<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
For the quarterly period ended September 30, 1999 or
Transition report pursuant to Section 13 or 15(d) of the Securities
___ Exchange Act of 1934
For the transition period from ________to________
Commission File No. 0-13836
SILICON VALLEY RESEARCH, INC.
-----------------------------
(Exact name of small business issuer as specified in its charter)
California 94-2743735
- ------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6360 San Ignacio Avenue San Jose, CA 95119-1231
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(408) 361-0333
- ------------------------------------------------------------------------------
Registrant's telephone number, including area code
______________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO ___
---
State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practicable date.
Common Shares Outstanding at September 30, 1999: 26,221,220
Transitional Small Business Disclosure Statement Format (Check One) YES___ NO X
-
This report contains 21 pages. The exhibit index is on page 20.
<PAGE>
SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Part I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1999 and September 30, 1999 (unaudited) 3
Consolidated Statements of Operations -
Three and Six Months Ended September 30, 1998 and 1999 (unaudited) 4
Consolidated Condensed Statements of Cash Flows -
Six Months Ended September 30, 1998 and 1999 (unaudited) 5
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10-18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Part II. OTHER INFORMATION 19-20
-----------------
Item 1 Legal Proceedings
Item 2 Changes in Securities and Use of Proceeds
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Securities Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
Signatures 21
Exhibit 27. Financial Data Schedule
</TABLE>
Page 2 of 21
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
Assets March 31, 1999 September 30, 1999
- ------ -------------- ------------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 247 $ 388
Accounts receivable, net of allowances of
$150 at March 31, 1999 and
$118 at September 30, 1999 444 303
Prepaid expenses and other current assets 109 90
------------ ------------
800 781
Fixed assets, net 290 170
Other assets, net 969 682
------------ ------------
$ 2,059 $ 1,633
============ ============
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities:
Short-term borrowing $ 225 $ --
Current portion of long-term debt 137 --
Notes payable 50 25
Accounts payable 450 322
Accrued expenses 478 534
Deferred revenue 235 74
------------ ------------
1,575 955
Long-term debt, less current portion -- 1,000
------------ ------------
Deferred tax liability 24 24
------------ ------------
Commitments and Contingencies (Note 8)
Shareholders' Equity:
Preferred stock, no par value:
Authorized: 1,000 shares
Issued and outstanding: none -- --
Common stock, no par value:
Authorized: 60,000 shares
Issued and outstanding:
26,214 shares at March 31, 1999
and 26,221 shares at September 30, 1999 43,930 44,141
Accumulated deficit (43,587) (44,618)
Cumulative translation adjustment 117 131
------------ ------------
460 (346)
------------ ------------
$ 2,059 $ 1,633
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 3 of 21
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SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1998 1999 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
License fees and other $ 157 $ 18 $ 382 $ 76
Maintenance and services 203 385 571 636
---------- ---------- ---------- ----------
Total revenue 360 403 953 712
---------- ---------- ---------- ----------
Cost of revenue:
License fees and other 109 80 179 160
Maintenance and services 117 225 346 356
---------- ---------- ---------- ----------
Total cost of revenue 226 305 525 516
---------- ---------- ---------- ----------
Gross margin 134 98 428 196
---------- ---------- ---------- ----------
Operating expenses:
Engineering, research and development 771 265 1,407 716
Selling and marketing 506 33 1,174 240
General and administrative 231 136 643 321
---------- ---------- ---------- ----------
Total operating expenses 1,508 434 3,224 1,277
---------- ---------- ---------- ----------
Operating loss (1,374) (336) (2,796) (1,081)
---------- ---------- ---------- ----------
Other income (expense):
Interest income 32 -- 45 --
Interest expense (14) (21) (29) (21)
Other, net 104 (36) (35) 71
---------- ---------- ---------- ----------
Total other income 122 (57) (19) 50
---------- ---------- ---------- ----------
Loss before provision for
income taxes (1,252) (393) (2,815) (1,031)
Provision for income taxes -- -- -- --
Net loss $ (1,252) $ (393) $ (2,815) $ (1,031)
========== ========== ========== ==========
Net loss per basic and diluted share $ (0.05) $ (0.01) $ (0.11) $ (0.04)
========== ========== ========== ==========
Weighted-average common shares
outstanding (basic and diluted) 26,199 26,220 25,290 26,219
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 4 of 21
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SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1998 1999
------- -------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(2,815) $(1,031)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization:
Fixed assets 154 76
Software licenses and development costs 306 253
Gain on cancellation of debt -- (96)
Loss on sale of fixed assets -- 41
Changes in assets and liabilities, net:
Accounts receivable 74 141
Prepaid expenses and other current assets 117 19
Accounts payable (98) (128)
Accrued expenses (154) 56
Deferred maintenance revenue (145) (161)
Other, net 52 33
------- -------
Net cash used in operating activities (2,509) (797)
------- -------
Cash Flows from Investing Activities:
Acquisition of fixed assets (17) (7)
Capitalization of software development costs and
purchase of software licenses (23) --
------- -------
Net cash used in investing activities (40) (7)
------- -------
Cash Flows from Financing Activities:
Proceeds from sale of fixed assets -- 11
Proceeds from subordinated debt financing -- 1,000
Principal payments of long-term debt (97) (135)
Principal payments on notes payable (125) (25)
Proceeds from issuance of common stock and warrants 2,094 80
------- -------
Net cash provided by financing activities 1,872 931
------- -------
Effect of exchange rate changes on cash 27 14
------- -------
Net increase in cash and
cash equivalents (650) 141
Cash and cash equivalents at beginning
of period 1,926 247
------- -------
Cash and cash equivalents at end
of period $ 1,276 $ 388
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 5 of 21
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SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 - Unaudited
(In thousands)
Note 1: Basis of Presentation and Financial Statement Information
The accompanying consolidated financial statements have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission for interim financial statements. Therefore, they do not include all
the disclosures which were presented in the Company's annual report on Form 10-
K. These financial statements do not include all disclosures required by
generally accepted accounting principles and accordingly, should be read in
conjunction with the consolidated financial statements and notes included as
part of the Company's latest annual report on Form 10-K.
In the opinion of management, the consolidated financial statements include
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the consolidated financial position, results of operations and
cash flows for the interim period. The results of operations presented are not
necessarily indicative of the results to be expected for the full year or for
any other period.
The report of Moss Adams LLP on the Company's fiscal 1999 consolidated
financial statements dated June 10, 1999 included an explanatory paragraph
regarding the Company's ability to continue as a going concern. There can be no
assurance that the Company will not continue to incur significant operating
losses or that required additional financing will be available to meet the
Company's business plans in fiscal 2000 and beyond.
Note 2: Earnings Per Share
The Company has adopted Statement of Financial Accounting Standards No. 128
"Earnings per Share" (FAS 128). Under FAS 128, the Company presents two EPS
amounts. Basic EPS is calculated based on income or loss to common shareholders
and the weighted-average number of shares outstanding during the reported
period. Diluted EPS includes additional dilution from common stock equivalents,
such as stock issuable pursuant to the exercise of stock options and warrants.
Common stock equivalents were not included in the computation of diluted
earnings per share when the Company reported a loss because to do so would have
been antidilutive for the periods presented.
The following is a reconciliation of the computation for basic and diluted
EPS:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1998 1999 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net loss $(1,252) $ (393) $(2,815) $(1,031)
======= ======= ======= =======
Weighted-average common shares
outstanding (basic) 26,199 26,220 25,290 26,219
Weighted-average common stock equivalents:
Stock options -- -- -- --
Warrants -- -- -- --
------- ------- ------- -------
Weighted-average common shares
outstanding (diluted) 26,199 26,220 25,290 26,219
======= ======= ======= =======
</TABLE>
Page 6 of 21
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SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
September 30, 1999 - Unaudited
(In thousands)
Note 3: Comprehensive Income (Loss)
The Company has adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income." This Statement requires that all items
recognized under accounting standards as components of comprehensive earnings be
reported in an annual financial statement that is displayed with the same
prominence as other annual financial statements. This Statement also requires
that an entity classify items of other comprehensive earnings by their nature in
an annual financial statement. Other comprehensive earnings in these financial
statements include foreign currency translation adjustments. Annual financial
statements for prior periods will be reclassified, as required. The Company's
total comprehensive earnings were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1998 1999 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net loss $(1,252) $ (393) $(2,815) $(1,031)
Other comprehensive (loss) gain (95) -- 27 14
------- ------- ------- -------
Total comprehensive loss $(1,347) $ (393) $(2,788) $(1,017)
======= ======= ======= =======
</TABLE>
Note 4: Statement of Cash Flows Information
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1998 1999
------ ------
<S> <C> <C>
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 29 $ --
Income Taxes -- --
</TABLE>
Note 5: Balance Sheet Components
<TABLE>
<CAPTION>
March 31, September 30,
1999 1999
-------- --------
<S> <C> <C>
Other Assets:
Software development costs $ 799 $ 799
Software licenses 979 979
-------- --------
1,778 1,778
Less accumulated amortization (1,087) (1,340)
-------- --------
691 438
Prepaid royalties, net 25 --
Goodwill 195 171
Other 58 73
-------- --------
$ 969 $ 682
======== ========
Accrued Expenses:
Payroll and related costs $ 228 $ 339
Taxes payable 106 106
Accrued professional fees 108 63
Other 36 26
-------- --------
$ 478 $ 534
======== ========
</TABLE>
Page 7 of 21
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SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
September 30, 1999 - Unaudited
(In thousands)
Note 6: Bank Lines of Credit
On June 8, 1998, the Company's $2,000 line of credit with its bank expired
and the $285 outstanding under the line of credit became due and payable. $225
of this amount remained outstanding as of May 11, 1999. In addition, $137
outstanding on an equipment line with the same lender also became due and
payable. The amounts outstanding under its line of credit and equipment line of
credit are classified as current in the March 31, 1999 balance sheets. On May
11, 1999, the Company entered into a Settlement Agreement with the lender
whereby SVR agreed to issue a cash payment for a portion of the debt and to
issue warrants to purchase common stock ("Warrants") for cancellation of the
remainder. The Settlement Agreement required that SVR make the cash payment and
deliver the Warrants to the lender by June 8, 1999, which the Company did.
