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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended MARCH 31, 1996
[_] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from _________________ to _________________
COMMISSION FILE NO. 0-13836
SILICON VALLEY RESEARCH
(NAME OF ISSUER IN ITS CHARTER)
CALIFORNIA 94-2743735
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
300 FERGUSON DRIVE, SUITE 300
MOUNTAIN VIEW, CALIFORNIA 94043
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (415) 962-3000
Securities registered under Section 12(b)
of the Act: NONE
Securities registered under Section 12(g)
of the Act: COMMON STOCK, NO PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 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 there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-K contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
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 aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the average of bid and asked prices of the Registrant's
Common Stock on June 5, 1996 in the over-the-counter market, was approximately
$70,000,000. Shares of voting stock held by each officer and director and by
each person who on that date owned 5% or more of the outstanding voting stock
have been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive
determination for other purposes.
As of June 5, 1996, Registrant had approximately 11,339,000 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the definitive Proxy Statement for registrant's 1996 Annual Meeting
of Stockholders to be filed with the Commission pursuant to Regulation 14A not
later than 120 days after the end of the fiscal year covered by this Form are
incorporated by reference into Part III of the Form 10-K Report.
The exhibit index appears on sequentially numbered pages 35 through 36.
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PART I
This report includes a number of forward-looking statements which reflect
the Company's current views with respect to future events and financial
performance. These forward-looking statements are subject to certain risks and
uncertainties, including those discussed in Item 7--Management's Discussion
and Analysis of Financial Condition and Results of Operation--Risk Factors,
and elsewhere in this Form 10-K that could cause actual results to differ
materially from historical results or those anticipated. In this report, the
words "anticipates," "believes," "expects," "intends," "future," and similar
expressions identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as
of the date hereof.
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
The Company offers a broad line of integrated placement, routing and
floorplanning physical layout software products which enable electronics
manufacturers to achieve improved performance and smaller die size in their IC
designs. The Company offers products which incorporate its proprietary line
probe technology to create denser circuit designs. These products minimize die
size, enabling a high performance IC design, and improve manufacturability of
the IC, resulting in higher production yield. Further, these products perform
at high speed, allowing designers rapid turnaround time for their physical
layout tasks, and are highly efficient, requiring less workstation memory to
complete the design. SVR has closely linked its IC design floorplanning
capabilities to its physical layout tools through common placement and routing
algorithms. This enables designers to make placement predictions that closely
match the actual placement during the physical layout. The Company's end-user
customers include AMD, HAL, Hyundai, Motorola, OKI Semiconductor, Samsung
Electronics, Sony and Yamaha.
INDUSTRY BACKGROUND
Electronics manufacturers face constant pressure to create faster, more
complex, and more reliable IC's. To compete effectively, electronics
manufacturers must shorten product development cycles, or "time to market" for
new products. Electronics manufacturers are also under increasing economic
pressure to increase manufacturing yield and reduce die size in order to
maximize revenue from semiconductor fabrication facilities. For example, the
Semiconductor Industry Association predicts that from 1996 to 2001, minimum
feature sizes for semiconductors will drop 49% from 0.35 micron to 0.18 micron
and the number of transistors per chip will rise 433% to approximately 64
million transistors. The interconnecting wire within the IC linking those
transistors will approach one and a quarter miles on a chip area of 350 square
millimeters. As a result of these trends, electronics manufacturers will
require EDA software tools that improve the quality and increase the speed of
the design process to remain competitive.
The design cycle for IC's consists of a number of steps: (i) architectural
specification, or the definition of the overall architecture of the IC, (ii)
design (involving synthesis, functional and timing verification), which
describes the desired functionality of the IC, (iii) physical layout, the
placement and interconnection (routing) of physical components, and (iv)
layout verification which verifies that the physical layout meets the
functional specification and manufacturing constraints (design rules). Recent
trends in IC design suggest that smaller feature sizes are becoming more
commonplace, thereby enabling higher frequency designs. These designs require
tighter timing constraints, smaller die size, and lower power requirements
while at the same time maintaining manufacturing yield.
The demands on EDA software tools have been compounded as companies
designing and manufacturing IC's are beginning to address the issues raised by
"deep submicron" design. Such design work involves feature sizes of 0.5 micron
or smaller. At deep submicron geometries, interconnect (wire) delay, rather
than gate (transistor) delay, increasingly becomes the factor which determines
the operating frequency of the IC. Deep submicron geometries require designers
to produce routing with minimal wire lengths and to achieve the smallest
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possible die size to meet high frequency specifications. In addition,
minimizing vias (interconnections between various metal layers inside the IC)
and corners in the routing of IC's improves manufacturability, thereby
increasing overall yield and reliability. As IC technology advances further
into deep submicron geometries, the physical layout task is becoming
increasingly difficult to complete within design specifications. As a result,
place and route tools such as those offered by SVR are required to address
these complex layout issues.
SVR PRODUCTS
The Company offers a broad line of products for IC physical design. All of
SVR's products run on Unix workstations from Sun Microsystems, Inc. and
Hewlett Packard Company and support industry standards such as Motif, X-
Windows, GDSII Stram format and EDIF. In addition, the Company has ported two
of its products to operate on workstations from HAL Computer Systems. SVR
offers interfaces to Mentor Graphics' Falcon Framework and Synopsys, Inc.'s
synthesis tools. The Company's products have a similar technology foundation
and are modular in nature. Each of the products offered by the Company are
sold in a range of configurations based on the size and complexity of the
design to be developed with the SVR product. The following table summarizes
SVR's product families:
<TABLE>
<CAPTION>
PRIMARY
PRODUCT FAMILY APPLICATION U.S. LIST PRICE LATEST RELEASE DATE KEY ADVANTAGES
-------------- ----------- --------------- ------------------- --------------
<C> <C> <C> <C> <S>
SVR GARDS ASIC Gate Array $ 70,000- March 1996 Timing-driven place &
route
$ 460,000 High density and ECO
capability
Full chip and block
design
High speed line probe
router
SVR SC ASIC Standard Cell $ 50,000- December 1995 100% completion
$ 150,000 Timing-driven placement
Full chip and block
design
Substantial power router
Mixed signal capability
Channel router
SVR SonIC Structured Custom $180,000- December 1995 100% completion
$ 460,000 Timing-driven place and
route
High density and ECO
capability
Block design tool
Channel placement
Line probe router
SVR FloorPlacer Gate Array $ 40,000- March 1996 Direct link to synthesis
and timing
Floorplanning $ 50,000 Graphical interface
Comprehensive routing
and timing analysis
</TABLE>
SVR GARDS: SVR believes that SVR GARDS, using the Company's line probe
routing algorithm, provides the fastest turnaround time for an area-based
place and route software tool in the EDA industry. In addition, SVR GARDS
provides high quality routing results with a minimum of vias, line segments,
and total interconnecting wire length. The product handles up to a million
gates and has been extended to handle n layers of interconnect. The
interactive timing-driven placement subsystem enables designers to improve
their placement to handle issues of congestion, timing or net length. The
timing-driven routing capabilities of the product allow designers to specify
timing constraints on all nets and on all critical paths without affecting run
times. SVR GARDS has a built-in simulator for timing analysis and a clock tree
synthesis module that minimizes clock delay. SVR GARDS includes a procedural
language interface which allows system designers to interface the tool to
virtually any design flow. The line probe routing algorithms enable the
product to perform incremental ECOs rapidly without disturbing the structure
of the routed design outside the region of interest.
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SVR SC: SVR SC is a channel-based router for the automatic place and route
of standard cell-based IC's. SVR SC provides two to four layer routing for
fixed and variable height and width standard cells. Routing over cells and
blocks is supported on all layers. SVR SC provides efficient floorplanning,
placement, and routing of standard cells, macro blocks, and mixed block and
cell designs. Advanced features such as row flipping and power rail sharing
allow designers to create designs with fewer channels and thus reduced die
size. Timing-driven placement and routing capabilities are integrated into the
product to assist designers in the creation of designs which function
according to their specification.
SVR SONIC: The Company recently introduced SVR SonIC, an IC physical layout
software product that provides designers with what the Company believes to be
the industry's first integrated solution for channel-based placement combined
with area-based line probe routing. The major benefit of this technology
combination is the ability to achieve 100% design completion quickly within an
area-based tool which facilitates ECO design activities and produces smaller
die sizes. SVR SonIC adjusts local channel heights within the IC layout to
accommodate congested regions and provides 100% timing control through timing-
driven placement and routing capabilities. SVR SonIC respects design rules and
physical design constraints to ensure a correct-by-construction design. The
product includes modules for netlist translation, library generation, channel
adjustment, global routing and constructive placement. SVR SonIC is simple to
integrate into design flows because all inputs and outputs are based on
industry standards such as EDIF, PDEF, SDF and GDSII.
SVR FLOORPLACER: SVR FloorPlacer is an interactive floorplanning software
product for designers of embedded arrays, gate arrays, and structured custom
blocks. By integrating the Company's area-based routing technology, SVR
FloorPlacer helps designers obtain an accurate assessment of timing
characteristics and routability of their designs early in the design process.
SVR FloorPlacer reduces time to market by eliminating costly iterations
between synthesis and layout. The software products provide interfaces and
links which allow direct back annotation of delays from SVR FloorPlacer
products into synthesis and simulation. The graphical user interface provides
improved usability and gives the user interactive control over the floorplan
while providing comprehensive graphical analysis and feedback. This interface
helps users improve routability and the timing attributes of their designs.
MARKETING AND SALES
The Company's products are marketed principally through its direct sales
force in the United States and Japan. The Company has domestic sales/support
offices in metropolitan areas of California, Pennsylvania, Massachusetts,
Texas and foreign sales offices in Tokyo and Taiwan. The Company also has
distributors in Korea, Taiwan and Europe.
During fiscal 1994, 1995 and 1996, 39%, 51% and 41%, respectively, of the
Company's revenue came from the Far East, principally Japan and Korea. Sales
of the Company's products in Europe accounted for an additional 4%, 1% and 2%
during fiscal 1994, 1995 and 1996, respectively. (See Note 14 of Notes to
Consolidated Financial Statements).
The Company markets its products both domestically and internationally to
integrated circuit vendors and manufacturers, large electronic systems
manufacturers, and major aerospace, automotive, and consumer electronics
companies. One customer accounted for 16% and two customers each accounted for
11% of the Company's consolidated revenue in fiscal 1996. One customer
accounted for 12% and two customers each accounted for 10% of the Company's
consolidated revenue in fiscal 1995. One customer accounted for 21% of the
Company's consolidated revenue in fiscal 1994. Revenue from a shareholder was
$400,000 and $43,000 in fiscal 1994 and 1995, respectively.
The Company licenses its software to customers (except in Japan, where the
Company sells its software to customers) under agreements that provide for a
license fee or sales price to use the product in perpetuity on a specified
computer. License fees for individual products range from approximately
$40,000 for the least expensive software to over $460,000 for the most complex
software product. License revenue represents the major part of the Company's
total revenue.
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The Company provides annual maintenance for a fee, which includes technical
support and services such as telephone consultation regarding the use of the
products, problem resolution, product enhancements, and distribution. A
majority of customers renew their maintenance each year.
