<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 March 31, 1998
----------------
Commission File Number 0-22472
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ADAPTIVE SOLUTIONS, INC.
- ------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Oregon 93-0981962
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 N.W. COMPTON DRIVE, SUITE 340, BEAVERTON, OR 97006
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(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
March 31, 1998:
7,596,851 SHARES, NO PAR VALUE
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ADAPTIVE SOLUTIONS, INC.
Index to Form 10-Q
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1998 and December 31, 1997 3
Consolidated Statements of Operations for the
three months ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows for the
three months ended March 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-15
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
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ADAPTIVE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $1,815 $1,892
Restricted cash - 160
Short-term investments - 337
Trade accounts receivable, net 1,126 915
Inventory, net 522 536
Prepaid expenses and other assets 118 72
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Total current assets 3,581 3,912
Fixtures and equipment - net 743 679
Intangible assets, net 632 99
Other assets 49 148
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TOTAL ASSETS $5,005 $4,838
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 313 $ 286
Accrued expenses 887 452
Current portion of capital lease
obligations 172 254
Deferred revenue 422 183
Notes payable 184 376
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Total current liabilities 1,978 1,551
Capital lease obligations, less current portion 22 38
Long-term debt 287 -
Total stockholders' equity 2,718 3,249
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $5,005 $4,838
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</TABLE>
See accompanying notes to condensed financial statements.
3
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ADAPTIVE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
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<S> <C> <C>
REVENUE:
Net product revenue $1,022 $ 676
Service and other revenue 190 -
Research and development
revenue 56 49
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TOTAL REVENUE 1,268 725
OPERATING COSTS AND EXPENSES
Cost of product revenue 213 240
Research and development 613 284
Sales and marketing 476 202
General and administrative 191 285
In-process research and 678 -
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TOTAL OPERATING COSTS AND
EXPENSES 2,171 1,011
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OPERATING LOSS (903) (286)
Other income\(expense) 19 8
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NET LOSS $ (884) $ (278)
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NET LOSS PER SHARE
Basic and diluted $(.012) $(0.04)
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SHARES USED IN CALCULATING
NET LOSS PER SHARE:
Basic and diluted 7,390 6,972
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</TABLE>
See accompanying notes to condensed financial statements.
4
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ADAPTIVE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (884) $ (278)
Adjustments to reconcile net loss to cash
(used in) operating activities:
Depreciation and amortization 76 74
In-process research and development 678 0
Loss on sale of asset 0 8
Changes in assets and liabilities:
Trade accounts receivable (211) (87)
Inventory 14 233
Prepaid expenses and other assets 53 9
Accounts payable 27 (2)
Accrued expenses 435 (615)
Deferred revenue 239 (309)
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Net cash provided/(used in) operating 427 (1,312)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 0 869
Purchases of fixtures and equipment (128) (30)
Purchases of intangible assets (545) 0
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Net cash provided by(used in) investing (673) 830
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 0 13
Proceeds from (payments on) capital lease (98) (127)
Proceeds from (payment on) notes payable (192) 247
Proceeds from of long-term debt 287 0
Restricted cash 160 0
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Net cash provided by financing activities 157 133
Effect of exchange rate on cash 12 0
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NET INCREASE(DECREASE) IN CASH AND
CASH EQUIVALENTS (77) (349)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,892 3,612
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CASH AND CASH EQUIVALENTS AT END
OF PERIOD $1,815 $ 3,263
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -
Cash paid for interest $ 6 $ 17
Net assets acquired in acquisition 637 0
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</TABLE>
See accompanying notes to condensed financial statements.
5
<PAGE>
ADAPTIVE SOLUTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
by the Company 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 1997
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 three months ended March 31,
1998 are not necessarily indicative of the results for the entire fiscal year
ending December 31, 1998.
