive certain retention and severance
payments so long as, among other things, such officer or employee maintains his
or her employment with the Company through a specified date. Certain of the
individual retention letters also require the affected officer or employee to
continue his or her employment with the Company or a successor to certain of its
operations in order to be eligible to receive a retention and/or severance
payment. Fujitsu has provided assurances to the Company regarding payment of
such individual retention amounts predicated each such employee's entitlement to
such retention amount.



                                       24
<PAGE>   29



OPTION GRANTS DURING FISCAL 1998

The following table lists the stock options granted to the Named Officers during
Fiscal 1998:

<TABLE>
<CAPTION>

                                      INDIVIDUAL GRANTS (a)
                         -------------------------------------------------        POTENTIAL REALIZABE
                                                                                        VALUE AT
                           NUMBER OF    % OF TOTAL                                  ASSUMED ANNUAL
                          SECURITIES      OPTIONS                               PRICE APPRECIATION
                          UNDERLYING     GRANTED TO    EXERCISE                FOR OPTION TERM (b) ($)
                           OPTIONS      EMPLOYEES     PRICE PER EXPIRATION  ---------------------------------
                          GRANTED (#) IN FISCAL YEAR  SHARE ($)    DATE         0%          5%        10%
                         ------------ -------------- ---------- ----------  ----------- --------- -----------
<S>                        <C>            <C>         <C>       <C>         <C>          <C>       <C>
Jack Simpson..........     1,000,000      20.72            (1)   12/10/07     202,000     871,115   1,896,749
Kit Webster (2).......       250,000       5.18         1.063    12/10/07       --        167,129     423,537
Mitchell K. Alsup (2).       135,556       2.81         1.063    12/10/07       --         90,621     229,652
Trevor  S.  Smith (2).       144,445       2.90         1.063    12/10/07       --         96,564     224,711
Frank Baffi (2).......       250,000       5.18         1.063    12/10/07       --        167,129     423,537
</TABLE>

(a) These options were granted under the Stock Option Plan with an exercise
    price equal to the closing price of the Company's Common Stock on the Nasdaq
    National Market System on the date of grant (except for options to purchase
    200,000 shares granted to Mr. Simpson with an exercise price equal to
    $0.05). The table does not include a grant to Fred T. May on February 17,
    1998 of options to purchase 180,000 shares of the Company's Common stock
    with an exercise price of $1.0625 per share and vesting one-third on the
    date of the grant with the remainder vesting ratably over the next 24
    months. Mr. May received such grant in his capacity as the Company's
    Chairman of the Board.

(b) The amounts shown are not the values of the options on the date they were
    granted. Instead, these are hypothetical future values based on the
    difference between the option exercise price and the assumed future Common
    Stock price at the end of the 10-year term of the options using hypothetical
    rates of annual stock price appreciation of 0%, 5% and 10%, respectively. It
    is highly unlikely that the appreciation rates specified in the table will
    occur.

(1) Exercise price per share for Mr. Simpson' options are as follows: 200,000 as
    $.05 per share and 800,000 shares at $1.063 per share.

(2) Messrs. Alsup and Smith's option grants include replacement options to
    purchase 35,556 shares and 44,444 shares of Common Stock, respectively,
    which were originally issued in February 1997. All Named Officers, excluding
    Mr. Simpson, received option grants during Fiscal 1998 which were
    subsequently relinquished in order to effect the repricing of such options
    and such option grants were replaced with an equivalent number of new option
    grants priced at $1.063

    Options granted to the Named Officers in Fiscal 1998 (other than the options
issued to Mr. Simpson pursuant to his employment agreement) vest one-fourth, one
year from the grant date, with the remaining three-fourths to vest in thirty-six
equal monthly installments, and may be exercised as to the vested portion
beginning one year after the grant date (for vesting information relating to Mr.
Simpson's options, see "Employment Agreements and Change-in-Control
Arrangements"). In addition, all of the options will vest in connection with a
"Major Event" (as defined in the Stock Option Plan) relating to the Company,
which will be deemed to have occurred if (a) any person or group other than
Fujitsu or its affiliates becomes the beneficial owner of securities of the
Company, or of any entity resulting from a merger or consolidation of the
Company, representing more than 50 percent of the combined voting power of the
Company or such entity, (b) Fujitsu or its affiliates directly or indirectly
acquire all of the outstanding Common Stock of the Company, or (c) a merger,
consolidation, or reorganization to which the Company is a party, or a sale of
substantially all of the assets of the Company, is consummated, if persons who
are not stockholders of the Company immediately before the consummation of such
transaction or Fujitsu or its affiliates are the beneficial owners, immediately
following the consummation of such transaction, of more than 50% of the combined
voting power of the outstanding securities of the Company or the entity
resulting from such transaction. The options expire 10 years from the date of
grant, six months after termination of employment, or eighteen months after
termination of employment due to the death or permanent disability of the
optionee (subject, in the case of Mr. Simpson, to certain additional conditions
and exceptions as required by his employment agreement).




                                       25
<PAGE>   30

EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS

    Effective May 21, 1997, Mr. Simpson was hired as the Company's President and
Chief Executive Officer. In conjunction with his employment, the Company entered
into a four-year employment agreement with Mr. Simpson (which replaced the
letter agreement previously entered into by the Company and Mr. Simpson and
which, among other things, provided that the Company and Mr. Simpson would enter
into a four-year employment agreement). The Company offered Mr. Simpson an
attractive compensation package in order to convince him to leave Scientific
Atlanta, Inc. ("SFA") after three and a half years as President of Network
Systems at that company. Pursuant to this arrangement, Mr. Simpson's base salary
for Fiscal 1998 was computed based upon an annual rate of $349,960, with an
annual review for merit purposes. Mr. Simpson is also eligible to receive
bonuses based on the Company's meeting certain predetermined goals and
objectives set by the Board, up to a maximum of 100% of his base salary based on
the Company's exceeding goals by 50% and/or tied directly to the Company's stock
price. Pursuant to the employment arrangement, Mr. Simpson received a
replacement bonus of $130,000, life insurance with a face value equal to three
times his annual salary and bonus, and a deferred annuity targeted to yield
approximately $150,000 per year at age 60, to replace salary, insurance
policies, and SERP plans he had while an officer at SFA. Mr. Simpson is also
eligible for the Company's standard holiday and benefits programs.

    Among other things, the employment agreement obligated the Company to grant
Mr. Simpson 100,000 stock options at an exercise price of $.05 per share,
vesting 50% on April 1, 1998 and 50% on April 1, 1999; 400,000 stock options at
an exercise price equal to the closing price of the Company's Common Stock on
the Nasdaq National Market System on Mr. Simpson's date of hire, which price was
$2.437, and vesting 100,000 immediately, and the remainder at a rate of 6,250
per month over the next four years (these options were not formally granted by
the Company until December 10, 1997, at which time such options were issued with
an exercise price equal to the closing price of the Company's Common Stock on
that date); and 100,000 performance-related stock options at an exercise price
of $.05 per share, vesting 50% when the average closing price of the Company's
Common Stock exceeds $4.00 per share, and 50% when such average closing price
exceeds the price on Mr. Simpson's date of hire by $7.00 per share. The grants
of options to Mr. Simpson were conditioned upon stockholder approval of the
amendment and restatement of the Company's Stock Option and Restated Stock
Purchase Plan 2.0 as the Stock Option Plan which, among other things, increased
the number of shares of Common Stock which may be issued pursuant to such plan.

    Except for his performance-related options, all of Mr. Simpson's options
will vest in the event of a Major Event. The options will expire 10 years from
the date of grant, six months after termination of employment, or eighteen
months after termination of employment due to the death or permanent disability
of Mr. Simpson (subject to certain exceptions). In the event Mr. Simpson's
employment is terminated without cause (or if Mr. Simpson terminates his
employment voluntarily following the occurrence of a Major Event following which
the Company ceases to be a public company (a "Going Private Event")), the
Company will continue to pay his direct compensation and to fund insurance and
medical benefits for a period of 24 months. Mr. Simpson's stock options,
excluding performance-related stock options, will continue to vest for the
twenty-four month period. In addition, if Mr. Simpson is terminated without
cause (or if Mr. Simpson terminates his employment voluntarily following the
occurrence of a Going Private Event), the Company will fund Mr. Simpson's
annuity for a minimum of 24 months from Mr. Simpson's hire date (with a
day-for-day extension for each day that Mr. Simpson continues his employment
with the Company after the consummation of a Going Private Event). Mr. Simpson
may also be terminated for cause without any severance benefits, provided that
he is properly alerted and given fair opportunity to explain or correct the
stated cause. "Cause" is restricted to actions or events where Mr. Simpson has
responsibility and accountability.

    Pursuant to a letter agreement dated April 1, 1997 (as subsequently
amended), Mr. Webster was hired as the Company's Chief Financial Officer (and
was subsequently appointed Secretary) at a base salary of approximately $150,000
(later increased to $185,000). Mr. Webster may also earn an incentive bonus of
up to $100,000, with the qualifying standards to be determined by mutual
agreement of Mr. Webster, the Company's Chief Executive Officer and the Human
Resources Committee of the Board of Directors. Mr. Webster is also eligible to
participate in the Stock Option Plan. Pursuant to his letter agreement, Mr.
Webster received an initial grant of 100,000 options under the Stock Option Plan
at an exercise price of $1.625 per share, the closing price of the Company's
Common Stock on the NASDAQ National Market System on April 16, 1997, the first
date of Mr. Webster's employment. Mr. Webster also received an additional grant
of 150,000 options under the Stock Option Plan in Fiscal 1998 (excluding grants
of 100,000 replacement options to effect a repricing of outstanding stock
options). All of Mr. Webster's options will vest upon the occurrence of a Major
Event. If Mr. Webster's employment is terminated without cause (or if



                                       26
<PAGE>   31

Mr. Webster voluntarily terminates his employment following the occurrence of a
Going Private Event), the Company will continue to pay his base salary for a
period of twelve months following the date of termination.

    Pursuant to a letter agreement dated April 12, 1997 (as subsequently
amended), Mr. Baffi was hired as the Company's Vice President of Sales at a base
salary of approximately $170,000, subject to merit review during the Company's
merit review cycle. Mr. Baffi is also eligible for a sales commission plan of up
to 100% of his base salary, with the qualifying standards to be determined by
mutual agreement of Mr. Baffi, the Company's Chief Executive Officer and the
Human Resources Committee of the Board of Directors. Mr. Baffi is also eligible
to participate in the Stock Option Plan. Pursuant to his letter agreement, Mr.
Baffi received an initial grant of 150,000 options under the Stock Option Plan
at an exercise price of $1.812 per share, the closing price of the Company's
Common Stock on the NASDAQ National Market System on April 28, 1997, the first
date of Mr. Baffi's employment, such options to vest 25% after one year of
employment, with the remainder vesting ratably over the next three year period.
All of Mr. Baffi's options will vest upon the occurrence of a Major Event. In
Fiscal 1998, Mr. Baffi also received an additional grant of 100,000 options
under the Stock Option Plan (excluding grants of replacement options to effect a
repricing of outstanding stock options). If Mr. Baffi's employment is terminated
without cause, the vesting of Mr. Baffi's stock options will be accelerated by
twelve months. In addition, if Mr. Baffi's employment is terminated without
cause, or if Mr. Baffi voluntarily terminates his employment following the
occurrence of a Going Private Event, the Company will continue to pay his base
salary for a period of twelve months following the date of termination. In
addition, pursuant to his letter agreement, a twelve month acceleration of Mr.
Baffi's stock options will occur if, without Mr. Baffi's agreement, (a) Mr.
Baffi's job is located outside the general area of Austin, Texas, requiring Mr.
Baffi to relocate, (b) Mr. Baffi ceases to report directly to the Company's
Chief Executive Officer or President, or (c) Mr. Baffi is no longer the senior
corporate executive whose principal responsibility is the management and
direction of the Company's sales function.

