<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, 1994


                         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 12,379,364 SHARES OF THE REGISTRANT'S COMMON STOCK, PAR VALUE OF
$.001 PER SHARE OUTSTANDING ON MARCH 31, 1994.
<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, 1994 and December 31, 1993                        3
                                                                      
                 Condensed Consolidated Statements of Income          
                   for the quarters ended March 31, 1994 and 1993                 4
                                                                      
                 Condensed Consolidated Statements of Cash Flows      
                   for the three months ended March 31, 1994 and 1993             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                                               14
                                                                      
       Item 2.   Changes in Securities                                           14
                                                                      
       Item 3.   Defaults upon Senior Securities                                 14
                                                                      
       Item 4.   Submission of Matters to a Vote of Security Holders             14
                                                                      
       Item 5.   Other Information                                               14
                                                                      
       Item 6.   Exhibits and Reports on Form 8-K                                14
                                                                      
Signatures                                                                       15
</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,
                                                                                1994             1993
                                                                             -----------     ------------
                                                                             (UNAUDITED)   
                                                                             (RESTATED)    
<S>                                                                            <C>              <C>
ASSETS                                                                                     

Current assets:
                                                                            
    Cash and cash equivalents                                                  $  7,344         $13,650
    Short-term investments                                                       36,202          36,270
    Accounts receivable                                                           5,575           5,450
    Inventories                                                                   9,484          10,499
    Other current assets and deferred taxes                                          72              39
                                                                               --------         -------
Total current assets                                                             58,677          65,908
Property and equipment, net                                                       2,487           2,265
Other assets                                                                         24              30
                                                                               --------         -------
Total assets                                                                   $ 61,188         $68,203
                                                                               ========         =======            
                                                                                           
LIABILITIES AND STOCKHOLDERS' EQUITY                                                       

Current liabilities:
                                                                       
    Accounts payable and other current liabilities                             $  4,258         $ 2,967
                                                                               --------         -------

Total current liabilities                                                         4,258           2,967

Stockholders' equity:
                                                                      
    Preferred stock, $.001 par value:                                                      
      Authorized shares - 2,000,000; 
      Issued and outstanding shares - None                                           --              --
    Common stock, $.001 par value                                                          
      Authorized shares - 30,000,000; 
      Issued and outstanding shares - 12,379,364 
      and 12,337,610 at March 31, 1994                                  
      and December 31, 1993, respectively                                            12              12
Additional paid-in capital                                                       68,386          68,348
Deferred compensation                                                              (235)           (257)
Unrealized loss on marketable securities                                           (154)             --
Accumulated deficit                                                             (11,079)         (2,867)
                                                                               --------         -------
Total stockholders' equity                                                       56,930          65,236
                                                                               --------         -------
Total liabilities and stockholders' equity                                     $ 61,188         $68,203
                                                                               ========         =======
</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,
                                                          ---------------------------
                                                             1994             1993
                                                          ----------       ----------
                                                          (RESTATED)
<S>                                                        <C>               <C>
Revenues                                                    $12,482         $ 7,448
Cost of revenues                                              7,115           3,615
                                                            -------         -------            
Gross profit                                                  5,367           3,833
                                                                        
Operating expenses:                                                     
Research and development                                      1,246             842
Selling and marketing                                         1,175             745
General and administrative                                      846             676
                                                            -------         -------
Total operating expenses                                      3,267           2,263
                                                            -------         -------            
Income from operations                                        2,100           1,570
Interest and other income, net                                  368             (84)
Loss on investments                                          (9,664)             --
                                                            -------         -------            
(Loss) income before income taxes                            (7,196)          1,486
                                                                        
Provision for income taxes                                    1,016             164
                                                            -------         -------            
Net (loss) income                                           $(8,212)        $ 1,322
                                                            =======         =======            
PER SHARE DATA:                                                         

Earnings (loss) per share                                   $ (0.66)        $  0.11
                                                            =======         =======
Weighted average number of common and common                            
  equivalent shares                                          12,375          11,565
                                                            =======         =======
</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,
                                                                        -----------------------------
                                                                           1994                1993
                                                                        ----------            -------
                                                                        (RESTATED)
<S>                                                                      <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES                         

Net (loss) income                                                        $ (8,212)            $ 1,322
Adjustments to reconcile net (loss) income to net cash       
  provided by (used in) operating activities:                 

  Depreciation and amortization                                               400                 139
  Losses on sales of investments                                            9,664                  --

Change in operating assets and liabilities:                  

  Accounts receivable                                                        (125)             (1,850)
  Inventories                                                               1,015                (342)
  Other current assets                                                        (33)                 (2)
  Other assets                                                                  6                  --
  Accounts payable and other current liabilities                            1,291                 327
                                                                         --------             -------
Net cash provided by (used in) operating activities                         4,006                (406)
                                                                         --------             -------                
CASH FLOWS FROM INVESTING ACTIVITIES                         