Note 7: Subordinated Debt Financing
In June 1999, the Company began a subordinated debt/warrant financing. The
financing included approximately $1,000 of three-year notes and the sale of
approximately 8,000 Warrants at $0.01 per Warrant. The debt bears simple
interest of 10% and the Warrants have a five-year term with an exercise price
per share of $0.125. This financing transaction consists of two closings. The
first closing took place on June 7, 1999. The Company received $768 cash
proceeds from this closing. This included $711 of three-year notes and the sale
of approximately 5,700 Warrants at $0.01 per Warrant. The second closing was to
have taken place on July 15, 1999. The closing was extended until September 24,
1999 pending negotiation of a workout with the Creditors' Committee through the
Credit Managers' Association to resolve accounts payable issues that was
satisfactory to the majority of the investors. An agreement was reached and the
Company received approximately $312 cash proceeds from the second closing. The
Company has used part of the proceeds from the financing to complete the
Settlement Agreement with its lender and to pay other accounts payable and
intends to use the balance of the proceeds to help fund its operations. The
Company's CEO, the Company's Chairman of the Board, an affiliate of a Company
director and two Company 10% shareholders participated in the financing.
Note 8: Commitments and Contingencies
As with other companies in industries similar to Silicon Valley Research,
Inc., 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. Due to its present cash shortage and resulting inability to pay its
vendors, several of its vendors had initiated collection actions against the
Company. Through the Credit Managers' Association, the Company has settled with
95% of its creditors. Each of such creditors chose one of the following payment
plans:
1. receive 30% of its unsecured claim in exchange for a complete release
of claim of the remaining balance; or
2. receive 15% of its unsecured claim in exchange for an agreement to
stay collection activities for one year with 10% interest earned on
the remaining balance.
The Company intends to settle with the remaining 5% of its creditors at a rate
of 30% of their unsecured claims.
Page 8 of 21
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SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
September 30, 1999 - Unaudited
(In thousands)
Note 9: Recent Accounting Pronouncements
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." Statement of Position 98-1
provides guidance for determining whether computer software is internal-use
software and on capitalization of the costs associated with internal-use
computer software. It also provides guidance on accounting for the proceeds of
computer software originally developed or obtained for internal use and then
subsequently sold to the public. The Company has not yet determined the impact,
if any, of adopting this statement. The disclosures prescribed by Statement of
Position 98-1 will be effective for the year ending March 31, 2000 consolidated
financial statements.
Note 10: Year 2000 Issues
The "Year 2000 Issue" arises because most computer systems and programs
were designed to handle only a two-digit year, as opposed to a four-digit year.
When the year 2000 begins, these computers may interpret "00" as the year 1900
and could either stop processing date-related computations or could process them
incorrectly. As the Company's customers and potential customers devote
resources to this issue, resources previously allocated to other information
systems requirements may be redirected to address Y2K problems and issues. To
the extent that the Company's products are not selected as part of customers'
overall Y2K solution, redirection of these customer resources could have a
material adverse effect on the Company's results of operations and financial
condition. In addition, the Y2K Issue creates risk for the Company from
unforeseen problems in its internal computer systems and from interaction with
third parties. Failure on the Company's part, or on the part of third parties'
computer systems could have a material impact on the Company's ability to
conduct its business and to process and account for the transfer of funds
electronically.
Page 9 of 21
<PAGE>
ITEM 2. 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 view with respect to future events and financial performance.
These forward-looking statements are subject to certain risks and uncertainties,
including those discussed in the Other Factors Affecting Future Results section
of this Item 2, elsewhere in this Form 10-QSB and as set forth in the Company's
form 10-K on file with the SEC, 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.
RESULTS OF OPERATIONS
REVENUE
Revenue for the second quarter of fiscal year 2000, which ended September
30, 1999, was $403, an increase from $360 in the second quarter a year ago.
Revenue for the six month period ended September 30, 1999 decreased to $712 from
$953 over the six month period ended September 30, 1998. The decrease was
primarily due to a decrease in license and maintenance revenue. A substantial
portion of the Company's resources were being used for non-revenue generating
activities. Management and administrative personnel were concentrating on new
financing and investment, as well as working out a payment solution with
creditors. During the first quarter of fiscal 2000, technical personnel were
used to prepare for the Company's annual trade show. International sales,
primarily Japan and the Far East, accounted for 1% of total revenue in the
second quarter of fiscal 2000 compared to 64% in the second quarter a year ago.
A substantial portion of the Company's revenues in each quarter results
from shipments during the last month of that quarter, and for that reason among
others, the Company's revenues are subject to significant quarterly
fluctuations. If revenue levels are below expectations, as in the quarter ended
September 30, 1999, 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
and service contracts, 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.
The Company's expense levels are based, in part, on its expectations as to
future revenue levels, which are difficult to predict.
COST OF REVENUE
Cost of license fees and other for the second quarter of fiscal year 2000
was $80, compared to $109 in the second quarter of fiscal 1999. Cost of license
fees and other for the six months ended September 30, 1999 was $160, compared to
$179 for the six months ended September 30, 1998. Cost of sales of license fees
and other is primarily the amortization of software development costs.
Cost of maintenance and services for the second quarter of fiscal year 2000
was $225 compared to $117 in the second quarter of fiscal 1999. Cost of
maintenance and services for the six months ended September 30, 1999 was $356
compared to $346 for the six months ended September 30, 1998. Cost of
maintenance and services is primarily the cost of providing design services,
technical support and technical documentation. Cost of maintenance and services
includes the design services costs of Quality I.C. Corporation, which was
acquired by the Company on March 31, 1998.
Page 10 of 21
<PAGE>
ENGINEERING, RESEARCH AND DEVELOPMENT EXPENSES
Engineering, research and development expenses for the second quarter of
fiscal year 2000 were $265 compared to $771 in the second quarter a year ago.
Comparing the second quarter of fiscal 2000 and the second quarter of fiscal
1999, engineering, research and development expenses were 66% and 214% of total
revenue, respectively. Engineering, research and development expenses for the
six months ended September 30, 1999 were $716 compared to $1,407 for the six
months ended September 30, 1998. Comparing these periods, engineering, research
and development expenses were 101% and 148% of total revenue, respectively. The
decrease in engineering, research and development expenses is due to cost-
cutting measures instituted by management, including a reduction in personnel,
while maintaining an emphasis on new product research and development.
SELLING AND MARKETING EXPENSES
Selling and marketing expenses for the second quarter of fiscal year 2000
decreased to $33 from $506 in the second quarter a year ago. In the second
quarter of fiscal 2000 and the second quarter of fiscal 1999, selling and
marketing expenses were 8% and 141% of total revenue, respectively. Selling and
marketing expenses for the six months ended September 30, 1999 decreased to $240
from $1,174 for the six months ended September 30, 1998. Comparing the six
month periods, selling and marketing expenses were 34% and 123% of total
revenue, respectively. The decrease is due to the effects of the Company's
cost-cutting measures, including a reduction in salaries and occupancy costs.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased to $136 for the second
quarter of fiscal year 2000 from $231 in the second quarter a year ago. In the
second quarter of fiscal 2000 and the second quarter of fiscal 1999, general and
administrative expenses were 34% and 64% of total revenue, respectively.
General and administrative expenses for the six months ended September 30, 1999
decreased to $321 from $643 for the six months ended September 30, 1998.
Comparing the six month periods, general and administrative expenses were 45%
and 67% of total revenue, respectively. The decrease is due to the effects of
the Company's cost-cutting measures, including a reduction in salaries and
professional fees.
OTHER INCOME (EXPENSE)
Other income for the first six months of fiscal year 2000 includes $96 gain
recognized on the cancellation of indebtedness. See Note 6 to the Consolidated
Financial Statements
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through
sales of equity securities and to a lesser extent, cash generated from
operations. To date in fiscal 2000, the Company has received approximately
$1,000 cash proceeds from a subordinated debt/warrant financing. During the six
months ended September 30, 1999, cash and cash equivalents increased $141 from
$247 to $388. This increase resulted from cash provided by the financing
activities of $931 less cash used by operations of $797 and $7 of cash used for
investing activities. During the same period, accounts receivable decreased
from $444 to $303 resulting from a decrease in revenue for the six months.
The Company incurred a loss in the second quarter of fiscal 2000 and
expects operating losses to continue, at least in the near term, until its
revenues are adequate to generate margin to cover expenses. At September 30,
1999, the Company had an accumulated deficit of $44,618. 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 may continue to experience negative cash flow through fiscal 2000
and potentially thereafter.
