<PAGE>
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                      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 JUNE 30, 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 (X) 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 July 31, 1999, 3,486,201 shares of the Registrant's Common Stock were
issued and outstanding.


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<PAGE>

                              SYNC RESEARCH, INC.

                                     INDEX

<TABLE>
<CAPTION>
                                                                                                                 PAGE
<S>                                                                                                              <C>
Part I.      Financial Information..........................................................................        3

  Item 1.    a)      Condensed consolidated balance sheets at June 30, 1999 (unaudited) and December 31,
                     1998...................................................................................        3
             b)      Condensed consolidated statements of operations (unaudited) for the three and six
                     months ended June 30, 1999 and 1998....................................................        4
             c)      Condensed consolidated statements of cash flows (unaudited) for the six months ended
                     June 30, 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..........        9

  Item 3.    Quantitative and Qualitative Disclosures About Market Risk.....................................       20

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>
                                                                                                 JUNE 30,        DECEMBER 31,
                                                                                                   1999              1998
                                                                                              ---------------  ----------------
                                                                                               (UNAUDITED)
<S>                                                                                           <C>              <C>
Current assets:
   Cash and cash equivalents................................................................        $ 10,327          $ 14,135
   Accounts and other receivables, net......................................................           3,091             2,443
   Inventories..............................................................................           5,364             6,111
   Prepaid expenses and other current assets................................................             546               808
                                                                                              ---------------  ----------------

Total current assets........................................................................          19,328            23,497
Furniture, fixtures and equipment, net......................................................           2,379             3,247
Other assets................................................................................              47                47
                                                                                              ---------------  ----------------
Total assets................................................................................        $ 21,754          $ 26,791
                                                                                              ---------------  ----------------
                                                                                              ---------------  ----------------

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable.........................................................................        $  1,625          $  3,138
   Accrued compensation and related costs...................................................             842               956
   Accrued severance and restructuring costs................................................           1,193             1,976
   Deferred revenue.........................................................................           2,658             2,063
   Other accrued liabilities................................................................             880               975
   Current maturities of capitalized lease obligations......................................              53                52
                                                                                              ---------------  ----------------
Total current liabilities...................................................................           7,251             9,160
Capitalized lease obligations, less current maturities......................................              29                60
Stockholders' equity:
   Preferred stock, $.001 par value:
      Authorized shares-2,000
      Issued and outstanding shares-none.....................................................              -                 -
  Common stock, $.005 par value:
     Authorized shares-10,000
     Issued and outstanding shares-3,453 at June 30, 1999
      and 3,491 at December 31, 1998........................................................              18                17
   Additional paid-in capital...............................................................          71,880            71,958
   Deferred compensation....................................................................               -                (7)
   Accumulated deficit......................................................................         (57,424)          (54,397)
                                                                                              ---------------  ----------------
Total stockholders' equity..................................................................          14,474            17,571
                                                                                              ---------------  ----------------
Total liabilities and stockholders' equity..................................................        $ 21,754          $ 26,791
                                                                                              ---------------  ----------------
                                                                                              ---------------  ----------------
</TABLE>

                             See accompanying notes.

                               SYNC RESEARCH, INC.


                                       3

<PAGE>

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                            For the three months ended              For the six months ended
                                                                     June 30,                               June 30,
                                                      ------------------  ------------------  -----------------   ----------------
                                                            1999                 1998               1999               1998
                                                      ------------------  ------------------  -----------------   ----------------
<S>                                                   <C>                 <C>                 <C>                 <C>
Net revenues                                           $      4,405        $      7,076        $      9,511         $    12,686
Cost of sales                                                 2,485               4,387               5,336               8,258
                                                      ------------------  ------------------- -----------------   ----------------
Gross profit                                                  1,920               2,689               4,175               4,428

Operating expenses:
       Research and development                               1,311               1,817               3,026               3,558
       Sales and marketing                                    1,356               3,112               3,152               5,944
       General and administrative                               647                 676               1,261               1,318
       Non-recurring charges                                      -                 267                   -                 267
                                                      ------------------  ------------------- -----------------   ----------------
       Total operating expenses                               3,314               5,872               7,439              11,087
                                                      ------------------  ------------------- -----------------   ----------------

