<PAGE> 1
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, 1997
- --- 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, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 94-2743735
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
6360 SAN IGNACIO AVENUE
SAN JOSE, CA 95119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 361-0333
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 disclosure of delinquent filers in response to Item
405 of Regulation S-K is not contained in this form, and will not 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. [X]
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 2, 1997 in the over-the-counter market, was approximately
$10,000,000. 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 2, 1997, Registrant had approximately 16,764,624 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the definitive Proxy Statement for registrant's 1997 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 Operations - Other Factors
Affecting Future Results, and elsewhere in this Form 10-K, as well as other
risks and uncertainties described in the Company's other reports filed with the
Securities and Exchange Commission 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
Silicon Valley Research, Inc. ("the Company" or "SVR") 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 integrated circuit ("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. The Company 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 HAL, Hyundai, Motorola, OKI Semiconductor, Samsung
Electronics, Sony, Texas Instruments 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 by 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
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lengths and to achieve the smallest 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 summarizes SVR's product families:
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.
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 introduced the first version SVR SonIC in 1995, 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.
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SVR JET: Jet is a full custom IC layout editor that offers rich functionality
with a flexible user interface. This product is required for library
development, analog layout and preparing a layout for manufacturing. Jet offers
a full set of primitive objects including real circles, arcs, complex arrays and
irregular shapes that allows the tool to support all layout technologies from
MOS to GaAs, Bipolar and Hybrid. Jet has the capacity to handle the largest
designs with sophisticated hierarchical editing capabilities such as
Edit-In-Place and edits across multiple view windows. A compiled macro language
allows users to define their own functions and add these to the user interface
menus. User defined function keys and screen icons provide functional, all-angle
interactive design rule checking (DRC) that can run simultaneously while drawing
or in mini-batch mode.
MARKETING AND SALES
The Company's products are marketed principally through its direct sales force
in the United States and Japan and Taiwan. The Company has domestic
sales/support offices in metropolitan areas of California, Pennsylvania,
Massachusetts, Texas, North Carolina and foreign sales offices in Tokyo and
Taiwan. The Company also has distributors in Taiwan, Singapore and Europe.
International sales were approximately $4,291, $4,740 and $1,390 for fiscal
1995, 1996 and 1997, respectively, representing 52%, 43% and 25% of total
revenue for the respective periods, of which 51%, 41% and 24% came from the Far
East, principally Japan and Taiwan. (See Note 11 of Notes to Consolidated
Financial Statements).
The Company markets its products both domestically and internationally to
integrated circuit designers and manufacturers, large electronic systems
manufacturers, and major aerospace, automotive, and consumer electronics
companies. Consolidated revenue consists of the following:
<TABLE>
<CAPTION>
Customer 1995 1996 1997
- -------- ---- ---- ----
<S> <C> <C> <C>
A 12% 16% 14%
B * * 19%
C * 11% 13%
D 10% * *
E 10% 11% *
</TABLE>
*less than 10% of consolidated revenue
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 $50,000
for the least expensive software to approximately $500,000 for the most complex
software product. License revenue represents the major part of the Company's
total revenue.
The Company provides software 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 continued development of
new products and enhanced features 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 developed. 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.
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- In fiscal 1995, 1996 and 1997, the Company spent approximately
$2,172,000, $3,330,000 and $3,609,000, or as a percentage of revenue
26%, 30% and 66%, 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).
LICENSING TECHNOLOGY
The Company has the exclusive marketing rights to Bell Labs Design Automation's
CLOVER line of deep sub-micron verification products worldwide, with the
exception of Japan and Taiwan, where the Company will co-market with Bell Lab's
existing distributors. CLOVER is an integrated collection of software product
modules with a unique solution to the VLSI layout verification problem of deep
submicron designs. Users can purchase separate modules for the various aspects
of layout verification their specific design project may require. Furthermore,
the hierarchical version of the CLOVER modules requires no extra migration
effort from flat designs, and all modules are fully compatible with Cadence's
DRACULA format. In addition to leading-edge hierarchical checking, CLOVER
includes extremely fast and accurate 3-D extraction; a required technology for
deep submicron designs.
Subsequent to year end, the Company announced it signed an OEM agreement with
OEA International, Inc., a private software development company, to market OEA's
two and three-dimensional (2D/3D) electric field equation solver bundled with
SVR's Integrated Circuit (IC) physical design tools. This technology gives SVR
the ability to very accurately calculate critical performance parameters for
deep sub-micron ICs. OEA's precise analysis algorithm allows SVR products to
detect timing errors in advanced high speed ICs without resorting to costly
design iterations, thereby shortening the design cycle and extending SVR's
solutions to the fastest and most advanced chip designs, including
microprocessors, telecommunications and multimedia ICs.
Also, the Company completed the integration and testing of a new high speed
automatic placement technology resulting in improved design quality and
turnaround time, as well as a smaller design die size, for SVR's SC(TM)and
SonIC(TM)families of products. The new placement technology named
TeraCell(TM) has been developed by CLK Computer-Aided Design, Inc. SVR has
licensed the TeraCell(TM)placement technology, which is being offered as an
option to existing SVR installations and offered with new product sales starting
in June, 1997.
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 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.
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
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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.
PROPRIETARY RIGHTS
The Company relies on contract, trade secret and copyright law to protect its
technology. There can be no assurance that others will not develop technologies
that are similar or superior to the Company's technology or duplicate the
Company's technology. 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, 1997, the Company employed 68 full-time workers, including 25 in
marketing and sales, 35 in engineering and product development and the remainder
engaged in administrative activities. Of the 68 full-time employees, 55 were
located in the United States, 5 were employed in Taiwan and 8 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'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.
ITEM 2. PROPERTIES
The Company's principal administrative, marketing, engineering development and
support facilities occupy approximately 19,000 square feet in an office building
in San Jose, California. The property is occupied under a five year lease
expiring on July 1, 2001.
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; Yardley,
Pennsylvania; and Austin, Texas.
Management believes that its facilities will be adequate for the Company's
operations.
ITEM 3. LEGAL PROCEEDINGS
As with other companies in the Company's industry, the Company is subject to the
risk of adverse claims and litigation on a variety of matters, including
infringement of intellectual property, intentional and/or negligent
misrepresentation of material facts and breach of fiduciary duties. On January
10, 1997, Gambit Automated Design, Inc. ("Gambit"), a competitor of the Company,
filed a complaint alleging misappropriation of trade secrets, breach of
contract, inducing breach of contract, breach of fiduciary duty, unfair
competition and unjust enrichment against the Company and Anton Krouglyanskiy, a
former employee of Gambit and a current employee of the Company. Gambit seeks
injunctive relief,
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compensation and punitive damages, restitution and attorneys' fees and costs.
The parties are currently engaged in discovery. The Company believes the
lawsuit is without merit and intends to defend itself vigorously.
In February 1997, the Company and Mentor Graphics Corporation settled a legal
action brought by Mentor against the Company in 1994. The Settlement Agreement
required the Company to issue 627,451 shares of Common Stock to Mentor and to
exchange certain technology. Effective May 15, 1997 the Company registered such
shares under the Securities Act pursuant to the terms of the Settlement
Agreement. In addition, the Company may be required to issue up to an aggregate
of 1,254,902 additional shares of Common Stock to Mentor within 90 days after
the effectiveness of the Mentor Registration Statement should the average market
price of the Common Stock trade below a certain price. Mentor has the right to
require the Company to register any such additional shares under the Securities
Act.
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.
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 415 shareholders of record and approximately 3,500 beneficial
holders as of March 31, 1997.
COMMON STOCK PRICES
<TABLE>
<CAPTION>
Fiscal 1996 Quarter ended June 30 Sept. 30 Dec. 31 March 31
------- -------- ------- --------
<S> <C> <C> <C> <C>
High 7 1/4 12 1/2 9 1/2 9
Low 2 7/8 6 6 3/4 3 5/8
Fiscal 1997 Quarter ended June 30 Sept. 30 Dec. 31 March 31
------- -------- ------- --------
High 8 3/4 6 3/4 5 1/8 2 1/4
Low 3 5/8 4 1/4 2 1 1/16
</TABLE>
The Company has not declared or paid dividends on its common stock in fiscal
1995, 1996 and 1997. 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.
On February 24, 1997, the Company issued 627,451 shares of Common Stock to
Mentor pursuant to the settlement of a legal action brought by Mentor against
the Company in 1994. See "Legal Proceedings". The issuance of the shares was
deemed to be exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act and Regulation D promulgated thereunder.
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ITEM 6. SELECTED FINANCIAL DATA
The following financial data have been derived from the Company's consolidated
financial statements.
