<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-Q

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

                FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999, OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                 FOR THE TRANSITION PERIOD FROM     TO        .

                        COMMISSION FILE NUMBER 000-26952

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

                               SYNC RESEARCH, INC.
             (Exact name of Registrant as specified in its charter)

           DELAWARE                                 33-0676350
(State or other jurisdiction of                  (I.R.S. Employer
incorporation or organization)                  Identification No.)

                                    40 PARKER
                                IRVINE, CA 92618
                    (Address of principal executive offices)
       Registrant's telephone number, including area code: (949) 588-2070

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


         Indicate by check 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 April 30, 1999, 17,498,258 shares of the Registrant's Common Stock were
issued and outstanding.



<PAGE>


                               SYNC RESEARCH, INC.

                                      INDEX

<TABLE>
<CAPTION>

                                                                                                                     PAGE
                                                                                                                     ----
<S>                                                                                                                    <C>
    Part I.      Financial Information..........................................................................        3

      Item 1.    a)      Condensed consolidated balance sheets at March 31, 1999 (unaudited) and December 31,
                         1998...................................................................................        3

                 b)      Condensed consolidated statements of operations (unaudited) for the three months ended
                         March 31, 1999 and 1998................................................................        4

                 c)      Condensed consolidated statements of cash flows (unaudited) for the three months ended
                         March 31, 1999 and 1998................................................................        5

                 d)      Notes to condensed consolidated financial statements...................................        6

      Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations..........
                                                                                                                        8

      Item 3.    Quantitative and Qualitative Disclosures About Market Risk.....................................       18

    Part II.     Other Information..............................................................................       19

      Item 1.    Legal Proceedings..............................................................................       19

      Item 2.    Changes in Securities and Use of Proceeds......................................................       19

      Item 3.    Defaults upon Senior Securities................................................................       20

      Item 4     Submission of Matters to a Vote of Security Holders............................................       20

      Item 5.    Other Information..............................................................................       20

      Item 6.    Exhibits and Reports on Form 8-K...............................................................       20
</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>

                                                                                                    March 31,       December 31,
                                                                                                      1999             1998
                                                                                                    -------           -------
                                                                                                  (Unaudited)
<S>                                                                                                  <C>               <C>    
Current assets:
   Cash and cash equivalents................................................................         $10,683           $14,135
   Accounts and other receivables, net......................................................           4,070             2,443
   Inventories..............................................................................           5,699             6,111
   Prepaid expenses and other current assets................................................             664               808
                                                                                                     -------           -------

Total current assets........................................................................          21,116            23,497
Furniture, fixtures and equipment, net......................................................           2,787             3,247
Other assets................................................................................              47                47
                                                                                                     -------           -------
Total assets................................................................................         $23,950           $26,791
                                                                                                     -------           -------
                                                                                                     -------           -------


                           LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable.........................................................................         $ 2,342           $ 3,138
   Accrued compensation and related costs...................................................           1,047               956
   Accrued severance and restructuring costs................................................           1,536             1,976
   Deferred revenue.........................................................................           2,059             2,063
   Other accrued liabilities................................................................             977               975
   Current maturities of capitalized lease obligations......................................              53                52
                                                                                                     -------           -------
      Total current liabilities.............................................................           8,014             9,160
Capitalized lease obligations, less current maturities......................................              42                60
Stockholders' equity:
   Preferred stock, $.001 par value:
      Authorized shares-2,000
      Issued and outstanding shares-none.....................................................              -                 -
  Common stock, $.001 par value:
     Authorized shares-50,000
     Issued and outstanding shares-17,580 at March 31, 1999
      and 17,458 at December 31, 1998.......................................................              17                17
   Additional paid-in capital...............................................................          72,009            71,958
   Deferred compensation....................................................................               -               (7)
   Accumulated deficit......................................................................        (56,132)          (54,397)