Operating loss                                               (1,394)             (3,183)             (3,264)             (6,659)

Interest income, net                                            105                 219                 240                 473
                                                      ------------------  ------------------- -----------------   ----------------

Loss before income taxes                                     (1,289)             (2,964)             (3,024)             (6,186)

Provision for income taxes                                        2                   -                   2                   2
                                                      ------------------  ------------------- -----------------   ----------------

Net loss                                               $     (1,291)       $     (2,964)       $     (3,026)       $     (6,188)
                                                      ------------------  ------------------- -----------------   ----------------
                                                      ------------------  ------------------- -----------------   ----------------

Basic and diluted net loss per share                   $      (0.37)       $      (0.85)       $      (0.87)       $      (1.81)
                                                      ------------------  ------------------- -----------------   ----------------
                                                      ------------------  ------------------- -----------------   ----------------

Shares used in computing net loss per share                   3,480               3,476               3,492               3,416
                                                      ------------------  ------------------- -----------------   ----------------
                                                      ------------------  ------------------- -----------------   ----------------
</TABLE>


                                       4

<PAGE>

                             SYNC RESEARCH, INC.

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

<TABLE>
<CAPTION>
                                                                                                    SIX MONTHS ENDED
                                                                                                         JUNE 30,
                                                                                              ----------------------------
                                                                                                   1999            1998
                                                                                              -------------   ------------
<S>                                                                                           <C>             <C>
OPERATING ACTIVITIES
  Net loss...................................................................................      $(3,026)       $(6,188)
  Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation and amortization..........................................................          780            931
      Provision for losses on accounts receivable............................................           75            339
      Deferred compensation expense..........................................................            7             14
  Changes in operating assets and liabilities, net:
      Accounts and other receivables.........................................................         (724)           259
      Inventories............................................................................          747            630
      Prepaid expenses and other current assets..............................................          263           (410)
      Accounts payable and accrued liabilities...............................................        (1608)          2249
      Accrued severance and restructuring....................................................         (783)           (81)
      Accrued compensation and related costs.................................................         (113)           (76)
      Deferred revenue.......................................................................          595            (76)
                                                                                              -------------   ------------
Net cash used in operating activities........................................................       (3,787)        (2,409)

INVESTING ACTIVITIES
   Sales (purchases) of furniture, fixtures and equipment, net...............................           88           (846)

FINANCING ACTIVITIES
   Repurchase of common stock................................................................         (136)
   Payments on capitalized lease obligations.................................................          (31)           (30)
   Proceeds from common stock options exercised and employee stock
        purchase plan........................................................................           58            111
                                                                                              -------------   ------------
Net cash provided (used) by financing activities.............................................         (109)            81
                                                                                              -------------   ------------

Net decrease in cash and cash equivalents....................................................       (3,808)        (3,174)
Cash and cash equivalents at beginning of period.............................................       14,135         21,734
                                                                                              -------------   ------------

Cash and cash equivalents at end of period...................................................      $10,137        $18,560
                                                                                              -------------   ------------
                                                                                              -------------   ------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Interest paid.............................................................................      $     4        $    37
                                                                                              -------------   ------------
                                                                                              -------------   ------------

   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 June 30, 1999, the condensed
consolidated statements of operations for the three and six months ended June
30, 1999 and 1998 and the condensed consolidated statements of cash flows for
the six months ended June 30, 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 June 30, 1999, the results of its
operations for the three and six months ended June 30, 1999 and 1998 and its
cash flows for the six months ended June 30, 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 and six months ended June 30, 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>
                                                                                JUNE 30,       DECEMBER 31,
                                                                                  1999               1998
                                                                             ---------------  ---------------
<S>                                                                          <C>              <C>
Equipment acquired under capital leases...................................          $   275          $   275
Furniture and fixtures....................................................              848              848
Computer equipment and software...........................................            7,374            7,462
Leasehold improvements....................................................            1,109            1,109
                                                                             ---------------  ---------------
                                                                                      9,606            9,694
Accumulated depreciation and amortization.................................           (7,227)          (6,447)
                                                                             ---------------  ---------------
                                                                                    $ 2,379          $ 3,247
                                                                             ---------------  ---------------
                                                                             ---------------  ---------------
</TABLE>


