<PAGE>   1

               UNITED STATES SECURITIES AND EXCHANGES COMMISSION

                            WASHINGTON, D.C. 20549


                                 FORM 10-Q/A


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


                   FOR THE FIRST QUARTER ENDED MARCH 31, 1995


                         COMMISSION FILE NUMBER 0-22202



                          PAIRGAIN TECHNOLOGIES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


            DELAWARE                                        33-0282809
-------------------------------                         ------------------
(STATE OR OTHER JURISDICTION OF                           (IRS EMPLOYER
 INCORPORATION OF ORGANIZATION)                         IDENTIFICATION NO.)



              14402 FRANKLIN AVENUE, TUSTIN, CALIFORNIA 92680-7013
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)


                                 (714) 832-9922
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.

                              YES      X       NO
                                     -----         -----

THERE WERE 14,887,719 SHARES OF THE REGISTRANT'S COMMON STOCK, PAR VALUE OF
$.001 PER SHARE OUTSTANDING ON MARCH 31, 1995.



<PAGE>   2
                          PAIRGAIN TECHNOLOGIES, INC.

                                     INDEX

<TABLE>
<CAPTION>
                                                                                          Page                  
                                                                                          ----                  
<S>                                                                                        <C>                  
Part I.    Financial Information                                                                                
                                                                                                                
                                                                                                                
           Item 1.    Financial Statements                                                                      
                                                                                                                
                      Condensed Consolidated Balance Sheets                                                     
                        at March 31, 1995 and December 31, 1994                            3                 
                                                                                                                
                      Condensed Consolidated Statements of Income                                               
                        for the three months ended March 31, 1995 and 1994                 4                 
                                                                                                                
                      Condensed Consolidated Statements of Cash Flows                                           
                        for the three months ended March 31, 1995 and 1994                 5                 
                                                                                                                
                      Notes to Condensed Consolidated Financial Statements                 6                  
                                                                                                                
           Item 2.    Management's Discussion and Analysis                                                      
                        of Financial Condition and Results of Operations                  10                
                                                                                                                
Part II.   Other Information                                                                                    
                                                                                                                
           Item 1.    Legal Proceedings                                                   15                 
                                                                                                                
           Item 2.    Changes in Securities                                               15                 
                                                                                                                
           Item 3.    Defaults upon Senior Securities                                     15                 
                                                                                                                
           Item 4.    Submission of Matters to a Vote of Security Holders                 15                 
                                                                                                                
           Item 5.    Other Information                                                   15                 
                                                                                                                
           Item 6.    Exhibits and Reports on Form 8-K                                    15                 
                                                                                                                
Signatures                                                                                16                   
</TABLE>




                                      2
<PAGE>   3
                                PART I:  ITEM 1

                             FINANCIAL INFORMATION

                          PAIRGAIN TECHNOLOGIES, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   MARCH 31,      DECEMBER 31,
                                                                     1995             1994
                                                                  -----------     ------------
                                                                  (UNAUDITED) 
<S>                                                                <C>               <C>
ASSETS                                                                        
Current assets:                                                               

    Cash and cash equivalents                                      $ 30,858          $   711
    Short-term investments                                           34,623           52,565
    Accounts receivable                                               7,676            9,693
    Inventories                                                      20,482           16,474
    Other current assets and deferred taxes                           3,689            3,704
                                                                   --------          -------
Total current assets                                                 97,328           83,147
Property and equipment, net                                           4,815            3,431
Other assets                                                             55               47
                                                                   --------          -------
Total assets                                                       $102,198          $86,625
                                                                   ========          =======           
                                                                              
LIABILITIES AND STOCKHOLDERS' EQUITY                                          

Current liabilities:                                                          

    Notes payable to bank                                          $     --          $ 1,000
    Accounts payable and other current liabilities                   10,556           10,779
                                                                   --------          -------
Total current liabilities                                            10,556           11,779

Stockholders' equity:                                                         

    Preferred stock, $.001 par value:                                         
      Authorized shares - 2,000,000; 
      Issued and outstanding shares - None                               --               --
    Common stock                                                              
      Authorized shares - 30,000,000; 
      Issued and outstanding shares - 14,887,719 and 
      12,708,636 at March 31, 1995 and 
      December 31, 1994, respectively                                    15               13
Additional paid-in capital                                           82,940           69,513
Deferred compensation                                                  (148)            (170)
Unrealized loss on marketable securities                                 (4)            (210)
Retained earnings                                                     8,839            5,700
                                                                   --------          -------
Total stockholders' equity                                           91,642           74,846
                                                                   --------          -------
Total liabilities and stockholders' equity                         $102,198          $86,625
                                                                   ========          =======
</TABLE>


           See notes to condensed consolidated financial statements.





