<PAGE>
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                   FORM 10-Q
 
<TABLE>
<S>        <C>
/X/        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                                  SECURITIES EXCHANGE ACT OF 1934
 
                   FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 1998, OR
 
/ /        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                                  SECURITIES EXCHANGE ACT OF 1934
</TABLE>
 
          FOR THE TRANSITION PERIOD FROM             TO             .
 
                         COMMISSION FILE NUMBER 0-26952
 
                            ------------------------
 
                              SYNC RESEARCH, INC.
 
             (Exact name of Registrant as specified in its charter)
 
           DELAWARE                             33-0676350
 (State or other jurisdiction                (I.R.S. Employer
              of                           Identification No.)
incorporation or organization)
 
                                   40 PARKER
                                IRVINE, CA 92618
                    (Address of principal executive offices)
       Registrant's telephone number, including area code: (949) 588-2070
 
                            ------------------------
 
    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 ___
 
    As of October 31, 1998, 17,416,847 shares of the Registrant's Common Stock
were issued and outstanding.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                              SYNC RESEARCH, INC.
                                     INDEX
 
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>          <C>                                                                                             <C>
Part I.      Financial Information.........................................................................           3
 
  Item 1.    a)  Condensed consolidated balance sheets at September 30, 1998 (unaudited) and December 31,
                 1997......................................................................................           3
 
             b)  Condensed consolidated statements of operations (unaudited) for the three and nine months
                 ended September 30, 1998 and 1997.........................................................           4
 
             c)  Condensed consolidated statements of cash flows (unaudited) for the nine months ended
                 September 30, 1998 and 1997...............................................................           5
 
             d)  Notes to condensed consolidated financial statements......................................           6
 
  Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations.........           9
 
Part II.     Other Information.............................................................................          21
 
  Item 1.    Legal Proceedings.............................................................................          21
 
  Item 2.    Changes in Securities and Use of Proceeds.....................................................          21
 
  Item 3.    Defaults upon Senior Securities...............................................................          22
 
  Item 4.    Submission of Matters to a Vote of Security Holders...........................................          22
 
  Item 5.    Other Information.............................................................................          22
 
  Item 6.    Exhibits and Reports on Form 8-K..............................................................          22
</TABLE>
 
                                       2
<PAGE>
PART I. FINANCIAL INFORMATION
  ITEM 1. FINANCIAL STATEMENTS
 
                              SYNC RESEARCH, INC.
 
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                                                     DECEMBER 31,
                                                                                                         1997
                                                                                      SEPTEMBER 30,  ------------
                                                                                          1998
                                                                                      -------------
                                                                                       (UNAUDITED)
<S>                                                                                   <C>            <C>
Current assets:
  Cash and cash equivalents.........................................................   $    16,068    $   21,734
  Accounts and other receivables, net...............................................         2,764         4,657
  Inventories.......................................................................         6,384         7,371
  Prepaid expenses and other current assets.........................................           769           522
                                                                                      -------------  ------------
Total current assets................................................................        25,985        34,284
Furniture, fixtures and equipment, net..............................................         4,008         4,167
Other assets........................................................................            44            44
                                                                                      -------------  ------------
Total assets........................................................................   $    30,037    $   38,495
                                                                                      -------------  ------------
                                                                                      -------------  ------------
 
                                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities..........................................   $     3,877    $    3,135
  Accrued compensation and related costs............................................           987           949
  Deferred revenue..................................................................           850         1,432
  Current maturities of capitalized lease obligations...............................            52            50
                                                                                      -------------  ------------
Total current liabilities...........................................................         5,766         5,566
Capitalized lease obligations, less current maturities..............................            66           111
 
Stockholders' equity:
  Common stock, $.001 par value:
    Authorized shares--50,000
    Issued and outstanding shares--17,396 at September 30, 1998 and 17,288 at
      December 31, 1997.............................................................            17            17
  Additional paid-in capital........................................................        71,964        71,786
  Deferred compensation.............................................................           (13)          (34)
  Accumulated deficit...............................................................       (47,763)      (38,951)
                                                                                      -------------  ------------
Total stockholders' equity..........................................................        24,205        32,818
                                                                                      -------------  ------------
Total liabilities and stockholders' equity..........................................   $    30,037    $   38,495
                                                                                      -------------  ------------
                                                                                      -------------  ------------
</TABLE>
 
                            See accompanying notes.
 
                                       3
<PAGE>
                              SYNC RESEARCH, INC.
 
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED     NINE MONTHS ENDED
                                                                          SEPTEMBER 30,          SEPTEMBER 30,
                                                                       --------------------  ---------------------
<S>                                                                    <C>        <C>        <C>        <C>
                                                                         1998       1997       1998        1997
                                                                       ---------  ---------  ---------  ----------
Net revenues.........................................................  $   7,541  $   5,675  $  20,227  $   17,048
Cost of sales........................................................      4,612      3,623     12,870      10,918
                                                                       ---------  ---------  ---------  ----------
  Gross profit.......................................................      2,929      2,052      7,357       6,130
Operating expenses:
  Research and development...........................................      1,869      1,761      5,428       5,514
  Selling and marketing..............................................      3,018      3,697      8,962      11,323
  General and administrative.........................................        889        791      2,207       2,930
  Non-recurring charges..............................................         --        735        267       1,241
                                                                       ---------  ---------  ---------  ----------
  Total operating expenses...........................................      5,776      6,984     16,864      21,008
                                                                       ---------  ---------  ---------  ----------
Operating loss.......................................................     (2,847)    (4,932)    (9,507)    (14,878)
Interest income, net.................................................        223        345        697       1,129
                                                                       ---------  ---------  ---------  ----------
Loss before income taxes.............................................     (2,624)    (4,587)    (8,810)    (13,749)
Provision for income taxes...........................................         --         --          2          --
                                                                       ---------  ---------  ---------  ----------
Net loss.............................................................  $  (2,624) $  (4,587) $  (8,812) $  (13,749)
                                                                       ---------  ---------  ---------  ----------
                                                                       ---------  ---------  ---------  ----------
Basic and diluted net loss per share.................................  $    (.15) $    (.27) $    (.51) $     (.80)
                                                                       ---------  ---------  ---------  ----------
                                                                       ---------  ---------  ---------  ----------
Shares used in computing net loss per share..........................     17,395     17,251     17,370      17,137
                                                                       ---------  ---------  ---------  ----------
                                                                       ---------  ---------  ---------  ----------
</TABLE>
 
                            See accompanying notes.
 
                                       4
<PAGE>
                              SYNC RESEARCH, INC.
 