For the Years Ended March 31,
(in thousands, except per
share amounts)
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Revenue $11,022 $ 7,537 $8,251 $10,947 $ 5,504
Operating income (loss) 1,411 (3,636) 420 530 (10,105)
Net Income (loss) 1,003 (3,892) 211 569 (9,885)
Net income (loss) per share 0.20 (0.66) 0.03 0.05 (0.86)
Shares used in per share calculation 4,892 5,886 8,353 10,423 11,479
BALANCE SHEET DATA:
Working capital (deficit) $ 2,070 $ (298) $ 4 $11,848 $ 481
Total assets 6,582 3,246 5,222 17,092 8,477
Long term obligations,
less current portion 373 36 794 38 254
Shareholders' equity 2,358 105 982 13,728 5,058
</TABLE>
SUMMARY QUARTERLY DATA - UNAUDITED
<TABLE>
<CAPTION>
Jun.30 Sep.30 Dec.31 Mar.31 Jun.30 Sep.30 Dec.31 Mar.31
Quarter Ended 1995 1995 1995 1996 1996 1996 1996 1997
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(in thousands, except
per share amounts)
Revenue $2,643 $2,496 $2,802 $3,006 $ 2,222 $ 943 $ 1,264 $ 1,075
Gross profit 2,453 2,310 2,625 2,814 2,004 628 598 420
Operating income (loss) 89 72 169 200 (640) (2,559) (4,937) (1,969)
Net income (loss) $ 70 $ 63 $ 151 $ 285 $ (535) $(2,479) $(4,893) $(1,978)
Net income (loss)
per share $ 0.01 $ 0.01 $ 0.01 $ 0.03 $ (0.05) $ (0.22) $ (0.42) $ (0.17)
</TABLE>
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, including releases of new products and enhancements. These
forward-looking statements are subject to certain risks and uncertainties,
including those discussed in the Other Factors Affecting Future Results section
of this Item 7 and elsewhere in this Form 10-K, as well as other risks and
uncertainties described in the Company's other reports filed with the
Securities and Exchange Commission, 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 decreased from $10,947 in fiscal 1996 to $5,504 in fiscal 1997.
Total revenue was $8,251 in fiscal 1995. The decrease in revenues in fiscal 1997
resulted primarily from lower license revenue in Asia as a result of a reduction
in capital investment by semiconductor manufacturers and increased competition
in the EDA marketplace, in general. International sales were approximately
$4,291, $4,740
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and $1,390 for fiscal 1995, 1996 and 1997, respectively, representing
52%, 43% and 25% of total revenue for the respective periods. Fiscal 1996
benefited from increased license fee revenue as a result of the release of
product enhancements, as well as the introduction of new products. Fiscal 1998
has an aggressive new product plan, including new releases of significant
enhancements for each of the Company's primary products. However, there can be
no assurance that these new products and enhancements will be released on a
timely basis, if at all, or will gain market acceptance. See "Other Factors
Affecting Future Results-New Products and Rapid Technological Change; Risk of
Product Defects".
In fiscal 1995, 1996 and 1997 maintenance revenue was $3,125, $3,197 and $2,620,
respectively. Maintenance fees revenue as a percentage of total revenue was 38%,
29% and 48% for fiscal 1995, 1996 and 1997, respectively. The decline in
maintenance fees revenue in fiscal 1997 was due to reduced license sales.
In February 1997, the Company restated its unaudited consolidated financial
statements for the quarters ended June 30, 1996 and September 30, 1996 to
reverse certain transactions and related expenses which were recognized other
than in accordance with the Company's accounting policies. The Company has filed
Forms 10Q/A for the quarters ended June 30, 1996 and September 30, 1996. The
results of operations for the year ended March 31, 1997 include the effect of
the restatements referred to above.
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, as in fiscal 1997, 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.
COST OF REVENUE
For fiscal 1995, 1996 and 1997, cost of license fees and other was $131, $388
and $1,308, respectively. Cost of license fees and other as a percentage of
total revenue was 2%, 4% and 24% for fiscal 1995, 1996 and 1997, respectively.
Cost of license fees and other consists primarily of the amortization of
capitalized software development costs and royalty expense. The increase in
fiscal 1997 was primarily the result of an increase in royalty expense and
amortization of capitalized development costs.
For fiscal 1995, 1996 and 1997, cost of maintenance fees was $383, $357 and
$546, respectively. Cost of maintenance fees as a percentage of total revenue
was 5%, 3% and 10% for fiscal 1995, 1996 and 1997, respectively. Cost of
maintenance fees is primarily the cost of providing technical support and
technical documentation which increased in fiscal 1997. The percentage increase
in fiscal 1997 was primarily due to reduced revenue levels.
ENGINEERING, RESEARCH AND DEVELOPMENT EXPENSES
Engineering, research and development expenses for fiscal 1995, 1996 and 1997
were $2,172, $3,330 and $3,609, respectively. The increase in engineering,
research and development expenses in fiscal 1996 and 1997 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 the additional engineering
personnel and the depreciation of upgrades to existing computer equipment. The
Company's commitment to engineering, research and development continued in
fiscal 1997, with the addition of an engineering staff in its Taiwan office and
a quality assurance department in the U.S. late in the year.
9
<PAGE> 10
SELLING AND MARKETING EXPENSES
Selling and marketing expenses for fiscal 1995, 1996 and 1997 were $4,338,
$5,145 and $5,914, respectively. In fiscal 1996, selling and marketing expenses
increased primarily due to an increase in sales and marketing personnel. The
increase in fiscal 1997 resulted primarily from the opening of sales offices in
Taiwan, Massachusetts and North Carolina.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for fiscal 1995, 1996 and 1997 were $807,
$1,197, and $4,232, respectively. The increase in fiscal 1996 was the result of
additions to the senior management team. In fiscal 1997, the Company recorded
approximately $3,000 of nonrecurring charges associated with severance
arrangements, litigation accruals, costs associated with the Company's
restatement of its first and second quarter financial results and additional
provisions, such as doubtful accounts receivable.
OTHER INCOME (EXPENSE)
Other income (expense) for fiscal 1995, 1996 and 1997 was $(28), $44 and $222,
respectively. Other income in fiscal 1996 and 1997 resulted primarily from net
interest income from investing the proceeds received in the secondary offering.
PROVISION FOR INCOME TAXES
The provision for income taxes for fiscal 1995, 1996 and 1997 was $181, $5 and
$2, 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 provision for
fiscal 1995 consisted primarily of federal alternative minimum tax, state taxes
and Japanese withholding taxes.
As of March 31, 1997, the Company had federal and state net operating loss
carryforwards of approximately $18,000 and $3,800, respectively. The Company
also had federal and California research and development tax credit
carryforwards of approximately $400 and $100, respectively. The net operating
loss and credit carryforwards will expire at various dates in 1998 through 2011,
if not utilized (see Note 9 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 1995, 1996 and 1997, the Company received
cash of $415, $12,297 and $1,204, 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 has incurred operating losses throughout fiscal 1997 and expects
such losses to continue at least in the near term as it expands its product
development and marketing capabilities. Prior to that, the Company generated
minimal net income from operations during the six preceding quarters. The
achievement of profitability is primarily dependent upon the continued
development and commercial acceptance of the Company's products, the successful
management of the business and management's ability to strategically focus the
Company. There can be no assurance as to whether or when achievement of
profitable operations will occur. In addition, the Company is experiencing
negative cash flow from operations and it is expected that it will continue to
experience negative cash flow at least through mid-fiscal 1998 and potentially
thereafter.
The Company's operating activities provided cash of $796 in fiscal 1995 and used
cash of $1,825 and $6,731 in fiscal 1996 and 1997, respectively. Fiscal 1997
includes cash payments of $1,750 made towards the acquisition of the exclusive
marketing rights to Bell Labs' line of deep submicron verification products with
future prepaid royalty payments totaling $2,250 due in fiscal 1998 and 1999.
10
<PAGE> 11
Investment activities, primarily comprising capitalized software development
costs, acquired fixed assets and purchased software licenses, were $832, $1,124
and $2,589 for fiscal 1995, 1996 and 1997, respectively.
The Company's primary unused sources of funds at March 31, 1997 consisted of
cash and cash equivalents of $2,064. Subsequent to March 31, 1997, the Company
completed a private placement of equity securities, increasing its capital base
by approximately $4,000 and received a commitment for an additional line of
credit of $2,000 from its bank. The Company believes its cash and cash generated
from operations and available borrowings, will be sufficient to finance its
operations at least through its 1998 fiscal year.
Nevertheless, the Company may require additional financing. Management is
exploring financing alternatives to supplement the Company's cash position.
Potential sources of additional financing include private equity financings,
mergers, strategic investments, strategic partnerships or various forms of debt
financings. The Company may be prevented or restricted from raising additional
funds by issuing equity securities or securities convertible into Common Stock
unless the Company amends its Articles of Incorporation to increase the number
of authorized shares of Common Stock. The Company intends to seek shareholder
approval to increase the Company's authorized shares of Common Stock at its next
annual shareholder meeting. However, no assurance can be given as to whether
such shareholder approval will be obtained in a timely manner, if at all. The
Company has no commitments or arrangements to obtain any additional funding and
there can be no assurance that the required financing of the Company will be
available on acceptable terms, if at all. The unavailability or timing of any
financing, could prevent or delay the continued development and marketing of the
products of the Company and could require substantial curtailment of operations
of the Company.
OTHER FACTORS AFFECTING FUTURE RESULTS
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 introduced its SVR SonIC family of
products, the Company expects that revenues from the sale of SVR GARDS products
will continue to account for at least a significant portion 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 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.