PRODUCT DEVELOPMENT
The EDA market is characterized by rapid technological advances in both
computer hardware and software. The Company believes that the development of
new products is critical to its success. Engineering efforts in the past year
included:
. Key improvements to routing and placement technology were made and new
versions of all products were released. Additionally, engineering
efforts were devoted to placement and routing within multilevel metal
technology environments and the porting of various products to high-
performance computing platforms.
. Significant efforts were focused on the completion of the Company's
SonIC product technology.
. In fiscal 1994, 1995 and 1996, the Company spent approximately
$3,070,000, $2,172,000 and $3,330,000, or as a percentage of revenue
41%, 26% and 30%, respectively, on engineering, research and
development. These amounts are net of costs capitalized in accordance
with Statement of Financial Accounting Standard No. 86, "Accounting for
the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed
(See Note 1 of Notes to Consolidated Financial Statements).
MANUFACTURING
The Company's software production operations consist of configuring the
existing software product with the proper customer specifications, recording
it on magnetic tapes or other recording media, producing user manuals and
other documentation, and shipping the product. Shipments are generally made
within 30 days after an order is received.
COMPETITION
The EDA software market in which the Company competes is intensely
competitive and subject to rapid technological change. The Company currently
faces competition from EDA vendors, including Cadence, which currently holds
the dominant share of the market for IC physical design software, Avant! and
Mentor Graphics. These EDA vendors have significantly greater financial,
technical and marketing resources, greater name recognition and, in some
cases, a larger installed customer base than the Company. These companies also
have established relationships with current and potential customers of the
Company and can devote substantial resources aimed at preventing the Company
from enhancing relationships with existing customers or establishing
relationships with potential customers. The Company believes that competitive
factors in the EDA software market include product performance, price, support
of industry standards, ease of use, delivery schedule, product enhancement,
and customer technical support and service. The Company believes that a
negative perception of the Company developed in early 1992 as a result of the
Company's failure to provide regular maintenance releases and product
enhancements for its existing software products during this time period.
Further, with respect to ease of use, the Company's products may not be
perceived as competing favorably.
Competition from EDA companies that choose to enter the IC physical design
market could present particularly formidable competition due to their large
installed customer base and their ability to offer a complete integrated IC
design solution, which SVR does not offer. The Company expects additional
competition from other established and emerging companies. In addition, the
EDA industry has become increasingly concentrated in recent years as a result
of consolidations, acquisitions and strategic alliances. Accordingly, it is
possible that new competitors or alliances among competitors could emerge and
rapidly acquire significant market share. There can be no assurance that the
Company will be able to compete successfully against current and future
competitors or that competitive pressures faced by the Company will not have a
material adverse effect on its business, operating results and financial
condition.
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PROPRIETARY RIGHTS
The Company relies on contract, trade secret and copyright law to protect
its technology. In fiscal 1995, the Company applied for a patent related to a
new capability developed by its research and development engineers. There can
be no assurance that the Company's patent application or any future patent
applications, whether or not challenged by applicable governmental patent
examiners, will be issued with the scope of the claims sought by the Company,
if at all. Furthermore, there can be no assurance that others will not develop
technologies that are similar or superior to the Company's technology,
duplicate the Company's technology or design around any patents owned by the
Company. The Company generally enters into confidentiality or license
agreements with its employees, distributors and customers, and limits access
to and distribution of its software, documentation and other proprietary
information. Despite these precautions, it may be possible for a third party
to copy or otherwise obtain and use the Company's products or technology
without authorization, or to develop similar technology independently. In
addition, effective copyright and trade protection may be unavailable or
limited in certain foreign countries.
EMPLOYEES
As of March 31, 1996, the Company employed 60 full-time workers, including
29 in marketing and sales, 22 in engineering and product development and the
remainder engaged in administrative activities. Of the 60 full-time employees,
47 were located in the United States, 6 were employed in Taiwan and 7 were
employed in Japan. The Company's continued success will depend, in large part,
on its ability to attract and retain trained and qualified personnel who are
in great demand throughout the industry. None of the Company's employees is
represented by a labor union. The Company believes that its employee relations
are good.
The Company's development, management of its growth and other activities
depend on the efforts of key management and technical employees. Competition
for such personnel is intense. The Company uses incentives, including
competitive compensation and stock option plans, to attract and retain well-
qualified employees. There can be no assurance, however, that the Company will
continue to attract and retain personnel with the requisite capabilities and
experience. The loss of one or more of the Company's key management or
technical personnel also could materially and adversely affect the Company.
The Company generally does not have employment agreements with its key
management personnel or technical employees. The Company's future success is
also dependent upon its ability to effectively attract, retain, train,
motivate and manage its employees. Failure to do so could have a material
adverse effect on the Company's business and operating results.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's principal administrative, marketing, engineering development,
and support facilities occupy approximately 19,600 square feet (3,000 square
feet of which is sub-leased to another company) in a two-story office building
in Mountain View, California, approximately 40 miles south of San Francisco.
The property is occupied under a sublease which has been extended until July
31, 1996. On April 23, 1996, the Company entered into a five year lease that
commences on July 1, 1996, for the occupancy of 19,104 square feet located at
6360 San Ignacio, San Jose, California. The Company expects to be moving its
headquarters to that facility in July, 1996.
The Company maintains foreign sales support offices in leased space at one
location in Japan and one location in Taiwan. The Company maintains domestic
sales support offices in leased space in Boxborough, Massachusetts; Blue Bell,
Pennsylvania; and Austin, Texas.
Management believes that its facilities will be adequate for the Company's
operations.
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ITEM 3. LEGAL PROCEEDINGS
In December 1994, the Company was named as defendant in an action brought by
Mentor Graphics in Santa Clara County Superior Court. The second amended
complaint, the operative pleading, alleges unfair competition, breach of
contract, breach of implied covenant of good faith and fair dealing and unjust
enrichment. The plaintiff is seeking attorneys' fees, unspecified damages and
enforcement of the contract. The contract provides for the exchange of source
code for specified products of the respective parties and a non-royalty
bearing license to incorporate the other party's source code into its
products, subject to certain market restrictions. The Company has not
incorporated the other party's source code, which is subject to the contract,
into its products and has not derived any revenues attributable to the other
party's source code. The litigation is in the discovery stage and the ultimate
outcome cannot presently be determined. The parties are currently in
discussions to resolve this matter but there can be no assurance that there
will be any settlement on terms satisfactory to the Company, if at all.
Regardless of the outcome of this pending litigation, the litigation may
result in substantial cost and expenses to the Company and significant
diversion of efforts by the Company's technical and management personnel. In
addition, an adverse ruling in this litigation could have a material adverse
effect on the Company's business, operating results or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders during the
Company's fourth quarter.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is currently traded on the Nasdaq National Market
under the symbol SVRI. From April 6, 1992 to September 8, 1995, the Company's
Common Stock was traded on the NASD Bulletin Board and from September 8, 1995
until February 9, 1996, was traded on the Nasdaq SmallCap Market. The
following table sets forth, for the fiscal period indicated, the low and high
closing sales prices for the Common Stock as reported by Nasdaq. The closing
sales prices prior to September 8, 1995 are calculated using the average of
the low ask and high bid prices for each day within the fiscal period. The
quotations for the Common Stock traded on the Nasdaq SmallCap Market and the
Bulletin Board may reflect inter-dealer prices, without retail mark-up, mark-
down or commission and may not necessarily represent actual transactions. The
Company had approximately 450 shareholders of record and approximately 2,500
beneficial holders as of March 31, 1996.
COMMON STOCK PRICES
<TABLE>
<CAPTION>
FISCAL 1994 QUARTER ENDED JUNE 30 SEPT. 30 DEC. 31 MARCH 31
- - ------------------------- ------- -------- ------- --------
<S> <C> <C> <C> <C>
High...................................... 3 2 1 7/8 1 1/4
Low....................................... 1 5/8 1 1/2 1/2
FISCAL 1995 QUARTER ENDED JUNE 30 SEPT. 30 DEC. 31 MARCH 31
- - ------------------------- ------- -------- ------- --------
High...................................... 1 7/8 3 5 4
Low....................................... 1/2 1 3/8 2 1/4 2 1/4
FISCAL 1996 QUARTER ENDED JUNE 30 SEPT. 30 DEC. 31 MARCH 31
- - ------------------------- ------- -------- ------- --------
High...................................... 7 1/4 12 1/2 9 1/2 9
Low....................................... 2 7/8 6 6 3/4 3 5/8
</TABLE>
The Company has not declared or paid dividends on its common stock in fiscal
1994, 1995 and 1996. Certain covenants in the Company's loan agreements
restrict the payment of dividends. The Company currently anticipates that it
will retain all future earnings for use in the operation and expansion of its
business and does not anticipate paying any cash dividends in the foreseeable
future. (See Note 5 of Notes to Consolidated Financial Statements.)
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ITEM 6. SELECTED FINANCIAL DATA
The following financial data have been derived from the Company's
consolidated financial statements.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
--------------------------------------
1992 1993 1994 1995 1996
------ ------- ------ ------ -------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
--------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................. $9,757 $11,022 $7,537 $8,251 $10,947
Operating income (loss)................. (960) 1,411 (3,636) 420 530
Net Income (loss)....................... (1,110) 1,003 (3,892) 211 569
Net income (loss) per share............. (0.24) 0.20 (0.66) 0.03 0.05
Shares used in per share calculation.... 4,593 4,892 5,886 8,353 10,423
BALANCE SHEET DATA:
Working capital (deficit)............... $ 910 $ 2,070 $ (298) $ 4 $11,848
Total assets............................ 5,148 6,582 3,246 5,222 17,092
Long term lease obligations, less
current portion......................... 1,126 373 36 794 38
Shareholders' equity.................... 423 2,358 105 982 13,728
</TABLE>
SUMMARY QUARTERLY DATA--UNAUDITED
<TABLE>
<CAPTION>
JUN. 30 SEP. 30 DEC. 31 MAR. 31 JUN. 30 SEP. 30 DEC. 31 MAR. 31
1994 1994 1994 1995 1995 1995 1995 1996
------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Quarter Ended
Revenue................. $1,829 $2,036 $2,124 $2,262 $2,643 $2,496 $2,802 $3,006
Gross profit............ 1,732 1,897 1,995 2,113 2,453 2,310 2,625 2,814
Operating income........ 102 156 30 132 89 72 169 200
Net income.............. $ 47 $ 102 $ 16 $ 46 $ 70 $ 63 $ 151 $ 285
Net income per share.... $ -- $ 0.01 $ -- $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.03
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(IN THOUSANDS)
This Management's Discussion and Analysis of Financial Condition and Results
of Operations includes a number of forward-looking statements which reflect
the Company's current views with respect to future events and financial
performance. These forward-looking statements are subject to certain risks and
uncertainties, including those discussed in the Other Factors section of this
Item 7 and elsewhere in this Form 10-K that could cause actual results to
differ materially from historical results or those anticipated. In this
report, the words "anticipates," "believes," "expects," "intends," "future,"
and similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof.
The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto.