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                               NINE MONTHS ENDED
                                                                                                 SEPTEMBER 30,
                                                                                             ---------------------
<S>                                                                                          <C>        <C>
                                                                                               1998        1997
                                                                                             ---------  ----------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss.................................................................................  $  (8,812) $  (13,749)
  Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization..........................................................      1,381       1,267
    Provision for losses on accounts receivable............................................         17          81
    Deferred compensation expense..........................................................         21          74
  Changes in operating assets and liabilities, net:
    Accounts and other receivables.........................................................      1,876       2,720
    Inventories............................................................................        987        (866)
    Accounts payable and accrued liabilities...............................................        742        (510)
    Accrued compensation and related costs.................................................         38         651
    Deferred revenue.......................................................................       (582)        (31)
    Other..................................................................................       (247)       (167)
                                                                                             ---------  ----------
Net cash used in operating activities......................................................     (4,579)    (10,530)
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of furniture, fixtures and equipment, net......................................     (1,222)     (1,183)
                                                                                             ---------  ----------
Net cash used in investing activities......................................................     (1,222)     (1,183)
CASH FLOWS FROM FINANCING ACTIVITIES
  Net bank repayments......................................................................         --        (802)
  Payments on capitalized lease obligations................................................        (43)        (21)
  Proceeds from common stock options exercised and employee stock purchase plan............        178         439
                                                                                             ---------  ----------
Net cash provided by (used in) financing activities........................................        135        (384)
                                                                                             ---------  ----------
Net decrease in cash and cash equivalents..................................................     (5,666)    (12,097)
Cash and cash equivalents at beginning of period...........................................     21,734      35,874
                                                                                             ---------  ----------
Cash and cash equivalents at end of period.................................................  $  16,068  $   23,777
                                                                                             ---------  ----------
                                                                                             ---------  ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Interest paid............................................................................  $      39  $       30
                                                                                             ---------  ----------
                                                                                             ---------  ----------
  Income taxes paid........................................................................  $      16  $        8
                                                                                             ---------  ----------
                                                                                             ---------  ----------
</TABLE>
 
                            See accompanying notes.
 
                                       5
<PAGE>
                              SYNC RESEARCH, INC.
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
                                  (UNAUDITED)
 
ITEM 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
1.  BASIS OF PRESENTATION
 
    The condensed consolidated balance sheet as of September 30, 1998, the
condensed consolidated statements of operations for the three and nine months
ended September 30, 1998 and 1997 and the condensed consolidated statements of
cash flows for the nine months ended September 30, 1998 and 1997 have been
prepared without audit. In the opinion of management, the unaudited financial
statements include all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the Company's financial position at September 30,
1998, the results of its operations for the three and nine months ended
September 30, 1998 and 1997 and its cash flows for the nine months ended
September 30, 1998 and 1997. The consolidated financial statements should be
read in conjunction with the audited financial statements of Sync Research, Inc.
and notes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997. The results of operations for the three and nine
months ended September 30, 1998 are not necessarily indicative of the operating
results to be expected for the full year.
 
    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying financial
statements. Actual results could differ from those estimates.
 
    Certain prior period amounts have been reclassified to conform with the
current period presentation.
 
2.  CASH AND CASH EQUIVALENTS
 
    The Company invests its excess cash in money market funds and short-term
debt instruments of U.S. corporations with strong credit ratings. The Company
has established guidelines with respect to the diversification and maturities
that maintain safety and liquidity. The Company considers all highly liquid
investments with an original maturity of three months or less and money market
funds to be cash equivalents.
 
3.  FURNITURE, FIXTURES AND EQUIPMENT
 
    Furniture, fixtures and equipment are recorded at cost and consist of the
following (in thousands):
 
<TABLE>
<CAPTION>
                                                                  SEPTEMBER 30,  DECEMBER 31,
                                                                      1998           1997
                                                                  -------------  ------------
<S>                                                               <C>            <C>
Equipment acquired under capital leases.........................    $     275     $      275
Furniture and fixtures..........................................          859            795
Computer equipment and software.................................        7,462          6,326
Leasehold improvements..........................................        1,106          1,084
                                                                  -------------  ------------
                                                                        9,702          8,480
Accumulated depreciation and amortization.......................       (5,694)        (4,313)
                                                                  -------------  ------------
                                                                    $   4,008     $    4,167
                                                                  -------------  ------------
                                                                  -------------  ------------
</TABLE>
 
                                       6
<PAGE>
                              SYNC RESEARCH, INC.
 
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                                  (UNAUDITED)
 
4.  INVENTORIES
 
    Inventories consist primarily of computer hardware and components and are
stated at the lower of cost (first-in, first-out) or market, as follows (in
thousands):
 
<TABLE>
<CAPTION>
                                                                  SEPTEMBER 30,  DECEMBER 31,
                                                                      1998           1997
                                                                  -------------  -------------
<S>                                                               <C>            <C>
Raw materials...................................................    $   3,189      $   3,636
Work in process.................................................          508            862
Finished goods..................................................        2,687          2,873
                                                                       ------         ------
                                                                    $   6,384      $   7,371
                                                                       ------         ------
                                                                       ------         ------
</TABLE>
 
5.  PER SHARE INFORMATION
 
    In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share. Statement No. 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented to conform with Statement No. 128.
 
    Net loss per common 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 the dilutive effect, if any, of
outstanding options and warrants to purchase common stock.
 
6.  CREDIT AGREEMENT
 
    Under the Company's unsecured credit agreement with a bank in effect as of
September 30, 1998, the Company was entitled to borrow an amount not to exceed
$5,000,000 at the bank's prime rate. The agreement expired on October 5, 1998
and the Company is negotiating the renewal of the agreement. There were no
amounts outstanding under this agreement as of September 30, 1998.
 
7.  IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
 
    In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME
(Statement No. 130), which is effective for years beginning after December 15,
1997. Statement No. 130 establishes standards for reporting and displaying
comprehensive income and its components with the same prominence as other
financial statement information. The implementation of this statement did not
have a significant effect on the Company's reported results of operations or
financial position.
 
    In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION (Statement No. 131), which is effective for
years beginning after December 15, 1997. Statement No. 131 establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports. It also establishes standards for related disclosures about products
and services, geographic areas, and major customers. The Company operates in one
business
 
                                       7
<PAGE>
                              SYNC RESEARCH, INC.
 
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                                  (UNAUDITED)
 
segment. Accordingly, the adoption of this statement did not have a significant
effect on the Company's financial statements.
 
8.  LITIGATION
 
    On November 5, 1997, an action entitled Dalarne Partners, Ltd. v. Sync
Research, Inc., et al., No SACV97-877 AHS(Eex) was filed against the Company and
certain of its directors and officers. The action was filed in the U.S. District
Court for the Central District of California, Southern Division. The action
purports to be a class action lawsuit brought on behalf of purchasers of the
Company's common stock during the period from November 18, 1996 through March
20, 1997. The complaint asserts claims for violation of the Securities Exchange
Act of 1934. The complaint seeks to recover damages in an unspecified amount. No
trial date or other deadline has been established. The Company intends to defend
this lawsuit vigorously.
 
