<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended September 30, 1996
------------------
Commission File Number 0-22472
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ADAPTIVE SOLUTIONS, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Oregon 93-0981962
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 N.W. Compton Drive, Suite 340, Beaverton, OR 97006
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(503) 690-1236
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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.
[X] Yes [ ] No
Number of shares of common stock outstanding as of
September 30, 1996:
6,916,270 shares, no par value
------------------------------
<PAGE> 2
ADAPTIVE SOLUTIONS, INC.
Index to Form 10-Q
PART I FINANCIAL INFORMATION
- ----------------------------
Page No.
--------
Item 1. Financial Statements
Balance Sheets as of September 30, 1996 and December 31, 1995 3
Statements of Operations for the three months and nine months
ended September 30, 1996 and 1995 4
Statements of Cash Flows for the nine months ended September
30, 1996 and 1995 5
Notes to Condensed Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-14
PART II OTHER INFORMATION
- -------------------------
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
- ----------
<PAGE> 3
ADAPTIVE SOLUTIONS, INC.
BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,164 $ 974
Trade accounts receivable, net 1,527 4,220
Inventory, net 1,118 2,885
Prepaid expenses 140 381
----------- ---------
Total current assets 6,949 8,460
Property and equipment - net 1,479 1,754
Other assets 136 7
----------- ---------
$ 8,564 $ 10,221
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19 $ 825
Line of credit 554 0
Accrued expenses 1,921 1,209
Current portion of capital lease obligations 479 476
Deferred revenue 926 67
----------- ---------
Total current liabilities 3,899 2,577
Capital lease obligations, less current portion 354 496
Stockholders' equity:
Common stock, no par value. Authorized 30,000
shares; issued and outstanding 6,916 shares
and 6,014 shares at September 30, 1996
and December 31, 1995, respectively 31,088 28,674
Unearned compensation 0 (17)
Accumulated deficit (26,777) (21,509)
----------- ---------
Total stockholders' equity 4,311 7,148
----------- ---------
$ 8,564 $ 10,221
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE> 4
ADAPTIVE SOLUTIONS, INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
--------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUE:
Net product revenue $ 959 $ 4,068 $ 5,283 $ 5,224
Research and development revenue 27 230 1,017 835
------- ------ ------ ------
TOTAL REVENUE 986 4,298 6,300 6,059
OPERATING COSTS AND EXPENSES
Cost of product revenue 1,640 2,453 5,035 3,706
Research and development 552 996 2,362 2,701
Sales and marketing 285 876 1,635 2,482
General and administrative 425 266 2,652 763
------- ------ ------ ------
TOTAL OPERATING COSTS AND EXPENSES 2,902 4,591 11,684 9,652
------- ------ ------ ------
OPERATING LOSS (1,916) (293) (5,384) (3,593)
Interest income 44 42 124 135
Interest expense & other income 5 (45) (57) (150)
Gain\(Loss) on sale of asset 50 0 50 0
------- ------ ------ ------
NET LOSS $ (1,817) $ (296) $(5,267) $(3,608)
======= ====== ====== ======
Net loss per common and common
equivalent share $ (0.26) $ (0.05) $ (0.78) $ (0.66)
======= ====== ====== ======
Weighted average common and common
equivalent shares outstanding 6,898 5,972 6,727 5,470
======= ====== ====== ======
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE> 5
ADAPTIVE SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,267) $ (3,608)
Adjustments to reconcile net loss to cash
provided/(used in) operating activities:
Depreciation and amortization 400 419
Amortization of unearned compensation 17 31
Changes in assets and liabilities:
Trade accounts receivable 2,693 (763)
Inventory 1,767 (1,323)
Prepaid expenses 241 39
Accounts payable (806) 186
Accrued expenses 712 465
Deferred revenue 859 (46)
------------- -----------
Net cash provided/(used in) operating
activities 616 (4,600)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (126) (1,285)
Purchases of other assets (129) -
------------- -----------
Net cash used in investing activities (255) (1,285)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 2,414 3,203
Proceeds from (payments on) capital lease
obligations (139) 879
Proceeds from line of credit, net 554 -
------------- -----------
Net cash provided by financing
activities 2,829 4,082
------------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,190 (1,803)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 974 4,991
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,164 $ 3,188
------------ ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -
Cash paid for interest $ 7 $ 150
============ ==========
</TABLE>
See accompanying notes to condensed financial statements.