Net purchases of investments                                               (9,939)                 --
Purchase of property and equipment                                           (411)               (296)
                                                                         --------             -------
Net cash used in investing activities                                     (10,350)               (296)
                                                                         --------             -------
CASH FLOWS FROM FINANCING ACTIVITIES                         

Borrowings under bank line of credit                                           --                 236
Payments on bank line of credit                                                --                 (64)
Proceeds from capital lease                                                    --                 264
Payments on capital lease                                                      --                 (16)
Proceeds from issuance of common stock and warrants                            38                   9
                                                                         --------             -------
Net cash provided by financing activities                                      38                 429
                                                                         --------             -------
Decrease in cash and cash equivalents                                      (6,306)               (273)
Cash and cash equivalents at beginning of period                           13,650               3,302
                                                                         --------             -------             
Cash and cash equivalents at end of period                               $  7,344             $ 3,029
                                                                         ========             =======
                                                             
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION             

Interest paid                                                            $     --             $    73
                                                                         ========             =======
Income tax paid                                                          $    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.  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, 1994
was as follows:





                                       6
<PAGE>   7
                          PAIRGAIN TECHNOLOGIES, INC.

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


<TABLE>
<CAPTION>
                                                                                 THREE MONTHS ENDED
                                                                                   MARCH 31, 1994
                                                                                --------------------
                                                                                (IN THOUSANDS EXCEPT
                                                                                 EARNINGS PER SHARE)
      <S>                                                                             <C>
      Net income as previously reported                                               $ 1,620
                                                                                      =======
      Net income before adjustment for investment losses                              $ 1,620

      Adjustments to properly reflect investment losses:

         Investment losses                                                             (9,950)
         Provision for income taxes                                                       118
                                                                                      -------
      Net loss after adjustment for investment loss                                   $(8,212)
                                                                                      =======
      Net loss per share                                                              $ (0.66)
                                                                                      =======
      Weighted average shares outstanding used to compute net loss per share           12,375
                                                                                      =======
      Net income per share, as previously reported                                    $  0.11
                                                                                      =======
      Weighted average shares outstanding used to compute net income per 
        share, as previously reported                                                  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,
1994, and consolidated results of operations for the condensed consolidated
statements of income for the three months ended March 31, 1994, and March 31,
1993, and cash flows for the three month periods ended March 31, 1994, and
March 31, 1993.  Results of operations for the three months ended March 31,
1994, are not necessarily indicative of results to be expected for the full
year ending December 31, 1994.

    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 for the year ended December 31,
1993.

    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 related to available for sale
securities and included in stockholders' equity at March 31, 1994 was $154,000,
net of tax.





                                       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,
                                                   1994            1993
                                                 ---------      ------------
                                                      (IN THOUSANDS)
          <S>                                     <C>             <C>
          Raw materials                           $2,585          $ 3,697
          Work in process                          4,321            4,442
          Finished goods                           2,578            2,360
                                                  ------          -------
                                                  $9,484          $10,499
                                                  ======          =======
</TABLE>

6.  INCOME TAXES

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

7.  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. Pursuant to the requirements of the
Securities and Exchange Commission, common and preferred shares issued by the
Company during the twelve months immediately preceding the initial public
offering, plus the number of shares issuable upon exercise of stock options
granted during this period, have been included in the calculation of the shares
used in computing net income per share as if they were outstanding for all
periods presented (using the treasury stock method and the estimated public
offering price in calculating equivalent shares).





                                       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, 1994, compared to quarter ended
March 31, 1993)

REVENUES

    Revenues for the three months ended March 31, 1994 increased $5.0 million,
or 68%, as compared with the same period in the prior year. Of this increase in
revenue, product revenue increased $5.5 million, royalty income increased
$571,000 and technology licensing fees decreased $1.0 million. The increase in
product revenue was primarily due to a 255% increase in unit sales volume of
the Company's HiGain product, a 56% increase in unit sales volume of the PG2
product and the introduction of the Company's Campus product line in June 1993.
These increases were somewhat offset by a decline in the average selling price
in both the HiGain and PG2 products due to competitive pressures. The increase
in royalty income was primarily due to fees paid by Alcatel for the use of the
Company's HDSL technology.

GROSS PROFIT

    The Company's gross profit increased $1.5 million for the three months
ended March 31, 1994 as compared with the same period in the prior year. The
growth in gross profit was attributable to the same factors indicated above
and, in addition, the decline in price mentioned above was somewhat offset by a
reduction in the per unit cost of the Company's HiGain product. The reduction
in per unit cost was a result of continuing engineering design changes, reduced
prices for components negotiated with the Company's vendors and reduced
manufacturing overhead achieved through increases in volume.

