<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-Q
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
    /X/      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

              FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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.)

                                    12 MORGAN
                                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 October 30, 1999, 3,477,871 shares of the Registrant's Common Stock were
issued and outstanding.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>


                               SYNC RESEARCH, INC.

                                      INDEX

<TABLE>
<CAPTION>

                                                                                                                  Page
                                                                                                                  ----
<S>          <C>                                                                                                   <C>

Part I.      Financial Information..........................................................................        3

  Item 1.    a)      Condensed consolidated balance sheets at September 30, 1999 (unaudited) and December
                     31, 1998...............................................................................        3
             b)      Condensed consolidated statements of operations (unaudited) for the three and nine
                     months ended September 30, 1999 and 1998...............................................        4
             c)      Condensed consolidated statements of cash flows (unaudited) for the nine months ended
                     September 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.....................................       21

Part II.     Other Information..............................................................................       22

  Item 1.    Legal Proceedings..............................................................................       22

  Item 2.    Changes in Securities and Use of Proceeds......................................................       22

  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>

                                                                                                September 30,      December 31,
                                                                                                      1999              1998
                                                                                              ----------------  ----------------
                                                                                                   (UNAUDITED)
<S>                                                                                                  <C>               <C>
Current assets:
   Cash and cash equivalents................................................................          $9,266           $14,135
   Accounts and other receivables, net......................................................           3,266             2,443
   Inventories..............................................................................           5,030             6,111
   Prepaid expenses and other current assets................................................             357               808
                                                                                             ----------------  ----------------

Total current assets........................................................................          17,919            23,497
Furniture, fixtures and equipment, net......................................................           1,770             3,247
Other assets................................................................................              91                47
                                                                                             ----------------  ----------------
Total assets................................................................................         $19,780           $26,791
                                                                                             ================  ================


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable.........................................................................         $ 2,219           $ 3,138
   Accrued  compensation and related costs..................................................             800               956
   Accrued severance and restructuring costs................................................             410             1,976
   Deferred revenue and customer deposits...................................................           2,125             2,063
   Other accrued liabilities................................................................             326               975
   Current maturities of capitalized lease obligations......................................              54                52
                                                                                             ----------------  ----------------
Total current liabilities...................................................................           5,934             9,160
Capitalized lease obligations, less current maturities......................................              18                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- 3,479 at September 30, 1999
      and 3,491 at December 31, 1998........................................................              18                17
   Additional paid-in capital...............................................................          71,929            71,958
   Deferred compensation....................................................................               -                (7)
   Accumulated deficit......................................................................         (58,119)          (54,397)
                                                                                             ----------------  ----------------
Total stockholders' equity..................................................................          13,828            17,571
                                                                                             ----------------  ----------------
Total liabilities and stockholders' equity..................................................         $19,780           $26,791
                                                                                             ================  ================
</TABLE>




                             See accompanying notes.



                                       3
<PAGE>


                               SYNC RESEARCH, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                            For the three months ended             For the nine months ended
                                                                  September 30,                          September 30,
                                                      --------------------------------------- -----------------   ----------------
                                                            1999                 1998               1999               1998
                                                      ------------------  ------------------- -----------------   ----------------
<S>                                                         <C>              <C>                 <C>                 <C>
Net revenues                                                $ 4,422          $    7,541          $   13,933          $   20,227
Cost of sales                                                 2,327               4,612               7,663              12,870
                                                      ------------------  ------------------- -----------------   ----------------
Gross profit                                                  2,095               2,929               6,270               7,357

Operating expenses:
       Research and development                               1,263               1,869               4,289               5,428
       Sales and marketing                                    1,051               3,018               4,203               8,962
       General and administrative                               571                 889               1,832               2,207
       Non-recurring charges                                      _                   _                   _                 267
                                                      ------------------  ------------------- -----------------   ----------------
       Total operating expenses                               2,885               5,776              10,324              16,864
                                                      ------------------  ------------------- -----------------   ----------------

Operating loss                                                 (790)             (2,847)             (4,054)             (9,507)

Interest income, net                                             95                 223                 335                 697
                                                      ------------------  ------------------- -----------------   ----------------