                                                                                                     -------           -------
Total stockholders' equity..................................................................          15,894            17,571
                                                                                                     -------           -------
Total liabilities and stockholders' equity..................................................         $23,950           $26,791
                                                                                                     -------           -------
                                                                                                     -------           -------
</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
                                                                                         March 31,
                                                                                 -------------------------
                                                                                       1999          1998
                                                                                      ------        ------
<S>                                                                                   <C>           <C>   
Net revenues...................................................................       $5,106        $5,610
Cost of sales..................................................................        2,851         3,871
                                                                                      ------        ------
   Gross profit................................................................        2,255         1,739
Operating expenses:
   Research and development....................................................        1,715         1,741
   Selling and marketing.......................................................        1,796         2,832
   General and administrative..................................................          614           642
                                                                                      ------        ------
   Total operating expenses....................................................        4,125         5,215
                                                                                      ------        ------
Operating loss.................................................................      (1,870)       (3,476)
Interest income, net...........................................................          135           255
                                                                                      ------        ------
Loss before income taxes.......................................................      (1,735)       (3,221)
Provision for income taxes.....................................................            -             2
                                                                                      ------        ------

Net loss.......................................................................    $ (1,735)      $(3,223)
                                                                                      ------        ------
                                                                                      ------        ------


Basic and diluted net loss per share...........................................     $ (0.10)      $ (0.19)
                                                                                      ------        ------
                                                                                      ------        ------


Shares used in computing net loss per share....................................       17,525        17,336
                                                                                      ------        ------
                                                                                      ------        ------
</TABLE>


                             See accompanying notes.



                                       4
<PAGE>


                               SYNC RESEARCH, INC.

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

<TABLE>
<CAPTION>

                                                                                                     Three Months Ended
                                                                                                         March 31,
                                                                                                 --------------------------
                                                                                                   1999            1998
                                                                                                   -------        -------
OPERATING ACTIVITIES
<S>                                                                                               <C>            <C>     
   Net loss..................................................................................     $(1,735)       $(3,223)
  Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation and amortization..........................................................          447            461
      Provision for losses on accounts receivable............................................           53            104
      Deferred compensation expense..........................................................            7              7
  Changes in operating assets and liabilities, net:
      Accounts and other receivables.........................................................      (1,680)          (301)
      Inventories............................................................................          412            115
      Prepaid expenses and other current assets..............................................          144          (369)
      Accounts payable and accrued liabilities...............................................        (794)            264
      Accrued severance and restructuring....................................................        (440)          (212)
      Accrued compensation and related costs.................................................           91          (161)
      Deferred revenue.......................................................................          (4)           (98)
                                                                                                   -------        -------
Net cash used in operating activities........................................................      (3,499)        (3,413)

INVESTING ACTIVITIES
   Sales (purchases) of furniture, fixtures and equipment, net...............................           13          (414)
FINANCING ACTIVITIES
   Net borrowings under credit agreements....................................................            -          1,500
   Payments on capitalized lease obligations.................................................         (17)           (18)
   Proceeds from common stock options exercised and employee stock
   purchase plan.............................................................................           51             80
                                                                                                   -------        -------
Net cash provided by financing activities....................................................           34          1,562
                                                                                                   -------        -------
Net decrease in cash and cash equivalents....................................................      (3,452)        (2,265)
Cash and cash equivalents at beginning of period.............................................       14,135         21,734
                                                                                                   -------        -------
Cash and cash equivalents at end of period...................................................      $10,683        $19,469
                                                                                                   -------        -------
                                                                                                   -------        -------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Interest paid.............................................................................          $ 2           $ 11
                                                                                                   -------        -------
                                                                                                   -------        -------

   Income taxes paid.........................................................................         $ 14           $ 21
                                                                                                   -------        -------
                                                                                                   -------        -------
</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 March 31, 1999, the
condensed consolidated statements of operations for the three months ended March
31, 1999 and 1998 and the condensed consolidated statements of cash flows for
the three months ended March 31, 1999 and 1998 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 March 31, 1999, the results of its
operations for the three months ended March 31, 1999 and 1998 and its cash flows
for the three months ended March 31, 1999 and 1998. The condensed 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, 1998. The results of
operations for the three months ended March 31, 1999 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>

                                                                                   March 31,       December 31,
                                                                                     1999             1998
                                                                                    -------          -------
<S>                                                                                  <C>              <C>   
Equipment acquired under capital leases...................................           $  275           $  275
Furniture and fixtures....................................................              848              848
Computer equipment and software...........................................            7,449            7,462
Leasehold improvements....................................................            1,109            1,109
                                                                                    -------          -------
                                                                                      9,681            9,694
Accumulated depreciation and amortization.................................          (6,894)          (6,447)
                                                                                    -------          -------
                                                                                    $ 2,787          $ 3,247
                                                                                    -------          -------
                                                                                    -------          -------
</TABLE>