PRODUCT MARGIN

    For the three months ended March 31, 1994, as compared with the same period
in 1993, product margins decreased to 40% from 44%. This decrease in product
margin was due to the reduction in average selling price at a rate greater than
product cost reductions. The reductions in per unit cost were due to the same
reasons given above. The Company expects that competition, with respect to its
HiGain products, will continue to place downward pressure on average sales
prices and may also continue to put downward pressure on the margins for this
product.

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 $1.0 million, or 44%, for the three
months ended March 31, 1994 as compared with the same period in the prior year.
Approximately 58% of this increase was due to the addition of personnel.





                                       10
<PAGE>   11
    Research and development expense increased $404,000, or 48%, for the three
months ended March 31, 1994 as compared with the same period in the prior year.
These increases were 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 $430,000, or 58%, for the three
months ended March 31, 1994 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 $170,000, or 25%, for the
three months ended March 31, 1994 as compared with the same period in the prior
year. This increase was due to the addition of an incentive compensation plan
for 1994, personnel, a distributor currency fluctuation rebate, sales tax and
travel costs. These increases were somewhat offset by a decrease in the
provision for doubtful accounts.

INCOME FROM OPERATIONS

   As a result of the above, income from operations for the quarter ended 
March 31, 1994 increased 34% to $2.1 million, compared to $1.6 million for the 
1993 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.  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 





                                       11
<PAGE>   12
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, 1994 was as follows:

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

         Investment losses                                                           (9,950)
         Provision for income taxes                                                     118
                                                                                    -------
      Net loss after adjustment for investment loss                                 $(8,212)
                                                                                    =======
      Net loss per share                                                            $ (0.66)
                                                                                    =======
      Weighted average shares outstanding used to compute net loss per share         12,375
                                                                                    =======
      Net income per share, as previously reported                                  $  0.11
                                                                                    =======
      Weighted average shares outstanding used to compute net income per 
        share, as previously reported                                                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 INCOME (EXPENSE), NET

    Net interest income increased to $368,000 for the three months ended March
31, 1994 from net interest expense of $84,000 for the three months ended March
31, 1993. This was due to interest earned on cash and short term investments
and a decrease in interest expense due to the repayment of amounts owed under
the Company's line of credit and borrowings of $3.0 million from Alcatel.

PROVISION FOR INCOME TAXES

    The provision for income taxes was $1.0 million for the three months ended
March 31, 1994, as the Company did not record any tax benefit from its
investment losses in excess of its investments gains. For the three months ended
March 31, 1993, the provision for income taxes was $164,000, or an 11% effective
tax rate, primarily due to the use of net operating loss carryforwards in 1993.
All of the Company's net operating loss carryforwards were used in 1993.

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

    As a result of the above, the net loss for the 1994 quarter was $8.2 
million or $0.66 per share, compared to income of $1.3 million or $0.11 per 
share in 1993. The weighted average number of common and common equivalent 
shares outstanding was 12.4 million and 11.6 million for the three months ended 
March 31, 1994 and 1993, respectively. The increase in the number of shares in 
1994 was due to the initial public offering of the Company's stock in 
September 1993.

LIQUIDITY AND CAPITAL RESOURCES

    For the three months ended March 31, 1994, cash and cash equivalents
decreased $6.3 million compared to a decrease of $300,000 in the three months
ended March 31, 1993.  The decrease in cash and cash equivalents resulted from
the investment losses during the first quarter of 1994.  Working capital was
$54.4 million at March 31, 1994 compared to $62.9 million at December 31,
1993.  The decrease in working capital was primarily due to losses realized on
investments offset by cash provided by operating activities. Inventories
decreased as unit sales volumes increased relative to material purchased. The
income tax liability increased as the Company began providing for income taxes
at statutory rates. In addition, the Company has 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 exchange contracts. At March 31, 1994 there were no borrowings under
the Loan Agreement.

    Capital expenditures relating primarily to the purchase of computer
equipment, test equipment, furniture and fixtures and software amounted to
$411,000 and $296,000 for the three months ended March 31, 1994 and 1993,
respectively. The Company had no material capital commitments as of March 31,
1994 and believes that its cash and short term investments together with
internally generated cash flow will be sufficient to meet its future working
capital and capital expenditure requirements.





                                       13
<PAGE>   14
                           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

         Scott O. Davis, the Company's Chief Financial Officer, submitted his
         resignation to take effect the earlier of June 1, 1994 or the
         selection of his successor by the Company.

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.





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<PAGE>   15

                                   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)





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