Loss before income taxes                                       (695)             (2,624)             (3,719)             (8,810)

Provision for income taxes                                        _                   _                   2                   2

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

Net loss                                                    $  (695)         $    (2,624)        $   (3,721)         $   (8,812)
                                                      ==================  =================== =================   ================

Basic and diluted net loss per share                        $ (0.20)         $     (0.75)        $    (1.07)         $    (2.55)
                                                      ==================  =================== =================   ================


Shares used in computing net loss per share                   3,468                3,479               3,483              3,474

                                                      ==================  =================== =================   ================
</TABLE>




                             See accompanying notes.



                                       4
<PAGE>


                               SYNC RESEARCH, INC.

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

<TABLE>
<CAPTION>

                                                                                                       Nine Months Ended
                                                                                                         September 30,
                                                                                                   --------------------------
                                                                                                   1999           1998
                                                                                              -------------  -------------
<S>                                                                                               <C>            <C>
OPERATING ACTIVITIES
   Net loss..................................................................................     $ (3,721)       $(8,812)
  Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation and amortization..........................................................        1,054          1,381
      Provision for losses on accounts receivable............................................          151             17
      Deferred compensation expense..........................................................            7             21
  Changes in operating assets and liabilities, net:
      Accounts and other receivables.........................................................         (974)         1,876
      Inventories............................................................................        1,081            987

      Prepaid expenses and other current assets..............................................          451           (247)
      Accounts payable and accrued liabilities...............................................       (1,568)           742
      Accrued severance and restructuring....................................................       (1,116)             -
      Accrued compensation and related costs.................................................         (156)            38
      Deferred revenue.......................................................................           62           (582)
        Other................................................................................          (44)             -
                                                                                              -------------  -------------
Net cash used in operating activities........................................................       (4,773)        (4,579)

INVESTING ACTIVITIES
   Purchases of furniture, fixtures and equipment, net.......................................          (28)        (1,222)

FINANCING ACTIVITIES
   Repurchase of common stock................................................................         (136)             -
   Payments on capitalized lease obligations.................................................          (40)           (43)
   Proceeds from common stock options exercised and employee stock                                     108            178
        purchase plan........................................................................
                                                                                              -------------  -------------
Net cash provided by (used in) financing activities..........................................          (68)           135
                                                                                              -------------  -------------

Net decrease in cash and cash equivalents....................................................       (4,869)        (5,666)
Cash and cash equivalents at beginning of period.............................................       14,135         21,734
                                                                                              -------------  -------------

Cash and cash equivalents at end of period...................................................       $9,266        $16,068
                                                                                              =============  =============


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Interest paid.............................................................................         $  6           $ 39
                                                                                              =============  =============

   Income taxes paid.........................................................................         $ 14           $ 16
                                                                                              =============  =============
</TABLE>


                             See accompanying notes.



                                       5
<PAGE>



                               SYNC RESEARCH, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

ITEM 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.        BASIS OF PRESENTATION

         The condensed consolidated balance sheet as of September 30, 1999, the
condensed consolidated statements of operations for the three and nine months
ended September 30, 1999 and 1998 and the condensed consolidated statements of
cash flows for the nine months ended September 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 September 30,
1999, the results of its operations for the three and nine months ended
September 30, 1999 and 1998 and its cash flows for the nine months ended
September 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 nine months ended September 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>

                                                                              September 30,      December 31,
                                                                                  1999                1998
                                                                            ---------------   ---------------
<S>                                                                                <C>               <C>
Equipment acquired under capital leases...................................         $   275           $   275
Furniture and fixtures....................................................             558               848
Computer equipment and software...........................................           7,385             7,462
Leasehold improvements....................................................             167             1,109
                                                                            ---------------   ---------------
                                                                                     8,385             9,694
Accumulated depreciation and amortization.................................          (6,615)           (6,447)
                                                                            ---------------   ---------------
                                                                                   $ 1,770           $ 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>