REVENUE
Total revenue increased from approximately $8,251 in fiscal 1995 to
approximately $10,947 in fiscal 1996. Over this period, revenue from license
fees and sale of software and other increased by 51% and revenue from
maintenance fees increased by approximately 2%. The primary reason for the
increase in license fee revenue was additional licensing of the SVR GARDS
software as a result of the release of significant product enhancements as
well as the introduction of new products, SVR SonIC and SVR Floorplacer. The
Company experienced a slight increase in maintenance revenues as a result of
the new product releases and enhancements.
Total revenue increased to approximately $8,251 in fiscal 1995 from
approximately $7,537 in fiscal 1994. The 9% increase was due primarily to
increased customer acceptance of the Company's product improvements and its
integration efforts of GARDS and SC.
In fiscal 1994, 1995 and 1996 maintenance revenue was $2,808, $3,125 and
$3,197, respectively. Maintenance fees revenue as a percentage of total
revenue was 37%, 38% and 29% for fiscal 1994, 1995 and 1996, respectively. The
increases in absolute dollars in fiscal 1995 and 1996 were due to increased
customer satisfaction with the Company's product improvements and the decrease
in fiscal 1994 maintenance fees revenue was due to reduced license sales in
fiscal 1994 and the failure of some customers to renew maintenance contracts
on discontinued products.
International sales were approximately $3,258, $4,291 and $4,740 for fiscal
1994, 1995 and 1996, respectively, representing 43%, 52%, and 43% of total
revenue for the respective periods.
While the Company has achieved annual revenue growth in each of the last
three years, and has attained profitability in the last two consecutive years,
there can be no assurance that such revenue growth or profitability can be
sustained. The Company's expense levels are based, in part, on its
expectations as to future revenue levels, which are difficult to predict. If
revenue levels are below expectations, operating results may be materially and
adversely affected. In addition, the Company's quarterly and annual results
may fluctuate as a result of many factors, including the size and timing of
software license fees, timing of co-development projects with customers,
timing of operating expenditures, increased competition, new product
announcements and releases by the Company and its competitors, gain or loss of
significant customers or distributors, expense levels, renewal of maintenance
contracts, pricing changes by the Company or its competitors, personnel
changes, foreign currency exchange rates, and economic conditions generally
and in the electronics industry specifically. There can also be no assurance
that the Company's distributor strategy will be successful or that the Company
will be able to retain current distributors or to identify new distributors in
the future that are acceptable to the Company.
COST OF REVENUE
For fiscal 1994, 1995 and 1996, cost of license fees and other was $377,
$131 and $388, respectively. Cost of license fees and other as a percentage of
total revenue was 5%, 2% and 4% for fiscal 1994, 1995 and 1996, respectively.
Cost of license fees and other consists primarily of the amortization of
capitalized software
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development costs. The increase from fiscal 1995 to fiscal 1996 was primarily
the result of an increase in the amortization of capitalized software
development costs. The decrease from fiscal 1994 to fiscal 1995 was primarily
due to the accelerated amortization of capitalized software development costs
of $126 in fiscal 1994.
For fiscal 1994, 1995 and 1996, cost of maintenance fees was $391, $383 and
$357, respectively. Cost of maintenance fees as a percentage of total revenue
was 5%, 5% and 3% for fiscal 1994, 1995 and 1996, respectively. Cost of
maintenance fees is primarily the cost of providing technical support and
technical documentation.
ENGINEERING, RESEARCH AND DEVELOPMENT EXPENSES
Engineering, research and development expenses for fiscal 1994, 1995 and
1996 were $3,070, $2,172 and $3,330, respectively. As a percentage of revenue
for the same periods, engineering, research and development expenses were 41%,
26% and 30%, respectively. The increase in engineering, research and
development expenses in fiscal 1996 was primarily due to an increase in
headcount in support of the Company's expanded product development program for
SVR GARDS and SVR SonIC. The Company also experienced an increase in computer
equipment costs related to rental expense for computer equipment leased under
operating leases for the new engineering personnel and the depreciation of
upgrades to existing computer equipment. The decrease in fiscal 1995 in
engineering, research and development expenses was due to increased
capitalized software development costs, reduced headcount and continued cost
controls.
SELLING AND MARKETING EXPENSES
Selling and marketing expenses for fiscal 1994, 1995 and 1996 were $5,315,
$4,338 and $5,145, respectively. For the last three fiscal years, selling and
marketing expenses were 71%, 53% and 47%, of revenue, respectively. In fiscal
1996, selling and marketing expenses increased in absolute dollars primarily
due to an increase in sales and marketing personnel and the percentage
decrease was primarily due to increased sales productivity. The decrease in
absolute dollars in fiscal 1995 was due to a decrease in the number of sales
and marketing personnel. The significant percentage increase in fiscal 1994
was primarily due to declining revenues in that period.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for fiscal 1994, 1995 and 1996 were
$870, $807 and $1,197, respectively. For the last three fiscal years, general
and administrative expenses were 12%, 10% and 11%, of revenue, respectively.
The increase in absolute dollars in fiscal 1996 was the result of additions to
the senior management team. In fiscal 1995 and 1994, general and
administrative expenses decreased primarily due to a reduction of expenses
through reduced head count and cost controls.
RESTRUCTURING COSTS
During fiscal 1994, the Company undertook a major restructuring of its
operations, resulting in an approximately $1,150 charge which reflected its
decision to reduce staff levels and close its European offices. The charge
included the recognition of foreign currency losses, severance paid to
employees and the cost of early termination of the leases for the European
operations. (See Note 2 of Notes to Consolidated Financial Statements.)
OTHER INCOME (EXPENSE)
Other income (expense) for fiscal 1994, 1995 and 1996 was $(49), $(28) and
$44, respectively. Other income in fiscal 1996 resulted primarily from net
interest income and expense and other expense in fiscal 1995 and 1994 resulted
primarily from net interest expense on outstanding indebtedness.
10
<PAGE>
PROVISION FOR INCOME TAXES
The provision for income taxes for fiscal 1994, 1995 and 1996 was $207, $181
and $5, respectively. The decrease in fiscal 1996 was due to the restructuring
of the Japan intercompany agreement and is substantially below the federal
statutory rate due to the utilization of net operating losses. The provisions
for fiscal 1995 and 1994 consisted primarily of federal alternative minimum
tax, state taxes and Japanese withholding taxes.
As of March 31, 1996, the Company had federal and state net operating loss
carryforwards of approximately $11,000 and $1,122, respectively. The Company
also had federal and California research and development tax development tax
credit carryforwards of approximately $376 and $111, respectively. The net
operating loss and credit carryforwards will expire at various dates beginning
in 1997 through 2011, if not utilized (see Note 12 of Notes to Consolidated
Financial Statements).
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations, including
increases in accounts receivable and capital equipment acquisitions, primarily
through private and public sales of equity securities and to a lesser extent,
cash generated from operations. In fiscal 1994, 1995 and 1996, the Company
received cash of $1,077, $415 and $12,297, respectively, from public and
private placements of Common Stock and the exercise of warrants and options to
purchase Common Stock. In addition, in fiscal 1995, the Company received
approximately $1,047 from the sale of subordinated debt securities and the
sale of a minority interest in the Company's Japanese subsidiary.
The Company's operating activities provided cash of $796 in fiscal 1995 and
used cash of $761 and $1,825 in fiscal 1994 and 1996, respectively.
Investment activities, comprised primarily of capitalization of software
development costs, acquisition of fixed assets and purchase of software
licenses, were $767, $832 and $1,124 for fiscal, 1994, 1995 and 1996,
respectively.
The Company's primary unused sources of funds at March 31, 1996, consisted
of cash and cash equivalents of approximately $10,238 and a bank line of
credit of $2,000. The Company believes its cash and cash generated from
operations and available borrowings, will be sufficient to finance its
operations for at least the next twelve months. The Company's cash
requirements in the future may also be financed through additional equity or
debt financings. There can be no assurance that such financing can be obtained
on favorable terms, if at all. (See Note 5 of Notes of Consolidated Financial
Statements.)
The Company's open commitments for the purchase of capital assets as of
March 31, 1996 were approximately $1,500.
The Company is currently engaged in litigation with Mentor Graphics.
Regardless of the outcome of this pending litigation, the litigation may
result in substantial cost and expenses to the Company and significant
diversion of efforts by the Company's technical and management personnel. In
addition, an adverse ruling in the litigation could have a material adverse
effect on the Company's business, operating results or financial condition.
OTHER FACTORS AFFECTING FUTURE RESULTS OF OPERATIONS
DEPENDENCE ON SINGLE PRODUCT LINE. Revenues from sales of the SVR GARDS
family of products have historically represented a substantial majority of the
Company's revenues. Although the Company has recently introduced its SVR
FloorPlacer and SVR SonIC products, the Company expects that revenues from the
sale of SVR GARDS products will continue to account for at least a majority of
the Company's revenues for the foreseeable future. The life cycles of the
Company's products are difficult to predict due to the effect of new product
introductions or product enhancements by the Company or its competitors,
market acceptance of new and enhanced versions of the Company's products and
competition in the Company's marketplace. Declines in
11
<PAGE>
the demand for the SVR GARDS family of products, whether as a result of
competition, technological change, price reductions or otherwise, could have a
material adverse effect on the Company's business, operating results and
financial condition.
NEW PRODUCTS AND RAPID TECHNOLOGICAL CHANGE; RISK OF PRODUCT DEFECTS. The
EDA industry is characterized by extremely rapid technological change,
frequent new product introductions and enhancements, evolving industry
standards and rapidly changing customer requirements. The development of more
complex ICs embodying new technologies will require increasingly sophisticated
design tools. The Company's future results of operations will depend, in part,
upon its ability to enhance its current products and to develop and introduce
new products on a timely and cost-effective basis that will keep pace with
technological developments and evolving industry standards and methodologies,
as well as address the increasingly sophisticated needs of the Company's
customers. The Company has in the past and may in the future experience delays
in new product development and product enhancements. The Company began
commercial shipments of its new SVR FloorPlacer software products in the
quarter ended March 31, 1995, and of its new SVR SonIC software products in
the quarter ended June 30, 1995. There can be no assurance that these new
products will gain market acceptance or that the Company will be successful in
developing and marketing product enhancements or other new products that
respond to technological change, evolving industry standards and changing
customer requirements, that the Company will not experience difficulties that
could delay or prevent the successful development, introduction and marketing
of these products or product enhancements, or that its new products and
product enhancements will adequately meet the requirements of the marketplace
and achieve any significant degree of market acceptance. In addition, all of
the Company's current products operate in, and planned future products will
operate in, the Unix operating system. In the event that another operating
system, such as Windows NT, were to achieve broad acceptance in the EDA
industry, the Company would be required to port its products to such an
operating system, which would be costly and time consuming and could have a
material adverse effect on the Company's business, operating results or
financial condition. Failure of the Company, for technological or other
reasons, to develop and introduce new products and product enhancements in a
timely and cost-effective manner would have a material and adverse effect on
the Company's business, operating results and financial condition. In
addition, the introduction or even announcement of products by the Company or
one or more of its competitors embodying new technologies or changes in
industry standards or customer requirements could render the Company's
existing products obsolete or unmarketable. Such deferment of purchases could
have a material adverse effect on the Company's business, operating results or
financial condition.