In June 1996, the Company entered into an agreement whereby it was granted the
exclusive marketing rights to Bell Labs CLOVER line of deep submicron
verification products worldwide, with the exception of Japan and Taiwan, where
the Company will co-market with Bell Labs existing distributors. In addition,
the Company has recently released, or intends to release, significant upgrades
to GARDS to provide a new Power Router, to SonIC to provide a new placer and new
routing capabilities, and to SC to provide a rewritten Global Router and fast
new placement. 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
11
<PAGE> 12
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 or that the Company's strategic partnership
relationship with Bell Labs will continue or achieve anticipated results.
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. There can be no assurance that the introduction or announcement of
new product offerings by the Company, or one or more of its competitors, will
not cause customers to defer purchases of existing Company products. 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
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. In fiscal 1996, HAL accounted for 16%
and Motorola and Yamaha each accounted for 11% of the Company's total revenue.
In fiscal 1997, HAL accounted for 14%, Lucent Technologies accounted for 19% and
Motorola, Inc. accounted for 13% 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 and
Taiwan, through a limited number of distributors. The Company has a limited
history of performance by its distributors. In addition, there can be no
assurance that the new distributors will be able to successfully distribute and
support the 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 an adverse effect on the Company's business.
12
<PAGE> 13
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. Numerous factors may
materially and unpredictably affect operating results of the Company, including
the uncertainties of 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. Any
unfavorable change in these or other factors could have a material adverse
effect on the Company's operating results for a particular quarter. Many of the
Company's customers order on an as-needed basis and often delay delivery of firm
purchase orders until their project commencement dates are determined, and, as a
result, the Company operates with no significant backlog. Quarterly revenue and
operating results will therefore depend on the volume and timing of orders
received during the quarter, which are difficult to forecast accurately.
Historically, the Company has often recognized a substantial portion of its
license revenues in the last month of the quarter, with these revenues
frequently concentrated in the last two weeks of the quarter. Operating results
would be disproportionately affected by a reduction in revenue because only a
small portion of the Company's expenses vary with its revenue. Operating results
in any period should not be considered indicative of the results to be expected
for any future period, and there can be no assurance that the Company's revenues
will increase or that the Company will achieve profitability.
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. Actual results of the Company could vary materially as a result
of a variety of factors, including, without limitation, the high average selling
price and long sales cycle for the Company's products, the relatively small
number of orders per quarter, dependence on sales to a limited number of large
customers, timing of receipt of orders, successful product introduction and
acceptance of the Company's products and increased competition.
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.
COMPLIANCE WITH NASDAQ LISTING REQUIREMENTS; DISCLOSURE RELATING TO
LOW-PRICED STOCK The Company's Common Stock is quoted on the Nasdaq National
Market ("The National Market"). However, in order to continue to be included in
the National Market, a company must meet certain maintenance criteria.
Continued inclusion also requires two market makers and a minimum bid price of
$1.00 per share; provided, however, that if a company falls below such minimum
bid price, it will remain eligible for continued inclusion in the National
Market if the market value of the public float is at least $3,000,000 and the
company has $4,000,000 in net tangible assets. The Nasdaq Stock Market, Inc.
("Nasdaq") has recently proposed new maintenance criteria which, if
implemented, would eliminate the exception to the $1.00 per share minimum bid
price and require, amoung other things, $4,000,000 in net tangible assets and
$5,000,000 market value of the public float. Failure to meet these maintenance
criteria in the future may result in the delisting of the Company's Common
Stock from the National Market and the quotation of the Company's Common Stock
on the Nasdaq SmallCap Market (the "SmallCap Market") if the requirements for
inclusion on the Small Cap Market are met. As a result of quotation on the
SmallCap Market, an investor may find it more difficult to dispose of the
Company's Common Stock.
13
<PAGE> 14
Failure to meet the SmallCap Market inclusion criteria, or the failure to meet
the SmallCap Market maintenance criteria if the initial SmallCap Market
inclusion criteria are met, may result in the delisting of the Company's Common
Stock from Nasdaq. Trading, if any, in the Company's Common Stock would
thereafter be conducted in the non-Nasdaq over-the-counter market. As a result
of such delisting, an investor may find it more difficult to dispose of, or to
obtain accurate quotations as to the market value of, the Company's Common
Stock.
MANAGEMENT TRANSITION
The Company is experiencing a period of management transition that has placed,
and may continue to place, a significant strain on its resources, including its
personnel. Robert R. Anderson resumed the role of Chief Executive Officer in
December, 1996 and has assembled a new senior management team. The Company's
ability to manage growth successfully will require its new management personnel
to work together effectively and will require the Company to improve its
operations, management and financial systems and controls. If the Company
management is unable to manage this transition effectively, the Company's
business, competitive position, results of operations and financial condition
will be materially and adversely affected.
INFLATION
To date, inflation has not had a significant impact on the results of the
Company's operations.
14
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Index to Financial Statements and Financial Statement Schedules
FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Accountants 16
Report of Previous Independent Accountants 17
Report of Management 18
Consolidated Balance Sheet as of March 31, 1996 and 1997 19
Consolidated Statement of Operations for the years ended March 31,
1995, 1996 and 1997 20
Consolidated Statement of Changes in Shareholders' Equity for the years
ended March 31, 1995, 1996 and 1997 21
Consolidated Statement of Cash Flows for the years ended March 31,
1995, 1996 and 1997 22
Notes to Consolidated Financial Statements 23-32
FINANCIAL STATEMENT SCHEDULE:
Schedule II - Valuation and Qualifying Accounts 33
</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.
15
<PAGE> 16
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 March
31, 1997, and the results of their operations and their cash flows for the years
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 audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
San Jose, California
May 27, 1997
16
<PAGE> 17
REPORT OF PREVIOUS INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Silicon Valley Research, Inc.
We have audited the consolidated statements of operations, shareholder's equity
and cash flows of Silicon Valley Research, Inc. for the year ended March 31,
1995 and financial statement schedule for the year ended March 31, 1995 listed
on page 15 of the 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated results of the operations and the cash flows
of Silicon Valley Research, Inc. for the year ended March 31, 1995 in conformity
with generally 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 6 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.
/s/ Coopers & Lybrand L.L.P.
San Jose, California
May 23, 1995
17
<PAGE> 18
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 10-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.
Robert R. Anderson Laurence G. Colegate, Jr.
Chairman of the Board Senior Vice President,
and Chief Executive Officer Finance and Administration
San Jose, California
June 18, 1997
18
<PAGE> 19
SILICON VALLEY RESEARCH, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, 1996 1997
(in thousands) -------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 10,238 $ 2,064
Accounts receivable, net of allowances of
$25 in 1996 and $150 in 1997 4,650 1,129
Prepaid expenses and other current assets 286 453
-------- --------
15,174 3,646
Fixed assets, net 537 879
Other assets, net 1,381 3,952
-------- --------
$ 17,092 $ 8,477
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 321 $ 515
Accrued expenses 1,329 1,443
Deferred maintenance revenue 1,537 1,018
Current portion of long-term debt 139 189
-------- --------
3,326 3,165
-------- --------
Long-term debt, less current portion 38 254
-------- --------
Commitments and contingencies (Note 6)
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; 11,308 shares
in 1996 and 12,227 shares in 1997 31,171 32,375
Accumulated deficit (17,423) (27,308)
Cumulative translation adjustment (20) (9)
-------- --------
13,728 5,058
-------- --------
$ 17,092 $ 8,477
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
19
<PAGE> 20
SILICON VALLEY RESEARCH, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended March 31, 1995 1996 1997
(in thousands, except per share data) ------- -------- --------
<S> <C> <C> <C>
REVENUE
License fees and other $ 5,126 $ 7,750 $ 2,884
Maintenance fees 3,125 3,197 2,620
------- -------- --------
Total revenue 8,251 10,947 5,504
------- -------- --------
COST OF REVENUE
License fees and other 131 388 1,308
Maintenance fees 383 357 546
------- -------- --------
Total cost of revenue 514 745 1,854
------- -------- --------
GROSS PROFIT 7,737 10,202 3,650
------- -------- --------
OPERATING EXPENSES
Engineering, research and development 2,172 3,330 3,609
Selling and marketing 4,338 5,145 5,914
General and administrative 807 1,197 4,232
------- -------- --------
Total operating expenses 7,317 9,672 13,755
------- -------- --------
Operating income (loss) 420 530 (10,105)
------- -------- --------
OTHER INCOME (EXPENSE)
Interest income 11 102 276
Interest expense (89) (98) (55)
Other, net 50 40 1
------- -------- --------
Total other income (expense) (28) 44 222
------- -------- --------
Income (loss) before provision for income taxes 392 574 (9,883)
Provision for income taxes 181 5 2
------- -------- --------
NET INCOME (LOSS) $ 211 $ 569 $ (9,885)
======= ======== ========
Net income (loss) per share $ 0.03 $ 0.05 $ (0.86)
======= ======== ========
Shares used in per share calculations 8,353 10,423 11,479
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
20
<PAGE> 21
SILICON VALLEY RESEARCH, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Cumulative
Common Stock Accumulated Translation
(In thousands) Shares Amount Deficit Adjustments Total
- -------------- ------ ------ ------- ----------- -----
<S> <C> <C> <C> <C> <C>
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
Common stock issued under
stock option and stock
purchase plans 144 339 339
Common stock issued on
settlement of litigation(Note 6) 628 800 800
Common stock issued on
exercise of warrants 147 65 65
Foreign currency translation
adjustment 11 11
Net loss (9,885) (9,885)
------ -------- --------- ------ --------
BALANCES, MARCH 31, 1997 12,227 $ 32,375 $ (27,308) $ (9) $ 5,058
====== ======== ========= ====== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
21
<PAGE> 22
SILICON VALLEY RESEARCH, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended March 31, 1995 1996 1997
(in thousands) ------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 211 $ 569 $ (9,885)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization:
Fixed assets 110 394 517
Software development costs 66 315 593
Software licenses 83 152 427
Changes in assets and liabilities, net :
Accounts receivable (513) (3,145) 3,364
Prepaid expenses and other current assets 43 (326) (173)
Accounts payable (2) 202 201
Accrued expenses 193 (130) 141
Deferred maintenance revenue 585 182 (442)
Other, net 20 (38) (1,474)
------- -------- --------
Net cash provided by (used in) operating activities 796 (1,825) (6,731)
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets (288) (452) (653)
Capitalization of software development costs and
purchase of software licenses (544) (672) (1,936)
------- -------- --------
Net cash used in investing activities (832) (1,124) (2,589)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (1,393) (1,393) (164)
Proceeds from sale/leaseback -- 843 --
Proceeds from sale of minority interest in subsidiary 250 -- --
Proceeds from subordinated debt offering 775 -- --
Proceeds from issuance of common stock 307 12,111 1,139
Proceeds from issuance of warrants 77 186 65
Net proceeds from notes payable 777 175 --
------- -------- --------
Net cash provided by financing activities 793 11,922 1,040
------- -------- --------
Effect of exchange rate changes on cash (32) 17 106
------- -------- --------
Net increase (decrease) in cash and cash equivalents 725 8,990 (8,174)
Cash and cash equivalents at beginning of year 523 1,248 10,238
------- -------- --------
Cash and cash equivalents at end of year $ 1,248 $ 10,238 $ 2,064
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
22
<PAGE> 23
SILICON VALLEY RESEARCH, INC.