Page 11 of 21
<PAGE>
The Company's primary unused sources of funds at September 30, 1999
consisted of cash and cash equivalents of $388. On June 8, 1998, the Company's
$2,000 line of credit with its bank expired and the $285 outstanding under the
line of credit became due and payable. $225 of this amount remained outstanding
as of May 11, 1999. In addition, $137 outstanding on an equipment line with the
same lender also became due and payable. On May 11, 1999, the Company entered
into a Settlement Agreement with the lender whereby SVR agreed to issue a cash
payment for a portion of the debt and to issue warrants to purchase common stock
("Warrants") for cancellation of the remainder. The Settlement Agreement
required that SVR make the cash payment and deliver the Warrants to the lender
by June 8, 1999, which the Company did.
In June 1999, the Company began a subordinated debt/warrant financing. The
financing included approximately $1,000 of three-year notes and the sale of
approximately 8,000 Warrants at $0.01 per Warrant. The debt bears simple
interest of 10% and the Warrants have a five-year term with an exercise price
per share of $0.125. This financing transaction consists of two closings. At
the first closing, which took place on June 7, 1999, the Company received $768
cash proceeds. This included $711 of three-year notes and the sale of
approximately 5,700 Warrants at $0.01 per Warrant. The second closing was
scheduled for July 15, 1999. The second closing was extended until September
24, 1999, pending negotiation of a workout with the Creditors' Committee through
the Credit Managers' Association to resolve accounts payable issues. An
agreement was reached and the Company received approximately $312 cash proceeds
from the second closing. The Company used part of the proceeds from the
financing to complete the Settlement Agreement with its lender and to pay other
accounts payable. The Company intends to use the balance of the proceeds to help
fund its operations. The Company's CEO, the Company's Chairman of the Board, an
affiliate of a Company director and two Company 10% shareholders participated
in this financing. The Company may require additional financing prior to year-
end.
As of September 30, 1999, the Company's current assets were less than its
current liabilities. However, its cash and cash equivalents were roughly equal
to the cash required to fund those of its current liabilities due in the next
six to nine months since a substantial amount of the accounts payable, accrued
liabilities and deferred revenue do not require cash to fund them at present.
As to the accounts payable, this is because an agreement was reached with the
Creditors' Committee through the Credit Managers' Association. The agreement
with the Creditors' Committee provided for a reduction of approximately $65 of
the Company's current payables and postponement of approximately $185 of its
current payables.
The Company's operations have required substantial cash in the past; for
example, $797 during the first six months of fiscal 2000. However, management
has implemented cost reducing measures and expects revenues to increase during
the remainder of fiscal 2000. Assuming management is successful with their cost
reduction and revenue achievement programs, the Company expects to fund future
operations without requiring additional financing. However, it is possible that
it could require additional financing to fund future operations.
The Company may issue a series of Preferred Stock with rights, preferences,
or privileges senior to those of the Common Stock. It has no commitments or
arrangements to obtain any additional funding and there is no assurance that the
amount of capital required will be available on acceptable terms, if at all.
However, because its Common Stock was delisted from trading on the NASDAQ
national market in November, 1998, and now trades in the over-the-counter
market, its ability to sell Common Stock or securities convertible into Common
Stock may be adversely affected. See "Delisting From NASDAQ; Disclosure
Relating to Low-Priced Stock" below for possible effect of current common stock
trading on future issuances.
The unavailability or timing of any financing could prevent or delay the
Company's continued development and marketing of our products and services. In
addition, substantial curtailment of its operations may be required which could
result in bankruptcy.
OTHER FACTORS AFFECTING FUTURE RESULTS
Recent and Expected Losses; Accumulated Deficit. For the quarter ended
- -----------------------------------------------
September 30, 1999, we incurred a net loss of approximately $393. We had an
accumulated deficit of approximately $44,618 as of September 30, 1999. We may
incur losses for most of the next fiscal year. We may incur significant
additional
Page 12 of 21
<PAGE>
losses for a longer period. There is no assurance that we will generate positive
cash flow from operations or that we will attain or sustain profitability in the
future. To the extent we grow or continue to incur losses, our operating and
investing activities may use cash and, consequently, require us to obtain
additional sources of financing in the future or to reduce operating expenses.
Need for Future Financing. As described above, under Management Discussion and
- -------------------------
Analysis-Liquidity and Capital Resources, we may require additional financing to
fund our operations during fiscal 2000. This is due to the cash requirements to
service our current debt and our continued negative cash flow from operations.
There can be no assurance that we will be able to raise such financing or that
any such financing we are able to conduct will be on attractive terms.
Going Concern Assumptions. Our independent accountants' report on our
- -------------------------
consolidated financial statements as of and for the years ended March 31, 1997,
1998 and 1999 contain an explanatory paragraph indicating that our historical
operating losses and limited capital resources raise substantial doubt about our
ability to continue as a going concern. We may require substantial additional
funds in the near future. If we are unable to raise sufficient funds or
generate sufficient cash from operations to cover the cost of our operations, it
is likely that any independent accountant's report on our future financial
statements will include a similar explanatory paragraph.
New Products and Rapid Technological Change; Risk of Product Defects. The
- --------------------------------------------------------------------
Electronic Design Automation ("EDA") industry is characterized by the following:
extremely rapid technological change
frequent new product introductions and enhancements
_ evolving industry standards
_ rapidly changing customer requirements.
The development of more complex integrated circuits with new technologies
will require more sophisticated design tools. The success of our future
operations partly depends upon our ability to enhance our current products and
to develop and introduce new products on a timely and cost-effective basis. Our
products and services must keep pace with technological developments and
evolving industry standards and methodologies, as well as address the
increasingly sophisticated needs of our customers. It is possible that in the
future, we may experience delays in new product development and product
enhancements. We have experienced similar delays in the past.
We announced a new product named DCP (Design Cockpit Platform). However,
there is no guarantee that:
_ this new product will gain market acceptance
_ we will be successful in developing and marketing product enhancements
_ we will be successful in developing other new products that respond to
technological change, evolving industry standards and changing customer
requirements
_ we will not experience difficulties that could delay or prevent the
successful development introduction and marketing of these products or
product enhancements
our new products and product enhancements will adequately meet the
requirements of the marketplace and achieve any significant degree of market
acceptance
All of our present products operate in the Unix operating system and we
intend for all of our future products to operate in the Unix operating system as
well as the Linux operating system. In the event that another operating system,
such as Windows NT, were to achieve broad acceptance in the EDA industry, we
would be required to port our products. This would be costly and time consuming
and could have a material adverse effect on our business, operating results or
financial condition. If we fail to develop and introduce new products and
product enhancements in a timely and cost-effective manner, for technological or
other reasons, it could also have material and adverse effects on our business,
operating results and financial condition.
Page 13 of 21
<PAGE>
Introducing or even announcing new products by us or our competitors, including
new technologies or changes in industry standards or customer requirements,
could render some or all of our existing products obsolete or unmarketable.
Furthermore, customers might defer purchases due to the introduction or
announcement, which would also have a material adverse effect on our business,
operating results or financial condition.
Complex software products, such as those we offer, can contain defects or
even fail when introduced or released. We have, in the past, discovered defects
in certain of our products. We may experience delays or lost revenue in
connection with repairs and corrections of defects we find in the future.
Although to date we have not experienced material adverse effects resulting from
defects, it is possible in the future that despite testing, errors will go
undiscovered in new products or releases until after shipment. These errors may
result in loss of market share or failure to achieve market acceptance. If this
were to occur, it could have a material adverse effect upon our business,
operating results or financial condition.
Delisting From NASDAQ; Disclosure Relating to Low-Priced Stock. Our common
- --------------------------------------------------------------
stock was delisted from trading on the NASDAQ National Market November 16, 1998.
Our common stock immediately began trading on the OTC Bulletin Board. As a
result, our ability to obtain additional financing through the issuance of
common stock or securities convertible into common stock may be adversely
affected. You might find that disposing of our common stock is more difficult
than is has been in the past. The trading price of our common stock is
currently less than $5.00 per share. Because of our common stock falls into the
category defined as penny stock, trading in the common stock is currently
subject to certain rules promulgated under the Exchange Act, which require
additional disclosure by broker-dealers. These rules require us, in advance of
trading, to provide you with disclosure schedules, which explain the penny stock
market and associated risks. The rules impose various sales practice
requirements on broker-dealers who sell penny stock. Broker-dealers engaging in
some types of these transactions must make a special suitability determination
and obtain your written consent prior to sale. This additional burden may
discourage broker-dealers from actively effectuating common stock transactions,
which in turn could have the adverse effect of severely limiting the
marketability of our common stock. Therefore, the ability of Silicon Valley
Research, Inc. shareholders to resell their stock would be limited. In turn,
this could adversely effect our ability to obtain future equity financing.
Possible Volatility of Stock Price. The market price of our common stock has
- ----------------------------------
been volatile. The following events could cause the market price of our common
stock to fluctuate substantially:
_ future announcements concerning our competitor's or our quarterly
variations in operating results
_ the introduction of technological innovations, new products, or changes in
product pricing policies
- - proprietary rights or other litigation, or
_ changes in earnings estimates by analysts or other factors
The stock market has from time to time experienced significant price and
volume fluctuations that have particularly affected the market prices for the
common stocks of technology companies like us. These fluctuations have often
been unrelated to the operating performance of particular companies.