                                                                                 September 30,       December 31,
                                                                                       1999                1998
                                                                               ----------------    ----------------
<S>                                                                                  <C>                 <C>
Raw materials.............................................................           $   2,971           $   2,983
Work in process...........................................................                 264                 752
Finished goods............................................................               1,795               2,376
                                                                               ----------------    ----------------
                                                                                     $   5,030           $   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 expires in April 2000. There were no borrowings outstanding as of
September 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 Division 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. The Court has taken defendants' motion under
submission and no hearing date is set. 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



                                       7
<PAGE>


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 commitments as of
September 30, 1999 are as follows:



<TABLE>
<CAPTION>

                    YEARLY TOTALS

<S>                      <C>                        <C>
                         10/99 - 12/99              $   76,354
                         2000                          311,263
                         2001                          316,694
                         2002                          288,514
                         2003                          238,639
                         Thereafter                 $  153,075
</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, digital transmission devices and supporting software.
The Company follows a sales strategy relying primarily on a direct sales force
and leveraging resellers, distributors, and carriers as delivery channels for
its products. Current partners include Sprint, MCI, Intermedia Communications,
Electronic Data Systems, and Diebold.

         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 third quarter of 1999 were $4.4 million, compared
to net revenues of $7.5 million for the quarter ended September 30, 1998. Net
revenues for the nine months ended September 30, 1999 were $13.9 million,
compared to $20.2 million for the comparable period in 1998. The decrease in net
revenues in the three and nine months ended September 30, 1999 compared to the
three and nine months ended September 30, 1998 was due primarily to decreased
sales of frame relay access and circuit management products resulting from the
completion in 1998 of one large project through IBM and several other large
projects. This decrease was partially offset by an increase in service revenues.
Sales to IBM and one large end user customer decreased significantly to 1.2% and
11.1% of the Company's total revenue for the three months ended September 30,
1999, respectively, as compared to 13.4% and 15.2%, respectively, for the three
months ended September 30, 1998. For the nine months ended September 30, 1999
sales to IBM and one large end user customer were 1.5% and 8.8%, respectively,
as compared to 16.4% and 21.0% for the nine months ended September 30, 1998.

         Sales to three customers accounted for 17.9%, 15.7% and 11.1% of
revenues for the quarter ended September 30, 1999. Sales to two customers
aggregated 15.2% and 13.4% of revenues for the quarter ended September 30, 1998.
For the nine months ended September 30, 1999, one customer represented 11.0% and
for the comparable prior year period two customers represented 21.0% and 16.4%
of the Company's net sales.



                                       9
<PAGE>



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

<TABLE>
<CAPTION>

                                                                 1999          %         1998         %
                                                               ----------   ---------  ----------  ---------
<S>                                                               <C>            <C>      <C>           <C>
Frame relay access products...................................    $1,491         34%      $3,288        44%
Circuit management products...................................     1,031         23%       2,252        30%
Transmission products.........................................       272          6%         571         7%
Other (including service revenue).............................     1,628         37%       1,430        19%
                                                               ----------   ---------  ----------  ---------
                                                                  $4,422        100%      $7,541       100%
                                                               ==========   =========  ==========  =========
</TABLE>


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

<TABLE>
<CAPTION>

                                                                 1999          %         1998         %
                                                               ----------   ---------  ----------  ---------
<S>                                                               <C>            <C>     <C>            <C>
Frame relay access products...................................    $5,720         41%     $10,894        54%
Circuit management products...................................     2,386         17%       4,207        21%
Transmission products.........................................       869          6%       1,432         7%
Other (including service revenue).............................     4,958         36%       3,694        18%

                                                               ----------   ---------  ----------  ---------
                                                                 $13,933        100%     $20,227       100%
                                                               ==========   =========  ==========  =========
</TABLE>



