<PAGE>   1
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                        ---------------------------------




                                    FORM 10-Q

(Mark One)

[X]   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the quarter ended March 31, 2001 or [ ]
      Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the transition period from __________ to
      __________

COMMISSION FILE NUMBER 0-18623

                        ---------------------------------

                               IKOS SYSTEMS, INC.
             (Exact name of registrant as specified in its charter)


                  DELAWARE                                      77-0100318
       (State or other jurisdiction of                       (I.R.S. Employer
       incorporation or organization)                       Identification No.)

      79 GREAT OAKS BLVD., SAN JOSE, CA                            95119
  (Address of principal executive offices)                      (zip code)

               REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
                                 (408) 284-0400



      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]  No [ ]

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

         COMMON STOCK $.01 PAR VALUE                      8,985,000
         ---------------------------                (Outstanding as of
              (Title of Class)                         March 31, 2001)



<PAGE>   2



                               IKOS SYSTEMS, INC.
                                    FORM 10-Q
                          QUARTER ENDED MARCH 31, 2001


                                      INDEX


Part I: Financial Information

        Item 1:Financial Statements
<TABLE>
<CAPTION>
                                                                            PAGE
               <S>                                                          <C>
            Condensed Consolidated Balance Sheets at
               March 31, 2001 (unaudited) and September 30, 2000............  3

            Unaudited Condensed Consolidated Statements of Income
               for the three and  six months ended March 31, 2001
               and April 1, 2000............................................  4

            Unaudited Condensed Consolidated Statements of Cash
               Flows for the six months ended March 31, 2001
               and April 1, 2000............................................  5

            Notes to Unaudited Condensed Consolidated Financial Statements..  6

        Item 2: Management's Discussion and Analysis
                  of Financial Condition and Results of Operations..........  9

        Item 3: Quantitative and Qualitative Disclosures
                  About Market Risk......................................... 16



Part II: Other Information

        Item 1: Legal Proceedings........................................... 17

        Item 4: Submission of Other Matters................................. 17

        Item 6: Exhibits and Reports on Form 8-K............................ 18

        Signatures.......................................................... 20
</TABLE>



<PAGE>   3
                         PART 1  FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS


                               IKOS SYSTEMS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (in thousands, except per-share amounts)
<TABLE>
<CAPTION>

                                                                  March 31,    September 30,
                                                                     2001           2000
                                                                 -----------   -------------
                                    ASSETS                       (Unaudited)
<S>                                                                <C>            <C>
Current assets:
    Cash and cash equivalents ...............................      $ 15,737       $ 12,032
    Short-term investments ..................................         6,036          7,771
    Accounts receivable (net of allowances for
        doubtful accounts of $846 and $645, respectively) ...        12,614         19,716
    Inventories .............................................         8,535          3,997
    Prepaid expenses and other assets .......................         1,005            578
                                                                   --------       --------
            Total current assets ............................        43,927         44,094

    Equipment and leasehold improvements
        Office and evaluation equipment .....................         5,613          6,782
        Machinery and equipment .............................         7,515         11,487
        Leasehold improvements ..............................         3,035          2,640
                                                                   --------       --------
                                                                     16,163         20,909
            Less allowances for depreciation and amortization        (8,850)       (14,534)
                                                                   --------       --------
                                                                      7,313          6,375
    Intangible assets (net of amortization of
        $1,009 and $924, respectively) ......................           799            883
    Other assets ............................................         1,077            653
                                                                   --------       --------
                                                                   $ 53,116       $ 52,005
                                                                   ========       ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Notes payable ..........................................         $  --       $  1,809
    Accounts payable .......................................         6,688          5,446
    Accrued payroll and related expenses ...................         3,085          3,549
    Accrued commissions ....................................           688          2,094
    Income taxes payable ...................................           856          3,252
    Other accrued liabilities ..............................         1,909          2,511
    Deferred revenues ......................................        11,109          8,388
                                                                  --------       --------
            Total current liabilities ......................        24,335         27,049

Accrued rent ...............................................           369             92
Commitments
Stockholders' equity:
    Preferred stock, $.01 par value; 10,000 shares
        authorized, none issued and outstanding ............            --             --
    Common stock, $.01 par value; 50,000 shares
        authorized, 8,985 and 8,797 shares
        issued and 8,985 and 8,778 outstanding, respectively            90             88
    Additional paid-in capital .............................        58,849         57,791
    Treasury stock, at cost, no shares in
        2001 and 19 in 2000 ................................            --           (126)
    Accumulated adjustments to comprehensive income ........        (1,314)          (842)
    Accumulated deficit ....................................       (29,213)       (32,047)
                                                                  --------       --------
            Total stockholders' equity .....................        28,412         24,864
                                                                  --------       --------
                                                                  $ 53,116       $ 52,005
                                                                  ========       ========
</TABLE>



            See notes to condensed consolidated financial statements

                                        3

<PAGE>   4
                                IKOS SYSTEMS INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                    (in thousands, except per share amounts)
<TABLE>
<CAPTION>

                                               Three Months Ended        Six Months Ended
                                             ----------------------   -----------------------
                                              March 31,    April 1,   March 31,      April 1,
                                                2001         2000       2001           2000
                                             ----------    --------   ---------     ---------
<S>                                           <C>          <C>          <C>          <C>
Net revenues
  Product ..............................      $11,803      $12,403      $28,182      $23,452
  Maintenance ..........................        5,607        4,396       10,237        8,752
                                              -------      -------      -------      -------
      Total net revenues ...............       17,410       16,799       38,419       32,204

Cost of revenues
  Product ..............................        2,896        2,456        6,251        5,161
  Maintenance ..........................        1,166        1,215        2,280        2,238
                                              -------      -------      -------      -------
      Total cost of revenues ...........        4,062        3,671        8,531        7,399

                                              -------      -------      -------      -------
      Gross profit .....................       13,348       13,128       29,888       24,805

Operating expenses:
  Research and development .............        4,552        3,953        9,060        7,207
  Sales and marketing ..................        7,222        5,760       14,500       11,681
  General and administration ...........        1,462        1,288        3,046        2,341
  Amortization of intangibles ..........           42           42           84          125
                                              -------      -------      -------      -------
      Total operating expenses .........       13,278       11,043       26,690       21,354
                                              -------      -------      -------      -------
Income from operations .................           70        2,085        3,198        3,451

Interest and other  income .............          392           99          611          191
                                              -------      -------      -------      -------