                                       6

<PAGE>

                              SYNC RESEARCH, INC.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

ITEM 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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>
                                                                                     JUNE 30,           DECEMBER 31,
                                                                                       1999                1998
                                                                                 ----------------     ---------------
   <S>                                                                           <C>                  <C>
   Raw materials.............................................................        $   2,622           $   2,983
   Work in process...........................................................              284                 752
   Finished goods............................................................            2,458               2,376
                                                                                 ----------------     ---------------
                                                                                     $   5,364            $  6,111
                                                                                 ----------------     ---------------
                                                                                 ----------------     ---------------
</TABLE>

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. All share amounts
have been adjusted to reflect the implementation of the Company's one for five
reverse stock split on June 28,1999.

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 are secured by
substantially all of the Company's assets and are subject to an interest rate
equal to the Bank's prime rate plus one half percent. The agreement to expires
in April 2000. There were no borrowings outstanding as of June 30, 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 17, 1999, the U.S. District Court issued an
order granting the Company's motion to dismiss the first amended complaint,
granting leave to amend. 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 September
13, 1999. The complaint seeks to recover damages in an unspecified amount. The
Company intends to defend this lawsuit vigorously.

8.   LEASE COMMITMENTS

     In July 1999, the company executed an agreement to terminate its existing
headquarters facility lease and enter into a new five year lease on another
facility. In addition, the company extended a portion of its Norton facility
lease for a period of three years. As a result, the future minimum operating
lease commitment as of July 1, 1999 are as follows:


                                       7

<PAGE>

<TABLE>
<CAPTION>
                   <S>                            <C>
                   7/99 - 12/99                  $199,115
                   2000                           308,902
                   2001                           317,420
                   2002                           286,250
                   2003                           235,499
                   Thereafter                     157,000
</TABLE>

9.   STOCKHOLDERS' EQUITY

     On June 28, 1999, the Company implemented a one-for-five reverse stock
split of common stock. All common stock amounts and per share information have
been restated to reflect the reverse stock split for all periods presented.


                                       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. 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 develops and sells frame relay access devices (FRADs), circuit
management probe products and digital transmission devices. The Company
follows a leveraged sales strategy utilizing a direct sales force, resellers,
distributors, OEMs, and carriers as delivery channels for its products.
Current partners include PacBell, Sprint, MCI, Intermedia Communications,
Electronic Data Systems, Diebold and Wang Global.

     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. Product revenues 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 second quarter of 1999 were $4.4 million, compared to
net revenues of $7.1 million for the quarter ended June 30, 1998. Net revenues
for the six months ended June 30, 1999 were $9.5 million, compared to $12.7
million for the comparable period in 1998. The decrease in net revenues in the
three and six months ended June 30, 1999 compared to the three and six months
ended June 30, 1998 was due primarily to decreased sales of frame relay access
products and circuit management products, partially offset by increases in other
revenues, primarily service fees. Sales to IBM and one large end user customer
decreased significantly to 1.1% and 8.3% of the Company's total revenue for the
three months ended June 30, 1999, respectively, as compared to 20.9% and 33.8%,
respectively, for the three months ended June 30, 1998. For the six months ended
June 30, 1999 sales to IBM and one large end user customer were 1.7% and 7.8%,
respectively, as compared to 18.1% and 24.4% for the six months ended June 30,
1998.

     Sales to three customers were 14%, 12% and 11% of sales for the quarter
ended June 30, 1999. Sales to two customers aggregated 34% and 21% of sales
for the quarter ended June 30, 1998. For the six months ended June 30, 1999,
one customer represented 13% and for the comparable prior year period two
customers represented 24% and 18% of the Company's sales.