         The percentage of net revenues represented by sales through channel
partners and other resellers was 41.5% and 48.4% for the three and nine months
ended September 30, 1999, respectively, as compared to 45.6% and 50.1%,
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 7.3% and 15.6% of the Company's total
sales during the three and nine months ended September 30, 1999, respectively,
as compared to 6.8% and 6.6% during the three and nine months ended September
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 2.3% and 6.8% of the Company's total revenues for the
three and nine months ended September 30, 1999, respectively. Domestic sales
represented 92.7% and 84.4% of the Company's total sales during the three and
nine months ended September 30, 1999, respectively, as compared to 93.5% and
93.4% for the three and nine month periods ended September 30, 1998,
respectively. The decrease in both the three and nine 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 $2.1 and $6.3 million for the three and nine
months ended September 30, 1999, respectively, from $2.9 and $7.4 million in the
corresponding prior year periods. The lower gross profit for the three and nine
month periods ended September 30, 1999 was primarily due to lower sales revenue.
Gross profit as a percentage of net revenues increased to 47.4% and 45.0% for
the three and nine months ended September 30, 1999, respectively, as compared to
38.8% and 36.4% for the three and nine months



                                       10
<PAGE>


ended September 30, 1998. The increase in margins during the three and nine
months ended September 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.




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, $455,000 of
externally acquired software has been capitalized. As a result of its cost
reduction efforts, the Company recorded a reduction to the net book value of its
capitalized software costs of $405,000 to reflect the decline in net realizable
value of the assets. Research and development expenses decreased to $1.3 million
and $4.3 million for the three and nine months ended September 30, 1999,
respectively, as compared to $1.9 and $5.4 million for the comparable periods in
1998. The decreased expenditures for both the three and nine month periods ended
September 30, 1999 were due primarily to reduced headcount and lower utilization
of outside consultants resulting from the Company's expense reduction programs.

         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 marketing activities. Selling and
marketing expenses decreased to $1.1 and $4.2 million for the three and nine
months ended September 30, 1999, respectively, as compared to $3.0 and $9.0
million for the comparable periods in 1998. The decrease in selling and
marketing expenses for both the three and nine month periods resulted primarily
from headcount reductions, changes in the mix of personnel utilized, reductions
in advertising and certain other marketing expenditures 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 to $571,000 for the quarter ended
September 30, 1999, as compared to $889,000 for the quarter ended September 30,
1998, and decreased to $1.8 million for the nine months ended September 30, 1999
from $2.2 million for the nine months ended September 30, 1998. The reductions
were generally due to the Company's cost reduction efforts.

         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, second and third quarters of 1999
were as follows (in thousands):

<TABLE>
<CAPTION>

DESCRIPTION                                       ACCRUAL                                              ACCRUAL
                                                AT 12/31/98       ACTIVITY         ADJUSTMENTS        AT 9/30/99
                                                --------------    -----------                        --------------
<S>                                             <C>              <C>              <C>               <C>
Severance and related expenses...............          $ 854         $(906)              $100             $  48
Idle and excess facility charges
   and write-off of assets...................          1,110          (675)              (100)              335
Other non-recurring charge...................             12            15                                   27
                                                ==============    ===========                        ==============
Total........................................         $1,976       $(1,566)              $  -             $ 410
                                                ==============    ===========                        ==============
</TABLE>



                                       11
<PAGE>


         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 $95,000 and $335,000 for the three and nine
months ended September 30, 1999, respectively, as compared to $223,000 and
$697,000 for the three and nine months ended September 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

         As of September 30, 1999, the Company's principal sources of liquidity
consisted of $9.3 million of cash and cash equivalents and a $3.0 million
secured bank line of credit which expires in April 2000. There were no
borrowings outstanding as of September 30, 1999.

         During the nine months ended September 30, 1999, cash utilized by
operating activities was $4.8 million, compared to $4.6 million in the
corresponding period in 1998. The increased cash utilization resulted primarily
from increases in accounts receivable of $974,000 and decreases in accounts
payable of $1,568,000 and accrued severance and restructuring of $1,565,000
partially offset by lower inventories of $1,081,000, and prepaid expenses of
$451,000. At September 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 $4.1 million for the nine months ended September
30, 1999. As of September 30, 1999, the Company had an accumulated deficit of
approximately $58.1 million. The Company has experienced, and may in the future
experience, significant fluctuations in revenues and operating results from
quarter to quarter and from year to year due to a combination of factors.
Factors that have in the past caused, or may in the future cause, the Company's
revenues and operating results to vary significantly from period to period
include: the timing of significant orders; the relatively long length of the
sales cycles for certain of the Company's products; the market conditions in the
networking industry; the timing of capital expenditures by the Company's target
market customers; competition and pricing in the industry; the Company's success
in developing, introducing and shipping new products; new product introductions
by the Company's competitors; 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