In the past, shareholder class action suits have been filed against
companies following periods of volatility of stock price. Litigation of this
nature could occur in our future. Litigation often diverts management attention
and resources and is costly to the company. If we were placed in this position,
it could have a material adverse effect on our business, financial condition and
operation results. Significant liabilities are always possible effects of
litigation.
Potential Fluctuations in Quarterly Operating Results. Numerous factors may
- -----------------------------------------------------
materially and unpredictably affect our operating results, including:
_ 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 us and our competitors
Page 14 of 21
<PAGE>
- - gain or loss of significant customers or distributors
- - expense levels
- - renewal of maintenance contracts
- - pricing changes by us or our competitors
- - personnel changes
- - foreign currency exchange rates
- - economic conditions generally and in the electronics industry specifically
Any unfavorable change in these or other factors could have a material adverse
effect on our operating results for a particular quarter. Many of our customers
order on an as-needed basis and often delay delivery of firm purchase orders
until their project commencement dates are determined. As a result, we operate
with no significant backlog. Therefore, quarterly revenue and operating results
will depend on the volume and timing of orders received during the quarter,
which are difficult to forecast accurately. Historically, we have often
recognized a substantial portion of our license revenues in the last month of
the quarter, with these revenues frequently concentrated in the last two weeks
of the quarter. Our operating results would be disproportionately affected by a
reduction in revenue because only a small portion of expenses vary with revenue.
Operating results in any period should not be considered indicative of the
results to be expected for any future period. Our revenues may or may not
increase and we may or may not become profitable.
Lengthy Sales Cycle. The licensing and sale of our software products generally
- -------------------
involve a significant commitment of capital from prospective customers. Delays
are frequently associated with large capital expenditures and lengthy acceptance
procedures. For these and other reasons, the sales cycle associated with the
licensing of our products is typically lengthy and subject to a number of
significant risks over which we have little or no control. Because the timing of
customer orders is hard to predict, we believe that our quarterly operating
results are likely to vary significantly in the future. Our actual results could
vary materially as a result of a variety of factors, including, without
limitation:
- - the high average selling price and long sales cycle for our 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
- - acceptance of our products and increased competition
Dependence Upon Semiconductor and Electronics Industries; General Economic and
- ------------------------------------------------------------------------------
Market Conditions. At Silicon Valley Research, Inc., we are 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. Each of these
industries is highly volatile and has periodically experienced significant
downturns. Often in connection with, or in anticipation of, declines in general
economic conditions, the number of new integrated circuit design projects often
decreases. Our customers' purchases of new licenses from us are largely
dependent upon the commencement of new design projects. Factors negatively
affecting any of these industries could have a material adverse effect on our
business, operating results or financial condition. Our business, operating
results and financial condition may in the future reflect substantial
fluctuations from period to period due to patterns and general economic
conditions in either the semiconductor or electronics industry.
International Sales. International sales, primarily in Japan and Taiwan,
- -------------------
accounted for approximately 25% of the total revenue in fiscal 1997, 32% in
1998, 36% in 1999 and 1% and the first six months of 2000. Declining revenues
from international sales were a result of the reduction in capital expenditures
by semiconductor manufacturers, particularly in Asia, as a result of the current
financial crisis in that region, and increased competition in the EDA software
market. We expect that international sales will continue to account for a
significant portion of our revenue. We plan to continue to expand our
international sales and distribution channels. However, this revenue involves a
number of inherent risks, including:
- - economic downturn in the electronics industry in Asia
Page 15 of 21
<PAGE>
- - traditionally slower adoption of the our products internationally
- - general strikes or other disruptions in working conditions
- - generally longer receivables collection periods
- - unexpected changes in or impositions of legislative or regulatory
requirements
- - reduced protection for intellectual property rights in some countries
- - potentially adverse taxes
- - delays resulting from difficulty in obtaining export licenses for certain
technology
- - other trade barriers
The factors listed above may have a material adverse effect on our future
international sales and, consequently, on our operating results.
Effective December 1998, we discontinued operating our Tokyo office and in
March 1999, we discontinued operating our Taiwan office. In the future, we will
use distributors to service the Japanese and Taiwanese markets.
Competition. The EDA software market in which Silicon Valley Research, Inc.
- -----------
competes is intensely competitive and subject to rapid technological change. We
currently face competition from EDA vendors, including Cadence, which currently
holds the dominant share of the market for integrated circuit physical design
software, Avant! and Synopsys. These EDA vendors have significantly greater
financial, technical and marketing resources, greater name recognition and a
larger installed customer base than we do. These companies also have established
relationships with current and potential customers of ours and can devote
substantial resources aimed at preventing us from enhancing relationships with
existing customers or establishing relationships with potential customers. We
believe that competitive factors in the EDA software market include:
- - product performance
- - price
- - support of industry standards
- - ease of use
- - delivery schedule
- - product enhancement
- - customer technical support and service
Competition from other EDA companies that choose to enter the integrated
circuit physical design market could present particularly formidable competition
due to their large installed customer base and their ability to offer a complete
integrated circuit design solution. We expect additional competition from other
established and emerging companies. In addition, the EDA industry has become
increasingly concentrated in recent years as a result of consolidations,
acquisitions and strategic alliances. Accordingly, it is possible that new
competitors or alliances among competitors could emerge and rapidly acquire
significant market share. We cannot assure you that we will be able to compete
successfully against current and future competitors or that competitive
pressures faced by us will not have a material adverse effect on our business,
operating results and financial condition.
Page 16 of 21
<PAGE>
Dependence on Certain Customers and Resellers. A small number of customers
- ---------------------------------------------
account for a significant percentage of our total revenue.
PERCENTAGE OF OUR TOTAL REVENUE BY CUSTOMER
<TABLE>
<CAPTION>
Customer Fiscal 1997 Fiscal 1998 Fiscal 1999
-------- ----------- ----------- -----------
<S> <C> <C> <C>
HAL Computer Systems, Inc., a subsidiary of Fujitsu Ltd. 14% N/A N/A
Lucent Technologies 19% N/A N/A
Motorola, Inc. 13% 13% 18%
Aspec Technology N/A 20% N/A
</TABLE>
We cannot assure you 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 our business, operating results or financial condition. We
currently sell and market our products overseas through a limited number of
distributors. Our history of performance with our distributors is also limited.
We cannot offer you assurance that the new distributors will be able to
successfully distribute and support our products on a timely basis or that such
distributors will not reduce their efforts devoted to selling our products or
terminate the relationship 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 our international distributors could have an adverse effect on
our business.
Management Transition. Here at Silicon Valley Research, Inc., we are
- ---------------------
experiencing a period of management transition that has placed, and may continue
to place, a significant strain on our resources, including our personnel. James
O. Benouis joined the Company in March 1998 as our President and Chief Operating
Officer. On August 4, 1998, Mr. Benouis was appointed our Chief Executive
Officer. Effective April 2, 1999, Laurence G. Colegate, Jr. resigned as Chief
Financial Officer.
Our ability to manage growth successfully will require our management
personnel to work together effectively and will require us to improve our
operational, management and financial systems and controls. If our management is
unable to bring about this transition effectively, our business, competitive
position, results of operations and financial condition will be materially and
adversely affected. See "Dependence on Key Personnel" below.
Dependence on Key Personnel. Our success depends to a significant extent upon a
- ---------------------------
number of key technical and management employees, in particular, Robert R.
Anderson, Chairman, and James O. Benouis, President and Chief Executive Officer.
We do not currently have "key man" life insurance on Mr. Anderson or Mr.
Benouis. The loss of services of Mr. Anderson or Mr. Benouis or any of our other
key employees could have a material adverse effect on us. See "Management
Transition" above.
Also, our success depends in large part on our ability to attract and
retain highly skilled technical, managerial, sales and marketing personnel.
Competition for such talented personnel is intense. We cannot assure you that we
will be successful in retaining our key technical and management personnel or in
attracting and retaining the personnel we require now in order to grow.
Proprietary Rights. Silicon Valley Research, Inc. relies on contract, trade
- ------------------
secret and copyright law to protect its technology. Competitors may develop
similar or superior technologies or duplicate our technology. We generally enter
into confidentiality or license agreements with our employees, distributors and
customers, and limit access to and distribution of our software, documentation
and other proprietary information. Despite these precautions, it is possible for
a third party to copy or otherwise obtain and use our 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.
Page 17 of 21
<PAGE>
There has been substantial industry litigation regarding patents and other
intellectual property rights involving technology companies. In the future,
litigation may be necessary to protect and enforce our intellectual property
rights, to defend us against claimed infringement of the rights of others and to
determine the scope and validity of the proprietary rights of others. Any such
litigation could be costly and could divert management's attention, which could
have a material adverse effect on our business, results of operations or
financial condition regardless of the outcome of the litigation. In addition,
third parties making claims against us with respect to intellectual property
infringement may block our ability to sell products in the United States and
abroad, and could result in an award of substantial damages. In the event of a
claim of infringement, Silicon Valley Research, Inc. and our customers could be
required to obtain one or more licenses from third parties. We cannot assure you
that either our customers or we could obtain necessary licenses from third
parties at a reasonable cost or at all.