    The Company entered into employment agreements, effective June 1993, with
Messrs. Alsup and Smith, which agreements expired in accordance with their
respective terms on June 30, 1996. During the term of their respective
agreements, Mr. Alsup served as the Company's Chief Architect and Mr. Smith
served as the Company's Vice President of Design and later as Vice President of
Development. Under their respective employment agreements, as of the end of
Fiscal 1996, Messrs. Alsup and Smith were entitled to receive base salaries of
$205,196 and $196,630 per year, respectively, each payable in bi-weekly
installments. In addition, the agreements entitled Messrs. Alsup and Smith to
certain life, health, dental insurance and other benefits, and to receive each
year a minimum annual incentive bonus, which for the twelve months ending June
30, 1996 was equal to 100% of their then respective base salaries.

    Following the expiration of each of the above-listed employment agreements
with Messrs. Alsup and Smith, each of such officers has continued to be employed
by the Company in his current position without an employment contract (although
commencing June 1997, Messrs. Alsup and Smith have each received letters from
the Company which, among other things, confirm their salaries and provide for
vesting of their options upon the occurrence of a Major Event).

    In addition, Messrs. Simpson, Webster, Alsup and Smith have received
individual retention letters under the Retention Plan. See "Employee Retention
and Severance Plan."

1995 QUALIFIED EMPLOYEE STOCK PURCHASE PLAN

    To provide employees with an opportunity to purchase Common Stock through
payroll deductions, the Company established the 1995 Qualified Employee Stock
Purchase Plan (the "ESPP"). The ESPP is intended to qualify for preferential tax
treatment under Section 423 of the Code. Under the ESPP, the Company's
employees, subject to certain restrictions described below, may purchase in the
aggregate up to 40,000 shares of Common Stock at less than the fair market value
of such shares.

    The ESPP is administered by the Stock Option Committee, and provides for
consecutive 24-month offering periods, beginning every six months, with exercise
dates at the end of each six-month period. The first 24-month offering period
commenced August 1, 1996. Each eligible employee who enrolls at the commencement
of any such offering period will be given an option to purchase shares during
such period at the lesser of 85% of (a) the fair market value on the
commencement date of the offering period or (b) the fair market value on the day
prior to the last day of the six-



                                       27
<PAGE>   32

month exercise period. In addition, if the fair market value of a share of
Common Stock is lower at the end of any six-month exercise period than it was at
the beginning of the 24-month offering period, a new 24-month offering period
will automatically commence on the day after that exercise date and all
participants will be automatically enrolled in a new 24-month offering period
(unless the participant objects in writing prior to such re-enrollment).
Purchases under the ESPP will be funded with deductions from a participating
employee's compensation, which may not exceed 10% nor be less than 2% of such
employee's compensation during any offering period. Further, no employee may be
granted options to purchase more than $25,000 of fair market value of Common
Stock during any calendar year.

    A total of 40,000 shares of Common Stock have been reserved for issuance
under the ESPP, and, as of June 30, 1998, 33,175 shares of Common Stock have
been issued under the ESPP.

401(k) PLAN

    Effective January 1, 1989, the Company implemented its 401(k) Plan and Trust
(the "401(k) Plan"), pursuant to which each employee of the Company may elect to
defer into the 401(k) Plan a percentage of his or her salary, not to exceed
certain statutory limits. Each employee is eligible to begin participation in
the 401(k) Plan on the first day of the first month coinciding with or following
his or her date of hire by the Company. The Company may make discretionary
contributions to the 401(k) Plan on behalf of any participating employee in an
amount to be determined by the Board. Such discretionary Company contributions
are 20% vested after two years of service and continue to vest at a rate of 20%
per additional year of service thereafter. Salary deferral contributions are
100% vested when made. As of June 30, 1998, the Company had not made a
contribution to the 401(k) Plan for Fiscal 1998 and does not expect to make such
a contribution.

INDEMNIFICATION AGREEMENTS

    The Company has entered or will enter into separate indemnification
agreements with each of its current Directors and officers that require the
Company, among other things, to indemnify them against certain liabilities which
may arise by reason of their status or service as Directors or officers. The
Company believes that these agreements and its Certificate of Incorporation and
Bylaw provisions regarding indemnification of Directors and officers are
necessary to attract and retain qualified persons as Directors and officers.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

    The Human Resources Committee consists of Messrs. Yoshikawa (Chairman), May,
Tajiri and Thompson. None of Messrs. Yoshikawa, Tajiri and Thompson are or were
officers or employees of the Company or any of its subsidiaries, while Mr. May
is currently the Chairman of the Board of the Company and served as Acting
President and Chief Executive Officer from March 1997 until May 1997 and
received compensation therefor. None of the members of the Human Resources
Committee had any other relationships which would require disclosure by the
Company pursuant to Item 404 of Regulation S-K ("Certain Relationships and
Related Transactions").

DIRECTOR COMPENSATION

    The members of the Board of Directors who are employed by Fujitsu or by the
Company receive no separate remuneration for acting as Directors of the Company.
The Board has implemented a policy pursuant to which Messrs. May and Thompson
and all other Directors who are not employees of the Company or of any five
percent stockholder of the Company are paid an annual fee of $10,000 per year
for service on the Board of Directors, plus $10,000 per year for each committee
on which such Director also serves ($25,000 in the case of the Ad Hoc Committee
established by the Board of Directors to make recommendations to the full Board
of Directors in connection with asset sales and similar transactions relating to
the Company's shutdown plan). Each such Director is also paid $1,500 per day for
in-person attendance at Board and committee meetings and $500 per day for
telephonic attendance at such meetings (no meeting fees are paid for meetings of
the Ad Hoc Committee). Mr. May did not receive any separate compensation for his
services as a Director during the period he served as the Company's Acting
President and Chief Executive Officer. Under the current policy, a Director's
aggregate compensation (excluding reimbursement of expenses) for service as a
Director for any calendar year may not exceed $100,000 (exclusive of amounts
received for service on the Ad Hoc



                                       28
<PAGE>   33

Committee). Effective June 1997, Mr. May receives an additional $3,500 per month
for his services as Chairman of the Board of the Company (which is not included
in the $100,000 limit). The Board has the authority to revise this fee structure
at its discretion.

    All Directors are entitled to receive reimbursement for expenses incurred in
connection with service on the Board or Board committees. In addition, all
Directors are eligible to participate in, and have received option grants under,
the Stock Plan. The Stock Plan provides for the automatic grant of non-qualified
stock options ("NSOs") to Directors who are not substantially full-time
employees of the Company, including any Director who is an employee or designee
of any stockholder if such stockholder permits the Director to hold the options
as his or her personal property (a "Qualifying Director"). Each person who
becomes a Qualifying Director after September 1995 will initially be granted an
NSO to purchase 10,000 shares of Common Stock on the date he or she first
becomes a Qualifying Director, which NSO shall vest ratably each month over four
years and have a term of ten years from the grant date, unless he or she
otherwise received Company options within one year prior to such date. In
addition, on each August 31 thereafter, each Qualifying Director will receive
another NSO to purchase an additional 2,000 shares of Common Stock (an "Annual
Director Grant"), which will vest ratably each month during the 37th through
48th months following the grant date and have a term of ten years from the grant
date. All such NSOs must have an exercise price not less than the per share fair
market value on the date of grant. Qualifying Directors are also eligible to
receive discretionary grants (from September 1995 to July 1997, Qualifying
Directors were not eligible to receive discretionary grants). On February 17,
1998, the Company issued Mr. May options to purchase 180,000 shares of the
Company's Common Stock at an exercise price equal to $1.0625 per share and
vesting immediately as to one-third of the shares, with the remainder vesting
ratably over the next twenty four months.



                                       29
<PAGE>   34

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The following table sets forth as of June 30, 1998 information as to the
beneficial ownership of the Company's Common Stock by (i) each person who is
known by the Company to own beneficially more than 5% of its outstanding shares
of Common Stock (for whom addresses are also provided), (ii) each of the
Company's Directors, (iii) each Named Officer, and (iv) all Directors and
executive officers of the Company as a group. In each instance, information as
to the number of shares beneficially owned and the nature of ownership has been
provided by the individual or entity identified or described and is not within
the direct knowledge of the Company.

<TABLE>
<CAPTION>
                  NAME AND ADDRESS OF                      BENEFICIAL        PERCENT OF
                 BENEFICIAL OWNER (1)                      OWNERSHIP          CLASS (2)
          ------------------------------------         ---------------------------------
<S>                                                     <C>              <C>
          Fujitsu Limited(3)..................                14,078,571       59.97%
               1-1, kamikodanaka 4-Chome
               Nakahara-Ku
               Kawasaki 211-88 Japan
          Roger D. Ross(3)(4).................                 1,209,260        5.15%
               One Highland Center
               Marble Falls, Texas 78645
          Mitchell K. Alsup...................                   320,001        1.36%
          Trevor  S.  Smith ..................                   400,001        1.70%
          Fred T. May(5) .....................                    97,501          *
          Jack W. Simpson, Sr.(6) ............                   218,500          *
          Francis S. (Kit) Webster III .......                        --          *
          Frank A. Baffi .....................                     5,000          *
          Edward F.  Thompson(7) .............                    45,000          *
          Ryusuke Hoshikawa(8)(9) ............                     7,500          *
          Masahiro Saida(9)(10) ..............                     7,500          *
          Yasushi Tajiri(9) ..................                        --          *
          Seiichi Yoshikawa(9)(11) ...........                     6,458          *
          All Directors and Executive ........                 1,197,566        5.10%
              Officers as a group (13 persons)

</TABLE>

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

*   Represents beneficial ownership of less than 1% of the Common Stock.

(1) Addresses provided for beneficial owners of more than 5% of the Common
    Stock.

(2) Applicable percentages of beneficial ownership are based on 23,476,965
    shares of Common Stock outstanding as of June 30, 1998. Additionally, where
    applicable, shares of Common Stock underlying options exercisable by any
    listed stockholder within 60 days of June 30, 1998 have been deemed to be
    outstanding and beneficially owned by such stockholder, but only for
    purposes of determining such stockholder's (and not any other stockholder's)
    percentage holdings.

(3) The Company, Fujitsu, Sun and Mr. Ross have entered into a Shareholders
    Agreement pursuant to which Sun has agreed to vote its shares of Common
    Stock in favor of the slate of nominees to the Company's Board of Directors
    approved by the Board, which slate will include, under certain
    circumstances, an individual designated by Sun. Pursuant to this agreement,
    Fujitsu and Mr. Ross (so long as he owns at least 5% of the outstanding
    shares of the Company's Common Stock) have agreed to vote under certain
    circumstances for a designee of Sun. Sun currently does not have a designee
    on the Company's Board of Directors. Fujitsu also owns all of the Company's
    outstanding Series B Convertible Preferred Stock.

(4) Includes options exercisable for 59,259 shares of Common Stock which have
    vested or will vest within 60 days of June 30, 1998. Also includes 10,000
    shares beneficially held by Mr. Ross' spouse, although Mr. Ross disclaims
    beneficial ownership of such shares.

(5) Includes options exercisable for 97,500 shares of Common Stock which have
    vested or will vest within 60 days of June 30, 1998. During Fiscal 1998, the
    Company determined that Mr. May had been ineligible to receive grants of
    incentive stock options to purchase 96,000 shares of the Company's common
    stock previously granted by the Company and those option grants were void.
    Accordingly, Mr. May's previous exercises of those options were also void.