                                       8
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS
 
    The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included in Part
I--Item 1 of this Quarterly Report. In addition, except for the historical
statements contained herein, the following discussion contains forward-looking
statements. The Company wishes to alert readers that the factors set forth in
the Company's Annual Report on Form 10-K for the year ended December 31, 1997,
and in the section of this Item 2 titled "Additional Factors That May Affect
Future Results," as well as other factors, could in the future affect, and in
the past have affected, the Company's results. The Company's actual results for
future periods could differ materially from those expressed in any
forward-looking statements, made by or on behalf of the Company. Readers are
cautioned not to place undue reliance on these forward-looking statements which
reflect management's analysis only as of the date hereof. The Company assumes no
obligation to update these forward-looking statements to reflect actual results
or changes in factors or assumptions affecting such forward-looking statements.
 
OVERVIEW
 
    Sync commenced operations in 1981 and funded operations through 1988 with
revenue from communications software consulting and custom product development
for equipment vendors and large end-users. The Company shipped its first
commercial WAN product in 1989. In 1991, Sync released its first conversion node
and frame relay access products. The Company has historically emphasized its
relationship with channel partners and other resellers and supporting sales
efforts of these resellers in connection with the Company's direct sales
efforts. The Company currently maintains OEM, marketing and sales arrangements
with communications and networking companies such as IBM, as well as carriers
such as Sprint, MCI, and Intermedia Communications, and systems integrators such
as Electronic Data Systems and Diebold.
 
    In 1997 and 1998, the Company implemented expense reduction initiatives, and
the Company may in the future implement additional expense reduction
initiatives, with the goal of enabling the Company to achieve profitability at
lower revenue levels. There can be no assurance that Sync's products will
achieve significant market penetration, either through its channel partners and
other resellers or its direct sales force, or that the Company will successfully
introduce new and enhanced products or compete effectively in its market, or
that its efforts to implement expense reductions will enable it to become
profitable at lower revenue levels, if at all.
 
RESULTS OF OPERATIONS
 
    NET REVENUES
 
    The Company derives its revenues primarily from sales of advanced wide-area
networking products. Product revenues are recognized upon shipment and the
Company generally does not have any significant remaining obligations upon
shipment of its products. Product returns and sales allowances are provided for
at the date of sale. Service revenues from customer maintenance fees for ongoing
customer support and product updates are recognized ratably over the term of the
maintenance period, which is typically 12 months.
 
    Net revenues for the third quarter of 1998 were $7.5 million, compared to
net revenues of $5.7 million for the quarter ended September 30, 1997. Net
revenues for the nine months ended September 30, 1998 were $20.2 million,
compared to $17.0 million for the comparable period in 1997. The increase in net
revenues in the third quarter of 1998 compared to the third quarter of 1997 was
due primarily to increased sales of frame relay access products and circuit
management products, partially offset by a reduction in sales of transmission
products. Sales to IBM and one large end user customer accounted for 13.4% and
15.2% of the Company's total revenues for the three months ended September 30,
1998, and 16.4% and 21.0% of the Company's total revenues for the nine months
ended September 30, 1998, respectively.
 
                                       9
<PAGE>
    Net revenues by product group for the three months ended September 30, 1998
and 1997 were as follows ($ in thousands):
 
<TABLE>
<CAPTION>
                                                      1998      PERCENTAGE      1997      PERCENTAGE
                                                    ---------  -------------  ---------  -------------
<S>                                                 <C>        <C>            <C>        <C>
Frame relay access products.......................  $   3,288           44%   $   2,187           39%
Circuit management products.......................      2,252           30        1,543           27
Transmission products.............................        571            8        1,007           18
Other.............................................      1,430           18          938           16
                                                    ---------          ---    ---------          ---
                                                    $   7,541          100%   $   5,675          100%
                                                    ---------          ---    ---------          ---
                                                    ---------          ---    ---------          ---
</TABLE>
 
    Net revenues by product group for the nine months ended September 30, 1998
and 1997 were as follows ($ in thousands):
 
<TABLE>
<CAPTION>
                                                   1998      PERCENTAGE      1997      PERCENTAGE
                                                 ---------  -------------  ---------  -------------
<S>                                              <C>        <C>            <C>        <C>
Frame relay access products....................  $  10,894           54%   $   6,973           41%
Circuit management products....................      4,207           21        3,655           21
Transmission products..........................      1,432            7        3,198           19
Other..........................................      3,694           18        3,222           19
                                                 ---------          ---    ---------          ---
                                                 $  20,227          100%   $  17,048          100%
                                                 ---------          ---    ---------          ---
                                                 ---------          ---    ---------          ---
</TABLE>
 
    The increase in revenues from sales of frame relay access products in 1998
compared to the 1997 periods was due primarily to continued acceptance of the
Company's 3600 frame relay access device product line that was released in the
first quarter of 1997. The decline in revenues from sales of transmission
products as compared to the prior year periods was due primarily to lower sales
in the Pacific Rim as a result of the continued Asian economic crisis.
 
    The percentage of net revenues represented by sales through channel partners
and other resellers declined to 45.6% and 50.1% for the three and nine months
ended September 30, 1998, respectively, from 70.9% and 72.3% for the
corresponding periods of 1997, respectively, primarily due to a few large end
user sales during the first three quarters of 1998. The Company expects that
sales to IBM will decline as a result of the completion of one large project in
the third quarter of 1998. The Company believes that sales through channel
partners and other resellers will continue to account for a significant portion
of net revenues. However, the mix of sales to channel partners and other
resellers may change from period to period.
 
    International sales represented 6.5% and 6.6% of the Company's total sales
during the three and nine months ended September 30, 1998, as compared to 20.6%
and 19.9% during the three and nine months ended September 30, 1997. The decline
was due primarily to continued sluggishness in the Company's sales to the
Pacific Rim as a result of the current Asian economic crisis. The near-term
outlook on the Company's sales to the Pacific Rim remains uncertain.
 
    GROSS PROFIT
 
    Cost of sales primarily consists of purchased materials used in the assembly
of the Company's products, fees paid to third party subcontractors for
installation and maintenance services, and compensation paid to employees in the
Company's manufacturing and service organizations.
 
    Gross profit increased to $2.9 and $7.4 million for the three and nine
months ended September 30, 1998, respectively, from $2.1 and $6.1 million in the
corresponding prior year periods. Gross profit as a percentage of net revenues
increased to 38.8% and 36.4% for the three and nine months ended September 30,
1998, respectively, as compared to 36.2% and 36.0% for the three and nine months
ended September 30, 1997. The increase in margins during 1998 compared to the
prior year periods was primarily due to the higher revenue levels in 1998.
 
                                       10
<PAGE>
    OPERATING EXPENSES
 
    Research and development expenses primarily consist of compensation paid to
personnel, including consultants, engaged in research and development, amounts
paid for outside development services and costs of materials utilized in the
development of hardware products, including prototype units and the depreciation
and amortization of equipment and tools utilized in the development process. It
is the Company's policy to expense all research and development costs as
incurred and to capitalize certain software development costs subsequent to the
establishment of technological feasibility. To date, $455,000 of externally
acquired software has been capitalized. Research and development expenses
increased slightly to $1.9 million for the third quarter of 1998, as compared to
$1.8 million for the third quarter of the prior year. The increase in research
and development expenses in the third quarter of 1998 was primarily due to the
development of new products and the continued enhancement of existing products.
For the nine months ended September 30, 1998, expenses were slightly lower at
$5.4 million compared to $5.5 million for the nine months ended September 30,
1997.
 
