ENTRADA NETWORKS INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended JANUARY 31, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File number: 000-26952

ENTRADA NETWORKS, INC.
(Exact name of Registrant as specified in charter)

Delaware 33-0676350
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)

12 Morgan
Irvine, California 92618
(Address of principal executive offices) (Zip Code)

(949) 588-2070
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, Par Value $0.001 Nasdaq
Title of each class Name of exchange on which registered

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K._____

The Registrant's revenues for its most recent fiscal year were $13,262,649.

The aggregate market value of voting stock based upon the closing sale price
held by non-affiliates of the Registrant on March 28, 2002 was $2,001,558.

Number of shares outstanding of the Registrant's only class of common stock as
of March 28, 2002 (the latest practicable date): 12,509,739.

DOCUMENTS INCORPORATED BY REFERENCE:
None.

TABLE OF CONTENTS

PART I
Item 1. Description of Business.......................................................... 1
Understanding Our Market..................................................... 2
Entrada's Strategic Plan..................................................... 2
Markets for Entrada's Products............................................... 3
Storage Area Networking Market............................................... 3
Sales and Marketing.......................................................... 3
Customers and Markets........................................................ 3
Customer Service and Support................................................. 4
Engineering, Research and Development........................................ 4
Manufacturing and Quality.................................................... 4
Working Capital Practices.................................................... 5
Forward-Looking Statements--Cautionary Statement............................. 5
Risk Factors................................................................. 6
Definitions.................................................................. 13
Item 2. Properties .................................................................... 15
Item 3. Legal Proceedings................................................................ 15
Item 4. Submission of Matters to a Vote of Security Holders.............................. 15

PART II
Item 5. Market for Company's Common Equity and Related Matters........................... 16
Item 6. Selected Financial Data.......................................................... 17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................. 18
Results of Operations: Comparison of the Years Ended January 31, 2002 and 2001 19
Results of Operations: Comparison of the Years Ended January 31, 2001 and 2000 20
Liquidity and Capital Resources.............................................. 22
Effects of Inflation and Currency Exchange Rates............................. 23
New Accounting Standards..................................................... 23
Critical Accounting Policies and Estimates................................... 23
Other Matters................................................................ 24
Item 7A. Quantitative and Qualitative Disclosures About Market Risk....................... 24
Item 8. Financial Statements and Supplementary Data...................................... 24
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 24

PART III
Item 10. Directors and Executive Officers of the Company.................................. 25
Item 11. Executive Compensation........................................................... 27
Compliance with Section 16(a) of the Exchange Act............................ 28
Item 12. Security Ownership of Certain Beneficial Owners and Management................... 29
Item 13. Certain Relationships and Related Transactions................................... 30

PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................. 30

SIGNATURES................................................................................ 33

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PART I

This Annual Report on Form 10-K may contain forward-looking statements that
involve risks and uncertainties. Such statements include, but are not limited
to, statements containing the words "believes, "anticipates," "expects,"
"estimates" and words of similar import. The Company's actual results could
differ materially from any forward-looking statements, which reflect
management's opinions only as of the date of this report, as a result of such
risks and uncertainties. The Company undertakes no obligation to revise or
publicly release the results of any revisions to these forward-looking
statements. Readers should carefully review the risk factors set forth below in
"Risk Factors" and in other documents the Company files from time to time with
the Securities and Exchange Commission, including its quarterly reports on Form
10-Q.

Item 1. Description of Business

Entrada Networks, Inc., and its three wholly owned subsidiaries are in the
business of developing and marketing products for the storage networking and
network connectivity industries. Our Torrey Pines Networks ("Torrey Pines")
subsidiary is in the design & development of storage area network ("SAN")
transport switching products. Our Rixon Networks ("Rixon") subsidiary designs,
manufactures, markets and sells a line of fast and gigabit Ethernet products
that are incorporated into the remote access and other server products of
Original Equipment Manufacturers ("OEM"). In addition, some of its products are
deployed by telecommunications network operators, applications service
providers, internet service providers, and the operators of corporate local area
and wide area networks for the purpose of providing access to and transport
within their networks. And, our Sync Research ("Sync") subsidiary designs,
manufactures and services frame relay products for some of the major financial
institutions in the U.S. and abroad.

The Company is the product of a reverse merger completed on August 31, 2000 with
a wholly owned subsidiary of Sorrento Networks Corporation. This subsidiary was
doing business as Entrada Networks. We had acquired all the outstanding capital
of Entrada Networks for 4.24 million of our common shares and issued an
additional 2.43 million shares for cash of $8.0 million. Entrada Networks'
obligation to its former parent of $25.5 million was contributed to our capital
as part of the merger. As a result of the merger, the former parent of Entrada
Networks held a majority interest in the combined entity, which was renamed
Entrada Networks, Inc. from Sync Research, Inc. Accordingly, the merger was
accounted for as a reverse merger, whereby Entrada Networks was deemed to have
purchased Sync. However Sync remains the legal entity and Registrant for
Security and Exchange Commission reporting purposes and the financial statements
of the combined entity now reflect the historical financial information of
Entrada Networks prior to August 31, 2000. Subsequent to the merger, the former
parent of Entrada Networks has disposed of 5,517,500 of its shares of our common
stock including those it distributed to its shareholders and currently holds
approximately 1,152,500 or 9.2% of our common shares outstanding.

Our principal business is the business formerly operated by Entrada Networks. In
September 2000, our Board of Directors concluded that the operations of our
frame relay business segment would not contribute to our profitability or toward
our goal of entering the storage area networking market space and adopted a
formal plan to discontinue this business segment operated by Sync. On September
6, 2001, the Company announced its restructuring plan creating three separate
wholly owned subsidiaries. The discontinued frame relay business was retained as
Sync Research, Inc. as one of the three subsidiaries. Sync Research, Inc.
continues to serve its current frame relay customers and provide manufacturing,
service and repair facilities for the other subsidiaries. On September 18, 2001
the Company's Board of Directors approved a plan to reclassify Sync Research as
an operating unit. In this capacity, Sync Research, Inc. became an integral part
of Entrada Networks.

Our financial statements reflect the retained financial position of the frame
relay business segment. Prior financial periods have been reclassified to
reflect the Sync retention. Unless otherwise specifically noted, this Annual
Report refers to the Entrada business that includes our Rixon Networks, Sync
Research, and Torrey Pines subsidiaries.

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Understanding Our Market

(A glossary can be found beginning on page 13 for technical terms used
throughout this document.)

Entrada's Strategic Plan

o Develop Storage over Light Transport Products. In calendar year 2002, Torrey
Pines plans to develop and introduce, possibly in conjunction with other
technology partners, a line of next generation storage transport products using
wave division multiplexing ("WDM") technology that will extend, passively or
intelligently as the problem may require, the distance of a SAN's fabric,
gigabit Ethernet, enterprise system connection ("ESCON") or fibre connectivity
("FICON") to a mainframe computer.

o Continue Providing Network Connectivity Products. Rixon continues providing
products including network interface, or "adapter," cards that allow computers,
servers, load balancers and other devices to connect to a local area network
("LAN"). These network interface cards support both the widely employed fast
Ethernet protocol and the emerging gigabit Ethernet protocol. Our products have
already achieved acceptance among server and other network products OEMs.

o Continue Providing Services to Business Critical Applications Needing
Packetized Frame Relay Devices. Sync develops, manufactures, markets, supports
and sells wide-area network ("WAN") access and management products and services
designed to economically and reliably support business critical applications
across carrier provided packetized transmission services, such as frame relay.

As data bandwidth requirements increase, telecommunications service providers,
traditionally carriers, have implemented frame relay data services in an effort
to develop new revenue sources and improve competitiveness. Frame relay, a
low-latency, frame-switched WAN protocol, has experienced rapid growth due to
its speed and economy, stability, its deployment flexibility, and its ability to
combine incompatible "protocols," such as International Business Machines
Corporation ("IBM") mainframe Systems Network Architecture ("SNA") and
client/server Transmission Control Protocol/Internet Protocol ("TCP/IP"), onto a
single telecommunications circuit. Frame relay represents a cost-effective and
stable technology that provides a smooth migration to asynchronous transfer mode
("ATM") and other broadband services generally used in the backbone of many of
these service providers.

Sync's strategy is to produce reliable and value-added network access devices
and management software applications that are engineered to support
mission-critical applications over frame relay and other digital services at a
favorable cost of ownership. Sync's FrameNode-TM- line of frame relay access
devices ("FRADs") and frame relay access routers converge business critical SNA,
IP/IPX and voice/fax branch applications across frame relay. Sync's circuit
management solutions consist of WAN probes and application software that improve
the availability and performance of frame relay networks by providing extensive
problem isolation and troubleshooting capabilities and proactive performance and
service-level management. Sync's TyLink-Registered Trademark- line of digital
transmission products including data service units and channel service units
("DSU/CSU") and Integrated Services Digital Network ("ISDN") termination
products, are the basic elements that provide low cost connectivity to a digital
WAN.

Today, many mainframe or similarly hosted data networks use expensive leased
lines to connect remote sites to central computing facilities or data centers.
Due to favorable carrier pricing and technical suitability, frame relay is a
less expensive, more efficient, direct substitute for such traditional leased
line connections and due to its maturity, is stable as compared to other
technology based alternatives, including the internet or other IP based
services.

Sync sells to resellers, distributors, OEM partners and a number of Regional
Bell Operating Companies ("RBOCs") and Inter-exchange Carriers ("IXCs"). Current
partners include, AT&T, MCI WorldCom ("MCI"), Electronic Data Systems, Geico and
Diebold. Sync believes that its relationships provide sufficient alternative
channels of fulfillment to serve the needs of middle and upper market customers.
Also, Sync utilizes a distribution and value-added reseller ("VAR") channel as a
primary distribution channels for its digital transmission products.

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Markets for Entrada's Products

Our products address the growing connectivity needs for networked high bandwidth
data communications. The networking industry has experienced dramatic growth
since the early 1990's as corporations discovered increasing value in connecting
desktop devices through local area networks. The emergence of the Internet as a
cost-efficient data transport medium accelerated this movement and moved the
revenue opportunity beyond the LAN to the MAN and WAN environments. Our products
address the demand for connectivity solutions in the traditional data networking
markets plus the emerging market for storage area networking. There can be no
assurance that any of the projections cited in the following discussion
regarding the growth of traditional data networking markets or of the storage
area networking market will prove accurate.

Storage Area Networking Market

The technology behind storage area networks is similar to that of LANs and WANs.
Storage area networks are essentially separate local area networks that consist
of servers, storage devices (such as disc drives) and the networking equipment
used to connect and route traffic among them. These devices include adapters,
hubs, switches and routers supporting the Fibre Channel standard. Storage area
networks create a shared storage resource that is readily available, highly
scalable and designed to be easily protected and managed.

While storage area networks are not new, we believe that trends already under
way will move them into the mainstream of distributed networking and that they
may likely become the standard way of accessing stored information. A report by
Dataquest, an IT market research and consulting firm, projects revenue of the
networking equipment used to build storage area networks to reach $5.4 billion
by 2003, representing a cumulative annual growth rate of 87%. In addition, the
Gartner Group, a market research & consulting firm, forecasts that 80% of the
world's storage will be connected to a SAN by 2004.

Sales and Marketing

Rixon's current sales and marketing activities are concentrated on increasing
market and account penetration for the existing fast and gigabit Ethernet
network connectivity product lines whose customers are primarily OEM server,
computer and peripheral vendors while Torrey Pines' is concentrating on gaining
customer acceptance of the Silverline'TM'-CWDM product by large OEMs. Sync's
sales and marketing strategy focuses on developing relationships with end-user
middle market enterprises through its existing customer base and promote Sync's
products and drive demand for its products and services. The primary roles of
Sync's sales efforts are (i) to assist end user customers in addressing complex
network problems; (ii) to differentiate the features and capabilities of Sync's
products from competitive offerings; and (iii) provide support to channel
partners.

Our sales and marketing organization for the three subsidiaries at January 31,
2002 consisted of eight (8) individuals, including managers, sales
representatives, and support personnel. The current channel mix is approximately
43% OEM, 7% indirect, and 50% other. We support our customers by providing
product training, regular mailing of promotional and technical material,
telephone and other technical support. Our marketing staff also engages in a
number of marketing communication activities including public relations,
advertising, trade shows, seminars and internet/electronic marketing.

Customers and Markets

Rixon's sales and marketing strategy is focused on communicating key benefits of
our server class fast & gigabit Ethernet adapter cards to our OEM customer base
and the end-user market that the OEMs service.

