<PAGE>
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, 1997
------------------
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
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(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, 1997:
6,987,864 shares, no par value
------------------------------
<PAGE>
ADAPTIVE SOLUTIONS, INC.
Index to Form 10-Q
PART I FINANCIAL INFORMATION
Page No.
--------
Item 1. Financial Statements
Balance Sheets as of
September 30, 1997 and December 31, 1996 3
Statements of Operations for the three months
and nine months ended September 30, 1997 and 1996 4
Statements of Cash Flows for the
nine months ended September 30, 1997 and 1996 5
Notes to Condensed Financial Statements 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-15
PART II OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
<PAGE>
ADAPTIVE SOLUTIONS, INC.
BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,326 $ 3,612
Short-term investments 337 --
Trade accounts receivable, net 856 1,084
Inventory, net 754 1,007
Prepaid expenses 12 33
-------- --------
Total current assets 4,285 5,736
Property and equipment - net 535 1,337
Other assets 148 139
-------- --------
$ 4,968 $ 7,212
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 217 $ 115
Accrued expenses 896 1,626
Current portion of capital lease
obligations 318 447
Deferred revenue 3 720
Notes Payable 247 --
-------- --------
Total current liabilities 1,681 2,908
Capital lease obligations, less current portion 37 259
Stockholders' equity:
Common stock, no par value. Authorized 30,000
shares; issued and outstanding 6,988 shares and
6,961 shares at September 30, 1997 and December 31, 1996,
respectively 31,117 31,104
Accumulated deficit (27,867) (27,059)
-------- --------
Total stockholders' equity 3,250 4,045
-------- --------
Total Liabilities and Stockholders' equity $ 4,968 $ 7,212
-------- --------
-------- --------
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
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,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUE:
Net product revenue $ 230 $ 959 $ 1,512 $ 5,283
Research and development
revenue 277 27 559 1,017
------ ------- -------- -------
TOTAL REVENUE 507 986 2,071 6,300
OPERATING COSTS AND EXPENSES
Cost of product revenue 94 1,640 501 5,035
Research and development 369 552 1,023 2,362
Sales and marketing 197 285 645 1,635
General and administrative 235 425 777 2,652
------ ------- -------- -------
TOTAL OPERATING COSTS AND
EXPENSES 895 2,902 2,946 11,684
------ ------- -------- -------
OPERATING LOSS (388) (1,916) (875) (5,384)
Interest income 28 44 94 124
Interest expense and other income, net 5 5 (14) (57)
Gain\(Loss) on sale of asset -- 50 (9) 50
------ ------- -------- -------
NET LOSS $ (355) $(1,817) $ (804) $(5,267)
------ ------- -------- -------
------ ------- -------- -------
Net loss per common
and common equivalent
share $(0.05) $ (0.26) $ (0.12) $ (0.78)
------ ------- -------- -------
------ ------- -------- -------
Weighted average common
and common equivalent
shares outstanding 6,988 6,898 6,983 6,727
------ ------- -------- -------
------ ------- -------- -------
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
ADAPTIVE SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended September 30,
--------------------------------
1997 1996
-------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (804) $ (5,267)
Adjustments to reconcile net loss to cash used by
operating activities:
Depreciation and amortization 231 400
Loss on sale of asset 9 --
Amortization of unearned compensation -- 17
Changes in assets and liabilities:
Short-term investment (337) --
Trade accounts receivable 228 2,693
Inventory 253 1,767
Prepaid expenses and other assets 21 241
Accounts payable 102 (806)
Accrued expenses (730) 712
Deferred revenue (717) 859
------- ---------
Net cash provided by (used in) operating activities (1,744) 616
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 869 --
Purchases of property and equipment (311) (126)
Purchase of other assets (9) (129)
------- ---------
Net cash used in investing activities 549 (255)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 13 2,414
Payments on capital lease obligations (351) (139)
Proceeds from issuance of notes payable 247 --
Proceeds from line of credit -- 554
------- ---------
Net cash provided by financing activities (91) 2,829
------- ---------
NET INCREASE(DECREASE) IN CASH AND
CASH EQUIVALENTS (1,286) 3,190
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,612 974
------- ---------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 2,326 $ 4,164
------- ---------
------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -
Cash paid for interest $ 27 $ 7
------- ---------
------- ---------
</TABLE>
See accompanying notes to condensed financial statements.