    Selling and marketing expenses consist primarily of base and incentive
compensation paid to sales and marketing personnel, travel and related expenses,
and costs associated with promotional and trade show activities. Selling and
marketing expenses decreased to $3.0 million for the quarter ended September 30,
1998, as compared to $3.7 million in the quarter ended September 30, 1997, and
decreased to $9.0 million for the nine months ended September 30, 1998 compared
to $11.3 million in the prior year period. The decrease in selling and marketing
expenses resulted primarily from sales and marketing headcount reductions,
partially offset by higher incentive based compensation.
 
    General and administrative expenses consist primarily of compensation paid
to administrative personnel, payments to consultants, professional services and
costs related to public company activities. General and administrative
expenditures increased to $889,000 for the quarter ended September 30, 1998, as
compared to $791,000 for the quarter ended September 30, 1997 primarily as a
result of higher legal fees incurred in connection with the Company's pending
class action lawsuit. General and administrative expenditures decreased to $2.2
million for the nine months ended September 30, 1998 from $2.9 million for the
nine months ended September 30, 1997. These expenses decreased due to the
Company's 1997 cost reduction programs.
 
    Non-recurring charges consist primarily of expenses related to changes in
the Company's executive management in the second quarter of 1998 and costs
related to the reduction in employees and the elimination or reduction of
certain remote office lease obligations undertaken in March and September 1997.
 
    Net interest income was $223,000 and $697,000 for the three and nine months
ended September 30, 1998, respectively, as compared to $345,000 and $1.1 million
for the three and nine months ended September 30, 1997, respectively. The
decrease in net interest income was primarily due to the Company's lower cash
balances resulting from the utilization of cash to fund the Company's operating
activities.
 
    INCOME TAXES
 
    There was no provision for income tax in 1997. The provision for income
taxes in 1998 represents minimum state taxes.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    As of September 30, 1998, the Company's principal sources of liquidity
consisted of $16.1 million of cash and cash equivalents and a $5 million
unsecured bank line of credit which expired in October 1998. The Company is
currently attempting to negotiate an extension of this credit agreement. During
the nine months ended September 30, 1998, cash utilized by operating activities
was $4.6 million, compared to $10.5 million for the nine months ended September
30, 1997. The lower cash utilization resulted primarily from the decrease in the
net loss in 1998 as compared to 1997. Capital expenditures during the first nine
months of 1998, consisting primarily of computer hardware and software
purchases, were $1.2 million, the same as the corresponding 1997 period.
 
                                       11
<PAGE>
    The Company believes that its available cash and cash equivalents will be
sufficient to meet its working capital requirements at least through 1998.
 
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
 
    The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Specifically, the Company
wishes to alert readers that, except for the historical information contained
therein, the previous discussion under "Results of Operations" and "Liquidity
and Capital Resources" constitutes forward-looking statements that are dependent
on certain risks and uncertainties which may cause actual results to differ
materially from those expressed in any forward-looking statements made by or on
behalf of the Company. The following is a description of certain of the major
risks and uncertainties.
 
    HISTORY OF LOSSES; SIGNIFICANT FLUCTUATIONS IN OPERATING RESULTS; UNCERTAIN
     PROFITABILITY
 
    The Company has experienced operating losses since inception, with, in
recent years, operating losses of $2.4 million in 1995, $11.7 million in 1996,
$18.0 million in 1997 and $8.8 million for the nine months ended September 30,
1998. As of September 30, 1998, the Company had an accumulated deficit of
approximately $47.8 million. The Company has experienced, and may in the future
experience, significant fluctuations in revenues and operating results from
quarter to quarter and from year to year due to a combination of factors.
Factors that have in the past caused, or may in the future cause, the Company's
revenues and operating results to vary significantly from period to period
include: the timing of significant orders; the timing of customer implementation
plans; the relatively long length of the sales cycles for certain of the
Company's products; the market conditions in the networking industry; the timing
of capital expenditures by Sync's target market customers; competition and
pricing in the industry; the Company's success in developing, introducing and
shipping new products; new product introductions by the Company's competitors;
announcements by IBM relating to products, services or pricing relevant to the
Company; the rate of migration of large IBM customers to frame relay; production
or quality problems; changes in material costs; disruption in sources of supply;
changes in foreign currency exchange rates; and general economic conditions. In
addition, revenues and gross margins may fluctuate due to the mix of
distribution channels employed and the mix of products or services sold. For
example, the Company generally realizes a higher gross margin on direct sales
than on sales through its channel partners and other resellers. Accordingly, as
channel partners and other resellers continue to account for a significant
portion of the Company's net revenues, gross profit as a percentage of net
revenues may decline.
 
    The Company's future revenues are difficult to predict. Revenues and
operating results in any quarter depend on the volume and timing of, and the
ability to fulfill, orders received within the quarter. Sales of the Company's
products typically involve a sales cycle of several months or over a year from
the point of initial customer contact until receipt of the first system order,
and, in addition, the Company has in the past encountered, and may in the future
encounter, subsequent delays between initial orders and network-wide deployment.
There can be no assurance that average sales cycles will not increase in future
periods. Further, due to the Company's focus on its channel partner marketing
strategy, the Company's revenues in any period are highly dependent upon the
sales efforts and success of Sync's channel partners and other resellers, which
are not within the control of the Company. There can be no assurance that the
Company's channel partners and other resellers will give a high priority to the
marketing of the Company's products as compared to competitive products or
alternative networking solutions or that Sync's channel partners and other
resellers will continue to offer the Company's products. Significant portions of
the Company's expenses are relatively fixed in advance, based in large part on
the Company's forecasts of future sales. If sales are below expectations in any
given period, the adverse effect of a shortfall in sales on the Company's
operating results may be magnified by the Company's inability to adjust spending
to compensate for such shortfall. The Company has in the past and may in the
future reduce prices or increase spending to respond to competition or to pursue
new product or market opportunities. Accordingly, there can be no assurance that
the Company will be able to attain or sustain profitability on a quarterly or an
annual basis.
 
                                       12
<PAGE>
In addition, if the Company's operating results fall below the expectations of
public market analysts and investors, the price of the Company's common stock
would likely be materially and adversely affected.
 