5
<PAGE> 6
ADAPTIVE SOLUTIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except per share data)
Basis of Presentation
The accompanying condensed financial statements have been prepared by the
Company without audit and in conformity with generally accepted accounting
principles for interim financial information. Accordingly, certain financial
information and footnotes have been omitted or condensed, therefore, these
financial statements should be read in conjunction with the Company's 1995
annual report to stockholders filed with the Securities and Exchange
Commission. In the opinion of management, the condensed financial statements
include all necessary adjustments (which are of a normal and recurring nature)
for the fair presentation of the results of the interim periods presented. The
results of operations for the nine months ended September 30, 1996 are not
necessarily indicative of the results for the entire fiscal year ending
December 31, 1996.
Inventories
Inventories are valued at the lower of cost or market with cost determined on
the average cost method. The components of inventories are as follows:
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
(unaudited)
<S> <C> <C>
Finished goods $ 67 $ 204
Work in process 27 342
Raw materials 2,230 2,486
Reserve for obsolete inventory (1,206) (147)
-------- --------
$ 1,118 $ 2,885
Income Taxes
The Company has net operating loss and unused research and experimentation
credit carryforwards available for income tax purposes. These carryforwards
expire in 2003 through 2008.
The Company's ability to use its net operating loss carryforwards to offset
future taxable income is subject to annual restrictions contained in the United
States Internal Revenue Code of 1986, as amended (the Code). These
restrictions act to limit the Company's future use of its net operating losses
following certain substantial stock ownership changes enumerated in the Code
and referred to hereinafter as an "ownership change".
6
<PAGE> 7
The Company's initial public offering in November 1993 created an ownership
change that has resulted in the net operating loss carryforwards being limited
to approximately $660 per year. In addition, approximately $330 of net
operating losses are further limited to approximately $145 per year due to
changes in the Company's ownership structure during 1990.
Since the Company's initial public offering in November 1993, the Company has
sold 3,167 shares of common stock. The Company has not yet determined the
impact, if any, of the sale of such shares on the availability of net operating
loss carryforwards.
Commitments
The Company purchases some of its inventory through the use of letters of
credit. At September 30, 1996, the Company has no outstanding letters of
credit. Such letters of credit are backed by a line of credit.
Net Loss Per Common and Common Equivalent Share
Net loss per share is computed using the weighted average number of common and
dilutive common equivalent shares assumed to be outstanding during the period.
Outstanding options and warrants are assumed not to be common stock equivalents
due to the reported net losses.
Line of Credit
The Company utilizes a secured operating line of credit agreement with a
maximum of $1,500 for the purpose of supporting short-term working capital
needs. The line carries an interest rate equal to prime plus 1.50%. Any
amount drawn under the line becomes due in January 1997. As of September 30,
1996, $554 had been drawn against this line of credit, leaving $946 available
under the line. The line is secured by accounts receivable.
Restructuring
In June 1996, the Company announced significant changes in its organizational
structure and in its product strategy which included the decision to shut-down
its Sunnyvale, California manufacturing facility in December of 1996. In
conjunction with this plan, the Company recorded restructuring costs
aggregating $1,973 and related liabilities of $1,248 in the second quarter of
1996. Additionally, in the third quarter of 1996, the Company recorded
restructuring costs of $805 relating to the decision to completely exit certain
product lines. These third quarter restructuring costs consisted of inventory
and fixed asset write-offs. The gradual shut-down of the Sunnyvale
manufacturing facility started in June of 1996 and will be completed in
December of 1996 resulting in the termination of a total of eleven employees
engaged in manufacturing, engineering, and administrative functions. As a
result, the Company ended the third quarter with a restructuring accrual of
$1,248.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIS REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS (IDENTIFIED WITH
AN ASTERISK ("*")) THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN THIS
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS".