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.
REVENUE RECOGNITION
Revenues comprise license fees for the Company's software products (except in
Japan where revenues comprise 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 been
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.
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.
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 consolidated financial statements include the accounts of the Company and
its subsidiaries in Japan and Taiwan after elimination of all significant
intercompany accounts and transactions. Minority interest in net assets and
income (loss) for the years then ended are not significant.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the statement of cash flows and balance sheet
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
Financial instruments that potentially subject the Company to significant
concentration of credit risk consists principally of accounts receivable. The
composition of the Company's accounts receivable with respect to the
semiconductor industry is characterized by generally short collection terms. The
Company's accounts receivable are derived from revenues earned from customers
located primarily in the United States and Far East. Generally, the Company
performs ongoing evaluation of its customers financial condition and does not
require collateral, allowances for potential credit losses are maintained and
such losses have been within management's expectations. At March 31, 1996 and
1997, four and five customers accounted for 59% and 63%, respectively, of the
Company's total receivables. At March 31, 1996 and 1997, two Japanese customers
accounted for 24% and 30%, respectively, of the Company's total receivables.
23
<PAGE> 24
ENGINEERING, RESEARCH AND DEVELOPMENT COSTS
Engineering, research and development costs consist principally 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.
FIXED ASSETS
Fixed assets are 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 months.
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number of
common and common equivalent shares outstanding during the period. Common
equivalent shares consist of stock options (using the treasury stock method).
Common equivalent shares from stock options are excluded from the computation if
their effect is antidilutive.
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.
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 notional amounts
outstanding of $281 and $117 at March 31, 1996 and 1997, 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 notional amount of the
contracts from the possible inability of counter parties to meet the terms of
these contracts and from movements in currency values. The other parties to
these contracts consist of a limited number of major financial institutions. The
Company does
24
<PAGE> 25
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 basis of assets
and liabilities and are measured using the currently enacted tax rates and laws.
STOCK-BASED COMPENSATION
The Company has adopted Statement of Financial Accounting Standards No. 123
("SFAS 123"). "Accounting for Stock-Based Compensation," which establishes a
fair value method of accounting for stock based compensation plans, and requires
additional disclosures for those companies who elect not to adopt the new method
of accounting. The Company has elected to continue to measure compensation costs
using the intrinsic value method prescribed by APB Opinion No. 25, "Accounting
for Stock Issued to Employees" and to comply with the pro forma disclosure
requirements of SFAS 123 (See Note 8). As such, adoption of SFAS 123 has had no
impact on the Company's financial statements.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS
128, which is effective for the Company's fiscal year ending March 31, 1998,
redefines earning per share under generally accepted accounting principles.
Under the new standard, primary earnings per share is replaced by basic earnings
per share, and fully diluted earnings per share is replaced by diluted earnings
per share. The adoption of SFAS 128 is not expected to have a material impact on
the Company since earnings per share reported under Accounting Principles Board
Opinion No. 15 approximates diluted earnings per share, which will be reported
under SFAS 128.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Standards No. 129 ("SFAS 129"), "Disclosure of Information about
Capital Structure". SFAS 129 requires disclosure of certain information related
to the Company's capital structure and is not anticipated to have a material
impact on the Company's financial position or results of operations.
NOTE 2 FIXED ASSETS
<TABLE>
<CAPTION>
March 31,
Fixed assets comprise: 1996 1997
---------- ----------
<S> <C> <C>
Computer equipment $ 1,805 $ 2,281
Office equipment 324 607
---------- ----------
2,129 2,888
Less accumulated depreciation and amortization (1,592) (2,009)
---------- ----------
$ 537 $ 879
========== ==========
<CAPTION>
Fixed assets acquired under capital leases included above are as follows:
<S> <C> <C>
Computer equipment $ 506 $ 489
Less accumulated amortization (350) (283)
---------- ----------
$ 156 $ 206
========== ==========
</TABLE>
25
<PAGE> 26
NOTE 3 OTHER ASSETS
<TABLE>
<CAPTION>
March 31,
Other assets comprise: 1996 1997
------- -------
<S> <C> <C>
Software development costs $ 1,133 $ 2,163
Software licenses 1,211 2,388
------- -------
2,344 4,551
Less accumulated amortization (1,330) (2,425)
------- -------
1,014 2,126
Loan to officer 100 --
Prepaid royalties -- 1,592
Other 267 234
------- -------
$ 1,381 $ 3,952
======= =======
</TABLE>
Software development costs capitalized during 1995, 1996 and 1997 were $487,
$646, and $1,045, respectively. Other consists primarily of deposits on
facilities and equipment leases.
NOTE 4 ACCRUED EXPENSES
<TABLE>
<CAPTION>
March 31,
Accrued expenses comprise: 1996 1997
------ ------
<S> <C> <C>
Accrued payroll and
related costs $ 650 $ 434
Taxes payable 324 108
Other 355 901
------ ------
$1,329 $1,443
====== ======
</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.
NOTE 5 LONG-TERM DEBT
<TABLE>
<CAPTION>
March 31,
Long-term debt comprise: 1996 1997
----- -----
<S> <C> <C>
Capitalized lease obligations $ 177 $ 200
Note payable -- 243
----- -----
177 443
Less current portion (139) (189)
----- -----
$ 38 $ 254
===== =====
</TABLE>
The Company has a $300 equipment line of credit with its bank. The line bears
interest at prime plus two percent, 10.5% at March 31, 1997. The line is
available for advances to purchase equipment and software through September 30,
1997. The line of credit is collateralized by substantially all of the assets 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. Amounts outstanding at March 31, 1997 were $243.
The aggregate principal payments of long-term debt and minimum lease payments
under capitalized lease obligations for the next five fiscal years ending March
31 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 214
1999 162
2000 91
2001 24
2002 12
-----
503
Less amounts representing interest (60)
-----
$ 443
=====
</TABLE>
26
<PAGE> 27
Subsequent to March 31, 1997, the company received a commitment for an
additional line of credit from its bank. The revolving line of credit will
provide for borrowings up to $2,000 with available borrowings limited to certain
percentages of eligible accounts receivable. Interest at prime plus one percent
(9.5% at March 31, 1997) will be due monthly with principal due one year from
the completion of loan documents.
NOTE 6 COMMITMENTS AND CONTINGENCIES
The Company leases its corporate headquarters in the United States through June
30, 2001, and sales offices in the United States, Taiwan and Japan under
operating leases expiring at various dates, including renewal options, through
2001. In addition, the Company leases certain computer and office equipment
under operating leases expiring at various dates through 1999. 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.
Non-cancelable rental payments over the term of leases exceeding one year are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 842
1999 635
2000 540
2001 135
2002 4
------
$2,156
======
</TABLE>
The Company is generally responsible for its pro rata share of taxes,
maintenance and insurance on the facilities. Rental expense aggregated $999,
$1,041 and $935 in 1995, 1996 and 1997, respectively.
In June 1996, the Company entered into an agreement whereby the Company was
granted the exclusive marketing rights to Bell Labs CLOVER line of deep
submicron verification products worldwide, with the exception of Japan and
Taiwan, where the Company will co-market with Bell Labs existing distributors.
Pursuant to the four year agreement, the Company has made prepaid royalty
payments of $1,750 and has future prepaid royalty payments due to Bell Labs of
$1,250 in fiscal 1998 and $1,000 in fiscal 1999.