Software products as complex as those offered by the Company may contain
defects or failures when introduced or when new versions are released. The
Company has, in the past, discovered software defects in certain of its
products and may experience delays or lost revenue to correct such defects in
the future. Although the Company has not experienced material adverse effects
resulting from any such defects to date, there can be no assurance that,
despite testing by the Company, errors will not be found in new products or
releases after commencement of commercial shipments, resulting in loss of
market share or failure to achieve market acceptance. Any such occurrence
could have a material effect upon the Company's business, operating results or
financial condition.
DEPENDENCE ON CERTAIN CUSTOMERS AND RESELLERS. A small number of customers
account for a significant percentage of the Company's total revenue. In fiscal
1994, Motorola, Inc. ("Motorola") accounted for 21% of the Company's total
revenue; in fiscal 1995, HAL Computer Systems, Inc., a subsidiary of Fujitsu.
Ltd ("HAL"), accounted for 12% and Sony Corporation and Yamaha Corporation
("Yamaha") each accounted for 10% of the Company's total revenue; and in
fiscal 1996, HAL accounted for 16% and Motorola and Yamaha each accounted for
11% of the Company's total revenue. There can be no assurance that sales to
these entities, individually or as a group, will reach or exceed historical
levels in any future period. Any substantial decrease in sales to one or more
of these customers could have a material adverse effect on the Company's
business, operating results or financial condition. The Company currently
sells and markets its products overseas, other than in Japan, through a
limited number of distributors. The Company has recently hired new
distributors in Taiwan, Korea and Europe. The Company has no history of
performance by its new distributors. In addition, there can be no assurance
that the new distributors will be able to successfully distribute and support
the
12
<PAGE>
Company's products on a timely basis or that such distributors will not reduce
their efforts devoted to selling the Company's products or terminate their
relationship with the Company as a result of competition with other suppliers'
products. The loss of or changes in the relationship with or performance by
one or more of the Company's international distributors could have a material
adverse effect on the Company's business, results of operations and financial
condition.
LENGTHY SALES CYCLE. The licensing and sales of the Company's software
products generally involves a significant commitment of capital by prospective
customers, with the attendant delays frequently associated with large capital
expenditures and lengthy acceptance procedures. For these and other reasons,
the sales cycle associated with the licensing of the Company's products is
typically lengthy and subject to a number of significant risks over which the
Company has little or no control. Because the timing of customer orders is
hard to predict, the Company believes that its quarterly operating results are
likely to vary significantly in the future.
DEPENDENCE UPON SEMICONDUCTOR AND ELECTRONICS INDUSTRIES; GENERAL ECONOMIC
AND MARKET CONDITIONS. The Company is dependent upon the semiconductor and
more generally, the electronics industries. Each of these industries is
characterized by rapid technological change, short product life cycles,
fluctuations in manufacturing capacity and pricing and gross margin pressures.
Each of these industries is highly cyclical and has periodically experienced
significant downturns, often in connection with, or in anticipation of
declines in general economic conditions during which the number of new IC
design projects often decreases. Purchases of new licenses from the Company
are largely dependent upon the commencement of new design projects, and
factors negatively affecting any of these industries could have a material
adverse effect on the Company's business, operating results or financial
condition. The Company's business, operating results and financial condition
may, in the future, reflect substantial fluctuations from period to period as
a consequence of patterns and general economic conditions in either the
semiconductor or electronics industry.
INFLATION
To date, inflation has not had a significant impact on the results of the
Company's operations.
13
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Accountants......................................... 15
Report of Previous Independent Accountants................................ 16
Report of Management...................................................... 17
Consolidated Balance Sheet as of March 31, 1995 and 1996.................. 18
Consolidated Statement of Operations for the years ended March 31, 1994,
1995 and 1996............................................................ 19
Consolidated Statement of Changes in Shareholders' Equity for the years
ended March 31, 1994, 1995 and 1996...................................... 20
Consolidated Statement of Cash Flows for the years ended March 31, 1994,
1995 and 1996............................................................. 21
Notes to Consolidated Financial Statements................................ 22
FINANCIAL STATEMENT SCHEDULE:
Schedule II--Valuation and Qualifying Accounts............................ 32
</TABLE>
All other financial statement schedules have been omitted since they are
either not required, not applicable or the information is otherwise included
in the consolidated financial statements or notes thereto.
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Silicon Valley Research, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Silicon Valley Research, Inc. and its subsidiaries at March 31,
1996, and the results of their operations and their cash flows for the year
then ended, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
As discussed in Note 8, the Company is a defendant in a lawsuit alleging
unfair competition and breach of contract and seeking attorney's fees,
punitive damages and enforcement of the contract. The Company is unable to
predict the outcome of the litigation or ultimate effect, if any, on its
operations or financial condition.
PRICE WATERHOUSE LLP
San Jose, California
May 14, 1996
15
<PAGE>
REPORT OF PREVIOUS INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Silicon Valley Research, Inc.
We have audited the accompanying consolidated balance sheet of Silicon
Valley Research, Inc. and subsidiaries as of March 31, 1995, and the related
consolidated statements of operations, shareholder's equity and cash flows for
each of the two years in the period ended March 31, 1995 and financial
statement schedule for each of the two years in the period ended March 31,
1995 listed on page 13 of this Form 10-K. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Silicon Valley
Research, Inc. and subsidiaries as of March 31, 1995, and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended March 31, 1995 in conformity with general accepted accounting
principles. In addition, in our opinion the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
As discussed in Note 8 to the consolidated financial statements, the Company
is a defendant in a lawsuit alleging unfair competition and breach of contract
and seeking attorneys' fees, punitive damages, and enforcement of the
contract. The ultimate outcome of the litigation cannot presently be
determined. Accordingly, no provision for any liability that may result upon
adjudication has been made in the accompanying consolidated financial
statements.
COOPERS & LYBRAND L.L.P.
San Jose, California
May 23, 1995
16
<PAGE>
REPORT OF MANAGEMENT
To Our Shareholders:
The consolidated financial statements have been prepared by the Company, and
we are responsible for their content. They are prepared in conformity with
generally accepted accounting principles, and in this regard we have
undertaken to make informed judgments and estimates, where necessary, of the
expected effects of events and transactions. The other financial information
in this annual report on Form-K is consistent with that in the consolidated
financial statements.
The Company maintains and depends upon a system of internal accounting
controls designed to provide reasonable assurance that our assets are
safeguarded, that transactions are executed in accordance with management's
intent and the law, and that the accounting records fairly and accurately
reflect the transactions of the Company.
The Company engaged Price Waterhouse LLP as independent accountants to
provide an objective, independent audit of our consolidated financial
statements.
The Board of Directors oversees the Company's consolidated financial
statements through its Audit Committee, which is composed of members of the
Board of Directors. The Committee meets whenever necessary to monitor and
review, with management and the independent accountants, the Company's
consolidated financial statements and accounting controls. The independent
accountants have access to the Audit Committee, without management present, to
discuss internal accounting controls, auditing, and financial reporting
matters.
/s/ Robert R. Anderson
-------------------------------------
Robert R. Anderson
Chairman of the Board
/s/ Glenn E. Abood
-------------------------------------
Glenn E. Abood
President and Chief Executive
Officer
Mountain View, California
June 18, 1996
17
<PAGE>
SILICON VALLEY RESEARCH
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31,
----------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents..................................... $ 1,248 $10,238
Accounts receivable, net of allowances of
$50 in 1995 and $25 in 1996.................................. 2,036 4,650
Prepaid expenses and other current assets..................... 166 286
------- -------
3,450 15,174
Fixed assets, net............................................. 1,067 537
Other assets, net............................................. 705 1,381
------- -------
$ 5,222 $17,092
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Notes payable................................................. $ 300 $ --
Accounts payable.............................................. 130 321
Accrued expenses.............................................. 1,497 1,329
Deferred maintenance revenue.................................. 1,477 1,537
Current portion of long-term debt............................. 42 139
------- -------
3,446 3,326
Long-term debt................................................ 794 38
------- -------
4,240 3,364
------- -------
Commitments and contingencies (Note 8)........................
SHAREHOLDERS' EQUITY
Preferred stock, no par value: authorized:
1,000 shares issued and outstanding: none -- --
Common stock, no par value:
authorized: 25,000 shares issued and outstanding:
7,715 shares in 1995 and 11,308 shares in 1996............... 18,874 31,171
Accumulated deficit........................................... (17,992) (17,423)
Cumulative translation adjustment............................. 100 (20)
------- -------
982 13,728
------- -------
$ 5,222 $17,092
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
18
<PAGE>
SILICON VALLEY RESEARCH
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
------------------------
1994 1995 1996
------- ------ -------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
REVENUE
License fees and other................................ $ 4,729 $5,126 $ 7,750
Maintenance fees...................................... 2,808 3,125 3,197
------- ------ -------
Total revenue..................................... 7,537 8,251 10,947
------- ------ -------
COST OF REVENUE
License fees and other................................ 377 131 388
Maintenance fees...................................... 391 383 357
------- ------ -------
Total cost of revenue................................. 768 514 745
------- ------ -------
Gross profit.......................................... 6,769 7,737 10,202
------- ------ -------
OPERATING EXPENSES
Engineering, research and development................. 3,070 2,172 3,330
Selling and marketing................................. 5,315 4,338 5,145
General and administrative............................ 870 807 1,197
Restructuring costs (Note 2).......................... 1,150 -- --
------- ------ -------
Total operating expenses.......................... 10,405 7,317 9,672
------- ------ -------
Operating income (loss)............................... (3,636) 420 530
------- ------ -------
OTHER INCOME (EXPENSE)
Interest income....................................... 40 11 102
Interest expense...................................... (115) (89) (98)
Other, net............................................ 26 50 40
------- ------ -------
Total other income (expense)...................... (49) (28) 44
------- ------ -------
Income (loss) before provision for income taxes....... (3,685) 392 574
Provision for income taxes............................ 207 181 5
------- ------ -------
NET INCOME (LOSS)..................................... $(3,892) $ 211 $ 569
------- ------ -------
Net income (loss) per share........................... $ (0.66) $ 0.03 $ 0.05
======= ====== =======
Shares used in per share calculations................. 5,886 8,353 10,423
======= ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
19
<PAGE>
SILICON VALLEY RESEARCH
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------
CUMULATIVE
ACCUMULATED TRANSLATION
SHARES AMOUNT DEFICIT ADJUSTMENTS TOTAL
------ ------- ----------- ----------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCES, MARCH 31, 1993....... 5,451 $17,110 $(14,311) $(441) $ 2,358
Common stock issued under stock
option and stock purchase
plans......................... 57 73 73
Common stock issued under
purchase agreement, net of
issuance costs................ 2,025 1,004 1,004
Write off of foreign currency
exchange loss due to
subsidiary closure............