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>
March 31, 1998 December 31, 1997
-------------- -----------------
(unaudited)
<S> <C> <C>
Finished goods $ 462 $ 488
Work in process - 2
Raw materials 491 439
Reserve for obsolete inventory (431) (393)
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$ 522 $ 536
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</TABLE>
ACQUISITION OF MIMETICS
On March 2, 1998, the Company completed the purchase of all of the remaining
outstanding shares of Mimetics S.A. ("Mimetics") of France for 304,545 shares
of the Company's common stock and warrants to purchase 184,590 shares of the
Company's common stock at a price of $3 per share. These warrants expire
March 2, 2002. In August of 1996, the Company entered into a strategic
relationship and purchased a minority ownership in Mimetics. In February of
1997, the Company purchased $337,000 in Mimetics convertible debentures. The
debentures were partially financed with proceeds from a note payable from
certain unrelated outside investors in the amount of $247,000. Mimetics will
continue to sell its current products, as well as assist in development of
the Company's CADE products and provide European sales, marketing, and
distribution channels for the Company's products.
6
<PAGE>
NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE
Beginning December 31, 1997 basic and diluted earnings per share (EPS) are
computed using the methods prescribed by Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share". It requires dual
presentation of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures and requires a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation. Prior-period EPS data have
been restated to conform with the presentation requirements of SFAS 128.
The adoption of SFAS 128 had no effect on the previously reported loss per
share amounts for the quarter ended March 31, 1997. Losses were reported in
all periods presented and, accordingly, the denominator was equal to the
weighted average outstanding shares with no consideration for outstanding
options to purchase shares of the Company's common stock, because to do so
would have been anti-dilutive.
COMPREHENSIVE INCOME
On January 1, 1998 the Company adopted SFAS No. 130 "Reporting Comprehensive
Income" which established requirements for disclosure of comprehensive
income. The objective of SFAS 130 is to report all changes in equity that
result from transactions and economic events other than transactions with
owners. Comprehensive income is the total net income(loss) and all other
non-owner changes in equity. There was no impact from the adoption of SFAS
No. 130.
7
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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"), was incorporated in Oregon in
1988, and has its principal executive offices located at 1400 NW Compton
Drive, Suite 340, Beaverton, Oregon 97006. Since the Company was founded in
1988 it has been a technology leader in advanced pattern recognition and
image processing. Today, Adaptive Solutions has become a key provider of
complete Computer Assisted Data Entry (CADE) systems. The soon to be
introduced EntryLink product line consists primarily of enhancements and
extensions to the IMAGELINK OCR Subsystem products and technology that the
Company acquired from Eastman Kodak Company ("Kodak") in October of 1997.
The acquisition of this flagship product, along with other system modules
developed by the Company, allows the Company to provide complete CADE systems
for high volume, mission critical applications. Such systems today front the
data entry process for Blue Cross, various DMV's and other major corporate
and government accounts across the country. Together with Kodak and other
key business partners, Adaptive Solutions is able to deliver a premier
solution to the forms processing industry's glut of electronic and
paper-based forms for high speed entry into 'intelligent' data systems.
In addition to existing products, this acquisition provided the Company with
technology, patents, an installed customer base, and a service business.
Acquisition of the Imagelink-Registered Trademark- OCR business created the
opportunity to immediately enter a strategically targeted market with a
proven product used in many existing production settings. The installed
customer base provides 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 continue to
provide on-site support for current and, subject to a review process, future
products developed by the Company, supplementing the Company's plan to
deliver and support high value turn-key data entry products world-wide. The
Company presently intends to develop and deploy the ICR (Intelligent
Character Recognition, recognition of hand printed alphanumeric characters)
technology and patents in the Company's future products to provide
significant differentiation. The Company will also seek to market versions
of the ICR technology into non-competitive markets. Finally, the Company has
developed a strategic relationship with Kodak as a top tier authorized
reseller for the Kodak line of scanners and other imaging-related products,
allowing the Company to become a complete solution provider for data entry
systems.
8
<PAGE>
In the first quarter of 1998, the Company completed its acquisition of
Mimetics S.A. of France ("Mimetics"). In August of 1996, the Company entered
into a strategic relationship and purchased a minority ownership in Mimetics.
In February of 1997, the Company purchased $337,000 in Mimetics convertible
debentures. The debentures were partially financed with proceeds from a note
payable from certain unrelated outside investors in the amount of $247,000.
On March 2, 1998, the Company purchased all of the remaining outstanding
shares of Mimetics for approximately 304,545 shares of the Company's common
stock and warrants to purchase 184,590 shares of the Company's common stock
at a price of $3 per share. These warrants expire March 2, 2002. Mimetics
will continue to sell its current products, as well as assist in development
of the Company's CADE products and provide European sales, marketing, and
distribution channels for the Company's products.