Concentration of Stock Ownership. Our present directors, executive officers and
- --------------------------------
5% shareholders and their affiliates beneficially own approximately 77% of the
outstanding common stock as of September 30, 1999. As a result, these
shareholders may be able to exercise significant influence over all matters
requiring shareholder approval, including the election of directors and approval
of significant corporate transactions. Such concentration of ownership may have
the effect of delaying or preventing a change in control of Silicon Valley
Research, Inc.
Depressive Effect of Warrants. We have a substantial number of common stock
- -----------------------------
warrants outstanding with an exercise price of $0.125 (9,251) and of $0.37
(2,400). These warrants may have the effect of causing our stock price to be
lower than it would be otherwise.
Effect of Certain Charter Projections; Blank Check Preferred Stock. Our 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 shareholders. The
rights of the holders of the common stock will be subject to, and may be
adversely affected by, the rights of the holders of any preferred stock that may
be issued in the future. The issuance of preferred stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire a majority of our outstanding voting stock.
Inflation. To date, inflation has not had a significant impact on the results
- ---------
of our operations.
Recent Accounting Pronouncements. In April 1998, the American Institute of
- --------------------------------
Certified Public Accountants issued Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use."
Statement of Position 98-1 provides guidance for determining whether computer
software is internal-use software and on capitalization of the costs associated
with internal-use computer software. It also provides guidance on accounting for
the proceeds of computer software originally developed or obtained for internal
use and then subsequently sold to the public. We have not yet determined the
impact, if any, of adopting this statement. The disclosures prescribed by
Statement of Position 98-1 will be effective for the year ending March 31, 2000
consolidated financial statements.
Year 2000 Issue. The "Year 2000 Issue" arises because most computer systems and
- ---------------
programs were designed to handle only a two-digit year, as opposed to a four-
digit year. When the year 2000 begins, these computers may interpret "00" as the
year 1900 and could either stop processing date-related computations or could
process them incorrectly. As our customers and potential customers devote
resources to this issue, resources previously allocated to other information
systems requirements may be redirected to address Y2K problems and issues. To
the extent that our products are not selected as part of customers' overall Y2K
solution, redirection of these customer resources could have a material adverse
effect on our results of operations and financial condition. In addition, the
Y2K Issue creates risk for us from unforeseen problems in our internal computer
systems and from interaction with third parties. Failure on our part, or on the
part of third parties' computer systems could have a material impact on our
ability to conduct our business and to process and account for the transfer of
funds electronically. The Company's management has evaluated the effect of Y2K
on its systems and software products and does not anticipate any material
adverse effects from Y2K on its operations or financial position.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not Applicable
Page 18 of 21
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
As with other companies in industries similar to the Silicon Valley
Research, Inc., 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. Due to its present
cash shortage and resulting inability to pay its vendors, several of
its vendors have initiated collection actions against the Company.
Through the Credit Managers' Association, the Company has settled with
95% of its creditors for a complete release of claim or an agreement
to stay collection activities for one year. Each of such creditors
chose one of the following payment plans:
1. receive 30% of its unsecured claim in exchange for a
complete release of claim of the remaining balance; or
2. receive 15% of its unsecured claim in exchange for an
agreement to stay collection activities for one year with
10% interest earned on the remaining balance.
Item 2. Changes in Securities and Use of Proceeds:
In June 1999, the Company began a subordinated debt/warrant financing.
The financing included approximately $1,000,000 of three-year notes
and the sale of approximately 8,000,000 Warrants at $0.01 per Warrant.
The debt bears simple interest of 10% and the Warrants have a five-
year term with an exercise price per share of $0.125. This financing
transaction consists of two closings. The first closing took place on
June 7, 1999. The Company received $768,200 cash proceeds from this
closing. This included $711,000 of three-year notes and the sale of
approximately 5,700,000 Warrants at $0.01 per Warrant. The second
closing was to have taken place on July 15, 1999. The closing was
extended until September 24, 1999 pending negotiation of a workout
with the Creditors' Committee through the Credit Managers' Association
to resolve accounts payable issues that was satisfactory to the
majority of the investors. An agreement was reached and the Company
received approximately $311,800 cash proceeds from the second closing.
The Company used part of the proceeds from the financing to complete
the Settlement Agreement with its lender and to pay other accounts
payable and intends to use the balance of the proceeds to help fund
its operations. The Company's CEO, the Company's Chairman of the
Board, an affiliate of a Company director and two Company 10%
shareholders participated in the financing.
Item 3. Defaults Upon Senior Securities: Not Applicable
Item 4. Submission of Matters to a Vote of Securities Holders:
(A) On September 13, 1999, the Annual Meeting of the Shareholders of
the Registrant was held. A total of 18,291,742 shares, or
approximately 70% of the shares outstanding, were represented at
this meeting.
(B) At the annual meeting, the shareholders elected Robert R.
Anderson as Director with 18,199,315 votes in favor and 92,427
withheld; James O. Benouis as Director with 18,183,527 votes in
favor and 108,215 withheld; and David G. Arscott and David Knight
as Directors with 18,200,327 votes in favor and 91,415 votes
withheld.
(C) The shareholders ratified the appointment of Moss Adams LLP as
the Company's independent public accountants with 18,188,558
votes in favor, 70,863 against and 32,321 votes abstained.
Item 5. Other Information: Not Applicable
Page 19 of 21
<PAGE>
Item 6. Exhibits and Reports on Form 8-K:
(A) Exhibits:
Exhibit
Number Description of Exhibit
- ------ ----------------------
(a)(1) The financial statements filed as part of this Report at Item 1 are
listed in the Index to Financial Statements and Financial Statement
Schedules on page 2 of this Report.
(a)(2) The following exhibits are filed with this Quarterly Report on Form
10-Q:
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 amendment to Amended and Restated Articles of
Incorporation (incorporated by reference to Exhibit 3.02 of
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998).
3.03 Registrant's bylaws, as amended to date (incorporated by reference to
Exhibit 4.01 of the 1984 Registration Statement).
3.05 Amendment to Bylaws dated November 12, 1996 (incorporated by reference
to Exhibit 3.04 of Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1996).
10.01 Agreement and Stipulation between Registrant and Finova Technology
Finance, Inc.
10.02 Workout Agreement of Silicon Valley Research, Inc.
27.00 Financial Data Schedule
(B) Reports on Form 8-K:
No Reports on Form 8-K were filed during the quarter covered by this report.
Page 20 of 21
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SILICON VALLEY RESEARCH, INC.
Date: November 12, 1999 /s/ James O. Benouis
----------------- --------------------
James O. Benouis
President and
Chief Executive Officer
(Chief Financial and Accounting
Officer)
Page 21 of 21
<PAGE>
Exhibit 10.01
JEFFREY M. FORSTER (SBN 50519)
FORSTER & SEGAL
160 W. Santa Clara St., #1100
San Jose, CA 95113
Telephone: (408) 977-3137
Attorneys for Defendants
SILICON VALLEY RESEARCH, INC.
TED A. GALFIN (SBN 95142)
GALFIN & PASSON, LLP
Attorneys at Law
18101 Von Karman Avenue, Suite 1400
Irvine, California 92612-1043
Attorneys for Plaintiff
FINOVA TECHNOLOGY FINANCE, INC.
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SANTA CLARA
FINOVA TECHNOLOGY FINANCE, INC. Case No: CV 780730
Plaintiff(s), STIPULATION AND
ORDER THEREON
v.
SILICON VALLEY RESEARCH, INC.
Defendant(s).
- -------------------------------
IT IS HEREBY STIPULATED by and between Plaintiff, FINOVA TECHNOLOGY
FINANCE, INC. (hereinafter "FINOVA") and Defendant, SILICON VALLEY RESEARCH,
INC. (hereinafter "SVR"), that they have reached a settlement in the above-
captioned matter on the following terms and basis.
1. The parties hereto desire to settle all matters and controversies
between them, including the rights and obligations of the parties under the
terms of a certain Equipment Lease entered into in or about September, 1995 (the
"Lease") as it relates to certain computer equipment (the "Equipment").
<PAGE>
2. The parties have agreed that within five (5) days after the execution
of this Stipulation, SVR shall deliver to FINOVA the sum of $25,000 by cashier's
check or other immediately available funds.
3. The parties agree that upon its receipt of the payment of the $25,000,
FINOVA agrees to forbear from proceeding in the above-captioned litigation until
August 3, 2000 (at which time the court has scheduled a status/settlement review
hearing) in consideration for the payment of said $25,000.
4. The parties acknowledge and agree that, after FINOVA's receipt of the
sum of $25,000 from SVR as provided in Paragraph 2 above, the sum of $157,818.91
will remain due, owing and unpaid to FINOVA under the terms of the lease.
Therefore, SVR agrees to pay to FINOVA the sum of $157,818.91, plus interest
thereon at the rate of ten percent (10%) per annum accruing from and after April
16, 1999 through and including August 3, 2000, at which time the remaining
balance of principal and interest shall be all due and payable, in full
settlement of this matter. Upon timely payment of said sum, together with any
accrued and unpaid interest thereon, FINOVA shall cause the above-referenced
action to be dismissed in its entirety, with prejudice.
5. A Request to Enter a Default Judgment was filed by FINOVA against SVR
on May 27, 1999. The parties hereby stipulate that the default or SVR entered on
May 27, 1999, shall be and it is hereby set aside.
6. As stated above, credit shall be given to amounts due and owing by SVR
to FINOVA for the $25,000 to paid upon execution of this Stipulation.