Foreign currency translation
adjustment.................... 611 611
Net loss....................... (49) (49)
(3,892) (3,892)
------ ------- -------- ----- -------
BALANCES, MARCH 31, 1994....... 7,533 18,187 (18,203) 121 105
Common stock issued under stock
option and stock purchase
plans......................... 182 307 307
Sale of 3% of Japanese
subsidiary, net of minority
interest and issuance costs... 272 272
Proceeds from issuance of
warrants for common stock..... 77 77
Warrants for common stock
issued in conjunction with
debt and severance agreements. 31 31
Foreign currency translation
adjustment.................... (21) (21)
Net income..................... 211 211
------ ------- -------- ----- -------
BALANCES, MARCH 31, 1995....... 7,715 18,874 (17,992) 100 982
Common stock issued under stock
option and stock purchase
plans......................... 259 528 528
Proceeds from issuance of
common stock, net of issuance
costs......................... 3,172 11,583 11,583
Common stock issued on exercise
of warrants................... 162 186 186
Foreign currency translation
adjustment.................... (120) (120)
Net income..................... 569 569
------ ------- -------- ----- -------
BALANCES, MARCH 31, 1996....... 11,308 $31,171 $(17,423) $ (20) $13,728
====== ======= ======== ===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
20
<PAGE>
SILICON VALLEY RESEARCH
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
------------------------
1994 1995 1996
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................... $(3,892) $ 211 $ 569
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization:
Fixed assets.................................... 111 110 394
Software development costs...................... 301 66 315
Software licenses............................... 570 83 152
Foreign exchange loss on subsidiary closure....... 611 -- --
Changes in assets and liabilities, net :
Accounts receivable............................. 2,140 (513) (3,145)
Accounts receivable from related party.......... 400 -- --
Prepaid expenses and other current assets....... (7) 43 (326)
Accounts payable................................ 7 (2) 202
Accrued expenses................................ (584) 193 (130)
Deferred maintenance revenue.................... (418) 585 182
Other, net...................................... -- 20 (38)
------- ------ -------
Net cash provided by (used in) operating activities. (761) 796 (1,825)
------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets......................... (177) (288) (452)
Capitalization of software development costs and
purchase of software licenses....................... (590) (544) (672)
------- ------ -------
Net cash used in investing activities............... (767) (832) (1,124)
------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt and other
liabilities......................................... (574) (1,393) (1,393)
Proceeds from sale/leaseback........................ -- -- 843
Proceeds from sale of minority interest in
subsidiary.......................................... -- 250 --
Proceeds from subordinated debt offering............ -- 775 --
Proceeds from capitalized lease..................... 200 -- --
Proceeds from issuance of common stock.............. 1,077 307 12,111
Proceeds from issuance of warrants.................. -- 77 186
Net proceeds from notes payable..................... 189 777 175
------- ------ -------
Net cash provided by financing activities........... 892 793 11,922
------- ------ -------
Effect of exchange rate changes on cash............. (181) (32) 17
------- ------ -------
Net increase (decrease) in cash and cash
equivalents......................................... (817) 725 8,990
Cash and cash equivalents at beginning of year...... 1,340 523 1,248
------- ------ -------
Cash and cash equivalents at end of year............ $ 523 $1,248 $10,238
======= ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
21
<PAGE>
SILICON VALLEY RESEARCH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
The Company designs, develops, and markets a series of advanced computer-
aided design software products for use by electronic engineers in the design
and engineering of integrated circuits and operates in one industry segment.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reported
period. Actual results could differ materially from those estimates.
INVESTMENT IN SUBSIDIARIES AND BASIS OF PRESENTATION
The financial statements include the accounts of the Company and its
subsidiaries after elimination of all significant intercompany accounts and
transactions. (See Note 2 for discussion of closure of European subsidiaries.)
The Company has reclassified the presentation of certain prior year
information to conform with the current year presentation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the statements of cash flows and balance sheets
include cash on hand and investments with original or remaining maturities at
the date of purchase of 90 days or less.
CONCENTRATION OF CREDIT RISK
The composition of the Company's accounts receivable with respect to the
semiconductor industry is characterized by generally short collection terms.
Generally, the Company does not require collateral, allowances for potential
credit losses are maintained and such losses have been within management's
expectations. At March 31, 1995 and 1996, three and four different customers
comprised 48% and 59%, respectively, of the Company's accounts receivable. At
March 31, 1995, one Korean customer comprised 22% of accounts receivable and
at March 31, 1996, two Japanese customers comprised 13% and 11%, respectively.
The Company places its cash with highly rated financial institutions and
limits the amount of credit exposure with any one financial institution.
REVENUE RECOGNITION
Revenues are comprised of license fees for the Company's software products
(except in Japan where revenues are comprised of sales of the Company's
software products) and fees for services complementing its products, including
annual maintenance and support, training and consulting.
Revenue from licenses is generally recognized when a customer purchase order
has been received, a license agreement has been executed, the software has
shipped, remaining obligations are insignificant, and collection of the
resulting account receivable is probable. Provisions for insignificant vendor
obligations are recorded at the time products are shipped.
22
<PAGE>
SILICON VALLEY RESEARCH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Software maintenance revenue, including maintenance revenue bundled with the
initial product license revenue, is deferred and recognized ratably over the
maintenance period. The maintenance revenue bundled with the initial product
license revenue is unbundled based on prices for which maintenance is sold
separately to customers. Training and consulting revenues are recognized as
these services are performed.
ENGINEERING, RESEARCH AND DEVELOPMENT COSTS
Engineering, research and development costs are principally comprised of
research and development expenditures in connection with new products,
improvements to existing products, maintenance, and documentation, all of
which are charged to expense as incurred.
The Company capitalizes software development costs incurred after
establishing technological feasibility of the product (using the working model
concept method) until the product is available for general release.
Capitalized software development costs are amortized and included in cost of
license fees and other revenues using the greater of the amount computed using
the ratio that current gross revenues for a product bear to the total of
current and anticipated future gross revenues for that product, or on a
straight-line basis over the expected economic life of the product, generally
estimated to be 30 months.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Equipment acquired under capital
lease obligations is recorded at the lower of fair market value or the present
value of the future minimum lease payments at the inception of the lease.
Depreciation of fixed assets is computed on the straight-line basis over
estimated useful lives of three to five years. Leasehold improvements are
amortized over the shorter of their estimated useful lives or the remaining
lease term. Capitalized leases are generally amortized over the shorter of the
life of the lease or the life of the asset. Software licenses are generally
amortized on the straight-line basis over 30 or 60 months.
NET INCOME (LOSS) PER SHARE
The number of shares used in computing net income (loss) per share is
calculated using the weighted average number of common and common equivalent
shares (to the extent such shares had a dilutive effect) outstanding for each
period. There is no significant difference between primary and fully-diluted
net income per share.
FOREIGN CURRENCY TRANSLATION
The functional currency of the Company's foreign subsidiaries is the local
currency. The assets and liabilities, capital accounts, and revenue and
expense accounts of the Company's foreign subsidiaries have been translated
using the exchange rates at the balance sheet date, historical exchange rates,
and the weighted average exchange rates for the period, respectively.
The net effect of the translation of the accounts of the Company's
subsidiaries has been included in shareholders' equity as cumulative
translation adjustments. Gains and losses that arise from exchange rate
changes on transactions denominated in a currency other than the local
currency are included in results of operations as incurred.
23
<PAGE>
SILICON VALLEY RESEARCH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOREIGN EXCHANGE CONTRACTS
Sales orders received by foreign sales subsidiaries are primarily
denominated in currencies other than the U.S. dollar. Intercompany payments
for Company products are made in U.S. dollars. In order to reduce the risk of
loss due to changes in exchange rates between the time the Company's products
are purchased by subsidiaries and the time payment is made, the subsidiaries
enter into foreign exchange contracts when economically feasible. Gains and
losses resulting from these contracts which to date have been insignificant
are recorded in general and administrative expense as the Company does not
have any firm commitments to third parties related to the Company's
intercompany foreign currency transactions. Foreign exchange contracts had
notational amounts outstanding of $389 and $281 at March 31, 1995 and 1996,
respectively. The foreign exchange contracts, which generally have maturities
that do not exceed six months, are contracts for delayed delivery of
securities at a purchase date and at a specified price. Risks arise equal to
the notational amount of the contracts from the possible inability of counter
parties to meet the terms of these contracts and from movements in security
values. The other parties to these contracts consist of a limited number of
major financial institutions. The Company does not expect any significant
losses as a result of default by other parties. The cash requirements under
these foreign exchange contracts are not significant.
INCOME TAXES
Income taxes are computed using the asset and liability method. Under the
asset and liability method, deferred income tax assets and liabilities are
determined based on the differences between the financial reporting and tax
bases of assets and liabilities and are measured using the currently enacted
tax rates and laws.
NOTE 2 RESTRUCTURING COSTS
During the year ended March 31, 1994, the Company restructured its
operations and consequently, recorded a $1,150 charge in 1994 operating
results to reflect its decision to reduce staff levels and close certain
offices. This also includes the write-off of the cumulative foreign currency
losses recorded in the equity section due to the closure of the European
offices. The restructuring costs are comprised of the following:
<TABLE>
<S> <C>
Cumulative foreign currency loss.................................. $ 611
European facility closure costs................................... 284
European payroll and payroll related severance costs.............. 201
Other............................................................. 54
------
$1,150
======
</TABLE>
At March 31, 1995, the accrual related to facility closure, severance and
other costs had been paid in amounts approximating those set forth above.
NOTE 3 FIXED ASSETS
<TABLE>
<CAPTION>
MARCH 31,
--------------
1995 1996
------ ------
<S> <C> <C>
Fixed assets comprise:
Computer equipment........................................ $2,158 $1,805
Office equipment.......................................... 242 324
------ ------
2,400 2,129
Less accumulated depreciation and amortization............ (1,333) (1,592)
------ ------
$1,067 $ 537
====== ======
</TABLE>
24
<PAGE>
SILICON VALLEY RESEARCH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Fixed assets acquired under capital leases included above are as follows:
<TABLE>
<S> <C> <C>
Computer equipment............................................ $247 $506
Less accumulated amortization................................. (210) (350)
---- ----
$ 37 $156
==== ====
</TABLE>
NOTE 4 OTHER ASSETS
<TABLE>
<CAPTION>
MARCH 31,
-------------
1995 1996
----- ------
<S> <C> <C>
Other assets comprise:
Software development costs................................. $ 487 $1,133
Software licenses.......................................... 891 1,211
----- ------
1,378 2,344
Less accumulated amortization.............................. (862) (1,330)
----- ------
516 1,014
Loan to officer............................................ -- 100
Other...................................................... 189 267
----- ------
$ 705 $1,381
===== ======
</TABLE>
Software development costs capitalized during 1994, 1995 and 1996 were $30,
$487, and $646, respectively. Accumulated amortization includes the write-off
of capitalized software of $126 and the write-off of purchased software of
$332 in fiscal 1994. Loan to officer consists of a 3 year forgiveable loan to
the President and Chief Executive Officer to help defray moving expenses. The
loan accrues interest at 5.9% each year. Other consists primarily of deposits
on facilities and equipment leases.