The Company is subject to various types of litigation during its normal course
of business. In January, 1997, Gambit Automated Design, Inc. ("Gambit"), a
competitor of the Company, filed a complaint alleging misappropriation of trade
secrets, breach of contract, inducing breach of contract, breach of fiduciary
duty, unfair competition and unjust enrichment against the Company and a former
employee of Gambit who is a current employee of the Company. Gambit seeks
injunctive relief, compensation and punitive damages, restitution and attorneys
fees and costs. The parties are currently engaged in discovery. The Company
believes the lawsuit is without merit and intends to defend itself vigorously.
In February 1997, the Company and Mentor Graphics Corporation ("Mentor") settled
a legal action brought by Mentor against the Company in 1994. The Settlement
Agreement required the Company to issue 627 shares of Common Stock to Mentor and
to exchange certain technology. The Company agreed to register such shares under
the Securities Act. In addition, as of August 13, 1997, the Company may be
required to issue up to an aggregate of 1,255 additional shares of Common Stock
to Mentor should the average market price of the Common Stock trade below a
certain minimum price. Mentor has the right to require the Company to register
any such additional shares under the Securities Act.
NOTE 7 SAVINGS AND INVESTMENT PLAN
The Company has the Silicon Valley Research, Inc. 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 two months 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
participants accounts is determined by the Board of Directors at the time of
contribution. The Company contributed $10, $22 and $25 to the Plan during fiscal
1995, 1996 and 1997, respectively. Administrative costs paid by the Company were
insignificant during fiscal 1995, 1996 and 1997.
27
<PAGE> 28
NOTE 8 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
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.
On April 16, 1997, the Company completed a private placement of units comprising
4,517 shares of Common Stock and warrants to purchase an additional 4,517 shares
of Common Stock at $1.31 per share, with proceeds to the Company of
approximately $4,000. The shares of Common Stock are unregistered. The Company
will file a registration statement with the Securities Exchange Commission on or
before August 14, 1997 as part of the private placement agreement. One director,
one officer/director and two officers participated in the private placement.
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, 1997, the Company has reserved 2,453 shares of common stock for
issuance under its employee stock option plan and Directors Stock Option Plan.
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.
Under the Directors' Stock Option Plan, 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 20
shares of the Company's common stock, and thereafter annually for up to 3 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.
On November 21, 1996, the Compensation Committee of the Board of Directors
approved an offer to all employees permitting an election to amend options with
exercise prices in excess of $2.50 to change the exercise price to the fair
market value of the Company's common stock on that date, which was $2.50, with
continuation of the existing vesting schedule. Options for the purchase of a
total of 1,182 shares were amended.
28
<PAGE> 29
On February 11, 1997 the Company's Board of Directors approved a non-qualified
option grant to its Audit Committee. The Options totaled 25 shares of the
Company's common stock with an exercise price of $1.44. The Options were fully
vested and exercisable on the date of grant.
At March 31, 1997, options to purchase 302 shares of common stock were vested,
and 792 shares of common stock were available for future grant.
The following table summarizes stock option activity under the Company's Plans:
<TABLE>
<CAPTION>
For the year ended For the year ended
March 31, 1996 March 31, 1997
-------------- ------------------
Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 970 $ 2.13 1,251 $ 3.81
Granted 879 4.59 1,504 2.86
Exercised (196) 1.78 (76) 2.09
Forfeited (402) 2.66 (993) 3.91
------- ------
Outstanding at end of year 1,251 3.81 1,686 1.99
======= ======
Options exercisable at year-end 170 302
Weighted-average fair value of $ 2.65 $ 1.12
options granted during the year
</TABLE>
The following table summarizes information about stock options outstanding and
exercisable at March 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted-
Shares Average Weighted- Shares Weighted-
Range of Outstanding Remaining Average Exercisable Average
Exercise Prices at 3/31/97 Contractual Life Exercise Price at 3/31/97 Exercise Price
<S> <C> <C> <C> <C> <C>
$ 0.88 - $ 1.19 86 6.16 $ 1.00 69 $ 1.00
$ 1.31 - $ 1.31 779 9.29 1.31 0 0.00
$ 1.44 - $ 2.38 111 7.55 1.82 80 1.71
$ 2.50 - $ 2.50 588 8.25 2.50 108 2.50
$ 3.19 - $ 8.75 122 7.58 4.68 45 4.37
----- ------ ------ --- ------
1,686 8.53 $ 1.99 302 $ 2.22
===== ====== ====== === ======
</TABLE>
The Company has adopted the disclosure-only provision of Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation". Accordingly, no compensation expense has been recognized for its
stock option plan or its stock purchase plan. Had compensation costs for the
Company's stock-based compensation plans been determined based on the fair value
at the grant dates for awards under those plans, consistent with the method of
SFAS 123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C> <C>
Net income(loss) As reported $ 569 $ (9,885)
Pro forma $ (72) $ (11,195)
Net income(loss) per share As reported $ 0.05 $ (0.86)
Pro forma $ (0.01) $ (0.98)
</TABLE>
29
<PAGE> 30
The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option-pricing model with the following assumptions used for
grants in 1997 and 1996, respectively; expected volatility of 86% for all years;
weighted-average risk-free interest rates of 6.38% and 5.79%, and
weighted-average expected lives of 3.52 years.
WARRANTS
The following warrants to purchase shares of the Company's common stock are
outstanding and fully vested at March 31, 1997:
<TABLE>
<CAPTION>
Expiring During
the Fiscal Number of Common
Year Ending Exercise Price Shares Under Warrants
- ----------- -------------- ---------------------
<S> <C> <C>
3/31/98 $3.31 50
3/31/99 $0.88 - $1.97 135
3/31/00 $1.25 - $1.50 368
---
553
===
</TABLE>
During the fiscal year ended March 31, 1997, warrants were exercised for 10
shares of the Company's common stock at a price of $0.88 per share for cash of
$9, 50 shares of the Company's common stock at a price of $1.13 per share for
cash of $56, 75 shares of the Company's common stock at a price of $1.50 per
share in a net exercise, cashless transaction, 18 shares of the Company's common
stock at a price of $1.13 per share in a net exercise, cashless transaction and
38 shares of the Company's common stock at a price of $0.50 per share in a net
exercise, cashless transaction.
EMPLOYEE STOCK PURCHASE PLAN
The 1993 Employee Stock Purchase Plan, under which 650 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 37, 63 and 68 shares of
common stock issued under the plan in 1995, 1996 and 1997, respectively, leaving
a balance of 425 shares available for issuance at March 31, 1997.
The fair value of the employees' purchase rights was estimated using the
Black-Scholes model with the following assumptions for 1996 and 1997,
respectively: expected volatility of 86% for all years; weighted-average
risk-free interest rates of 5.79% and 6.38%; and weighted-average expected lives
of 2 years. The weighted-average fair value of those purchase rights granted in
1996 and 1997 was $1.15 and $1.80, respectively.
NOTE 9 INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Years ended March 31, 1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
CURRENT:
Federal $ -- $3 $--
State 3 2 --
Foreign (net of benefit of net operating loss
carryforward of $225 in 1995) 178 - 2
---- -- --
Total provision $181 $5 $2
==== == ==
</TABLE>
30
<PAGE> 31
Deferred income taxes result from temporary differences in the recognition of
certain expenses for financial and income tax reporting. The net deferred tax
assets at March 31 consists of the following:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Allowances and accruals not currently deductible $ 246 $ (211)
Net operating losses 3,809 7,271
------- -------
Total deferred tax assets 4,055 7,060
Less: valuation allowance (4,055) (7,060)
------- -------
Net deferred tax asset $ -- $ --
======= =======
</TABLE>
The Company has provided for a valuation allowance when it is more likely than
not that some portion or all of the net deferred asset will not be realized.
Based upon a number of factors, including the lack of a history of profits,
management believes that there is sufficient uncertainty regarding the
realization of deferred assets such that a full valuation allowance has been
provided.
At March 31, 1997, the Company had available federal and state tax net operating
loss carryforwards of $18,000 and $3,800, respectively. The federal and state
tax net operating loss carryforwards expire from 2002 to 2011 and 1998 to 2002,
respectively. For federal purposes, the Company has federal and state research
and development credit carryforwards of $400 and $100, 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, 1995 1996 1997
- --------------------- ---- ---- ----
<S> <C> <C> <C>
Provision (benefit) at U.S. statutory rate $ 91 $ 195 $(3,361)
Tax losses not currently benefited -- -- 3,361
Tax effect resulting from foreign activity 178 -- 2
State taxes, net of federal tax benefit 3 2 --
Utilization of net operating loss carryforward (91) (192) --
----- ----- -------
Tax provision $ 181 $ 5 2
===== ===== =======
</TABLE>
NOTE 10 SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Years ended March 31, 1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Cash paid during the period for:
Interest $ 89 $ 98 $ 27
Income taxes $242 $ 10 $ 10
Noncash investing and financing activities:
Warrants for Common Stock $ 31 $ -- $ --
Computer equipment and software licenses
purchased by capital lease obligations
and notes payable $ 34 $259 $429
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.
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.