Income before provision for income taxes          462        2,184        3,809        3,642
  Provision for income taxes ...........          115          540          975          905
                                              -------      -------      -------      -------
      Net income .......................      $   347      $ 1,644      $ 2,834      $ 2,737
                                              =======      =======      =======      =======

Basic net income per share .............      $  0.04      $  0.19      $  0.32      $  0.32
                                              =======      =======      =======      =======

Common and common equivalent shares
  used in computing per share amounts...        8,924        8,531        8,865        8,474
                                              =======      =======      =======      =======

Dilutive net income per share ..........      $  0.03      $  0.17      $  0.28      $  0.28
                                              =======      =======      =======      =======

Common and common equivalent shares
  used in computing per share amounts...       10,278        9,926       10,151        9,723
                                              =======      =======      =======      =======
</TABLE>


            See notes to condensed consolidated financial statements

                                        4


<PAGE>   5

                               IKOS SYSTEMS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                Increase (decrease) in cash and cash equivalents
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                       Six Months Ended
                                                                   ------------------------
                                                                    March 31,      April 1,
                                                                      2001           2000
                                                                   ----------     ----------
<S>                                                                <C>            <C>
Operating activities:
   Net income ...............................................      $  2,834       $  2,737
   Adjustments to reconcile net income to net
     cash provided by operating activities:
     Depreciation and amortization ..........................         1,630          1,644
     Gain on sale of capital equipment ......................            85             --
     Accumulated translation adjustments ....................          (472)          (160)
     Accrued rent ...........................................           277            (64)


   Changes in operating assets and liabilities:
     Accounts receivable ....................................         7,102         (1,636)
     Inventories ............................................        (4,538)           (58)
     Prepaid expenses and other current assets ..............          (427)           270
     Other assets ...........................................          (424)           334
     Accounts payable .......................................         1,242            977
     Accrued payroll and related expenses ...................          (464)          (755)
     Accrued commissions ....................................        (1,406)           117
     Income taxes payable ...................................        (2,396)           732
     Other accrued liabilities ..............................          (602)          (547)
     Deferred revenues ......................................         2,721          1,820
                                                                   --------       --------
       Net cash provided by operating activities ............         5,162          5,411

Investing activities:
   Purchases of equipment and leasehold improvements ........        (2,569)        (1,490)
   Purchase of short-term investments .......................        (8,922)        (2,969)
   Maturities of short-term investments .....................        10,657          2,323
                                                                   --------       --------
       Net cash used in investment activities ...............          (834)        (2,136)

Financing activities:
   Principal payments on short-term borrowings ..............        (1,809)            --
   Sale of common stock .....................................         1,186            893
                                                                   --------       --------
       Net cash provided by (used in) financing activities...          (623)           893

Increase in cash and cash equivalents .......................         3,705          4,168
Cash and cash equivalents at beginning of period ............        12,032          7,664
                                                                   --------       --------

Cash and cash equivalents at end of period ...............         $ 15,737       $ 11,832
                                                                   ========       ========
</TABLE>



           See notes to condensed consolidated financial statements.

                                        5
<PAGE>   6


                               IKOS SYSTEMS, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


1.      BASIS OF PRESENTATION

        The accompanying unaudited consolidated financial statements at March
        31, 2001 and for the three and six months ended March 31, 2001 and April
        1, 2000, have been prepared in conformity with generally accepted
        accounting principles, consistent with those applied in, and should be
        read in conjunction with, the audited consolidated financial statements
        for the year ended September 30, 2000 included in the Form 10-K as filed
        with the Securities and Exchange Commission on December 21, 2000. The
        unaudited interim financial information reflects all normal recurring
        adjustments, which are, in the opinion of management, necessary for a
        fair statement of results for the interim periods presented. The results
        for the three and six months ended March 31, 2001 are not necessarily
        indicative of results expected for the full year.


2.      INVENTORIES

        Inventories are stated at the lower of cost (first-in, first-out) or
        market and consisted of (in thousands):

<TABLE>
<CAPTION>
                                          March 31,  September 30,
                                            2001         2000
                                          ---------  -------------
<S>                                         <C>           <C>
                Raw materials               $1,091        $ 951
                Work-in-process              5,105        1,386
                Finished goods               2,339        1,660
                                            ------      -------
                                            $8,535      $ 3,997
                                            ======      =======
</TABLE>

3.      NET INCOME PER SHARE

        The computation of basic net income per share for the periods presented
        is derived from the information on the face of the income statement, and
        there are no reconciling items in either the numerator or denominator.
        Additionally, there are no reconciling items in the numerator used to
        compute dilutive net income per share. The incremental common shares
        attributable to outstanding options for the three and six month periods
        ended March 31, 2001 and April 1, 2000 included in the total shares used
        in the denominator of the diluted net income per share calculation are
        as follows (in thousands):

<TABLE>
<CAPTION>

                                        March 31,     April 1,
                                          2001          2000
                                        ---------     --------

                <S>                     <C>          <C>
                Three months ended        1,354        1,395
                                          =====        =====
                Six months ended          1,286        1,249
                                          =====        =====
</TABLE>

                                       6
<PAGE>   7

                               IKOS SYSTEMS, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.      COMPREHENSIVE INCOME (LOSS)

        Comprehensive income (loss) for the three and six months ending March
        31, 2001 and April 1, 2000 are as follows (in thousands):

<TABLE>
<CAPTION>
                                        Three Months Ended      Six Months Ended
                                        -------------------    --------------------
                                        March 31,  April 1,    March 31,   April 1,
                                          2001       2000        2001        2000
                                        ---------  --------    ---------   --------
<S>                                     <C>        <C>         <C>         <C>
      Net income as reported             $   347     $ 1,644    $ 2,834    $ 2,737

      Accumulated translation
         adjustments                        (397)        (82)      (472)      (160)
                                         -------     -------    -------    -------
      Comprehensive income
         (loss)                          $   (50)    $ 1,562    $ 2,362    $ 2,577
                                         =======     =======    =======    =======
</TABLE>

5.      INCOME TAXES

        The Company's effective tax rate on the consolidated pretax income was
        approximately 25% for the three and six month periods ending March 31,
        2001 and April 1, 2000. The Company's effective tax rate for both
        periods differs from the federal statutory rate primarily due to
        benefits associated with its net operating loss carryforward.

6.      LITIGATION AND CONTINGENCIES

        On February 9, 2001, the Company filed a patent infringement complaint
        against Axis Systems, Inc. (Axis) in the United States District Court in
        the District of Delaware. The complaint alleges infringement by Axis of
        four patents involving the Company's Virtual Wires(TM) technology, which
        allows high resource utilization in FPGA-based emulators. The Company is
        seeking both injunctive relief and monetary damages.