NOTE 5 NOTES PAYABLE
The Company has a $2,000 line of credit with a bank. The line bears interest
at prime plus 1 percent. The line of credit is collateralized by substantially
all of the accounts receivable of the Company. The terms of the credit
agreement require minimum amounts of net worth, maximum ratios of indebtedness
to net worth and minimum quarterly after tax profits. This agreement also
restricts the Company's ability to pay any cash dividends to its shareholders
and expires on September 15, 1996. Amounts outstanding at March 31, 1995, and
1996, were $300 and $0, respectively.
NOTE 6 ACCRUED EXPENSES
<TABLE>
<CAPTION>
MARCH 31,
--------------
1995 1996
------- ------
<S> <C> <C>
Accrued expenses comprise:
Accrued payroll and related costs......................... $ 723 $ 650
Taxes payable............................................. 384 324
Other..................................................... 390 355
------- ------
$ 1,497 $1,329
======= ======
</TABLE>
Other consists of accruals related to expenses incurred in the normal course
of business, such as professional fees, utilities, and travel and sales
expenses.
25
<PAGE>
SILICON VALLEY RESEARCH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7 LONG--TERM DEBT
<TABLE>
<CAPTION>
MARCH 31,
-----------
1995 1996
----- ----
<S> <C> <C>
Long-term debt comprise:
Capitalized lease obligations................................ $ 61 $177
Subordinated debt............................................ 775 --
----- ----
836 177
Less current portion......................................... (42) (139)
----- ----
$ 794 $ 38
===== ====
</TABLE>
The subordinated debt, which was issued in September, 1994, under an
agreement with certain investors, required quarterly payments of interest at 7
1/2%, and was subordinated to all indebtedness of the Company to banks,
insurance companies, factors or other lending or financial institutions
regularly engaged in the business of lending money. The subordinated debt was
paid in full in February, 1996. One of the lenders was a 5% shareholder and
two were directors of the Company. The lenders also purchased warrants for $52
in cash entitling them to purchase 258 shares of unregistered Common Stock of
the Company at a price of $1.50 per share at any time prior to September 1,
1999 (see Note 10).
The aggregate principal payments of long-term debt and minimum lease
payments under capitalized lease obligations for the next two fiscal years
ending March 31 are as follows:
<TABLE>
<S> <C>
1996............................................................... $ 154
1997............................................................... 39
-----
193
Less amounts representing interest................................. (16)
-----
$ 177
=====
</TABLE>
NOTE 8 COMMITMENTS AND CONTINGENCIES
The Company leases its current headquarters in the United States through
July 31, 1996, and sales offices in the United States, Taiwan and Japan under
operating leases expiring at various dates, including renewal options, through
1999. In addition, the Company leases certain computer and office equipment
under operating leases expiring at various dates through 1996. In November,
1995, the Company signed a sale and leaseback agreement relating to computer
equipment. The Company received cash of $843 under this transaction and in
return the Company is obligated to make lease payments for 42 months. On April
23, 1996, the Company entered into a five year lease that commences on July 1,
1996 for the occupancy of approximately 20,000 square feet in San Jose,
California, that will serve as its headquarters. Non-cancelable rental
payments over the term of leases exceeding one year, including the lease of
the Company's new headquarters, are as follows:
<TABLE>
<S> <C>
1997.............................................................. $ 726
1998.............................................................. 791
1999.............................................................. 594
2000.............................................................. 297
2001.............................................................. 282
Thereafter........................................................ 71
-------
$ 2,761
=======
</TABLE>
26
<PAGE>
SILICON VALLEY RESEARCH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company is generally responsible for its pro rata share of taxes,
maintenance and insurance on the facilities. Rental expense aggregated $1,198,
$999 and $1,041 in 1994, 1995 and 1996, respectively.
The Company is subject to various types of litigation during its normal
course of business. In December, 1994, the Company was named as defendant in
an action brought by a competitor in the Santa Clara County Superior Court
alleging unfair competition and breach of contract. The second amended
complaint, the operative pleading, alleges unfair competition, breach of
contract, breach of implied covenant of good faith and fair dealing, and
unjust enrichment. The plaintiff is seeking attorneys' fees, damages, and
enforcement of the contract. The litigation is in the discovery stage and the
ultimate outcome cannot presently be determined. Accordingly, no provision for
any liability that may result upon adjudication has been made in the
consolidated financial statements.
NOTE 9 SAVINGS AND INVESTMENT PLAN
The Company has the Silicon Valley Research Savings and Investment Plan and
Trust ("the Plan"), qualified under Sections 401(k) and 401(a) of the Internal
Revenue Code. The Plan provides for tax-deferred automatic salary deductions
and alternative investment options. Employees are eligible to participate
after completion of 60 days of employment. Participants may apply for loans
from their accounts.
The Plan permits Company contributions determined annually by the Board of
Directors. Contributions authorized, if any, will not exceed amounts allowed
by Internal Revenue Code Section 404. Allocation of employer contributions to
participant's accounts is determined by the Board of Directors at the time of
contribution. The Company contributed $10 and $22 to the Plan during 1995 and
1996, respectively. There were no Company contributions to the Plan during
1994. Administrative costs paid by the Company were insignificant during 1994,
1995 and 1996.
NOTE 10 CAPITAL STOCK
PREFERRED STOCK
The Company's Board of Directors has the authority to issue up to 1,000
shares of preferred stock and to determine the price, rights, preferences,
privileges and restrictions, including voting rights, without any further vote
or action by the Company's shareholders.
STOCK SPLIT
On September 6, 1995, the shareholders of the Company approved a one for two
reverse stock split of the Company's common stock, which became effective on
January 25, 1996. All references to number of shares and to per share
information in the consolidated financial statements have been adjusted to
reflect the reverse stock split on a retroactive basis.
PRIVATE PLACEMENT
In February, 1993, the Company entered into a Stock Purchase Agreement with
a limited group of accredited investors. Under the terms of the Agreement, the
Company sold 700 newly issued, unregistered shares of the Company's common
stock in exchange for $1,050 in cash (cost of issuance amounted to $39). Three
officers and directors participated in the offering. Anytime after August 1,
1993, holders may request the Company to effect a registration and one holder
participated in the February, 1996 public offering.
In January, 1994, the Company entered into a Stock Purchase Agreement with a
limited group of accredited investors. Under the terms of the Agreement, the
Company sold 2,025 newly issued, unregistered shares of the Company's common
stock in exchange for $1,012 in cash (cost of issuance amounted to $8). Three
directors participated in the offering. Anytime after August 1, 1994, holders
may request the Company to effect a registration and one holder participated
in the February, 1996 public offering.
27
<PAGE>
SILICON VALLEY RESEARCH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On June 6, 1995, the Company entered into a Stock Purchase Agreement with a
limited group of existing and new accredited investors. One of the investors
is a 5% shareholder. Under the terms of the Agreement, the Company sold 1,172
newly issued, unregistered shares of the Company's common stock in exchange
for $2,860 in cash (cost of issuance amounted to approximately $25). No
officers or directors participated in the offering. Anytime after August 31,
1995, holders may request the Company to effect a registration and to date no
qualifying requests have been made.
PUBLIC OFFERING
On February 13, 1996, the Company closed on a public offering selling 2,000
shares of common stock for $9,400 (cost of issuance amounted to approximately
$652). Two shareholders also sold 2,408 shares of common stock in this
offering.
STOCK OPTIONS
At March 31, 1996, the Company has reserved 1,529 shares of common stock for
issuance under its employee stock option plan and Directors Stock Option Plan.
This includes an increase of 550 shares approved by the shareholders of the
Company on September 6, 1995.
Options are granted under the employee stock option plan by an Option
Committee designated by the Board of Directors at an exercise price equal to
the fair market value as of the date of the grant and generally vest over
three to four years after one year from the date of the grant.
On May 14, 1990, the Company adopted the Directors Stock Option Plan
reserving 75 shares of common stock for issuance under the plan and in
September, 1995 increased the shares of common stock reserved for issuance to
125. Options are granted automatically on the effective date of the Plan to
existing Board of Director members or upon initial election or appointment of
a member of the Board of Directors for up to 15 shares of the Company's common
stock, and thereafter annually for up to 1.5 shares of the Company's common
stock at an exercise price equal to the fair market value, as determined by
the closing trading price on the grant date. The options generally vest in
equal monthly installments over three to four years after one year from the
date of the grant.
The table below summarizes the Company's stock option activity under its
stock option plans:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
------------------------
SHARES PRICE PER SHARE
------ ----------------
<S> <C> <C> <C>
Balance March 31, 1993.......................... 654 $1.2500 -$3.5000
Options granted................................. 586 $0.8750 -$2.8740
Options exercised............................... (1) -$1.8126
Options terminated.............................. (556) $1.0000 -$2.8740
-----
Balance March 31, 1994.......................... 683 $0.8750 -$3.5000
Options granted................................. 742 $1.1250 -$4.1876
Options exercised............................... (145) $0.8750 -$2.7500
Options terminated.............................. (310) $1.0000 -$3.5000
-----
Balance March 31, 1995.......................... 970 $0.8750 -$4.1876
Options granted................................. 879 $3.1250 -$8.8750
Options exercised............................... (196) $0.8750 -$3.0000
Options terminated.............................. (402) $0.8750 -$6.1876
-----
Balance March 31, 1996.......................... 1,251 $0.8750 -$8.8750
=====
</TABLE>
28
<PAGE>
SILICON VALLEY RESEARCH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At March 31, 1996, options to purchase 169 shares of common stock were
vested, and 278 shares of common stock were available for future grant.
EMPLOYEE STOCK PURCHASE PLAN
The 1993 Employee Stock Purchase Plan, under which 350 shares of common
stock have been reserved for issuance, allows substantially all employees to
subscribe to shares of common stock during participation periods set by the
Board of Directors at a purchase price which is the lower of 85% of the fair
market value at the beginning or the end of each period. There were 56, 37 and
63 shares of common stock issued under the plan in 1994, 1995 and 1996,
respectively, leaving a balance of 194 shares available for issuance at March
31, 1996.
WARRANTS
The following warrants to purchase shares of the Company's common stock are
outstanding and fully vested at March 31, 1996:
<TABLE>
<CAPTION>
EXPIRING DURING
THE FISCAL NUMBER OF COMMON
YEAR ENDING EXERCISE PRICE SHARES UNDER WARRANTS
--------------- ---------------- ---------------------
<S> <C> <C>
03/31/97 $0.5000--$1.2400 58
03/31/98 $1.1250--$3.3130 153
03/31/99 $0.8750 125
03/31/00 $1.1250--$1.5000 418
---
754
===
</TABLE>
During the fiscal year ended March 31, 1996, warrants were exercised for 150
shares of the Company's common stock at a price of $1.24 per share for cash of
$186 and 12 shares of the Company's common stock at a price of $0.50 in a net
exercise, cashless transaction.
In January, 1994, the Chairman of the Board purchased the warrants that
expire in fiscal 1999.