Overview
The Company was incorporated in 1988 and first shipped products in 1993. The
Company has been engaged in the development of its products and has incurred
significant operating losses through September 30, 1996. As of September 30,
1996, the Company had an accumulated deficit of $26,777,000. For the nine
months ended September 30, 1996, the Company incurred a net loss of $5,267,000.
The Company recently announced significant changes in its organizational
structure and its product strategy. Under the revised strategy, the Company
will gradually supersede its proprietary CNAPS parallel microprocessor
capabilities with products based on emerging mainstream parallel processing
chips from companies such as Intel and Motorola.* The parallel processing chip
to be produced by Motorola, the "VeComp" chip, uses software and architecture
purchased from the Company. The Company anticipates building systems using
these processors targeted at two vertical markets: high volume business forms
and package label processing. The Company has also announced key partnerships
with two software companies, Mitek Systems and Mimetics S.A., to manufacture
products that provide significantly faster hand print and machine print ICR
(Intelligent Character Recognition) capabilities. The products developed
through these capabilities will be sold to the financial forms processing
markets by Mitek and Mimetics, and to express courier and postal applications
by the Company.* The Company plans to provide customers with highly optimized
forms processing solutions with this strategy.* In order to become profitable,
the Company must successfully develop these new products, obtain market
acceptance for the products, obtain design wins for incorporation of its board
level products into developers' OEM systems, develop sufficiently higher sales
volumes and manufacturing efficiencies, manage its operating expenses and
expand its distribution capability.* There can be no assurance that the
Company will meet any of these objectives or achieve profitability. The
Company expects that operating losses will continue through the end of 1996 and
into 1997.
8
<PAGE> 9
The Company expects that revenues will fluctuate substantially from quarter to
quarter and will be difficult to forecast. The absence of significant backlog
will also limit the Company's ability to plan production and inventory levels.
These factors could lead to substantial fluctuations in operating results. In
addition, due to the complexity of massively parallel processing, the Company
has a long sales cycle for its products. The timing of new orders for these
products could lead to substantial fluctuations in operating results.
Operating results may also fluctuate based upon other factors, including, but
not limited to, cancellation or rescheduling of orders, currency fluctuations,
seasonal fluctuations in business activity, product announcements by the
Company or its competitors or changes in pricing policies by the Company, its
competitors or its suppliers.
Because the Company's future operating results will depend upon sales of its
board level products to OEM application developers for incorporation into their
systems, factors affecting such OEMs, including the timing of new orders for
their products, general market acceptance of such products or product
announcements by such developers, could cause variability in the Company's
operating results. In addition, the Company intends to devote significant
resources to research and development associated with new products. Once the
expenditure of such resources is planned, it may be difficult to reduce them
quickly if funds are limited. The Company's ability to reduce operating
expenses, especially over the short term, is therefore limited. The Company
may therefore be unable to adjust spending in a timely manner to compensate for
any unanticipated shortfall in revenues. Accordingly, any significant
shortfall in revenues in any quarter, regardless of the cause of such
shortfall, would have an almost immediate adverse impact on the Company's
operating results and on the Company's ability to achieve and maintain
profitability.
Under its revised product strategy, the Company will continue production of its
CNAPS chips for use in its products until a complete migration to the Motorola
parallel processing chip can be achieved. The Company does not manufacture the
semiconductor wafers used for the CNAPS chips included in its products. Wafer
capacity in the semiconductor industry is currently limited. Any increase in
demand for wafers over currently expected levels or any failure of wafer supply
in the industry to grow at anticipated rates would magnify any potential
shortages of chips. To date, the Company has not been able to negotiate long-
term supply agreements with its wafer manufacturers or its future suppliers of
mainstream parallel processing chips. There can be no assurance that the
Company's wafer manufacturers or chip suppliers will allocate sufficient
capacity to the Company to meet its demand. If the Company were unable to
obtain adequate supplies of wafers and chips on a timely basis, its financial
position and results of operations would be materially and adversely affected.