                                       9

<PAGE>

Net revenues by product group for the three months ended June 30, 1999 and 1998
were as follows ($ in thousands):

<TABLE>
<CAPTION>
                                                                 1999          %         1998         %
                                                               ----------   ---------  ----------  ---------
<S>                                                            <C>          <C>        <C>         <C>
Frame relay access products...................................    $1,802          41%     $4,690         66%
Circuit management products...................................       846          19       1,203         17
Transmission products.........................................       248           6         244          4
Other.........................................................     1,502          34         939         13
                                                               ----------   ---------  ----------  ---------
                                                                  $4,398         100%     $7,076        100%
                                                               ----------   ---------  ----------  ---------
                                                               ----------   ---------  ----------  ---------
</TABLE>

Net revenues by product group for the six months ended June 30, 1999 and 1998
were as follows ($ in thousands):

<TABLE>
<CAPTION>
                                                                 1999          %         1998         %
                                                               ----------   ---------  ----------  ---------
<S>                                                            <C>          <C>        <C>         <C>
Frame relay access products...................................    $4,229         45%      $7,606        60%
Circuit management products...................................     1,355          14       1,955         15
Transmission products.........................................       597           6         861          7
Other.........................................................     3,323          35       2,264         18
                                                               ----------   ---------  ----------  ---------
                                                                  $9,504        100%     $12,686       100%
                                                               ----------   ---------  ----------  ---------
                                                               ----------   ---------  ----------  ---------
</TABLE>

     The percentage of net revenues represented by sales through channel
partners and other resellers was 56.5% and 51.6% for the three and six months
ended June 30, 1999 respectively, as compared to 42.8% and 52.8%, respectively,
for the corresponding periods in 1998. The sales mix of channel partners and
other resellers may change from period to period.

     International sales represented 12.7% and 19.4% of the Company's total
sales during the three and six months ended June 30, 1999, respectively, as
compared to 6.6% and 6.5% during the three and six months ended June 30,
1998, respectively. The increase was due primarily to the timing of shipments
to the European operations of one large U.S. based multinational customer
representing 4.0% and 8.9% of the Company's total revenues for the three and
six months ended June 30, 1999, respectively. Domestic sales represented
87.3% and 80.6% of the Company's total sales during the three and six months
ended June 30, 1999, respectively, as compared to 93.4% and 93.5% of the
Company's total sales for the three and six month periods ended June 30,
1998, respectively. The decrease in percentage of the Company's total sales
in both the three and six month periods of 1999 was due primarily to export
sales to the large multinational customer and 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 the
Company's manufacturing and service employees.

     Gross profit decreased to $1.9 and $4.2 million for the three and six
months ended June 30, 1999, respectively, from $2.7 and $4.4 million in the
corresponding prior year periods. The lower gross profit for the three and six
month periods ended June 30, 1999 was primarily due to lower sales revenue.
Gross profit as a percentage of net revenues increased to 43.6% and 43.9% for
the three and six months ended June 30, 1999, respectively, as compared to 38.0%
and 34.9% for the three and six months ended June 30, 1998. The increase in
margins during the three and six months ended June 30, 1999 compared to the same
period of 1998 was primarily due to lower manufacturing and service overhead
costs realized from the Company's expense reduction initiatives.


                                      10

<PAGE>

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, $300,000 of
externally acquired software has been capitalized. Research and development
expenses decreased to $1.3 and $3.0 million for the three and six months ended
June 30, 1999, respectively, as compared to $1.8 and $3.6 million for the
comparable periods in 1998. The decreased expenditures for both the three and
six month periods ended June 30, 1999 were due primarily to reduced headcount
and lower utilization of outside consultants.