NOTE 11 SALE OF SHARES IN SUBSIDIARY
On December 27, 1994, the Company sold 3% (60 shares) of the common stock of
its Japanese subsidiary to certain independent investors for $272, net of
costs. Under the terms of the sales agreement, the Company must complete an
initial public offering of its subsidiary's common stock in Japan by March 31,
2001 or exchange the investors' shares for common shares of the Company having
a fair market value equal to the cost of the shares held by investors plus 5%
interest for each year held. The Company has recorded, in shareholder's
equity, its proportionate increase in the equity of its Japanese subsidiary.
NOTE 12 INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
------------------------
1994 1995 1996
------- -------- -------
<S> <C> <C> <C>
CURRENT:
Federal.......................................... $ -- $ -- $ 3
State............................................ 1 3 2
Foreign (net of benefit of net operating loss
carryforward of $225 in 1995)................... 206 178 --
------- -------- ------
Total provision................................ $ 207 $ 181 $ 5
======= ======== ======
</TABLE>
29
<PAGE>
SILICON VALLEY RESEARCH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred income taxes result from temporary differences in the recognition
of certain expenses for financial and income tax reporting. The net deferred
tax assets consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------
1995 1996
---------- ----------
<S> <C> <C>
Allowances and accruals not currently
deductible...................................... $ 284 $ 246
Net operating losses............................ 4,310 3,809
---------- ----------
Total deferred tax assets................... 4,594 4,055
Less the Valuation allowance.................... (4,594) (4,055)
---------- ----------
Net deferred tax asset $ -- $ --
========== ==========
</TABLE>
The Company has provided a valuation allowance on the deferred tax assets to
reduce the assets to the amount expected to be realized.
At March 31, 1996, the Company had available federal and state tax net
operating loss carryforwards of $11,000 and $1,122 , respectively. The federal
and state tax net operating loss carryforwards expire from 2002 to 2010 and
1997 to 2000, respectively. For federal purposes, the Company has federal and
state research and development credit carryforwards of $376 and $111,
respectively, expiring from 1997 through 2011. These credits may be available
to offset future taxes.
A reconciliation between the provision for income taxes computed at the
statutory rate and the effective rate reflected in the Consolidated Statement
of Operations is as follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH
31,
-------------------
1994 1995 1996
------- ---- ----
<S> <C> <C> <C>
Provision (benefit) at U.S. statutory rate........... $(1,790) $ 91 $195
Tax losses not currently benefited................... 1,790 -- --
Tax effect resulting from foreign activity........... 206 178 --
State taxes, net of federal tax benefit.............. 1 3 2
Utilization of net operating loss carryforward....... -- (91) (192)
------- ---- ----
Tax provision.................................... $ 207 $181 $ 5
======= ==== ====
</TABLE>
NOTE 13 SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-----------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Cash paid during the period for:
Interest......................................... $ 115 $ 89 $ 98
Income taxes..................................... $ 333 $ 242 $ 10
Noncash investing and financing activities:
Warrants for Common Stock........................ $ -- $ 31 $ --
Capital lease obligations to finance computer
equipment and software licenses.................. $ -- $ 34 $ 259
Exchange of software to acquire computer
equipment........................................ $ -- $ 739 $ 294
</TABLE>
In March, 1995, the Company exchanged software with a customer in return for
computer equipment. The recorded cost of the computer equipment of $739
represented approximately the fair market value of that asset. The fair value
of the software exchanged for the computer equipment was approximately $789,
which resulted in cash receipts of approximately $50 in conjunction with the
transfer.
30
<PAGE>
SILICON VALLEY RESEARCH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In June, 1995, the Company exchanged software held for sale with a customer
in return for source code and recorded purchased software of $294 and license
and maintenance fee revenues of $262 and $32, respectively. The recorded cost
of the software of $294 represents approximately the fair market value of the
asset.
NOTE 14 BUSINESS SEGMENTS
The Company's products are principally distributed and serviced through its
own marketing and service organization. Operations are conducted in the United
States, Europe and Japan. The following table summarizes the United States,
European and Japanese operations of the Company:
<TABLE>
<CAPTION>
ADJUSTMENTS
UNITED AND
STATES EUROPE JAPAN ELIMINATION'S CONSOLIDATED
------- ------ ------ ------------- ------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 31, 1994
Sales to unaffiliated
customers................... $ 4,860 $ 333 $2,344 $ -- $ 7,537
Transfer between geographic
regions..................... 1,690 -- -- (1,690) --
------- ----- ------ ------- -------
Total sales................. $ 6,550 $ 333 $2,344 $(1,690) $ 7,537
======= ===== ====== ======= =======
Operating income (loss)..... $(2,089) $(885) $ (662) $ -- $(3,636)
======= ===== ====== ======= =======
Identifiable assets......... $ 1,421 $ -- $1,825 $ -- $ 3,246
======= ===== ====== ======= =======
YEAR ENDED MARCH 31, 1995
Sales to unaffiliated
customers................... $ 5,030 $ 75 $3,146 $ -- $ 8,251
Transfer between geographic
regions..................... 1,394 -- -- (1,394) --
------- ----- ------ ------- -------
Total sales................. $ 6,424 $ 75 $3,146 $(1,394) $ 8,251
======= ===== ====== ======= =======
Operating income (loss)..... $ 279 $ (38) $ 179 $ -- $ 420
======= ===== ====== ======= =======
Identifiable assets......... $ 2,875 $ -- $2,347 $ -- $ 5,222
======= ===== ====== ======= =======
YEAR ENDED MARCH 31, 1996
Sales to unaffiliated
customers................... $ 7,116 $ 253 $3,578 $ -- $10,947
Transfer between geographic
regions..................... 1,686 -- -- (1,686) --
------- ----- ------ ------- -------
Total sales................. $ 8,802 $ 253 $3,578 $(1,686) $10,947
======= ===== ====== ======= =======
Operating income (loss)..... $ 74 $ 248 $ 208 $ -- $ 530
======= ===== ====== ======= =======
Identifiable assets......... $15,354 $ -- $1,738 $ -- $17,092
======= ===== ====== ======= =======
</TABLE>
Included in total United States revenue are export sales of $581, $1,070 and
$909 for 1994, 1995 and 1996, respectively, principally to the Far East. Total
consolidated revenue outside of the United States was $3,258, $4,291 and
$4,740 in 1994, 1995 and 1996, respectively.
One customer accounted for 16% and two customers each accounted for 11% of
the Company's consolidated revenue in fiscal 1996. One customer accounted for
12% and two customers each accounted for 10% of the Company's consolidated
revenue in fiscal 1995. One customer accounted for 21% of consolidated revenue
in fiscal 1994. Revenue from one product accounted for 69% of the Company's
consolidated revenue in fiscal 1996. Revenue from a shareholder was $400 and
$43 in fiscal 1994 and 1995, respectively.
31
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
BALANCE AT WRITE-OFF
BEGINNING OF PROVISION DOUBTFUL OF UNCOLLECTIBLE BALANCE AT
YEAR ACCOUNTS RECEIVABLE ACCOUNTS RECEIVABLE END OF YEAR
------------ ------------------- ------------------- -----------
<S> <C> <C> <C> <C>
Accounts receivable--
allowances
for doubtful accounts
Year ended March 31,
1994.................... $53 $-- $ 3 $50
Year ended March 31,
1995.................... 50 -- -- 50
Year ended March 31,
1996.................... $50 $200 $225 $25
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company's Board of Directors approved a change in the Company's
independent accountants for the fiscal year ending March 31, 1996, from
Coopers & Lybrand L.L.P. to Price Waterhouse LLP on March 29, 1996. This
change was based on the recommendation of the Audit Committee of the Board of
Directors. The former accountants neither resigned nor declined to stand for
reelection. Form 8-K was filed with the Securities and Exchange Commission on
April 4, 1996.
32
<PAGE>
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE SECTION 16(a) OF THE EXCHANGE ACT
The following sets forth certain information regarding the executive
officers of the Registrant:
Executive officers serve at the discretion of the Board of Directors of the
Registrant.
Robert R. Anderson (age 58) became Chairman of SVR in January 1994 and was
Chief Executive Officer from April 1994 until July 1995 and was Chief
Financial Officer from September 1994 to February 1996. Mr. Anderson co-
founded KLA Instruments Corporation ("KLA"), a supplier of equipment for
semiconductor companies, in 1975. He served as Vice-Chairman of the Board of
KLA from November 1991 to March 1994 and served as Chairman of the Board of
KLA from May 1985 to November 1991. Prior to that, Mr. Anderson served as
Chief Operating Officer and Chief Financial Officer of KLA for nine years. Mr.
Anderson currently serves as director of Applied Science & Technology Inc., a
supplier of systems components for the semiconductor industry, and Tegal
Corporation, a designer and manufacturer of etch systems.
Glenn E. Abood (age 35) joined SVR in May 1995 and was named President,
Chief Executive Officer and a director in July 1995. Mr. Abood was employed by
Zycad Corp., an electronic design automation company ("Zycad"), from July 1984
to July 1995 with his most recent positions as Vice President and General
Manager of Zycad's New Jersey operations. Mr. Abood has over twelve years in
the electronic design automation industry and has held positions in
engineering, sales, marketing and management. Mr. Abood received an MSEE from
Worcester Polytechnic Institute.
Cheryl S. Billings (age 47) joined SVR as Corporate Controller in September
1992 and was named Chief Accounting Officer in October 1992. Mrs. Billings is
a CPA and CMA, with over 16 years experience in industry and public
accounting. Prior to joining SVR, she was with Cisco Systems Inc., a
manufacturer of local area network and wide area network interconnect devices,
as Manager, General Accounting from June 1990 to November 1991 and with the
accounting firm of Price Waterhouse from August 1986 to November 1989. She is
currently a regent for the Institute of Certified Management Accountants. Mrs.
Billings received a BS in accounting from San Jose State University.
Stephen J. Burdoin (age 48) joined SVR as Vice President of Finance in
November 1995 and has been Chief Financial Officer since February 1996. Mr.
Burdoin is a member of the California State Bar and has practiced law for ten
years prior to joining SVR. Prior to that, Mr. Burdoin had 15 years experience
in industry accounting. Most recently, he was General Counsel for Nady
Systems, Inc., a manufacturer of electronic equipment, from April 1995 to
November 1995 and Associate Attorney with The Law Offices of Hagai Horowitz
from October 1994 to March 1995 and The Law Offices of Patrick E. Catalano
from January 1993 to September 1994. Prior to that, he was Staff Counsel for
Nationwide Mutual Insurance Company from July 1990 to December 1992. Prior to
practicing law, Mr. Burdoin held various accounting positions including
Controller, General Accounting Manager and Supervisor of Financial Reporting
for various companies, including Advanced Micro Devices, Inc., a manufacturer
of microprocessors and integrated circuits. Mr. Burdoin received a BS from
California State University, Hayward, an MBA from Golden Gate University, and
a JD from Santa Clara University.
Dr. Teng-Sheng Moh (age 37) joined SVR as Senior Technologist in June 1994,
was named Director of Engineering in June 1995 and was named Vice President of
Engineering in November 1995. Dr. Moh has over 11 years of experience in EDA
research and development. Prior to joining SVR, he was with Cadence, a
developer of electronic design automation software, from July 1990 to June
1994. Prior to that, he received a Ph.D. in Computer Science at the University
of California at Davis.