Furthermore a sale of the Equipment has been undertaken and the sale amount is
$1,700. SVR has procured the buyer and negotiated the sales price, which is
acceptable to FINOVA, and said $1,700 shall also be credited against amounts due
to FlNOVA by SVR as set out above. Said payment of $1,700 shall be in cashier's
check or other immediately available funds and made payable to FINOVA TECHNOLOGY
FINANCE, INC. Upon receipt of said payment, FINOVA shall forward a bill of sale
for the leased Equipment pursuant to instructions from SVR.
7. The Case Management Conference heard in Santa Clara County Superior
Court on July 27, 1999 before Judge Leonard Sprinkles in Department 9 was
attended by Jeffrey M. Forster on behalf of both parties. A new
Status/Settlement Review Hearing has been set by the court on August 3, 2000,
<PAGE>
at 10:00 a.m., in Department 9 of this court, when this settlement should be
finalized by the parties. Any other court appearances required by the parties to
this action in Santa Clara Superior Court in the interim shall be made by
Jeffrey M. Forster.
8. It is agreed that upon the execution and filing of this Stipulations,
counsel for SVR shall pay any appearance fee required by in the Santa Clara
Superior Court and shall attend any and all conferences or other required
meetings with the court and provide any case management statements that may be
required in the interim.
9. If the matter is not settled on or before August 3, 2000 by the
payment of the outstanding balance due by SVR to FINOVA as provided in paragraph
4 above, then FINOVA shall have all of its remedies available to pursue its
claims against SVR and put the matter back on calendar by attendance before the
court on August 3, 2000 at the Status/Settlement Review Hearing in order to
schedule court ordered proceedings, including any motions, other alternative
dispute resolution efforts that are made and thereafter trial if the foregoing
are not successful. Without limiting the foregoing, the parties expressly agree
that the terms of this Stipulation may be enforced by FINOVA by motion for the
entry of judgment under Code of Civil Procedure Section 664.6.
10. The parties agree to cooperate with each other in executing any and
all documents or other pleadings that may be required by the court in order to
finalize this settlement, including any other releases, dismissals or documents
necessary to remove and set aside the Request to Enter Default as set forth
above.
11. SVR and FINOVA have executed this Stipulation based upon their own
independent judgment without threat, coercion or duress. SVR and FINOVA fully
understand the terms and legal effect of this Stipulation, and both acknowledge
that they have had adequate opportunity to consult legal counsel in connection
with this Stipulation.
12. This Stipulation is made for the benefit of SVR and FINOVA and their
respective successors and assigns. No other person or persons shall have any
rights or remedies under or by reason of this Stipulation.
13. The parties further agree:
<PAGE>
a. This Stipulation may be executed in multiple counterparts, each
of which shall constitute an original Stipulation, but all of
which shall constitute one and the same Stipulation;
b. Any amendment to this Stipulation must be writing, must be
executed and delivered by both parties, and must expressly refer
to this Stipulation;
c. This Stipulation shall be binding upon and shall inure to the
benefit of the parties hereto, their heirs, executors,
administrators, successors, legal representatives and assigns;
d. This Stipulation shall be governed by the laws of the State of
California as applicable.
e. SVR and FINOVA agree that the rule of construction to the effect
that any ambiguities are to be or may be resolved against the
drafting party shall not be employed in the interpretation of
this Stipulation to favor one party against the other.
f. In the event any party to this Stipulation brings further
proceedings and/or a separate suit to enforce any provision of
this Stipulation or is required to defend any action, the
unsuccessful party agrees to pay the successful party such costs
and attorneys' fees as the court deems just and proper;
g. For purposes of this Stipulation, the addresses of the parties
for all notices are set forth below:
Finova Technology Finance, Inc.
115 West Century Road
Paramus, NJ 07653
ATTN: O'Neil Ptrone, Manager-Collections
With a copy to:
TED A. GALFIN (SBN 95142)
GALFIN & PASSON, LLP
Attorneys at Law
18101 Von Karman Avenue, Suite 1400
Irvine, California 92612-1043
<PAGE>
Silicon Valley Research, Inc.
6360 San Ignacio Avenue
San Jose, California 95119-1231
ATTN: James Benouis, President
With a copy to:
Jeffrey M. Forster, Esq. (SBN 50519)
Forster & Segal
160 W. Santa Clara Street, #1100
San Jose, California 95113
15. In witness whereof, the parties have executed this Stipulation as of
the dates set forth below.
FINOVA TECHNOLOGY FINANCE, INC.
By: /s/ O'Neil Petrone Date: 8/18/99
-------------------------------- -------------
O'Neil Petrone, Manager-Collections
SILICON VALLEY RESEARCH, INC.
By: /s/ James Benouis Date: 10/7/99
-------------------------------- -------------
James Benouis, President
APPROVED AS TO FORM AND CONTENT:
GALFIN & PASSON, LLP
By: /s/ Ted A. Galfin Date: 8/23/99
-------------------------------- -------------
Ted A. Galfin
Attorney for Plaintiffs
FINOVA TECHNOLOGY FINANCE, INC.
FORSTER & SEGAL
By: /s/ Jeffrey M. Forster Date: 9/2/99
-------------------------------- -------------
Jeffrey M. Forster
Attorney for Defendants
SILICON VALLEY RESEARCH, INC.
<PAGE>
ORDER
Upon the foregoing Stipulation of the parties hereto and good cause
appearing therefor,
IT IS SO ORDERED.
Dated: Oct. 13, 1999 Leonard B. Sprinkles
------------- --------------------
<PAGE>
EXHIBIT 10.02
WORKOUT AGREEMENT
-----------------
of
--
SILICON VALLEY RESEARCH, INC.
-----------------------------
This Workout Agreement ("Agreement") is made between Silicon Valley
Research, Inc. ("Debtor") and each of the creditors of the Debtor which executes
a Consent in the form attached hereto as Exhibit A (individually, a Creditor
and, collectively, the "Creditors").
RECITALS
--------
A. As of November 1, 1998 ("Workout Date"), the Debtor is indebted to the
holders of unsecured claims totaling approximately $340,000.
B. The Debtor convened a meeting on November 19, 1998, to which all of
its unsecured creditors were invited. At that meeting, the management of Debtor
discussed the Debtor's financial condition and its future prospects. Subsequent
to that meeting, the creditors formed a committee of creditors ("Committee")
which is currently composed of the following Creditors:
Creditor Name Representative
------------- --------------
Flying Beyond, Inc. Greg Moyer
Advanta Business Services Corp. Todd Miller
C. Thereafter, the Debtor met with the Committee and a plan for
restructuring of the obligations of the Debtor was agreed upon between the
Debtor and the Committee. This Agreement embodies such agreement. The Committee
supports this Agreement and recommends that the creditors participate in the
debt restructuring proposed by this Agreement.
1
<PAGE>
Article I
---------
DESCRIPTION AND DETERMINATION OF CLAIMS
---------------------------------------
1.1 Claims Treated Under This Agreement. Except as otherwise provided
-----------------------------------
herein, claims subject to this Agreement ("Unsecured Claims") shall include all
unsecured claims against the Debtor which existed on the Workout Date. Unsecured
Claims shall include (a) all unsecured claims arising under leases or executory
contracts entered into prior to the Workout Date except to the extent of the
reasonable value of the use of goods, services or space actually used or
occupied by the Debtor after the Workout Date and (b) interest, late charges and
other amounts accruing on or before the Workout Date. Unsecured Claims shall not
include those claims described in Exhibit B hereto ("Schedule of Excluded
Claims") or an amendment to such Schedule B which is delivered to the Committee
by the Debtor on or before the Effective Date.
1.2 Designation of Claim Amount by Creditor. Upon execution of a Consent,
---------------------------------------
each Creditor shall state thereon the amount of its Unsecured Claim. Such
Unsecured Claim shall not include any interest, late charges or similar amounts
accruing after the Workout Date, all of which accruals shall be deemed waived by
the execution of the Consent, except for those Creditors with previous
stipulations and/or workout agreements which provide for treatment similar to
Distribution Alternative 1 as set forth in Article 2.2(a) hereof. Further, with
respect to such Creditors, the terms of any such previous stipulations and/or
workout agreements shall remain in full force and effect not withstanding
anything to the contrary set forth herein.
1.3 Delivery of Consent. The Creditor shall deliver such Consent to CMA
-------------------
at the address or facsimile number shown thereon. CMA shall note on each Consent
the date it is received and shall immediately transmit a copy of such Consent to
the Debtor.
1.4 Notice of Dispute. Not later than the later of (a) the Effective Date
-----------------
or (b) thirty days after receipt of the copy of each Consent from CMA, if the
Debtor
2
<PAGE>
disputes all or any portion of the Unsecured Claim asserted by a Creditor in its
Consent, the Debtor shall transmit written notice to the Creditor stating the
amount thereof that is disputed. Provided, however, the amount acknowledged and
agreed to be due and owing from the Debtor to any Creditor under the terms of
any previous stipulations and/or workout agreement shall be binding upon the
Debtor and may not be disputed under this Agreement.
1.5 Determination of Allowed Claim. If the Debtor gives timely notice of
------------------------------
dispute of an Unsecured Claim, the portion of such claim which the Debtor
disputes shall be deemed a "Disputed Claim." Any Unsecured Claim, or portion
thereof, which the Debtor does not timely dispute shall be deemed an Allowed
Claim.