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>

                                                                                                   March 31,          December 31,
                                                                                                     1999                1998
                                                                                                   ---------            --------
<S>                                                                                                <C>                 <C>      
               Raw materials.............................................................          $   2,512           $   2,983
               Work in process...........................................................                539                 752
               Finished goods............................................................              2,648               2,376
                                                                                                   ---------            --------


                                       6
<PAGE>


                                                                                                   $   5,699            $  6,111
                                                                                                   ---------            --------
                                                                                                   ---------            --------
</TABLE>




                               SYNC RESEARCH, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

ITEM 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

5.        PER SHARE INFORMATION

         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

         In April 1999, the Company entered into a new $3,000,000 credit
agreement with a bank. Outstanding borrowings under this credit agreement will
be secured by substantially all of the Company's assets and subject to an
interest rate equal to the Bank's prime rate plus one half percent on amounts
outstanding. The agreement is expected to expire in April 2000. There were no
borrowings outstanding as of March 31, 1999.

7.        LITIGATION

         On November 5, 1997, an action entitled Dalarne Partners, Ltd. Vs. 
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 purported 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 asserted claims for violation 
of the Securities Exchange Act of 1934. On February 16, 1999, the U.S. 
District Court issued an order granting the Company's motion to dismiss the 
first amended complaint. The plaintiffs filed a second amended complaint on 
March 22, 1999. The Company and the other defendents have moved to dismiss 
the second amended complaint which currently is scheduled for hearing on June 
28, 1999. The complaint seeks to recover damages in an unspecified amount. 
The Company intends to defend this lawsuit vigorously.

                                       7
<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. Except for the historical information
contained herein, the matters discussed in this document are 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, 1998,
and in the section of this Item 2 titled "Additional Factors That May Affect
Future Results," as well as other factors that 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 has 
developed and sells frame relay access devices (FRADs), circuit management 
probe products and digital transmission devices. The Company follows a 
leveraged sales strategy utilizing resellers, distributors, original 
equipment manufacturer (OEM) partners and carriers as delivery channels for 
its products. Current partners include PacBell, Sprint, MCI, Intermedia 
Communications, Electronic Data Systems, Diebold and Wang Global. The Company 
has also sold its products through OEM relationships with IBM and 3Com among 
others. The agreement between IBM and Sync expired in March 1999. 3Com has 
discontinued its support for the Company's products. Accordingly, the Company 
believes that revenue derived from sales to IBM and 3Com will decline in the 
future and represent a small percentage of its total revenue.

         In 1998 and 1997, the Company implemented various expense reduction
programs with the goal of enabling the Company to achieve profitability at lower
revenue levels. However, there can be no assurance that its efforts to implement
expense reductions will enable it to become profitable at lower revenue levels,
if at all. Also, there can be no assurance that the Company'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.

RESULTS OF OPERATIONS

         NET REVENUES

         The Company derives its revenues primarily from sales of advanced
wide-area networking products, which are recognized upon shipment. 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 first quarter of 1999 were $5.1 million, 
compared to net revenues of $5.6 million for the quarter ended March 31, 
1998. The decrease in net revenues in the first quarter of 1999 compared to 
the first quarter of 1998 was due primarily to decreased sales of frame relay 
access products, circuit management and transmission products partially 
offset by increases in other revenues, primarily service fees. Sales to IBM 
were $0.1 million or 2.0% of the Company's total revenues for the three 
months ended March 31, 1999, and $0.8 million or 14.3% of the Company's total 
revenues for the three months ended March 31, 1998. The agreement between IBM 
and the Company expired in March 1999. During the first quarter of 1999, two 
end-user customers represented 22.1% and 11.9% of the Company's total 
revenues. During the first quarter of 1998, one end-user customer represented 
11.4% of the Company's total revenues.

                                       8
<PAGE>


Net revenues by product group for the three months ended March 31, 1999 and 1998
were as follows ($ in thousands):

<TABLE>
<CAPTION>

                                                                 1999          %         1998         %
                                                               ----------   ---------  ----------  ---------
<S>                                                            <C>          <C>        <C>          <C>
Frame relay access products...................................    $2,427         48%     $2,916         52%
Circuit management products...................................       509         10         752         13
Transmission products.........................................       349          7         617         11
Other.........................................................     1,821         35       1,325         24
                                                               ----------   ---------  ----------  ---------

                                                                  $5,106        100%      $5,610       100%
                                                               ----------   ---------  ----------  ---------
                                                               ----------   ---------  ----------  ---------
</TABLE>


         The percentage of net revenues represented by sales through channel
partners and other resellers declined to 47.4% for the three months ended March
31, 1999 from 65.6% for the corresponding period in 1998, due primarily to
decreased revenue from sales to IBM. The sales mix of channel partners and other
resellers may change from period to period.