        On March 22, 2001, Axis filed a patent infringement complaint against
        the Company in the United States District Court for the Northern
        District of California. The complaint alleges infringement by IKOS of
        Axis's patent for a "Simulation/Emulation System and Method," U.S.
        Patent No 6,009,256. Axis claims that this patent covers technology for
        a single system that provides simulation, acceleration, and emulation of
        complex electronic integrated circuit and system-on-chip designs. The
        compliant alleges that certain of the Company's emulation products
        infringe on the patent. Axis is seeking both injunctive relief and
        monetary damages. The Company believes the claim is without merit and
        intends to vigorously defend the action.

                                       7
<PAGE>   8


                               IKOS SYSTEMS, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


7.      RECENT ACCOUNTING PRONOUNCEMENTS

        In December 1999, the Securities and Exchange Commission (SEC) issued
        Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in
        Financial Statements". IKOS is required to implement SAB101 no later
        than the quarter ending September 29, 2001. The Company is currently
        evaluating the impact of SAB 101 and is uncertain as to what impact, if
        any, SAB 101 will have on its revenues and results of operations. The
        impact of SAB 101, if any, will be reported as a change in accounting
        principle in accordance with FASB Statement No. 3. This may result in a
        significant cumulative effect change in accounting adjustment that would
        be reflected in the Company's results of operations for the fiscal year
        ended September 29, 2001.

        In June 1998, the Financial Accounting Standards Board issued SFAS No.
        133, "Accounting for Derivative Instruments and Hedging Activities,"
        which establishes accounting and reporting standards for derivative
        instruments and hedging activities. It requires the Company to recognize
        all derivatives as either assets or liabilities in the balance sheet and
        measure those instruments at fair value. It further provides criteria
        for derivative instruments to be designated as fair value, cash flow, or
        foreign currency hedges, and establishes accounting standards for
        reporting changes in the fair value of the derivative instruments. Upon
        adoption, the Company was required to adjust hedging instruments to fair
        value in the balance sheet and recognize the offsetting gains or losses
        as adjustments to be reported in net income or other comprehensive
        income, as appropriate. The Company adopted SFAS No. 133 as of October
        1, 2000. The adoption of SFAS No. 133 did not have a material effect on
        the Company's results of operations or financial position.


                                       8
<PAGE>   9

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS


CAUTIONARY STATEMENT

The statements in the Management's Discussion and Analysis of Financial
Condition and Results of Operations that are forward looking involve numerous
risks and uncertainties and are based on current expectations. Actual results
may differ materially from those projected. Such risks and uncertainties may be
more fully described in other reports and information filed by the Company with
the Securities and Exchange Commission. Certain of these risks and uncertainties
are discussed under the caption "Factors That May Affect Future Results of
Operations."

NET REVENUES

Net revenues for the three month and six month periods ending March 31, 2001
were $17,410,000 and $38,419,000, respectively, representing a 4% and 19%
increase, respectively, over the same periods of the prior year. The increase
for the current quarter when compared to the same prior year quarter was
primarily related to an increase in maintenance revenues of approximately 28%
offset by a decrease in product revenues of 5%. Maintenance increased primarily
as a result of growth in emulation maintenance orders. Emulation maintenance
revenue grew approximately 145%. The base of emulation users has increased
resulting in the related maintenance revenue increase. This growth is partially
offset by a decrease in simulation users reflecting a decrease in simulation
maintenance of approximately 6%. Product revenues declined due to a slowing
economy resulting in certain equipment purchases being delayed or cancelled by
customers. The major portion of the decrease related to simulation sales, which
declined 47% while emulation product sales actually increased 43%. The decline
in simulation sales is expected as the Company has continually focused on the
emulation market since the Company's introduction of an emulation product in
fiscal 1997. Emulation revenues, although increasing when compared to the prior
year quarter, were down 26% from the first quarter of fiscal 2001, which the
Company believes is due to the effects of the slowing economy.

For the six month period ending March 31, 2001, revenues have increased on the
overall strength of emulation product revenues which are up over 63% when
compared with the first six months of the prior year. Maintenance revenues also
contribute to the overall increase for the six month period increasing 17% over
this period. Simulation product revenues have decreased by approximately 26%,
which is expected. The Company expects to continue is focus on the emulation
market in an effort to continue to grow emulation revenues. In addition, the
Company continues to expect a decline in the simulation revenues.

International revenues for the three and six month periods ending March 31,
2001, totaled $5,795,000 and $11,758,000, respectively or approximately 33% and
31% of total revenues, respectively. International revenues for the three months
ending March 31, 2001 increased 28% as a result of increased sales in Japan
during the quarter. For the six month period ending March 31, 2001,
international revenues decreased approximately 4% when compared to the first six
months of the prior year. The decrease in revenues is due to lower than planned
revenues in Japan for the six month period. The Company believes the shortfall
is a result of the Company's increased emphasis on emulation and the
difficulties involved in penetrating the Japan market with a new product.


                                       9
<PAGE>   10



GROSS PROFIT MARGINS

Gross profit margins for the three and six month periods ended March 31, 2001
were 77% and 78%, respectively. Gross profit margins for the three and six month
periods end April 1, 2000 were 78% and 77%, respectively. Despite the lower than
expected revenues during the quarter margins were reasonably flat and comparable
with the prior year.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses for the three and six month periods ending
March 31, 2001 were approximately $4,552,000 and $9,060,000, respectively,
representing 26% and 24% of revenues, respectively. Research and development
expenses for the three and six month periods ending April 1, 2000 were
approximately $3,953,000 and $7,207,000, respectively, representing 23% and 22%
of revenues, respectively. The increase for both the three and six months ended
March 31, 2001, as a percentage of sales, are due to the overall increase in
expense against lower than expected revenues for the quarter and six month
periods. The increases for the three and six month periods are primarily related
to increased payroll and related costs due to increased headcount and increased
consulting fees. As the Company continues to research verification tool
methodologies and introduce new products, research and development costs are
expected to increase in absolute dollars over the remainder of the year.

