<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 June 30, 1997
Commission File Number 0-22472
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
June 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
June 30, 1997 and December 31, 1996 3
Statements of Operations for the
three months and six months ended June 30, 1997 and 1996 4
Statements of Cash Flows for the
six months ended June 30, 1997 and 1996 5
Notes to Condensed Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-13
PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14-15
SIGNATURES 16
<PAGE>
ADAPTIVE SOLUTIONS, INC.
BALANCE SHEETS
(IN THOUSANDS)
June 30, December 31,
1997 1996
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,752 $ 3,612
Short-term investments 337 --
Trade accounts receivable, net 990 1,084
Inventory, net 762 1,007
Prepaid expenses 20 33
----------- -----------
Total current assets 4,861 5,736
Property and equipment - net 415 1,337
Other assets 148 139
----------- -----------
$ 5,424 $ 7,212
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 80 $ 115
Accrued expenses 1,035 1,626
Current portion of capital lease
obligations 361 447
Deferred revenue 3 720
----------- -----------
Total current liabilities 1,479 2,908
Capital lease obligations, less current portion 90 259
Notes payable 247 --
Stockholders' equity:
Common stock, no par value. Authorized 30,000
shares; issued and outstanding 6,988 shares
and 6,961 shares at June 30, 1997 and
December 31, 1996, respectively 31,117 31,104
Accumulated deficit (27,509) (27,059)
----------- -----------
Total stockholders' equity 3,608 4,045
----------- -----------
$ 5,424 $ 7,212
----------- -----------
----------- -----------
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 Six months ended
June 30, June 30,
-------------------------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUE:
Net product revenue $ 606 $ 976 $ 1,282 $ 4,327
Research and development
revenue 233 507 282 987
-------- -------- -------- --------
TOTAL REVENUE 839 1,483 1,564 5,314
OPERATING COSTS AND EXPENSES
Cost of product revenue 167 1,262 407 3,396
Research and development 370 880 654 1,811
Sales and marketing 246 538 448 1,350
General and administrative 257 1,740 542 2,227
-------- -------- -------- --------
TOTAL OPERATING COSTS AND
EXPENSES 1,040 4,420 2,051 8,784
-------- -------- -------- --------
OPERATING LOSS (201) (2,937) (487) (3,470)
Interest income 32 53 66 80
Interest expense (2) (21) (19) (62)
Loss on sale of asset -- -- (9) --
-------- -------- -------- --------
NET LOSS $ (171) $ (2,905) $ (449) $ (3,452)
-------- -------- -------- --------
-------- -------- -------- --------
Net loss per common
and common equivalent
share $ (0.02) $ (0.43) $ (0.06) $ (0.53)
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average common
and common equivalent
shares outstanding 6,988 6,763 6,980 6,519
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
ADAPTIVE SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Six months ended June 30,
-------------------------
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (449) $ (3,452)
Adjustments to reconcile net loss to cash used by
operating activities:
Depreciation and amortization 158 284
Loss on sale of asset 9 --
Amortization of unearned compensation -- 17
Changes in assets and liabilities:
Short-term investment (337) --
Trade accounts receivable 94 3,040
Inventory 245 650
Prepaid expenses and other assets 13 247
Accounts payable (35) (767)
Accrued expenses (591) 830
Deferred revenue (717) (20)
-------- --------
Net cash provided by(used in) operating
activities (1,610) 829
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 869 --
Purchases of property and equipment (115) (155)
Purchase of other assets (9) (93)
-------- --------
Net cash used in investing activities 745 (248)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 13 2,394
Payments on capital lease obligations (255) (16)
Proceeds from issuance of notes payable 247 --
Proceeds from line of credit -- 554
-------- --------
Net cash provided by financing activities 5 2,932
-------- --------
NET INCREASE(DECREASE) IN CASH AND
CASH EQUIVALENTS (860) 3,513
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,612 974
-------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 2,752 $ 4,487
-------- --------
-------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -
Cash paid for interest $ 19 $ 62
-------- --------
-------- --------
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 six months ended June 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:
June 30, 1997 December 31, 1996
------------- -----------------
(unaudited)
Finished goods $ 68 $ 6
Work in process 52 -
Raw materials 898 1,192
Reserve for obsolete inventory (256) (191)
------ ------
$ 762 $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 be 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 June 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>
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 automated data entry and image recognition
solutions targeted at a range of applications. As of June 30, 1997, the Company
had an accumulated deficit of $27,509,000. For the three months ended June 30,
1997, the Company incurred a net loss of $171,000.
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 automated data
entry 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.
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 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 the third quarter of 1997.
8
<PAGE>
REVENUES
Total revenue of $839,000 for the three months ended June 30, 1997 included
$400,000 from the sale and license of technology to a major customer and
$233,000 from the Company's agreement with Northrop Grumman, under which the two
companies are jointly developing an advanced image processing architecture. The
Northrop Grumman contract is expected to generate additional revenue in the
third quarter of 1997, but the technology sales and license revenue is not
expected to continue in the near future.* The remaining revenue for the quarter
ended June 30, 1997 consisted primarily of the sale of CNAPS and PCI-XL boards
and software. Revenue from the comparable period in 1996 was $1,483,000.
For the six months ended June 30, 1997, total revenue of $1,564,000 consisted of
$700,000 from the sale and license of technology to the major customer, $282,000
from the Northrop Grumman contract, and sales of CNAPS and PCI-XL boards and
software. Revenue from the comparable period in 1996 was $5,314,000.