(6) Includes options exercisable for 187,500 shares of Common Stock which have
    vested or will vest within 60 days of June 30, 1998.

(7) Includes options exercisable for 40,000 shares of Common Stock which have
    vested or will vest within 60 days of June 30, 1998.

(8) Includes options exercisable for 7,500 shares of Common Stock which have
    vested or will vest within 60 days of June 30, 1998.



                                       30
<PAGE>   35

(9)  Beneficial ownership of shares held by Fujitsu is not attributed to
     Directors who are employees of Fujitsu.

(10) Includes options exercisable for 7,500 shares of Common Stock which have
     vested or will vest within 60 days of June 30, 1998.

(12) Includes options exercisable for 6,458 shares of Common Stock which have
     vested or will vest within 60 days of June 30, 1998.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    From April 1, 1997 to March 30, 1998, the Company purchased a significant
portion of its wafer fabrication needs, in addition to other computer related
products, from Fujitsu and its affiliates. Such purchases totaled approximately
$9.4 million in the aggregate over such period. During the same period, the
Company sold microprocessor products to Fujitsu and its affiliates for an
aggregate amount of approximately $15.3 million. The Company believes that the
above-described purchases from and sales to Fujitsu and its affiliates were on
terms comparable to those available from unaffiliated suppliers or purchasers,
as the case may be, except that Fujitsu generally provides more favorable
payment terms to the Company than are otherwise commercially available.

    During Fiscal 1997 the Company entered into a Development Agreement with
Fujitsu whereby Fujitsu would fund $4.5 towards the development of a derivative
of the Company's Colorado 4 microprocessor for use in embedded control
applications. During fiscal 1997, Fujitsu paid the Company $3.5 million pursuant
to this agreement. The remaining $1.0 was received by the Company as of the end
of April 1998.

    On June 25, 1997, the Company and Fujitsu entered into a Development
Agreement, pursuant to which, among other things, Fujitsu would pay the Company
an aggregate of $34.5 million in partial funding for the Company's "Viper"
64-bit microprocessor development project and for a license for associated
intellectual property. The resulting technology will be co-owned by the Company
and Fujitsu, and each company will have the right to exploit the technology in
derivative products and to grant sublicenses on a limited basis. Payments are to
be made periodically through March 31, 1999, upon the attainment of certain
milestones, and are subject to reduction, and the contract is subject to
cancellation under certain conditions if milestones are not met. During Fiscal
1998, the Development Agreement was amended on September 29, 1997, December 26,
1997 and March 19, 1998 providing the Company relief from certain milestone
attainment criteria. As of June 1998, the Company has received $16.5 million and
recorded $1.2 million of penalties pursuant to this agreement. Such penalties
are payable only if the Company fails to deliver the final milestone as defined
by the Development Agreement. The Company will not deliver the final milestone.

    In November 1996 the Company established a "New Credit Facility" with DKB
for a maximum principal amount of $25 million; in February 1997 such New Credit
Facility was increased to a maximum of $50 million. The New Credit Facility was
scheduled to expire on March 31, 1998, and was guaranteed by Fujitsu until that
date. In September 1997, a separate $10 million "Additional Credit Facility" was
established with DKB. This Additional Credit Facility expired on September 30,
1997. At September 29, 1997, the principal amount outstanding under both credit
facilities was $56.0 million, with $50 million due on December 31, 1997, and $6
million due on September 30, 1997. On September 30, 1997, the Company concluded
a recapitalization transaction with Fujitsu, whereby the Company issued 500,000
shares of a new Series B Convertible Preferred Stock to Fujitsu and Fujitsu paid
$50 million on behalf of the Company to DKB in partial payment of the Company's
outstanding indebtedness to DKB in satisfaction of Fujitsu's obligation pursuant
to certain loan guarantees provided by Fujitsu to DKB. In connection with the
recapitalization, Fujitsu provided a guarantee for a replacement credit facility
with DKB for a maximum principal amount of $20 million (which replaces the
previous "New Credit Facility"). As noted above under "Future Operating
Results", the line of credit and guaranty was scheduled to expire on March 31,
1998, but have been extended to December 31, 1998. As of June 15, 1998, the
Company has borrowed the maximum $20 million of available credit provided by the
existing credit facility.

    The Company and Fujitsu are negotiating an asset purchase agreement pursuant
to which Fujitsu will purchase certain intellectual property rights from the
Company (with a royalty-free license back to the Company for some of those
rights). The Company and Fujitsu have also reached an agreement in principle
pursuant to which Fujitsu would acquire ROSS Israel from the Company.



                                       31
<PAGE>   36

    In connection with the orderly shutdown of the Company's operations, the
Company and Fujitsu are also in the process of negotiating the termination of
all of the existing development and license agreements between the two
Companies, including the Viper Development Agreement. The Company believes that
it is likely that the termination of the Viper Development Agreement will
include a waiver of the penalties accrued by the Company under that agreement.



                                       32
<PAGE>   37



                                     PART IV

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

    (a) (1) and (2) Financial Statements and Schedules
                 Index to Financial Statements .......  F-1

    All other schedules for which provision is made in the applicable rules and
regulations of the Securities and Exchange Commission have been omitted as the
schedules are not required under the related instructions, are not applicable,
or the information required thereby is set forth in the consolidated financial
statements or notes thereto.

        (3) Exhibits  

  Exhibit
    No.                       Description
    ---                       -----------

    3.1      ---- Restated Certificate of Incorporation of Registrant*

    3.2      ---- Restated by-laws of the Registrant, as amended

    3.3      ---- Certificate of Designation for Series B Convertible Preferred
                  Stock of the Registrant*******

    4.1      ---- Specimen of Common Stock Certificate**

    4.2      ---- Stock Purchase Warrant issued by the Registrant to Sun
                  Microsystems, Inc.*

    10.1     ---- Stock Option Plan and Restricted Stock Purchase Plan 3.0, as 
                  amended

    10.2     ---- Form of Incentive Stock Option Agreement for options
                  granted under Stock Option and Restricted Stock Purchase Plan
                  2.0 prior to August, 1995, to employees hired before June 28,
                  1993**

    10.3     ---- Form of Incentive Stock Option Agreement for options
                  granted under Stock Option and Restricted Stock Purchase Plan
                  2.0 prior to September, 1995, to employees hired on or after
                  June 28, 1993**

    10.4     ---- Form of Incentive Stock Option Agreement for options
                  granted under Stock Option and Restricted Stock Purchase Plan
                  2.0 prior to September, 1995, to employees hired on or after
                  January 1, 1995**

    10.5     ---- Employment Agreement of Roger Ross**

    10.6     ---- Employment Agreement of Mitchell Alsup**

    10.7     ---- Employment Agreement of Trevor Smith**

    10.8     ---- Intentionally Omitted

    10.9     ---- Purchase and Support Agreement, dated January 27, 1995,
                  between the Registrant and SunService Division of Sun
                  Microsystems, Inc.**+

   10.10     ---- Letter dated October 13, 1994, to the Registrant from Sun
                  Microsystems, Inc.**+


                                       33
<PAGE>   38

   10.11     ---- Contractor Design Agreement, dated July 15, 1995, between
                  the Registrant, Fujitsu Limited and PUYALLUP Integrated
                  Circuit Company, Inc.**+

   10.12     ---- Procurement Agreement, dated November 16, 1994, between the
                  Registrant and MicroModule Systems**+

   10.13     ---- Security Agreement, dated December 14, 1994, between the
                  Registrant and MicroModule Systems**

   10.14     ---- General SPARC Trademark License Amendment, dated July 1,
                  1992, between the Registrant and SPARC International**

   10.15     ---- Specific SPARC Trademark License Amendment, dated July 1,
                  1992, between the Registrant and SPARC International**

   10.16     ---- Compliance Testing Agreement, dated September 2, 1993,
                  between the Registrant and SPARC International**

   10.17     ---- Software License Agreement, dated April 7, 1995, between
                  the Registrant and Fujitsu Limited**

   10.18     ---- Lease Agreement for Office Space, dated May 20, 1991, and
                  first amendment and second addendum thereto, between the
                  Registrant and Texas Commerce Bank, dated January 24, 1992
                  and June 19, 1992, respectively**

  10.18.1    ---- Second Amendment to Lease Agreement, dated December 7, 1995,
                  between the Registrant and Oak Hill Office Partners, Ltd. ***

  10.18.2    ---- Third Amendment to Lease Agreement, dated April 23, 1996,
                  between the Registrant and Oak Hills Office Partners, Ltd. ***

   10.19     ---- Commercial Lease Agreement, dated April 30, 1990, between
                  the Registrant and Texas Commerce Bank**


   10.20     ---- Lease Agreement, dated May 19, 1995, between the Registrant 
                  and Security Capital Industrial Trust**

   10.21     ---- Master Lease Agreement, dated January 25, 1995, with
                  amendments thereto, between the Registrant and Comdisco,
                  Inc.**

   10.22     ---- Purchase and Assignment Agreement, dated January 27,
                  1995, between the Registrant and Capitol Resource Funding,
                  Inc.**

   10.23     ---- Second Amended and Restated Loan Agreement, dated March 15,
                  1995, between the Registrant and The Dai-Ichi Kangyo Bank,
                  Limited**


                                       34
<PAGE>   39

   10.24     ---- Letter of Guaranty dated February 7, 1995, from Fujitsu
                  Limited to The Dai-Ichi Kangyo Bank, Limited**

   10.25     ---- Form of Incentive Stock Option Agreement approved for
                  options granted from and after September 1995 through June
                  24, 1997**

   10.26     ---- Form of Nonqualified Stock Option Agreement for options
                  granted from and after September 1995 through June 24,
                  1997**

   10.27     ---- 1995 Qualified Employee Stock Purchase Plan**

   10.28     ---- Securities Purchase Agreement between the Registrant and Sun
                  Microsystems, Inc.*

   10.29     ---- Shareholders Agreement among the Registrant, Roger D. Ross,
                  Fujitsu Limited and Sun Microsystems, Inc.*

   10.30     ---- Indemnity Agreement between the Registrant and Fujitsu
                  Limited*

   10.31     ---- Form of Indemnity Agreement between the Registrant and certain
                  Directors and Officers**

   10.32     ---- Underwriting Agreement, dated as of November 6, 1995, between
                  the Registrant, on the one hand, and Robertson, Stephens &
                  Company, L.P. and Paine Webber Incorporated as representatives
                  of the several underwriters named therein, on the other hand*

   10.33     ---- Office Lease Agreement, dated February 1, 1996, between the
                  Registrant and NationsBank of Texas, N.A. ***

   10.34     ---- Sublease, dated February 1, 1996, between the Registrant and
                  UHC Management Company, Inc. ***

   10.35     ---- Letter dated December 5, 1995, to the Registrant from Sun
                  Microsystems, Inc. ***+

   10.36     ---- Credit Agreement dated as of September 23, 1996, by and
                  among Registrant, The Chase Manhattan Bank and Texas Commerce
                  Bank National Association ****

   10.37     ---- Promissory Note between the Company and The Dai-Ichi Kangyo
                  Bank Limited, dated November 18,1996 *****

   10.38     ---- Letter of Guaranty between Fujitsu Limited and The Dai-Ichi
                  Kangyo Bank Limited, dated November 19, 1996*****

   10.39     ---- Letter Agreement between the Registrant and Francis "Kit"
                  Webster III, dated April 1, 1997***

   10.40     ---- Letter Agreement between the Registrant and Frank A. Baffi,
                  dated April 12, 1997***



                                      35

<PAGE>   40

   10.41     ---- Letter Agreement between the Registrant and Jack W. Simpson,
                  Sr. dated May 5, 1997, and associated addendum dated May 13,
                  1997***