SALES AND MARKETING EXPENSES

Sales and marketing expenses for the three and six month periods ending March
31, 2001 were approximately $7,222,000 and $14,500,000, respectively,
representing 41% and 38% of revenues, respectively. Sales and marketing expenses
for the three and six month periods ending April 1, 2000 were approximately
$5,760,000 and $11,681,000, respectively, representing 34% and 36% of revenues,
respectively. The increase as a percentage of sales, for both the three and six
months ended March 31, 2001, are due to the overall increase in expense against
lower than expected revenues for the quarter and six month periods. The increase
in absolute dollars over the prior year quarter and six months is primarily
related to increased payroll and commissions, recruiting, travel and trade show
expenses.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for the three and six month periods ending
March 31, 2001 were approximately $1,462,000 and $3,046,000, respectively,
representing 8% of revenues for both periods. General and administrative
expenses for the three and six month periods ending April 1, 2000 were
approximately $1,288,000 and $2,341,000, respectively, representing 8% and 7% of
revenues, respectively. The slight increase for both the three and six months
ended March 31, 2001, as a percentage of sales, is due to the overall increase
in expenses against lower than expected revenues for the three and six month
periods. For the three and six month periods ending March 31, 2001, the general
and administrative expenses were higher than the prior year periods in terms of
absolute dollars as a result of increased salaries and related expenses.

INCOME TAXES

The Company's effective tax rate on the consolidated pretax income was
approximately 25% for the three and six month periods ending March 31, 2001 and
April 1, 2000. The Company's effective tax rate for both periods differs from
the federal statutory rate primarily due to benefits associated with its net
operating loss carryforward.


                                       10
<PAGE>   11





OTHER

The Company has experienced minimal gains or losses on foreign currency
translation. With the exception of the Company's Japan operations, substantially
all of its international sales to date have been billed and collected in U.S.
dollars. The Company pays the expenses of its international operations in local
currencies and to date the Company has not engaged in hedging transactions with
respect to such obligations. The Company's sales in Japan are billed and
collected in the Japanese local currency. As such, the Company periodically
enters into foreign exchange contracts to minimize foreign exchange risk
relating to the Japanese subsidiary's sales that are denominated in yen. A
forward exchange contract obligates the Company to exchange predetermined
amounts of a specified foreign currency at a specified exchange rate on a
specified date or to make an equivalent US dollar payment equal to the value of
such exchange. Through March 31, 2001, the impact of such arrangements have been
immaterial to the Company operations.

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

Potential Fluctuations in Quarterly Results. The Company's quarterly operating
results have in the past and may in the future vary significantly depending on
factors including the timing of customer development projects and purchase
orders, new product announcements and releases by the Company and other
companies, gain or loss of significant customers, price discounting of the
Company's products, the timing of expenditures, customer product delivery
requirements, availability and cost of components or labor and economic
conditions generally and in the electronics industry specifically. Any
unfavorable change in these or other factors could have a material adverse
effect on the Company's operating results for a particular quarter. Many of the
Company's customers order on an as-needed basis and often delay issuance of firm
purchase orders until their project commencement dates are determined. Quarterly
revenue and operating results will therefore depend on the volume and timing of
orders received during the quarter, which are difficult to forecast accurately.
Moreover, a significant portion of the Company's revenue may result from
shipments during the last few weeks of the quarter from orders generally
received in the last month of the quarter. Any concentration of sales at the end
of the quarter may limit the Company's ability to plan or adjust operating
expenses and production and inventory levels. Therefore, if anticipated
shipments in any quarter do not occur or are delayed, expenditure levels could
be disproportionately high as a percentage of revenue, and the Company's
operating results for that quarter would be adversely affected. In addition,
sales of individual systems with high average sales prices can constitute a
significant percentage of the Company's quarterly revenue. Operating results in
any period should not be considered indicative of the results to be expected for
any future period, and there can be no assurance that the Company's net revenues
will increase or that the Company will remain profitable in any future period.

Sales Trends. Over the past several years the marketplace for the Company's
products has evolved substantially. The Company has seen a significant reduction
in sales of its simulation products as revenues have declined from approximately
$37,044,000 in fiscal 1997 to approximately $21,719,000 in fiscal 2000. While
the decrease is due in part to the evolution of the market, the primary cause of
the decrease is the result of the Company's focus on its new emerging product
line of emulation solutions. The Company has seen its revenues from its
emulation products increase from approximately $6,000,000 in fiscal 1997 to over
$32,933,000 in fiscal 2000. There can be no assurance that the Company will be
able to maintain these past trends. These trends will be dependent upon the
Company introducing new products and methodologies. Furthermore, increased
overall sales will also depend on an increasing number of complex ICs designed
for electronic systems, integration of the Company's products with other tools
for IC design, the ability of the Company's products to shorten overall customer
design cycles and increased industry acceptance of the Company verifications
solutions. Because the

                                       11
<PAGE>   12


market for hardware-assisted verification products is evolving, it is difficult
to predict with any assurance whether the markets for such solutions will
continue to expand. There can be no assurances that such market will expand, or
even if such market expands, that the Company's products will achieve and
maintain the market acceptance required to maintain revenue growth and
profitability in the future.

New Product Development. To obtain the expected revenue growth, the Company
needs to continue to invest in new product development. The Company has focused
most of its development resources on its emulation products. The Company's
initial emulation product was commercially released in the first quarter of
fiscal 1997. The Company encountered several product design issues with its
second-generation emulation product, and in addition, the EDA marketplace for
emulation products continued to evolve, impacting the original design. During
1998, the Company addressed its product design issues by completely redesigning
the emulation product. The Company released its third generation system in
fiscal 1999 and its fourth generation system was released in March 2001,
providing emulation users with up to 15 million gates of emulation capacity.
While the Company has seen favorable results with its third generation release
and interest in the fourth generation system, there can be no assurance that
this fourth generation product will adequately meet the requirements of the
marketplace. There continues to be further development of the emulation product
as well as other verification products, and as the Company continues to develop
such products which are based on the new technology, there can be no assurance
that the enhanced products or other developed products resulting from this
development will provide the necessary solutions to customer design verification
needs, be of acceptable quality or achieve further market acceptance. The
success of the Company in developing, introducing, selling and supporting
verification products will depend on a variety of factors, including but not
limited to, the timely and successful enhancement of current products,
completion of product design and development of future products, the timely and
efficient implementation of manufacturing processes, effective sales, marketing
and customer service. Furthermore, the absence of performance problems or other
difficulties that may require design modifications and related expenses will
contribute to overall success otherwise such issues may hinder or damage market
acceptance of the products. While the Company's verification systems are
designed to provide cost and ease of use advantages intended to broaden the
market for hardware-assisted verification, there can be no assurance that its
products will be able to achieve such goals. Moreover, there can be no assurance
that the market for such verification solutions will broaden beyond the current
set of users.