5
<PAGE>
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 1996
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, 1997 are not necessarily
indicative of the results for the entire fiscal year ending December 31, 1997.
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:
September 30, 1997 December 31, 1996
------------------ -----------------
(unaudited)
Finished goods $ 60 $ 6
Work in process 67 -
Raw materials 883 1,192
Reserve for obsolete inventory (256) (191)
----- ------
$ 754 $1,007
----- ------
----- ------
INCOME TAXES
The difference between the expected tax expense (benefit), computed by applying
the federal statutory rate of 34% to income (loss) before taxes, and the actual
tax expense (benefit) of $-0- is primarily due to the increase in the valuation
allowance for deferred tax assets.
At December 31, 1996, the Company has net operating loss carryforwards of
approximately $24,250 to offset against future income for federal and state tax
purposes. These carryforwards expire in 2003 through 2011.
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>
A provision of the Tax Reform Act of 1986 required the utilization of net
operating losses and credits are limited when there is a change of more than 50%
in ownership of the Company. Such a change occurred with the sale of preferred
stock in 1990 and the initial public offering in 1993. Accordingly, the
utilization of the net operating loss carryforwards generated from periods prior
to August 21, 1990 and the period from August 22, 1990 to November 1, 1993 is
limited; the amounts subject to the limitation are approximately $1,109 and
$10,732, respectively.
Additionally, the completion of private placement offerings in 1994, 1995 and
1996 may have constituted a change of ownership that will further limit the use
of net operating loss carryforwards to offset future taxable income. No
analysis has been performed by the Company to determine whether such ownership
change has occurred or to what extent the use of net operating loss
carryforwards to offset future taxable income may be limited.
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.
RESTRUCTURING
During the second quarter of 1996, management and the Board of
Directors of the Company authorized and committed the Company to a
restructuring of its organizational and product strategies. The
restructuring included discontinuing production of chips from raw
wafers and closing the California manufacturing facility.
Additionally, the Company's Powershop product line was
discontinued. The Company recorded costs of $2,817 associated with
these changes. The costs were charged to the related expense
categories. The primary components of this charge related to
employee termination costs ($521), lease termination costs ($200),
reserves for inventory ($1,056) and property and equipment
writedowns ($1,040). At September 30, 1997 there was $297 of
accrued restructuring costs relating to lease termination costs
($160) and property and equipment ($137). All other costs had been
charged against the restructuring reserve.
7
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) No. 128 "Earnings
per Share". This statement establishes a different method of
computing net income per share than is currently required under the
provisions of Accounting Principles Board Opinion No. 15. Under
SFAS No. 128, the Company will be required to present both basic
net income per share and diluted net income per share. Basic net
income per share is expected to be comparable or slightly higher
than the currently presented net income per share as the effect of
dilutive stock options will not be considered in computing basic
net income per share. Diluted net income per share is expected to
be comparable or slightly lower than the currently presented net
income per share.
The Company plans to adopt SFAS No. 128 in the fourth quarter of
1997 and at that time all historical net income per share data
presented will be restated to conform to the provisions of this
Statement.
8
<PAGE>
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
Adaptive Solutions, Inc., (the "Company"), incorporated in Oregon in
1988, designs and markets high performance computer assisted data
entry and image recognition solutions targeted at a range of
applications. As of September 30, 1997, the Company had an
accumulated deficit of $27,867,000. For the three months ended
September 30, 1997, the Company incurred a net loss of $355,000.
During 1996 the Company made substantial changes to its strategy, and
it has continued to refine the new strategy during 1997. Key elements
of the strategy include: 1) a focus on applications requiring high
performance Computer Assisted Data Entry (CADE) and image recognition
in a range of industries, including medicine, transportation, and
government; 2) development of high performance programmable image
processing engine products for Windows NT and Intel CPU based server
and embedded systems environments; 3) a gradual transition from the
Company's proprietary CNAPS processor to parallel processing
microprocessors being brought to market by Motorola, Inc.("Motorola")
and Intel Corporation ("Intel"); and 4) development of relationships,
through marketing agreements, investments or acquisitions, with other
software and hardware companies with expertise in the image
recognition area. The parallel processing chip to be produced by
Motorola, the "VeComP" chip, uses architecture purchased from the
Company. The company has developed software partnerships with two
companies, Mitek Systems of San Diego, California ("Mitek"), and
Mimetics S.A. of Paris, France ("Mimetics"), and is continuing to
explore additional alliances that would further enhance the
development of the Company's strategy.