9
<PAGE> 10
Revenues
Net product revenue for the three months and nine months ended September 30,
1996 of $959,000 and $5,283,000, respectively, consisted of the sale of CNAPS
boards, software and maintenance agreements and PowerShop boards and software.
Included, in the quarter ending September 30, 1996 is revenue of $100,000 and
deferred revenue of $900,000 in connection with the sale and license of
technology to a major customer. Revenue from the board and Powershop products
is recognized at the time of product shipment. Revenue from the software and
maintenance agreements is deferred and recognized over the life of the
agreement. Net product revenue for the comparable periods in 1995 was
$4,068,000 and $5,224,000, respectively.
The Company's future success and its ability to continue operations will depend
in substantial part on its ability to significantly maintain and increase sales
of its existing products and products to be developed under its revised product
strategy.* Although the Company has agreements with various OEMs, none of
these agreements include minimum purchase commitments. There can be no
assurance that the Company will be able to generate significant additional
sales or maintain sales at current or historical levels; failure to do so would
have a material adverse effect on the Company's financial position and results
of operations.
Research and development revenue for the three months and nine months ended
September 30, 1996 was $27,000 and $1,017,000, respectively. For the
comparable periods in 1995, research and development revenue was $230,000 and
$835,000, respectively. Research and development revenue for the nine months
ended September 30, 1996 was generated primarily from technology development
contracts with the U.S. Government and a major U.S. microprocessor company.
Research and development revenue for the nine months ended September 30, 1995
was largely attributable to technology development contracts with the U.S.
Government.
International sales totaled $82,000 (8% of total revenue) for the three months
ended September 30, 1996 and $820,000 (13% of total revenue) for the nine
months ended September 30, 1996. For the comparable periods in 1995,
international sales were $576,000 (13% of total revenue) and $757,000 (12% of
total revenue), respectively. The percentage of international revenues to
total revenues has decreased slightly as a result of the Company's decision to
exit certain lower volume product lines.
Foreign regulatory bodies often establish technical standards different from
those in the United States; while the Company tests its products to meet these
standards, there can be no assurance that the Company's products will comply
with such standards in the future. The Company's international sales and
operations may also be materially adversely affected by the imposition of
governmental controls, export license requirements, restrictions on the export
of critical technology, political and economic instability, trade restrictions,
changes in taxes, varying exchange rates, difficulties in establishing and
managing international operations and general economic conditions. Compliance
or noncompliance with international quality standards may also affect operating
results. In this respect, the Company has not applied for and has no present
plans to apply for ISO 9000 certification.
10
<PAGE> 11
Cost of Product Revenue
The cost of product revenue for the three months and nine months ended
September 30, 1996 was $1,640,000 and $5,035,000, respectively. For 1995, the
cost of product revenue for the similar periods was $2,453,000 and $3,706,000,
respectively. The cost of product revenue consists of direct manufacturing
costs, overhead costs associated with the manufacturing operations in
Beaverton, Oregon and Sunnyvale, California, provisions for warranty costs, and
reserves for inventory obsolescence and return. The increase in cost for the
nine months ended September 30, 1996 was due to costs totaling $1,300,000
associated with the Company's change in organizational structure and revised
product strategy.
Cost of product revenue could be negatively affected in future periods due to a
number of factors, including problems with component supplies, variability of
component cost, product quality or reliability problems or other factors.
Additionally, the Company's restructuring plans include the shutdown of its
Sunnyvale, California manufacturing site to reduce overhead costs. The
Sunnyvale site manufactured the Company's proprietary CNAPS processors from
silicon wafers. The testing of the Company's CNAPS processors will now be
performed by outside vendors. The transition of this part of the manufacturing
process may lead to increased processor costs. In addition, the Company
purchases many of its components from Japanese manufacturers and pricing for
these components is generally in yen. When the value of the yen increases
relative to the dollar, the cost to the Company of these components increases
correspondingly. Accordingly, future increases in the value of the yen
relative to the dollar could adversely affect the Company's gross margins or
make the prices of the Company's products less competitive.