The Company currently maintains a research and development facility in India.
Through this facility, the Company has developed certain technology, which has
resulted in new products. The research and development facility has positively
impacted the Company's ability to meet its product development deadlines.
However, the Company has significant development risk with respect to the
continued incorporation of the acquired technology into future products. Such
effort will result in increased spending on research and development as the
Company attempts to continue to meet its goals and deadlines. There can be no
assurance that such goals or deadlines will be achieved in a timely manner.
Furthermore, should such goals and deadlines for the introduction of new
products be attained, there can be no assurance that the resulting new products
will adequately meet the requirements of the marketplace.

Competition. The EDA industry is highly competitive and rapidly changing. The
Company's products are specifically targeted at the emerging portion of the
industry relating to complex designs that the Company believes benefit from its
verification products. The Company currently competes with traditional software
verification methodologies, including product offerings sold by Cadence,
Synopsys and Mentor Graphics. The Company's main competition for the sale of
emulation systems is Quickturn/Cadence and Mentor Graphics. The Company expects
competition in the market for verification tools to increase as other companies
attempt to

                                      12
<PAGE>   13

introduce new products and product enhancements. Moreover, the Company competes,
and expects that it will continue to compete, with established EDA companies. A
number of these companies have longer operating histories, significantly greater
financial, technical and marketing resources, greater name recognition and
larger installed customer bases than the Company. In addition, many of these
competitors and potential competitors have established relationships with
current and potential customers of the Company and offer a broader and more
comprehensive product line. Increased competition could result in price
reductions, reduced margins and loss of market share, all of which could
materially adversely affect the Company. In addition, current competitors or
other entities may develop other products that have significant advantages over
the Company's products. There can be no assurance that the Company will be able
to compete successfully against current and future competitors or that
competitive pressures faced by the Company will not materially adversely affect
its operating results.

New Products and Technological Change. The EDA industry is characterized by
extremely rapid technological change in both hardware and software development,
frequent new product introductions, evolving industry standards and changing
customer requirements. The introduction of products embodying new technologies
and the emergence of new industry standards can render existing products
obsolete and unmarketable. The Company's future success will depend upon its
ability to enhance its current series of simulation and emulation systems and to
design, develop and support its future simulation and emulation products on a
timely basis. These efforts require a high level of expenditures for research
and development by the Company to address the increasingly sophisticated needs
of the customers. There can be no assurance that the Company will be successful
in developing and marketing product enhancements or new products that respond to
technological change or evolving industry standards or changing customer
requirements, that the Company will not experience difficulties that could delay
or prevent the successful development, introduction and marketing of these
products, or that its new products and product enhancements will adequately meet
the requirements of the marketplace, will be of acceptable quality or will
achieve market acceptance. If the Company is unable, for technological or other
reasons, to develop and introduce products in a timely manner in response to
changing market conditions or customer requirements, the Company's business,
operating results and financial condition will be materially and adversely
affected. Moreover, from time to time, the Company may announce new products or
technologies that have the potential to replace the Company's existing product
offerings. There can be no assurance that the announcement of new product
offerings will not cause customers to defer purchases of existing Company
products, which could adversely affect the Company's results of operations for
any particular quarter.

Dependence on Electronics Industry. The Company is dependent upon the
electronics industry and, in particular, new system and IC design projects. The
electronics industry is characterized by rapid technological change, short
product life cycles, fluctuations in manufacturing capacity and pricing and
margin pressures, all of which cause it to be volatile. As a result, the
electronics industry has historically experienced sudden and unexpected
downturns, at which time the number of new system and IC design projects
decrease. Because most of the Company's sales occur upon the commencement of new
projects for system and IC products, the Company is dependent upon the rate of
commencement of new system and IC design projects. Accordingly, negative factors
affecting the electronics industry could have a material adverse effect on the
Company's results of operations.

Dependence Upon Certain Suppliers. Certain key components used in the Company's
products are presently available from sole or limited sources. The inability to
develop alternative sources for these sole or limited source components or to
obtain sufficient quantities of these components could result in delays or
reductions in product shipments, which could adversely affect the Company's
operating results. The Company's systems use proprietary FPGAs that are
currently manufactured solely by Xilinx, Inc. ("Xilinx").

                                       13
<PAGE>   14

The Company generally purchases these components, including semiconductor
memories used in the Company's verification hardware, pursuant to purchase
orders placed from time to time in the ordinary course of business and has no
supply arrangements with any of its source suppliers that require the suppliers
to provide components in guaranteed quantities or at set prices. Moreover, the
manufacture of these components can be extremely complex, and the Company's
reliance on the suppliers of these components exposes the Company to production
difficulties and quality variations that may be experienced by these suppliers.
Therefore, the Company's reliance on its sole and limited source suppliers
involves several risks, including a potential inability to obtain an adequate
supply of required components, reduced control over pricing and timely delivery
and quality of acceptable components. While the timeliness and quality of
deliveries to date from such suppliers have been acceptable, there can be no
assurance that problems will not occur in the future. Any prolonged inability to
obtain components or subassemblies in sufficient quantities or quality or on
favorable pricing or delivery terms, or any other circumstances that would
require the Company to seek alternative sources of supply, could have a material
adverse effect on the Company's operating results and could damage the Company's
relationships with its customers.

Customer Concentration. A relatively limited number of customers have
historically accounted for a substantial portion of the Company's net revenues.
During fiscal 2000, 1999 and 1998, sales to the Company's top ten customers
accounted for approximately 66%, 60% and 45%, respectively, of the Company's net
revenues. The Company expects that sales of its products to a limited number of
customers will continue to account for a high percentage of net revenues for the
foreseeable future. The loss of a major customer or any reduction in orders by
such customers, including reductions due to market or competitive conditions in
the electronics or EDA industries, would have an adverse effect on the Company's
results of operations. Moreover, the Company's ability to increase its sales
will depend in part upon its ability to obtain orders from new customers, as
well as the financial condition and success of its existing customers and the
general economy. There can be no assurance that such increases will occur.

Proprietary Rights. The Company protects its proprietary product information
through the use of employee nondisclosure agreements and by limiting access to
confidential information. The Company presently has 13 United States patents,
that cover various aspects and features of its products, including its overall
system architecture and certain features in the systems hardware for both
simulation and emulation products. These licenses expire between November 22,
2005 and August 15, 2017. The Company also has licensed rights under certain
patent applications relating to VirtualWires from MIT. This license is through
December 2004, and thereafter becomes nonexclusive. MIT may terminate this
license if the Company fails to meet certain minimum net sales milestones or
upon certain other material breaches of the license agreement that remain
uncured after 90 days' notice of such breach. Although the Company may file
additional patent applications in the future, it does not expect to rely
extensively on patents to protect its products. The Company also relies on
certain software which it licenses from third parties, including software which
is integrated with internally developed software and used in the Company's
systems.