    UNCERTAIN MARKET ACCEPTANCE OF FRAME RELAY FOR MISSION-CRITICAL APPLICATIONS
 
    The market for SNA-over-frame relay and circuit management products is
relatively uncertain and still evolving. The success of the Company and its
channel partners in generating significant sales of frame relay access and
circuit management products will depend in part on their ability to educate end
users about the benefits of the Company's technology and convince end users to
switch their mission-critical applications to frame relay. In addition, broad
acceptance of frame relay services will also depend upon the tariffs for such
services, which are determined by carriers. If the tariff structure for
dedicated leased lines becomes more favorable relative to tariffs for a
comparable network utilizing frame relay, the market for frame relay networking
products could be adversely affected. There can be no assurance that the market
will adopt frame relay for mission-critical applications to any significant
extent. The failure of such adoption to occur could have a material adverse
effect on the Company's business, operating results and financial condition.
 
    UNCERTAIN MARKET ACCEPTANCE OF THE COMPANY'S PRODUCTS; PRODUCT CONCENTRATION
 
    The Company currently derives substantially all of its revenues from its
frame relay access, circuit management, transmission and other products and
expects that revenues from these products will continue to account for
substantially all of its revenues for the foreseeable future. Broad market
acceptance of, and continuing demand for, these products, is, therefore,
critical to the Company's future success. Factors that may affect the market
acceptance of the Company's products include the extent to which frame relay is
adopted for mission-critical applications, the availability and price of
competing products and technologies, announcements by IBM relating to products,
services or pricing relevant to the Company, the success of the sales efforts of
the Company and its resellers and tariff rates for carrier services. Moreover,
the Company's operating history in the WAN internetworking market and its
resources are limited relative to those of certain of its current and potential
competitors. The Company's future performance will also depend in part on the
successful development, introduction and market acceptance of new and enhanced
products. Failure of the Company's products to achieve market acceptance could
have a material adverse effect on the Company's business, operating results and
financial condition.
 
    DEPENDENCE ON CHANNEL PARTNERS AND OTHER RESELLERS
 
    The Company's channel partners and other resellers currently account, and
are expected to continue to account, for a significant part of the Company's net
revenues. Sales through channel partners and other resellers accounted for
50.1%, 67.0%, 85.7%, and 88.1%, of net revenues of the Company in the nine
months ended September 30, 1998, and for the years ended December 31, 1997, 1996
and 1995, respectively. The Company currently maintains OEM, marketing and sales
arrangements with communications and networking companies such as IBM, as well
as carriers such as Sprint, MCI and Intermedia Communications and system
integrators such as Electronic Data Systems and Diebold. Sales through IBM
accounted for 13.4% and 16.4% of the Company's net revenues for the three and
nine months ended September 30, 1998, respectively. The Company expects revenues
to IBM will decline as a result of the completion of one large project in the
third quarter of 1998. The Company's agreements with its channel partners and
other resellers do not restrict the sale of products that compete with those of
the Company. In addition, these agreements generally provide for discounts based
on expected or actual volumes of products purchased or resold by the reseller in
a given period, do not require minimum purchases, and prohibit distribution of
certain products by the Company through certain categories of third parties
under certain conditions. The agreements also specify that the channel partners
and certain other resellers will be provided manufacturing rights and access to
certain of the Company's source code upon the occurrence of specified conditions
or defaults.
 
                                       13
<PAGE>
    Certain of the Company's channel partners offer alternative solutions,
designed by themselves or third parties, for SNA internetworking or have
pre-existing relationships with current or potential competitors of the Company.
Certain of the Company's channel partners have in the past developed competitive
products and terminated their relationships with the Company, and such
developments could occur in the future. Many of the Company's resellers offer
competitive products manufactured either by third parties or by themselves. For
example, NET and Racal, which accounted for 6.6% and 4.4%, respectively, of the
Company's net revenues in 1996, have developed competitive products and product
strategies and accordingly, did not account for a significant portion of 1997 or
1998 revenues. Sales to 3Com accounted for 2.0% of revenues for the nine months
ended September 30, 1998 and 6.5%, 19.2% and 17.9% of net revenues of the
Company in 1997, 1996 and 1995, respectively. The Company believes the amount of
revenues derived from sales to 3Com will likely decline as competitive products
impact the conversion product business.
 
    The Company generally realizes a higher gross margin on direct sales than on
sales through its channel partners and other resellers. Accordingly, as channel
partners and other resellers continue to account for a significant portion of
the Company's net revenues, gross profit as a percentage of net revenues may
decline. Each of the Company's channel partners or other resellers can cease
marketing the Company's products at the reseller's option, under certain
conditions, with limited notice and with little or no penalty. There can be no
assurance that the Company will retain its current channel partners or other
resellers or that it will be able to recruit additional or replacement channel
partners. The loss of one or more of the Company's channel partners or other
resellers could have a material adverse effect on the Company's business,
operating results and financial condition. In addition, there can be no
assurance that the Company's channel partners and other resellers will give
priority to the marketing of the Company's products as compared to competitive
products or alternative networking solutions or that Sync's channel partners and
other resellers will continue to offer the Company's products. Any reduction or
delay in sales of the Company's products by its channel partners could have a
material adverse effect on the Company's business, operating results and
financial condition.
 
YEAR 2000 COMPLIANCE
 
    Many currently installed computer and telecommunications systems and
software products were not designed to consider the impact of moving into the
21st century. As a result, errors or system failures could result if these
systems and applications are not corrected or replaced prior to the year 2000.
The Company is currently in the process of evaluating the impact of the "Year
2000" issue upon its products, support systems and overall business.
 
    The Company relies on third party suppliers for the management and control
of fabrication, assembly and testing of substantially all of the Company's
products. The Company has, either internally or in collaboration with certain of
its suppliers and customers, evaluated and tested certain of its products and
intends to test all of its current products by the end of 1998. The Company
believes that several of its discontinued conversion and frame relay products
are not Year 2000 compliant and the Company currently does not plan to update
these products. The Company has adopted a Year 2000 compliance definition based
upon certain generally accepted Year 2000 standards, input from customers, and
other available sources. The Company has tested its frame relay access and
circuit management products against this definition. These products have been
updated to be fully compliant against this definition. The Company is in the
process of evaluating its other current products. Some of these products either
do not have internal dating or rely on date information from other devices
resident in the networks in which they operate. Thus, any Year 2000 problems
from third party networking products could cause the Company's products not to
work in accordance with their specifications. In addition, the Company's
products are tested as standard-built, stand-alone units, or at most, in a
standard system configuration. Accordingly, custom built products and special
system configurations may create problems the Company has not or will not
uncover. Upon completion of the testing phase, the Company will assess any
changes to its current products that may be
 
                                       14
<PAGE>
required to achieve Year 2000 compliance. The Company has given certain of its
customers warranties on Year 2000 compliance and may have to offer updates or
replacement products to these customers. The Company has not incurred
substantial costs to date to address the Year 2000 issue and is unable to
estimate the additional cost, if any, that may arise from actions taken by the
Company, if any, to address the Year 2000 issue or from the interaction of the
Company's products with other companies' networking devices and systems. Any
failure by the Company to make its products Year 2000 compliant could result in
a decrease in revenues of the Company's products and/or possible claims against
the Company by customers as a result of Year 2000 problems caused by the
Company's products and could have a material adverse effect on the Company.
 