         International sales represented 25.3% of the Company's total sales 
during the three months ended March 31, 1999, as compared to 6.5% during the 
three months ended March 31, 1998. The increase was due primarily to the 
timing of one large European customer opportunity representing 15.8% of the 
Company's total revenues. Domestic sales represented 74.7% and 93.5% of the 
Company's total sales during the three months ended March 31, 1999 and 1998, 
respectively. The decrease was due primarily to lower sales to IBM.

         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 in the Company's
manufacturing and service employees.

         Gross profit increased to $2.3 million for the three months ended March
31, 1999 as compared to $1.7 million in the corresponding prior year period.
Gross profit as a percentage of net revenues increased to 44.2% for the three
months ended March 31, 1999 as compared to 31.0% for the three months ended
March 31, 1998. The increase in margins during the first quarter of 1999
compared to the prior year period was primarily due to the higher percentage of
direct end-user sales in the first quarter of 1999 which tend to have higher
margins than sales through reseller channels, increased sales of higher 
performance frame relay access products which have higher margins than other 
products and lower manufacturing and service overhead costs realized from the
Company's recent expense reduction program.

         OPERATING EXPENSES

         Research and development expenses primarily consist of compensation 
paid to personnel, including consultants, engaged in research and development 
activities, amounts paid for outside development services and costs of 
materials utilized in the development of hardware products, including product 
prototypes 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 in accordance with Financial Accounting Standard No. 86, 
ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE 
MARKETED. To date, $380,000 of externally acquired software has been 
capitalized. Research and development expenses totalled $1.7 million for the 
first quarter of 1999 and 1998.

         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 $1.8 million for the quarter ended March 31,
1999, as compared to $2.8 million in the quarter ended March 31, 1998. The
decrease in selling and marketing



                                       9
<PAGE>


expenses resulted primarily from headcount reductions and other cost reduction
measures.

         General and administrative expenses consist primarily of compensation
paid to corporate and administrative personnel, payments to consultants and
professional service providers, and public company related costs. General and
administrative expenditures decreased slightly to $614,000 for the quarter ended
March 31, 1999, as compared to $642,000 for the quarter ended March 31, 1998.

         During the fourth quarter of fiscal 1998, the Company implemented 
expense reduction programs to reduce its overall cost structure and, as a 
result, recognized a $2.9 million non-recurring charge consisting of 
severance and related headcount reduction costs, idle and excess facility 
charges and write-offs of assets no longer in use due to the reduction 
efforts. The components of the activity during the first quarter of 1999 were 
as follows (in thousands):

<TABLE>
<CAPTION>

Description                                            Accrual                                            Accrual
-----------                                           At 12/31/99        Charge          Activity        At 3/31/99
                                                     -------------    -------------    -------------    -------------
<S>                                                        <C>              <C>             <C>               <C>  
Severance and related expenses.....................        $ 854            $   -           $(333)            $ 521
Idle and excess facility charges
   and write-off of assets.........................        1,110                -            (107)            1,003
Other non-recurring charge........................            12                -                -               12
                                                     -------------    -------------    -------------    -------------
Total..............................................       $1,976             $  -           $(440)           $1,536
                                                     -------------    -------------    -------------    -------------
                                                     -------------    -------------    -------------    -------------
</TABLE>


         The Company expects all 1998 expense reduction program activities will
be substantially completed during fiscal 1999. The Company will continue to
evaluate and may adjust its organization and cost structure.

         Net interest income was $135,000 for the three months ended March 31,
1999 as compared to $255,000 for the three months ended March 31, 1998. 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 has been no provision for income tax in 1999. The provision for
income taxes in 1998 represents minimum state taxes.

LIQUIDITY AND CAPITAL RESOURCES

         As of March 31, 1999, the Company's principal sources of liquidity
consisted of $10.7 million of cash and cash equivalents and a $3 million secured
bank line of credit which expires in April 2000. There were no borrowings
outstanding as of March 31, 1999.