From time to time the Company has received, and may receive in the future,
notice of claims of infringement of other parties' proprietary rights. Although
the Company does not believe that its products infringe the proprietary rights
of any third parties, there can be no assurance that infringement or invalidity
claims (or claims for indemnification resulting from infringement claims) will
not be asserted against the Company or that any such assertions will not
materially adversely affect the Company's business, financial condition or
results of operations. On February 9, 2001, the Company filed a patent
infringement complaint against Axis Systems, Inc. (Axis) in the United States
District Court in the District of Delaware that alleges infringement by Axis of
four patents involving the Company's Virtual Wires technology. The Company is
seeking both injunctive relief and monetary damages. On March 22, 2001, Axis
filed a patent infringement complaint against the Company in the United States
District Court for the Northern District of California alleging infringement by
IKOS of Axis's patent for a "Simulation/Emulation System and Method," U.S.
Patent No 6,009,256. Axis is seeking both injunctive relief and monetary
damages. The Company believes the claim is without merit and intends to
vigorously defend the action; however, here can be no assurance that the Company
will prevail in any future litigation. Irrespective of the validity or the
successful assertion of such claims against the Company, the Company could incur
significant costs and diversion of management efforts with respect to the
defense thereof which could have a material adverse effect on the Company'
business, financial condition or results of operations. If any claims or actions
are asserted against the Company, the Company may seek to obtain a license under
a third party's intellectual property rights. There can be no assurance,
however, that under such circumstances, a license would be available under
reasonable terms or at all. Adverse determinations in litigation could result in
the loss of the Company's proprietary rights, subject the Company to significant
liabilities, require the Company to seek licenses from third parties or prevent
the Company from licensing our technology, any of which could have a material
adverse effect on the Company's business, financial condition and operating
results.

Euro Conversion. On January 1, 1999, certain member countries of the European
Union established fixed conversion rates between their existing currencies and
the Euro. The transition period for the introduction of the Euro ends June 30,
2002. Issues facing the Company as a result of the introduction of the Euro
include converting information technology systems, reassessing currency risk,
renegotiating vendor contracts, and processing tax and accounting records. We
are addressing these issues and do not currently expect the Euro to have a
material effect on our financial conditions or results of operations.

California Energy Crisis. The Company relies on a continuous power supply to
conduct operations, and California's current energy crisis could disrupt its
business and/or increase its expenses. California is in the midst of an energy
crisis that could disrupt the Company's operations and increase its expenses. In
the event of an acute power shortage, that is, when power reserves for
California fall below 1.5%, California has on some occasions implemented, and
may in the future continue to implement, rolling blackouts throughout
California. The majority of the Company's operations are located in California
and the Company currently has only limited backup generators for emergency
alternate sources of power in the event of a blackout. If blackouts interrupt
the power supply, the Company would be temporarily unable to continue operations
at its facilities. Any such interruption in its ability to continue operations
at its facilities could delay shipments of products to customers, and could
result in lost revenue, which could harm the Company's business and results of
operations.

Economic Downturn. The current economic downturn in the U.S. could cause a
decline in demand for the Company's products. The recent announcements of
economic slowdown by major companies of which some are customers of the Company
or are major end customers to the


                                       14
<PAGE>   15

Company's current customer base could result in a slowdown in demand for some of
the Company's products. If the Company's customers are not successful in
maintaining high levels of demand for their products, their demand for the
Company's products may decrease and adversely affect the Company's operating
results.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, the Company has financed its operations, including increases in
accounts receivable, inventory and capital equipment acquisitions, primarily
through private and public sales of equity securities and a loan secured by
capital equipment. The Company's cash, cash equivalents and short-term
investments were $21,773,000 at March 31, 2001 up from $19,803,000 at September
30, 2000. The increase was a result of $5,162,000 of cash provided by operating
activities offset by $834,000 of cash used in investing activities (excluding
short-term investment activities) and $623,000 of cash used in financing
activities.

Operating Activities - The Company's operating activities provided cash of
$5,162,000 during the first six months of fiscal 2001. The cash provided by
operations was primarily due to net income adjusted for depreciation,
amortization and accrued rent and a decreases in accounts receivables, combined
with an increases in accounts payables and deferred revenues. These increases in
cash provided by operations were partially offset by increases in inventories,
prepaid expenses and other assets combined with decreases in accrued payroll
expenses, accrued commissions, income taxes payable and other accrued
liabilities.

Investing Activities - Net cash used in investing activities for the first six
months of fiscal 2001 was $834,000. The use of cash was primarily related to the
purchases of short-term investments of $8,922,000 and the acquisition of capital
equipment of $2,569,000, partially offset by the maturities of short-term
investment in the amount of $10,657,000.

Financing Activities - Net cash used in financing activities for the six months
of fiscal, 2001, was $623,000 and was primarily related to the repayment of the
outstanding line of credit in the amount of $1,809,000 partially offset by the
net sales of stock under stock option and purchase plans during the six months.

The Company's primary unused sources of funds at March 31, 2000 consisted of
$15,737,000 of cash and cash equivalents, in addition to $6,036,000 of
short-term investments. The Company renegotiated its working capital line of
credit and currently maintains a $5,000,000 working capital line. Of this total
the Company has approximately $3,500,000 available under the Company's line as
the remainder serves as collateral under two letter of credit arrangements the
Company has outstanding relating to its facilities. The Company believes that
its current cash, cash equivalents, short-term investments and its available
credit facility, together with cash and cash equivalents generated from
operations will be sufficient to finance its operations for at least the next
twelve months. Should the Company require other financing arrangements, there
can be no assurance that such financing will be available, if at all, on terms
favorable or acceptable to the Company.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of March 31, 2001, the Company's investment portfolio consists of money
market funds, corporate-backed debt obligations and mortgaged-backed government
obligations generally due within one year. The Company's primary objective with
its investment portfolio is to invest available cash while preserving principal
and meeting liquidity needs. In accordance with the Company's investment policy,
the Company places investments with high credit quality issuers and limits the
amount of credit exposure to any one issuer. These securities, which approximate


                                    15
<PAGE>   16

$14,765,000 and have an average interest rate of approximately 5.50%, are
subject to interest rate risks. However, based on the investment portfolio
contents and the ability of the Company to hold these investments until
maturity, the Company believes that if a significant change in interest rates
were to occur, it would not have a material effect on the Company's financial
condition, although there can be no assurance of this.