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 and products being developed under its 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.
International sales totaled $9,000 (1% of total revenue) for the three months
ended June 30, 1997 and $84,000(5% of total revenue) for the six months ended
June 30, 1997. For the comparable periods in 1996, international sales were
$147,000 (10% of total revenue) and $738,000 (14% 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.
9
<PAGE>
COST OF PRODUCT REVENUE
The cost of product revenue for the three months and six months ended June 30,
1997 was $167,000 and $407,000, respectively. For 1996, the cost of product
revenue for the similar periods was $1,262,000 and $3,396,000, 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 six months ended June 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.
Additionally, the shutdown of the Company's Sunnyvale, California manufacturing
site which manufactured the Company's proprietary CNAPS processors from silicon
wafer has led the Company to outsource the testing of the CNAPS processors. 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 $370,000 and $654,000 for the three months
and six months ended June 30, 1997 were associated with the development of high
performance image recognition applications for the automated data entry market
and the development of image processing and recognition engines for server and
embedded systems environments. Research and development expenses were $880,000
and $1,811,000 for the comparable periods in 1996. The research and development
focus has been shifted toward automated data entry solutions utilizing
application software developed by the Company and its partners. The reduction
in expenses for the three months and six months ended June 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 automated data entry solutions and image recognition and
processing 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.
10
<PAGE>
SALES AND MARKETING EXPENSES
Sales and marketing expenses for the three months and six months ended June 30,
1997 were $246,000 and $448,000, respectively, as compared to $538,000 and
$1,350,000 for the same periods a year earlier. Sales and marketing expenses
are primarily comprised of salary costs, sales commissions, advertising 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, sales samples, and commission related to lower
sales levels.
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 six months ended
June 30, 1997 were $257,000 and $542,000 as compared to $1,740,000 and
$2,227,000 for the same period in 1996. The primary components of these
expenses are salaries, insurance and fees related to legal, accounting and
consulting services. The decreased level of expense from the prior year was
primarily due to costs associated with the Company's restructuring in the second
quarter of 1996, as well as, reductions in financial personnel and the use of
consulting services.
INTEREST INCOME AND EXPENSE
Interest income for the three months and six months ended June 30, 1997 was
$32,000 and $66,000 respectively. Interest income for the same periods in 1996
was $53,000 and $80,000, respectively. Interest income varies depending upon
the cash balances and prevailing interest rates from period to period. Interest
expense for the three months and six months ended June 30, 1997 decreased to
$2,000 and $19,000, respectively, from $21,000 and $62,000 for the three months
and six months ended June 30, 1996, respectively. In 1997 interest expense was
mainly due to the Company's capital lease obligations, while in 1996 interest
expense was primarily attributable to the Company's line of credit and capital
lease obligations. The Company has not entered into additional capital lease
obligations in the current year.
11
<PAGE>
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.
Although the Company has not established any new capital leases in 1997, as of
June 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 $451,000 at June 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
June 30, 1997 were $2,752,000, a decrease of $860,000 from the cash and cash
equivalents balance of $3,612,000 at December 31, 1996. The Company's working
capital at June 30, 1997 was $3,382,000, an increase of $554,000 from the
working capital balance of $2,828,000 at December 31, 1996. The Company expects
that it may need additional funding in the future, 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.
12
<PAGE>
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.
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.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders was held on May 21, 1997. At the
meeting, the following directors were elected:
No. of Shares Voted
-------------------
Directors For Withheld
--------- --- --------
C. Scott Gibson 6,361,667 90,870
Daniel J. Meub 6,361,767 90,770
Dan Hammerstrom, Ph.D. 6,361,767 90,770
T. Peter Thomas 6,361,767 90,770
Frederick M. Haney, Ph.D. 6,361,767 90,770
Jean-Claude Peterschmitt 6,361,767 90,770
In addition, the shareholders approved the following proposals:
Number of Shares Voted
----------------------
Proposal For Against Abstain
-------- --- ------- -------
1) Ratify approval of an 2,150,599 313,061 50,349
amendment to the Company's
1988 Stock Incentive Plan to
increase the number of shares
of Common Stock authorized
for issuance thereunder by
600,000 shares
2) Ratify appointment of KPMG 6,398,698 313,061 50,349
Peat Marwick, LLP, as
independent auditors of the
Company for the fiscal year
ending December 31, 1997
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) EXHIBITS
None
(b) REPORTS ON FORM 8-K
None
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: 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
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 2,752
<SECURITIES> 337
<RECEIVABLES> 990
<ALLOWANCES> 127
<INVENTORY> 762
<CURRENT-ASSETS> 4,861
<PP&E> 3,086
<DEPRECIATION> 2,671
<TOTAL-ASSETS> 5,424
<CURRENT-LIABILITIES> 1,479
<BONDS> 0
0
0
<COMMON> 31,117
<OTHER-SE> (27,509)
<TOTAL-LIABILITY-AND-EQUITY> 5,424
<SALES> 1,282
<TOTAL-REVENUES> 1,564
<CGS> 407
<TOTAL-COSTS> 407
<OTHER-EXPENSES> 1,644
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2)
<INCOME-PRETAX> (449)
<INCOME-TAX> 0
<INCOME-CONTINUING> (449)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (449)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