                                       12
<PAGE>


channel partners and other resellers. Accordingly, if channel partners and other
resellers 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.
During the past year, the Company has shifted its efforts from a focus utilizing
channel partners to one focused more on a direct sales model while utilizing
channel partners for strategic opportunities and fulfillment. Accordingly, the
Company's revenues in any period are highly dependent upon the sales efforts and
success of the Company's direct sales force and those channel partners upon
which it relies. 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. In addition, the Company has shifted its focus
from large corporate Fortune 100 enterprises to the middle market enterprise;
those companies with 50 to 500 remote locations. There can be no assurance that
the middle market enterprise prospect customers will select the Company's
products as compared to alternative product offerings provided by other vendors.
A significant portion of the Company's expenses are relatively fixed in advance,
based in large part on the Company's forecasts of future sales. If sales are
below expectations in any given period, the adverse effect of a shortfall in
sales on the Company's operating results may be magnified by the Company's
inability to adjust spending to compensate for such shortfall. The Company has
in the past and may in the future reduce prices or increase spending to respond
to competition or to pursue new product or market opportunities. Accordingly,
there can be no assurance that the Company will be able to attain or sustain
profitability on a quarterly or an annual basis. In addition, if the Company's
operating results fall below the expectations of public market analysts and
investors, the price of the Company's common stock would likely be materially
and adversely affected.

DEPENDENCE ON THE IBM CUSTOMER BASE

         The Company's frame relay access products are targeted at the large
installed base of IBM customers utilizing SNA networks. Thus, the Company faces
the risks associated with a relatively concentrated customer base, including the
possibility that larger IBM customers may migrate to frame relay at a
slower-than-expected rate, if at all, and the possibility that IBM customers may
purchase IBM-sponsored frame relay products other than Sync products or other
suppliers' products. IBM has sold, in the past, the Company's FrameNode(R)
product family under the name IBM Nways 2218. The agreement between IBM and the
Company expired in March 1999. Sales to IBM accounted for 1.5%, 14.1%, 16.5% and
4.9% ,respectively of the Company's net revenues for the nine months ended
September 30, 1999 and fiscal years 1998, 1997 and 1996, respectively. On August
31, 1999, IBM announced its intention to discontinue support for many of its
wide area network products and in lieu of such support entered into an
arrangement with Cisco Systems to transition its customers and prospects towards
solutions provided by Cisco. The Company has relied on IBM products, in certain
circumstances, to provided support for Sync products at the customer's data
center. Due to the IBM announcement, the Company will need to enhance its
product capability to include interoperability with products provided by vendors
other than IBM. There can be no assurance that IBM will continue to support
frame relay, that IBM will not develop or promote SNA-over-frame relay products
competitive with the Company's products, that the IBM/ Cisco relationship will
not adversely impact the Company's ability to sell its products, or that the
Company will be able to sufficiently provide for interoperability between its
products and products provided by vendors other that IBM. 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 nine months ended September 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 41% and 49%, respectively, of the Company's net
revenues. The market for SNA-over-frame relay products is maturing. The success
of the Company and its channel partners in generating



                                       13
<PAGE>


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 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 significant 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 48.4%, 62.5%, 67.0%
and 85.7% of net revenues of the Company for the nine months ended September 30,
1999 and fiscal years 1998, 1997 and 1996, respectively. Current partners
include Sprint, MCI, Intermedia Communications, Electronic Data Systems, and
Diebold. 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 1.5%, 14.1%, 16.5% and 4.9%
of the Company's net revenues for the first nine months of 1999 and for the
fiscal years 1998, 1997 and 1996, respectively.

         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 for
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



                                       14
<PAGE>


significant portion of the Company's net revenues, gross profit as a percentage
of net revenues may decline.