1.6 Treatment of Disputed Claims.
----------------------------
(a) Resolution Through Arbitration. The allowability of each Disputed
------------------------------
Claim shall be determined by either (i) agreement between the Debtor and the
Creditor or (ii) binding arbitration pursuant to the Commercial Arbitration
Rules of the American Arbitration Association upon demand submitted to the
Association by either party. The award of the arbitrator in such proceeding
shall be a declaration only of the amount of the Creditor's Allowed Claim under
this Agreement and shall specify that it may be satisfied only in accordance
with this Agreement. The allocation of the cost of such arbitration (including
the fees, if any, of the arbitrator) shall be determined by the arbitrator in
the award.
(b) Reserve for Disputed Claims. At the time when any distribution is
---------------------------
to be made to the holders of Allowed Claims, the Disbursing Agent shall withhold
an amount equal to the distribution that would have been made on all Disputed
Claims if they had been Allowed Claims at the time of the distribution. The
Disbursing Agent shall hold such amount in an interest bearing, federally
insured deposit account ("Claims Reserve") pending resolution of the Disputed
Claim as provided herein.
3
<PAGE>
(c) Distributions on Disputed Claims. Not later than thirty days
--------------------------------
after the Disbursing Agent receives written notice that the allowability of a
Disputed Claim is resolved, the Disbursing Agent shall pay to the Creditor
holding such claim, from the Claims Reserve, (a) the portion of the
distributions that were withheld on account of the Disputed Claim to which the
holder thereof is entitled as a result of resolution of the Disputed Claim and
(b) the interest accrued in the Claims Reserve on account of such portion. The
portion of such distributions to which the holder is not entitled shall be
returned to the Debtor.
Article II
----------
TREATMENT OF CLAIMS
-------------------
2.1 Acceptance of Agreement; Consideration. By execution of their
--------------------------------------
Consents, the Creditors accept this Agreement and the treatments set forth
herein. The treatment provided to Unsecured Claims in this Agreement shall
supercede and replace all such Unsecured Claims, except those Creditors with
previous stipulations and/or workout agreements which provide for treatment
similar to Distribution Alternative 1 as set forth in Article 2.2(a) hereof.
Further, with respect to such Creditors, the terms of any such previous
stipulations and/or workout agreements shall remain in full force and effect not
withstanding anything to the contrary set forth herein. The Creditors accept
this Agreement for valuable consideration, receipt of which is hereby
acknowledged; such consideration includes the promises of the Debtor herein and
the powers granted to the Committee.
2.2 Distribution Alternatives.
-------------------------
(a) All Creditors holding Allowed Claims shall be entitled to elect
("Alternative 1") to receive on account of such claims cash
payments totaling 15% of such claims in the manner set forth in
Article 3.1 hereof
4
<PAGE>
in exchange for a one-year stay on the remaining balance. The 15%
payment will decrease the indebtedness and interest will accrue
at the rate of 10% on the remaining balance. The Creditor will
agree to suspend any and all collection activities for one year.
(b) All Creditors holding Allowed Claims shall be entitled to elect
("Alternative 2") to receive on account of such claims cash
payments totaling 30% of such claims in the manner set forth in
Article 3.1 hereof and the Creditor will forgive the remaining
balance. The Debtor will receive a complete release from the
Creditor.
Article III
-----------
DISTRIBUTIONS
-------------
3.1 Distributions to Creditors. Upon receipt of all consents and
--------------------------
verification by the Debtor and the Committee, the Disbursing Agent shall make
distributions to the Creditors based upon the distribution election chosen on
the consent.
3.2 Return of Excess Funds. After all claims are satisfied in full, the
----------------------
Disbursing Agent shall return to the Debtor all funds remaining in the Claims
Reserve.
Article IV
----------
EFFECTIVE DATE
--------------
4.1 Acceptance of Creditors. This Agreement shall become effective only
-----------------------
if it is accepted by the holders of 95% or more in dollar amount of Unsecured
Claims or by such lower percentage to which the Debtor agrees. In determining
such percentage, Unsecured Claims held by creditors who do not submit Consents
shall be deemed to be in the amounts shown in the Debtor's books and records.
5
<PAGE>
4.2 Definition of Effective Date. The "Effective Date" of this Agreement
----------------------------
shall be the day on which the Disbursing Agent certifies that the required
percentage of acceptances has been received in accordance with Article 4.1
hereof.
Article V
---------
COVENANTS
---------
5.1 Affirmative Covenants. Until the obligations of the Debtor under the
---------------------
claims are satisfied in full, unless the Committee agrees otherwise, the Debtor
shall:
(a) Continuation of Relationships. Continue to conduct business with
-----------------------------
Creditors to the extent that the prices, service, product availability, and
quality of performance by such Creditors are comparable to those available to
the Debtor generally and to the extent this covenant is not prohibited by
antitrust or other applicable law, governmental regulations, or requirements of
customers of the Debtor.
(b) Maintenance of Books and Records. Maintain its books and records
--------------------------------
according to generally accepted accounting principles applied on a consistent
basis.
(c) Payment of Taxes. Promptly pay all taxes, fees, levies and
----------------
charges due and payable to any public authority as they accrue, except to the
extent such nonpayment is due to a bona fide dispute as to liability therefor.
5.2 Negative Covenants. Until the obligations of the Debtor under the
------------------
claims are satisfied in full, unless the Committee agrees otherwise, the Debtor
shall not:
(a) Payments Outside Agreement. Make any payment on any Unsecured
--------------------------
Claim other than according to the treatments set forth in this Agreement.
(b) Distributions To Shareholders. Declare or pay any dividend or
-----------------------------
make any distribution in cash or in kind with respect to any of its capital
stock or take any action to authorize any such dividend or distribution.
6
<PAGE>
(c) Redemption of Stock. Purchase, redeem, retire or otherwise
-------------------
acquire for value any of its capital stock.
(d) Loans to Others. Make any loan in any amount to any person or
---------------
entity other than travel, expense and/or similar advances made in the ordinary
course of business to existing or prospective employees.
(e) Guaranties. Become obligated as a surety or guarantor on behalf
----------
of any other person or entity except in the ordinary course of business.
5.3 Confidentiality of Information. The Committee acknowledges that
------------------------------
substantial portions of the information provided to it may be confidential
information of the Debtor, and the Committee shall safeguard the confidentiality
of all information designated by the Debtor as confidential and shall not,
without the prior written consent of the Debtor, disclose any information so
designated to any third party other than its attorneys.
Article VI
----------
DEFAULT AND REMEDIES
--------------------
6.1 Events of Default. It shall be an "Event of Default" hereunder if (a)
-----------------
the Debtor fails to make any payment required hereby within ten days after the
due date thereof; (b) the Debtor fails to perform any other of its obligations
hereunder; or (c) the Debtor fails to make any payment and/or fails to perform
any other obligation under the terms of any previous stipulation and/or workout
agreement with any Creditor.
6.2 Remedies on Default. Upon the occurrence of an Event of Default and
-------------------
so long as such Event of Default is continuing, the Committee may, at its
election, give notice of such default to the Debtor. The notice shall specify
the Event(s) of Default on which such notice is based. If such Event of Default
is a failure to make any payment required hereby, the Debtor shall have not more
than ten (10) days after giving of such notice to cure such Event of Default. If
such Event of Default is due to a failure to
7
<PAGE>
perform any other of its obligations hereunder, the Debtor shall have not more
than thirty (30) days to cure such Event of Default. If the Debtor fails to cure
such Event of Default within the foregoing periods, the Committee may declare
the entire balance of claims immediately due and payable and exercise all
remedies available to it and the Creditors hereunder and applicable law. In such
event, (a) Creditors may individually pursue their rights and remedies pursuant
to applicable law, and (b) no further notices need be given to the Debtor other
than such notices as are required by applicable law. Provided, further, upon the
occurance of an Event of Default under any previous stipulation and/or workout
agreement, the Creditor may immediately pursue any and all remedies available
under such previous stipulation, workout agreement and/or under applicable law.
Article VII
-----------
COMMITTEE AND DISBURSING AGENT
------------------------------
7.1 Authority of the Committee. The Committee shall continue to
--------------------------
represent all Creditors. The Creditors authorize the Committee to act for them,
directly and agents, in all matters related to this Agreement, including the
modification of any terms, conditions, or covenants hereof or thereof. Creditors
shall be bound by all decisions made and actions taken or directed by the
Committee, and neither the Committee nor any of its members shall be liable to
any Creditor for any action taken or not taken by it or them in good faith.
7.2 Resignation and Replacement of Committee Members. In the event that
------------------------------------------------
one or more members of the Committee shall resign or otherwise become unable to
serve, the remaining members may select replacements from those Creditors
willing to serve. In addition, the Committee may authorize the addition of
Creditors to the Committee and elect the representative of any Creditor serving
on the Committee to
8
<PAGE>
serve as the Chair of the Committee. The Debtor shall be given prompt notice of
any changes in the composition of the Committee.
7.3 Expenses of the Committee. The Debtor shall pay all reasonable
-------------------------
expenses incurred by the Committee and the Disbursing Agent in the performance
of their duties under this Agreement, including reasonable attorney fees, upon
presentation of appropriate evidence thereof. The Debtor shall not, however, be
required to pay any fee to a member of the Committee for service on the
Committee.