Research and Development Expenses
Research and development expenses of $552,000 and $2,362,000 for the three
months and nine months ended September 30, 1996, respectively, were associated
with the continuing support of enhancements to the Company's existing products,
the development of the CNAPS/PCI board, and the development of the Company's
new forms processing products family. Research and development expenses were
$996,000 and $2,701,000, respectively, for the comparable periods in 1995. The
research and development focus has been shifted toward forms processing
solutions utilizing application software from Mitek Systems and Mimetics S.A.
and software developed by the Company. The reduction in expenses for the three
months and nine months ended September 30, 1996 were a result of the Company's
new organizational structure, revised product strategy, and decreased
compensation and development expenses associated with the termination of the
development of the Company's next generation processor.
The Company believes that a significant investment in research and development
is critical to its future success. To the extent permitted by its liquidity
position, the Company plans to continue to invest substantial resources in
research and development. If resource constraints cause the Company to
allocate resources away from its research and development activities, the
Company's future financial position and results of operations could be
adversely affected.
11
<PAGE> 12
Sales and Marketing Expenses
Sales and marketing expenses for the three months and nine months ended
September 30, 1996 were $285,000 and $1,635,000, respectively. For the
comparable periods in 1995, sales and marketing expenses were $876,000 and
$2,482,000, respectively. Sales and marketing expenses are primarily comprised
of labor costs, sales commissions, and promotion, and customer literature.
Commissions generally vary with sales volume. The level of spending for
promotion and literature costs is largely dependent on the level of promotion
for new products. The decrease in sales and marketing expenses from the prior
year consists of decreases in advertising, promotion, personnel, travel, and
sales samples.
The Company believes that effective sales and marketing activities are critical
to any future growth in sales; accordingly, if resource constraints cause the
Company to allocate resources away from these activities, the Company's future
financial position and results of operations could be adversely affected.
General and Administrative Expenses
General and administrative expenses for the three months and nine months ended
September 30, 1996 were $425,000 and $2,652,000, respectively. For the
comparable periods in 1995, general and administrative expenses were $266,000
and $763,000, respectively. The primary components of these expenses are
salaries, insurance and fees related to legal, accounting and consulting
services. The increased level of expense from the prior year was primarily due
to costs associated with the hiring of and transition to a new chief executive
officer and increased spending for information systems services. Also included
in the amount for the three months and nine months ended September 30, 1996 are
costs totaling $87,000 and $1,458,000 respectively, associated with the
Company's termination of certain employees, change in organizational structure,
and revised product strategy.
Interest Income and Expense
Interest income for the three months and nine months ended September 30, 1996
was $44,000 and $124,000, respectively. For the comparable periods in 1995,
interest income was $42,000 and $135,000, respectively. Interest income varies
depending upon the cash balances and prevailing interest rates from period to
period. Interest expense for the three months and nine months ended September
30, 1996 was ($5,000) and $57,000, respectively. For the comparable periods in
1995, interest expense was $45,000 and $150,000, respectively. Interest
expense is generated by the Company's line of credit borrowing and capital
lease obligations. The negative interest expense in the three months ended
September 30, 1996 is the result of a capital lease adjustment associated with
the reorganization of the Company. The Company has not entered into
significant additional capital lease obligations in the current year.
12
<PAGE> 13
Income Taxes
The completion of the initial public offering in November 1993 constituted a
change in ownership that will limit the net operating loss carryforwards that
can be used to offset taxable income in future years. See Notes to Condensed
Financial Statements.
Liquidity and Capital Resources
To date, the Company has funded its operations primarily through (i) sales of
its equity and convertible debt securities with venture capital and other
investors, (ii) equipment leases, (iii) revenues from technology development
agreements and government research contracts and (iv) revenues from the sales
of its CNAPS development systems, boards and software products and PowerShop
products.
As of September 30, 1996, the Company had established capital leases with three
major equipment leasing companies at effective interest rates ranging from 10%
to 21%. The aggregate principal amount outstanding under these capital leases,
including the current portion, totaled $833,000 as of September 30, 1996.