Torrey Pines' sales and marketing strategy is focused on communicating key
benefits of SAN transport to both our OEM customer base and the end-user market
that the OEMs service. In summary, we are sending the message that

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SAN transport will efficiently protect more data than IT Managers can with
isolated SAN islands, easily and efficiently deploy more corporate information,
anywhere in the company, leverage the company's investment in an existing IP
network infrastructure, and utilize existing bandwidth for "cost-free" backup.
If an existing IP network is idle during off-hours (e. g., midnight to 6 am),
bandwidth and infrastructure can be used for free. Our Silverline'TM' products
when developed will even help leverage underutilized IP network capacity and
lower total cost of ownership with a high performance to price ratio.

Sync follows a sales strategy relying primarily on leveraging resellers,
distributors, and a number of Service Providers as delivery channels for its
products, including several partners serving the international market. Sync
utilizes a distribution and value-added reseller ("VAR") channel as its primary
distribution channel for the digital transmission products. Sync has from time
to time entered into OEM relationships with selected internetworking companies
and will continue to develop such relationships as appropriate.

For fiscal 2002, two customers accounted for 19.6% and 11.3% of our net
revenues.

Customer Service and Support

Our customer service organization is structured to assist OEM and system
integrator accounts. Post-sales support for all of our customers include product
warranty against defects in material and workmanship. The length of product
warranties varies by product, from 12 months in some instances, to 60 months for
a broad range of products, and previously, lifetime warranties for certain
legacy products. Telephone technical support programs for hardware and software
generally cover the first 12 months from purchase. On-site support and shared
support agreements are designed to provide a high level of service to fulfill a
broad spectrum of customer needs.

Engineering, Research and Development

As of January 31, 2002, there were eight (8) employees working in our
engineering, research and development area. Our research and development
expenditures were $6.5 million for the fiscal year ended January 31, 2002.

Our efforts are targeted to achieve technological advances that will allow us to
introduce innovative products to market. Product introduction is driven by a
combination of rapidly evolving technology and standards, as well as changing
customer requirements. Our team works closely with our systems engineering
staff, performing continuous evaluations of customer needs, emerging trends and
technical challenges in order to identify new market opportunities. We believe
that our ability to introduce new products on a timely basis depends upon our
ability to maintain advanced technology research programs while simultaneously
focusing on their practical application to our customers' strategic
requirements.

Manufacturing and Quality

Our products are manufactured on an outsourced basis from various contract
manufacturers. Final assembly, test and quality assurance are performed by us at
our Irvine, California facility.

Our manufacturing strategy is to outsource all repetitive operations to
top-tier, third party manufacturers. These manufacturers provide us with access
to enhanced supply chain agreements, volume purchasing power, a lower cost labor
base, and improved quality and process control. We concurrently undertake
manufacturing engineering with development engineering to ensure that reliable,
high yield and low cost manufacturing processes that meet our customers'
manufacturing standards are designed into our products from inception. We
perform final integration and testing at our Irvine, California facility.

We actively manage our components supply chain. Network connectivity and frame
relay product assemblies consist of approximately 500 individual part types, and
all of these parts have been qualified to current, purchasing customers'
standards. For approximately 90% of these parts we have qualified second or
third sources in place.

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We believe that our strategy of outsourcing the majority of our manufacturing
activities to third party contract manufacturers enables us to react quickly to
market demand and avoid the significant capital investment that would be
required to establish and maintain full manufacturing facilities. We are
therefore able to focus our manufacturing resources on final assembly, burn-in
and final testing to ensure reliability and quality assurance for our products.
We have a quality assurance program in place and continually evaluate this
process to ensure quality practices throughout the organization and to monitor
the performance of our third party vendors.

As of January 31, 2002, there were eleven (11) employees working in our
manufacturing, repair, test, shipping, receiving, purchasing, inventory control.
Our expenditures were $1.9 million for the fiscal year ended January 31, 2002.

Working Capital Practices

We have historically maintained high levels of inventories to meet the output
requirements of our customers and to ensure an uninterrupted flow of inputs from
our suppliers. As of January 31, 2002, we had 204 days of inventory on hand.

We perform ongoing credit evaluations of each of our customers' financial
condition and we extend unsecured credit related to the sales of various
products. As of January 31, 2002, three customers accounted for 47.0%, 14.2% and
11.7% of net receivables. One customer accounted for 37% of net receivables at
January 31, 2001. Days sales outstanding ("DSO") was at 53 days at January 31,
2002.

Forward-Looking Statements--Cautionary Statement

Certain statements in this Annual Report on Form 10-K, in our future filings
with the Securities and Exchange Commission, in our press releases and in our
oral statements made with the approval of an authorized executive officer are
forward-looking statements, including, but not limited to, Part II, Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of this form 10-K. These forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of
the Securities Exchange Act of 1934, as amended, and the Private Securities
Litigation Reform Act of 1995, are not historical facts but rather reflect
current expectations concerning future results and events. Words such as
"believes," "expects," "intends," "plans," "anticipates," "likely," "will" and
similar expressions identify such forward-looking statements. These
forward-looking statements are subject to risks, uncertainties and other
factors, some of which are beyond the Company's control that could cause actual
results to differ materially from those forecast or anticipated in such
forward-looking statements. These factors include, but are not limited to, the
technical and commercial success of the Company's current and future products,
reliance on vendors and product lines, competition, performance of new products,
performance of affiliates and their future operating results, the Company's
ability to establish successful strategic alliances, quarterly and seasonal
fluctuations, dependence on senior management and possible volatility of stock
price. These factors are discussed generally in greater detail under the caption
"Risk Factors" in this form 10-K.

We wish to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected. These risks and uncertainties are described in the
following section. We specifically decline any obligation to publicly release
the result of any revisions that may be made to any forward-looking statements
to reflect anticipated or unanticipated events or circumstances occurring after
the date of such statements, or to update the reasons why actual results could
differ from those projected in the forward-looking statements.

5

Risk Factors

In connection with the safe harbor contained in the Private Securities Reform
Act of 1995 we are hereby identifying important factors that could cause actual
results to differ materially from those contained in any forward-looking
statements made by us or on our behalf. Any such statement is qualified by
reference to the following cautionary statements:

o Our industry is highly competitive, and we may not have the resources
required to compete successfully. The market for network connectivity
products and services and SAN transport equipment is extremely competitive
and we expect competition to intensify in the future. Our primary sources
of competition include 3COM, Adaptec, Emulex, Intel Corporation,
Interphase, SAN Valley, SAN Castle, CNT, Gadzoox Networks, Inc., Vixel,
ADVA, ONI Systems Corporation, and many other companies. We may also face
competition from a number of other companies that have announced plans for
new products to address the same problems that our products address. Many
of our current and potential competitors have significantly greater sales
and marketing, technical, manufacturing, financial and other resources as
well as greater name recognition and larger customer base than us. Our
competitors may have more extensive customer relationships than us,
including relationships with our potential customers. In particular,
established companies in the telecommunications equipment or computing
industries may seek to expand their product offerings by designing and
selling products using competitive technology that could render our
products obsolete or have a material adverse effect on our revenue.

We operate in a market segment where emerging companies enter the markets
in which we are competing and new products and technologies are introduced.
Increased competition may result in further price reductions, reduced gross
margins and loss of market share, any of which could materially and
adversely affect its business, operating results and financial condition.
There can be no assurance that we will be able to compete successfully
against current and future competitors, or that the competitive factors we
will face will not have a material adverse effect on our business,
operating results and financial condition.

o Our business will be seriously harmed if we are not able to develop and
commercialize new or enhanced products. Our growth depends on our ability
to successfully develop new or enhanced products. The development of new or
enhanced products is a complex and uncertain process that requires the
accurate anticipation of technological and market trends. Our next
generation of network management products as well as our wavelength
division multiplexing products are currently under development. We cannot
be sure whether these or other new products will be successfully developed
and introduced to the market on a timely basis or at all. We will need to
complete each of the following steps to successfully commercialize these
and any other new products: complete product development, qualify and
establish component suppliers, validate manufacturing methods, conduct
extensive quality assurance and reliability testing, complete any software
validation, and demonstrate systems interoperability.

Each of these steps presents serious risks of failure, rework or delay, any
one of which could adversely affect the rate at which we are able to
introduce and market our products. If we do not develop these products in a
timely manner, our competitive position and financial condition could be
adversely affected.

In addition, as we introduce new or enhanced products, we must also manage
the transition from older products to newer products. If we fail to do so,
we may disrupt customer ordering patterns or may not be able to ensure that
adequate supplies of new products can be delivered to meet anticipated
customer demand. Any failure to effectively manage this transition may
cause us to lose current and prospective customers.

o We have incurred net losses over the last four years and may experience
future losses. We have incurred losses from continuing operation during the
years ended January 31, 2002, 2001, 2000 and 1999 of $10.7 million, $17.7
million, $3.4 million and $3.7 million, respectively. We have financed
these losses through a combination of debt issuances, bank lines of credit
and security placements. We believe we have sufficient credit lines and
working capital to meet our planned level of operations in the future.
However, there can be no assurance that our working capital requirements
will not exceed our ability to generate sufficient cash to support our
requirements and the needed capital will have to be obtained from
additional external sources. We cannot give any assurances that sufficient
working capital, at terms acceptable to us, will be available when needed.

o Our future growth depends on our ability to attract new customers, and on
our customers' ability to sell additional services to their own customers.
Most of our potential customers evaluate our network connectivity and
storage area products for integrated deployment in larger systems. There
are a limited number of potential customers for our products. If we are not
selected by a potential customer for particular system projects, our
business may be seriously harmed. Similarly, our growth depends on our
customers' success in selling integrated solutions based on our products
and complementary products from others. Our success will depend on our
ability to effectively anticipate and adapt to customer requirements and
offer products and

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services that meet customer demands. Any failure of our current or
prospective customers to purchase products from us for any reason,
including a downturn in their business, would seriously harm our ability to
grow our business.

o The time that our customers and potential customers require for testing and
qualification before purchasing our networking products can be long and
variable, which may cause our results of operations to be unpredictable.
Before purchasing our products, potential customers must undertake a
lengthy evaluation, testing and product qualification process. In addition,
potential customers require time-consuming field trials of our products.
Our sales effort requires the effective demonstration of the benefits of
our products to, and significant training of, potential customers. In
addition, even after deciding to purchase our products, our customers may
take several years to deploy our products. The timing of deployment depends
on many factors, including the sophistication of a customer and the
complexity and size of a customer's networks. Our sales cycle, which is the
period from the time a sales lead is generated until the recognition of
revenue, can often be longer than one year. The length and variability of
our sales cycle is influenced by a variety of factors beyond our control,
including: our customers' build out and deployment schedules, our
customers' access to product purchase financing, our customers' needs for
functional demonstration and field trials, and the manufacturing lead time
for our products. Because our sales cycles are long and variable, our
results of operations may be unpredictable.

o Our products may have errors or defects that we find only after deployment,
which could seriously harm our business. Our products can only be fully
tested after deployment. Our customers may discover errors or defects in
our products, and our products may not operate as expected. If we are
unable to fix errors or other problems that may be identified, we could
experience: loss of or delay in revenues and loss of market share, loss of
customers, failure to attract new customers or achieve market acceptance,
diversion of engineering resources, increased service and warranty costs,
and legal actions by our customers. Any failure of our current or planned
products to operate as expected could delay or prevent their adoption and
seriously harm our business.

o If our products do not interoperate with our customers' systems,
installations will be delayed or cancelled or our products could be
returned. Many of our customers require that our products be designed to
interoperate with their existing networks, each of which may have different
specifications and utilize a variety of protocols. Our customers' networks
contain multiple generations of products that have been added over time as
these networks have grown and evolved. Our products must interoperate with
all of the products within these networks as well as future products in
order to meet our customers' requirements. If we are required to modify our
product design to be compatible with our customers' systems to achieve a
sale, it may result in a longer sales cycle, increased research and
development expense and reduced margins on our products. If our products do
not interoperate with those of our customers' networks, installations could
be delayed, orders for our products could be cancelled or our products
could be returned, any of which could seriously harm our business.

o If we fail to complete certain strategic opportunities, our business may be
harmed. Strategic opportunities such as the sale or spin-off of certain
business units are important to our overall business plan. We cannot be
certain that we will be able to complete transactions on terms that are
favorable to us. In addition, we cannot be certain that we will be
successful in negotiating and completing future sales or spin-offs. Our
business may be harmed if we fail to successfully complete such
transactions.

o If we fail to establish and successfully maintain strategic alliances, our
business may be harmed. Strategic alliances are an important part of our
effort to expand our revenue opportunities and technological capabilities.
We cannot be certain that we will be able to enter strategic alliances on
terms that are favorable to us. Our business may be harmed if we fail to
establish and maintain strategic alliances.

o Our business may be seriously harmed if we are unable to establish
successful relationships with distributors and systems integrators. We
believe that our future success is dependent upon our ability to establish
successful relationships with a variety of distributors and systems
integrators. As we expand domestically and internationally, we will
increasingly depend on distributors and systems integrators. If we are

7

unable to establish and expand these relationships, we may not be able to
increase market awareness or sales of our products, which may prevent us
from achieving and maintaining profitability.

o Our emerging business for storage area networking products may be seriously
harmed if the market for storage area networking products does not develop
as we expect. Our planned product offerings are focused on the needs of
providers that service storage area networks. The market for storage area
networking products is new, and we cannot be certain that a viable market
for our products will develop or be sustainable. If this market does not
develop, or develops more slowly than we expect, our business may be
seriously harmed. Furthermore, the storage area networking industry is
subject to rapid technological change and newer technology or products
developed by others could render our products non-competitive or obsolete.
In developing our products, we have made, and will continue to make,
assumptions about the networking standards that our customers and
competitors may adopt. If the standards adopted are different from those
that we have chosen to support, market acceptance of our products would be
significantly reduced and our business will be seriously harmed.

o We depend upon contract manufacturers and any disruption in these
relationships may cause us to fail to meet the demands of our customers and
damage our customer relationships. We use contract manufacturers to
manufacture and assemble our products in accordance with our
specifications. We do not have long-term contracts with any of them, and
none of them are obligated to perform services for us for any specific
period or at any specified price, except as may be provided in a particular
purchase order. We may not be able to effectively manage our relationships
with these manufacturers and they may not meet our future requirements for
timely delivery or provide us with the quality of products that we and our
customers require.