     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 $1.4 and $3.2 million for the three and six
months ended June 30, 1999, respectively, as compared to $3.1 and $5.9 million
for the comparable periods in 1998. The decrease in selling and marketing
expenses for both the three and six month periods 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 $647,000 for the quarter ended
June 30, 1999, as compared to $676,000 for the quarter ended June 30, 1998, and
decreased to $1,261,000 for the six months ended June 30, 1999 from $1,318,000
for the six months ended June 30, 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 and second quarters of 1999 were as
follows (in thousands):

<TABLE>
<CAPTION>
DESCRIPTION                                            ACCRUAL                              ACCRUAL
                                                     AT 12/31/98          ACTIVITY        AT 6/30/99
                                                     -------------       -------------    -------------
<S>                                                  <C>                 <C>              <C>
Severance and related expenses.....................       $  854              $(637)           $  217
Idle and excess facility charges
   and write-off of assets.........................        1,110               (161)              949
Other non-recurring charge........................            12                 15                27

                                                     -------------       -------------    -------------
Total..............................................       $1,976              $(783)           $1,193
                                                     -------------       -------------    -------------
                                                     -------------       -------------    -------------
</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 $105,000 and $240,000 for the three and six months
ended June 30, 1999, respectively, as compared to $219,000 and $473,000 for the
three and six months ended June 30, 1998, 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

     The provisions for income taxes in 1998 and 1999 represent minimum state
taxes.

LIQUIDITY AND CAPITAL RESOURCES


                                      11

<PAGE>

     As of June 30, 1999, the Company's principal sources of liquidity consisted
of $10.3 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 June 30, 1999.

     During the six months ended June 30, 1999, cash utilized by operating
activities was $3.8 million, compared to $2.4 million in the corresponding
period in 1998. The increased cash utilization resulted primarily from increases
in accounts receivable of $724,000 and decreases in accounts payable of
$1,608,000 and accrued severance and restructuring of $783,000 partially offset
by lower inventories of $747,000, and prepaid expenses of $263,000 and higher
deferred revenues of $595,000. At June 30, 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

     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 $3.0 million for the six months ended June 30,
1999. As of June 30, 1999, the Company had an accumulated deficit of
approximately $57.4 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; the rate of migration of 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


                                      12

<PAGE>

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-Registered Trademark- 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 1.7%, 14.1%, 16.5% and 4.9% of the Company's net
revenues in the six months ended June 30, 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

     During the the six months ended June 30, 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 45% and 49%, respectively, of the Company's net revenues. The
market for SNA-over-frame relay products is 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 rather than remaining on leased
line networks or selecting newer and/or alternative technologies. 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 51.6%, 62.5%, 67.0%
and 85.7% of net


                                      13

<PAGE>

revenues of the Company for the six months ended June 30, 1999 and fiscal
years 1998, 1997 and 1996, respectively. Current partners include 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 1.7%, 14.1%, 16.5%
and 4.9% of the Company's net revenues for the first six months of 1999 and
for the fiscal years 1998, 1997 and 1996, respectively. Sales to 3Com
accounted for 4.3%, 2.6%, 6.5% and 19.2% of the Company's net revenues for
the first six months 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 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.

     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.


                                      14

<PAGE>

     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 the end of 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 continuing to make inquiries and evaluate the 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. Even where assurances have been received, the
Company remains subject to the risk that Year 2000 matters could negatively
affect such companies and, therefore, could cause delays in timely delivery of
products and services to the Company and have a material adverse effect on the
Company.

     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 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, 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,


                                      15

<PAGE>

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.

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. 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 mid-sized and 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


                                      16

<PAGE>

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 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
19.4%, 6.9%, 19.1% and 12.7% of the Company's net revenues for the six months
ended June 30, 1999 and fiscal years 1998, 1997 and 1996, respectively. The
increase in International Sales in 1999 resulted primarily from sales related to
the European operations of one large U.S. based multinational customer. 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 5.0% of the Company's net
revenues for the first six months 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


                                      17

<PAGE>

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
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


                                      18

<PAGE>

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. In order to comply
with the Nasdaq listing requirements, on June 28, 1999 the Company implemented a
1 for 5 reverse stock split that was approved by its shareholders at the
Company's Annual Meeting on June 11, 1999. As a result of the reverse stock
split, the Company has maintained its stock price above the $1 per share minimum
level, and accordingly, has been informed by Nasdaq that it currently meets the
requirements for continued listing. However, there can be no assurance that the
Company will meet the minimum closing bid price or any other Nadaq listing
requirements on an ongoing basis.