31
<PAGE> 32
NOTE 11 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, Japan and Taiwan. The following table summarizes the United
States, European, Japanese and Taiwanese operations of the Company:
<TABLE>
<CAPTION>
Adjustments
United and
States Europe Japan Taiwan Eliminations Consolidated
------ ------ ----- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
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
======== ===== ======= ===== ======= ========
YEAR ENDED MARCH 31, 1997
Sales to unaffiliated customers $ 4,406 $ 77 $ 1,021 $ -- $ -- $ 5,504
Transfer between geographic
regions 410 -- -- -- (410) --
-------- ----- ------- ----- ------- --------
Total sales $ 4,816 $ 77 $ 1,021 $ -- $ (410) $ 5,504
======== ===== ======= ===== ======= ========
Operating income (loss) $ (8,195) $ 77 $(1,135) $(852) $ -- $(10,105)
======== ===== ======= ===== ======= ========
Identifiable assets $ 7,087 $ -- $ 1,262 $ 128 $ -- $ 8,477
======== ===== ======= ===== ======= ========
</TABLE>
Included in total United States revenue are export sales of $1,070, $909 and
$292 for 1995, 1996 and 1997, respectively, principally to the Far East. Total
consolidated revenue outside of the United States was $4,291, $4,740 and $1,390
in 1995, 1996 and 1997, respectively.
Revenue from three products accounted for 52%, 20% and 23% of the Company's
consolidated revenue in fiscal 1997. Revenue from one product accounted for 69%
of the Company's consolidated revenue in fiscal 1996. Revenue from a shareholder
was $43 in fiscal 1995. A small number of customers account for a significant
percentage of the Company's total revenue as follows:
<TABLE>
<CAPTION>
Customer 1995 1996 1997
-------- ---- ---- ----
<S> <C> <C> <C>
A 12% 16% 14%
B * * 19%
C * 11% 13%
D 10% * *
E 10% 11% *
</TABLE>
* less than 10% of consolidated revenue
32
<PAGE> 33
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Provision Write-off of
Balance at doubtful uncollectible Balance at
beginning of Accounts Accounts end of
Year Receivable Receivable Year
---- ---------- ---------- ----
<S> <C> <C> <C> <C>
Accounts receivable - allowances for
doubtful accounts
Year ended March 31, 1995 $ 50 $ -- $ -- $ 50
Year ended March 31, 1996 $ 50 $ 200 $ 225 $ 25
Year ended March 31, 1997 $ 25 $ 1,235 $ 1,110 $ 150
</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.
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 59) became Chairman of SVR in January 1994 and resumed
the position of Chief Executive Officer in December 1996. Prior to that, Mr.
Anderson was Chief Executive Officer from April 1994 until July 1995 and was
Chief Financial Officer from September 1994 to November 1995. 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.
Laurence G. Colegate, Jr. (age 54) joined SVR as Senior Vice President, Finance
and Administration and Chief Financial Officer in February 1997. Mr. Colegate
has over 30 years experience in corporate financing, financial control, tax,
treasury, information systems and risk management. Prior to joining SVR, he was
Vice President and Chief Financial Officer of CBR Cement Corporation, a producer
and distributor of cement and construction materials, from 1989 to 1995.
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.
33
<PAGE> 34
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.
Dr. Ching-Chy Wang (age 43) is President of SVR Asia Pacific. Dr. Ching-Chy Wang
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 spent
several years as a member of the consulting staff at Cadence, a developer of
electronic design automation software, from 1991 to 1994. He was manager of the
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.
Dr. Warren C. Wong (age 43) joined SVR as Director of the Clover Product
Division in October 1996, and was named Vice President of Sales in January 1997.
Dr. Wong has over 12 years of management experience in EDA research and
development, sales, marketing and customer support. Prior to joining SVR he was
Vice President of Product Management at Anagram, a developer of electronic
design automation software, from August 1996 to October 1996. Prior to that, he
was Director of Logic Modeling at Meta- Software, an EDA company, from April
1995 to July 1996. From April 1985 to March 1995, Dr. Wong held various
management positions in research and development as well as customer support at
Cadence, a developer of electronic design automation software, most recently as
Director of Verification Solution. Dr. Wong has a Ph.D. in Statistics from the
University of California, Berkeley.
The Registrant incorporates by reference the Registrant's definitive proxy
statement to be filed pursuant to Regulation 14A on, or before, July 29, 1997
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, 1997
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, 1997 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, 1997
for the information required by Item 13.
34
<PAGE> 35
ITEM 14. EXHIBITS AND REPORTS ON FORM 10-K
(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 15 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 15 of this Report.
(a)(3) The following exhibits are filed with this Annual Report on Form 10-K:
Exhibit
Number Description of Exhibit
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 Form 10-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 Form 10-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).
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).
*Management Contract or Compensatory Plan or Arrangement
35
<PAGE> 36
Exhibit
Number Description of Exhibit
10.12 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).
10.14* Change of Control and Severance Benefits Agreement as of February 19,
1997 between the Registrant and Laurence G. Colegate, Jr.
10.15 Stock Transfer Terms and Conditions dated February 24, 1997 between the
Registrant and Mentor Graphics, Inc. (incorporated by reference to
Exhibit 4.01 of the Registrant's Registration Statement on Form S-3
(File No. 333-26599) filed May 7, 1997)
10.16 Form of Unit Purchase Agreement among the Company and several
investors dated as of April 16, 1997 (incorporated by reference to
Exhibit 4.01 of the Registrant's Registration Statement on Form S-3
(File No. 333-26599) filed May 7, 1997.)
10.17 Form of Warrant to Purchase Common Stock among the Company and several
investors dated as of April 16, 1997 (incorporated by reference to
Exhibit 4.01 of the Registrant's Registration Statement on Form S-3
(File No. 333-26595) filed May 7, 1997.)
21.1 Subsidiaries of the Registrant
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Coopers & Lybrand L.L.P.
24.1 Power of Attorney (see page 37)
27.1 Financial Data Schedule
*Management Contract or Compensatory Plan or Arrangement
36
<PAGE> 37
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, INC.
(Registrant)
Officer
Date: June 24, 1997 By: /s/ Robert R. Anderson
------------- --------------------------------
Robert R. Anderson, Chairman of the
Board and Chief Executive Officer
POWER OF ATTORNEY
Each of the officers and directors of Silicon Valley Research, Inc. whose
signature appears below hereby constitutes and appoints Robert R. Anderson and
Laurence G. Colegate, Jr., and each of them, their true and lawful attorneys and
agents, with full power of substitution, each with power to act alone, to sign
and execute on behalf of the undersigned any amendment or amendments to the
annual report on Form 10-K and to perform any acts necessary in order to file
such amendments, and each of the undersigned does hereby ratify and confirm all
that said attorneys and agents or their or his substitutes, shall do or cause to
be done by virtue hereof.
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.
NAME/TITLE DATE
/s/ Robert R. Anderson June 24, 1997
- --------------------------------------------- -------------
Robert R. Anderson, Chairman of the Board and
Chief Executive Officer (Principal Executive Officer)
/s/ Laurence G. Colegate, Jr. June 24, 1997
- --------------------------------------------- -------------
Laurence G. Colegate, Jr., Chief Financial Officer
and Senior Vice President of Finance and
Administration (Principal Financial and Accounting Officer)
/s/ Benjamin Huberman June 24, 1997
- --------------------------------------------- -------------
Benjamin Huberman, Director
/s/ Yoshio Nishi June 24, 1997
- --------------------------------------------- -------------
Yoshio Nishi, Director
/s/ Roy Rogers June 24, 1997
- --------------------------------------------- -------------
Roy L. Rogers, Director
/s/ Thomas Sherby June 24, 1997
- --------------------------------------------- -------------
Dr. Thomas Sherby, Director
37
<PAGE> 38
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
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 Form 10-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 Form 10-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).
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).
*Management Contract or Compensatory Plan or Arrangement
<PAGE> 39
Exhibit
Number Description of Exhibit
10.12 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).
10.14* Change of Control and Severance Benefits Agreement as of February 19,
1997 between the Registrant and Laurence G. Colegate, Jr.
10.15 Stock Transfer Terms and Conditions dated February 24, 1997 between the
Registrant and Mentor Graphics, Inc. (incorporated by reference to
Exhibit 4.01 of the Registrant's Registration Statement on Form S-3
(File No. 333-26599) filed May 7, 1997)
10.16 Form of Unit Purchase Agreement among the Company and several
investors dated as of April 16, 1997 (incorporated by reference to
Exhibit 4.01 of the Registrant's Registration Statement on Form S-3
(File No. 333-26599) filed May 7, 1997.)
10.17 Form of Warrant to Purchase Common Stock among the Company and several
investors dated as of April 16, 1997 (incorporated by reference to
Exhibit 4.01 of the Registrant's Registration Statement on Form S-3
(File No. 333-26595) filed May 7, 1997.)
21.1 Subsidiaries of the Registrant
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Coopers & Lybrand L.L.P.
24.1 Power of Attorney (see page 37)
27.1 Financial Data Schedule
*Management Contract or Compensatory Plan or Arrangement
<PAGE> 1
EXHIBIT 10.14
SILICON VALLEY RESEARCH, INC.
CHANGE OF CONTROL AND SEVERANCE BENEFITS AGREEMENT
This Change of Control and Severance Benefits Agreement (the
"Agreement") is effective as of February 19, 1997, by and between Laurence G.