Each of our contract manufacturers also builds products for other
companies. We cannot be certain that they will always have sufficient
quantities of inventory available to fill our orders, or that they will
allocate their internal resources to fill these orders on a timely basis.
Qualifying a new contract manufacturer and commencing volume production is
expensive and time consuming and could result in a significant interruption
in the supply of our products. If we are required to change contract
manufacturers, we may suffer delays that could lead to the loss of revenue
and damage our customer relationships.

o We rely on a limited number of suppliers for some of our components, and
our business may be seriously harmed if our supply of any of these
components is disrupted. We and our contract manufacturers currently
purchase several key components of our products from a limited number of
suppliers. We purchase each of these components on a purchase order basis
and have no long-term contracts for these components. In addition, the
availability of many of these components to us is dependent in part by our
ability to provide suppliers with accurate forecasts of our future
requirements. In the event of a disruption in supply or if we receive an
unexpectedly high level of purchase orders, we may not be able to develop
an alternate source in a timely manner or at favorable prices. Any of these
events could hurt our ability to deliver our products to our customers and
negatively affect our operating margins. In addition, our reliance on our
suppliers exposes us to potential supplier production difficulties or
quality variations. Any such disruption in supply would seriously impact
our present and future sales.

o If we are unable to hire or retain highly skilled personnel, we may not be
able to operate our business successfully. Our future success depends upon
the continued services of our key management, sales and marketing, and
engineering personnel, many of whom have significant industry experience
and relationships. Many of our personnel, in particular, Dr. Kanwar J.S.
Chadha, our President and Chief Executive Officer and Dr. Davinder Sethi,
our Chief Financial Officer would be difficult to replace. We do not have
"key person" life insurance policies covering any of our personnel. The
loss of the services of any of our key personnel could delay the
development and introduction of, and negatively impact our ability to sell,
our products. In addition, we will need to hire additional personnel for
most areas of our business, including our sales and marketing and
engineering operations. Competition for highly skilled personnel is intense
in our industry, and we may not be able to attract and retain qualified
personnel, which could seriously harm our business.

o We may be unable to protect our intellectual property, which could limit
our ability to compete. We rely on a combination of patent, copyright,
trademark and trade secret laws and restrictions on disclosure to protect

8

our intellectual property rights. We also enter into confidentiality or
license agreements with our employees, consultants and corporate partners,
and control access to, and distribution of, our software, documentation and
other proprietary information. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy or otherwise
obtain and use our products or technology. Monitoring unauthorized use of
our products is difficult, and we cannot be certain that the steps we have
taken will prevent unauthorized use of our technology, particularly in
foreign countries where the laws may not protect our proprietary rights as
fully as in the United States. If competitors gain access to our
technology, our ability to compete could be harmed.

o We could become subject to litigation regarding intellectual property
rights, which could seriously harm our business and require us to incur
significant costs. In recent years, there has been significant litigation
in the United States involving patents and other intellectual property
rights. We may be a party to litigation in the future to protect our
intellectual property or as a result of an allegation that we infringe
others' intellectual property. Any parties asserting that our products
infringe upon their proprietary rights would force us to defend ourselves
and possibly our customers or manufacturers against the alleged
infringement. These claims and any resulting lawsuits, if successful, could
subject us to significant liability for damages and invalidation of our
proprietary rights. Additionally, any claims and lawsuits, regardless of
their merits, would likely be time-consuming and expensive to resolve and
would divert management time and attention.

Any claims of infringement of the intellectual property of others could
also force us to do one or more of the following: stop selling,
incorporating or using our products that use the challenged intellectual
property; obtain from the owner of the infringed intellectual property
right a license to sell or use the relevant technology, which may not be
available to us on reasonable terms, or at all; or redesign those products
that use such technology. If we are forced to take any of the foregoing
actions, our business may be seriously harmed.

o If necessary licenses of third-party technology are not available to us or
are very expensive, our products could become obsolete. We may be required
to license technology from third parties to develop new products or product
enhancements. We cannot assure you that third-party licenses will be
available to us on commercially reasonable terms, if at all. If we are
required to obtain any third-party licenses to develop new products and
product enhancements, we could be required to obtain substitute technology,
which could result in lower performance or greater cost, either of which
could seriously harm the competitiveness of our products.

o The markets that our products address are governed by regulations and
evolving industry standards. The market that we sell and deploy our
products into is characterized as being highly regulated and industry
standards intensive, with many standards evolving as new technologies are
deployed. In the United States, our products must comply with various
regulations defined by the Federal Communications Commission and standards
established by Underwriters Laboratories. In addition, there are industry
standards established by various organizations such as Fibre Channel
Industry Association, American National Standards Institute, and Internet
Engineering Task Force. We design our products to comply with those
industry standards so that each particular product can be accepted by its
intended customers and we are not aware of any standards based product
modifications currently required. To the extent non-compliance with such
standards has a detrimental effect on customer acceptance, we must address
such non-compliance in the design of our products. Standards for new
services and network management are still evolving. We are a member of
several standards committees, which enables us to participate in the
development of standards for emerging technologies. However, as the
standards evolve, we will be required to modify our products or develop and
support new versions of our products. The failure of our products to
comply or delays in compliance, with the various existing and evolving
industry standards could delay introduction and acceptance of our products,
which could materially and adversely affect our business, operating
results and financial condition.

In foreign countries, our products may be subject to a wide variety of
governmental review and certification requirements. If we fail to conform
our products to these regulatory requirements, we could lose revenue and
our business could be seriously harmed. Additionally, any failure of our
products to comply with relevant regulations could delay their introduction
and require costly and time-consuming engineering changes.

o We are subject to various risks associated with international sales and
operations. We expect that we will eventually have international sales.
These sales will be subject to a number of risks, including: changes in

9

foreign government regulations and telecommunications standards, import and
export license requirements, tariffs, taxes and other trade barriers,
fluctuations in currency exchange rates, difficulty in collecting accounts
receivable, the burden of complying with a wide variety of foreign laws,
treaties and technical standards, difficulty in staffing and managing
foreign operations, and political and economic instability.

All of our sales have been denominated in U.S. dollars. All of our expenses
are denominated in the U.S. dollar, however in the future a portion of our
sales could also be denominated in non-U.S. currencies. As a result,
currency fluctuations between the U.S. dollar and the currencies in which
we would do business could cause foreign currency translation gains or
losses that we would recognize in the period incurred. We cannot predict
the effect of exchange rate fluctuations on our future operating results
because of the number of currencies involved, the variability of currency
exposure and the potential volatility of currency exchange rates. We do not
currently engage in foreign exchange hedging transactions to manage our
foreign currency exposure.

o Our future revenues are unpredictable and our financial results may
fluctuate. Our revenue and operating results could fluctuate substantially
from quarter to quarter and from year to year. This could result from any
one or a combination of factors such as the cancellation or postponement of
orders, the timing and amount of significant orders from our largest
customers, our success in developing, introducing and shipping product
enhancements and new products, the mix of products we sell, new product
introductions by competitors, pricing actions taken by us or our
competitors, the timing of delivery and availability of components from
suppliers, changes in material costs and general economic conditions.

o Our backlog at any point may not be a good indicator of expected revenues.
Our backlog at the beginning of each quarter typically is not sufficient to
achieve expected revenue for the quarter. To achieve our revenue objective,
we are dependent upon obtaining orders during each quarter for shipment
during that quarter. Furthermore, our agreements with our customers
typically provide that they may change delivery schedules and cancel orders
within specified time frames, typically 30 days or more prior to the
scheduled shipment date, without significant penalty. Our customers have in
the past built, and may in the future, build significant inventory in order
to facilitate more rapid deployment of anticipated major projects or for
other reasons. Decisions by such customers to reduce their inventory levels
have led and could lead to reductions in purchases from us. These
reductions, in turn, have and could cause fluctuations in our operating
results and have had and could have an adverse effect on our business,
financial condition and results of operations in periods in which the
inventory is reduced.

Our backlog on January 31, 2002 was approximately $1.9 million, compared
with a backlog of $2.7 million at January 31, 2001. We include in our
backlog only orders confirmed with a purchase order for products to be
shipped within twelve months to customers with approved credit status.

o Seasonality. Our revenues are impacted by the buying patterns of our
customers, including but not limited to cultural and religious holidays in
Asia, Europe and the United States, and other factors. Our revenue have
historically been weaker in the first half of a fiscal year and stronger in
the second half.

o Our business may be adversely affected by competitive pressures, which we
must react to. The industry we compete in is characterized by declining
prices of existing products, therefore continual improvements of
manufacturing efficiencies and introduction of new products and
enhancements to existing products are required to maintain gross margins.
In response to customer demands or competitive pressures, or to pursue new
product or market opportunities, we may take certain pricing or marketing
actions, such as price reductions, volume discounts, or provisions of
services at below market rates. These actions could materially and
adversely affect our business, operating results and financial condition.

o If we do not effectively manage our growth, we may not be able to
successfully expand our business. Growth of our business will place a
significant strain on our management systems and resources. Our ability to
successfully offer our products and implement our business plan in a
rapidly evolving market requires an effective planning and management
process. We will need to continue to improve our financial, managerial and
manufacturing process and reporting systems, and will need to continue to
expand, train and manage our

10

workforce worldwide. Failure to effectively manage our growth and address
the above requirements, it could affect our ability to pursue business
opportunities and expand our business.

o A substantial number of our common shares are eligible for future sale. No
prediction can be made as to the effect, if any, that future sales of
common stock that we may make, or the availability of common stock for
future sales, will have on the market price of common stock prevailing from
time to time. Sales of a substantial number of shares of common stock in
the public market could adversely affect the market price for our common
stock and reported earnings per share.

o Availability of raw materials. Many of our products require components that
may not be readily available. These include microprocessors, custom
integrated circuits and other electronic components. To minimize the risks
of component or product shortages, we attempt to maintain multiple supply
sources. However, there can be no assurance that such sources will be
adequate to meet our needs.

o Patents, trademarks and licenses. We currently hold nine patents and have
three patents pending for our Silverline'TM' product design. Although we
attempt to protect our intellectual property rights through patents,
trademarks, and copyrights, by maintaining certain technology as trade
secrets and by other measures, we cannot assure you that any patent,
trademark, copyright or other intellectual property rights owned by us will
not be invalidated, circumvented or challenged; that such intellectual
property rights will provide competitive advantages to us; or that any of
our future patent applications, if any, will be issued with the scope of
the claims sought by us, if at all. We cannot assure you that others will
not develop technologies that are similar or superior to our technology, or
that our competitors will not duplicate our technology or "design around"
the patents that we own. In addition, effective patent, copyright and trade
secret protection may be unavailable or limited in certain foreign
countries in which we do business or intend to do business in the future.

We believe that the future success of our business will depend on our
ability to translate the technological expertise and innovation of our
personnel into new and enhanced products. We cannot assure you that the
steps taken by us will prevent misappropriation of our technology. In the
future, we may take legal action to enforce its patents and other
intellectual property rights, to protect its trade secrets, to determine
the validity and scope of the proprietary rights of others, or to defend
against claims of infringement or invalidity. Such litigation could result
in substantial costs and diversion of resources and could harm our business
and operating results.