In addition to its cash equivalents and short-term investments, the Company
enters into derivative financial instruments such as forward exchange contracts
to hedge certain identifiable receivables denominated in Japanese yen. Any
market risks associated with these contracts and related underlying transactions
are deemed minimal.


                            PART II OTHER INFORMATION

ITEM 1  LEGAL PROCEEDINGS

    On February 9, 2001, the Company filed a patent infringement complaint
against Axis Systems, Inc. (Axis) in the United States District Court in the
District of Delaware. The complaint alleges infringement by Axis of four patents
involving the Company's Virtual Wires(TM) technology, which allows high resource
utilization in FPGA-based emulators. The Company is seeking both injunctive
relief and monetary damages.

    On March 22, 2001, Axis filed a patent infringement complaint against the
Company in the United States District Court for the Northern District of
California. The complaint alleges infringement by IKOS of Axis's patent for a
"Simulation/Emulation System and Method," U.S. Patent No 6,009,256. Axis claims
that this patent covers technology for a single system that provides simulation,
acceleration, and emulation of complex electronic integrated circuit and
system-on-chip designs. The compliant alleges that certain of the Company's
emulation products infringe on the patent. Axis is seeking both injunctive
relief and monetary damages. The Company believes the claim is without merit and
intends to vigorously defend the action.

ITEMS 2 AND 3      Not applicable

ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The annual meeting of stockholders was held on January 23, 2001.

The stockholders approved a proposal to elect the Board of Directors of the
Company to serve for the ensuing fiscal year. The proposal received the
following votes:

<TABLE>
<CAPTION>

                                 FOR            WITHHELD
                              ---------         --------
<S>                           <C>               <C>
Gerald S. Casilli             7,443,083         346,579
Ramon A. Nunez                7,441,128         348,534
James R. Oyler                7,443,083         346,579
Glenn E. Penisten             7,443,081         346,581
William Stevens               7,442,783         346,879
Jackson Hu                    7,443,993         346,729
</TABLE>

The stockholders approved a proposal to amend the Company's 1996 Employee Stock
Purchase Plan increasing by 400,000 the maximum number of shares of the
Company's common stock that may be issued thereunder. The proposal received the
following votes:

<TABLE>
<CAPTION>
          FOR                    AGAINST               ABSTENTIONS           BROKER NON-VOTES
          ---                    -------               -----------           ----------------
       <S>                       <C>                   <C>                   <C>
       7,275,292                 499,913                  14,457                    0
</TABLE>

                                       16
<PAGE>   17

In addition, stockholders ratified the appointment of Ernst & Young LLP as
independent public accountants of the Company for the fiscal year ending
September 29, 2001. The proposal received the following votes:

<TABLE>
<CAPTION>
          FOR                    AGAINST               ABSTENTIONS           BROKER NON-VOTES
          ---                    -------               -----------           ----------------
       <S>                       <C>                   <C>                   <C>
       7,775,518                  3,550                   10,594                    0
</TABLE>

ITEM 5   NOT APPLICABLE.

ITEM 6   EXHIBITS AND REPORTS ON FORM 8-K


(a) INDEX TO EXHIBITS
                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
   EXHIBIT
   NUMBER    DESCRIPTION
   ------    -----------
   <S>       <C>
      2.1    Agreement and Plan of Reorganization among the Company, VMW
             Acquisition Corporation and VMW dated May 14, 1996 (Incorporated by
             reference to Exhibit 2.1 of the Company's registration statement on
             Form S-3 effective June 26, 1996).
      2.2    Technology Purchase Agreement dated May 12, 1998 by and between the
             Company and Interra, Inc. (Incorporated by reference to Exhibit 2.1
             of the Company's Current Report on Form 8-K filed May 20, 1998).
      3.1    Certificate of Incorporation (Incorporated by reference to Exhibit
             3.1 of the Company's registration statement on Form S-1 effective
             July 25, 1990).
      3.2    Certificate of Amendment of Certificate of Incorporation filed May
             5, 1994 (Incorporated by reference to Exhibit 4.1 of the Company's
             registration statement on Form S-2 effective October 12, 1995).
      3.3    Certificate of Amendment of Certificate of Incorporation filed
             April 24, 1995 (Incorporated by reference to Exhibit 4.2 of the
             Company's registration statement on Form S-2 effective October 12,
             1995).
      3.4    Certificate of Amendment of Certificate of Incorporation filed
             February 3, 1997 (Incorporated by reference to Exhibit 3.4 of the
             Company's quarterly report on Form 10-Q for the quarter ending
             March 29, 1997).
      3.5    By laws (Incorporated by reference to Exhibit 3.2 of the Company's
             registration statement on Form S-1 effective July 25, 1990).
      4.1    Rights agreement dated as of January 27, 1992 between the Company
             and Manufacturers Hanover Trust Company of California, Rights
             Agent. (Incorporated by reference to Exhibit (C)1, in the Company's
             report on Form 8-K filed February 10, 1992).
     10.1    Lease Agreement for the Company's principal facility dated March
             20, 1992, between Ames Avenue Associates and the Company, as
             amended. (Incorporated by reference to Exhibit 10.1 of the
             Company's annual report on 10-K for the year ending September 26,
             1992).
     10.2    Form of Director and Officer Indemnity Agreement. (Incorporated by
             reference to Exhibit 10.6 of the Company's registration statement on
             Form S-1 effective July 25, 1990).
     10.3    1988 Stock Option Plan. (Incorporated by reference to Exhibit 10.14 of
             the Company's registration statement on Form S-1 effective July 25, 1990).
     10.4    Patent Cross License Agreement dated May 17, 1989 with Zycad
             Corporation (Incorporated by reference to Exhibit 10.20 of the
             Company's registration statement on Form S-1 effective July 25,
             1990).
     10.5    International Distributorship Agreement dated April 11, 1988, with C.
             Itoh & Co., Ltd. (Incorporated by reference to Exhibit 10.24 of the
             Company's registration statement on Form S-1 effective July 25, 1990).
             Confidential Treatment has been granted as to certain portions of this
             Exhibit.
</TABLE>