9
<PAGE>
Recently, the company announced the purchase of Eastman Kodak
Company's Optical Character Recognition (OCR) business. The Company
believes this is a major step toward its goal of becoming a leading
provider of complete Computer Assisted Data Entry solutions. The
Company acquired Kodak's OCR products, technology, patents, and
service business. The Company also acquired next-generation
intelligent character recognition (ICR) technology and patents
developed by Kodak. In addition to the physical assets, the
acquisition provides the Company with four strategic opportunities.
First, acquisition of the Imagelink-Registered Trademark- OCR business
provides an opportunity to immediately enter a strategically targeted
market with a proven product used in many existing production
settings.* Second, the installed customer base provides the Company
with ongoing customer relationships and a service revenue stream by
assuming current Kodak product maintenance contracts.* Moreover, the
Company has contracted with Kodak Professional Services to provide on-
site support of current and future products developed by the Company
supplementing the Company's plan to deliver high value turn-key data
entry products world-wide.* Third, the company presently intends to
develop and deploy the ICR technology and patents in the Company's
future products to provide significant differentiation and the Company
will also seek to market versions of the ICR software as a product
useful by strategic partners and for production OEMs.* Finally, the
Company's strategy is to become a complete solution provider as a top
tier authorized imaging reseller for the Kodak line of scanners and
other imaging products.
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 and software products
into developers' OEM systems, develop sufficiently higher sales
volumes and manufacturing efficiencies, manage its operating expenses
and 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 at least through 1997.
10
<PAGE>
REVENUES
Total revenue of $507,000 for the three months ended September 30,
1997 included $277,000 from the Company's agreement with Northrop
Grumman, under which the two companies are jointly developing an
advanced image processing architecture. The revenue from the Northrop
Grumman contract was lower than expected due to Motorola's inability
to deliver its VeComP-Registered Trademark- chip in the tiime frame
originally planned. Due to this delay in delivery of the chip, it is
unclear whether additional revenues can be generated from this
contract.* The remaining revenue for the quarter ended September 30,
1997 consisted primarily of the sale of CNAPS and PCI-XL boards and
software. Revenue from the comparable period in 1996 was $986,000.
For the nine months ended September 30, 1997, total revenue of
$2,071,000 consisted of $700,000 from the sale and license of
technology to the major customer, $559,000 from the Northrop Grumman
contract, and sales of CNAPS and PCI-XL boards and software. Revenue
from the comparable period in 1996 was $6,300,000.
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, develop
additional sales of the newly acquired Imagelink product line to new
and existing customers, implement the Company's plans to add to the
acquired product line, successfully complete expected contracts, and
further development of products under the Company's revised product
strategy.* 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.
While the Company had no international sales for the three months
ended September 30, 1997, international sales of $84,000 (4% of total
revenue) were recorded for the nine months ended September 30, 1997.
For the comparable periods in 1996, international sales were $82,000
(8% of total revenue) and $820,000 (13% of total revenue),
respectively. The percentage of international revenues to total
revenues has decreased as a result of the Company's decision to
discontinue the PowerShop product in 1996.
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.
11
<PAGE>
COST OF PRODUCT REVENUE
The cost of product revenue for the three months and nine months ended
September 30, 1997 was $94,000 and $501,000, respectively. For 1996,
the cost of product revenue for the similar periods was $1,640,000 and
$5,035,000, respectively. The cost of product revenue consists of
direct manufacturing costs, overhead costs associated with the
manufacturing operations in Beaverton, Oregon, provisions for warranty
costs, and reserves for inventory obsolescence and return. The
decrease in cost for the three months and nine months ended September
30, 1997, as compared to the similar periods in the prior year, was
due mainly to the decrease in revenues versus the prior year, the
reduced overhead associated with the shutdown of the California
manufacturing site, and the inventory reserves associated with the
Company's restructuring in the second quarter of 1996.