    The Company relies on a number of computer systems and applications to
operate and monitor all major aspects of its business. The Company is in the
process of evaluating its internal information and non-information systems
through inquiries with the manufacturers of such systems and anticipates that
most of these systems will be evaluated by the end of 1998. The Company believes
that several manufacturers of the Company's systems have already updated their
products to comply with the Year 2000 issue, or will make updates available by
mid-1999, or relatively low cost alternative solutions may become available.
However, there can be no assurance that any such updates will be completed on a
timely basis, if at all, or at a reasonable cost, or that such updates will work
as anticipated in and after the year 2000.
 
    The Company has not yet established contingency plans for the Year 2000
issue. The Company intends to continue to evaluate its Year 2000 exposure and
develop any necessary contingency plans by mid-1999.
 
    Many of the Company's customers and prospective customers are expected to
devote a substantial portion of their information systems budgets to the Year
2000 problem over the next several years, and, as a result, spending may be
diverted from wide area networking solutions. In addition, the Company relies on
a large variety of business enterprises such as customers, suppliers, creditors,
financial organizations, and domestic and international governmental entities,
for the accurate exchange of data. Any disruption in the computer systems of any
of these third parties could materially and adversely affect the Company. Due to
the Company's focus on the wide area networking market, which is vulnerable to
technological issues involving the Year 2000, substantially all of the Company's
revenues may be at risk.
 
    Year 2000 compliance definitions and risks continue to evolve and the
Company may be impacted by future changes in Year 2000 compliance standards.
Despite the Company's efforts to address the Year 2000 impact on its products,
internal systems and business operations, the Year 2000 issue may result in a
material disruption of its business or have a material adverse effect on the
Company's business, financial condition or results of operations.
 
    RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS
 
    The market for the Company's products is characterized by rapidly changing
technology, evolving industry standards and frequent new product introductions.
The Company's success will depend to a substantial degree upon its ability to
develop and introduce in a timely fashion enhancements to its existing products
and new products that meet changing customer requirements and emerging industry
standards. The development of new, technologically advanced products is a
complex and uncertain process requiring high levels of innovation, as well as
the accurate anticipation of technological and market trends. There can be no
assurance that the Company will be able to identify, develop, manufacture,
market or support new products successfully, that such new products will gain
market acceptance or that the Company will be able to respond effectively to
technological changes, emerging industry standards or product announcements by
competitors. In addition, the Company has on occasion experienced delays in the
introduction of product enhancements and new products. There can be no assurance
that in the future the Company will be able to introduce product enhancements or
new products on a timely basis. Further, from time to time, the Company may
announce new products, capabilities or technologies that have the potential to
replace
 
                                       15
<PAGE>
or shorten the life cycle of the Company's existing product offerings. There can
be no assurance that announcements of product enhancements or new product
offerings will not cause customers to defer purchasing existing Company products
or cause resellers to return products to the Company. Failure to introduce new
products or product enhancements effectively and on a timely basis, customer
delays in purchasing products in anticipation of new product introductions and
any inability of the Company to respond effectively to technological changes,
emerging industry standards or product announcements by competitors could have a
material adverse effect on the Company's business, operating results and
financial condition.
 
    PRODUCT ERRORS
 
    Products as complex as those offered by the Company may contain undetected
software or hardware errors when first introduced or as new versions are
released. Such errors have occurred in the past, and there can be no assurance
that, despite testing by the Company and by current and potential customers,
errors will not be found in new or enhanced products after commencement of
commercial shipments. Moreover, there can be no assurance that once detected,
such errors can be corrected in a timely manner, if at all. Software errors may
take several months to correct, if they can be corrected at all, and hardware
errors may take even longer to rectify. The occurrence of such software or
hardware errors, as well as any delay in correcting them, could result in the
delay or loss of market acceptance of the Company's products, additional
warranty expense, diversion of engineering and other resources from the
Company's product development efforts or the loss of credibility with Sync's
channel partners and other resellers, any of which could have a material adverse
effect on the Company's business, operating results and financial condition.
 
    INTENSE COMPETITION
 
    The market for communications products is intensely competitive and subject
to rapid technological change and emerging industry standards. The Company's
current competitors include internetworking companies, such as Cisco and Bay
Networks; frame relay access device (FRAD) providers, such as Hypercom, Motorola
ISG and Cabletron; and circuit management and digital transmission providers
such as Visual Networks, Digital Link, Racal, AT&T Paradyne and Adtran, among
others. Potential competitors include other internetworking and WAN access and
transmission companies, network management software companies, frame relay
switch providers, IBM and the Company's other channel partners. Certain of these
companies have recently announced products and intentions to enter the frame
relay access or circuit management market. Many of the Company's current and
potential competitors have longer operating histories and greater financial,
technical, sales, marketing and other resources, as well as greater name
recognition and a larger customer base, than does the Company. As a result, they
may be able to respond more quickly to new or emerging technologies and changes
in customer requirements or may be able to devote greater resources to the
development, promotion, sale and support of their products than the Company.
Many also have long-standing customer relationships with large enterprises that
are part of the Company's target market, and these relationships may make it
more difficult to complete sales of the Company's products to these enterprises.
Further, certain of the Company's channel partners have in the past developed
competitive products and terminated their relationships with the Company, and
such developments could occur in the future. As a consequence of all these
factors, the Company expects increased competition, particularly in the frame
relay market. Increased competition could result in significant price
competition, reduced profit margins or loss of market share, any of which could
have a material adverse effect on the Company's business, operating results and
financial condition. There can be no assurance that the Company will be able to
compete successfully in the future.
 
    DEPENDENCE ON THE IBM CUSTOMER BASE
 
    The Company's frame relay access products are leveraged towards the large
installed base of IBM customers utilizing SNA networks. Thus, the Company faces
the risks associated with a relatively
 
                                       16
<PAGE>
concentrated customer base, including the possibility that larger IBM customers
may migrate to frame relay at a slower-than-expected rate, if at all, and the
possibility that IBM customers may purchase IBM-sponsored frame relay products
other than Sync products. There can be no assurance that IBM will continue to
support frame relay, that IBM will not develop or promote SNA-over-frame relay
products competitive with the Company's products, that the relationship between
the Company and IBM will be successful, that IBM will not terminate the
relationship or that IBM will not endorse the products of competitors or
networking solutions not offered by the Company. Any of these events could have
a material adverse effect on the Company's business, operating results and
financial condition.
 