Colegate, Jr. (the "Employee"), and Silicon Valley Research, Inc., a California
corporation (the "Company").
RECITALS
A. The Employee presently serves at the pleasure of the Board of
Directors as Senior Vice President, Finance and Administration and Chief
Financial Officer of the Company and performs significant strategic and
management responsibilities necessary to the continued conduct of the Company's
business and operations.
B. The Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication and objectivity of the
Employee, notwithstanding the possibility or occurrence of a Change of Control
(as defined below) of the Company.
C. The Board believes that it is imperative to provide the Employee
with certain severance benefits upon the Employee's termination of employment
which provide the Employee with enhanced financial security and provide
sufficient incentive and encouragement to the Employee to remain with the
Company even after a Change of Control.
D. Certain capitalized terms used in the Agreement are defined in
Section 3 below.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Employee by the Company, the
parties agree as follows:
1. Terms of Employment. The Company and the Employee agree that the
Employee's employment is at will, and that their employment relationship may be
terminated by either party at any time, with or without cause. The provisions of
this Agreement shall terminate on March 1, 2002 (except that the Employee's
employment by the Company shall continue to be "at will"). Any termination of
this Agreement shall not affect any required payment or benefit that accrues
prior to such termination.
2. Severance Benefits. Subject to Sections 2(c) and 2(d) below,
(a) Termination Following A Change of Control. If the Employee's
employment is terminated within twelve (12) months following a Change of
Control, then the Employee shall be entitled to receive severance benefits as
follows:
<PAGE> 2
(i) Involuntary Termination. If the Employee's employment is
terminated as a result of Involuntary Termination (as defined in Section 3(b)
below), then the Employee shall be entitled to receive severance pay in an
amount equal to 100% of the Employee's annual base salary at the time of such
termination, plus the full amount of Employee's annual bonus at the "on-target"
level for the fiscal year in which Employee is terminated, which amount shall be
paid in lieu of any bonus or commission that may be owing, or becomes owed to
Employee at any time thereafter. Any severance payments to which the Employee is
entitled pursuant to this section shall be paid in a lump sum within thirty (30)
days of the Employee's termination. In addition, for a period of up to twelve
(12) months after any termination under this Section 2(a)(i), the Company shall,
if permitted under the Company's existing health insurance plan at no additional
premium to the Company, continue Employee's existing group health insurance
coverage, or if not so permitted, reimburse the Employee for any COBRA premiums
paid by the Employee for continued group health insurance coverage (the
"Employment Benefits"). Such Employment Benefits shall terminate upon the
earlier of (i) twelve (12) months from the date of the Employee's termination or
(ii) upon commencement of new employment by the Employee.
(ii) Voluntary Resignation. If the Employee's employment
terminates by reason of the Employee's voluntary resignation (and is not an
Involuntary Termination or a Termination for Cause), then the Employee shall not
be entitled to receive severance or other benefits following the date of such
termination under the terms of this Agreement, and the Company shall have no
obligation to provide for the continuation of any health and medical benefit or
life insurance plans existing on the date of such termination except as
otherwise required by applicable law.
(iii) Disability; Death. If the Company terminates the
Employee's employment as a result of the Employee's Disability, or such
Employee's employment is terminated at any time due to the death of the
Employee, then the Employee shall not be entitled to receive severance or other
benefits following the date of such termination under the terms of this
Agreement, and the Company shall have no obligation to provide for the
continuation of any health and medical benefit or life insurance plans existing
on the date of such termination except as otherwise required by applicable law.
(iv) Termination for Cause. If the Employee is terminated for
Cause, then the Employee shall not be entitled to receive any severance or other
benefits following the date of such termination under the terms of this
Agreement, and the Company shall have no obligation to provide for the
continuation of any health and medical benefit or life insurance plans existing
on the date of such termination except as otherwise required by applicable law.
(v) Stock Option Exercisability. If the Employee's employment
terminates by reason of Involuntary Termination within twelve (12) months
following a Change of Control, the Employee shall be automatically credited with
an additional twelve (12) months of continuous service for purposes of
determining the exercisability
2
<PAGE> 3
and vesting with respect to any stock option granted to the Employee under the
Company's stock option plans, which shall be in addition to any credit under
Section 2(b) below.
(b) Stock Option Acceleration in Connection with Change of Control.
In the event of any Change of Control, the Employee shall be automatically
credited with an additional twelve (12) months of continuous service for
purposes of determining the exercisability and vesting with respect to any stock
option granted to the Employee under the Company's stock option plans.
(c) Termination Without a Change of Control
(i) Involuntary Termination. If the Employee's employment is
terminated as a result of Involuntary Termination (as defined in Section 3(b)
below), then the Employee shall be entitled to receive severance pay in an
amount equal to 50% of the Employee's annual base salary at the time of such
termination, plus the prorated amount of Employee's annual bonus at the
"on-target" level for the fiscal year in which Employee is terminated, which
amount shall be paid in lieu of any bonus or commission that may be owing, or
becomes owed to Employee at any time thereafter. Any severance payments to which
the Employee is entitled pursuant to this section shall be paid in a lump sum
within thirty (30) days of the Employee's termination. In addition, for a period
of up to six (6) months after any termination under this Section 2(c)(i), the
Company shall, if permitted under the Company's existing health insurance plan
at no additional premium to the Company, continue Employee's existing group
health insurance coverage, or if not so permitted, reimburse the Employee for
any COBRA premiums paid by the Employee for continued group health insurance
coverage (the "Employment Benefits"). Such Employment Benefits shall terminate
upon the earlier of (i) six (6) months from the date of the Employee's
termination or (ii) upon commencement of new employment by the Employee.
(ii) Stock Option Acceleration. In the event of an Involuntary
Termination other than in a Change of Control event, the Employee shall be
automatically credited with an additional six (6) months of continuous service
for purposes of determining the exercisability and vesting with respect to any
stock option granted to the Employee under the Company's stock option plans.
(iii) Voluntary Resignation. If the Employee's employment
terminates by reason of the Employee's voluntary resignation (and is not an
Involuntary Termination or a Termination for Cause), then the Employee shall not
be entitled to receive severance or other benefits following the date of such
termination under the terms of this Agreement, and the Company shall have no
obligation to provide for the continuation of any health and medical benefit or
life insurance plans existing on the date of such termination except as
otherwise required by applicable law.
(iv) Disability; Death. If the Company terminates the Employee's
employment as a result of the Employee's Disability, or such Employee's
3
<PAGE> 4
employment is terminated at any time due to the death of the Employee, then the
Employee shall not be entitled to receive severance or other benefits following
the date of such termination under the terms of this Agreement, and the Company
shall have no obligation to provide for the continuation of any health and
medical benefit or life insurance plans existing on the date of such termination
except as otherwise required by applicable law.
(v) Termination for Cause. If the Employee is terminated for
Cause, then the Employee shall not be entitled to receive any severance or other
benefits following the date of such termination under the terms of this
Agreement, and the Company shall have no obligation to provide for the
continuation of any health and medical benefit or life insurance plans existing
on the date of such termination except as otherwise required by applicable law.
(d) Release of Claims; Resignation. Employee's entitlement to any
benefits under Section 2(a) and 2(c) is conditioned upon Employee's execution
and delivery to the Company of (i) a general release of claims in a form
satisfactory to the Company and (ii) a resignation from all of Employee's
positions with the Company, or any Company subsidiary, including any
directorship on the Board of Directors or membership on or any committees
thereof on which Employee serves, in a form satisfactory to the Company.
(e) Limitation of Payments and Benefits.
(i) To the extent that any of the payments and benefits provided
for in this Agreement or otherwise payable to the Employee constitute "parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), and, but for this Section 2(e), would be subject
to the excise tax imposed by Section 4999 of the Code or any similar or
successor provision, the aggregate amount of such payments and benefits shall be
reduced, but only to the extent necessary so that none of such payments and
benefits are subject to excise tax pursuant to Section 4999 of the Code.
(ii) Within sixty (60) days after the later of termination of
employment or the related Change in Control, the Company shall notify the
Employee in writing if it believes that any reduction in the payments and
benefits that would otherwise be paid or provided to the Employee under the
terms of this Agreement is required to comply with the provisions of Subsection
2(e)(i). If the Company determines that any such reduction is required, it will
provide the Employee with copies of the information used and calculations made
by the Company to determine the amount of such reduction. The Company shall
determine, in a fair and equitable manner after consultation with the Employee,
which payments and benefits are to be reduced so as to result in the maximum
benefit for the Employee.