                                       3
<PAGE>   4
                          PAIRGAIN TECHNOLOGIES, INC.

                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED
                                                             MARCH 31,
                                                    -------------------------
                                                     1995              1994
                                                    -------           -------
                                                                    (RESTATED)
<S>                                                 <C>               <C>
Revenues                                            $19,078           $12,482
Cost of revenues                                      9,653             7,115
                                                    -------           -------
Gross profit                                          9,425             5,367
                                                               
Operating expenses:                                            

   Research and development                           1,892             1,246
   Selling and marketing                              1,868             1,175
   General and administrative                         1,451               846
                                                    -------           -------
Total operating expenses                              5,211             3,267
                                                    -------           -------
Income from operations                                4,214             2,100
Interest and other income, net                          587               368
Gain (loss) on investments                              100            (9,664)
                                                    -------           -------
Income (loss) before income taxes                     4,901            (7,196)
Provision for income taxes                            1,759             1,016
                                                    -------           -------
Net income (loss)                                   $ 3,142           $(8,212)
                                                    =======           =======
PER SHARE DATA:                                                

Earnings (loss) per share                           $  0.20           $ (0.66)
                                                    =======           =======
Weighted average number of common and common                   
  equivalent shares                                  16,103            12,375
                                                    =======           =======
</TABLE>

           See notes to condensed consolidated financial statements.





                                       4
<PAGE>   5
                          PAIRGAIN TECHNOLOGIES, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                              THREE MONTHS ENDED
                                                                                   MARCH 31,
                                                                           ------------------------
                                                                             1995            1994
                                                                           -------         --------
                                                                                          (RESTATED)
<S>                                                                        <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES                                          
       
Net income (loss)                                                          $ 3,142         $ (8,212)
Adjustments to reconcile net income (loss) to net cash 
  provided by operating activities:                                                          

  Depreciation and amortization                                                619              400
  (Gains) losses on sales of investments                                      (100)           9,664

Change in operating assets and liabilities:                                          
  Accounts receivable                                                        2,017             (125)
  Inventories                                                               (4,008)           1,015
  Other current assets                                                          15              (33)
  Other assets                                                                  (8)               6
  Accounts payable and other current liabilities                              (223)           1,291
                                                                           -------         --------
Net cash provided by operating activities                                    1,454            4,006
                                                                           -------         -------- 
CASH FLOWS FROM INVESTING ACTIVITIES                                                 

Net proceeds from (purchases of) investments                                17,948           (9,939)
Purchase of property and equipment                                          (1,684)            (411)
                                                                           -------         --------
Net cash provided by (used in) investing activities                         16,264          (10,350)
                                                                           -------         --------
CASH FLOWS FROM FINANCING ACTIVITIES                                                 

Payments on bank line of credit                                             (1,000)              --
Proceeds from issuance of common stock and warrants                         13,429               38
                                                                           -------         --------
Net cash provided by financing activities                                   12,429               38
                                                                           -------         --------
Increase (decrease) in cash and cash equivalents                            30,147           (6,306)
Cash and cash equivalents at beginning of period                               711           13,650
                                                                           -------         --------
Cash and cash equivalents at end of period                                 $30,858         $  7,344
                                                                           =======         ========          
                                                                                     
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                     

Interest paid                                                              $    18         $     --
                                                                           =======         ========          
Income tax paid                                                            $   872         $    162
                                                                           =======         ========          
</TABLE>

           See notes to condensed consolidated financial statements.