Although the Company has no material commitments to purchase capital equipment,
the Company may need to expend significant additional amounts for capital
equipment in connection with its change in product strategy. The Company's
cash and cash equivalents at September 30, 1996 were $4,164,000, an increase of
$3,190,000 from the cash and cash equivalents balance of $974,000 at December
31, 1995. The Company's working capital at September 30, 1996 was $3,050,000,
a decrease of $2,833,000 from the working capital balance of $5,883,000 at
December 31, 1995. The Company obtained additional funding of approximately
$2,400,000 during the three months ended March 31, 1996 through a private
placement of common stock. The Company expects that it will require additional
funding in 1997, although it is unable to predict the precise amount or date
that such funding will be required.
The Company will continue considering alternative sources for expected future
funding, including equity or debt financings, corporate partnering
relationships involving up-front payments and/or equity investments, sales of
technology and other alternatives. The Company has not yet identified which,
if any, of these courses it will pursue, nor has it received commitments from
any such sources for any funding of any kind. Accordingly, there can be no
assurance that any such funding can be obtained. If adequate funds are not
available as required, the Company's ability to fulfill product orders, as well
as the Company's financial position and results of operations, will be
adversely affected. In particular, the Company could be required to
significantly reduce or suspend its operations, seek a merger partner or sell
additional securities on terms that are highly dilutive to existing
stockholders. The Company's future capital needs will depend upon numerous
factors, including the success of the Company's revised product strategy, the
progress of the Company's research and development activities, the extent and
timing of the acceptance of the Company's products, the cost of the Company's
sales, marketing and manufacturing activities and the amount of revenues
generated from operations, none of which can be predicted with certainty, and,
therefore, there can be no assurance that the Company will not require
additional funding earlier than anticipated.
13
<PAGE> 14
The Company has 1,680,764 outstanding warrants entitling the holders to
purchase 2,286,319 shares of the Company's common stock at an exercise price of
$6.393. In addition, there are 75,000 warrants outstanding which entitle the
holders to purchase 75,000 shares of the Company's common stock at an exercise
price of $3.375.
14
<PAGE> 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
--------
27 - Financial Data Schedule (filed electronically only)
(b) Reports on Form 8-K
On July 26, 1996 the Company filed with the Securities and Exchange
Commission a report on Form 8-K to report the Company's Press Release
dated June 24, 1996 concerning a revised business strategy and
expense reductions, and expected lower second quarter revenues.
On August 5, 1996 the Company filed with the Securities and Exchange
Commission a report on Form 8-K to report the Company's Press Release
dated July 23, 1996 to report the Company's financial results for the
three months and six months ended June 30, 1996.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADAPTIVE SOLUTIONS, INC.
------------------------
(Registrant)
Date: November 11, 1996 By: /s/ Dan Hammerstrom
-----------------------------
Dan Hammerstrom, Acting
President and Chief
Executive Officer
By: /s/ Richard L. Boonstra
-----------------------------
Richard L. Boonstra, Acting
Corporate Controller and
Chief Financial Officer
16
<PAGE> 17
INDEX TO EXHIBITS
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
EX-27 Financial Data Schedule (filed electronically only)
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ADAPTIVE
SOLUTIONS, INC.'S SEPTEMBER 30, 1996 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000873952
<NAME> ADAPTIVE SOLUTIONS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-3O-1996
<CASH> 4,164
<SECURITIES> 0
<RECEIVABLES> 1,691
<ALLOWANCES> 164
<INVENTORY> 1,118
<CURRENT-ASSETS> 6,949
<PP&E> 3,876
<DEPRECIATION> 2,397
<TOTAL-ASSETS> 8,564
<CURRENT-LIABILITIES> 3,899
<BONDS> 0
<COMMON> 31,088
0
0
<OTHER-SE> (26,777)
<TOTAL-LIABILITY-AND-EQUITY> 8,564
<SALES> 5,283
<TOTAL-REVENUES> 6,300
<CGS> 5,035
<TOTAL-COSTS> 5,035
<OTHER-EXPENSES> 6,649
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (57)
<INCOME-PRETAX> (5,267)
<INCOME-TAX> 0
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</TABLE>