As is common in our industry, we have from time to time received
notification from other companies claiming that certain of our products may
infringe intellectual property rights held by such companies. Any claim or
litigation, with or without merit, could be costly, time consuming and
could result in a diversion of management's attention, which could harm our
business. If we were found to be infringing the intellectual property
rights of any third party, we could be subject to liabilities for such
infringement, which could be material, and could be required to seek
licenses from other companies or to refrain from using, manufacturing or
selling certain products or using certain processes. Although holders of
patents and other intellectual property rights often offer licenses to
their patent or other intellectual property rights, no assurance can be
given that licenses would be offered, that the terms of any offered license
would be acceptable to us or that failure to obtain a license would not
cause its operating results to suffer.

11

o Environmental compliance. Our operations are subject to various federal,
state and local laws and regulations with respect to environmental matters.
We believe that we are in material compliance with all such federal, state
and local laws and regulations.

o Employees. As of January 31, 2002 we employed 35 full-time employees and
independent contractors, including eight (8) in engineering, eleven (11) in
manufacturing, test, repair and quality assurance, eight (8) in sales,
sales support and marketing, seven (7) in administration, and one (1)
executive. None of our employees are represented by a collective bargaining
agreement, and the Company believes that relations with its employees are
good.

o Fluctuations in revenue and operating results. The industries we operate in
are subject to fluctuation. Our operating results may fluctuate as a result
of a number of factors, including the timing of orders from, and shipments
to, customers; the timing of new product introductions and the market
acceptance of those products; increased competition; changes in
manufacturing costs; availability of parts; changes in the mix of product
sales; the rate of end-user adoption and carrier and private network
deployment of our solutions; factors associated with international
operations; and changes in world economic conditions.

12

Definitions

As used in this Annual Report on Form 10-K, the following terms have the
meanings indicated:

"CWDM" means Coarse Wave Division Multiplexing, which is a sophisticated
optoelectronics technology that uses multiple wavelengths of light very
efficiently to greatly increase the number of video, data or voice channels of
information that can be sent on a single optical fiber in a transmission system.
CWDM has a wider wavelength range than DWDM and permits the use of lower cost
lasers and components.

"DWDM" means Dense Wavelength Division Multiplexing, which is a sophisticated
optoelectronics technology that uses multiple wavelengths of light very
efficiently to greatly increase the number of video, data or voice channels of
information that can be sent on a single optical fiber in a transmission system.

"ESCON" means Enterprise System CONnection, a protocol for 200 Mbps signal
transmission speed over fiber optic cable.

"Ethernet" means a 10 Mbps speed network that runs over thick coaxial cable
(10BASE5), thin coaxial cable (10BASE2), twisted-pair (10BASE-T), and
fiber-optic cable. It is the most widely used LAN technology and the most
popular form of Ethernet is 10BASE-T. Ethernet is network specification that was
developed at Xerox Corp's Palo Alto Research Center, and made into a network
standard by Digital, Intel, and Xerox.

"Fast Ethernet" means a 100 Mbps speed network that runs over thick coax,
twisted-pair, and fiber-optic cable. Fast Ethernet is 10 times faster than
Ethernet.

"FDDI" means a Fiber Distributed Data Interface and is a fiber optic network
that supports transmission speeds up to 100 Mbps.

"FICON" means FIbre CONnectivity, a Fibre Channel based, packet switched,
channel architecture offering greater bandwidth per channel than the older
ESCON.

"IP" means Internet Protocol, the standard for communication over the Internet.

"IT" means Information Technology, the general field of managing the
transmission and storage of information.

"ISDN" means an Integrated Services Digital Network and is an all-digital
communications network that provides a wide range of services on a switched
basis. Voice, data and video can be simultaneously transmitted on one line from
a source.

"ISO" means International Standards Organization. Founded in 1946, ISO is an
international organization composed of national standards bodies from over 75
countries. ISO has defined a number of important computer standards, the most
significant of which is perhaps OSI (Open Systems Interconnection), a
standardized architecture for designing networks.

"ISP" means an Internet Service Provider.

"LAN" means a Local Area Network and is a high-speed communications system
designed to link computers for the purpose of sharing files, programs and
various devices such as printers and high-speed modems within a small geographic
area such as a workgroup, department or single floor of a multi-story building.
LANs may include dedicated computers or file servers that provide a centralized
source of shared files and programs.

"MAN" means a Metropolitan Area Network and is a high-speed communications
system designed to link computers within a geographic area the size of large
city.

"Multiplexing" means a process that combines a number of lower speed data
transmissions into one high-speed data transmission by splitting that total
available bandwidth into narrower bands (frequency division) or by allotting a
common channel to several different transmitting devices one at a time in
sequence (time division).

"OC-1, OC-3, OC-12, OC-48, OC-192" means 51.85 Mbps, 155 Mbps, 622 Mbps, 2.5
Gbps and 10 Gbps transmission speeds for signals over fiber optic cables.

"OEM" means Original Equipment Manufacturer.

13

"Packet" means the "envelope" in which the network software places a message
being sent from one station to another station in a network. One of the key
features of a packet is that it contains the destination address in addition to
the data.

"Protocol" means a standard developed by international standards bodies,
individual equipment vendors, and ad hoc groups of interested parties to define
how to implement a group of services in one or more layers of the OSI model. The
Open Systems Interconnect ("OSI") reference model was developed by the ISO to
define all the services a LAN should provide. Ethernet and Token Ring, for
example, are both protocols that define different ways to provide the services
called for in the Physical and Data Link Layers of the OSI model.

"Router" means a network translator that reads network-addressing information
within packets to provide greater selectivity in directing traffic over multiple
network segments. It is a more complex inter-networking device.

"SAN" means Storage Area Network, a secure information infrastructure that
interconnects servers and routers to facilitate universal access to data and
systems.

"SSP" means Storage Service Provider, a service provider that manages the
storage and maintenance of its customers' data.

"Switch" means a device that allows the network operator to vary and select
connections between network nodes at very high speeds.

"TCP/IP" means Transmission Control Protocol/Internet Protocol, which is a
suite of protocols used for communications between two or more devices.

"WAN" means a Wide Area Network and is a communications network that connects
geographically dispersed users. Typically, a WAN consists of two or more LANs.
The largest WAN in existence is the Internet.

14

Item 2. Properties.

We lease 69,000 square feet of office, manufacturing and distribution space as
detailed below.

Our facilities under lease include:

Location Square Footage Facility Type Expiration Date
- -------- -------------- ------------- ---------------

Annapolis Junction, Maryland 35,000 Office/Labs/Manufacturing October 31, 2004
Irvine, California 23,000 Office/Labs/Manufacturing August 14, 2004
Norton, Massachusetts 11,000 Office/Manufacturing July 31, 2002

We believe that our existing facilities are and will remain adequate for the
foreseeable future. We have consolidated all of our operations at our Irvine,
California facility. Our Norton, Massachusetts and Annapolis Junction, Maryland
facilities are unoccupied. We are actively marketing our Maryland facility. We
have been successful in concluding an early termination of our San Diego,
California facility lease effective March 31, 2002 for a total consideration of
$168,000.

Item 3. Legal Proceedings.

From time to time, we are involved in various other legal proceedings and claims
incidental to the conduct of our business. Although it is impossible to predict
the outcome of any outstanding legal proceedings, we believe that such legal
proceedings and claims, individually and in the aggregate, are not likely to
have a material effect on our financial position or results of operations or
cash flows.

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

Entrada Networks, Inc., held its annual meeting on September 27, 2001 to vote
upon the following matters:

1. To elect five directors of the Company who will hold office for
one-year terms ending at the Annual Meeting of Stockholders in 2002 or
until their successors have been duly elected and qualified.

2. To ratify the appointment of BDO Seidman, LLP as the firm of
independent auditors for the year ending January 31, 2002.

The following table summarizes the results of the voting at the meeting:

Votes For Votes Against Abstentions

1. Director nominees:
Kanwar J.S. Chadha 6,273,434 33,428 0

Leonard N. Hecht 6,084,809 222,053 0

Rohit Phansalkar 6,274,729 32,133 0

Davinder Sethi 6,287,739 19,123 0

Raymond Ngan 6,287,972 18,890 0

2. Auditor appointment 6,291,211 9,920 5,731

15

PART II

Item 5. Market for Company's Common Equity and Related Stockholder Matters.

Our common stock has traded on Nasdaq National Markets under the symbol ESAN
since the merger on August 31, 2000. On January 31, 2002 Nasdaq approved trading
on the Nasdaq SmallCap Market. Prior to August 31, 2000 we traded under the
ticker symbol SYNX.

The following table sets forth the high and low closing prices for our common
stock as reported in the Nasdaq National Market for the periods indicated, and
taking into account the 1-for-5 reverse split in June 1999.

Fiscal 2000 High Low
----------- ---- ---

Quarter from February 1, 1999 to April 30, 1999 $5.63 $2.34
Quarter from May 1, 1999 to July 31, 1999 $2.81 $1.88
Quarter from August 1, 1999 to October 31, 1999 $2.75 $1.94
Quarter from November 1, 1999 to January 31, 2000 $4.44 $2.38

Fiscal 2001
----------- ---- ---

Quarter from February 1, 2000 to April 30, 2000 $5.41 $1.75
Quarter from May 1, 2000 to July 31, 2000 $4.75 $2.53
Quarter from August 1, 2000 to October 31, 2000 $7.31 $2.75
Quarter from November 1, 2000 to January 31, 2001 $4.44 $1.56

Fiscal 2002
----------- ---- ---

Quarter from February 1, 2001 to April 30, 2001 $3.88 $0.75
Quarter from May 1, 2001 to July 31, 2001 $1.32 $0.20
Quarter from August 1, 2001 to October 31, 2001 $0.28 $0.09
Quarter from November 1, 2001 to January 31, 2002 $0.22 $0.09

On March 28, 2002, the closing sale price for our common stock was $0.16 per
share. There is no assurance that a market in our common stock will continue. We
have received notification from Nasdaq that we must meet the $1.00 bid price
criteria by August 13, 2002. We are working to insure we meet this criteria by
the date specified.

As of March 28, 2002 (the latest practicable date) there were 953 shareholders
of record, including brokerage firms and nominees, of our common stock, and more
than 12,100 beneficial shareholders.

We have never paid any cash dividends on our common stock. Our present credit
facility contains covenants which preclude the payment of dividends. The present
policy of the Board of Directors is to retain all available funds to finance the
planned level of operations. In light of the anticipated cash needs of our
business, it is not anticipated that any cash dividends will be paid to the
holders of our common stock in the foreseeable future.

16

Item 6. Selected Financial Data

The following table sets forth selected consolidated financial data with respect
to our five most recent fiscal years ended January 31. The selected consolidated
statement of operations data set forth below for each of our three most recent
fiscal years, and the selected consolidated balance sheet data set forth at
January 31, 2002 and 2001, are derived from our consolidated financial
statements which have been audited by BDO Seidman, LLP, independent certified
public accountants, as indicated in their report which is included elsewhere in
this annual report. The selected consolidated statement of operations data set
forth below for each of the two fiscal years ended January 31, 1999 and 1998,
and the consolidated balance sheet data set forth below at January 31, 2000,
1999, and 1998 are derived from our audited consolidated financial statements
not included in this annual report. The selected consolidated financial data
should be read in conjunction with our consolidated financial statements, and
the notes thereto including Note A which discusses our merger and discontinued
operations, included elsewhere in this annual report, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Item 7. The historical financial information for fiscal 2001 has been restated
to reflect the retention of Sync Research, Inc. as a subsidiary of Entrada
Networks effective July 2001. The historical figures for Net Income (loss) did
not change.

Fiscal Year Ended January 31,
-----------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----

Statement of Operations Data:

Net revenue $13,263 $25,657 $28,771 $29,007 $30,624
Net loss from continuing operations $(10,650) $(17,728) $(3,387) $(3,716) $(6,954)

Net loss per share from continuing operations:
Basic $(0.97) $(2.50) $(0.80) $(0.88) $(1.64)
Diluted $(0.97) $(2.50) $(0.80) $(0.88) $(1.64)

Balance Sheet Data:
Cash and cash equivalents $ 698 $ 9,953 $ 112 $ 198 $ 246
Restricted cash 300 300 -- -- --
Working capital 1,426 7,815 4,209 1,066 (1,555)
Total assets 9,439 22,012 16,544 16,750 16,364
Total debt (including short-term debt) 828 4,093 2,878 4,825 5,131
Stockholders' equity (deficit) 3,237 10,136 (14,706) (11,319) (7,604)

17

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Certain statements contained in this Annual Report on Form 10-K, including,
without limitation, statements containing the words "believes", "anticipates",
"estimates", "expects", and words of similar import constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Readers are referred to the "Risk Factors" section of this Annual
Report on Form 10-K contained herein, which identifies important risk factors
that could cause actual results to differ from those contained in the
forward-looking statements.