The Company has also reached an agreement in principal with Formware
Corporation of Park City, Utah ("Formware") to use Formware's image-based key
entry product in the Company's future product offerings. The Company expects
to reach a definitive agreement with Formware in the first half of 1998.*
Coupled with the recognition technology owned by the company, the results of
ongoing internal development projects, and the ongoing relationship with
Kodak, this product rounds out the Company's current product portfolio and
will allow deployment of a wholly new set of competitive products during Q2
1998.
In addition to these recent acquisitions and partnerships, the Company has
made significant advances on product development and sales and marketing
initiatives. The Company has scheduled new product releases in the second
quarter of 1998, which focus on Kodak OCR and Microimager customer needs and
are intended to enhance the functionality of the Imagelink product. The
Company has also scheduled product releases in the second half of 1998, which
are designed to improve the speed, accuracy, and functionality of the
EntryLink product line. These products are targeted at specific strategic
market verticals and will allow existing imaging customers to migrate to
improved technological solutions to their business needs. Sales and
marketing have focused on defining customer needs within strategic vertical
markets and expanding sales and distribution channels. The Company believes
these initiatives build upon the foundation laid in 1997 and are major steps
toward the goal of becoming a leading provider of complete Computer Assisted
Data Entry solutions.
9
<PAGE>
The Company's future success will be substantially dependent upon its ability
to integrate the products and technologies from its partners and recent
acquisitions into the Company's products and product strategy. If the
Company is unable, for technological or other reasons, to develop products in
a timely manner in response to changes in the industry, or if products or
product enhancements developed by the Company do not achieve market
acceptance, the Company's results of operations will be materially adversely
affected. There can be no assurance that the Company will be successful in
developing and marketing products and product enhancements, that the Company
will not experience difficulties that could delay the successful development
and marketing of these products, or that its products and product
enhancements will be accepted in the marketplace. Moreover, from time to
time, the Company or its competitors may introduce new products or
technologies that have the potential to replace the Company's existing
products. There can be no assurance that these new products may delay or
eliminate the purchase of the Companies existing products, which could have a
material adverse affect on the Company's results of operations.
10
<PAGE>
REVENUES
Net product revenue for the three months ended March 31, 1998 of $1,022,000
consisted of the sale of Imagelink OCR products, CNAPS boards, and
deliverables to Motorola, Inc. Included in the quarter ending March 31, 1998
is revenue of $750,000 in connection with the sale and license of technology
to Motorola, Inc. Revenue from Imagelink and board products is recognized at
the time of product shipment. Revenue from the software maintenance
agreements is deferred and recognized over the life of the agreement. Net
product revenue for the comparable period in 1997 was $676,000.
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 to be 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.
Research and development revenue for the three months ended March 31, 1998
was $56,000. For the comparable period in 1997, research and development
revenue was $49,000. Research and development revenue for the three months
ended March 31, 1998 was generated primarily from technology development and
non-recurring engineering associated with the Company's products. Research
and development revenue for the three months ended March 31, 1997 was largely
attributable to technology development contracts with a large aerospace
company.
International sales totaled $165,000 (13% of total revenue) for the three
months ended March 31, 1998. For the comparable period in 1997,
international sales were $75,000 (10% of total revenue). The level of
international revenues has increased as a result of the Company's acquisition
of Mimetics S.A. in France. The Company expects that international revenues
will increase to even more significant levels in future quarters.*
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 ended March 31, 1998 and
1997 was $213,000 and $240,000, 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 ended March 31, 1997 was due mainly to changes in product
mix. The Company's strategy is based upon a greater percentage of revenues
from software products and customer solutions which typically have a higher
margin than the component level products sold by the Company in previous
periods.
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 continues to develop new products for its markets.
There can be no assurance that these new products will have the same margins
as the Company's current products.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses of $613,000 for the three months ended
March 31, 1998 were associated with the development of enhancements of the
acquired OCR Subsystem product, and development of high performance CADE
solutions utilizing application software from the Company's internal
development efforts and the Company's partners. Research and development
expenses were $284,000 for the comparable period in 1997. The increase in
expenses for the three months ended March 31, 1998 was a result of increased
development personnel and costs associated with the acquisition of the OCR
Subsystem product line and the Company's French subsidiary.