                                       5
<PAGE>   6
                          PAIRGAIN TECHNOLOGIES, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


1.  RESTATEMENT OF PREVIOUSLY REPORTED QUARTERLY FINANCIAL STATEMENTS

         In 1993 and 1994, the Company invested a portion of its excess cash
with Capital Insight, Inc. ("Capital Insight"), a financial advisor and broker
based in Beverly Hills, California.  The Company had no funds invested with
Capital Insight at either December 31, 1993 or December 31, 1994, as all such
invested funds were returned to the Company prior to the end of each of those
years.

         In early 1995, the Company again invested a portion of its excess cash
with Capital Insight, with instructions that the funds be invested solely in
U.S. Treasury securities with maturities of one year or less.  These
instructions were consistent with the investment guidelines which had been
approved by the Company's Board of Directors in October 1994.  However, these
instructions were violated and the funds were used to engage in unauthorized
trading in options and futures. In November 1995, the Company confirmed that it
had incurred non- recurring losses of $15.8 million resulting from these
inappropriate and unauthorized trading activities.

         The Company's outside directors retained independent legal counsel and
forensic accountants to determine the facts and circumstances surrounding this
matter.  This investigation revealed no improper involvement by any Company
director, officer or employee in the unauthorized trading.  Additionally, the
investigation found that the Company was provided with fictitious statements by
Capital Insight, and the Company had actually incurred substantial losses in
the second quarter of 1995.  During the third and fourth quarters of 1995, the
unauthorized trading generated significant gains resulting in net trading
losses of $15.8 million for the year.  There was no effect on net income for
the first quarter of 1995.  Furthermore, it was determined that the 1994
statements provided by this advisor and relied upon by the Company for its
quarterly reporting were also incorrect.  Although total financial results for
1994 were not impacted by these false statements, previously reported 1994
quarterly financial statements did not reflect the proper periods in which the
trading gains and losses occurred.  Based on the results of the investigation,
the Company has amended its quarterly statements for both 1994 and 1995 to
reflect the proper reporting of the trading gains and losses.  The effect on
net income and net income per share for the three months ended March 31, 1995
and 1994 was as follows:





                                       6
<PAGE>   7
                          PAIRGAIN TECHNOLOGIES, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
                                  (continued)


<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED       THREE MONTHS ENDED         
                                                                            MARCH 31, 1995           MARCH 31, 1994           
                                                                          ------------------       ------------------
                                                                           (IN THOUSANDS EXCEPT EARNINGS PER SHARE)               
     <S>                                                                       <C>                      <C>                   
     Net income as previously reported                                         $ 3,142                  $ 1,620               
                                                                               =======                  =======               
     Net income before adjustment for investment losses                        $ 3,142                  $ 1,620               
                                                                                                                              
     Adjustments to properly reflect investment losses:                                                                       
                                                                                                                              
     Investment losses                                                              --                   (9,950)              
     Provision for income taxes                                                     --                      118               
                                                                               -------                  -------               
     Net income (loss) after adjustment for investment loss                    $ 3,142                  $(8,212)              
                                                                               =======                  =======               
     Net income (loss) per share                                               $  0.20                  $ (0.66)              
                                                                               =======                  =======               
     Weighted average shares outstanding used to compute                                                                      
       net income (loss) per share                                              16,103                   12,375               
                                                                               =======                  =======               
     Net income per share, as previously reported                              $  0.20                  $  0.11               
                                                                               =======                  =======               
     Weighted average shares outstanding used to compute net                                                                  
       income per share, as previously reported                                 16,103                   15,305               
                                                                               =======                  =======               
</TABLE>

         In January 1996, the Company received a copy of a complaint, filed
derivatively by a Company stockholder on behalf of the Company, naming as
defendants the Company's directors and certain officers, as well as Capital
Insight and Mr. S. Jay Goldinger, its president.  The derivative complaint
states causes of action for breach of fiduciary duty, abuse of control,
constructive fraud and gross mismanagement and waste of corporate assets.  The
suit seeks an award in the amount of all damages sustained by the Company
including the losses of $15.8 million and legal fees and expenses.