   10.42     ---- Amended and Restated Loan Agreement, dated April 24, 1997, by
                  and between Registrant and The Dai-Ichi Kangyo Bank, Limited
                  (including form of Promissory Note)***

   10.43     ---- Development Agreement, dated as of March 31, 1997, by and
                  between Fujitsu Limited and Registrant+***

   10.44     ---- Development Agreement, dated as of June 25, 1997, by and
                  between Fujitsu Limited and Registrant+***

   10.45     ---- Loan Agreement dated as of November 15, 1996 by and between
                  Ross Technology, Inc. and The Dai-Ichi Kangyo Bank, Limited***

   10.46     ---- Termination and Release Agreement dated as of February 26,
                  1997 between the Registrant and The Chase Manhattan Bank******

   10.47     ---- Letter of Guarantee dated February 20, 1997 from Fujitsu
                  Limited to The Dai-Ichi Kangyo Bank, Limited******

   10.48     ---- Stock Purchase Agreement between Fujitsu Limited and the
                  Registrant dated as of September 30, 1997*******

   10.49     ---- Agreement for Reimbursement of Wafer Payments between the 
                  Registrant and Fujitsu Limited dated as of September 30,
                  1997*******

   10.50     ---- Agreement between Fujitsu Limited and the Registrant dated as 
                  of September 29, 1997 relating to the Viper Development
                  Agreement dated June 25, 1997*******

   10.51     ---- Letter of Guaranty dated October 29, 1997 from Fujitsu
                  Limited to The Dai-Ichi Kangyo Bank, Ltd., New York
                  Branch*******

   10.52     ---- Agreement between Fujitsu Limited and the Registrant dated as
                  of December 26, 1997 relating to the Viper Development 
                  Agreement dated June 25, 1997#

   10.53     ---- Separation Agreement between Roger D. Ross and the Registrant
                  dated as of December 5, 1997#

   10.54     ---- Master Promissory Note, dated October 29, 1997, by and
                  between Registrant and The Dai-Ichi Kangyo Bank, Limited, New
                  York Branch #

   10.55     ---- Stock Purchase Agreement between the Registrant and Fujitsu
                  Limited dated September 30, 1997##

   10.56     ---- Employment Agreement, dated May 21, 1997, between the 
                  Registrant and Jack W. Simpson, Sr.

   10.57     ---- Amendment to Letter of Agreement between the Registrant and
                  Francis S. (Kit) Webster III


                                       36
<PAGE>   41
   10.58     ---- Amendment to Letter of Agreement between the Registrant and 
                  Frank A. Baffi

   10.59     ---- Employee Retention and Severance Plan

   10.60     ---- Retention Letter dated June 4, 1998 for Jack W.  Simpson, Sr.

   10.61     ---- Retention Letter dated June 3, 1998 for Francis S. (Kit)
                  Webster

   10.62     ---- Retention Letter dated May 28, 1998 for Mitchell K. Alsup

   10.63     ---- Retention Letter dated May 28, 1998 for Trevor S. Smith

   10.64     ---- Retention Letter dated June 1, 1998 for Joe D. Jones

   10.65     ---- Retention Letter dated June 1, 1998 for Carter L. Godwin

   10.66     ---- Agreement between Fujitsu Limited and the Registrant dated as
                  of March 30, 1998 relating to the Viper Development Agreement
                  dated June 25, 1997++

   10.67     ---- Form of Incentive Stock Option Agreement for options granted
                  from and after June 24, 1997###

   10.68     ---- Form of Nonqualified  Stock Option Agreement for options
                  granted from and after June 24, 1997###



                                       37
<PAGE>   42

     11      ---- Earnings per share computations

     21      ---- Subsidiaries of the Registrant

     23      ---- Consent of KPMG Peat Marwick LLP

     27      ---- Financial Data Schedule




        * Incorporated by reference to identically numbered exhibits to the
          Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
          ended September 29, 1997.

       ** Incorporated by reference to identically numbered exhibits to the
          Registrant's Registration Statement on Form S-1 (Registration No. 
          33-95878) effective as of November 6, 1995.

      *** Incorporated by reference to identically numbered exhibits to the
          Registrant's Annual Report on Form 10-K for the fiscal year ended
          March 31, 1997.

     **** Incorporated by reference to the Registrant's Quarterly Report on Form
          10-Q for the fiscal quarter ended September 30, 1996.

    ***** Incorporated by reference to the Registrant's Quarterly Report on Form
          10-Q for the fiscal quarter ended December 30, 1996.

   ****** Incorporated by reference to the Registrant's Current Report on Form
          8-K dated March 21, 1997.

  ******* Incorporated by reference to the Registrant's Quarterly Report on Form
          10-Q for the fiscal quarter ended September 29, 1997.

        # Incorporated by reference to the Registrant's Quarterly Report on Form
          10-Q for the fiscal quarter ended December 29, 1997.

       ## Incorporated by reference to the Registrant's Current Report on Form
          8-K dated September, 30 1997.

      ### Incorporated by reference to Post-Effective Amendment No. 1 to
          Registrant's Registration Statement on Form S-8 File No. 333-00920


                                       38
<PAGE>   43

        + Certain portions of this Exhibit were omitted and filed separately
          with the Securities and Exchange Commission under an application for
          confidential treatment, which application was granted by the
          Commission.

       ++ Certain portions of this Exhibit have been omitted and filed
          separately under an application for confidential treatment.

      (b) Reports on Form 8-K

          None
                                        
                                       39
<PAGE>   44



                                   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.

ROSS TECHNOLOGY, INC.
a Delaware corporation

By:  /s/ JACK W. SIMPSON, SR.
   --------------------------------------
           Jack W. Simpson, Sr.
    Director, Chief Executive Officer and
             President

July 13, 1998

    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.

<TABLE>
<CAPTION>

             SIGNATURE                         TITLE                       DATE
    ---------------------------        -----------------------        -------------
<S>                                   <C>                            <C>
    /s/ FRED T. MAY                    Chairman of the Board          July 13, 1998
    --------------------------
    Fred T. May

    /s/ FRANCIS S. WEBSTER III         Chief Financial                July 13, 1998
    --------------------------         Officer
    Francis S. Webster III

    /s/ CARTER L. GODWIN               Chief Accounting Officer       July 13, 1998
    --------------------------           and Corporate
    Carter L. Godwin                     Controller

    /s/ RYUSUKE HOSHIKAWA              Director                       July 13, 1998
    --------------------------
    Ryusuke Hoshikawa

    /s/ MASAHIRO SAIDA                 Director                       July 13, 1998
    --------------------------
    Masahiro Saida

    /s/ YASUSHI TAJIRI                 Director                       July 13, 1998
    --------------------------
    Yasushi Tajiri

    /s/ EDWARD F. THOMPSON             Director                       July 13, 1998
    --------------------------
    Edward F. Thompson

    /s/ SEIICHI YOSHIKAWA              Director                       July 13, 1998
    --------------------------
    Seiichi Yoshikawa
</TABLE>





                                       40
<PAGE>   45





                     ROSS TECHNOLOGY, INC. AND SUBSIDIARY

                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULE

<TABLE>
<CAPTION>

                                                                                         PAGE
                                                                                        NUMBER
                                                                                        ------
<S>                                                                                    <C>
  Independent Auditors' Report.......................................................    F-2
  Consolidated Balance Sheets as of March 30, 1998 and March 31, 1997................    F-3
  Consolidated Statements of Operations for the years ended March 30, 1998, March 31,
     1997 and April 1, 1996..........................................................    F-4
  Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
     March 30, 1998, March 31, 1997 and April 1, 1996................................    F-5
  Consolidated Statements of Cash Flows for the years ended March 30, 1998, March 31,
     1997 and April 1, 1996..........................................................    F-6
  Notes to Consolidated Financial Statements.........................................    F-7
2. Financial Statement Schedules
  Schedule II -- Valuation and Qualifying Accounts...................................    F-19
</TABLE>


                                      F-1
<PAGE>   46
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
ROSS Technology, Inc.:



    We have audited the accompanying consolidated balance sheets of ROSS
Technology, Inc. and subsidiary as of March 30, 1998 and March 31, 1997, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for each of the years in the three-year period ended March 30,
1998. In connection with our audits of the consolidated financial statements, we
also have audited financial statement schedule II. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.

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

    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ROSS
Technology, Inc. and subsidiary as of March 30, 1998 and March 31, 1997 and the
results of their operations and their cash flows for each of the years in the
three-year period ended March 30, 1998, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

The accompanying consolidated financial statements and financial statement
schedule have been prepared assuming that the Company will continue as a going
concern. As discussed in note 1 to the consolidated financial statements, the
Company has experienced recurring losses from operations, is experiencing
difficulty in generating sufficient cash flow to meet its obligations and
sustain its operations, and has announced its intention to begin an orderly
shutdown of its operations, which raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in notes 1 and 15. The consolidated financial
statements and financial statement schedule do not include any adjustments that
might result from the outcome of this uncertainty.


                                                  KPMG Peat Marwick LLP

                                                  /s/ KPMG PEAT MARWICK LLP
                                                  -------------------------

Austin, Texas
July 7, 1998







                                      F-2
<PAGE>   47
                              ROSS TECHNOLOGY, INC.
                                 AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                     ASSETS

                                                                          MARCH 30,  MARCH 31,
                                                                            1998       1997
                                                                         ----------  ---------
<S>                                                                      <C>         <C>
Current assets:
  Cash and cash equivalents............................................  $      787  $   2,811
  Trade accounts receivable, net (note 2)..............................       2,712     11,297
  Receivable from Fujitsu (note 10)....................................       3,343      3,320
  Inventory (note 3)...................................................       7,808     16,308
  Other current assets.................................................         512      3,331
                                                                         ----------  ---------
          Total current assets.........................................      15,162     37,067
Property and equipment, net (note 4)...................................       3,325     17,752
                                                                         ----------  ---------
          Total assets.................................................  $   18,487  $  54,819
                                                                         ==========  =========

                        LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
  Trade accounts payable...............................................  $    6,091  $  19,194
  Accrued liabilities..................................................       5,083      8,307
  Payable to Fujitsu (note 10).........................................       1,293      4,043
  Notes payable (note 6)...............................................      15,000     43,500
                                                                         ----------  ---------
          Total current liabilities....................................      27,467     75,044
                                                                         ----------  ---------
Commitments and contingencies (notes 1, 9 and 15) 
  Stockholders' deficit:
  Series B preferred stock, $.001 par value aggregate (liquidation
   preference $50,000), 75,000 shares authorized, 500 issued and                         
   outstanding at March 30,1998........................................           1         --
  Common stock, $.001 par value, 100,000 shares authorized, 23,798 
     shares issued and 23,477 outstanding at March 30, 1998, and
     23,747 shares issued and 23,426 outstanding at March 31, 1997.....          23         23
  Additional paid-in capital...........................................     132,079     82,564
  Accumulated deficit..................................................    (139,832)  (101,561)
                                                                         ----------  ---------
                                                                             (7,729)   (18,974)
  Less treasury stock, 321 shares, at cost.............................      (1,251)    (1,251)
                                                                         ----------  ---------
          Total stockholders' deficit..................................      (8,980)   (20,225)
                                                                         ----------  ---------
          Total liabilities and stockholders' deficit..................  $   18,487  $  54,819
                                                                         ==========  =========
</TABLE>

          See accompanying notes to consolidated financial statements.