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 development efforts. 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
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SALES AND MARKETING EXPENSES
Sales and marketing expenses for the three months ended March 31, 1998 and
1997 were $476,000 and $202,000, respectively. Sales and marketing expenses
are primarily comprised of labor costs, sales commissions, travel expenses,
and promotion and advertising. 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 increase in sales
and marketing expenses from the prior year is largely attributable to
increases in personnel, travel, advertising and promotion related to sales of
the Company's OCR Subsystem product and development of customers and sales
channels.
The Company expects that sales and marketing expense levels will continue to
increase as sales support, advertising, public relations and product
introduction activities increase, in accordance with the Company's new
strategy.* The Company believes that increased 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 ended March 31, 1998
were $191,000 as compared to $285,000 for the same period in 1997. 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 a reduction in insurance, sales and
property tax, personnel, and consulting expenses. The Company expects that
general and administrative expenses will increase in future periods due to
increased headcount associated with its acquisition of Mimetics S.A.
IN-PROCESS RESEARCH AND DEVELOPMENT
In connection with the acquisition of Mimetics, the Company acquired ongoing
research and development activities, which resulted in a one time write-off
of $678,000 related to certain in-process research and development costs.
The value assigned to the in-process research and development represents
those research and development efforts in process at the acquisition date for
which technological feasibility had not yet been established and which had no
alternative future uses. Accounting principles require that such cost be
charged to expense as incurred.
13
<PAGE>
OTHER INCOME AND EXPENSE, NET
Interest income for the three months ended March 31, 1998 and 1997 was
$24,000 and $34,000, respectively. Interest income varies depending upon the
cash balances and prevailing interest rates from period to period. Interest
expense for the three months ended March 31, 1998 and 1997 was $5,000 and
$17,000, respectively. In 1998 and 1997 interest expense was mainly due to
the Company's capital lease obligations. The Company has entered into
approximately $25,000 in additional capital lease obligations in the current
year.
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.
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."
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 $1,100 and $10,700, 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.
At December 31, 1996, the Company is in a net deferred tax asset position
resulting primarily from net operating loss carryforwards and has recorded a
valuation allowance for all deferred tax assets in excess of existing
deferred liabilities.
14
<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.
As of March 31, 1998, 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 $194,000 as of March 31,
1998. 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 product strategy. The Company's
cash and cash equivalents at March 31, 1998 were $1,815,000, a decrease of
$77,000 from the cash and cash equivalents balance of $1,892,000 at December
31, 1997. The Company's working capital at March 31, 1998 was $1,603,000, a
decrease of $758,000 from the working capital balance of $2,361,000 at
December 31, 1997. The Company expects that it will 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 financing, 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.
15
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) EXHIBITS
None
(b) REPORTS ON FORM 8-K
On March 18 the Company filed a report on Form 8-K to report the
acquisition of Mimetics S.A. of France.
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: MAY 11, 1998 BY /s/ DANIEL J. MEUB
----------------------------
DANIEL J. MEUB
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
BY /s/ RICHARD L. BOONSTRA
----------------------------
RICHARD L. BOONSTRA
CORPORATE CONTROLLER AND
PRINICIPAL FINANCIAL OFFICER
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,815
<SECURITIES> 0
<RECEIVABLES> 1,388
<ALLOWANCES> 262
<INVENTORY> 522
<CURRENT-ASSETS> 3,581
<PP&E> 1,325
<DEPRECIATION> 582
<TOTAL-ASSETS> 5,005
<CURRENT-LIABILITIES> 1,978
<BONDS> 0
0
0
<COMMON> 31,681
<OTHER-SE> (28,963)
<TOTAL-LIABILITY-AND-EQUITY> 5,005
<SALES> 1,022
<TOTAL-REVENUES> 1,268
<CGS> 213
<TOTAL-COSTS> 213
<OTHER-EXPENSES> 1,958
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6)
<INCOME-PRETAX> (884)
<INCOME-TAX> 0
<INCOME-CONTINUING> (884)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (884)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