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.


                                      19

<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

RISKS ASSOCIATED WITH FOREIGN EXCHANGE

     In the first six months of 1999, approximately 19.4% 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 June 30, 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           $10.3   2 months      5%        $10.3
</TABLE>


                                      20

<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 17, 1999, the U.S. District Court issued an
order granting the Company's motion to dismiss the first amended complaint,
granting leave to amend. The plaintiffs filed a second amended complaint on
March 22, 1999. The Company and the other defendants have moved to dismiss the
second amended complaint; which currently is scheduled for hearing on September
13, 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

     (a)  AMENDMENT TO ARTICLES

     On June 25, 1999 the Company filed a Certificate of Amendment to the
Amended and Restated Certificate of Incorporation of the Company pursuant to
which effective as of June 28, 1999, each outstanding share of the Company's
Common Stock was converted into 0.20 of a share of Common Stock.

     (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 June 30, 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 June 30, 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......................................       4,054,353
Acquisition of other business(es)........................................................       5,338,000
Working capital..........................................................................      (4,247,846)
Operating losses.........................................................................      41,170,362
                                                                                              -----------
      Total..............................................................................     $47,168,529(1)
                                                                                              -----------
                                                                                              -----------
</TABLE>
--------------------
     (1)  Excludes operating losses, capital expenditures and working capital
          changes of Tylink Corporation


                                      21

<PAGE>

     ("Tylink") prior to the Company's acquisition of Tylink in August 1996.

     In addition, the Company used aggregate proceeds of $850,154 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.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     None.

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

     On June 11, 1999 the Company held its annual meeting of stockholders. At
the annual meeting, the Company's stockholders approved the following matters by
the following votes:

         1.    Election of the following directors of the Company

<TABLE>
<CAPTION>
               Nominees                     For               Against           Abstentions      Broker Nonvotes
               --------             ----------------------------------------------------------------------------
               <S>                  <C>                    <C>                  <C>              <C>
               Gregorio Reyes              14,165,509           519,151                 0                   0
               Charles A. Haggerty         14,222,076           462,584                 0                   0
               William J. Schroeder        14,098,112           586,548                 0                   0
</TABLE>

         2.    Amendment to the Company's Certificate of Incorporation effecting
               a one for five reverse stock split.

<TABLE>
<CAPTION>
                                            For               Against           Abstenstions     Broker Nonvotes
                                    ----------------------------------------------------------------------------
                                    <S>                    <C>                  <C>              <C>
                                           13,341,801         1,316,158            26,701                   0
</TABLE>

         3.    Ratification of appointment of Ernst & Young LLP as the Company's
               independent auditors for the fiscal year ending December 31,
               1999.

<TABLE>
<CAPTION>
                                            For               Against           Abstenstions     Broker Nonvotes
                                    ----------------------------------------------------------------------------
                                    <S>                    <C>                  <C>              <C>
                                           14,522,333            78,092            84,235                   0
</TABLE>

ITEM 5.  OTHER INFORMATION

     None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)EXHIBITS

<TABLE>
     <C>          <S>
      3.1         Certificate of Amendment of Amended and Restated Certificate of
                  Incorporation.

      3.2         Amended and Restated Bylaws.

     10.15        Amendment to Loan and Security Agreement between the Company and
                  Silicon Valley Bank dated April 14, 1999.

     10.39        Settlement Agreement and Mutual Release with James D. McNally dated
                  April 13, 1999.

     10.40        Amended and Restated Management Agreement between the Company and
                  Richard Martin dated April 9, 1999.

     27.1         Financial Data Schedule.
</TABLE>


                                      22

<PAGE>

     (b)REPORTS ON FORM 8-K

     No Reports on Form 8-K were filed during the quarter ended June 30, 1999.



                                  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: August 16, 1999                     FINANCIAL AND ACCOUNTING OFFICER)




                                      23