(iii) Within thirty (30) days after the Employee's receipt of
the Company's notice pursuant to Subsection 2(e)(ii), the Employee shall notify
the
4
<PAGE> 5
Company in writing if the Employee disagrees with the amount of reduction
determined by the Company, or the selection of the payments and the benefits to
be reduced. As part of such notice, the Employee shall also advise the Company
of the amount of reduction, if any, that the Employee has, in good faith,
determined to be necessary to comply with the provisions of Subsection 2(e)(i)
and/or the payments and benefits to be reduced. Failure by the Employee to
provide this notice within the time allowed will be treated by the Company as
acceptance by the Employee of the amount of reduction determined by the Company
and/or the payments and benefits to be reduced. If any differences regarding the
amount of the reduction and/or the payments and benefits to be reduced have not
been resolved by mutual agreement within sixty (60) days after the Employee's
receipt of the Company's notice pursuant to Subsection 2(e)(ii), the amount of
reduction and/or the payments and benefits to be reduced as determined by the
Employee will be conclusive and binding on both parties unless, prior to the
expiration of such sixty (60) day period, the Company notifies the Employee in
writing of the Company's intention to have the matter submitted to arbitration
for resolution and proceeds to do so promptly. If the Company gives no notice to
the Employee of a required reduction as provided in Subsection 2(e)(ii), the
Employee may unilaterally determine the amount of reduction required, if any,
and/or the payments and benefits to be reduced, and, upon written notice to the
Company, the amount and/or the payments and benefits to be reduced will be
conclusive and binding on both parties.
(iv) If, as a result of the reductions required by Subsection
2(e)(i), the amounts previously paid to the Employee exceed the amount to which
the Employee is entitled, the Employee will promptly return the excess amount to
the Company.
3. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
(a) Change of Control. "Change of Control" shall mean the occurrence
of either of the following events:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company's then outstanding
voting securities; or
(ii) (A) a merger in which the Company is not the surviving
corporation, and the shareholders of the Company immediately prior to the merger
do not own at least a majority of the outstanding shares of the surviving
corporation, (B) a dissolution or liquidation of the Company or (C) the sale of
all or substantially all of the assets of the Company.
(b) Involuntary Termination. "Involuntary Termination" shall mean
5
<PAGE> 6
the Employee's resignation within 60 days after any of the following:
(i) Without the Employee's express written consent, the
assignment to the Employee of any significant duties or the significant
reduction of the Employee's duties, either of which is materially inconsistent
with the Employee's position with the Company and responsibilities in effect
immediately prior to such assignment, or the removal of the Employee from such
position and responsibilities, which is not effected for death, Disability or
for Cause;
(ii) Any reduction by the Company in an amount greater than 10%
in the base salary of the Employee as in effect immediately prior to such
reduction, other than a reduction applied generally to executive officers of the
Company;
(iii) Any reduction by the Company in the kind or level of
employee benefits to which the Employee is entitled immediately prior to such
reduction, other than a reduction applied generally to executive officers of the
Company;
(iv) The relocation of the Employee to a facility or a location
more than 50 miles from the Employee's then present location, without the
Employee's express written consent; or
(v) The failure of the Company to obtain the assumption of the
terms of this Agreement by any successors contemplated in Section 4 below.
provided, however, that the Employee's resignation as a result of any of the
foregoing conditions shall be a voluntary resignation, and not an involuntary
termination, unless the Employee gives written notice of any such condition(s)
to the Board and allows the Company at least 10 days thereafter to correct such
condition(s). It shall also be an Involuntary Termination if the Company
terminates the Employee for any reason other than Disability, death or for
Cause.
(c) Cause. For purposes of this Agreement, a termination "for Cause"
occurs if the Employee is terminated for any of the following reasons:
(i) Theft, dishonesty, or intentional falsification of any
employment or Company records;
(ii) Improper disclosure of the Company's confidential or
proprietary information;
(iii) Any action by the Employee that Employee knew or should
have known could have a material detrimental effect on the Company's reputation
or business;
(iv) The Employee's failure or inability to perform any
6
<PAGE> 7
reasonable assigned duties after written notice from the Company to the Employee
of, and a reasonable opportunity to cure, such failure or inability;
(v) Any employment-related misconduct by the Employee, including
but not limited to sexual harassment, threats of harm or acts of physical
violence toward employees, customers, consultants or suppliers of the Company;
or
(vi) The Employee's conviction (including any plea of guilty or
nolo contendre) for any criminal act that impairs his ability to perform his
duties for the Company.
(d) Disability. "Disability" shall mean that the Employee is unable
to perform his duties as an employee of the Company as the result of his
incapacity due to physical or mental illness for 120 days (not necessarily
consecutive) in any one year period. Termination resulting from Disability may
only be effected after at least 30 days' written notice by the Company of its
intention to terminate the Employee's employment. In the event that the Employee
resumes the performance of substantially all of his duties as an employee of the
Company before the termination of his employment becomes effective, the notice
of intent to terminate shall automatically be deemed to have been revoked.
4. Employee Covenant Regarding Nonsolicitation. For a period of one (1)
year following termination of employment for any reason, the Employee shall not
recruit, solicit, or invite the solicitation of any employees of the Company to
terminate their employment with the Company.
5. Successors.
(a) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the same manner and
to the same extent as the Company would be required to perform such obligations
in the absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this
subsection (a) or which becomes bound by the terms of this Agreement by
operation of law.
(b) Employee's Successors. All rights of the Employee hereunder
shall inure to the benefit of, and be enforceable by, the Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. Employee shall have no right to assign any
of his obligations or duties under this Agreement to any other person or entity.
6. Notice.
7
<PAGE> 8
(a) General. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
(b) Notice of Termination. Any termination by the Company for Cause
or by the Employee as a result of a voluntary resignation or an Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with Section 6 of this Agreement. Such notice shall
indicate the specific termination provision in this Agreement relied upon, shall
set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination under the provision so indicated, and shall specify the
termination date (which shall be not more than 15 days after the giving of such
notice).
7. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking New Employment or in any other manner), nor shall any such payment be
reduced by any earnings that the Employee may receive from any other source.
(b) Waiver. No provision of this Agreement shall be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.
(d) Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(e) Arbitration. In the event of any dispute or claim relating to or
arising out of the Employee's employment relationship with the Company, this
Agreement, or the termination of the Employee's employment with the Company for
any reason (including, but not limited to, any claims of breach of contract,
wrongful termination, fraud or age, race, sex, national origin, disability or
other discrimination or
8
<PAGE> 9
harassment), the Employee and the Company agree that all such disputes shall be
fully, finally and exclusively resolved by binding arbitration conducted by the
American Arbitration Association in Santa Clara County, California. The Employee
and the Company hereby knowingly and willingly waive their respective rights to
have any such disputes or claims tried to a judge or jury, provided, however,
that this arbitration provision shall not apply to any disputes or claims
relating to or arising out of the actual or alleged misuse or misappropriation
of the Company's property, including, but not limited to, its trade secrets or
proprietary information.
(f) No Assignment of Benefits. The rights of any person to payments
or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection (f) shall be
void.
(g) Employment Taxes. All payments made pursuant to this Agreement
will be subject to withholding of applicable income and employment taxes.
(h) Assignment by Company. The Company may assign its rights under
this Agreement to an affiliate, and an affiliate may assign its rights under
this Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment. In the case of
any such assignment, the term "Company" when used in a section of this Agreement
shall mean the corporation that actually employs the Employee.
(i) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
9
<PAGE> 10
(j) Prior Agreements. This Agreement shall supersede all prior
arrangements whether written or oral, and understandings, regarding the subject
matter of this Agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
COMPANY SILICON VALLEY RESEARCH, INC.
By: /s/ Robert R. Anderson
-------------------------------------
Title: Chief Executive Officer
----------------------------------
EMPLOYEE By: /s/ Laurence G. Colegate, Jr.
-------------------------------------
Laurence G. Colegate, Jr.
10
<PAGE> 1
EXHIBIT 21.1
SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
March 31, 1997
<TABLE>
<CAPTION>
Percentages
Organized Under of Voting
Laws of Securities Owned
--------------- ----------------
<S> <C> <C>
Silicon Valley Research, Inc. (Registrant) California ---
<CAPTION>
SUBSIDIARIES:
<S> <C> <C>
Silicon Valley Research, Inc. K.K. Japan 97%
SVR Taiwan Taiwan 100%
</TABLE>
All of the above subsidiaries are included in Silicon Valley
Research, Inc.'s Consolidated Financial Statements.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-97988) and on Form S-3 (No. 33-26599) of Silicon
Valley Research, Inc. of our report dated May 27, 1997 appearing on page 16 of
this Form 10-K.
PRICE WATERHOUSE LLP
San Jose, California
June 26, 1997
<PAGE> 1
EXHIBIT 23.2
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) and on Form S-3 (No. 33-26599)
of our report dated May 23, 1995, on our audit of the consolidated financial
statements and financial statement schedule of Silicon Valley Research, Inc. and
subsidiaries as of March 31, 1995, and for the year ended March 31, 1995, which
report is included in this 1997 Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
San Jose, California
June 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1997 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,064
<SECURITIES> 0
<RECEIVABLES> 1,279
<ALLOWANCES> 150
<INVENTORY> 0
<CURRENT-ASSETS> 3,646
<PP&E> 2,888
<DEPRECIATION> 2,009
<TOTAL-ASSETS> 8,477
<CURRENT-LIABILITIES> 3,165
<BONDS> 0
0
0
<COMMON> 32,375
<OTHER-SE> (27,317)
<TOTAL-LIABILITY-AND-EQUITY> 8,477
<SALES> 2,884
<TOTAL-REVENUES> 5,504
<CGS> 1,854
<TOTAL-COSTS> 13,755
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55
<INCOME-PRETAX> (9,883)
<INCOME-TAX> 2
<INCOME-CONTINUING> (9,885)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,885)
<EPS-PRIMARY> (0.86)
<EPS-DILUTED> (0.86)
</TABLE>