                                       17
<PAGE>   18

<TABLE>
<CAPTION>
   EXHIBIT
   NUMBER    DESCRIPTION
   ------    -----------
   <S>       <C>

     10.6    OEM Software License Agreement between CAD Language Systems, Inc. and
             IKOS Systems, Inc. dated June 22, 1989 and amendment dated September 1991
             (Incorporated by reference to Exhibit 10.18 of the Company's Annual
             Report for the year ended September 28, 1991).
     10.7    Technology Transfer and Joint Development Agreement with
             Racal-Redac, Inc. dated July 1, 1993 (Incorporated by reference to
             Exhibit 10.19 of the Company's quarterly report on Form 10-Q for
             the quarter ended July 3, 1993). Confidential Treatment has been
             granted as to certain portions of this Exhibit.
     10.8    Settlement Agreement and Release dated March 31, 1994 between
             Racal-Redac, Inc. and the Company (Incorporated by reference to
             Exhibit 10.13 of the Company's registration statement on Form S-2
             effective October 12, 1995).
     10.9    Software License Agreement with Compass Design Automation dated
             December 31, 1993 (Incorporated by reference to Exhibit 10.17 of
             the Company's quarterly report on Form 10-Q for the quarter ended
             January 1, 1994).
     10.10   Agreement dated June 2, 1994, by and between the Company and Gerald
             S. Casilli (Incorporated by reference to Exhibit 10.18 of the
             Company's quarterly report on Form 10-Q for the quarter ended July
             2, 1994).
     10.11   Agreement dated June 2, 1994, by and between the Company and Daniel
             R. Hafeman (Incorporated by reference to Exhibit 10.18 of the
             Company's quarterly report on Form 10-Q for the quarter ended July
             2, 1994).
     10.12   Agreement dated June 2, 1994, by and between the Company and
             Stephen McLaughlin. (Incorporated by reference to Exhibit 10.18 of
             the Company's quarterly report on Form 10-Q for the quarter ended
             July 2, 1994).
     10.13   Agreement dated June 2, 1994, by and between the Company and Larry
             A. Melling (Incorporated by reference to Exhibit 10.18 of the
             Company's quarterly report on Form 10-Q for the quarter ended July
             2, 1994).
     10.14   Agreement dated June 2, 1994, by and between the Company and Ramon
             A. Nunez (Incorporated by reference to Exhibit 10.18 of the
             Company's quarterly report on Form 10-Q for the quarter ended July
             2, 1994).
     10.15   Agreement dated June 2, 1994, by and between the Company and Joseph
             W. Rockom (Incorporated by reference to Exhibit 10.18 of the
             Company's quarterly report on Form 10-Q for the quarter ended July
             2, 1994).
     10.16   The Company's 1995 Outside Directors Stock Option Plan
             (Incorporated by reference to Exhibit 10.22 of the Company's
             registration statement on Form S-2 effective October 12, 1995).
     10.17   Development and OEM Agreement for Verilog/IKOS Co-simulation
             Interface dated August 26, 1994 by and between the Company and
             Precedence Incorporated (Incorporated by reference to Exhibit 10.24
             of the Company's registration statement on Form S-2 effective
             October 12, 1995).
     10.18   Amendment to OEM Agreement for the acquisition of certain software
             technology, by and between Compass Design Automation, Inc. and the
             Company dated December 27, 1995 (Incorporated by reference to
             Exhibit 10.20 of the Company's quarterly report on Form 10-Q for
             the quarter ended December 30, 1995).
     10.19   Amended and Restated Employment Agreement dated August 1, 1995 by
             and between the Company and Ramon Nunez (Incorporated by reference
             to Exhibit 10.21 of the Company's quarterly report on Form 10-Q for
             the quarter ended December 30, 1995).
     10.20   Patent License Agreement dated December 22, 1993 between
             Massachusetts Institute of Technology and the Company (Incorporated
             by reference to Exhibit 10.20 of the Company's quarterly report on
             Form 10-Q for the quarter ended June 29, 1996). Confidential
             treatment has be granted as to certain portions of this Exhibit.
</TABLE>

                                       18
<PAGE>   19

<TABLE>
<CAPTION>
   EXHIBIT
   NUMBER    DESCRIPTION
   ------    -----------
   <S>       <C>
     10.21   The Company's 1995 Stock Option Plan, as amended (Incorporated by
             reference to Exhibit 10.21 of the Company's Quarterly Report on
             Form 10-Q for the quarter ended April 4, 1998).
     10.22   The Company's 1996 Employee Stock Purchase Plan, as amended
             (Incorporated by reference to Exhibit 10.22 of the Company's
             Quarterly Report on Form 10-Q for the quarter ended April 4, 1998).
     10.23   The Company's amended and restated Rights Plan by and between the
             Company and Bank of Boston NA dated January 22, 1999 (Incorporated
             by reference to Exhibit 1 of the Company's report on Form 8-A /a
             filed on January 29, 1999.
     10.24   Agreement dated April 11, 1997, by and between the Company and
             Robert Hum (Incorporated by reference to Exhibit 1 of the Company's
             report of Form 8-A as filed on January 29, 1999).
     10.25   Agreement dated February 2, 1999, by and between the Company and
             Thomas N. Gardner (Incorporated by reference to Exhibit 10.25 of
             the Company's quarterly report on Form 10-Q for the quarter ended
             July 3, 1999).
     10.26   Agreement dated February 3, 1999, by and between the Company and
             Nader Fathi (Incorporated by reference to Exhibit 10.26 of the
             Company's quarterly report on Form 10-Q for the quarter ended July
             3, 1999).
     10.27   Revolving Credit and Security Agreement dated as of March 31, 2000 by and
             between IKOS Systems, Inc. and Comerica Bank--California. (Incorporated
             by reference to Exhibit 10.27 of the Company's quarterly report on
             Form 10-Q for the quarter ended July 1, 2000)
     10.28   Lease Agreement for the Company's principal facility dated January
             14, 2000, by and between the Company and Pepper Lane--Great Oaks,
             LLC. (Incorporated by reference to Exhibit 10.28 of the Company's
             Annual Report on Form 10-K for the year ended September 30, 2000)
     10.29   Lease Agreement for the Company's Waltham Research and Development
             facility dated July 28, 2000 by and between the Company and LGP
             Limited Partnership (Incorporated by reference to Exhibit 10.28 of
             the Company's Annual Report on Form 10-K for the year ended
             September 30, 2000).
</TABLE>

(b) REPORTS ON FORM 8-K

        NONE

                                       19
<PAGE>   20

                                   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.

    IKOS SYSTEMS, INC.
                                            Registrant


Date: May 11, 2001                          /s/ Joseph W. Rockom
                                            -----------------------------------
                                            (JOSEPH W. ROCKOM CFO)
                                            Principal Financial Officer,
                                            Duly Authorized Officer




                                       20