         In January 1996, the Company filed suit, in Los Angeles federal court,
against Mr. S. Jay Goldinger and Capital Insight, charging unauthorized
trading, fraudulent misrepresentation, violation of federal securities laws and
breach of fiduciary duties.  The suit seeks $15.8 million in damages by reason
of the losses incurred by the Company, as well as punitive damages and legal
fees.

         The Company does not maintain Directors and Officers liability
insurance.  However, under the terms of its articles of incorporation, the
Company indemnifies its directors and officers for damages and legal fees
arising from litigation matters.  The ultimate outcome of these complaints can
not presently be determined and, accordingly, no provision for any loss or
recovery that may result has been made in the Company's financial statements.





                                       7
<PAGE>   8
                          PAIRGAIN TECHNOLOGIES, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
                                  (continued)

2. INTERIM PERIOD ACCOUNTING POLICIES

         In the opinion of the Company's management, the accompanying unaudited
condensed consolidated financial statements contain all normal recurring
adjustments necessary to present fairly the financial position as of  March 31,
1995, and consolidated results of operations for the condensed consolidated
statements of income for the three months ended March 31, 1995, and March 31,
1994, and cash flows for the three month periods ended March 31, 1995, and
March 31, 1994.  Results of operations for the three months ended March 31,
1995, are not necessarily indicative of results to be expected for the full
year ending December 31, 1995.

         Although the Company believes that the disclosures in the financial
statements are adequate to make the information presented not misleading,
certain information and footnote information normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission, and these financial statements should be
read in conjunction with the Company's audited consolidated financial
statements included in the Company's Form 10-K/A for the year ended December
31, 1994.

         Certain prior year amounts have been reclassified to conform with the
current period's presentation.

3. PRINCIPLES OF CONSOLIDATION

         The accompanying condensed consolidated financial statements include
the accounts of the Company, PairGain Technologies, Inc., and its wholly owned
subsidiaries, PairGain Canada, Inc., and PairGain Services Group, Inc.  All
significant intercompany accounts and transactions have been eliminated in
consolidation.

4.  SHORT-TERM INVESTMENTS

         The Company adopted the provision of Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities ("Statement 115") on January 1, 1994. Pursuant to Statement 115, the
Company's short-term investments have been classified as either trading or
available for sale at the time of purchase. Trading securities are carried at
fair value with unrealized gains and losses included in the Company's results
of operations.  Securities classified as available for sale are carried at fair
value with unrealized gains and losses reported in a separate component of
stockholders' equity. The unrealized loss, net of tax, related to available for
sale securities and included in stockholders' equity at March 31, 1995 and
December 31, 1994 was $4,000 and $210,000, respectively.





                                       8
<PAGE>   9
                          PAIRGAIN TECHNOLOGIES, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
                                  (continued)

5.  INVENTORIES

         Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:

<TABLE>
<CAPTION>
                                                 MARCH 31,     DECEMBER 31,
                                                    1995           1994
                                                 ---------     ------------
                                                      (IN THOUSANDS)
           <S>                                    <C>             <C>
           Raw materials                          $ 4,529         $ 4,743
           Work in process                         11,930           9,529
           Finished goods                           4,023           2,202
                                                  -------         -------
                                                  $20,482         $16,474
                                                  =======         =======
</TABLE>

6.  BANK LINE OF CREDIT

         The Company maintains an unsecured line of credit with a bank. The
line allows maximum borrowings of $10,000,000, of which up to $2,000,000 may be
utilized for the secured purchase of fixed assets (term loan), $2,000,000 for
letters of credit and $2,000,000 for foreign exchange contracts. The line bears
interest at prime (9.0% at March 31, 1995) and borrowings under term loan
provisions of the agreement bear interest at prime plus 1%. At March 31, 1995,
the Company had no outstanding borrowings under this line of credit.

7.  INCOME TAXES

         Income taxes are provided at the rate expected to be in effect for the
entire year.

8.  PER SHARE DATA

         Net income per share is computed using the weighted average number of
common shares and common share equivalents outstanding during the periods
presented. Common share equivalents result from outstanding options and
warrants to purchase common stock.





                                       9
<PAGE>   10
                                PART I:  ITEM 2

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                          PAIRGAIN TECHNOLOGIES, INC.