    DEPENDENCE ON CONTRACT MANUFACTURERS
 
    The Company's manufacturing operations consist primarily of materials
planning and procurement, light assembly, system integration, testing and
quality assurance. The Company has arrangements with two contract manufacturers
to out source substantial portions of its procurement, assembly and system
integration operations. There can be no assurance that these independent
contract manufacturers will be able to meet the Company's future requirements
for manufactured products or that such independent contract manufacturers will
not experience quality problems in manufacturing the Company's products. The
inability of the Company's contract manufacturers to provide the Company with
adequate supplies of high quality products could have a material adverse effect
upon the Company's business, operating results and financial condition. The loss
of any of the Company's contract manufacturers could cause a delay in Sync's
ability to fulfill orders while the Company attempts to identify a replacement
manufacturer. Such an event could have a material adverse effect on the
Company's business, operating results and financial condition.
 
    The Company's manufacturing procedures may in certain instances create a
risk of excess or inadequate inventory if orders do not match forecasts. The
Company previously increased manufacturing capacity through the expansion of its
relationships with contract manufacturers. Any manufacturing delays, excess
manufacturing capacity or inventories or inability to increase manufacturing
capacity, if required, could have a material adverse effect on the Company's
business, operating results and financial condition.
 
    DEPENDENCE ON SUPPLIERS
 
    Certain key components used in the manufacture of the Company's products are
currently purchased only from single or limited sources. At present,
single-sourced components include programmable integrated circuits, gate-arrays,
selected other integrated circuits and cables, custom-molded plastics and
custom-tooled sheet metal, and limited-sourced components include flash
memories, DRAMs, printed circuit boards and selected integrated circuits. The
Company generally relies upon contract manufacturers to buy component parts that
are incorporated into board assemblies. The Company buys directly final assembly
parts, such as plastics and metal covers, cables and other parts used in final
configurations. The Company generally does not have long-term agreements with
any of these single or limited sources of supply. Any loss in a supplier,
increase in required lead times, increase in price of component parts,
interruption in the supply of any of these components, or the inability of the
Company to procure these components from alternate sources at acceptable prices
and within a reasonable time, could have a material adverse effect upon the
Company's business, operating results and financial condition. If orders do not
match forecasts, the Company may have excess or inadequate inventory of certain
materials and components, and suppliers may demand longer lead times, higher
prices or termination of contracts. From time to time the Company has
experienced shortages of certain components and has paid above-market prices to
acquire such components on an accelerated basis or has experienced delays in
fulfilling orders while waiting to obtain the necessary components. Such
shortages may occur in the future and could have a material adverse effect on
the Company's business, operating results and financial condition.
 
                                       17
<PAGE>
    DEPENDENCE ON AND RISKS ASSOCIATED WITH INTERNATIONAL SALES
 
    Sales to customers outside of the United States accounted for approximately
6.6%, 19.1%, 12.7% and 10.7% of the Company's net revenues in the nine months
ended September 30, 1998 and in fiscal years 1997, 1996 and 1995, respectively.
However, these percentages may understate sales of the Company's products to
international end users because certain of the Company's U.S.-based channel
partners market the Company's products abroad. The Company currently anticipates
that international sales may continue to account for a significant percentage of
the Company's net revenues in future periods. However, as a result of the recent
Asian economic crisis, the Company experienced project delays and order
cancellations during the fourth quarter of 1997 and has continued to experience
sluggishness in it sales to the Pacific Rim during the first nine months of
1998. Sales to the Pacific Rim during the third quarter of 1998 represented 6.6%
of the Company's net revenue for such period.
 
    The Company markets its products in foreign countries primarily through its
channel partners and independent distributors. Failure of these resellers to
market the Company's products internationally or the loss of any of these
resellers could have a material adverse effect on the Company's business,
operating results and financial condition. In addition, the Company's ability to
increase sales of its products to international end users may be limited if the
carrier services, such as frame relay, or protocols supported by the Company's
products are not widely adopted internationally. A number of additional risks
are inherent in international transactions. The Company's international sales
currently are U.S. dollar-denominated. As a result, an increase in the value of
the U.S. dollar relative to foreign currencies, as has occurred recently in
several Asian markets, could make the Company's products less competitive in
international markets. International sales may also be limited or disrupted by
the imposition of governmental controls, export license requirements,
restrictions on the export of critical technology, currency exchange
fluctuations, political instability, trade restrictions and changes in tariffs.
In addition, sales in Europe and certain other parts of the world typically are
adversely affected in the third quarter of each year as many customers and end
users reduce their business activities during the summer months. These
international factors could have a material adverse effect on future sales of
the Company's products to international end users and, consequently, the
Company's business, operating results and financial condition.
 
    DEPENDENCE ON PROPRIETARY TECHNOLOGY
 
    The Company's future success depends, in part, upon its proprietary
technology. The Company does not hold any patents and currently relies on a
combination of contractual rights, trade secrets and copyright laws to establish
and protect its proprietary rights in its products. There can be no assurance
that the steps taken by the Company to protect its intellectual property will be
adequate to prevent misappropriation of its technology or that the Company's
competitors will not independently develop technologies that are substantially
equivalent or superior to the Company's technology. In the event that protective
measures are not successful, the Company's business, operating results and
financial condition could be materially and adversely affected. In addition, the
laws of some foreign countries do not protect the Company's proprietary rights
to the same extent as do the laws of the United States. The Company is also
subject to the risk of adverse claims and litigation alleging infringement of
intellectual property rights of others. There can be no assurance that third
parties will not assert infringement claims in the future with respect to the
Company's current or future products or that any such claims will not require
the Company to enter into license arrangements or result in litigation,
regardless of the merits of such claims. No assurance can be given that any
necessary licenses will be available or that, if available, such licenses can be
obtained on commercially reasonable terms. Should litigation with respect to any
such claims commence, such litigation could be extremely expensive and
time-consuming and could have a material adverse effect on the Company's
business, operating results and financial condition regardless of the outcome of
such litigation.
 
                                       18
<PAGE>
    TARIFF AND REGULATORY MATTERS
 
    Rates for public telecommunications services, including features and
capacity of such services, are governed by tariffs determined by carriers and
subject to regulatory approval. Future changes in these tariffs could have a
material effect on the Company's business. For example, should tariffs for frame
relay services increase in the future relative to tariffs for dedicated leased
lines, the cost-effectiveness of the Company's products could be reduced, which
could have a material adverse effect on the Company's business, operating
results and financial condition. In addition, the Company's products must meet
industry standards and receive certification for connection to certain public
telecommunications networks prior to their sale. In the United States, the
Company's products must comply with various regulations defined by the Federal
Communications Commission and Underwriters Laboratories. Internationally, the
Company's products must comply with standards established by telecommunications
authorities in various countries as well as with recommendations of the
Consultative Committee on International Telegraph and Telephony. In addition,
carriers require that equipment connected to their networks comply with their
own standards, which in part reflect their currently installed equipment. Some
public carriers have installed equipment that does not fully comply with current
industry standards, and this noncompliance must be addressed in the design of
the Company's products. Any future inability to obtain on a timely basis or
retain domestic or foreign regulatory approvals or certifications or to comply
with existing or evolving industry standards could have a material adverse
effect on the Company's business, operating results and financial condition.
 