The results of operations reflect our activities and our wholly owned
subsidiaries; this consolidated group is referred to individually and
collectively as "We" and "Our".

Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the consolidated audited financial
statements and related notes thereto.

The Company is the product of a reverse merger completed on August 31, 2000 with
a wholly owned subsidiary of Sorrento Networks Corporation. This subsidiary was
doing business as Entrada Networks. We acquired all the outstanding capital of
Entrada Networks for 4.24 million of our common shares and issued an additional
2.43 million shares for cash of $8.0 million. Entrada Networks' obligation to
its former parent of $25.5 million was contributed to our capital as part of the
merger. As a result of the merger, the former parent of Entrada Networks held a
majority interest in the combined entity, which was Entrada Networks, Inc.
Accordingly, the merger was accounted for as a reverse merger, whereby Entrada
Networks was deemed to have purchased Sync. However, Sync remains the legal
entity and Registrant for Security and Exchange Commission reporting purposes
and the financial statements of the combined entity now reflect the historical
financial information of Entrada Networks prior to August 31, 2000. Subsequent
to the merger the former parent of Entrada Networks has disposed of 5,517,500 of
its shares of our common stock including those it distributed to its
shareholders and currently holds 1,152,500 shares, approximately 9.2% of our
common shares outstanding.

18

Our principal business is the business formerly operated by Entrada Networks,
and in September 2000, our Board of Directors concluded that the operations of
our frame relay business segment would not contribute to our profitability or
toward our goal of entering the storage area networking market space and adopted
a formal plan to discontinue this business segment operated by Sync. On
September 6, 2001, the Company announced its restructuring plan creating three
separate wholly owned subsidiaries. The discontinued frame relay business was
retained as Sync Research, Inc. as one of the three subsidiaries. Sync Research,
Inc. will continue to serve its current frame relay customers and provide
manufacturing, service and repair facilities for the other subsidiaries. On
September 18, 2001 the Company's Board of Directors approved a plan to
reclassify Sync Research as an operating unit. In this capacity, Sync Research,
Inc. became an integral part of the Entrada Networks. Our financial statements
reflect the operations and financial position of the frame relay business
segment as a discontinued operation for some of the periods reported. Unless
otherwise specifically noted, this Annual Report refers to the Entrada business
and not to the former Sync business. Certain statements contained in this Annual
Report on Form 10-K, including, without limitation, statements containing the
words "believes", "anticipates", "estimates", "expects", and words of similar
import constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Readers are referred to the "Other
Risk Factors" section of this Annual Report on Form 10-K, as well as the
"Financial Risk Management" and "Future Growth Subject to Risks" sections
contained herein, which identify important risk factors that could cause actual
results to differ from those contained in the forward-looking statements.

Results of Operations: Comparison of the Years Ended January 31, 2002 and
January 31, 2001

With the reclassification of Sync Research, Inc. as an operating unit during the
third quarter of fiscal 2002, the historical figures for twelve months ended
January 31, 2001 of $(155,000) for the `Loss from Discontinued Operations' were
reclassified to operating expenses in cost of sales, selling and marketing,
engineering, and general and administrative. The loss on the twelve month
historical figures consists of $2.8 million from inventory impairments included
in Cost of Sales and $4.8 million twelve months ended January 31, 2001 for
goodwill, vendor payables, severance costs, lease termination and various other
estimated costs for disposal of the business segment. As a result of the
decision to discontinue and retain Sync Research, Inc., there were no material
commitments or contingencies. The historical figures for Net Income (loss) did
not change.

Net revenue. Our consolidated net revenue from continuing operations was $13.3
million for fiscal 2002, compared with $25.7 million for fiscal 2001. The
decrease in net revenue for fiscal 2002 resulted primarily from decreased
revenue from OEMs of networking adapter products due to the significant market
downturn in calendar year 2001 and to a lesser degree to distributors of remote
access and print server products.

Gross profit. Cost of sales consists principally of the costs of components,
subcontract assembly from outside manufacturers, and in-house system
integration, quality control, final testing and configuration costs. Gross
profit increased to $5.5 million for the fiscal 2002 from $4.5 million for
fiscal 2001. Our gross margin increased to 41.5% for the fiscal year ended
January 31, 2002 from 17.7% for fiscal 2001. The increase in gross margins
resulted primarily from the Company returning to normal margins. The Company's
fiscal year 2001 margins were low due to inventory write down for obsolesce.

Selling and marketing. Selling and marketing expenses consist primarily of
employee compensation and related costs, commissions to sales representatives,
tradeshow expenses and travel expenses. Selling and marketing expenses decreased
to $3.4 million for fiscal 2002 from $5.2 million for fiscal 2001. The reduction
in selling and marketing costs reflects personnel reductions resulting from the
lower revenue and facility consolidations in fiscal 2002. As a percentage of
revenue, selling and marketing expenses increased to 25.9% for fiscal 2002, from
20.4% for fiscal 2001. The increase in selling and marketing costs as a
percentage of revenue is due to lower revenue for fiscal 2002 compared with the
prior year.

Engineering, research and development. Engineering, research and development
expenses consist primarily of compensation related costs for engineering
personnel, facilities costs, and materials used in the design, development and
support of our technologies. All research and development costs are expensed as
incurred. Engineering, research and development expenses decreased to $6.5
million, or 49.0% of net revenue, for fiscal 2002, compared with $6.9 million,
or 26.7% of net revenue, for fiscal 2001. The decrease in research and
development expenses was primarily due to cost savings achieved through the
consolidation of facilities towards the end of the fiscal year.

19

General and administrative. General and administrative expenses consist
primarily of employee compensation and related costs, legal and accounting fees,
public company costs, and allocable occupancy costs. General and administrative
expenses were $4.0 million, or 30.4% of net revenue, for fiscal 2002, compared
with $2.9 million, or 11.4% of net revenue, for fiscal 2001. The increase in
general and administrative expenses is primarily due to costs incurred in fiscal
2002 relating to the establishment of our headquarters facility in San Diego,
CA. These additional expenses were partially offset by cost savings from the
consolidation of our facilities. As a result of the merger and establishment of
our headquarters in San Diego, CA, we added a layer of senior management and
incurred additional costs associated with operating as a public company,
including the costs of proxies, mailing, annual reports and stockholders'
meetings. Reductions late in the fiscal year with the consolidation in Irvine,
CA of the San Diego, CA and Annapolis Junction, MD facilities will reduce our
costs further in fiscal 2003.

Other operating expenses. Other operating expenses for fiscal 2002 include a
$1.7 million reserve recorded against the staff and facility reductions. We
reduced our staff by 107 through the closure of our Annapolis Junction, MD and
San Diego, CA facilities and the reduction in our SAN marketing, sales, and
research and development. This is a decrease from the fiscal 2001 other
operating expense of $6.9 million which included expenses from the discontinued
operation of Sync Research, Inc.

Income taxes. There was no provision for income taxes for fiscal years 2002 and
2001. We have carry forwards of domestic federal net operating losses, which may
be available, in part, to reduce future taxable income in the United States.
However, the Internal Revenue Code limits the application of net operating loss
carry forwards in the event of ownership changes of greater than 50%. We had a
change of ownership in fiscal year 2001 that will limit the amount of any net
operating loss carry forward we may use in a particular year.

Discontinued operations. In September 2000, our Board of Directors had concluded
that the operations of our frame relay business segment would not contribute to
our profitability or toward our goal of entering the storage area networking
market space and adopted a formal plan to discontinue this business segment
operated by Sync. On September 6, 2001, the Company announced its restructuring
plan creating three separate wholly owned subsidiaries. The discontinued frame
relay business was retained as Sync Research, Inc. as one of the three
subsidiaries. Sync Research, Inc. will continue to serve its current frame relay
customers and provide manufacturing, service and repair facilities for the other
subsidiaries. On September 18, 2001 the Company's Board of Directors approved a
plan to reclassify Sync Research as an operating unit. In this capacity, Sync
Research, Inc. became an integral part of the Entrada Networks.

With the reclassification of Sync Research, Inc. as an operating unit during the
third quarter of fiscal year ended January 31, 2002, the historical figures for
twelve months ended January 31, 2001 of $(155,000) for the `Loss from
Discontinued Operations' were reclassified to operating expenses in cost of
sales, selling and marketing, engineering, and general and administrative. The
loss on the twelve month historical figures consists of $2.8 million from
inventory impairments included in Cost of Sales and $4.8 million twelve months
ended January 31, 2001 for goodwill, vendor payables, severance costs, lease
termination and various other estimated costs for disposal of the business
segment. As a result of the decision to discontinue and retain Sync Research,
Inc., there were no material commitments or contingencies. The historical
figures for Net loss did not change.

Results of Operations: Comparison of the Years Ended January 31, 2001 and
January 31, 2000

Net revenue. Our consolidated net revenue from continuing operations were $25.7
million for fiscal 2001, compared with $28.8 million for fiscal 2000. The
decrease in net revenue for fiscal 2001 resulted primarily from decreased
revenues from distributors of remote access and print server products, partially
offset by increased revenue to OEMs of networking adapter products. The shift in
revenue toward OEMs reflected our focus on expanding revenue to OEMs and the
roll out of our new generation products.

Gross profit. Cost of sales consists principally of the costs of components,
subcontract assembly from outside manufacturers, and in-house system
integration, quality control, final testing and configuration costs. Gross
profit decreased to $4.5 million for the fiscal 2001 from $11.3 million for
fiscal 2000. The gross profit would be 4.5 million for the fiscal 2001 excluding
a $2.8 million valuation adjustment consisting of $0.6 million for print
servers, $0.6 million for remote access servers and $1.6 million for other
legacy products. Our gross margin, excluding the valuation adjustment, decreased
to 28.6% for the fiscal year ended January 31, 2001 from 39.2% for fiscal 2000.
The

20

decline in gross margins resulted from increased revenue to OEM customers that
have lower margins than revenue to distributors as well as transitions from
legacy products in anticipation of the merger of Sync and Entrada Networks and
the retention of Sync Research, Inc.

Selling and marketing. Selling and marketing expenses consist primarily of
employee compensation and related costs, commissions to sales representatives,
tradeshow expenses and travel expenses. Selling and marketing expenses decreased
to $5.2 million for fiscal 2001 from $5.6 million for fiscal 2000. The reduction
in selling and marketing costs reflects personnel reductions resulting from the
closure in May 2000 of our Massachusetts facility as well as personnel
reductions in anticipation of the merger of Sync and Entrada Networks. As a
percentage of revenue, selling and marketing expenses increased to 20.4% for
fiscal 2001, from 19.6% for fiscal 2000. The increase in selling and marketing
costs as a percentage of revenue is due to lower revenue for fiscal 2001
compared with the prior year.

Engineering, research and development. Engineering, research and development
expenses consist primarily of compensation related costs for engineering
personnel, facilities costs, and materials used in the design, development and
support of our technologies. All research and development costs are expensed as
incurred. Engineering, research and development expenses increased to $6.9
million, or 26.7% of net revenue, for fiscal 2001, compared with $6.2 million,
or 21.6% of net revenue, for fiscal 2000. The increase in research and
development expenses was primarily due to increased new product development
costs, partially offset by cost savings achieved through the consolidation of
facilities. We expect research and development expenses to continue to increase
as we enter the SAN market space. In addition, due to changing market
conditions, we wrote off capitalized software development costs to research and
development expenses of $1.0 million and $1.8 million during fiscal years 2001
and 2000, respectively. Exclusive of the valuation allowance, engineering
research and development expenses were 22.8% and 15.4% of net revenue in fiscal
years 2001 and 2000, respectively.

General and administrative. General and administrative expenses consist
primarily of employee compensation and related costs, legal and accounting fees,
public company costs, and allocable occupancy costs. General and administrative
expenses were $2.9 million, or 11.4% of net revenue, for fiscal 2001, compared
with $2.2 million, or 7.6% of net revenue, for fiscal 2000. The increase in
general and administrative expenses is primarily due to costs incurred in fiscal
2001 relating to the establishment of our headquarters facility in San Diego.
These additional expenses were partially offset by cost savings from the
consolidation of our facilities as well as the elimination of 37,000 square feet
of unused space leased at our Annapolis Junction, Maryland facility. As a result
of the merger and establishment of our headquarters in San Diego, we have added
a layer of senior management and will incur additional costs associated with
operating as a public company, including the costs of proxies, mailing, annual
reports and stockholders' meetings. These costs are incremental to our general
and administrative costs and will continue indefinitely.