         During the three months ended March 31, 1999, cash utilized by
operating activities was $3.5 million, compared to $3.4 million in the
corresponding period in 1998. At March 31, 1999 the Company had no material
commitments for capital expenditures.

         The Company believes that its available cash and cash equivalents will
be sufficient to meet its working capital requirements at least through 1999.

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 major
risks and uncertainties.

HISTORY OF LOSSES; SIGNIFICANT FLUCTUATIONS IN OPERATING RESULTS; UNCERTAIN
PROFITABILITY



                                       10
<PAGE>


         The Company has experienced operating losses since inception, with, in
recent years, operating losses of, $11.6 million in 1996, $18.0 million in 1997
and $16.3 million in 1998 and $1.9 million for the three months ended March 31,
1999. As of March 31, 1999, the Company had an accumulated deficit of
approximately $56.1 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 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 the Company'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; impact of Year 2000 compliance problems on the networking industry and
the Company's customers, 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 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, if channel partners and other resellers
continue to account for a large percentage 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, 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 the Company'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 the Company's channel partners and other resellers
will continue to offer the Company's products. A significant portion 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. 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.

DEPENDENCE ON THE IBM CUSTOMER BASE

         The Company's frame relay access products are targeted at the large
installed base of IBM customers utilizing SNA networks. Thus, the Company faces
the risks associated with a relatively 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 or other
suppliers' products. IBM has sold the Company's FrameNode(R) product family
under the name IBM Nways 2218. The agreement between IBM and the Company expired
in March 1999. Sales to IBM respectively accounted for 2.0%, 14.1%, 16.5% and
4.9% of the Company's net revenues in the first quarter of 1999 and fiscal years
1998, 1997 and 1996, respectively, and are expected to decline further in 1999.
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, 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.

 UNCERTAIN MARKET ACCEPTANCE OF FRAME RELAY FOR MISSION-CRITICAL APPLICATIONS



                                       11
<PAGE>


         During the first quarter of 1999 and for the fiscal year 1998, sales of
frame relay access products, which enable systems network architecture (SNA) and
client/server internet-working over frame relay, represented approximately 48%
and 49%, respectively, of the Company's net revenues. The market for
SNA-over-frame relay products is relatively new and still evolving. The success
of the Company and its channel partners in generating significant sales of frame
relay access 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 account, and are
expected to continue to account, for a large percentage of the Company's net
revenues, including most of its sales outside of the United States. Sales
through channel partners and other resellers accounted for 47.4%, 62.5%, 67.0%
and 85.7% of net revenues of the Company for the first quarter of 1999 and
fiscal years 1998, 1997 and 1996, respectively. Current partners include
PacBell, Sprint, MCI, Intermedia Communications, Electronic Data Systems,
Diebold and Wang Global. The Company has also sold its products through OEM
relationships with IBM and 3Com among others. The agreement between IBM and Sync
expired in March 1999 and was not renewed. Sales to IBM accounted for 2.0%,
14.1%, 16.5% and 4.9% of the Company's net revenues for the first quarter of
1999 and for the fiscal years 1998, 1997 and 1996, respectively. Sales to 3Com
accounted for 7.7%, 2.6%, 6.5% and 19.2% of the Company's net revenues for the
first quarter of 1999 and fiscal years 1998, 1997 and 1996, respectively. 3Com
has discontinued its support for the Company's products. Accordingly, the
Company believes that revenue derived from sales to 3Com and IBM will decline in
the future and represent a small percentage of total revenue.

         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.
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. 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, prohibit distribution of certain products by the Company through
certain categories of third parties under certain conditions and provide
manufacturing rights and access to source code upon the occurrence of specified
conditions or defaults.

         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.



                                       12
<PAGE>


         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.

         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 the
Company'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 and other resellers 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 continues to evaluate the impact of the "Year 2000" issue upon its
products, support systems and overall business.