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. In addition, the Company's mix
of product sales may change substantially as the Company executes its
revised product strategy, this change in the product mix may have a
material adverse effect on the Company's financial performance.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses of $369,000 and $1,023,000 for the
three months and nine months ended September 30, 1997 were associated
with the development of high performance image recognition
applications for the computer assisted data entry market and the
development of image processing and recognition engines for server and
embedded systems environments. Research and development expenses were
$552,000 and $2,362,000 for the comparable periods in 1996. The
research and development focus has been shifted toward computer
assisted data entry solutions utilizing application software developed
by the Company and its partners. The reduction in expenses for the
three months and nine months ended September 30, 1997, as compared to
the same periods in 1996, was a result of decreased compensation and
development expenses associated with reduced R & D headcount and the
termination of the development of the Company's next generation
processor. This has allowed the Company to focus its R & D
expenditures on its revised product strategy, the development of its
computer assisted data entry solutions and image recognition engines.
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.
12
<PAGE>
SALES AND MARKETING EXPENSES
Sales and marketing expenses were $197,000 and $645,000 for the three
months and nine months ended September 30, 1997, compared with
$285,000 and $1,635,000 for the same periods in 1996. The decrease in
sales and marketing expenses is the result of lower spending on
personnel, advertising, promotion, personnel, and travel.
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 continue 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, 1997 were $235,000 and $777,000 as compared
to $425,000 and $2,652,000 for the same period in 1996. The decrease
in general and administrative spending is the result of the Company's
revised strategy and organizational structure, which resulted in
significant reductions in personnel in the second half of 1996.
INTEREST INCOME AND EXPENSE
Interest income for the three months and nine months ended September
30, 1997 was $28,000 and $94,000 respectively. Interest income for
the same periods in 1996 was $44,000 and $124,000, respectively.
Interest income varies depending upon the cash balances and prevailing
interest rates from period to period. Interest expense and Other
Income, net for the three months and nine months ended September 30,
1997 was $5,000 and $(14,000), respectively, from $5,000 and
$(57,000) for the three months and nine months ended September 30,
1996, respectively.
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.
13
<PAGE>
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.
Although the Company has not established any new capital leases in
1997, as of September 30, 1997, the Company had outstanding capital
leases with two 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 $355,000 at September 30, 1997. 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, 1997 were
$2,326,000, a decrease of $1,286,000 from the cash and cash
equivalents balance of $3,612,000 at December 31, 1996. The Company's
working capital at September 30, 1997 was $2,604,000, a decrease of
$224,000 from the working capital balance of $2,828,000 at December 31,
1996.
The Company expects that it will need additional funding in 1998,
although it is unable to predict the precise amount or date that such
funding will be required. The Company has not yet identified specific
sources of funding, nor has it received commitments for funding.
Accordingly, there can be no assurance that any such funding can be
obtained on terms acceptable to the Company, if at all. 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.
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>
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) No. 128 "Earnings
per Share". This statement establishes a different method of
computing net income per share than is currently required under the
provisions of Accounting Principles Board Opinion No. 15. Under SFAS
No. 128, the Company will be required to present both basic net income
per share and diluted net income per share. Basic net income per
share is expected to be comparable or slightly higher than the
currently presented net income per share as the effect of dilutive
stock options will not be considered in computing basic net income per
share. Diluted net income per share is expected to be comparable or
slightly lower than the currently presented net income per share.
The Company plans to adopt SFAS No. 128 in the fourth quarter of 1997
and at that time all historical net income per share data presented
will be restated to conform to the provisions of this Statement.
15
<PAGE>
Item 1. Legal proceedings.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) EXHIBITS
None
(b) REPORTS ON FORM 8-K
None
16
<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: August 11, 1997 By /s/ Daniel J. Meub
-------------------------------
Daniel J. Meub
President and Chief
Executive Officer
By /s/ Richard L. Boonstra
-------------------------------
Richard L. Boonstra
Corporate Controller
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000873952
<NAME> ADAPTIVE SOLUTIONS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 2,326
<SECURITIES> 337
<RECEIVABLES> 856
<ALLOWANCES> 127
<INVENTORY> 754
<CURRENT-ASSETS> 4,285
<PP&E> 3,282
<DEPRECIATION> 2,747
<TOTAL-ASSETS> 4,968
<CURRENT-LIABILITIES> 1,434
<BONDS> 0
0
0
<COMMON> 31,117
<OTHER-SE> (27,867)
<TOTAL-LIABILITY-AND-EQUITY> 4,968
<SALES> 1,512
<TOTAL-REVENUES> 2,071
<CGS> 501
<TOTAL-COSTS> 501
<OTHER-EXPENSES> 2,445
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> (804)
<INCOME-TAX> 0
<INCOME-CONTINUING> (804)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (804)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