    DEPENDENCE ON KEY PERSONNEL
 
    The Company's success depends, to a significant degree, upon the continued
contributions of its key management, sales, marketing, research and development
and manufacturing personnel. The Company believes its future success will also
depend in large part upon its ability to attract and retain highly skilled
engineering, managerial, sales and marketing personnel, and development
engineers. Competition for such personnel is intense, and there can be no
assurance that the Company will be successful in attracting and retaining such
personnel. During 1997 and 1998, the Company implemented significant expense
reductions, including reductions in force, with the goal of enabling the Company
to achieve profitability at lower revenues. The loss of the services of these or
any of the Company's other key personnel or the failure to attract or retain
qualified personnel in the future could have a material adverse effect on the
Company's business, operating results or financial condition.
 
    GENERAL ECONOMIC CONDITIONS
 
    Demand for the Company's products depends in large part on the overall
demand for communications and networking products, which has in the past and may
in the future fluctuate significantly based on numerous factors, including
capital spending levels and general economic conditions. There can be no
assurance that the Company will not experience a decline in demand for its
products due to general economic conditions. Any such decline could have a
material adverse effect on the Company's business, operating results and
financial condition.
 
    VOLATILITY OF STOCK PRICE
 
    Any negative announcements by the Company regarding its products, markets or
financial performance, or announcements of technological innovations or the
introduction of new products by its competitors, as well as market conditions in
the technology sector, may have a significant effect on the market price of the
Company's common stock. Further, the stock market has experienced volatility
which has particularly affected the market prices of equity securities of many
high technology companies and which often has been unrelated to the operating
performance of such companies. These market fluctuations may have an adverse
effect on the price of the Company's common stock.
 
                                       19
<PAGE>
    ANTI-TAKEOVER PROVISIONS
 
    The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In addition, certain provisions
of the Company's charter documents, including provisions eliminating cumulative
voting, eliminating the ability of stockholders to call meetings or to take
actions by written consent and limiting the ability of stockholders to raise
matters at a meeting of stockholders without giving advance notice, may have the
effect of delaying or preventing a change in control or management of the
Company, which could have an adverse effect on the market price of the Company's
common stock. Certain of the Company's stock option and purchase plans and
agreements provide for assumption of such plans, or, alternatively, immediate
vesting upon a change of control or similar event. In addition, the Company has
entered into severance agreements with its officers, pursuant to which they are
entitled to specified severance payments if they are actually or constructively
terminated within specified time periods following a change of control of the
Company. The Board of Directors has authority to issue up to 2,000,000 shares of
preferred stock and to fix the rights, preferences, privileges and restrictions,
including voting rights, of these shares without any further vote or action by
the stockholders. The rights of the holders of the common stock will be subject
to, and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire a majority of the outstanding voting stock of the
Company, thereby delaying, deferring or preventing a change in control of the
Company. Furthermore, such preferred stock may have other rights, including
economic rights senior to the common stock, and as a result, the issuance of
such preferred stock could have a material adverse effect on the market value of
the common stock. The Company has no present plan to issue shares of preferred
stock.
 
                                       20
<PAGE>
                              SYNC RESEARCH, INC.
 
PART II.  OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
 
    On November 5, 1997, an action entitled Dalarne Partners, Ltd. v. Sync
Research, Inc., et al., No. SACV97-877 AHS(EEx) was filed against the Company
and certain of its directors and officers. The action was filed in the U.S.
District Court for the Central District of California, Southern Division. The
action purports to be a class action lawsuit brought on behalf of purchasers of
the Company's common stock during the period from November 18, 1996 through
March 20, 1997. The complaint asserts claims for violation of the Securities
Exchange Act of 1934. The complaint seeks to recover damages in an unspecified
amount. No trial date or other deadline has been established. The Company
intends to defend this lawsuit vigorously.
 
ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS
 
    (d) USE OF PROCEEDS
 
    In connection with its initial public offering in 1995, the Company filed a
Registration Statement on Form S-1, SEC File No. 33-96910 (the "REGISTRATION
STATEMENT"), which was declared effective by the Commission on November 8, 1995.
Pursuant to the Registration Statement, the Company registered and sold
2,585,000 shares of its Common Stock, $0.001 par value per share, for its own
account. The offering was completed on November 9, 1995. The aggregate offering
price of the registered shares was $51,700,000. The managing underwriters of the
offering were BancAmerica Robertson, Stephens (formerly Robertson, Stephens &
Company), BT Alex. Brown (formerly Alex. Brown & Sons Incorporated) and Dain
Rauscher Wessels (formerly Wessels, Arnold & Henderson). From November 9, 1995
to September 30, 1998, the Company incurred the following expenses in connection
with the offering:
 
<TABLE>
<S>                                                               <C>
Underwriting discounts and commissions..........................  $3,619,000
Other expenses..................................................    912,471
                                                                  ---------
    Total Expenses..............................................  $4,531,471
                                                                  ---------
                                                                  ---------
</TABLE>
 
    All of such expenses were direct or indirect payments to others.
 
    The net offering proceeds to the Company after deducting the total expenses
above were $47,168,529. From November 9, 1995 to September 30, 1998, the Company
used such net offering proceeds, in direct or indirect payments to others, as
follows:
 
<TABLE>
<S>                                                             <C>
Construction of plant, building and facilities................  $    850,638
Purchase and installment of machinery and equipment...........     4,003,331
Acquisition of other business(es).............................     5,338,000
Working capital...............................................     1,495,283
Operating losses..............................................    31,509,790
                                                                ------------
    Total.....................................................  $ 43,197,042(1)
                                                                ------------
                                                                ------------
</TABLE>
 
------------------------
 
(1) Excludes operating losses, capital expenditures and working capital changes
    of Tylink Corporation ("Tylink") prior to the Company's acquisition of
    Tylink in August 1996.
 
    In addition, the Company used aggregate proceeds of $611,125 to make
departing payments to departing officers. This use of proceeds does not
represent a material change in the use of proceeds described in the prospectus
of the Registration Statement.
 
                                       21
<PAGE>
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
 
        10.27 Amended and Restated 1996 Non-Executive Stock Option Plan (amended
              as of August 21, 1998)
 
        10.34 Settlement Agreement and Mutual Release with John Rademaker dated
              September 28, 1998.
 
        27.1  Financial Data Schedule.
 
    (B) REPORTS ON FORM 8-K
 
        No Reports on Form 8-K were filed during the quarter ended September 30,
    1998.
 
                                       22
<PAGE>
                                   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
undersigned, thereunto duly authorized.
 
                                SYNC RESEARCH, INC.
 
                                By:            /s/ WILLIAM K. GUERRY
                                     -----------------------------------------
                                                 William K. Guerry
                                           VICE PRESIDENT OF FINANCE AND
                                                   ADMINISTRATION
                                            AND CHIEF FINANCIAL OFFICER
                                      (DULY AUTHORIZED SIGNATORY AND PRINCIPAL
Date: November 16, 1998                  FINANCIAL AND ACCOUNTING OFFICER)
 
                                       23