Other operating expenses. Other operating expenses for fiscal 2001 include a
$1.4 million valuation reserve recorded against distributor receivables and $0.5
million of costs associated with the closure of our Massachusetts facility in
May 2000 and also a $4.3 goodwill impairment recorded during the year. We
reduced our staff by 39 through the closure of our Massachusetts facility and
other personnel reductions associated with a shift in our business focus to OEM
revenue as well as in anticipation of our merger with Sync.

Income taxes. There was no provision for income taxes for fiscal years 2001 and
2000. We have carry forwards of domestic federal net operating losses, which may
be available, in part, to reduce future taxable income in the United States.
However, the Internal Revenue Code limits the application of net operating loss
carry forwards in the event of ownership changes of greater than 50%. We have
had a change of ownership that will limit the amount of any net operating loss
carry forward we may use in a particular year. In addition, we provided a
valuation allowance in full for our deferred tax assets as it is our opinion
that it is more likely than not that some portion or all of the assets will not
be realized.

Loss on disposal of discontinued operations of $10.4 million for fiscal 2001
represents estimated costs of disposing of the Company's frame relay business
based in Irvine, California. The estimated loss consists $1.1 for vendor
payables, $1.1 of severance costs, $0.7 million for lease termination and $0.5
for various other estimated costs for disposal of the business segment.

21

Liquidity and Capital Resources

The amounts included in our statement of cash flows for fiscal 2002 are not
comparable to our fiscal 2001 amounts due to the inclusion of the former Sync
Research, Inc. for less than a full year. However, the adjustment to reconcile
net loss to net cash used in operating activities and the changes in Assets and
Liabilities reflect the retention of Sync Research as an operating subsidiary.

We financed our operations before the merger through a combination of debt and
non-interest bearing advances from our former parent. At January 31, 2001, our
working capital was $7.8 million and cash and cash equivalents were $10.0
million. At January 31, 2002, our working capital was $1.4 million and cash and
cash equivalents were $1.0 million.

Cash flow used in operations was $4.2 million during the fiscal year ended
January 31, 2002 compared with cash flow used by operations of $8.7 million for
the fiscal year ended January 31, 2001. Cash flow used in operations in fiscal
2002 reflects $7.2 million of net loss from operations including adjustment for
non-cash expenses including depreciation, amortization, and reserves, plus a
$0.7 million decrease in accounts payable, a $1.6 million increase in gross
inventories, and a $2.6 million decrease in accrued expenses. During fiscal
2001, our cash flow used by operations reflected $21.1 million of net loss
from operations after adjustment for non-cash expenses including depreciation,
amortization, reserves and valuation allowances, plus a $2.2 million decrease
in accounts payable, partially offset by a $0.3 million decrease in gross
inventories, increase in accrued expenses of $1.2 million and a decrease
of other current Liabilities of $1.9 million.

Our investing activities consist primarily of purchases of property, plant and
equipment and software development costs. We purchased $2.0 million and $1.6
million in equipment during the fiscal years ended January 31, 2002 and 2001,
respectively. During fiscal 2001 we acquired $7.6 million of cash belonging to
Sync Research. We do not expect our investments in property and equipment will
increase.

Our financing activities during the fiscal year ended January 31, 2002 included
repayments on our bank loan of $2.9 million and the addition of a $250,000
senior convertible debenture with attached warrants. In connection with the
conversion feature of the note and the warrants, the note was discounted by
$229,000 and paid in capital increased by $229,000. Monthly interest on this
conversion feature will be approximately $9,000 per month for 2 years. In
addition, board of director's fees due and one additional accounts payable
account totaling $80,000 were paid in stock. During the fiscal year ended
January 31, 2001 provided cash flows of $12.5 million, primarily in connection
with the merger. As part of the Sync and Entrada Networks merger, we received
$8.0 million in cash in exchange for common stock. Additional sources of net
cash provided by financing activities were $1.3 million in net proceeds from
short-term borrowings from our credit facilities and $3.7 million of
non-interest bearing advances from our former parent, net of repayments.

Our Silicon Valley Bank credit facility has a maximum limit of $5.0 million,
subject to a limitation equal to 65% of our eligible receivables plus the lesser
of $1.0 million or 40% of the liquidation value of our eligible inventory.
Borrowings under the credit line bear interest at the bank's prime rate plus
1.75%. In connection with the line of credit, we issued Silicon Valley Bank
five-year warrants to purchase 75,757 shares of our common stock at $3.30 per
share. We have accrued $54,000 of deferred interest in connection with these
warrants. The deferred interest is being amortized as interest expense over the
twelve month term of the credit arrangement in fiscal year 2002. The credit
arrangement is subject to covenants regarding our tangible net worth, and is
collateralized by accounts receivable, inventory and equipment. The credit
facility expired on February 20, 2002, and on March 31, 2002, it was extended
until April 30, 2002. There is no guarantee that the bank will continue its
line of credit with us. We continue to negotiate with the bank.

We anticipate that our available cash resources will be sufficient to meet our
presently anticipated capital requirements through fiscal 2003. We are always
pursuing external equity financing arrangements that could enhance our liquidity
position in the coming years. Nonetheless, our future capital requirements may
vary materially from those now planned including the need for additional working
capital to accommodate infrastructure needs. There can be no assurances that our
working capital requirements will not exceed our ability to generate sufficient
cash internally to support our requirements and that external financing will be
available or that, if available, such financing can be obtained on terms
favorable to us and our shareholders.

22

Effects of Inflation and Currency Exchange Rates

We believe that the relatively moderate rate of inflation in the United States
over the past few years has not had a significant impact on our revenue or
operating results or on the prices of raw materials. There can be no assurance,
however, that inflation will not have a material adverse effect on our operating
results in the future.

All of our revenue and expenses are currently denominated in U.S. dollars and to
date our business has not been affected by currency fluctuations. In the future,
however, we could conduct business in several different countries and thus
fluctuations in currency exchange rates could cause our products to become
relatively more expensive in particular countries, leading to a reduction in
revenue in that country. In addition, inflation in such countries could increase
our expenses. In the future, we may engage in foreign currency denominated
revenue or pay material amounts of expenses in foreign currencies and, in such
event, may experience gains and losses due to currency fluctuations. Our
operating results could be adversely affected by such fluctuations.

New Accounting Standards

In June 2001, the Financial Accounting Standards Board finalized FASB Statements
No. 141, Business Combinations (SFAS 141), and No. 142, Goodwill and Other
Intangible Assets (SFAS 142). SFAS 141 requires the use of the purchase method
of accounting and prohibits the use of the pooling-of-interests method of
accounting for business combinations initiated after June 30, 2001. SFAS 141
also requires that the Company recognize acquired intangible assets apart from
goodwill if the acquired intangible assets meet certain criteria. SFAS 141
applies to all business combinations initiated after July 1, 2001 and for
purchase business combinations completed on or after July 1, 2001. It also
requires, upon adoption of SFAS 142, that the Company reclassify the carrying
amounts of intangible assets and goodwill based on the criteria in SFAS 141. The
Company does not believe the adoption of SFAS 141 will have a material effect,
if any, on our financial position of results of operations.

SFAS 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested for impairment in
accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal years beginning after December 15, 2001 to all goodwill and other
intangible assets recognized at that date, regardless of when those assets were
initially recognized. SFAS 142 requires the Company to complete a transitional
goodwill impairment test nine months from the date of adoption. The Company is
also required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142. The Company does not believe
the adoption of SFAS 142 will have a material effect, if any, on our financial
position of results of operations.

In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 requires the fair value of a liability for an asset
retirement obligation to be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying amount of the
long-lived asset. SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002. The Company believes the adoption of this Statement will have
no material impact on its financial statements.

In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFASB 144 requires that those long-lived assets
be measured at the lower of carrying amount or fair value less cost to sell,
whether reported in continuing operations or in discontinued operations.
Therefore, discontinued operations will no longer be measured at net realizable
value or include amounts for operating losses that have not yet occurred. SFASB
144 is effective for financial statements issued for fiscal years beginning
after December 15, 2001 and, generally, are to be applied prospectively. The
Company believes the adoption of this Statement will have no material impact on
its financial statements.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accourdance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosures of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates, including those
related to our valuation of inventory and our allowance for uncollectable
accounts receivable. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements:

o Inventory is evaluated on a continual basis and reserve adjustments are made
based on management's estimate of future sales value, if any, of specific
inventory items. Reserve adjustments are made for the difference between
the cost of the inventory and the estimated market value and charged to
operations in the period in which the facts that give rise to the
adjustments become known.

o Accounts receivable balances are evaluated on a continual basis and
allowances are provided for potentially uncollectable accounts based on
management's estimate of the collectability of customer accounts. If the
financial condition of a customer were to deteriorate, resulting in an
impairment of their ability to make payments, an additional allowance may
be required. Allowance adjustments are charged to operations in the period
in which the facts that give rise to the adjustments become known.

23

Other Matters

From time to time, we are involved in various other legal proceedings and claims
incidental to the conduct of our business. Although it is impossible to predict
the outcome of any outstanding legal proceedings, we believe that such legal
proceedings and claims, individually and in the aggregate, are not likely to
have a material effect on our financial position or results of operations or
cash flows.

On February 14, 2002 we received a letter from The NASDAQ advising us to bring
our stock prices to $1.00 per share by August 13, 2002.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to financial market risks, including changes in interest rates
and foreign currency rates. Our exposure to interest rate risk is the result of
our need for periodic additional financing for our large operating losses and
capital expenditures. The interest rate that we will be able to obtain on debt
financing will depend on market conditions at that time, and may differ from the
rates we have secured on our current debt. Additionally, the interest rates
charged by our present lenders adjust on the basis of the lenders' prime rate.

All of our revenues and expenses have been denominated in U.S. dollars and to
date our business has not been affected by currency fluctuations. In the future,
however, we could conduct business in several different countries and thus
fluctuations in currency exchange rates could cause our products to become
relatively more expensive in particular countries, leading to a reduction in
revenue in that country. In addition, inflation in such countries could increase
our expenses. In the future, we may engage in foreign currency denominated
revenue or pay material amounts of expenses in foreign currencies and, in such
event, may experience gains and losses due to currency fluctuations. Our
operating results could be adversely affected by such fluctuations. We attempt
to minimize our currency exposure risks through working capital management and
do not hedge our exposure to translation gains and losses related to foreign
currency exposures.

We do not hold or issue derivative, derivative commodity instruments or other
financial instruments for trading purposes. Investments held for other than
trading purposes do not impose a material market risk.

We believe that the relatively moderate rate of inflation in the United States
over the past few years and the relatively stable interest rates incurred on
short-term financing have not had a significant impact on our revenue, operating
results or prices of raw materials. There can be no assurance, however, that
inflation or an upward trend in short-term interest rates will not have a
material adverse effect on our operating results in the future should we require
debt financing in the future.

Item 8. Financial Statements and Supplementary Data.

The information required by Item 8 is set forth in Item 14 of this Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

None.

24

PART III

Item 10. Directors and Executive Officers of the Company

On March 28, 2002, our directors and executive officers were:

Name Age Position
---- --- --------

Kanwar J.S. Chadha 56 Chairman, President, Chief Executive Officer, Director
Davinder Sethi 55 Vice Chairman, Chief Financial Officer, Director (i)
Leonard Hecht 65 Director (ii)(iii)
Raymond Ngan 30 Director (ii)
Rohit Phansalkar 57 Director (ii)(iv)

(i) Member of Compensation Committee, (ii) Member of Audit and
Compensation Committees, (iii) Chairman of Audit Committee, (iv)
Chairman of Compensation Committee

Our By-Laws provide that the members of the Board of Directors be elected
annually by the Shareholders of Entrada for one-year terms. Each director who is
not an employee of Entrada or its subsidiaries receives $1,000 for each Board of
Directors or committee meeting attended. Directors who serve as the chairman of
a committee receive an additional $500 for each committee meeting attended. The
Board of Directors has two committees: Audit and Compensation. There are no
family relationships between any directors and officers, except as discussed
below.

Dr. Kanwar J.S. Chadha, Chairman, President, Chief Executive Officer and
Director, has an agreement dated December 1, 2000, that provides for the
immediate vesting of options, and for the Company's loan of funds to Dr. Chadha
for the purposes of exercising such options, in the event of a change in control
of Entrada. We also have an employment agreement with Dr. Chadha that runs
through April 14, 2004.