7.4 Procedure for Committee Action. Any decision of the Committee to take
------------------------------
any action or give any consent shall be made by majority vote of the members of
the Committee. Such action or consent shall be effectively communicated to the
Debtor or any third party if communicated in a writing signed by the members of
the Committee, and the Debtor shall be entitled to rely on any communication
from the members of the Committee.
7.5 Appointment of Disbursing Agent. CMA shall be the disbursing agent
-------------------------------
("Disbursing Agent") under this Agreement and shall continue to serve in such
capacity until completion of its duties under this Agreement or until CMA
resigns or is removed. If CMA ceases to serve as Disbursing Agent, the Committee
shall have the authority to appoint a replacement Disbursing Agent.
7.6 Duties of Disbursing Agent. The Disbursing Agent shall make the
--------------------------
distributions required under this Agreement and shall perform all duties
incident thereto that the Disbursing Agent is instructed to perform by the
Committee including, but not limited to, maintenance of the Claims Reserve and
records identifying claims and the names and addresses of Creditors. The
Disbursing Agent shall keep the Claims Reserve as a segregated account. As to
all matters relating to the performance of its duties hereunder, the Disbursing
Agent shall be acting as agent for the Creditors. The Disbursing Agent shall be
entitled to rely on instructions received from the Committee, except that
determination of the amounts of Allowed Claims shall be made in
9
<PAGE>
accordance with Article 1.5 hereof. The duties of the Disbursing Agent shall be
ministerial only, and neither the Disbursing Agent nor any of its officers,
directors or agents shall be liable to any Creditor for any action taken or not
taken by it or them in good faith.
7.7 Fees and Expenses of the Disbursing Agent. As compensation for its
-----------------------------------------
services, the Disbursing Agent shall receive a fee of 5% of the first $100,000
distributed and 3% of distributions of the next $100,000 to $1 million, or a
minimum fee of $5,000, whichever is greater. The fee is due and payable at the
time the funds are distributed to unsecured creditors. In addition, the Debtor
shall reimburse the Disbursing Agent, when requested by the Disbursing Agent,
for its reasonable expenses of performing its services, including but not
limited to reimbursement for postage, photocopy, telephone, facsimile, and
travel expenses.
Article VIII
------------
GENERAL PROVISIONS
------------------
8.1 Governing Law. This Agreement and all controversies relating to the
-------------
subject matter hereof shall be governed by and determined in accordance with the
laws of the State of California without application of any conflict of laws
rules or principles that would refer such controversy to the law of any other
jurisdiction.
8.2 All notices, requests, or other communications required or permitted
under this Agreement shall be effective only if in writing and delivered
personally, by overnight courier, or by facsimile transmission, addressed as
follows:
If to the Debtor, to:
Silicon Valley Research, Inc.
6360 San Ignacio Avenue
San Jose, CA 95119
Attn: Mr. James Benouis, President and Chief
Executive Officer
Facsimile: 408-361-0330
10
<PAGE>
With a copy to:
Brooks & Raub, A Professional Corporation
721 Colorado Avenue, Suite 101
Palo Alto, California 94303-3913
Attn: Lincoln Brooks, Esq.
Facsimile: (650) 321-1450
If to the Committee, to:
Advanta Business Services Corp.
1020 Laurel Oak Road
Voorhees, NJ 08043
Attn: Todd Miller
Facsimile: (609) 770-0738
Flying Beyond, Inc.
60 N. Keeble Avenue
San Jose, CA 95126
Facsimile: (408) 777-8508
If to CMA, to:
Credit Managers Association
of California
2557 Merced Street
San Leandro, California 94577
Attn: Mr. Chuck Brooks
Facsimile: (510) 346-6020
Notices to particular Creditors shall be addressed and delivered to the
addresses or facsimile numbers shown on their Consents. Each party may change
its address or facsimile notice by giving notice of such change in the manner
specified in this section. Notice shall be deemed effectively given at the time
it is received if given by personal delivery or overnight courier or at the time
shown on the transmittal confirmation of the sender's facsimile machine if given
by facsimile transmission.
8.3 Counterparts. This Agreement, when executed by the Debtor and the
------------
Committee, and the Consents, when executed by Creditors, shall constitute a
single agreement.
11
<PAGE>
8.4 Captions. The captions used in this Agreement are for the convenience
--------
of the parties, and shall not be utilized to construe or interpret the
provisions of this Agreement.
8.5 Entire Agreement. Except as otherwise provided herein, this Agreement
----------------
and the Consents shall constitute the entire agreement of the Debtor, the
Creditors and the Committee, and supersede and replace all prior and
contemporaneous agreements, documents, or understandings, whether written or
oral. All such prior and contemporaneous oral agreements and understandings
shall have no legal effect. Notwithstanding anything herein to the contrary, all
of the terms, conditions and covenants set forth in any previous stipulation
and/or workout agreement by and between the Debtor and any Creditor shall remain
in full force and effect. Any such previous stipulation and/or workout agreement
shall be fully enforceable in accordance with its terms and, in the event of any
conflict between the terms of this Agreement and the terms of any such previous
stipulation and/or workout agreement, the terms of such previous stipulation
and/or workout agreement shall prevail.
IN WITNESS WHEREOF, the Debtor and the Committee have executed this
Agreement as of the date written below and each Creditor shall be deemed to have
executed this Agreement by execution of a Consent.
Dated: ________________ SILICON VALLEY RESEARCH, INC.
By: ___________________________________
James O. Benouis, President and CEO
Committee of Creditors of
SILICON VALLEY RESEARCH, INC.
By: _______________________________
Todd Miller, Advanta Business
Services
By: _______________________________
Greg Moyer, Flying Beyond, Inc.
12
<PAGE>
Exhibit A
SILICON VALLEY RESEARCH, INC.
-----------------------------
WORKOUT AGREEMENT
-----------------
CONSENT
-------
The undersigned Creditor ("Creditor") hereby accepts all of the terms and
conditions of the Workout Agreement of Silicon Valley Research, Inc. ("Debtor"),
dated ________, 1999 ("Workout Agreement"). I certify that I have read the
Workout Agreement and understand all of its terms, including the provisions that
(a) the cash and other benefits I receive will be in full satisfaction of my
Unsecured Claim (as defined in the Workout Agreement) and (b) the Committee is
authorized to act on my behalf in connection with all matters related to my
Unsecured Claim, including the modification of the terms of the Workout
Agreement.
I further certify that, as of November 1, 1998, the amount of my Unsecured
Claim is $__________. [I certify that this amount does not include any interest,
late charges, attorney fees, or the like which was incurred after November 1,
1998, except for those Creditors with previous workout agreements electing
Distribution Alternative 1.]
- --------------------------------------------------------------------------------
Legal Name of Creditor..................... _______________________________
Signature of Creditor or Authorized
Representative............................. _______________________________
Printed or Typed Name of Person Signing.... _______________________________
Title of Person Signing.................... _______________________________
Address of Creditor........................ _______________________________
_______________________________
Telephone Number........................... _______________________________
Facsimile Number........................... _______________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Alternative 1:
I hereby make the distribution election under Article 2.2(a) to receive on
account of my Allowed Claim cash payments totaling 15% of such claim in the
manner set forth in Article 3.1 hereof in exchange for a one-year stay on the
remaining balance. The 15% payment will decrease the indebtedness and interest
will accrue at the rate of 10% on the remaining balance. The Creditor will
suspend any and all collection activities for one year.
Initials [____]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Alternative 2:
I hereby make the distribution election under Article 2.2(b) to receive on
account of my Allowed Claims cash payments totaling 30% of such claims in the
manner set forth in Article 3.1 hereof and the Creditor will forgive the
remaining balance. The Debtor will receive a complete release from the Creditor.
Initials [____]
- --------------------------------------------------------------------------------
PLEASE SIGN AND RETURN TO: CREDIT MANAGERS ASSOCIATION OF CALIFORNIA
2557 Merced Street
San Leandro, CA 94577
Attention: Mr. Chuck Brooks
(510) 346-6020
13
<PAGE>
Exhibit B
SILICON VALLEY RESEARCH, INC..
------------------------------
WORKOUT AGREEMENT
-----------------
Schedule of Excluded Claims
---------------------------
The claims of the following persons and entities shall not be included in
the Unsecured Claims subject to this workout agreement, notwithstanding their
existence on the Workout Date:
1. Accrued salaries, wages, vacation pay, and similar benefits payable to
employees employed by the Debtor on the date of the Workout Agreement, and
all employment taxes relating thereto.
2. Insurance premiums and other amounts payable with respect to the Debtor's
life and health insurance policies which are in force on the Effective
Date.
3. Accrued utility charges for gas, electricity, telephone, waste disposal,
and other similar services.
4. Reimbursement of out-of-pocket expenses incurred by employees and
directors.
5. Personal property tax claims
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1999 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 388
<SECURITIES> 0
<RECEIVABLES> 421
<ALLOWANCES> 118
<INVENTORY> 0
<CURRENT-ASSETS> 781
<PP&E> 2,371
<DEPRECIATION> 2,201
<TOTAL-ASSETS> 1,633
<CURRENT-LIABILITIES> 955
<BONDS> 0
0
0
<COMMON> 44,141
<OTHER-SE> (44,487)
<TOTAL-LIABILITY-AND-EQUITY> 1,633
<SALES> 76
<TOTAL-REVENUES> 712
<CGS> 160
<TOTAL-COSTS> 1,277
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21
<INCOME-PRETAX> (1,031)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,031)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,031)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