Arthur E. B. Monk (age 50) joined SVR as Vice President of Marketing in July
1994, was named Vice President of Corporate Development in February 1995, and
was named Vice President of Marketing and Corporate Development in April 1996.
He was a consultant from June 1986 to July 1994 with Art Monk & Associates,
helping companies commercialize technology. Prior to that, Mr. Monk held
senior marketing and
33
<PAGE>
management positions at ROLM Corporation and Hewlett-Packard Company
("Hewlett-Packard") in the telecommunications and computer industries. His
education includes an MS in Biophysics from the University of Manitoba and an
MBA in Marketing and Finance from the University of Alberta.
Randall L. Smith (age 37) joined SVR as Vice President of Marketing in
February 1995 and was named as Vice President of Product Marketing in April
1996. He was Sales Manager at Silicon Architects from June 1994 to January
1995 and an employee of Cadence from April 1990 to April 1994, most recently
as Director of Partnership from January 1993 to April 1994. In addition, Mr.
Smith has held consulting roles with AT & T Corp. and International Business
Machines Corp. He has over 16 years experience in the EDA industry. He
received a BSEE from Cornell University and an MBA from Santa Clara
University.
Minoru Takagi (age 50) is Vice President of SVR and President and General
Manager of SVR-KK in Japan. He has been an employee of the Company since the
mid 1980s. He began his career in the electronics industry in 1968 and has
worked for Burroughs Computer, Fairchild, and Megatest Corp., a manufacturer
of automatic test systems for the integrated circuit industry, in Japan.
Ching-Chy Wang (age 42) joined SVR in June 1994 as Principal Technologist
and was named Vice President of the Company and President of SVR-Taiwan in
February 1996. Dr. Wang was an employee, and Member of Consulting Staff, of
Cadence, a developer of electronic design automation software, between 1991 to
1994. He was Manager of Design Languages Group with ExperTest, a software
company involved in automatic transparent generation, between 1989 to 1991.
Dr. Wang received a BS in Control Engineering and Computer Science from
National Chiao-Tung University, an MS in Computer Science from the University
of Utah, and a Ph.D. in Computer Science from the University of Pittsburgh.
Craig M. Wentzel (age 42) joined SVR as Vice President of Eastern Area Sales
in December 1995. Mr. Wentzel was Sales Director at Zycad from July 1992 to
December 1995. Prior to that, he was Sales Manager at Valid Logic Systems and
Cadence from September 1989 to July 1992. Mr. Wentzel previously worked for
Tektronix, Inc., a strategic business development for new instrument products
for the U. S. Department of Defense customer base. Mr. Wentzel has over 16
years of sales and management experience with 10 years experience with EDA
companies. He received a BSET from Trenton State College and an MS in
Biomedical Engineering from Rutgers University.
The Registrant incorporates by reference the Registrant's definitive proxy
statement to be filed pursuant to Regulation 14A on, or before, July 29, 1996
for the information required by Item 10 with respect to the Company's
directors and the information required by Item 405 of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION
The Registrant incorporates by reference the Registrant's definitive proxy
statement to be filed pursuant to Regulation 14A on, or before, July 29, 1996
for the information required by Item 11.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Registrant incorporates by reference the Registrant's definitive proxy
statement to be filed pursuant to Regulation 14A on, before, July 29, 1996 for
the information required by Item 12.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Registrant incorporates by reference the Registrant's definitive proxy
statement to be filed pursuant to Regulation 14A on, or before, July 29, 1996
for the information required by Item 13.
34
<PAGE>
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 10-K
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
(a)(1) The financial statements filed as part of this Report at Item 8 are
listed in the Index to Financial Statements and Financial Statement
Schedules on page 14 of this Report.
(a)(2) The financial statement schedule filed as part of this Report at Item
8 is listed in the index to Financial Statements and Financial
Statement Schedules on page 14 of this Report.
(a)(3) The following exhibits are filed with this Annual Report on Form 10-K:
3.01 Registrant's Articles of Incorporation as amended to date
(incorporated by reference to Exhibit 3.01 of Registrant's
Registration Statement on Form S-1 (File No. 2-89943) filed March 14,
1984, as amended (the "1984 Registration Statement")).
3.02 Registrant's bylaws, as amended to date (incorporated by reference to
Exhibit 4.01 of the 1984 Registration Statement).
10.01* Registrant's 1990 Directors Stock Option Plan (incorporated by
reference to Exhibit A of Registrant's Proxy Statement dated July 10,
1990).
10.02 Stock Purchase Agreement dated May 16, 1991 between the Registrant and
Intergraph Corporation (incorporated by reference to Exhibit 4.01 of
Registrant's Report on Form 8-K dated June 7, 1991).
10.03* Registrant's 1988 Stock Option Plan, as amended to date, including the
stock option grant form and the stock option exercise notice and
agreement (incorporated by reference to Exhibit 10.15 of Registrant's
Annual Report on Form10-KSB for the fiscal year ended March 31, 1993).
10.04 Warrant Agreement dated March 31, 1992 between the Registrant and
Intergraph Corporation (incorporated by reference to Exhibit 10.18 of
Registrant's Annual Report on Form10-KSB for the fiscal year ended
March 31, 1993).
10.05* Registrant's 1993 Employee Stock Purchase Plan, as amended to date
(incorporated by reference to Exhibit 10.20 of Registrant's Annual
Report on Form 10-KSB for the fiscal year ended March 31, 1993).
10.06 Stock Purchase Agreement dated February 12, 1993 between the
Registrant and several investors (incorporated by reference to Exhibit
4.01 of Registrant's current report on Form 8-K filed on April 15,
1993).
10.07 Stock Purchase Agreement dated January 19,1994 between the Registrant
and several investors (incorporated by reference to Exhibit 4.01 of
Registrant's current report on Form 8-K filed on February 4, 1994).
10.08 Warrant Agreement dated March 22, 1994 between the Registrant and
Prutech Research and Development Partnership II (incorporated by
reference to Exhibit 10.22 of Registrant's Annual Report on Form 10-
KSB for the fiscal year ended March 31, 1994).
10.09 Subordination debt agreement dated September 15, 1994 between the
registrant and several investors (incorporated by reference to Exhibit
4.01 of Registrant's current report on Form 8-K filed on November 4,
1994).
10.10* Employment Agreement dated October 31, 1995 between the Registrant and
Glenn E. Abood (incorporated by reference to Exhibit 10.10 of
Registrant's Registration Statement on Form S-2 filed December 6,
1995).
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.11 Stock Purchase Agreement dated June 6, 1995 between the Registrant and
several investors (incorporated by reference to Exhibit 10.10 of the
Registrant's Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1995).
10.12 Security and Loan Agreement dated September 15, 1995 by and among
Imperial Bank and the Registrant (incorporated by reference to Exhibit
10.12 of the Registrant's Registration Statement on Form SB-2 filed
December 6, 1995).
10.13 Master Equipment Lease Agreement dated November 9, 1995 by and between
Financing for Science International, Inc. and the Registrant
(incorporated by reference to Exhibit 10.13 of the Registrant's
Registration Statement on Form SB-2 filed December 6, 1995).
21.01 Subsidiaries of the Registrant
23.01 Consent of Price Waterhouse LLP
23.02 Consent of Coopers & Lybrand L.L.P.
27.00 Financial Data Schedule
</TABLE>
- - --------
*Management Contract or Compensatory Plan or Arrangement
36
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SILICON VALLEY RESEARCH
(Registrant)
Officer
By: /s/ Glenn E. Abood
----------------------------------
GLENN E. ABOOD,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Date: June 18, 1996
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
SIGNATURES TITLE DATE
/s/ Robert R. Anderson Chairman and June 18, 1996
- - ------------------------------------- Director
ROBERT R. ANDERSON
/s/ Glenn E. Abood President, Chief June 18, 1996
- - ------------------------------------- Executive Officer
GLENN E. ABOOD and Director
/s/ Stephen J. Burdoin Vice President, June 18, 1996
- - ------------------------------------- Chief Financial
STEPHEN J. BURDOIN Officer and
Secretary
/s/ Cheryl S. Billings Corporate Controller June 18, 1996
- - ------------------------------------- and Chief
CHERYL S. BILLINGS Accounting Officer
/s/ Roy L. Rogers Director June 18, 1996
- - -------------------------------------
ROY L. ROGERS
/s/ Dr. Thomas Sherby Director June 18, 1996
- - -------------------------------------
DR. THOMAS SHERBY
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
above constitutes and appoints Glenn E. Abood his true and lawful attorney-in-
facts and agents with full power of substitution and, for him and in his name,
place and stead, in any and all capacities to sign any and all amendments to
this Report on Form 10-K, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
37
<PAGE>
EXHIBIT 21.01
SILICON VALLEY RESEARCH AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
MARCH 31, 1996
<TABLE>
<CAPTION>
PERCENTAGES
ORGANIZED UNDER OF VOTING
LAWS OF SECURITIES OWNED
--------------- ----------------
<S> <C> <C>
Silicon Valley Research (Registrant)........ California --
Subsidiaries:
Silvar-Lisco G.m.b.H. ...................... West Germany 100%
(Non-operating subsidiary)
Closure in fiscal 1994
Silicon Valley Research K.K. ............... Japan 97%
SVR Taiwan.................................. Taiwan 100%
</TABLE>
All of the above subsidiaries are included in Silicon Valley Research's
Consolidated Financial Statements.
<PAGE>
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8(Nos. 2-293335, 33-2885, 33-10593, 33-20855, 33-67304,
and 33-97988) of Silicon Valley Research, Inc. of our report dated May 14,
1996 appearing on page 15 of this Form 10-K.
PRICE WATERHOUSE LLP
San Jose, California
June 20, 1996
<PAGE>
EXHIBIT 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Silicon Valley Research, Inc. and subsidiaries on Form S-8 (File Nos. 2-
293335, 33-2885, 33-10593, 33-20855, 33-67304, 33-97988) of our report dated
May 23, 1995, on our audits of the consolidated financial statements and
financial statement schedule of Silicon Valley Research, Inc. and subsidiaries
as of March 31, 1995, and for the years ended March 31, 1995 and 1994, which
report is included in this 1996 Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
San Jose, California
June 20, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1996 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 10,238
<SECURITIES> 0
<RECEIVABLES> 4,675
<ALLOWANCES> 25
<INVENTORY> 0
<CURRENT-ASSETS> 15,174
<PP&E> 2,129
<DEPRECIATION> 1,592
<TOTAL-ASSETS> 17,092
<CURRENT-LIABILITIES> 3,326
<BONDS> 38
0
0
<COMMON> 31,171
<OTHER-SE> (17,443)
<TOTAL-LIABILITY-AND-EQUITY> 17,092
<SALES> 7,750
<TOTAL-REVENUES> 10,947
<CGS> 388
<TOTAL-COSTS> 745
<OTHER-EXPENSES> 9,672
<LOSS-PROVISION> 200
<INTEREST-EXPENSE> 98
<INCOME-PRETAX> 574
<INCOME-TAX> 5
<INCOME-CONTINUING> 569
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 569
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.00
</TABLE>