         There can be no assurance that the Company will retain its current
channel partners or other resellers or that it will be able to recruit
additional or replacement channel partners. The loss of one or more of the
Company's channel partners or other resellers could have a material adverse
effect on the Company's business, operating results and financial condition. In
addition, there can be no assurance that the Company's channel partners and
other resellers will give priority to the marketing of the Company's products as
compared to competitive products or alternative networking solutions or that the
Company's channel partners and other resellers will continue to offer the
Company's products. Any reduction or delay in sales of the Company's products by
its channel partners and other resellers could have a material adverse effect on
the Company's business, operating results and financial condition.

YEAR 2000 COMPLIANCE

         Many currently installed computer and telecommunications systems and
software products were not designed to consider the impact of moving into the
21st century. As a result, errors or system failures could result if these
systems and applications are not corrected or replaced prior to the year 2000.
The Company continues to evaluate the impact of the "Year 2000" issue upon its
products, support systems and overall business.

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

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

         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. All of the Company's key vendors have represented to the
Company the achievement of substantial compliance and the expectation that the
Year 2000 will not materially impact product delivery. As a result, the Company
has determined that contingency plans to provide for alternative sources are not
required at this time. 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



                                       15
<PAGE>


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

         Many of the Company's customers and prospective customers are expected
to devote a substantial portion of their information systems budgets to the Year
2000 problem, and, as a result, spending may be diverted from wide area
networking solutions. In addition, the Company's customers, which consists
primarily of mid size to large enterprises operating business critical
applications over the wide area networks that are supported by the Company's
products, may be less willing to purchase wide area networking products or
otherwise implement new network solutions during the second half of 1999 in
anticipation of the Year 2000. The Company relies on a large variety of business
enterprises such as customers, suppliers, creditors, financial organizations,
and domestic and international governmental entities, for the accurate exchange
of data. Any disruption in the computer systems of any of these third parties
could materially and adversely affect the Company. Due to the Company's focus on
the wide area networking market, which is vulnerable to technological issues
involving the Year 2000, substantially all of the Company's revenues may be at
risk.

         Despite the Company's efforts to address the Year 2000 impact on its
products, internal systems and business operations, the Year 2000 issue may
result in a material disruption of its business or have a material adverse
effect on the Company's business, financial condition or results of operations.

RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS

         The market for the Company's products is characterized by rapidly
changing technology, evolving industry standards and frequent new product
introductions. The Company's success will depend to a substantial degree upon
its ability to develop and introduce in a timely fashion enhancements to its
existing products and new products that meet changing customer requirements and
emerging industry standards. The development of new, technologically advanced
products is a complex and uncertain process requiring high levels of innovation,
as well as the accurate anticipation of technological and market trends. There
can be no assurance that the Company will be able to identify, develop,
manufacture, market or support new products successfully, that such new products
will gain market acceptance or that the Company will be able to respond
effectively to technological changes, emerging industry standards or product
announcements by competitors. In addition, the Company has on occasion
experienced delays in the introduction of product enhancements and new products.
There can be no assurance that in the future the Company will be able to
introduce product enhancements or new products on a timely basis. Further, from
time to time, the Company may announce new products, capabilities or
technologies that have the potential to replace or shorten the life cycle of the
Company's existing product offerings. There can be no assurance that
announcements of product enhancements or new product offerings will not cause
customers to defer purchasing existing Company products or cause resellers to
return products to the Company. Failure to introduce new products or product
enhancements effectively and on a timely basis, customer delays in purchasing
products in anticipation of new product introductions and any inability of the
Company to respond effectively to technological changes, emerging industry
standards or product announcements by competitors could have a material adverse
effect on the Company's business, operating results and financial condition.

 PRODUCT ERRORS

         Products as complex as those offered by the Company may contain
undetected software or hardware errors when first introduced or as new versions
are released. Such errors have occurred in the past, and there can be no
assurance that, despite testing by the Company and by current and potential
customers, errors will not be found in new or enhanced products after
commencement of commercial shipments. Moreover, there can be no assurance that
once detected, such errors can be corrected in a timely manner, if at all.
Software errors may take several months to correct, if they can be corrected at
all, and hardware errors may take even longer to rectify. The occurrence of such
software or hardware errors, as well as any delay in correcting them, could
result in the delay or loss of market acceptance of the Company's products,
additional warranty expense, diversion of engineering and other resources from
the Company's product development efforts or the loss of credibility with the
Company's



                                       16
<PAGE>


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 has entered into arrangements with contract
manufacturers to outsource substantial portions of its procurement, assembly and
system integration operations. There can be no assurance that these independent
contract manufacturers will be able to meet the Company's future requirements
for manufactured products or that such independent contract manufacturers will
not experience quality problems in manufacturing the Company's products. The
inability of the Company's contract manufacturers to provide the Company with
adequate supplies of high quality products could have a material adverse effect
upon the Company's business, operating results and financial condition. The loss
of any of the Company's contract manufacturers could cause a delay in the
Company's ability to fulfill orders while the Company identifies a replacement
manufacturer. Such an event could have a material adverse effect on the
Company's business, operating results and financial condition.

         The Company's manufacturing procedures may in certain instances create
a risk of excess or inadequate inventory if orders do not match forecasts. Any
manufacturing delays, excess manufacturing capacity or inventories or inability
to increase manufacturing capacity, if required, could have a material adverse
effect on the Company's business, operating results and financial condition.

 DEPENDENCE ON SUPPLIERS

         Certain key components used in the manufacture of the Company's
products are currently purchased only from single or limited sources. At
present, single-sourced components include programmable integrated circuits,
selected other integrated circuits and cables, custom-molded plastics and
custom-tooled sheet metal, and limited-sourced components include flash
memories, DRAMs, printed circuit boards and selected integrated circuits. The
Company generally relies upon contract manufacturers to buy component parts that
are incorporated into board assemblies. The Company buys directly final assembly
parts, such as plastics and metal covers, cables and other parts used in final
configurations. The Company generally does not have long-term agreements with
any of these single or limited sources of supply. Any loss in a supplier,
increase in required lead times, increase in price of component parts,
interruption in the supply of any of these components, or the inability of the
Company to procure these components from alternate sources at acceptable prices
and within a reasonable time, could have a material adverse effect upon the
Company's business, operating results and financial condition. If



                                       17
<PAGE>


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 15.6%, 6.9%, 19.1% and 12.7% of the Company's net revenues for the
nine months ended September 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 and sales to its reseller partner in South Korea. The
Company expects that international sales may represent an important percentage
of net revenues in future periods. Sales levels to customers in the Pacific Rim
countries, which represented approximately 4.7% of the Company's net revenues
for the first nine months of 1999 and 3.7% of the Company's net revenues in
1998, remain uncertain.

         Historically, the Company's international sales have been conducted
primarily through independent distributors. The Company intends to continue to
market its products in foreign countries in the future through its channel
partners. Failure of these resellers to market the Company's products
internationally or the loss of any of these resellers could have a material
adverse effect on the Company's business, operating results and financial
condition. In addition, the Company's ability to increase sales of its products
to international end users may be limited if the carrier services, such as frame
relay, or protocols supported by the Company's products are not widely adopted
internationally. A number of additional risks are inherent in international
transactions. The Company's international sales currently are U.S.
dollar-denominated. As a result, an increase in the value of the U.S. dollar
relative to foreign currencies, as has occurred recently in several Asian
markets, could make the Company's products less competitive in international
markets. International sales may also be limited or disrupted by the imposition
of governmental controls, export license requirements, restrictions on the
export of critical technology, currency exchange fluctuations, political
instability, trade restrictions and changes in tariffs. In addition, sales in
Europe and certain other parts of the world typically are adversely affected in
the third quarter of each year as many customers and end users reduce their
business activities during the summer months. These international factors could
have a material adverse effect on future sales of the Company's products to
international end users and, consequently, the Company's business, operating
results and financial condition.

 DEPENDENCE ON PROPRIETARY TECHNOLOGY

         The Company's future success depends, in part, upon its proprietary
technology. The Company does not hold any patents and currently relies on a
combination of contractual rights, trade secrets and copyright laws to establish
and protect its proprietary rights in its products. There can be no assurance
that the steps taken by the Company to protect its intellectual property will be
adequate to prevent misappropriation of its technology or that the Company's
competitors will not independently develop technologies that are substantially
equivalent or superior to the Company's technology. In the event that protective
measures are not successful, the Company's business, operating results and
financial condition could be materially and adversely affected. In addition, the
laws of some foreign countries do not protect the Company's proprietary rights
to the same extent as do the laws of the United States. The Company is also
subject to the risk of adverse claims and litigation alleging infringement of
intellectual property rights of others. There can be no assurance that third
parties will not assert infringement claims in the future with respect to the
Company's current or future products or that any such claims will not require
the Company to enter into license arrangements or result in litigation,
regardless of the merits of such claims. No assurance can be given that any
necessary licenses will be available or that, if available, such licenses can be
obtained on commercially reasonable terms. Should litigation with respect to any
such claims commence, such litigation could be extremely expensive and
time-consuming and could have a material adverse effect on the Company's
business, operating results and financial condition regardless of the outcome of
such litigation.

 TARIFF AND REGULATORY MATTERS

         Rates for public telecommunications services, including features and
capacity of such services, are



                                       18
<PAGE>


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 1999, the Company has undergone moderate personnel turnover in
research and development, sales, and other functional areas. During 1998 and
1999, the Company also experienced significant turnover in the composition of
its executive officers. Two of the current three executive officers, including
the President and Chief Executive Officer, have been officers of the Company for
less than a year. The loss of the services of any of the Company's key personnel
or the failure to attract or retain qualified personnel in the future could have
a material adverse effect on the Company's business, operating results or
financial condition.

 GENERAL ECONOMIC CONDITIONS

         Demand for the Company's products depends in large part on the overall
demand for communications and networking products, which has in the past and may
in the future fluctuate significantly based on numerous factors, including
capital spending levels and general economic conditions. There can be no
assurance that the Company will not experience a decline in demand for its
products due to general economic conditions. Any such decline could have a
material adverse effect on the Company's business, operating results and
financial condition.

 VOLATILITY OF STOCK PRICE

         Factors such as announcements of technological innovations or the
introduction of new products by the Company or its competitors, as well as
market conditions in the technology sector, may have a significant effect on the
market price of the Company's common stock. Further, the stock market has
experienced volatility which has particularly affected the market prices of
equity securities of many high technology companies and which often has been
unrelated to the operating performance of such companies. These market
fluctuations may have an adverse effect on the price of the Company's common
stock.

 NASDAQ STOCK LISTING

         The Company's common stock is listed and traded on the Nasdaq National
Market. On January 4, 1999, the Company received a letter from Nasdaq notifying
the Company that it has failed to maintain a closing bid price of greater than
$1.00 in accordance with the Nasdaq listing requirements. 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 the Company's stockholders at
the 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



                                       19
<PAGE>


assurance that the Company will meet the minimum closing bid price or any other
NASDAQ 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.



                                       20
<PAGE>


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 RISKS ASSOCIATED WITH FOREIGN EXCHANGE

         In the first nine months of 1999, approximately 15.6% 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 three months. At September 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                    $8.6       2 months       5%          $8.6
</TABLE>



                                       21
<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. 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 Division 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. The Court has taken defendants'
motion under submission and no hearing date is set. 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

    None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

    None.

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

    None

ITEM 5.  OTHER INFORMATION

    None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

    (a)EXHIBITS

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

        10.41  Third Amendment to Lease for 10c Commerce Way, Norton, MA dated
               July 28, 1999

        10.42  Standard Industrial Lease for 12 Morgan, Irvine, CA dated July
               19, 1999


        27.1   Financial Data Schedule.

       * Re-filed in order to include certain material excluded from previous
filing.

    (b)REPORTS ON FORM 8-K

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



                                       22
<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                               SYNC RESEARCH, INC.

                               By:              /s/ William K. Guerry
                                         ---------------------------------------
                                                   William K. Guerry
                                         PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                              AND CHIEF FINANCIAL OFFICER
                                        (DULY AUTHORIZED SIGNATORY AND PRINCIPAL
Date: November 15, 1999                    FINANCIAL AND ACCOUNTING OFFICER)



                                       23
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                                                                  1476-10Q-0999