         The Company has defined Year 2000 compliance using the British
Standards Institute (BSI) definition. The BSI DISC PD2000-1 definition provides
that Year 2000 compliance shall mean that neither product performance nor
functionality is affected by dates prior to, during and after the year 2000. The
Company has either internally or in collaboration with certain of its suppliers
and customers evaluated, tested and verified the Year 2000 compliance of its
latest product offerings. The Company believes that several of its discontinued
or earlier versions of its conversion and frame relay products are not Year 2000
compliant and the Company currently does not plan to update these products.
However, the Company offers for sale upgrade programs to its customers of most
of these non-compliant discontinued products. Certain of the Company's products
rely on date information from other devices resident in the networks in which
they operate. Thus, any Year 2000 problems within these third party networking
products could cause the Company's products not to work accurately or cause
disruption in their operation.

         The Company relies on a number of computer systems and applications to
operate and monitor all major aspects of its business. The Company has evaluated
all of its business critical systems, internal information and non-information
systems, and most of its non-critical systems through inquiries with the
respective manufacturers and testing or the completion of other verification
procedures. Substantially all of the Company's critical systems have been
verified to meet the Company's Year 2000 requirements and the Company's
non-critical systems are expected to be made fully compliant by December 31,
1999. 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 be 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 the year 2000.

         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 is currently in the process of making inquiries
regarding Year 2000 compliance of all of its significant vendors and service
providers upon which it relies. The Company intends to establish contingency
plans to provide for alternative sources as necessary.

         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. In addition, the Company is unable to assess the
potential risks and exposures associated with changes in generally accepted
definitions of Year 2000 compliance that may impact the compliance of its



                                       13
<PAGE>


products. Any failure by the Company to make its products Year 2000 compliant
could result in a decrease in sales of the Company's products, diversion of
development resources, damage to the Company's reputation, increased service and
warranty costs and/or possible claims against the Company by customers as a
result of Year 2000 problems caused by the Company's products, any of which
could have a material adverse effect on the Company, its business, operating
results and financial condition.

         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's
customers, which consists primarily of mid size to large enterprises operating
business critical applications over the wide area networks that are supported by
the Company's products, may be less willing to purchase wide area networking
products or otherwise implement new network solutions during the second half of
1999 in anticipation of the Year 2000. 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. 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 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 the
Company'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.



                                       14
<PAGE>


 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 Nortel; FRAD providers, such as Hypercom, Motorola ISG and 
Cabletron; and circuit management and digital transmission providers such as 
Visual Networks, Netscout, Digital Link, Racal, AT&T Paradyne and Adtran, 
among others. Potential competitors include other internetworking and WAN 
access and transmission 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. 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 CONTRACT MANUFACTURERS

         The Company's manufacturing operations consist primarily of materials
planning and procurement, light assembly, system integration, testing and
quality assurance. The Company entered into arrangements with contract
manufacturers to outsource 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 the
Company's ability to fulfill orders while the Company identifies 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. 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,
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



                                       15
<PAGE>


effect on the Company's business, operating results and financial condition.

 DEPENDENCE ON AND RISKS ASSOCIATED WITH INTERNATIONAL SALES

         Sales to customers outside of the United States accounted for
approximately 25.3%, 6.9%, 19.1% and 12.7% of the Company's net revenues for the
first quarter of 1999 and fiscal years 1998, 1997 and 1996, 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 expects that
international sales may represent an important percentage of net revenues in
future periods. The near-term outlook on the Company's sales to the Pacific Rim,
which represented approximately 6.1% of the Company's net revenues for the first
quarter of 1999 and 3.7% of the Company's net revenues in 1998, remains
uncertain.

         Historically, the Company's international sales have been conducted
primarily through independent country-specific distributors. The Company intends
to continue to market its products in foreign countries in the future through
its channel partners. 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.


 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



                                       16
<PAGE>


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 1998, the Company implemented significant expense reductions,
including reductions in force, with the goal of enabling the Company to achieve
profitability at lower revenues. During 1998 and 1999, the Company also
experienced significant turnover in the composition of its executive officers.
Two of the current four executive officers, including the President and Chief
Executive Officer, have been officers of the Company for less than a year. The
loss of the services of any of the Company's 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

         Factors such as announcements of technological innovations or the
introduction of new products by the Company or 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.