RESULTS OF OPERATIONS (quarter ended March 31, 1995, compared to quarter ended
March 31, 1994)

REVENUES

         Revenues for the three months ended March 31, 1995 increased $6.6
million, or 53%, as compared with the same period in the prior year.  Of this
increase in revenue, product revenue increased $7.0 million, and royalty income
decreased $372,000. The increase in product revenue is primarily due a 114%
increase in the unit sales volume of the Company's HiGain product. The
Company's other two products, Campus and PG2, also contributed to the overall
growth of product revenue by having unit sales volume increases of 228% and
37%, respectively. These increases were somewhat offset by a decline in the
average selling price in both the HiGain and Campus products due to competitive
pressures. The decrease in royalty income was primarily due to a reduction in
royalty fees generated by Alcatel for the use of the Company's HDSL technology.

GROSS PROFIT

         Gross profit represents total revenues for a period, including
technology fees and royalty income, less the cost of revenues for such period.
Cost of revenues represents primarily product costs, together with associated
overhead expenditures. Gross profit increased $4.1 million, or 76%,  for the
three months ended March 31, 1995 as compared with the same period in the prior
year. This growth in gross profit was attributable principally to the increase
in the Company's revenues. In addition, the decline in average sales price was
somewhat offset by a reduction in the per unit cost of the Company's HiGain
product. This reduction in per unit cost was a result of continuing engineering
design changes, reduced prices for components from vendors and reduced
manufacturing overhead rates achieved through increases in volume.

         The Company expects that increased future competition will continue to
place downward pressure on the average sales prices of its existing products.
Declining average sales prices may adversely affect gross product margins on
the Company's existing products if the Company is unable to fully offset such
reductions in average sales prices by reductions in the Company's per unit
cost. The Company's ability to mitigate future declines in its gross product
margin will depend in part upon its ability to introduce and sell new products
with higher gross product margins and further reduce its per unit costs.

OPERATING EXPENSES

         In order to support the growth of its business, the Company
significantly expanded its levels of operations in all areas resulting in
increased operating expenses. Operating expenses increased $1.9 million, or
60%, for the three months ended March 31, 1995 as compared with the same period
in the prior year. Approximately 43% of this increase was due to the addition
of personnel.





                                       10
<PAGE>   11
         Research and development expense increased $646,000, or 52%, for the
three months ended March 31, 1995 as compared with the same period in the prior
year. This increase was primarily due to the addition of personnel,
depreciation on additions to capital equipment, prototype expenditures as new
products were tested in the lab and payments to outside consultants.

         Selling and marketing expense increased $693,000, or 59%, for the
three months ended March 31, 1995 as compared with the same period in the prior
year. This increase was primarily due to growing levels of sales and marketing
support personnel, commissions related to higher revenue levels, advertising
and travel costs.

         General and administrative expense increased $605,000, or 72%, for the
three months ended March 31, 1995 as compared with the same period in the prior
year. This increase was due to an increase in the Company's bad debt provision
over the prior year, an increase in sales and property taxes and an overall
increase in the level of purchasing associated with general supplies and
non-capitalized equipment.

INCOME FROM OPERATIONS

        As a result of the above, income from operations for the quarter ended
March 31, 1995 increased 101% to $4.2 million, compared to $2.1 million for the
1994 quarter.

LOSS ON INVESTMENTS

         In 1993 and 1994, the Company invested a portion of its excess cash
with Capital Insight, Inc. ("Capital Insight"), a financial advisor and broker
based in Beverly Hills, California.  The Company had no funds invested with
Capital Insight at either December 31, 1993 or December 31, 1994, as all such
invested funds were returned to the Company prior to the end of each of those
years.

         In early 1995, the Company again invested a portion of its excess cash
with Capital Insight, with instructions that the funds be invested solely in
U.S. Treasury securities with maturities of one year or less.  These
instructions were consistent with the investment guidelines which had been
approved by the Company's Board of Directors in October 1994.  However, these
instructions were violated and the funds were used to engage in unauthorized
trading in options and futures. In November 1995, the Company confirmed that it
had incurred non- recurring losses of $15.8 million resulting from these
inappropriate and unauthorized trading activities.