                                      F-3
<PAGE>   48





                              ROSS TECHNOLOGY, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                        YEAR ENDED        YEAR ENDED        YEAR ENDED
                                                         MARCH 30,         MARCH 31,          APRIL 1,
                                                           1998              1997              1996
                                                      -------------     -------------     -------------
<S>                                                   <C>               <C>               <C>
Net sales (note 10) ................................  $      42,057     $      83,104     $     100,805
Cost of sales (note 10) ............................         43,238           107,951            53,921
                                                      -------------     -------------     -------------
          Gross profit (loss) ......................         (1,181)          (24,847)           46,884
                                                      -------------     -------------     -------------
Operating expenses:
  Research and development, net (note 10) ..........          5,842            24,659            15,906
  Selling, general and administrative ..............         16,889            31,137            10,495
  Write-down of property and equipment .............         11,203              --                --
  Write-down of investment in subsidiary ...........          1,080              --                --
  Amortization of intangibles ......................           --               3,637             1,166
                                                      -------------     -------------     -------------
          Total operating expenses .................         35,014            59,433            27,567
                                                      -------------     -------------     -------------
          Income (loss) from operations ............        (36,195)          (84,280)           19,317
Other income (expense):
  Interest income ..................................           --                --                 527
  Interest expense .................................         (2,076)           (1,472)           (2,001)
                                                      -------------     -------------     -------------
          Income (loss) before income taxes ........        (38,271)          (85,752)           17,843
Income tax expense (benefit) .......................           --                 953              (317)
                                                      -------------     -------------     -------------
          Net income (loss) ........................  $     (38,271)    $     (86,705)    $      18,160
                                                      =============     =============     =============

Net income (loss) ..................................  $     (38,271)    $     (86,705)    $      18,160
Dividends related to preferred stock ...............           --                --                (832)
                                                      -------------     -------------     -------------
Net income (loss) applicable to common
    stockholders ...................................  $     (38,271)    $     (86,705)    $      17,328
                                                      =============     =============     =============
 Net income (loss) per share:
           Basic....................................  $       (1.63)    $       (3.71)    $        1.23
                                                      =============     =============     =============
           Diluted..................................  $       (1.63)    $       (3.71)    $         .82
                                                      =============     =============     =============
 Weighted average common shares outstanding:
           Basic....................................         23,450            23,396            14,067
                                                      =============     =============     =============
           Diluted..................................         23,450            23,396            21,033
                                                      =============     =============     =============
</TABLE>

          See accompanying notes to consolidated financial statements.




                                      F-4
<PAGE>   49





                              ROSS TECHNOLOGY, INC.
                                 AND SUBSIDIARY

            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                                            TOTAL
                                  SERIES A      SERIES B        COMMON STOCK       ADDITIONAL                          STOCKHOLDERS'
                                  PREFERRED    PREFERRED   ---------------------    PAID-IN   ACCUMULATED   TREASURY      EQUITY
                                   STOCK        STOCK
                                   AMOUNT       AMOUNT       SHARES      AMOUNT     CAPITAL     DEFICIT       STOCK      (DEFICIT)
                                  ---------    ---------   ---------   ---------   ---------   ---------    ---------    ---------
<S>                               <C>          <C>         <C>         <C>         <C>         <C>          <C>          <C>       
Balances at April 3,
 1995 .........................   $      18    $    --         7,200   $       7   $  17,875   $ (32,184)   $    --      $ (14,284)
Conversion of preferred
 stock ........................         (18)        --         7,200           7          11        --           --           --
Issuance of common stock in
 initial public offering,
 net of offering expenses
 of $1,844 ....................        --           --         5,082           5      64,341        --           --         64,346
Payment of preferred stock
 dividends ....................        --           --          --          --          --          (832)        --           (832)
Treasury stock received
 through sale of
 subsidiary ...................        --           --          --          --          --          --         (1,251)      (1,251)
Exercise of stock
 options ......................        --           --         3,843           4         131        --           --            135
Net income ....................        --           --          --          --          --        18,160         --         18,160
                                  ---------    ---------   ---------   ---------   ---------   ---------    ---------    ---------
Balances at April 1,
 1996 .........................        --           --        23,325          23      82,358     (14,856)      (1,251)      66,274
Stock issuances under
 employee plans ...............        --           --           422        --           206        --           --            206
Net loss ......................        --           --          --          --          --       (86,705)        --        (86,705)
                                  ---------    ---------   ---------   ---------   ---------   ---------    ---------    ---------
Balances at March 31,
 1997 .........................        --           --        23,747          23      82,564    (101,561)      (1,251)     (20,225)
                                  =========    =========   =========   =========   =========   =========    =========    =========
Issuance of Series B
  Preferred stock, net of
  offering expenses of $492....        --              1                    --        49,507                                49,508
Stock issuances under
 employee plans ...............        --           --            51        --             8        --           --              8
Net loss ......................        --           --          --          --          --       (38,271)        --        (38,271)
                                  ---------    ---------   ---------   ---------   ---------   ---------    ---------    ---------
Balances at March 30,
 1998 .........................   $    --      $       1      23,798   $      23   $ 132,079   $(139,832)   $  (1,251)   $  (8,980)
                                  =========    =========   =========   =========   =========   =========    =========    =========
</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-5
<PAGE>   50
                              ROSS TECHNOLOGY, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                     YEAR ENDED  YEAR ENDED   YEAR ENDED
                                                      MARCH 30,   MARCH 31,   APRIL 1,
                                                        1998        1997        1996 
                                                      --------    --------    --------
<S>                                                   <C>         <C>         <C>     
Cash flows from operating activities:
 Net income (loss) ................................   $(38,271)   $(86,705)   $ 18,160
 Adjustments to reconcile net income (loss) to
  net cash provided by (used in) operating 
  activities:
 Deferred income taxes ............................       --         2,182      (2,182)
 Depreciation and amortization ....................      8,327       5,077       3,525
 Amortization of goodwill .........................       --         3,637       1,166
 Write-down of investment in subsidiary ...              1,080        --          --
 Write-down of property and equipment .....             11,203        --          --
 Gain on disposal of assets .......................       --          (392)       --
 Change in assets and liabilities:
 Trade accounts receivable ........................      8,585       4,910      (6,587)
 Receivable from Fujitsu ..........................        (23)      3,460      (4,658)
 Inventory ........................................      8,500      16,013     (18,559)
 Other current assets .............................      2,819        (625)     (2,305)
 Trade accounts payable ...........................    (13,103)      9,607       2,358
 Payable to Fujitsu ...............................     (2,750)    (14,886)     10,919
 Accrued liabilities ..............................     (3,224)      5,204         809
                                                      --------    --------    --------
 Net cash provided by (used in) operating
 activities .......................................    (16,857)    (52,518)      2,646
                                                      --------    --------    --------
Cash flows from investing activities:
 Capital expenditures .............................     (6,183)     (6,968)    (13,267)
 Proceeds from disposal of assets .................       --           650        --
                                                      --------    --------    --------
 Net cash used in investing activities ............     (6,183)     (6,318)    (13,267)
                                                      --------    --------    --------
Cash flows from financing activities:
 Stock issuances under employee plans .............          8         206         135
 Payments on notes payable ........................    (50,000)       --       (37,023)
 Proceeds from borrowings on notes payable ........     21,500      43,500        --
 Proceeds from issuance of common stock ...........       --          --        64,346
 Proceeds from issuance of preferred stock ........     49,508        --          --
 Payment of preferred stock dividends .............       --          --          (832)
                                                      --------    --------    --------
 Net cash provided by financing activities ........     21,016      43,706      26,626
                                                      --------    --------    --------
 Net increase (decrease) in cash and cash
 equivalents ......................................     (2,024)    (15,130)     16,005
Cash and cash equivalents at beginning of year ....      2,811      17,941       1,936
                                                      --------    --------    --------
Cash and cash equivalents at end of year ..........   $    787    $  2,811    $ 17,941
                                                      ========    ========    ========
Supplemental Disclosure of Cash Flow
Information:
 Taxes paid .......................................   $    245    $  1,225    $    997
 Interest paid ....................................   $  2,393    $    458    $  2,001
</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-6
<PAGE>   51



                              ROSS TECHNOLOGY, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

    ROSS Technology, Inc. and subsidiary (the "Company") is an affiliate of
Fujitsu Limited ("Fujitsu"), a Japanese corporation. The Company designs,
manufactures and markets high performance microprocessor and system products
utilizing the SPARC architecture, the dominant RISC architecture. The principal
market for the Company's products is the OEM market for computer workstations,
primarily in the U.S. and Japan.

    Fujitsu owned  approximately 60% of the outstanding shares of the common
stock of the Company as of March 30, 1998.

    In Fiscal 1998, the Company incurred a net loss of approximately $38.3
million and used approximately $16.9 million of cash in operating activities. As
of March 30, 1998, the Company had negative working capital of approximately
$12.3 million and a stockholders' deficit of approximately $9.0 million. In June
1998, the Company announced its intentions to begin an orderly shut-down of its
operations. The Company currently plans to maintain operations to the end of
calendar year 1998. The Company has provided end-of-life notices to all of its
current customers providing them the opportunity to place orders for their
forecasted needs. The Company is also seeking various strategic alternatives for
its business, including an acquisition of the entire company by a third party,
although the Company believes that such an acquisition is unlikely.

    The matters discussed above raise substantial doubt about the Company's
ability to continue as a going concern. The consolidated financial statements do
not include any adjustments that might result should the Company be unable to 
continue as a going concern.

Summary of Significant Accounting Policies

    Principles of Consolidation -- The consolidated financial statements of the
Company include the accounts of ROSS Technology, Inc. and its wholly-owned
subsidiary ROSS Semiconductors (Israel), Ltd. All significant intercompany
balances and transactions have been eliminated.

    Accounting Period -- The Company's fiscal year ends on the Monday closest to
March 31.

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

    Significant Accounting Estimates -- Inventory, Inventory Purchase Orders and
Property and Equipment -- The Company's estimate for lower of cost or market for
inventory is based on the Company's best estimates of product sales prices and
customer demand patterns and/or its plans to transition its product mix.
However, the Company participates in a highly competitive industry that is
characterized by aggressive pricing practices, downward pressures on gross
margins, rapid technological advances, continual improvement in product
price-performance characteristics, and price sensitivity and changing demand
patterns on the part of customers. As a result of the industry's ever-changing
and dynamic nature, it is at least reasonably possible that the estimates used
by the Company to determine lower of cost or market for inventory amounts and
the accrual for excess inventory purchase orders will be materially different
from the actual amounts recorded. These differences could result in materially
higher or lower than expected inventory costs, which could have a material
effect on 




                                      F-7
<PAGE>   52

the Company's results of operations and financial condition in the near term.
The Company has also relied upon a qualified third party appraisal to estimate
the fair value of its property and equipment.

    Cash Equivalents -- The Company considers all highly liquid investments
purchased with original maturities of three months or less to be cash
equivalents.

    Inventory -- Inventory is stated at the lower of cost (principally standard
cost which approximates actual cost on a first-in, first-out basis) or market.
Provisions are made currently for the difference between the cost and the
estimated market value of inventory.

    Income Taxes -- Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
the period that includes the enactment date. A valuation allowance is provided
for deferred tax assets which are not considered more likely than not to be
realized.

    The Company files a separate income tax return from Fujitsu, and accordingly
it accounts for income taxes as if it were a stand-alone company.

    Revenue Recognition -- The Company recognizes revenue when product is
shipped customers. The company reduces recognition of net sales to the extent of
estimated rights of return and price protection.

    Warranty Expense -- The Company generally offers a one-year warranty on the
majority of its products sold. Warranty costs are accrued and expensed when the
related product is sold.

    Stock Option Plan -- Prior to April 2, 1996, the Company accounted for its
stock option plan in accordance with the provisions of Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations." As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock exceeded
the exercise price. On April 2, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in fiscal
year 1996 and future years as if the fair-value-based method defined in SFAS No.
123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions
of SFAS No. 123.

    Property and Equipment -- Property and equipment are stated at cost, which
approximated fair market value at the date of acquisition. Depreciation on
property and equipment is calculated on the straight-line method over the
estimated useful lives of the assets which range from three to six years. The
Company recorded an adjustment in Fiscal 1998 to record property and equipment
at estimated fair value (see Note 4).

    Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of --
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," on
April 2, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.



                                      F-8
<PAGE>   53

    Earnings (Loss) Per Share -- In February 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 128, "Earnings Per Share." FASB
Statement No. 128 supersedes APB Opinion No. 15, "Earnings Per Share," and
specifies the computation, presentation, and disclosure requirements for
earnings per share ("EPS"). It replaces Primary EPS and Fully Diluted EPS with
Basic EPS and Diluted EPS, respectively. Basic EPS, unlike Primary EPS, excludes
all dilution while Diluted EPS, like Fully Diluted EPS, reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity.

    The Company adopted SFAS No. 128, "Earnings Per Share," in the quarterly
period ended December 29, 1997. Basic earnings per share is based on the
weighted average of all common shares issued and outstanding, and is calculated
by dividing net income available to common stockholders by the weighted average
shares outstanding during the period. Diluted earnings per share is calculated
by dividing net income available to common stockholders by the weighted average
number of common shares used in the basic earnings per share calculation plus
the number of common shares that would be issued assuming conversion of all
potentially dilutive common shares outstanding. All historical earnings per
share data have been restated to conform to this presentation. Below is the
calculation of basic and diluted earnings per share for each of the past three
fiscal years:

<TABLE>
<CAPTION>
                                                                  FISCAL YEAR ENDED
                                                         --------------------------------------
                                                          March 30,     March 31,      April 1,
                                                            1998          1997          1996
                                                         ----------    ----------    ----------
                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                      <C>           <C>           <C>       
Net income (loss) ....................................   $  (38,271)   $  (86,705)   $   18,160
Net income (loss) applicable to common stockholders ..   $  (38,271)   $  (86,705)   $   17,328
                                                         ==========    ==========    ==========

Weighted average shares outstanding - Basic ..........       23,450        23,396        14,067
Dilutive effect of preferred shares ..................         --            --           4,312
Employee stock options and other .....................         --            --           2,654
                                                         ----------    ----------    ----------
Weighted average shares outstanding - Diluted ........       23,450        23,396        21,033
                                                         ==========    ==========    ==========
Earnings per common share:
Basic ................................................   $    (1.63)   $    (3.71)   $     1.23
                                                         ==========    ==========    ==========
Diluted* .............................................   $    (1.63)   $    (3.71)   $     0.82
                                                         ==========    ==========    ==========
</TABLE>

*   For the fiscal year ended March 30, 1998, options totaling 405,982 and the
    conversion of Series B Preferred Stock to 20,000,000 shares of common stock
    were excluded from the computation of diluted earnings per share because
    they would have been antidilutive for this period. For Fiscal years ended
    March 31, 1997 and April 1, 1996, options totaling 967,179 and 288,676,
    respectively, were excluded from the computation of diluted earnings per
    common share because they would have been antidilutive for those periods.

    Reclassification -- Certain reclassifications have been made to conform
prior years data to the current presentation. In accordance with SFAS No. 128,
the Company restated earnings (loss) per share for all prior periods presented.




                                      F-9
<PAGE>   54



(2) TRADE ACCOUNTS RECEIVABLE

    Trade accounts receivable consists of the following:

<TABLE>
<CAPTION>
                                               MARCH 30,     MARCH 31,
                                                 1998          1997 
                                              ----------    ----------
                                                   (IN THOUSANDS)
<S>                                           <C>           <C>       
         Trade accounts receivable ........   $    3,170    $   12,852
         Less allowance for doubtful
         accounts .........................         (458)       (1,555)
                                              ----------    ----------
                                              $    2,712    $   11,297
                                              ==========    ==========
</TABLE>


    The Company recorded a $16.5 million charge to write-off accounts receivable
in Fiscal 1997. This amount is recorded in selling, general and administrative
expenses in Fiscal 1997 in the accompanying financial statements. The amount
charged to bad debt expense in Fiscal 1998 was approximately $1.8 million.

(3) INVENTORY

Inventory consists of the following:

<TABLE>
<CAPTION>
                                                           MARCH 30,     MARCH 31,
                                                            1998          1997
                                                           -------       -------
                                                              (IN THOUSANDS)
<S>                                                        <C>           <C>    
Die bank ...........................................       $   694       $ 4,496
Work in progress ...................................         5,297         6,236
Finished goods .....................................         1,817         5,576
                                                           -------       -------
                                                           $ 7,808       $16,308
                                                           =======       =======
</TABLE>

    Die bank inventory, consisting of silicon wafers and cut and tested die, is
comparable to raw material inventory in other manufacturing industries. Work in
progress inventory includes work in process as well as the Company's inventories
of multi-die packages (MDPs) and components and sub-systems to be incorporated
into module, board, and system products. Finished goods inventory includes
finished module, board and system products as well as MDPs and ASICs offered for
sale to OEM customers.

    The Company recorded a $7.3 million charge in Fiscal 1998 and a $38.9
million charge in Fiscal 1997 for its write-down of inventory. This amount is
recorded in cost of sales in the accompanying financial statements. In addition,
the Company recorded a $5.2 million accrual for the costs to cancel excess
inventory purchase orders in Fiscal 1997. This amount is recorded in accrued
liabilities and cost of sales in Fiscal 1997 in the accompanying financial
statements.

(4) PROPERTY AND EQUIPMENT

    Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                            MARCH 30,  MARCH 31,
                                                              1998       1997
                                                            --------   --------
                                                              (IN THOUSANDS)
<S>                                                         <C>        <C>     
Buildings and leasehold
improvements ............................................   $   --     $  2,699
Equipment and tooling ...................................      2,561     19,706
Software ................................................       --        5,634
Furniture and fixtures ..................................        764        685
                                                            --------   --------
                                                                         28,724
Less accumulated depreciation ...........................       --      (10,972)
                                                            --------   --------
                                                            $  3,325   $ 17,752
                                                            ========   ========
</TABLE>

    As required by SFAS No. 121, the Company recorded an $11.2 million
write-down for long-lived assets since events and circumstances indicated that
the assets were impaired. The impairment charge was the difference between the
Company's carrying value and the estimated fair value of the assets. The Company
estimated fair value through the use of a third party appraisal of the assets.




                                      F-10
<PAGE>   55



(5) INTANGIBLE ASSETS

Intangible assets consists of the following:

<TABLE>
<CAPTION>
                                                          MARCH 30,    MARCH 31,
                                                            1998        1997
                                                          ---------   ---------
                                                            (IN THOUSANDS)
<S>                                                       <C>         <C>      
Goodwill ..............................................   $    --     $   6,530
Less accumulated amortization .........................        --        (6,530)
                                                          ---------   ---------
                                                          $    --     $     --  
                                                          =========   =========
</TABLE>

    During 1997, the Company determined that projected future cash flows did not
support the goodwill amount and amortized the remainder of the goodwill in 1997.

(6) NOTES PAYABLE

Notes payable consists of the following:

<TABLE>
<CAPTION>
                                                          MARCH 30,    MARCH 31,
                                                            1998         1997
                                                         ----------   ----------
                                                             (IN THOUSANDS)
<S>                                                      <C>          <C>       
Notes payable to bank ................................   $   15,000   $   43,500
                                                         ==========   ==========
</TABLE>

    The notes payable to a bank at March 30, 1998, were outstanding under a
$20,000,000 revolving credit facility with a bank, due December 31, 1998.
Interest accrues at the bank's quoted rate (6.3% at March 30, 1998). The notes
payable are guaranteed by Fujitsu.

(7) FAIR VALUE OF FINANCIAL INSTRUMENTS

    The following method and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate
value:

    Receivables, Trade Accounts Payable, Accrued Liabilities, Payable to Fujitsu
and Notes Payable -- The carrying amount approximates fair value because of the
short maturity of these instruments.

(8) INCOME TAXES

    No income tax provision was recorded for the year ended March 30, 1998, as a
result of the Company's net operating loss.

    A net income tax provision of $953,000 was recorded for the fiscal year
ended March 31, 1997. The tax provision consisted of a current income tax
benefit of $1,229,000 and deferred tax expense of $2,182,000. The current income
tax benefit was the net of $1,300,000 attributable to a carryback of a net
operating loss to the year ended April 1, 1996, and $71,000 of state taxes due
for Fiscal 1997. The deferred tax expense resulted from the re-establishment of
the April 1, 1996, valuation allowance of $2,182,000 for the deferred tax asset.
The net operating loss carryback to the year ended April 1, 1996, resulted in an
alternative minimum tax credit.



                                      F-11
<PAGE>   56


    For the year ended April 1, 1996, a $317,000 income tax benefit was
recorded, which consisted of current and deferred Federal income tax expense
(benefit) of $1,865,000 and ($2,182,000), respectively.

    The components of the net deferred tax asset as of March 30, 1998 and March
31, 1997, were as follows:

<TABLE>
<CAPTION>
                                                                1998        1997
                                                              --------    --------
                                                                (IN THOUSANDS)
<S>                                                           <C>         <C>     
Deferred tax asset:
  Net operating loss carryforwards ........................   $ 30,315    $  5,710
  Property and equipment, principally due to
    difference in depreciation and write-offs for book 
    purposes...............................................      2,872         280
  Inventory write-downs ...................................      2,473      14,791
  Other accruals ..........................................      2,950       3,033
  Accounts receivable, principally due to allowance
    for doubtful accounts .................................        527       3,651
  Tax credit carryforwards ................................      2,086         500
                                                              --------    --------
          Subtotal ........................................     41,223      27,965
  Valuation allowance .....................................    (41,223)    (27,965)
                                                              --------    --------
          Net deferred tax asset ..........................   $   --      $   --
                                                              ========    ========
</TABLE>

    The net change in the total valuation allowance for the years ended March
30, 1998, and March 31, 1997, was an increase of $13,258,000 and $27,965,000,
respectively. The Company has a Federal income tax net operating loss
carryforward of approximately $89,161,000 at March 30, 1998, expiring in 2013.
Additionally, the Company has an alternative minimum tax credit carryforward of
approximately $500,000. At March 30, 1998, the Company has provided a 100%
valuation allowance of $41,223,000 against the deferred tax asset due to the
Company's recent losses and the lack of objective evidence indicating that it is
more likely than not that the asset will be recovered.

    For the years ended March 30, 1998, March 31, 1997, and April 1, 1996, the
tax provision varies from the amounts computed by applying the statutory Federal
income tax rate to income (loss) before income taxes, primarily due to the
change in the beginning of the year valuation allowance for deferred tax assets,
and the inability to recognize the net operating loss carryforward.

(9) COMMITMENTS AND CONTINGENCIES

    The Company leases its operating facility and certain equipment under
noncancelable operating leases with terms expiring in 1999 through 2002. Future
minimum lease payments under these leases at March 30, 1998, are:

<TABLE>
<CAPTION>
                     YEAR ENDING             (IN THOUSANDS) 
                    --------------           -------------- 
<S>                  <C>                         <C>        
                     1999.................       $1,908     
                     2000.................        1,100     
                     2001.................        1,027     
                     2002.................          783     
                     2003.................           --     
                                                 ------     
                                                 $4,818     
                                                 ======     
</TABLE>

Rent expense for the Company was as follows (in thousands):

<TABLE>
<S>                                                                       <C>   
Year ended March 30, 1998 ...........................................     $3,387
Year ended March 31, 1997 ...........................................      1,191
Year ended April 1, 1996 ............................................        719
</TABLE>

    The Company is subject to lawsuits and other claims arising in the ordinary
course of business. In the opinion of management, the effect of such matters
will not have a material adverse effect on the Company's financial position or
results of operations.

(10) TRANSACTIONS WITH AFFILIATES

    The Company has transactions with Fujitsu arising in the normal course of
business. Included in the 




                                      F-12
<PAGE>   57

revenue and purchases for the year ended March 30, 1998, is approximately $15.3
million and $ 9.4 million, respectively, relating to sales to and purchases from
Fujitsu for the year ended March 30, 1998. Also for the year ended March
30, 1998, the Company received $17.0 million from payments pursuant to two
separate Development Agreements between the Company and Fujitsu. In Fiscal 1998,
the Company also paid to Fujitsu a guaranty fee relating to Fujitsu's guaranty
of the Company's bank debt equal to .5% of the guaranty amount and interest on
the intercompany payable at a rate of LIBOR+3%. Included in revenue and
purchases for the year ended March 31, 1997, is approximately $17.9 million and
$27.6 million relating, respectively, to sales to and purchases from Fujitsu.
Included in revenue and purchases for the year ended April 1, 1996, is
approximately $18.9 million and $34.0 million, relating, respectively, to sales
to and purchases from Fujitsu.

    In Fiscal 1998, the Company entered into a Development Agreement with
Fujitsu whereby Fujitsu would partially fund the development of the Company's
64-bit Viper development project. During Fiscal 1998, the Company received $16.5
million pursuant to this agreement, which was recorded as a reduction to
research and development expense and accrued a penalty for schedule delays in
the amount of $1.2 million, which was recorded as an increase to research and
development expense. The Development Agreement provides for future payments to
the Company upon completion of certain milestones and acceptance by Fujitsu.
During Fiscal 1998, the Company failed to timely meet the milestones set forth
in the Viper Development Agreement. Fujitsu and the Company amended such
agreement to provide for a redefinition of the deliverables associated with such
milestones. The Company does not anticipate attaining future milestones and is
in potential default of the Agreement. The Company and Fujitsu are in
negotiations to terminate the Viper Development Agreement and the Company
believes that it is likely that such termination will include a waiver of the
penalties accrued by the Company under the Agreement.

    In Fiscal 1997 the Company entered into a Development Agreement with Fujitsu
whereby Fujitsu would partially fund the development of a derivative of the
Company's Colorado 4 microprocessor. During Fiscal 1997, the Company received
$3.5 million pursuant to this agreement, $2 million of which was applied against
research and development expenses and $1.5 million of which was recorded in
accrued liabilities. This development project was completed in April 1998.

    In November 1996 the Company established a "New Credit Facility" with DKB
for a maximum principal amount of $25 million; in February 1997 such New Credit
Facility was increased to a maximum of $50 million. The New Credit Facility was
scheduled to expire on March 31, 1998, and was guaranteed by Fujitsu until that
date. In September 1997, a separate $10 million "Additional Credit Facility"
was established with DKB. This Additional Credit Facility expired on September
30, 1997. On September 29, 1997, the principal amount outstanding under both
credit facilities was $56.0 million, with $50 million due on December 31, 1997,
and $6 million due on September 30, 1997. On September 30, 1997, the Company
concluded a recapitalization transaction with Fujitsu, whereby the Company
issued 500,000 shares of a new Series B Convertible Preferred Stock to Fujitsu
and Fujitsu paid $50 million on behalf of the Company to DKB in partial payment
of the Company's outstanding indebtedness to DKB in satisfaction of Fujitsu's
obligation pursuant to certain loan guarantees provided by Fujitsu to DKB. In
connection with the recapitalization, Fujitsu provided a guarantee for a
replacement credit facility with DKB for a maximum principal amount of $20
million (which replaces the previous "New Credit Facility"). The line of credit
and guaranty was scheduled to expire on March 31, 1998, but have been extended
to December 31, 1998. As of June 15, 1998, the Company has borrowed the maximum
$20 million of available credit provided by the existing credit facility.

    During the Company's initial public offering, Sun Microsystems, Inc.
purchased approximately five percent of the outstanding common stock of the
Company. In addition, Sun Microsystems, Inc. is a significant customer of the
Company.

(11) 401(k) PLAN

    The Company has an employee benefit plan (the Plan) qualifying under Section
401(k) of the Internal Revenue Code for all eligible employees. Eligible
employees may defer a portion of their annual compensation under the Plan
subject to maximum limitations. The requirements for eligibility include a
minimum age of 21. Contributions to the Plan are made at the discretion of the
Company and amounted to $0, $0 and $215,000 for 



                                      F-13
<PAGE>   58

the years ended March 30, 1998, March 31, 1997, and April 1, 1996, respectively.

(12) STOCKHOLDERS' EQUITY

Series A Preferred Stock

    On September 29, 1997, the Company amended its Certificate of Incorporation
to delete its previously authorized Series A Convertible Preferred Stock. As
such this series is no longer authorized and none are outstanding.

Series B Preferred Stock

    Series B preferred shares are subject to the rights, preferences,
restrictions and other matters set forth in its certificate of designation. The
holder of these preferred shares is entitled to, among other things, cumulative
dividends, liquidation preferences, conversion rights, and certain voting
rights.

    The holders of Series B Convertible Preferred Stock are entitled to receive
dividends, when declared by the Board of Directors. The holders have the right
to convert each share of the Series B Convertible preferred stock into such
number of fully-paid and nonassessable shares of Common Stock as is determined
by dividing the Liquidation Preference per share of Series B Preferred Stock by
the Conversion Price. "Conversion Price" means the Market Price of the Common
Stock; except that (i) during the two year period following the initial issuance
of shares of Series B Convertible Preferred Stock, the Conversion Price shall be
equal to $2.50; and (ii) on the occurrence of a Special Conversion Event, the
Conversion Price shall be equal to the lower of Market Price and $2.00; provided
that the Conversion Price shall in no event be less than $1.00. "Special
Conversion Event" means and is deemed to occur in the event the Company
commences any case, proceeding or other action under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors.

    In the event of any involuntary liquidation, dissolution or winding up of
the Company, the holders of shares of Series B Convertible Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Company
available for distribution to its stockholders at an amount equal to $100 per
share.

    Holders of Series B Convertible Preferred Stock are not entitled to vote in
elections of directors. Holders of Series B Convertible Preferred Stock are
entitled to vote on such other matters as to which such stock is, as a matter of
law, entitled to vote. With respect to any matter as to which Series B
Convertible Preferred Stock is entitled to vote, each issued and outstanding
share of Series B Convertible Preferred Stock shall be entitled to a number of
votes equal to the number of shares of Common Stock into which each such share
of Series Convertible B Preferred Stock is convertible. In general, holders of
Series B Convertible Preferred Stock, when entitled to vote, shall vote together
with the holders of any other Preferred Stock and Common Stock as a single
class.

Stock Option Plans

    On January 30, 1998, Fujitsu, in its capacity as majority stockholder,
executed a written consent to approve an amendment to the Company's Stock Option
and Restricted Stock Purchase Plan 3.0 ("the Plan") to (i) increase the number
of shares subject to the Stock Option Plan from 7,200,000 to 9,695,000 and (ii)
increase the maximum number of options or shares of restricted stock that an
individual could receive under the Stock Option Plan in any fiscal year from
600,000 to 1,000,000. An information statement regarding the action taken was
circulated to the Company's stockholders. Consents from other stockholders,
other than Fujitsu, were not solicited.

    The Plan provides for grants to employees, members of the Board of
Directors, consultants and advisors of incentive stock options, nonstatutory
stock options and restricted common stock. Under the Plan the option price for
incentive stock options may not be less than the fair market value of the stock
at the time the options are granted.



                                      F-14
<PAGE>   59

    Under the terms of the Plan options can be granted for no more than ten
years and expire on the earlier of the expiration date or six months after
termination of employment, unless termination of employment is due to death or
disability, whereby the options expire eighteen months after the termination of
employment. Vesting is determined by the Stock Option Committee of the Board of
Directors. The majority of stock options granted under the Plan vest 25% one
year from December 10, 1997 with the remaining 75% vesting ratably over the
following three years

    The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option and stock purchase plans. Had compensation cost
been recognized consistent with SFAS No. 123 the Company's net loss and loss per
share would have been increased to pro forma amounts indicated below for the
fiscal years ended March 30, 1998 and March 31, 1997 (in thousands, except net
loss per share amounts):

<TABLE>
<CAPTION>
                                                        1998            1997
                                                     ----------      ----------
<S>                                                  <C>             <C>        
Net loss
  As reported ..................................     $  (38,271)     $  (86,705)
  Pro forma ....................................     $  (38,619)     $  (88,276)
Net loss per share
  As reported ..................................     $    (1.63)     $    (3.71)
  Pro forma ....................................     $    (1.65)     $    (3.77)
</TABLE>

    During Fiscal 1998, 380,000 stock options were granted at an exercise price
below fair market value. These options had a per share weighted average fair
value of $0.92 and a weighted average exercise price of $0.53. All other options
granted during Fiscal 1998 had an exercise price equal to the market value and
had a per share weighted average fair value of $0.74. The per share weighted
average fair value of stock options issued by the Company during Fiscal 1997 and
1996 were $1.61 and $5.77, respectively.

    The weighted average fair value was determined based on the Black-Scholes
option-pricing model, utilizing the following assumptions:

<TABLE>
<CAPTION>
                                                    1998       1997       1996
                                                   ------     ------     ------
<S>                                                <C>        <C>        <C>    
Dividend yield ................................      --         --         --
Expected volatility ...........................      50.0%      50.0%      50.0%
Risk-free rate of return ......................       6.5%       6.4%       6.2%
Average expected option life ..................    5 years    5 years    5 years
</TABLE>

    A summary of option activity under the Plan for the fiscal years ended March
30, 1998, March 31, 1997 and April 1, 1996, is as follows:

<TABLE>
<CAPTION>
                                            1998                          1997                         1996
                                  --------------------------   --------------------------   --------------------------
                                                   WEIGHTED                    WEIGHTED                      WEIGHTED
                                                   AVERAGE                     AVERAGE                       AVERAGE
                                                   EXERCISE                    EXERCISE                      EXERCISE
                                    SHARES          PRICE        SHARES          PRICE        SHARES          PRICE
                                  -----------    -----------   -----------    -----------   -----------    -----------
                                (IN THOUSANDS)                (IN THOUSANDS)               (IN THOUSANDS)
<S>                               <C>            <C>           <C>            <C>           <C>            <C>        
Outstanding at beginning
  of year .....................           902    $      4.69         1,249    $      6.33         4,466    $     0.035
Granted .......................         4,826           1.15           665           4.09           753          10.88
Exercised .....................           (51)          .075          (422)         0.035        (3,939)         0.035
Cancelled .....................        (1,768)          2.00          (590)         10.25           (31)          9.68
                                  -----------    -----------   -----------    -----------   -----------    -----------
Outstanding at year-end .......         3,909    $      1.22           902    $      4.69         1,249    $      6.33
                                  ===========                  ===========                  ===========
Options exercisable at year
  end .........................           426    $      2.05           289    $      2.40           497    $     0.035
Shares available for future
  grant .......................         1,513                          345                          387
</TABLE>




                                      F-15
<PAGE>   60
    The following summarizes information regarding the Company's stock options
outstanding at March 30, 1998:


<TABLE>
<CAPTION>
                                            WEIGHTED-       WEIGHTED-                     WEIGHTED-
                                            AVERAGE         AVERAGE        NUMBER         AVERAGE 
          RANGE OF             NUMBER       REMAINING       EXERCISE    EXERCISABLE AT    EXERCISE
        EXERCISE PRICES     OUTSTANDING  CONTRACTUAL LIFE    PRICE      MARCH 30, 1998     PRICE
        ---------------     -----------  ----------------    -----      --------------     -----
                           (IN THOUSANDS)                              (IN THOUSANDS)
<S>    <C>                  <C>          <C>              <C>               <C>          <C> 
       $ .035  - $ 1.0625         399         9.6          $   .51         134            $  0.54  
       $ 1.063 - $ 2.0000       3,263         9.7             1.08         129               1.07  
       $ 2.125 - $ 4.8000         204         8.4             3.17         139               3.11  
       $ 6.250 - $10.7500          30         7.5             7.75          16               7.73  
       $12.000 - $13.1250          13         7.4            12.88           8              12.92  
       ------------------       -----         ---          -------         ---            -------  
       $. 035  - $13.1250       3,909         9.6          $  1.22         426            $  2.05  
       ==================       =====                                      ===            
</TABLE>

    On December 10, 1997, the Company's Board of Directors resolved that all
employees of the Company as of that date who were granted options between
January 1, 1997 and December 10, 1997, at an exercise price greater than $1.063
per share were eligible to receive an equivalent number of options at an
exercise price of $1.063 per share in replacement of their current options.

Employee Qualified Stock Purchase Plan

    In 1995 the Company approved an Employee Qualified Stock Purchase Plan
("ESPP"), which was amended in 1996, and which as amended allows eligible
employees of the Company and its subsidiary to purchase shares of common stock
through payroll deductions. The ESPP consists of consecutive 24-month offering
periods composed of four 6-month exercise periods. The shares can be purchased
at the lower of 85% of the fair market value of the common stock at the date of
commencement of this one year offering period or at the last day of each 6-month
exercise period. Purchases are limited to 10% of an employee's eligible
compensation, subject to a maximum annual employee contribution limited to
$25,000 market value of common stock (calculated as employee's enrollment price
multiplied by purchased shares). During Fiscal 1998 and Fiscal 1996, no such
shares were issued. In Fiscal 1997, 33,175 such shares were issued.

(13) BUSINESS CONCENTRATION

    The Company's sales are concentrated in the computer industry, however its
customers operate in different markets and geographic areas. Fujitsu, Sun
Microsystems, and users of Sun Microsystems products are the principal consumers
of the Company's products. The following table summarizes the percentage of
gross revenues generated by sales to customers which account for more than 10%
of net sales for the fiscal years ended March 30, 1998, March 31,1997 and April
1, 1996:

<TABLE>
<CAPTION>
                   CUSTOMER   1998  1997   1996
                   --------   ----  ----   ----
<S>                           <C>   <C>    <C>
                   A........   15%   28%    45%
                   B........   36    22     19
</TABLE>

    During the years ended March 30, 1998, March 31, 1997 and April 1, 1996
export sales were approximately $20,318,000, $27,840,000 and $36,230,000,
respectively.

(14) FOURTH QUARTER ADJUSTMENTS

    In the fourth quarter of Fiscal 1998, the Company revised several of its
estimates related to its investment in its subsidiary, inventory and property 
and equipment as follows:

<TABLE>
<CAPTION>
                                                                (IN THOUSANDS)
                                                                --------------
<S>                                                                <C>  
           Inventory, lower of cost or market..................       7,271
           Write-down of property and equipment................      11,203
           Write-down of investment in subsidiary..............       1,080
                                                                   --------
                     Total.....................................    $ 19,554
                                                                   ========
</TABLE>

    These adjustments increased the net loss by approximately $19.5 million
($.83 per share) for the year ended March 30, 1998.




                                      F-16
<PAGE>   61

(15)      SUBSEQUENT EVENTS

     As a result of the continuing and substantial deterioration of the
Company's financial position, on June 1, 1998, the Company announced that it
would commence an orderly shutdown of its operations. The decision was
precipitated by a continuing decrease in revenues from the Company's sales of
32-bit products. The Company is exploring certain strategic alternatives,
including an acquisition of the entire Company by a third party and the sale of
various assets, including the Viper development and associated intellectual
property, Austin manufacturing operation and the Company's Design Center in
Israel. To date, the Company has been unable to locate a buyer for the entire
Company and believe it is highly unlikely that it will be able to do so. A
letter of intent with respect to the sale of the manufacturing operations was
entered into on June 25, 1998. In addition, the Company and Fujitsu are
negotiating an asset purchase agreement pursuant to which Fujitsu will purchase
certain intellectual property rights from the Company (with a royalty-free
license back to the Company for some of those rights). The Company is also
actively involved in discussions with potentially interested parties, including
Fujitsu, with regard to other of its assets. There is no assurance that any
further agreements will be reached or that agreements reached will close in
accordance with their terms. In the absence of a sale of the entire Company, the
Company intends to cease all of its operations by the end of calendar 1998.

    Under the plan approved by the Company's Board of Directors, it is
anticipated that the Company will continue its operations, at a scaled back
level, through the end of calendar year 1998. Under this plan, the Company hopes
to avoid undue disruption to its customers, which will have an opportunity to
place orders for their forecasted needs, which the Company will strive to meet.
The Company believes that by endeavoring to keep its design and product
engineers in place as well as a scaled-back test site, it would have a better
chance of finding a buyer for the Company of all or part of its assets,
including its intellectual property. The Company has formed a business unit,
named BridgePoint, that contains its significantly scaled back sales, service
and manufacturing operations employees, as well as the inventory related to its
32-bit products. It is currently anticipated that BridgePoint will serve the
ROSS customers until year end and may be sold separately or as a part of the
entire Company (a letter of intent with respect to the sale of the Bridgepoint
operations was entered into on June 25, 1998). The Company at this time will
seek to maximize its asset value for its creditors. While the Company hopes to
pay all of its creditors in full, its ability to do so is dependent upon its
ability to generate sufficient cash from the sale of products and assets. The
Company believes that it is highly unlikely that there will be any funds or
assets available for distribution to any stockholders.

    As part of the preparation for the shutdown of the Company's business, the
Company has issued notices to its employees under the Federal Workers Adjustment
and Retraining Notification Act. These notices provided advance notice to all
employees of the scheduled termination of their employment in connection with
the shutdown. Approximately 93 employees, or 46% of the Company's work force
will be laid off as of July 31, 1998, excluding the approximately 30 full and
part time employees at the ROSS Design Center in Israel. The Company's 64-bit
"Viper" Development Team (including the Vice President of Engineering and the
Chief Architect), the BridgePoint operations, sales and service personnel
(including the Vice President of Manufacturing) and an administrative team
(including the Chief Executive Officer, Chief Financial Officer and Corporate
Controller), will continue to operate the smaller ROSS Company and pursue
alternatives, although the Company intends to lay-off the Viper development team
on July 31, 1998 if an agreement to sell those operations has not been reached
by that time.



                                      F-17
<PAGE>   62
\     In conjunction with the Company's orderly shutdown of its operations and 
in order to provide certain employees with an incentive to continue his or her
employment with the Company, the Company adopted an Employee Retention and
Severance Plan (the "Retention Plan"). Also as part of the orderly shutdown, the
Company provided severance packages to all eligible terminated employees as
required by its general severance policy, substantially all of the executive
officers, have been retained pursuant to individual retention agreements. Given
the Company's uncertain financial position, retention agreements were provided
by the Company to such executive officers to provide incentive so that the key
personnel necessary to effect the sale of the Company's assets remained with the
Company until such time that their services are no longer required. The total
cost of the Retention Plan and severance packages totals $5.2 million, of which
$3.2 million relates to prior contractual obligations of the Company and
obligations of the Company under its general severance policy. At March 30,
1998, these severance costs did not meet the criteria as stated in Emerging
Issues Task Force issue No. 94-3 and, therefore; these severance costs will not
be accrued until the first quarter of fiscal 1999.

    In general, the individual retention letters issued to the Company's
executive officers and other eligible employees (namely, the members of the
Company's "Viper" development design team, the BridgePoint manufacturing,
operations and customer service personnel and certain administrative personnel)
entitle such officer or employee to receive certain retention and severance
payments so long as, among other things, such officer or employee maintains his
or her employment with the Company through a specified date. Certain of the
individual retention letters also require the affected officer or employee to
continue his or her employment with the Company or a successor to certain of its
operations in order to be eligible to receive a retention and/or severance
payment. Fujitsu has provided assurances to the Company regarding payment of
such individual retention amounts predicated upon each employee's entitlement to
such retention amount.

    On May 18, 1998, the Company was informed by the Nasdaq National Market of
the Company's failure to maintain certain listing requirements - failure to
maintain a closing bid price of greater than or equal to $1.00 per share and
failure to maintain a market value of public float greater than or equal to $5
million. If the Company is unable to demonstrate compliance with these two rules
before August 13, 1998, the Company's securities will be delisted at the opening
of business on August 17, 1998. The Company does not believe that it will be
able to demonstrate compliance with such rules by the August 13, 1998 deadline.
The Company's Common stock would continue to trade on the over-the-counter
bulletin board market maintained by the Nasdaq National Market.






                                      F-18
<PAGE>   63



                                   SCHEDULE II

                      ROSS TECHNOLOGY, INC. AND SUBSIDIARY

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                     DESCRIPTION              BALANCE AT   ADDITIONS  DEDUCTIONS  BALANCE AT
                     -----------              BEGINNING   CHARGED TO    FROM       END OF
                                              OF PERIOD     EXPENSE    ACCOUNTS     PERIOD
           Allowance for doubtful accounts:   ----------   ---------  ----------  ---------- 
<S>                                           <C>         <C>         <C>         <C>     
             Year ended April 1, 1996...      $    495    $   1,576   $      14   $  2,057
             Year ended March 31, 1997..         2,057       10,613      11,115      1,555
             Year ended March 30, 1998..         1,555        1,819       2,916        458
</TABLE>



                                      F-19
<PAGE>   64
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
  Exhibit
    No.                       Description
    ---                       -----------
<S>               <C>

    3.2      ---- Restated by-laws of the Registrant, as amended

    10.1     ---- Stock Option Plan and Restricted Stock Purchase Plan 3.0, as 
                  amended

   10.56     ---- Employment Agreement, dated May 21, 1997, between the
                  Registrant and Jack W. Simpson, Sr.

   10.57     ---- Amendment to Letter of Agreement between the Registrant and
                  Francis S. (Kit) Webster III

   10.58     ---- Amendment to Letter of Agreement between Company and Frank A.
                  Baffi

   10.59     ---- Employee Retention and Severance Plan

   10.60     ---- Retention Letter dated June 4, 1998 for Jack W.  Simpson, Sr.

   10.61     ---- Retention Letter dated June 3, 1998 for Francis S. (Kit)
                  Webster

   10.62     ---- Retention Letter dated May 28, 1998 for Mitchell K. Alsup

   10.63     ---- Retention Letter dated May 28, 1998 for Trevor S. Smith

   10.64     ---- Retention Letter dated June 1, 1998 for Joe D. Jones

   10.65     ---- Retention Letter dated June 1, 1998 for Carter L. Godwin

   10.66     ---- Agreement between Fujitsu Limited and the Company dated as of
                  March 30, 1998 relating to the Viper Development Agreement
                  dated June 25, 1997++

     11      ---- Earnings per share computations

     21      ---- Subsidiaries of the Registrant

     23      ---- Consent of KPMG Peat Marwick LLP

     27      ---- Financial Data Schedule

</TABLE>

       ++ Certain portions of this Exhibit have been omitted and filed
          separately under an application for confidential treatment.