 NASDAQ STOCK LISTING

         The Company's common stock is listed and traded on the Nasdaq 
National Market. On January 4, 1999, the Company received a letter from 
Nasdaq notifying the Company that it has failed to maintain a closing bid 
price of greater than $1.00 in accordance with the Nasdaq listing 
requirements. According to the notice, the Company had 90 days from the date 
of the letter to cure such deficiency by having a minimum closing bid price 
of its common stock equal to or greater than $1.00 per share for ten 
consecutive trading days. As of May 17, 1999, the Company has not been able 
to cure this deficiency. Accordingly, the Company's Board of Directors has 
voted for an amendment to the Company's Certificate of Incorporation to 
effect a one-for-five reverse split of the Company's Common Stock, subject to 
ratification by the Company's stockholders at the Company's annual meeting on 
June 11, 1999. The Company has also requested an oral hearing with Nasdaq, 
currently scheduled for May 21, 1999, to stay delisting of the Company from 
the Nasdaq National Market pending approval and completion of the reverse 
stock split. There can be no assurance that the Company will be successful in 
meeting the minimum bid listing requirements even with a one-for-five reverse 
stock split or that in the future it will meet this or other listing 
requirements. Any such inability could have a material adverse effect the 
liquidity of the Company's common stock and on the Company's business, 
operating results and financial condition.

                                       17
<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 defined 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.



                                       18
<PAGE>


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 RISKS ASSOCIATED WITH FOREIGN EXCHANGE

         In the first quarter of 1999, approximately 25.3% of the Company's net
revenues were derived from sales to international customers, primarily in Europe
and the Pacific Rim. As a result, the Company is exposed to market risk from
changes in foreign exchange rates and international economic conditions, which
could affect its results of operations and financial condition. In order to
reduce the risk from fluctuation in foreign exchange rates, the Company's sales
are denominated in U.S. dollars. The Company has not entered into any currency
hedging activities.

INTEREST RATE RISKS

         The Company invests its excess cash in high quality government and
corporate debt instruments. However, the Company may be exposed to fluctuation
in rates on these investments. Increases or decreases in interest rates
generally translate into increases or decreases in the fair value of these
investments. Such changes to these investments have historically not been
material due to the short-term nature of the Company's investment. In addition,
the credit worthiness of the issuer, the relative values of alternative
investments, the liquidity of the instruments and other general market
conditions may affect the fair value of interest rate sensitive instruments. In
order to reduce the risk from fluctuation in rates, the Company invests in money
market funds and short-term debt instruments of U.S. corporations with strong
credit ratings and the federal government with contractual maturities of less
than six months. At March 31, 1999, investments were as follows ($ in millions):

<TABLE>
<CAPTION>

                                                                                              Average
                                                                                 Average     Interest       Fair
                                                                    Balance      Maturity      Rate        Value
                                                                    -------      --------      ----        -----

<S>                                                                   <C>        <C>            <C>        <C>  
Short-term debt instruments and money market funds                    $10.7      2 months       5%         $10.7
</TABLE>



                                       19
<PAGE>



                               SYNC RESEARCH, INC.

PART II.  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         On November 5, 1997, an action entitled Dalarne Partners, Ltd. Vs. 
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 purported 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 asserted claims for violation 
of the Securities Exchange Act of 1934. On February 16, 1999, the U.S. 
District Court issued an order granting the Company's motion to dismiss the 
first amended complaint. The plaintiffs filed a second amended complaint on 
March 22, 1999. The Company and the other defendents have moved to dismiss 
the second amended complaint which currently is scheduled for hearing on June 
28, 1999. The complaint seeks to recover damages in an unspecified amount. 
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 March 31, 1999, 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 March 31, 1999, 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...........................................            $853,660
Purchase and installment of machinery and equipment......................................           4,049,548
Acquisition of other business(es)........................................................           5,338,000
Working capital..........................................................................           (236,039)
Operating losses.........................................................................          39,878,719
                                                                                                  -----------
      Total..............................................................................         $49,883,888 (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 $808,487 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.



                                       20
<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

       10.38   Settlement Agreement and Mutual Release with Douglas Antaya dated
               February 3, 1999.

       27.1    Financial Data Schedule.

    (b)REPORTS ON FORM 8-K

       No Reports on Form 8-K were filed during the quarter ended March 31,
1999.



                                       21
<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.
Date: May 17, 1999     By:                  /s/ William K. Guerry
                                           -----------------------------

                                                 William K. Guerry
                                    VICE PRESIDENT OF FINANCE AND ADMINISTRATION
                                             AND CHIEF FINANCIAL OFFICER
                                      (DULY AUTHORIZED SIGNATORY AND PRINCIPAL
                                           FINANCIAL AND ACCOUNTING OFFICER)