         The Company's outside directors retained independent legal counsel and
forensic accountants to determine the facts and circumstances surrounding this
matter.  This investigation revealed no improper involvement by any Company
director, officer or employee in the unauthorized trading.  Additionally, the
investigation found that the Company was provided with fictitious statements by
Capital Insight, and the Company had actually incurred substantial losses in
the second quarter of 1995.  During the third and fourth quarters of 1995, the
unauthorized trading generated significant gains resulting in net trading
losses of $15.8 million for the year.  There was no effect on net income for
the first quarter of 1995.  Furthermore, it was determined that the 1994
statements provided by this advisor and relied upon by the Company for its
quarterly reporting were also incorrect.  Although total financial results for
1994 were not impacted by these false statements, previously reported 1994
quarterly financial statements did not reflect the proper periods in which the
trading gains and losses occurred.  Based on the results of the investigation,
the Company has amended its quarterly statements for both 1994 and 1995 to
reflect the proper reporting of the trading gains and losses.  The effect on
net income and net income per share for the three months ended March 31, 1995
and 1994 was as follows:





                                       11
<PAGE>   12
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED       THREE MONTHS ENDED
                                                                MARCH 31, 1995           MARCH 31, 1994
                                                              -------------------      ------------------
                                                               (IN THOUSANDS EXCEPT EARNINGS PER SHARE)      
<S>                                                                 <C>                      <C>
Net income as previously reported                                   $ 3,142                  $ 1,620
                                                                    =======                  =======
Net income before adjustment for investment losses                  $ 3,142                  $ 1,620
                                                             
Adjustments to properly reflect investment losses:           

    Investment losses                                                    --                   (9,950)
    Provision for income taxes                                           --                      118
                                                                    -------                  -------
Net income (loss) after adjustment for investment loss              $ 3,142                  $(8,212)
                                                                    =======                  =======
Net income (loss) per share                                         $  0.20                  $ (0.66)
                                                                    =======                  =======
Weighted average shares outstanding used to compute          
  net income (loss) per share                                        16,103                   12,375
                                                                    =======                  =======
Net income per share, as previously reported                        $  0.20                  $  0.11
                                                                    =======                  =======
Weighted average shares outstanding used to compute net      
  income per share, as previously reported                           16,103                   15,305
                                                                    =======                  =======
</TABLE>

         In January 1996, the Company received a copy of a complaint, filed
derivatively by a Company stockholder on behalf of the Company, naming as
defendants the Company's directors and certain officers, as well as Capital
Insight and Mr. S. Jay Goldinger, its president.  The derivative complaint
states causes of action for breach of fiduciary duty, abuse of control,
constructive fraud and gross mismanagement and waste of corporate assets.  The
suit seeks an award in the amount of all damages sustained by the Company
including the losses of $15.8 million and legal fees and expenses.

         In January 1996, the Company filed suit, in Los Angeles federal court,
against Mr. S. Jay Goldinger and Capital Insight, charging unauthorized
trading, fraudulent misrepresentation, violation of federal securities laws and
breach of fiduciary duties.  The suit seeks $15.8 million in damages by reason
of the losses incurred by the Company, as well as punitive damages and legal
fees.

         The Company does not maintain Directors and Officers liability
insurance.  However, under the terms of its articles of incorporation, the
Company indemnifies its directors and officers for damages and legal fees
arising from litigation matters.  The ultimate outcome of these complaints can
not presently be determined and, accordingly, no provision for any loss or
recovery that may result has been made in the Company's financial statements.





                                       12
<PAGE>   13
INTEREST AND OTHER INCOME, NET

         Net interest income increased to $587,000 for the three months ended
March 31, 1995 from $368,000 for the same period in the prior year. This
increase was primarily due to a shift in the Company's investment strategy
towards the generation of interest income rather than the generation of trading
gains. Interest expense for the three months ended March 31, 1995 was $18,000.
There was no interest expense for the three months ended March 31, 1994.

PROVISION FOR INCOME TAXES

        The provision for income taxes increased to $1.8 million, for the three
months ended March 31, 1995 from $1.0 million for the same period in the prior
year. The Company did not record any tax benefit from its investment losses in
excess of its investment gains in the 1994 quarter.

NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE

        Net income for the three months ended March 31, 1995 was $3.1 million,
or $0.20 per share, compared to a net loss of $8.2 million or $0.66 per share
for the 1994 quarter. The weighted average number of common and common
equivalent shares outstanding was 16.1 million and 12.4 million for the three
months ended March 31, 1995 and 1994, respectively. The increase in shares in
1995 is due to the inclusion of outstanding stock options and warrants (using
the treasury stock method). Outstanding stock options and warrants were not
considered in the 1994 quarter, as they would have been anti-dilutive in
computing loss per share for that period.

LIQUIDITY AND CAPITAL RESOURCES

         As of March 31, 1995, the Company had $65.5 million in cash, cash
equivalents and short-term investments and $86.8 million in working capital.
These figures represent an increase of $12.2 million in cash, cash equivalents
and short-term investments and $15.4 million in working capital over the year
ending December 31, 1994. These increases are primarily due to the receipt of
$13.2 million in cash from the Company's secondary public offering (including
cash received for warrant exercises) that took place in March 1995. The
decrease in the Company's accounts receivable to $8.0 million at March 31,
1995, compared to $10.2 million at December 31, 1994, was primarily due to a
decrease in collection days during the first three months of 1995. The increase
in inventory to $20.5 million at March 31, 1995, compared to $16.5 million at
December 31, 1994, was due to increased stocking levels to support future
shipments. The Company has historically maintained high levels of inventory and
has not turned inventory rapidly. As part of its growth strategy, the Company
intends to increase inventory turns in the future. However, there can be no
assurances that the Company can successfully accomplish such an increase, and
the failure to do so could have a material adverse effect on the Company's
business and results of operations.

         Capital expenditures relating primarily to the purchase of computer
equipment, test equipment, leasehold improvements and software amounted to $1.7
million and $411,000 for the three months





                                       13
<PAGE>   14
ended March 31, 1995 and 1994, respectively. During 1994, the Company entered
into an agreement to purchase software and equipment to upgrade its information
system capabilities. The total commitment thereunder is approximately $750,000.
This equipment will be received after March 31, 1995 and therefore is not
included in the capital additions incurred during the three month period ended
March 31, 1995.

         In December 1993, the Company entered into a Loan and Security
Agreement with its bank which provides for a revolving unsecured credit
facility of $10.0 million, subject to sublimits for amounts utilized for term
loans, letters of credit and foreign exchange contracts. The Loan Agreement
contains financial and operating covenants, including limitations on the
ability of the Company to incur additional indebtedness and restrictions on the
Company's ability to take certain other corporate actions. The Loan Agreement
also requires the Company to be in compliance with certain financial ratios. At
March 31, 1995 the Company had no outstanding borrowings under the Loan
Agreement and was in compliance with all financial and operating covenants. The
Loan Agreement expires on May 5, 1995.

         The Company believes that the current cash balance, together with
internally generated cash flow, will be sufficient to meet its working capital
and capital expenditure requirements through 1995.





                                       14
<PAGE>   15
                           PART II. OTHER INFORMATION

                          PAIRGAIN TECHNOLOGIES, INC.


Item 1.  Legal Proceedings

         None.

Item 2.  Changes in Securities

         None.

Item 3.  Defaults upon Senior Securities

         None.

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

         None.

Item 5.  Other Information

         None.

Item 6.  Exhibits and Reports on Form 8-K

         (A) Exhibits

             11.1  Computation of Per Share Earnings

         (B) Reports on Form 8-K

             None.





                                       15
<PAGE>   16

                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
under signed thereunto duly authorized.




                                             PairGain Technologies, Inc.
                                        --------------------------------------
                                                   (Registrant)





Date:   March 28, 1996                   /s/ CHARLES W. McBRAYER
                                        --------------------------------------
                                             Charles W. McBrayer
                                             Vice President, Finance 
                                             and Administration
                                             Chief Financial Officer
                                             (Duly Authorized Officer)





Date:   March 28, 1996                   /s/ ROBERT R. PRICE
                                        --------------------------------------
                                             Robert R. Price
                                             Corporate Controller
                                             (Chief Accounting Officer)





                                       16