Dr. Kanwar J.S. Chadha, 56, has served as the President and Chief Executive
Officer of Entrada since April 2000. He was elected as a director on August 31,
2000 and elected Chairman on September 28, 2001. He joined AT&T Bell
Laboratories in February 1973 as a Member of Technical Staff and served as a
systems engineer and principal software designer for the AMPS trial system. As a
Supervisor at AT&T Bell Laboratories from August 1977 to August 1980, Dr. Chadha
was responsible for the development of various software systems. As a Department
Head at AT&T Bell Laboratories from August 1980 to January 1987, he managed the
development of cellular technologies, MERLIN phone system, Applications
Processor, Videotex system, and System 25 PBX. He was a co-founder of
WaterBazaar.com e-portal, that when developed will provide buyers and suppliers
of water purification products worldwide an electronic exchange through which to
conduct e-commerce. Dr. Chadha was also a founding member of ERPL, Inc., a firm
that specializes in the development of embedded software systems, enterprise and
manufacturing resource planning software systems, and that provides
business-to-business e-marketplace systems solutions and development. From 1988
to 1999, he ran his own private businesses in the graphic arts arena. Dr. Chadha
holds a B.E. (Hons) in Electrical Engineering from Thapar Institute of
Technology, Punjab, India, a M.A.Sc. in Control Systems from the University of
Toronto, Ontario, Canada, and a Ph.D. in Systems Engineering from Case Western
Reserve University, Cleveland, Ohio. Dr. Chadha is a first cousin of Dr.
Davinder Sethi, one of our directors.

Leonard N. Hecht, 65, has served as one of our directors since August 31, 2000
and as our Chairman from September 2000 until August 2001. Mr. Hecht has served
as Executive Vice President of Sorrento Networks, Inc. since August 2000 and as
one of its directors from June 1996 to January 2001. Since 1994, he has been
President of Chrysalis Capital Group, an investment banking company specializing
in mergers, acquisitions and financing that he founded. From 1987 to 1993, Mr.
Hecht was Managing Director of the Investment Banking Group and head of the
Technology Assessment Group of Houlihan Lokey Howard & Zukin, a financial
advisory firm. From 1984 to 1987, Mr. Hecht was the Vice Chairman of the Board
and Chief Executive Officer of Quantech Electronics Corp., a diversified
publicly held electronics company. Prior to joining Quantech, Mr. Hecht was a
founding principal of Xerox Development Corporation, a wholly-owned subsidiary
of the Xerox Corporation. Xerox Development

25

Corporation was active in strategic planning, mergers and acquisitions,
divestitures, licensing, joint ventures and venture investing for the Xerox
Corporation. Mr. Hecht has served on the board of many private and public
companies.

Dr. Raymond Ngan, 30, has been a director of Entrada since November 2000. Dr.
Ngan has been guiding technology and telecommunications companies for many
years, most recently as Principal at Hikari Capital International. He previously
served as Senior Vice President, Morgan Stanley Dean Witter, and as a Senior
Associate at Chase Capital Partners. Dr. Ngan holds a bachelors, masters and
Ph.D. from Oxford University, Oxford, UK, and an MBA from The Wharton School at
the University of Pennsylvania.

Rohit Phansalkar, 57, has served as one of our directors since August 31, 2000.
Mr. Phansalkar was the Chairman and CEO of Sorrento Networks Corporation from
July to September 2000. He was a partner of Anderson Weinroth & Co. LP from
February 1998 to June 2000. Prior to that, Mr. Phansalkar was the co-founder,
Vice Chairman and CEO of Newbridge Capital, a firm dedicated to making private
equity investments in India. From 1993 to 1996, Mr. Phansalkar was a Managing
Director of Oppenheimer & Co., where he was the head of the Energy Finance
Group. Mr. Phansalkar was the founding Chairman of The India Fund, a $510 mm
closed-end fund listed on the NYSE. Prior to joining Oppenheimer, Mr. Phansalkar
was a Managing Director of Bear Stearns & Co. He is a director of Zip Global
Networks, Xius Technologies and Vyvos, Inc. Mr. Phansalkar received a BS in
engineering from Michigan Technological University and a MBA from Harvard
Graduate School of Business.

Dr. Davinder Sethi, 55, has served as our Chief Financial Officer since November
1, 2001. He has been a director of Entrada since September 2000. He was elected
our Vice Chairman on November 19, 2001. Dr. Sethi is an independent advisor in
the fields of information technology and finance. He is the former Chairman and
Chief Executive Officer of iPing, Inc., and a former Director and Senior Advisor
to Barclays de Zoete Wedd. In addition, Dr. Sethi spent seven years at Bell
Laboratories in operations research and communications network planning and
seven years in corporate finance at AT&T. Dr. Sethi holds a Ph.D. and M.S. in
Operations Research, Economics and Statistics from the University of California,
Berkeley, and is a graduate of the Executive Management Program at Penn State.
Dr. Sethi also serves on the Board of Directors of Pamet Systems, Inc. and
WorldWater Corporation. Dr. Sethi is a first cousin of Dr. Chadha, our Chairman.

26

Item 11. Executive Compensation

The following tables set forth the annual compensation for both individuals who
served as our Chairman and Chief Executive Officer ("CEO") for the fiscal year
ended January 31, 2002, for our Vice Chairman and Chief Financial Officer
("CFO") and two former most highly compensated executive officers, other than
the CEO, who were serving as executive officers at the end of our fiscal year
and whose salary and bonus exceeded $100,000.

Summary Compensation Table

Annual Compensation Long-Term Compensation
--------------------------------- -----------------------------------
Other Restricted Securities Long-Term All
Annual Stock Underlying Incentive Other
Salary (A) Bonus Compensation Award(s) Options Plan Compensation
Name and Principal Position Year ($) ($) ($) ($) (#) Payouts ($)
- --------------------------- ---- ---------- ----- ------------ ---------- ---------- --------- ------------

Kanwar J.S. Chadha, 2002 211,110 - - 160,000 -
Chairman, CEO, 2001 141,038 92,625 - - 500,000 - -
President, Director

Davinder Sethi,
Vice Chairman, CFO, 2002 35,805 - - - 500,000 - -
Director 2001 - - - - 100,000 - -

(A) Dr. Sethi was employed by us for only a portion of fiscal 2002. The annual
salary of Dr. Sethi is $150,000.

Long-Term Incentive Plans

We have no long-term incentive plans other than the 1991, 1996 and 2000 Stock
Option Plans and the 1995 Directors' Stock Option Plan.

Option Grants in Last Fiscal Year

Individual Grants
------------------------------------------------------------
Number of Percent of Market Potential Realizable Value at
Secyrities Total Options Exercise Price on Assumed Annual Rates of Stock Price
Underlying Granted in or Base Date Appreciation for Option Term (A)
Options Employees in Price Granted Expiration ------------------------------------
Name Granted (#) Fiscal Year ($/Share) ($/Share) Date 0% ($) 5% ($) 10% ($)
------------ ----------- -------------------------------------------------------------- ---------- -----------

Kanwar J.S. Chadha 125,111 10.8% $ 1.18 $ 1.18 4/16/2011 - $ 92,844 $235,286
34,889 3.0 $ 1.18 $ 1.18 4/16/2011 25,891 65,612
Davinder Sethi 50,000 4.3 $ 0.11 $ 0.11 9/28/2011 $ 3,459 $ 8,766
50,000 4.3 0.15 0.15 10/31/2011 4,717 11,953
400,000 34.4 0.15 0.15 10/31/2011 37,734 95,625

(A) In accordance with Securities and Exchange Commission rules, these
columns show gains that might exist for the respective options,
assuming that the market price of our common stock appreciates from the
date of the grant over the term of the option at rates of 5% and 10%,
respectively.

27

Aggregated Option Exercises in Fiscal Year 2002 and January 31, 2002 Option Values

Number of
Shares Securities Underlying Value of Unexercised
Acquired Unexercised Options In-the-Money Options
On Value at Fiscal Year-End (#) at Fiscal Year-End ($) (A)
Exercise Realized -------------------------- -----------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------

Kanwar J.S. Chadha - - 256,411 432,543 - -

Davinder Sethi - - 200,000 400,000 $500 -

(A) Options are "in-the-money" if, on January 31, 2002, the market price of
the Common Stock ($0.12) exceeded the exercise price of such options.
The value of such options is calculated by determining the difference
between the aggregate market price of the Common Stock covered by such
options on January 31, 2002, and the aggregate exercise price of such
options.

Compliance with Section 16(a) of the Exchange Act

The Securities Exchange Act of 1934 requires our directors and executive
officers and persons who own more than ten percent of a registered class of our
equity securities to file reports of beneficial ownership and changes in
beneficial ownership with the Securities and Exchange Commission. To our
knowledge, all filing requirements by our officers and directors were complied
with during the year ended January 31, 2002.

28

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information as of March 28, 2002,
regarding the ownership of the Common Stock by (i) each Director of the Company;
(ii) each of the executive officers named in the Summary Compensation Table,
above; (iii) each person known by us to beneficially own 5% or more of Common
Stock; and (iv) all Directors and executive officers of Entrada as a group.
Except as indicated, all persons named as beneficial owners of Common Stock have
sole voting and investment power with respect to the shares indicated as
beneficially owned by them.

Common Stock
----------------------------------------
Number of Percentage of
Name of Beneficial Owner (A) Shares Outstanding (H)
- ---------------------------- ------ ---------------

Kanwar J.S. Chadha 1,044,615 (B) 7.9%

Leonard N. Hecht 239,746 (C) 1.9%

Rohit Phansalkar 348,359 (D) 2.8%

Davinder Sethi 1,112,823 (E) 8.5%

Raymond Ngan 311,538 (F) 2.5%

All Directors and Executive Officers as a group 3,057,081 23.1%

HandsOn Ventures, LLC 3,846154 (G) 25.0%

Sorrento Networks Corporation 1,152,500 9.2%

Springboard-Harper Technology Fund (Cayman) Ltd 741,249 5.9%

- ----------
(A) All information with respect to beneficial ownership of the shares is
based upon filings made by the respective beneficial owners with the
Securities and Exchange Commission or information provided by such
beneficial owners to us. Except as noted the addresses for each
beneficial owner is 12 Morgan, Irvine, California 92618.

(B) Includes exercisable options held by Dr. Chadha to acquire 660,000
shares of common stock. On February 5, 2002 the board of directors
approved payment of $50,000 of Dr. Chadha's salary for fiscal year 2003
in stock at the price of the stock on January 29, 2002 as reported by
Nasdaq at the close of business. On January 29, 2002, the price was
$0.13 per common share with the $50,000 payable by issuing 384,615
shares to him.

(C) Includes exercisable options held by Mr. Hecht to acquire 150,000
shares of common stock, and 89,746 shares indirectly owned by him. On
January 31, 2002 Mr. Hecht received 89,746 shares of common stock for
his unpaid past board fees in the amount of $11,667 at the market price
of January 29, 2002 which was at $0.13 per share. In addition, Mr.
Hecht holds options to purchase 90,000 shares of our common stock
currently owned by Sorrento Networks Corporation, which are not
considered to be beneficially owned by Mr. Hecht.

(D) Includes exercisable options held by Mr. Phansalkar to acquire 150,000
shares of common stock, and 198,359 shares owned directly or indirectly
by him. In addition, Mr. Phansalkar holds options to purchase 50,000
shares of our common stock currently owned by Sorrento Networks
Corporation, which are not considered to be beneficially owned by Mr.
Phansalkar. On January 31, 2002 Mr. Phansalkar received 194,869 shares
of common stock for his unpaid past board fees in the amount of $25,333
at the market price of January 29, 2002 which was at $0.13 per share.
Mr. Phansalkar also owns approximately 3,500 shares of the common stock
of Sorrento Networks Corporation.

29

(E) Includes exercisable options held by Dr. Sethi to acquire 600,000
shares of common stock and 512,823 shares owned directly or indirectly
by him. On January 31, 2002 Dr. Sethi received 128,208 shares of common
stock for his unpaid past board fees in the amount of $16,667 at the
price of $0.13 per share. On February 5, 2002 the board of directors
approved payment of $50,000 of Dr. Sethi's salary for fiscal year 2002
into stock at the price of the stock on January 29, 2002 as reported by
Nasdaq at the close of business. On January 29, 2002 the price was
$0.13 per common share with the $50,000 resulting in 384,615 shares
being issued to him.

(F) Includes exercisable options held by Dr. Ngan to acquire 150,000 shares
of common stock and 161,538 shares owned directly or indirectly by him.
On February 5, 2002 Dr. Ngan received 161,538 shares of common stock
for his unpaid past board fees in the amount of $21,000 at the market
price of January 29,2002 which was at $0.13 per share.

(G) Includes shares beneficially owned by HandsOn Ventures, LLC including
48,405 shares, options that are currently exercisable or exercisable
within 60 days after January 31,2002 for 200,000 shares, Per HANDSON
VENTURES 13G filing with the SEC, and rights to acquire 3,846,154
shares under currently exercisable warrants and convertible
debentures. HandsOn Ventures, LLC and its affiliates are
contractually restricted from beneficially owning in excess of 19.99%
in the aggregate of Issuer's common stock outstanding on January 15,
2002, unless approved by our stockholders

(H) For each beneficial owner, the "Percentage of Outstanding" equals each
owner's actual holdings of shares plus shares represented by
unexercised options and warrants held, divided by the total of our
outstanding shares at March 28, 2002 plus the unexercised options and
warrants detailed above for the referenced holder only. In other words,
individual percentages of the listed holders will not add to the group
total because the calculations are made separately for each holder.

Item 13. Certain Relationships and Related Transactions.

We were subleasing a portion of our San Diego facility on a month-to-month basis
to a subsidiary of our former parent. During the 12 months ended January 31,
2002 we received rent payments of approximately $48,000. For a consideration for
an early termination of this lease effective March 31, 2002, we received on
behalf of the Landlord two months rent totaling $8,000 and a consideration of
$37,500. This partially offset costs of approximately $168,000 to terminate the
master San Diego, CA facility lease agreement.

Effective October 12, 2001, our subsidiary Torrey Pines Network, Inc. sold on a
non-exclusive basis rights relating to the Silverline'TM'-WDM product to Meret
Communications, Inc. for $200,000, which was paid in full at that time. We have
no further obligations to Meret regarding this technology. Meret is a subsidiary
of Sorrento Networks Corporation, the owner of approximately 9.2% of our
outstanding shares of common stock.

Dr. Chadha's brother is the managing partner of HandsOnVentures, LLC which
purchased the $250,000 senior convertible debenture and warrants referred to in
Item 7 above.

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) Exhibits and Consolidated Financial Statement Schedules

1. Financial Statements: (see index to financial statements at
page F-1)

Independent Certified Public Accountants' Report

Consolidated Balance Sheets at January 31, 2002 and 2001

Consolidated Statements of Operations for the Years Ended
January 31, 2002, 2001 and 2000

30

Consolidated Statement of Stockholders' Equity for the Years
Ended January 31, 2002, 2001 and 2000

Consolidated Statements of Cash Flows for the Years Ended
January 31, 2002, 2001 and 2000

Notes to Consolidated Financial Statements

2. Exhibits:
--------

2 Amended and Restated Agreement and Plan of Merger between Sync
Research, Inc, a Delaware Corporation, and Osicom Technologies, Inc., a
New Jersey Corporation - (A)

3.1 Amended and Restated Certificate of Incorporation dated June 25, 1999 -
(B)

3.2 Amended and Restated By-Laws of Registrant - (C)

3.3 Series A Preferred Stock Certificate of Designation dated May 11, 2000
- (D)

3.4 Certificate of Amendment to the Certificate of Incorporation dated
August 31, 2000 - filed herewith

4.1 Amended and Restated 1991 Stock Plan (amended as of June 12, 1998) and
form of Option Agreement - (E)

4.2 Amended 1995 Employee Stock Purchase Plan (amended as of September 27,
1996) and form of Subscription Agreement - (F)

4.3 Amended and Restated 1995 Directors' Option Plan (amended as of June
12, 1998) and form of Option Agreement - (E)

4.4 Amended and Restated 1996 Non-Executive Stock Option Plan (amended as
of August 21, 1998) - (G)

4.5 2000 Stock Incentive Plan dated October 12, 2000 - (H)

4.6 Securities Purchase Agreement dated January 15, 2002-(K)

9.1 Amended and Restated Shareholders' Agreement dated April 25, 1994 - (I)

10.1 401(k) Plan - (I)

10.2 Third Amendment to Lease for 10C Commerce Way, Norton, MA dated July
28, 1999 - (J)

10.3 Lease for 10070 Mesa Rim Road, San Diego, CA dated May 25, 2000 - filed
herewith

10.4 Amended lease for 9020 Junction Drive, Annapolis Junction, MD dated
April 22, 1999 - filed herewith

10.5 Standard Industrial Lease for 12 Morgan, Irvine, CA dated July 19, 1999
- (J)

10.6 Form of Amended and Restated Severance Agreement between the Company
and William Guerry, dated October 8, 1999 - (C)

10.7 Form of Noncompetition agreement between Entrada and Sorrento Networks
Corporation dated August 30, 2000 - filed herewith

10.8 Silicon Valley Bank Subordination Agreement dated January 22, 2002

10.9 Form of Employment Agreement Between Entrada and Kanwar J.S. Chadha
dated May 10, 2001

21 Subsidiaries of the Registrant - filed herewith

23 Consent of BDO Seidman LLP - filed herewith

31

The foregoing are incorporated by reference from the Registrant's filings as
indicated:

A Form S-4/A filed August 3, 2000.
B Form 10-Q for the fiscal quarter ended June 30, 1999, filed August 16,
1999.
C Form 10-K for the year ended December 31, 1999, filed March 24, 2000.
D Form 8-K filed May 19, 2000.
E Form 10-Q for the fiscal quarter ended June 30, 1998, filed August 14,
1998.
F Form 10-Q for the fiscal quarter ended September 30, 1996, filed
November 14, 1996.
G Form 10-Q for the fiscal quarter ended September 30, 1998, filed
November 16, 1998.
H Form 14C filed November 6, 2000.
I Form S-1, as amended, which became effective on November 9, 1995.
J Form 10-Q for the fiscal quarter ended September 30, 1999, filed
November 15, 1999.
K Form 8-K filed January 25, 2002

L Form S-8 filed December 14, 2000

NOTE: Certain previously filed exhibits are no longer being incorporated by
reference (and therefore not numerically listed) as the underlying
documents have either expired or are no longer material or relevant.

(b) Report on Form 8-K
------------------

April 6, 2001 Notice of revised first quarter revenue with
action to reduce costs.

June 1, 2001 Notice of revised first quarter revenue

July 16, 2001 Notice of revised second quarter revenue.

September 20, 2001 Retention of Sync Research, Inc. approval.

October 23, 2001 Consolidation of Entrada Network facilities.

November 26, 2001 Notice of corporate address change.

January 28, 2002 Authorized the issuance of $250,000.00 principal
amount of 10% Senior Convertible Debentures due
January 15, 2004.

February 1, 2002 Stock to be listed on Nasdaq SmallCap market.

32

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, we have duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

ENTRADA NETWORKS, INC.

By: /s/ Davinder Sethi Date: May 1, 2002
---------------------------------------
Davinder Sethi,
Chief Financial Officer
Principal Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on our behalf and in the
capacities and on the dates indicated.

By: /s/ Kanwar J.S. Chadha Date: May 1, 2002
-----------------------------------------------
Kanwar J.S. Chadha
Chairman, President, Director,
Chief Executive Officer

By: /s/ Leonard Hecht Date: May 1, 2002
-----------------------------------------------
Leonard Hecht
Director

By: /s/ Rohit Phansalkar Date: May 1, 2002
-----------------------------------------------
Rohit Phansalkar
Director

By: /s/ Davinder Sethi Date: May 1, 2002
-----------------------------------------------
Davinder Sethi
Vice Chairman, Director

By: /s/ Raymond Ngan Date: May 1, 2002
-----------------------------------------------
Raymond Ngan
Director

33

ENTRADA NETWORKS, INC.
AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
-----------

Independent Certified Public Accountant's Report F-2

Consolidated Balance Sheets as of January 31, 2002 and 2001 F-3

Consolidated Statements of Operations for the years ended
January 31, 2002, 2001 and 2000 F-4

Consolidated Statements of Shareholders' Equity for the years ended
January 31, 2002, 2001 and 2000 F-5

Consolidated Statements of Cash Flows for the years ended
January 31, 2002, 2001 and 2000 F-6

Notes to Consolidated Financial Statements F-7 to F-20

34

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Shareholders of
Entrada Networks, Inc.

We have audited the accompanying consolidated balance sheets Entrada Networks,
Inc. (a Delaware corporation) and subsidiaries (the "Company") as of January 31,
2002 and 2001 and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years ended January 31,
2002, 2001 and 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a reasonable
basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company and subsidiaries as of January 31, 2002 and 2001, and the results of
their operations and their cash flows for each of the years ended January 31,
2002, 2001 and 2000 in conformity with accounting principles generally accepted
in the United States of America.

/s/ BDO Seidman LLP
- ---------------------------

BDO Seidman LLP
Los Angeles, California
April 12, 2002

F-2

ENTRADA NETWORKS, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In Thousands)

- ---------------------------------------------------------------------------------------------------------------
January 31, 2002 January 31, 2001
- -------------------------------------------------------------------------------------------- ----------------

ASSETS

CURRENT ASSETS
Cash and equivalents $ 698 $ 9,953
Restricted cash (Note B) 300 300
Accounts receivable, net (Note R) 1,977 4,980
Inventory, net (Notes B, and R) 4,099 4,636
Prepaid expenses and other current assets 527 592
- ------------------------------------------------------------------------------------------ --------
TOTAL CURRENT ASSETS 7,601 20,461
- ------------------------------------------------------------------------------------------ --------

PROPERTY AND EQUIPMENT, NET (Note C) 1,807 2,452

- ---------------------------------------------------------------------------------------------------------
OTHER ASSETS 31 31
- ---------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 9,439 $ 22,944
========================================================================================== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Short-term debt (Note D) $ 686 $ 3,568
Current maturities of long term debt (Note F) 115 394
Accounts payable 2,713 3,435
Other current and accrued liabilities (Note E) 2,660 5,280

- ------------------------------------------------------------------------------------------ --------
TOTAL CURRENT LIABILITIES 6,174 12,677
- ------------------------------------------------------------------------------------------ --------

Long-term debt and capital lease obligations (Notes G and H) 27 131

- ------------------------------------------------------------------------------------------ --------
TOTAL LIABILITIES 6,201 12,808
- ------------------------------------------------------------------------------------------ --------

COMMITMENTS AND CONTINGENCIES (Notes H and I)

STOCKHOLDERS' EQUITY (Note J)
Common stock, $.001 par value; 50,000 shares authorized; 11,580 shares
issued and outstanding at January 31, 2002; 10,993 shares issued
and outstanding at January 31, 2001 12 11
Additional paid-in capital 52,072 51,722
Accumulated deficit (48,846) (41,597)

- ------------------------------------------------------------------------------------------ --------
TOTAL STOCKHOLDERS' EQUITY 3,238 10,136
- ------------------------------------------------------------------------------------------ --------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,439 $ 22,944
========================================================================================== ========

See accompanying notes to consolidated financial statements.

F-3

ENTRADA NETWORKS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share amounts)

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

Year Ended
January 31
------------------------------
2002 2001 2000
- ---------------------------------------------------------------------------------------------------

NET REVENUES $ 13,263 $25,657 $28,771

COST OF SALES 7,757 21,114 17,498

- ----------------------------------------------------------------------------------------------------
GROSS PROFIT 5,506 4,543 11,273
- ----------------------------------------------------------------------------------------------------

OPERATING EXPENSES
Selling and marketing 3,438 5,239 5,647
Engineering, research and development 6,499 6,860 6,223
General and administrative 4,035 2,913 2,177
Other operating expenses 1,741 6,875 -
Non-recurring one-time charges (Note F) 248 - -

- ----------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 15,961 21,887 14,047
- ----------------------------------------------------------------------------------------------------

LOSS FROM OPERATIONS (10,455) (17,344) (2,774)
- ----------------------------------------------------------------------------------------------------

OTHER CHARGES
Interest expense (195) (384) (613)

- ----------------------------------------------------------------------------------------------------
TOTAL OTHER CHARGES (195) (384) (613)
- ----------------------------------------------------------------------------------------------------

LOSS FROM CONTINUING OPERATIONS (10,650) (17,728) (3,387)

INCOME (LOSS) ON DISCONTINUED
OPERATIONS (Note A) 3,401 (3,401) -

- ----------------------------------------------------------------------------------------------------
NET LOSS $ (7,249) $(21,129) $(3,387)
====================================================================================================

LOSS PER COMMON SHARE (Note M):

BASIC AND DILUTED
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (IN THOUSANDS) 10,994 7,083 4,244

NET LOSS PER COMMON SHARE:
Continuing operations $ (0.97) $ (2.50) $ (0.80)
Discontinued operations 0.31 (0.48) 0.00
- ----------------------------------------------------------------------------------------------------
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.66) $ (2.98) $ (0.80)
====================================================================================================

See accompanying notes to consolidated financial statements.

F-4

ENTRADA NETWORKS, INC.
AND SUBSIDIARIES
For the Years Ended January 31, 2002, 2001, 2000, and 1999

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands)