U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB


  X           Annual  report  pursuant to Section 13 or 15(d) of the  Securities
-----         Exchange Act of 1934 For the fiscal year ended March 31, 2001

-----         Transition  report  under  Section  13 or 15(d) of the  Securities
              Exchange   Act  of   1934   For   the   transition   period   from
              ________________ to ________________

Commission File No. 0-13836

                          SILICON VALLEY RESEARCH, INC.
        (Exact name of Small Business Issuer as specified in its charter)

California                                            94-2743735
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                        Identification Number)

6293 San Ignacio Avenue  Suite 201
San Jose, CA                                          95119-1231
(Address of principal executive offices)              (Zip Code)

Issuer's telephone number, including area code:       (408) 361-0333

Securities registered under Section 12(b) of the Act: None

Securities registered under Section 12(g)             Common Stock, no par value
of the Act:                                           (Title of Class)


Indicate by check mark whether the issuer: (1) has filed all reports required to
be filed by  Section 13 or 15(d) of the  Exchange  Act during the past 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 by check mark if disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B is not contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant,  based upon the average of bid and asked prices of the  Registrant's
common stock on June 29, 2001 in the over-the-counter  market, was approximately
$3,700,000. Shares of voting stock held by each officer and director and by each
person who on that date owned 5% or more of the  outstanding  voting  stock have
been  excluded  in that  such  persons  may be  deemed  to be  affiliates.  This
determination of affiliate status is not necessarily a conclusive  determination
for other purposes.

As of June 29, 2001, Issuer had 40,730,342 shares of common stock outstanding.

Transitional Small Business Disclosure Format:       ______yes     ___X____no

                      The exhibit index appears on sequentially numbered page 41

<PAGE>

                                     Part I

This  report  includes a number of  forward-looking  statements,  which  reflect
Silicon Valley Research,  Inc.'s current views with respect to future events and
financial performance.  These forward-looking  statements are subject to certain
risks and  uncertainties,  including  those  discussed in Item 6 -  Management's
Discussion and Analysis of Financial Condition and Results of Operations - Other
Factors Affecting Future Results,  and elsewhere in this Form 10-KSB, as well as
other risks and  uncertainties  described in the  Company's  other reports filed
with the Securities and Exchange  Commission  that could cause actual results to
differ materially from historical results or those anticipated.  In this report,
the words "anticipates,"  "believes,"  "expects," "intends," "future," "may" and
similar  expressions  regarding  our intent,  belief,  and current  expectations
identify  forward-looking  statements.  Readers are cautioned not to place undue
reliance on these  forward-looking  statements,  which speak only as of the date
hereof.  We  undertake  no  obligation  to  publicly  release the results of any
revisions  to these  forward-looking  statements  which  may be made to  reflect
events or circumstances  occurring  subsequent to the filing of this Form 10-KSB
with the Securities and Exchange Commission.

Item 1.  Description of Business

General

Silicon Valley Research, Inc. (sometimes referred to as "the Company" or "SVR"),
incorporated in 1979,  develops and markets  physical design software for use by
integrated circuit ("IC") designers,  including those of its subsidiary, Quality
I.C.   Corporation.   Our  software  products  are  used  to  automatically  and
efficiently  arrange and  connect the  individual  components  that  comprise an
integrated  circuit.  While this  process,  commonly  referred  to as "place and
route", is a crucial element of most chip designs, some critical areas require a
more manual approach.  Designers at Quality I.C.  Corporation are skilled in the
production of custom chip components to satisfy  demanding  performance and area
requirements.  By  combining  both  strengths,  our design  project  support and
consulting  services  encompass  nearly all aspects of the  physical  integrated
circuit  design  process.  Our  end-user  customers  include  Hyundai,   Micron,
Motorola,   N.E.C.,  OKI  Semiconductor,   Prominent   Communications,   Samsung
Electronics, Sarnoff, Sony, Texas Instruments, and Yamaha.

Industry Background

Electronics manufacturers face constant pressure to create faster, more complex,
and more reliable IC's. To compete effectively,  electronics  manufacturers must
shorten  product  development  cycles,  or "time to  market"  for new  products.
Electronics  manufacturers  are  also  under  increasing  economic  pressure  to
increase  manufacturing  yield and reduce die size in order to maximize  revenue
from  semiconductor  fabrication  facilities.  As  a  result  of  these  trends,
electronics  manufacturers  will require  electronic design  automation  ("EDA")
software  tools that  improve the quality and  increase  the speed of the design
process to remain competitive.

The  design  cycle for IC's  consists  of a number of steps:  (i)  architectural
specification,  or the  definition of the overall  architecture  of the IC, (ii)
design  (involving  synthesis,   functional  and  timing  verification),   which
describes  the desired  functionality  of the IC,  (iii)  physical  layout,  the
placement and interconnection (routing) of physical components,  and (iv) layout
verification  which  verifies  that the  physical  layout  meets the  functional
specification and manufacturing  constraints (design rules). Recent trends in IC
design suggest that smaller feature sizes are becoming more commonplace, thereby
enabling  higher  frequency  designs.   These  designs  require  tighter  timing
constraints,  smaller die size, and lower power requirements,  while at the same
time maintaining manufacturing yield.

The demands on EDA software  tools have been  compounded as companies  designing
and  manufacturing  IC's are  beginning  to address  the issues  raised by "deep
submicron"  design.  Such design work  involves  feature  sizes of 0.5 micron or
smaller.  At deep submicron  geometries,  interconnect (wire) delay, rather than
gate (transistor)  delay,  increasingly  becomes the factor which determines the
operating  frequency of the IC. Deep submicron  geometries  require designers to
produce  routing with minimal wire lengths and to achieve the smallest  possible
die size to meet high frequency  specifications.  In addition,  minimizing  vias
(interconnections between various metal layers inside the IC) and corners in the
routing of IC's improves manufacturability, thereby increasing overall yield and
reliability.  As IC technology


                                       2

<PAGE>

advances  further into deep submicron  geometries,  the physical  layout task is
becoming increasingly difficult to complete within design  specifications.  As a
result,  place and route  tools  such as those  offered  by us are  required  to
address these complex layout issues.

SVR Products

We offer a line of products for IC physical  design.  All of our products run on
Unix workstations from Sun  Microsystems,  Inc. and Hewlett Packard Company,  as
well as on the Linux  operating  system.  All of our products  support  industry
standards such as Motif, X-Windows,  GDSII Stream format, EDIF, Verilog, LEF and
DEF. In  addition,  we have ported two of our  products,  QIC/APR and GARDS,  to
operate on the Red Hat  version  of the Linux  operating  system  running on X86
workstations.  We offer  interfaces  to Mentor  Graphics  Falcon  Framework  and
Synopsys,  Inc.'s  synthesis  tools and Cadence's  physical  design  tools.  Our
products have a similar technology foundation and are modular in nature. Each of
the  products  offered by us is sold in a range of  configurations  based on the
size and  complexity  of the design to be  developed  with the SVR  product.  In
addition,  we offer a set of design project support services encompassing the IC
development process including complete IC design engineering services, VLSI mask
design and chip assembly  capability,  and CAD/EDA tool application  methodology
consulting services. The following summarizes our product families:

SVR QIC/APR: SVR QIC/APR is our latest product offering. QIC/APR is the combined
offering of DCP,  QICPlace and QICRoute.  QIC/APR  offers all of the features of
the combined products in one comprehensive and affordable package.

SVR DCP: SVR Design  Cockpit  Platform is a  next-generation  framework for tool
integration.  SVR DCP combines an  extensible  database  with a modular  plug-in
architecture  to provide a generic engine for VLSI design  automation.  Database
viewers,  file format support, and complete interfaces to external tools such as
QICPlace and QICRoute are specified as plug-ins.  SVR DCP is controlled  through
an elegant graphical user interface which gives it advanced editing capabilities
suitable for floorplanning,  full-custom  layout,  placement  modification,  and
route editing. Customers may use SVR DCP's standard scripting language, Perl, to
modify and customize the tool to the needs of their design flow.

SVR  QICPlace:  SVR  QICPlace is a  stand-alone  placement  engine  based on the
powerful  placement  subsystem of SVR GARDS.  It uses its  timing-driven  MinCut
algorithm  to  produce  high-density   results.  SVR  QICPlace  provides  design
flexibility by  transparently  supporting  non-rectangular  placement  areas and
cells.  For designs with  sensitive  timing  budgets,  SVR  QICPlace's  accurate
clock-tree  synthesis  minimizes the skew of critical paths.  SVR QICPlace plugs
seamlessly into SVR DCP for complete interactive control.

SVR QICRoute:  SVR QICRoute is our next-generation  routing solution,  combining
the proven speed and efficiency of SVR GARDS routing subsystem with powerful new
features for deep  submicron  design.  SVR  QICRoute's  pin-pair  routing  gives
designers precise control over timing-critical  nets. Timing violations can also
be  automatically  eliminated using SVR QICRoute's  MeetSkew routing  algorithm.
Although the line-probe  routing algorithm  consistently  delivers  high-quality
routing  results,  SVR  QICRoute  can  optionally  be guided  by  global-routing
information.  Like SVR QICPlace, SVR QICRoute is tightly integrated with SVR DCP
through a sophisticated plug-in interface.

SVR GARDS:  We believe that SVR GARDS,  using our line probe routing  algorithm,
provides the fastest  turnaround time for an area-based place and route software
tool in the EDA industry.  In addition,  SVR GARDS provides high quality routing
results with a minimum of vias, line segments,  and total  interconnecting  wire
length.  The  product  handles up to a million  gates and has been  extended  to
handle  n  layers  of  interconnect.  The  interactive  timing-driven  placement
subsystem  enables  designers to improve  their  placement  to handle  issues of
congestion,  timing or net length. The timing-driven routing capabilities of the
product allow  designers to specify  timing  constraints  on all nets and on all
critical paths without  affecting run times. SVR GARDS has a built-in  simulator
for timing  analysis  and a clock tree  synthesis  module that  minimizes  clock
delay.  SVR GARDS includes a procedural  language  interface which allows system
designers to interface  the tool to  virtually  any design flow.  The line probe
routing  algorithms  enable  the  product to perform  incremental  ECOs  rapidly
without  disturbing  the  structure of the routed  design  outside the region of
interest.


                                       3

<PAGE>

SVR SC: SVR SC is a  channel-based  router for the automatic  place and route of
standard  cell-based  IC's.  SVR SC provides two to four layer routing for fixed
and variable height and width standard  cells.  Routing over cells and blocks is
supported on all layers. SVR SC provides efficient floorplanning, placement, and
routing of standard  cells,  macro  blocks,  and mixed  block and cell  designs.
Advanced features such as row flipping and power rail sharing allow designers to
create  designs with fewer  channels  and thus  reduced die size.  Timing-driven
placement and routing  capabilities  are  integrated  into the product to assist
designers  in  the  creation  of  designs  which  function  according  to  their
specification.

SVR  FloorPlacer:  SVR  FloorPlacer  is an  interactive  floorplanning  software
product for designers of embedded  arrays,  gate arrays,  and structured  custom
blocks. By integrating our area-based routing technology,  SVR FloorPlacer helps
designers  obtain  an  accurate   assessment  of  timing   characteristics   and
routability  of their  designs  early in the  design  process.  SVR  FloorPlacer
reduces time to market by eliminating  costly  iterations  between synthesis and
layout.  The software  products provide  interfaces and links which allow direct
back  annotation  of delays from SVR  FloorPlacer  products  into  synthesis and
simulation.  The graphical user interface  provides improved usability and gives
the user  interactive  control over the floorplan while providing  comprehensive
graphical analysis and feedback.  This interface helps users improve routability
and the timing attributes of their designs.

IC Design and Consulting  Services:  We provide a set of design project  support
services  focused  mainly on the physical  design  portion of the IC development
process  including  complete  physical design  engineering  services,  VLSI mask
design and chip assembly  capability,  and CAD/EDA tool application  methodology
consulting  services.  Design capabilities  include standard cell library layout
and verification,  hierarchical chip floorplanning,  full custom  internal-block
layout,  standard-cell-block  place-and-route implementation and top-level place
and route chip  assembly.  As an integrated  EDA tool supplier and IC design and
layout  organization,  we also  provide  consulting  in the areas of  high-level
design   methodology,   EDA  tool   application  and   integration,   customized
environments and need-specific tool enhancements.

Marketing and Sales

During  the 2001  fiscal  year,  we changed  our sales  model to offer our tools
through  e*ECAD's Web service on a  pay-per-use  basis.  E*ECAD is the first Web
service to offer engineers featured EDA tools hosted on their worldwide Internet
portal that delivers the tools on a pay-per-use basis. Users can access e*ECAD's
broad variety of software and download  selected tools to their  computers.  Our
customers download,  install and run the tools they need and are charged for the
actual usage time, which can be billed in .01 second increments. The new pricing
structure enables us to offer flexible pricing solutions to worldwide  customers
who demand an alternative to the high licensing fees of traditional front-loaded
licensing  models.  In addition to the new  Internet  model,  we continue to use
traditional  lines of distribution for our products.  We have domestic sales and
support offices in metropolitan areas of California and Texas.

We market our products  both  domestically  and  internationally  to  integrated
circuit designers and manufacturers, large electronic systems manufacturers, and
major aerospace,  automotive,  and consumer electronics companies.  Consolidated
revenue from our major customers consists of the following:

                                                            Year Ended March 31,

     Customer                                               2001            2000
     --------                                               ----            ----

     Cicada Semiconductor                                    14%             *
     Cirrus Logic                                            18%             *
     Mediamatics                                             11%             *
     Motorola, Inc.                                          24%             16%


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<PAGE>

     SigmaTel                                                18%             13%
     The Shearwater Group                                    *               12%

     *less than 10% of consolidated revenue

In addition to the Internet model  described  above,  we license our software to
customers  (except in Japan,  where the Company sells its software to customers)
under  agreements that provide for a fully paid up license fee or sales price to
use the  product  in  perpetuity  on a  specified  computer.  License  fees  for
individual  products range from  approximately  $25,000 for the least  expensive
software to approximately $200,000 for the most complex software product.

We provide software maintenance agreements, typically for a one year term, for a
fee,   which  includes   technical   support  and  services  such  as  telephone
consultation  regarding the use of the products,  problem resolution and product
enhancements.

Product Development

The EDA market is characterized by rapid technological advances in both computer
hardware and software. We believe that the continued development of new products
and enhanced  features is critical to our success.  In fiscal 2000 and 2001,  we
spent approximately  $1,070,000 and $835,000,  or as a percentage of revenue 52%
and 71%, respectively, on engineering,  research and development.  These amounts
are  net  of  costs  capitalized  in  accordance  with  Statement  of  Financial
Accounting Standard No. 86, "Accounting for the Costs of Computer Software to be
Sold,  Leased,  or  Otherwise  Marketed"  (See  Note 1 of Notes to  Consolidated
Financial Statements).

Licensing Technology

We  previously  completed  the  integration  and  testing  of a new  high  speed
automatic  placement   technology  resulting  in  improved  design  quality  and
turnaround  time, as well as a smaller design die size, for our SC(TM) family of
products.  The new placement  technology named TeraCell(TM) was developed by CLK
Computer-Aided  Design, Inc. We licensed the TeraCell(TM)  placement technology,
which was offered as an option to  existing  SVR  installations  and began being
offered with new product sales starting in June, 1997. CLK Computer-Aided Design
was acquired by Mentor  Graphics in November 1998. Our license to distribute the
TeraCell(TM)  placement  technology  expired in April 2000. We do not anticipate
any negative effect on revenues as a result of the expiration of the agreement.

Manufacturing

Our software production  operations consist of configuring the existing software
product  with the proper  customer  specifications,  producing  user manuals and
other  documentation  and  shipping  the  product to the  customer  by making it
available for download  from the Company's ftp server.  Software is delivered to
customers  electronically  over the Internet.  Many of our customers order on an
as-needed  basis and often delay  delivery of firm  purchase  orders until their
project commencement dates are determined,  and, as a result, we operate with no
significant backlog. We are not dependent on seasonal fluctuations.


Competition

The EDA software market in which we compete is intensely competitive and subject
to rapid  technological  change. We currently face competition from EDA vendors,
including Cadence, which currently holds the dominant share of the market for IC
physical  design  software,   Avant!  and  Synopsys.   These  EDA  vendors  have
significantly greater financial, technical and marketing resources, greater name
recognition and a larger installed customer base than ours. These companies also
have established  relationships with current and potential customers of ours and
can  devote  substantial   resources  aimed  at  preventing  us  from  enhancing
relationships  with  existing  customers  or  establishing   relationships  with
potential  customers.  We believe that  competitive  factors in the EDA software
market include product performance,


                                       5

<PAGE>

price,  support of industry standards,  ease of use, delivery schedule,  product
enhancement, and customer technical support and service.

Competition from other EDA companies that choose to enter the IC physical design
market could  present  particularly  formidable  competition  due to their large
installed  customer  base and their  ability to offer a complete  integrated  IC
design solution,  which we do not offer. We expect  additional  competition from
other  established  and emerging  companies.  In addition,  the EDA industry has
become increasingly  concentrated in recent years as a result of consolidations,
acquisitions  and  strategic  alliances.  Accordingly,  it is possible  that new
competitors  or alliances  among  competitors  could emerge and rapidly  acquire
significant  market  share.  There can be no  assurance  that we will be able to
compete  successfully against current and future competitors or that competitive
pressures  faced by us will not have a material  adverse effect on its business,
operating results and financial condition.

Proprietary Rights

We rely on contract,  trade secret and copyright law to protect our  technology.
There can be no  assurance  that others will not develop  technologies  that are
similar or superior to our technology or duplicate our technology.  We generally
enter  into   confidentiality   or  license   agreements   with  our  employees,
distributors  and  customers,  and  limit  access  to  and  distribution  of our
software,   documentation  and  other  proprietary  information.  Despite  these
precautions,  it may be possible for a third party to copy or  otherwise  obtain
and use our products or technology without authorization,  or to develop similar
technology independently.  In addition, effective copyright and trade protection
may be unavailable or limited in certain foreign countries.

There has been  substantial  industry  litigation  regarding  patents  and other
intellectual  property rights  involving  technology  companies.  In the future,
litigation  may be  necessary to protect and enforce our  intellectual  property
rights, to defend us against claimed infringement of the rights of others and to
determine the scope and validity of the proprietary  rights of others.  Any such
litigation could be costly and could divert management's attention,  which could
have a  material  adverse  effect on our  business,  results  of  operations  or
financial  condition  regardless of the outcome of the litigation.  In addition,
third parties  making claims  against us with respect to  intellectual  property
infringement  may be able to obtain  injunctive or other  equitable  relief that
could  effectively  block our ability to sell our products in the United  States
and abroad, and could result in an award of substantial damages. In the event of
a claim of  infringement,  we and our customers may be required to obtain one or
more  licenses  from third  parties.  There can be no  assurance  that we or our
customers  could obtain  necessary  licenses  from third parties at a reasonable
cost or at all.

Employees

As of March 31,  2001,  we  employed  22  full-time  employees,  18  engaged  in
engineering,  product  development,  and IC design  services  and the  remainder
engaged in  administrative  activities.  The 22  employees  were  located in the
United States. Our success will depend, in large part, on our ability to attract
and retain  trained and qualified  personnel who are in great demand  throughout
the industry. None of our employees is represented by a labor union.

Our development, management of growth and other activities depend on the efforts
of key management  and technical  employees.  Competition  for such personnel is
intense. We use incentives,  including competitive compensation and stock option
plans,  to  attract  and  retain  well-qualified  employees.  There  can  be  no
assurance,  however,  that we will continue to attract and retain personnel with
the requisite  capabilities  and experience.  The loss of one or more of our key
management or technical personnel also could materially and adversely affect us.
We generally do not have employment agreements with our key management personnel
or technical employees.

Item 2.  Description of Property

Our principal administrative, marketing, engineering development and support and
I.C. design functions occupy two facilities. One facility occupies approximately
2,000  square feet in an office  building in San Jose,  California  under a four
year lease expiring on March 31, 2005. The other  occupies  approximately  5,300
square feet in an office  building in Austin,  Texas under a lease expiring June
30, 2004.

Management believes that our facilities will be adequate for our operations.


                                       6

<PAGE>

Item 3.  Legal Proceedings

As with other  companies in our industry,  we are subject to the risk of adverse
claims  and  litigation  on a variety  of  matters,  including  infringement  of
intellectual  property,   intentional  and/or  negligent   misrepresentation  of
material facts and breach of fiduciary duties.

In March 2001, we sued a customer to recover approximately  $220,000 for amounts
unpaid for a license sale. The customer has  counterclaimed the following causes
of   action:   breach  of   contract,   breach  of   warranty,   and   negligent
misrepresentation.  We believe that the  counterclaim  is without merit.  We are
vigorously  pursuing  our cause of action,  the  outcome  of which is  currently
unknown. The parties are currently engaged in discovery.

Item 4.  Submission of Matters to a Vote of Security Holders

No matters were  submitted to a vote of the security  holders  during our fourth
quarter.


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<PAGE>

                                     Part II

Item 5.  Market for Common Equity and Related Stockholder Matters

Our common stock was traded on the Nasdaq  National  Market until  November 1998
and is currently traded on the OTC Bulletin Board (the "OTCBB") under the symbol
SVRI. The following table sets forth, for the fiscal period  indicated,  the low
and high closing sales prices for the common stock as reported by Nasdaq and the
OTCBB. We had approximately  393 shareholders of record and approximately  5,426
beneficial holders as of March 31, 2001.

Common Stock Prices

Fiscal 2000 Quarter ended       June 30      Sept. 30     Dec. 31      March 31
                                -------      --------     -------      --------
         High                     $0.19         $0.15       $1.28         $1.19
         Low                      $0.10         $0.13       $0.12         $0.48

Fiscal 2001 Quarter ended       June 30      Sept. 30     Dec. 31      March 31
                                -------      --------     -------      --------
         High                     $0.69         $0.65       $0.46         $0.22
         Low                      $0.19         $0.16       $0.13         $0.14

The prices set forth above reflect inter-dealer prices,  without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.

We have not  declared or paid  dividends  on our common stock in fiscal 2000 and
2001.  Certain  covenants  in  our  loan  agreements  restrict  the  payment  of
dividends.  We currently  anticipate that we will retain all future earnings for
use in the operation and expansion of our business and do not anticipate  paying
any cash dividends in the foreseeable future.


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<PAGE>

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
of Operations (in thousands)

This Management's  Discussion and Analysis of Financial Condition and Results of
Operations  includes a number of  forward-looking  statements  which reflect our
current  views  with  respect  to  future  events  and  financial   performance,
including,  for  example,  statements  concerning  releases of new  products and
enhancements,  expected revenue growth,  continuation of expense  reductions and
international  sales.  These  forward-looking  statements are subject to certain
risks  and  uncertainties,  including  those  discussed  in  the  Other  Factors
Affecting  Future  Results  section of this Item 6 and  elsewhere in this Annual
Report on Form 10-KSB, as well as other risks and uncertainties described in our
other  reports filed with the  Securities  and Exchange  Commission,  that could
cause  actual  results to differ  materially  from  historical  results or those
anticipated.  In this report,  the words  "anticipates"  "believes,"  "expects,"
"intends,"  "future,"  "may" and similar  expressions  identify  forward-looking
statements.  Readers  are  cautioned  not  to  place  undue  reliance  on  these
forward-looking statements, which speak only as of the date hereof. We undertake
no  obligation  to  publicly  release  the  results  of any  revisions  to these
forward-looking  statements which may be made to reflect events or circumstances
occurring  subsequent to the filing of this Form 10-KSB with the  Securities and
Exchange Commission.

The following  discussion  should be read in conjunction  with the  Consolidated
Financial Statements and Notes thereto. Dollar amounts are in thousands.

Revenue

Total revenue decreased from $2,065 in fiscal 2000 to $1,182 in fiscal 2001. The
decrease  in  revenues  in fiscal  2001  resulted  primarily  from a decrease in
license  revenue  beginning in the second quarter of fiscal 2001 due to a change
in our sales  strategy.  During our second  fiscal  quarter,  we  completed  the
implementation of our internet software delivery system ahead of schedule. Since
the new time-based  internet  licensing model would represent a substantial cost
savings to the individual customer,  we felt compelled to give our customers the
option to wait  until the  internet  licensing  option was  available.  Only one
customer elected to purchase a permanent  license,  while over a dozen customers
and potential customers elected to join the backlog of sales and potential sales
waiting for the release of the time-based internet licensing model. The relative
lack of license sales during the last three quarters of the fiscal year reflects
the transition  from a quarterly  sales cycle to a  pay-by-the-hour  model while
maintaining customer relations by not intentionally selling a substantial amount
of  inventory  prior  to  a  large  price  reduction   represented  in  the  new
pay-as-you-go  model.  We released our Gards  product  on-line late in the third
quarter in December 2000. Our SC product was released after the end of the third
quarter in January 2001. We released our Linux version of Gards after the end of
the fiscal year in June 2001. International sales were approximately $93 and $38
for fiscal 2000 and 2001, respectively,  representing 5% and 3% of total revenue
for the respective periods. This decrease resulted primarily from closure of our
Japan and Taiwan  offices.  Our plans for fiscal 2002 include an aggressive  new
product plan, including new releases of significant enhancements for each of our
primary products,  as well as plans to increase  international  sales.  However,
there can be no  assurance  that these new  products  and  enhancements  will be
released on a timely basis, if at all, or will gain market acceptance.  With the
acquisition of QIC, we have front-end technology which improves the flow of data
into our product  tools and improves  the  resulting  performance.  We intend to
focus  increasingly  on the services  market  going  forward in order to provide
customers with a service-driven  integrated circuit design solution.  See "Other
Factors Affecting Future Results-New  Products and Rapid  Technological  Change;
Risk of Product Defects".

In fiscal 2000 and 2001  maintenance and services revenue was $1,222 and $1,137,
respectively.  Services revenue as a percentage of total revenue was 59% and 96%
for fiscal 2000 and 2001, respectively. The decline in maintenance fees included
in  services  revenue  in  fiscal  2001 was due to a  reduction  in  maintenance
renewals.

If revenue levels are below  expectations,  operating results will be materially
and  adversely  affected.  In addition,  our  quarterly  and annual  results may
fluctuate as a result of many factors, including the size and timing of software
license  fees,  timing of  co-development  projects  with  customers,  timing of
operating  expenditures,  increased  competition,  new product announcements and
releases by us and our  competitors,  gain or loss of  significant  customers or
distributors,  expense levels, renewal of maintenance contracts, pricing changes
by us or our competitors, personnel changes, foreign currency exchange rates and
economic conditions generally and in the electronics industry specifically.


                                       9

<PAGE>

Our expense levels are based, in part, on its  expectations as to future revenue
levels, which are difficult to predict.

Cost of revenue

For fiscal 2000 and 2001, cost of licenses was $306 and $217, respectively. Cost
of licenses as a percentage of licenses revenue was 36% and 482% for fiscal 2000
and 2001, respectively.  Cost of licenses consists primarily of the amortization
of capitalized software development costs and is not a function of revenue.

For fiscal 2000 and 2001, cost of maintenance  and services  decreased from $782
to $730,  respectively.  Cost of  maintenance  and services as a  percentage  of
maintenance  and  services  revenue  was 64% and 64% for  fiscal  2000 and 2001,
respectively.  Cost of maintenance and services  primarily  includes the cost of
providing  design  services.  In addition,  a small  percentage of costs are for
technical support and technical documentation.

Engineering, Research and Development Expenses

Engineering,  research  and  development  expenses for fiscal 2000 and 2001 were
$1,070  and $835,  respectively.  The  decrease  in  engineering,  research  and
development expenses in fiscal 2001 was due to cost-cutting  measures instituted
by management, including a reduction in personnel, while maintaining an emphasis
on new  product  research  and  development.  We believe  we have the  personnel
necessary to complete our planned product upgrades and releases during 2002.

Selling and Marketing Expenses

Selling  and  marketing  expenses  for fiscal  2000 and 2001 were $381 and $578,
respectively. The increase in fiscal 2001 resulted from a write-off of bad debts
in the second quarter.

General and Administrative Expenses

General and administrative expenses for fiscal 2000 and 2001 were $521 and $745,
respectively.  General and  administrative  expenses  have  increased  due to an
increase in professional fees,  including accounting fees to comply with new SEC
regulations, legal fees and investor relations.

Other Income (Expense)

Other  income   (expense)  for  fiscal  2000  and  2001  was  $203  and  $(147),
respectively. Other income in fiscal 2000 includes the following one-time items:
$142 gain recognized on the cancellation of indebtedness,  $150 foreign currency
translation  gain  recognized upon the closure of foreign  subsidiaries  and $41
loss  recognized  on the sale of fixed  assets.  Other expense for 2000 and 2001
includes  interest expense on a subordinated  debt/warrant  financing of $73 and
$124, respectively.

Provision for Income Taxes

The  provision  for  income  taxes  for  fiscal  2000  and  2001  was $0 and $0,
respectively.

As of March 31, 2001, we had federal and state net operating loss  carryforwards
of  approximately  $36,600  and  $8,700,  respectively.  We also had federal and
California  research and development tax credit  carryforwards  of approximately
$727 and $513,  respectively.  The net operating  loss and credit  carryforwards
will expire at various  dates from 2001 through  2020, if not utilized (see Note
10 of Notes to Consolidated Financial Statements).

Liquidity and Capital Resources

Since inception,  we have financed our operations  primarily through private and
public sales of equity  securities and to a lesser  extent,  cash generated from
operations.  In  fiscal  2000 and 2001,  we  received


                                       10

<PAGE>

cash of $1,223 and $662,  respectively,  from private placements of common stock
and warrants and the exercise of warrants and options to purchase common stock.

Although we reported  net income for the first  fiscal  quarter,  we incurred an
operating  loss for the  entire  fiscal  2001.  At  March  31,  2001,  we had an
accumulated  deficit of $46,464.  The achievement of  profitability is primarily
dependent  upon the  continued  development  and  commercial  acceptance  of our
products,  the successful  management of the business,  management's  ability to
strategically  focus the  Company.  There can be no  assurance  that  profitable
operations will occur. In addition,  we are experiencing negative cash flow from
operations and it is expected that we will continue to experience  negative cash
flow for a portion of fiscal 2002 and potentially thereafter.

Our operating activities used cash of $1,225 and $1,327 in fiscal 2000 and 2001,
respectively.

Investment  activities,  primarily  comprising  capitalized software development
costs,  acquired fixed assets and purchased software  licenses,  were $(153) and
$(195) for fiscal 2000 and 2001, respectively.

Our primary unused sources of funds at March 31, 2001 consisted of cash and cash
equivalents of $103.

Our operations have required  substantial cash in the past; for example,  $1,327
during fiscal 2001 and $1,225 in 2000.

On March  26,  2001,  we issued a  Warrant  Reduction  Offer  (the  "Offer")  to
investors who held warrants to purchase shares of our Common Stock  ("Warrants")
at an exercise price of $0.53 per share (the "$0.53 Warrants"). Under the Offer,
such  investors  were able to exercise the $0.53  Warrants at a reduced price of
either  $0.13 per share or $0.115  per share.  Investors  who  exercised  at the
$0.115 price were  prohibited from selling the shares acquired from the exercise
for 60 days  commencing  from the exercise date.  Investors who exercised at the
$0.13 price had no restrictions on the sale of the underlying  shares. The Offer
expired on Friday,  April 6, 2001.  2,414  Warrants were exercised at $0.115 per
share  and 135  Warrants  were  exercised  at $0.13  per  share,  raising  $295.
Affiliates of a Company  director and one 10%  shareholder  participated  in the
Offer.

In January 2001, we entered into an Agreement  with our bank for the purchase of
our receivables.  The agreement  provides that the bank will purchase up to $250
of our domestic accounts  receivable.  The bank will advance us 80% of qualified
receivables.  In the event that our customers do not pay on the invoices  within
90 days of invoice date, we may be required to return the amount advanced to the
bank. It is also possible  that we could  require  additional  financing to fund
future operations.

On October  13,  2000,  we issued a Warrant  Reduction  Offer (the  "Offer")  to
investors who held warrants to purchase shares of our Common Stock  ("Warrants")
at an exercise price of $0.37 per share (the "$0.37 Warrants"). Under the Offer,
such  investors  were able to exercise the $0.37  Warrants at a reduced price of
either  $0.175 per share or $0.155 per share.  Investors  who  exercised  at the
$0.155 price were  prohibited from selling the shares acquired from the exercise
for 60 days  commencing  from the exercise date.  Investors who exercised at the
$0.175 price had no restrictions on the sale of the underlying shares. The Offer
expired on Friday, October 20, 2000. 1,341 Warrants were exercised at $0.155 per
share and 249 Warrants were  exercised at $0.175 per share,  raising  $251.  One
officer/director  of the Company,  affiliates of a Company  director and one 10%
shareholder participated in the Offer.

We believe that cash and cash generated from  operations  will not be sufficient
to finance  operations  through fiscal 2002.  Management is exploring  financing
alternatives  to supplement our cash position.  Potential  sources of additional
financing include private equity  financings,  mergers,  strategic  investments,
strategic partnerships or various forms of debt financings.  However, our Common
Stock was delisted from trading on the Nasdaq  National  Market in November 1998
and now trades in the over-the-counter  market. Our ability to obtain additional
financing  through the  issuance of our Common Stock or  securities  convertible
into Common  Stock could be  adversely  affected.  See  "Delisting  from Nasdaq;
Disclosure Relating to Low-Priced Stock".

We may issue a series of Preferred Stock with rights, preferences, or privileges
senior to those of the Common Stock.  We have no commitments or  arrangements to
obtain  any  additional  funding  and there is no  assurance  that the amount of
capital  required will be available on  acceptable  terms,  if at all.  However,
because our Common Stock was delisted from trading on the NASDAQ national market
in November,


                                       11

<PAGE>

1998, and now trades in the over-the-counter  market, our ability to sell Common
Stock or securities convertible into Common Stock may be adversely affected. See
"Delisting  From  NASDAQ;  Disclosure  Relating to  Low-Priced  Stock" below for
possible effect of current common stock trading on future issuances.

The  unavailability  or  timing  of any  financing  could  prevent  or delay our
continued  development and marketing of our products and services.  In addition,
substantial  curtailment of our operations may be required which could result in
bankruptcy.

Other Factors Affecting Future Results

Recent and  Expected  Losses;  Accumulated  Deficit.  We  incurred a net loss of
$2,085  for the year  ended  March 31,  2001 and had an  accumulated  deficit of
$46,464 as of March 31, 2001. We may incur future losses.  There is no assurance
that we will generate  positive cash flow from our operations to fund our growth
or that we will sustain  profitability  in any future  period.  To the extent we
incur losses or grow in the future,  our operating and investing  activities may
use cash and,  consequently,  such  losses or growth  will  require us to obtain
additional sources of financing in the future.

Need for Future Financing.  As described above, under Management  Discussion and
Analysis-Liquidity  and Capital  Resources,  we believe cash and cash  generated
from operations may not be sufficient to finance operations through fiscal 2002.
Management is exploring  financing  alternatives to supplement our cash position
to service our current debt and any negative  cash flow from  operations.  There
can be no  assurance  that we will be able to raise such  financing  or that any
such financing we are able to conduct will be on attractive terms.

Going  Concern   Assumptions.   Our  independent   accountants'  report  on  our
consolidated  financial  statements as of and for the years ended March 31, 2000
and 2001  contained an  explanatory  paragraph  indicating  that our  historical
operating losses and limited capital resources raise substantial doubt about our
ability to continue as a going concern.  If we are unable to generate sufficient
cash from operations or if necessary,  raise  sufficient funds to cover the cost
of operations,  it is likely that any independent  accountant's report on future
financial statements will include a similar explanatory paragraph.

Change in Business  Model.  During the second quarter of fiscal 2001, we changed
our sales strategy to a time-based  internet  licensing  model.  We released our
Gards product on-line late in the third quarter in December 2000. Our SC product
was released after the end of the third quarter in January 2001. We released our
Linux version of Gards after the end of the fiscal year in June 2001.  There can
be no  assurance  that this new  time-based  internet  licensing  model  will be
successful.  We entered into an agreement with The Shearwater  Group in November
1999 that provided that The  Shearwater  Group would be the exclusive  worldwide
distributor  for all of our  products  for a minimum  term of one year.  We have
elected to not extend the exclusive  contract with the Shearwater  Group,  which
expired November 10, 2000.

Dependence  on Certain  Customers.  A small  number of  customers  account for a
significant  percentage  of our total  revenue.  There can be no assurance  that
sales to  these  entities,  individually  or as a group,  will  reach or  exceed
historical levels in any future period. Any substantial decrease in sales to one
or more of these customers could have a material adverse effect on our business,
operating results or financial condition.

New  Products  and Rapid  Technological  Change;  Risk of Product  Defects.  The
Electronic Design Automation ("EDA") industry is characterized by the following:

o        extremely rapid technological change
o        frequent new product introductions and enhancements
o        evolving industry standards
o        rapidly changing customer requirements

The development of more complex  integrated  circuits with new technologies will
require more  sophisticated  design tools. The success of our future  operations
partly depends upon our ability to enhance  current  products and to develop and
introduce new products on a timely and  cost-effective


                                       12

<PAGE>

basis. Our products and services must keep pace with technological  developments
and  evolving  industry  standards  and  methodologies,  as well as address  the
increasingly  sophisticated needs of our customers.  During fiscal 2002, we will
have an aggressive new product release and current product update program,  upon
which expected revenue increases are partially based. It is possible that in the
future,  we  may  experience  delays  in new  product  development  and  product
enhancements.  We have experienced similar delays in the past. Such delays would
likely  decrease  expected  fiscal 2002 revenues,  which could cause us to incur
losses and utilize our available cash or even run out of cash.

In fiscal  2001,  we announced  new products  offered on the e*ECAD Web service.
However, there is no guarantee that:

o        these new products will gain market acceptance
o        we will be successful in developing and marketing product enhancements
o        we will be successful in developing  other new products that respond to
         technological change, evolving industry standards and changing customer
         requirements
o        we will not  experience  difficulties  that could  delay or prevent the
         successful development, introduction and marketing of these products or
         product enhancements
o        new  products  and  product   enhancements  will  adequately  meet  the
         requirements of the  marketplace and achieve any significant  degree of
         market acceptance

All of our present products  operate in the Unix and/or Linux operating  systems
and we intend for all future products to operate in the Unix and Linux operating
systems. In the event that another operating system, such as Windows NT, were to
achieve broad  acceptance in the EDA industry,  we would be required to port our
products.  This  would be costly  and time  consuming  and could have a material
adverse effect on our business,  operating results or financial condition. If we
fail to develop and introduce new products and product  enhancements in a timely
and  cost-effective  manner,  for technological or other reasons,  it could also
have  material  and  adverse  effects on our  business,  operating  results  and
financial  condition.  Introducing or even  announcing new products by us or our
competitors,  including  new  technologies  or changes in industry  standards or
customer  requirements,  could  render  some  or all of  our  existing  products
obsolete or  unmarketable.  Furthermore,  customers might defer purchases due to
the  introduction  or  announcement,  which  would also have a material  adverse
effect on our business, operating results or financial condition.

Complex software  products,  such as those we offer, can contain defects or even
fail when introduced or released.  We have, in the past,  discovered  defects in
certain of our products.  We may experience delays or lost revenue in connection
with repairs and corrections of defects found in the future. Although to date we
have not  experienced  material  adverse effects  resulting from defects,  it is
possible in the future that despite testing,  errors will go undiscovered in new
products or releases  until after  shipment.  These errors may result in loss of
market share or failure to achieve market acceptance.  If this were to occur, it
could have a material  adverse  effect upon our business,  operating  results or
financial condition.

Delisting From NASDAQ; Disclosure Relating to Low-Priced Stock. Our common stock
was delisted from trading on the NASDAQ  National  Market November 16, 1998. Our
common stock  immediately  began trading on the OTC Bulletin Board. As a result,
our ability to obtain additional  financing through the issuance of common stock
or securities convertible into common stock may be adversely affected. Investors
might find that disposing of our common stock is more difficult than is has been
in the past.  The trading price of our common stock is currently less than $5.00
per share.  Because the common  stock falls into the  category  defined as penny
stock,  trading  in the common  stock is  currently  subject  to  certain  rules
promulgated  under the Exchange  Act,  which  require  additional  disclosure by
broker-dealers.  These rules  require us, in advance of trading,  to provide you
with disclosure  schedules,  which explain the penny stock market and associated
risks.  The rules impose various sales practice  requirements on  broker-dealers
who  sell  penny  stock.   Broker-dealers   engaging  in  some  types  of  these
transactions  must make a special  suitability  determination  and  obtain  your
written  consent  prior  to  sale.   This   additional   burden  may  discourage
broker-dealers from actively  effectuating  common stock transactions,  which in
turn could have the adverse effect of severely limiting the marketability of our
common  stock.   Therefore,   the  ability  of  Silicon  Valley  Research,  Inc.
shareholders  to resell  their  stock  would be  limited.  In turn,  this  could
adversely effect our ability to obtain future equity financing.


                                       13

<PAGE>

Possible  Volatility  of Stock  Price.  The market price of our common stock has
been volatile.  The following  events could cause the market price of our common
stock to fluctuate substantially:

o        future  announcements  concerning  our  competitors  or  its  quarterly
         variations in operating results
o        the introduction of technological innovations, new products, or changes
         in product pricing policies
o        proprietary rights or other litigation, or
o        changes in earnings estimates by analysts or other factors

The stock market has from time to time experienced  significant price and volume
fluctuations  that have  particularly  affected the market prices for the common
stocks of technology  companies like ours.  These  fluctuations  have often been
unrelated to the operating performance of particular companies.

In the past,  shareholder  class action suits have been filed against  companies
following periods of volatility of stock price.  Litigation of this nature could
occur in our future. Litigation often diverts management attention and resources
and is costly to the company. If we were placed in this position,  it could have
a material  adverse  effect on our business,  financial  condition and operation
results. Significant liabilities are always possible effects of litigation.

Potential  Fluctuations in Quarterly  Operating  Results.  Numerous  factors may
materially and unpredictably affect our operating results, including:

o        uncertainties of the size and timing of software license fees
o        timing of co-development projects with customers
o        timing of operating expenditures
o        increased competition
o        new product announcements and releases by us and our competitors
o        gain or loss of significant customers or distributors
o        expense levels
o        renewal of maintenance contracts
o        pricing changes by us or our competitors
o        personnel changes
o        foreign currency exchange rates
o        economic   conditions   generally  and  in  the  electronics   industry
         specifically

Any unfavorable  change in these or other factors could have a material  adverse
effect on our operating results for a particular quarter.  Many of our customers
order on an as-needed  basis and often delay  delivery of firm  purchase  orders
until their project  commencement dates are determined.  As a result, we operate
with no significant backlog. Therefore,  quarterly revenue and operating results
will  depend on the  volume and timing of orders  received  during the  quarter,
which  are  difficult  to  forecast  accurately.  Historically,  we  have  often
recognized a  substantial  portion of license  revenues in the last month of the
quarter,  with these revenues  frequently  concentrated in the last two weeks of
the  quarter.  Operating  results  would  be  disproportionately  affected  by a
reduction in revenue because only a small portion of expenses vary with revenue.
Operating  results in any  period  should not be  considered  indicative  of the
results  to be  expected  for any future  period.  Our  revenues  may or may not
increase.

Lengthy Sales Cycle. The licensing and sale of our software  products  generally
involve a significant commitment of capital from prospective  customers.  Delays
are frequently associated with large capital expenditures and lengthy acceptance
procedures.  For these and other reasons,  the sales cycle  associated  with the
licensing  of our  products  is  typically  lengthy  and  subject to a number of
significant risks over which we have little or no control. Because the timing of
customer orders is hard to predict,  we believe that quarterly operating results
are  likely to vary  significantly  in the  future.  Actual  results  could vary
materially as a result of a variety of factors, including, without limitation:

o        the high average selling price and long sales cycle for our products
o        the relatively small number of orders per quarter
o        dependence on sales to a limited number of large customers
o        timing of receipt of orders
o        successful product introduction
o        acceptance of our products and increased competition


                                       14

<PAGE>

Dependence Upon Semiconductor and Electronics  Industries;  General Economic and
Market  Conditions.   Silicon  Valley  Research,  Inc.  is  dependent  upon  the
semiconductor  and, more generally,  the electronics  industries.  Each of these
industries is characterized by rapid  technological  change,  short product life
cycles,  fluctuations  in  manufacturing  capacity  and  pricing.  Each of these
industries  is highly  volatile  and has  periodically  experienced  significant
downturns.  Often in connection with, or in anticipation of, declines in general
economic conditions,  the number of new integrated circuit design projects often
decreases. Customer purchases of new licenses from us are largely dependent upon
the commencement of new design  projects.  Factors  negatively  affecting any of
these industries could have a material adverse effect on our business, operating
results or financial  condition.  Our business,  operating results and financial
condition  may in the future  reflect  substantial  fluctuations  from period to
period  due  to  patterns  and  general   economic   conditions  in  either  the
semiconductor or electronics industry.

International  Sales.  International  sales,  primarily  in  Japan  and  Taiwan,
accounted  for  approximately  5% and 3% of the total revenue in fiscal 2000 and
2001,  respectively.   Declining  revenues  from  international  sales  resulted
primarily  from closure of our Tokyo office in December  1998, and Taiwan office
in March 1999 brought about,  in part, by the reduction in capital  expenditures
by semiconductor  manufacturers,  particularly in Asia and increased competition
in the EDA software  market.  We plan for  international  sales to account for a
significant portion of revenue during fiscal 2002, as had been the case prior to
fiscal  2000.  However,  this  revenue  involves  a number  of  inherent  risks,
including:

o        economic downturn in the electronics industry in Asia
o        traditionally slower adoption of our products internationally
o        general strikes or other disruptions in working conditions
o        generally longer receivables collection periods
o        unexpected  changes in or  impositions  of  legislative  or  regulatory
         requirements
o        reduced protection for intellectual property rights in some countries
o        potentially adverse taxes
o        delays  resulting  from  difficulty  in obtaining  export  licenses for
         certain technology
o        other trade barriers

The  factors  listed  above  may  have  a  material  adverse  effect  on  future
international sales and, consequently, on operating results.

Dependence on Key Personnel.  Our success depends to a significant extent upon a
number of key technical and management employees,  in particular,  upon James O.
Benouis,  our President and Chief  Executive  Officer.  We do not currently have
"key man" life insurance on Mr. Benouis.  The loss of services of Mr. Benouis or
any of our other key employees  could have a material  adverse effect on us. Our
success  will  depend  in  large  part on our  ability  to  attract  and  retain
highly-skilled technical, managerial, sales and marketing personnel. Competition
for  such  personnel  is  intense.  There  can be no  assurance  that we will be
successful  in retaining  our key  technical  and  management  personnel  and in
attracting and retaining the personnel we require to grow.

Effect of Certain Charter Projections; Blank Check Preferred Stock. Our Board of
Directors has the  authority to issue up to 1,000 shares of preferred  stock and
to  determine  the price,  rights,  preferences,  privileges  and  restrictions,
including voting rights, without any further vote or action by shareholders. The
rights of the  holders  of the  common  stock  will be  subject  to,  and may be
adversely affected by, the rights of the holders of any preferred stock that may
be issued in the  future.  The  issuance of  preferred  stock,  while  providing
desirable  flexibility  in  connection  with  possible  acquisitions  and  other
corporate  purposes,  could  have the effect of making it more  difficult  for a
third party to acquire a majority of our outstanding voting stock.

Inflation. To date, inflation has not had a significant impact on the results of
our operations.

Recent  Accounting  Pronouncements.  In April 1998,  the  American  Institute of
Certified Public Accountants issued Statement of Position 98-1,  "Accounting for
the  Costs of  Computer  Software  Developed  or  Obtained  for  Internal  Use."
Statement of Position 98-1 provides  guidance for determining  whether  computer
software is internal-use  software and on capitalization of the costs associated
with


                                       15

<PAGE>

internal-use  computer software. It also provides guidance on accounting for the
proceeds of computer software originally  developed or obtained for internal use
and  then  subsequently  sold  to the  public.  The  disclosures  prescribed  by
Statement  of Position  98-1 were  effective  for the year ending March 31, 2000
consolidated financial statements.

In December 1999, the SEC issued Staff Accounting  Bulletin No. 101 ("SAB 101"),
Revenue Recognition in Financial  Statements." SAB 101 summarizes certain of the
SEC's views in applying  generally  accepted  accounting  principles  to revenue
recognition in financial  statements.  SAB 101 was adopted during the year ended
March 31, 2001.  The  adoption of SAB 101 did not have a material  effect on the
Company's financial position or results of operations.

                                       16

<PAGE>

Item 7.  Financial Statements and Financial Statement Schedules

Index to Financial Statements and Financial Statement Schedules
<TABLE>
Financial Statements:
<CAPTION>
<S>      <C>                                                                                          <C>
         Report of Independent Accountants                                                            18
         Report of Management                                                                         19
         Consolidated Balance Sheet as of March 31, 2001                                              20
         Consolidated Statements of Operations for the years ended March 31,
              2001 and 2000                                                                           21
         Consolidated Statements of Changes in Shareholders' Equity for the years
              ended March 31, 2001 and 2000                                                           22
         Consolidated Statements of Cash Flows for the years ended March 31,
              2001 and 2000                                                                           23
         Notes to Consolidated Financial Statements                                                   24-34
</TABLE>
All other financial  statement schedules have been omitted since they are either
not required,  not applicable or the  information  is otherwise  included in the
consolidated financial statements or notes thereto.


                                       17

<PAGE>

Report of Independent Accountants

To the Board of Directors and Shareholders of Silicon Valley Research, Inc.

We have audited the  accompanying  consolidated  balance sheet of Silicon Valley
Research, Inc. and subsidiary as of March 31, 2001, and the related consolidated
statements of  operations,  stockholders'  equity and cash flows for each of the
two years then ended.  These financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Silicon Valley Research,  Inc.
and  subsidiary as of March 31, 2001,  and the results of its operations and its
cash flows for each of the two years then ended in  conformity  with  accounting
principles generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements, the Company has incurred significant recurring losses from
operations and has limited capital  resources that raise substantial doubt about
its  ability to  continue as a going  concern.  Management's  plans in regard to
these  matters are also  described in Note 1. The  financial  statements  do not
include any adjustments that might result from the outcome of this uncertainty.



/s/  Moss Adams LLP

San Francisco, California
June 8, 2001, except Note 13 as to which the date is June 27, 2001.


                                       18

<PAGE>

Report of Management

To Our Shareholders:

The consolidated  financial statements have been prepared by the Company, and we
are  responsible  for  their  content.  They are  prepared  in  conformity  with
generally accepted accounting principles,  and in this regard we have undertaken
to make  informed  judgments and  estimates,  where  necessary,  of the expected
effects of events and  transactions.  The other  financial  information  in this
Annual  Report  on Form  10-KSB  is  consistent  with  that in the  consolidated
financial statements.

The Company maintains and depends upon a system of internal  accounting controls
designed to provide reasonable  assurance that our assets are safeguarded,  that
transactions  are executed in accordance with  management's  intent and the law,
and that the accounting  records fairly and accurately  reflect the transactions
of the Company.

The Company  engaged  Moss Adams LLP as  independent  accountants  to provide an
objective, independent audit of our consolidated financial statements.

The Board of Directors oversees the Company's  consolidated financial statements
through  its Audit  Committee,  which is  composed  of  members  of the Board of
Directors.  The  independent  accountants  have  access to the Audit  Committee,
without management present, to discuss internal accounting  controls,  auditing,
and financial reporting matters.






                                                         James O. Benouis
                                                         President and
                                                         Chief Executive Officer


San Jose, California
July 13, 2001


                                       19

<PAGE>

                  SILICON VALLEY RESEARCH, INC. and subsidiarY
                           Consolidated Balance Sheet
                                 (in thousands)


                                                                 March 31, 2001
Assets


Current Assets
Cash and cash equivalents                                            $      103
Accounts receivable, net of allowances of $85                               476
Other receivable                                                            151
Prepaid expenses and other current assets                                   191
                                                                     ----------
                                                                            921

Fixed assets, net                                                           164
Other assets, net                                                           265
                                                                     ----------
                                                                     $    1,350
                                                                     ==========

Liabilities and Shareholders' Equity

Current Liabilities
Notes payable                                                        $       25
Short term borrowings                                                       148
Accounts payable                                                            333
Accrued expenses                                                            252
Deferred revenue                                                             90
                                                                     ----------
                                                                            848
                                                                     ----------
Long-term debt, less current portion                                        926
                                                                     ----------

Deferred tax liability                                                       20
                                                                     ----------

Commitments  and contingencies (Note 7)

Shareholders' Equity
Preferred stock, no par value;
      authorized:  1,000 shares;
      issued and outstanding: none                                            -
Common stock,  no par value;
      authorized:  60,000 shares;
      issued and outstanding: 40,619 shares                              46,020
Accumulated deficit                                                     (46,464)
                                                                     ----------
                                                                           (444)
                                                                     ----------
                                                                     $    1,350
                                                                     ==========


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       20

<PAGE>

                          SILICON VALLEY RESEARCH, INC.
                      Consolidated Statements of Operations
                      (in thousands, except per share data)

                                                        Years Ended March 31,

                                                         2001             2000
                                                       --------          ------

Revenue
License fees and other                                 $     45        $    843
Maintenance and services                                  1,137           1,222
                                                       --------        --------
         Total revenue                                    1,182           2,065
                                                       --------        --------

Cost of revenue
License fees and other                                      217             306
Maintenance and services                                    730             782
                                                       --------        --------
         Total cost of revenue                              947           1,088
                                                       --------        --------

Gross margin                                                235             977
                                                       --------        --------

Operating expenses
Engineering, research and development                       835           1,070
Selling and marketing                                       578             381
General and administrative                                  745             521
                                                       --------        --------
         Total operating expenses                         2,158           1,972
                                                       --------        --------

Operating loss                                           (1,923)           (995)
                                                       --------        --------

Other income (expense)
Interest income                                               9               5
Interest expense                                           (124)            (73)
Other, net                                                  (32)            271
                                                       --------        --------
         Total other income (expense)                      (147)            203
                                                       --------        --------

Loss before provision for income taxes                   (2,070)           (792)

Provision for income taxes                                   15            --
                                                       --------        --------

Net loss                                               $ (2,085)       $   (792)
                                                       ========        ========

Net loss per basic and diluted share                   $  (0.06)       $  (0.03)
                                                       ========        ========

Weighted-average common shares
outstanding (basic and diluted)                          36,616          28,172
                                                       ========        ========


              The accompanying notes are an integral part of these
                       consolidated financial statements.


<PAGE>

<TABLE>
                                          SILICON VALLEY RESEARCH, INC.
                                 Consolidated Statement of Shareholders' Equity
<CAPTION>
                                                                         Accumulated                 Other
(In thousands)                        Common Stock         Accumulated   Comprehensive               Comprehensive
         Total                      Shares      Amount      Deficit      Income(Loss)                Income(Loss)
         -----                      ------      ------      -------      -------------               -------------

<S>                                 <C>        <C>         <C>             <C>          <C>           <C>
Balances, March 31, 1999            26,214     $43,930     $(43,587)       $    117                   $   460
                                    ------     -------     --------        --------                   -------

Foreign currency translation
    adjustment                          --          --           --            (117)        (117)     $  (117)
Net loss                                --          --         (792)             --         (792)        (792)
                                                                                        --------
Comprehensive income(loss)              --          --           --              --     $   (909)          --
                                                                                        ========
Common stock issued under
    stock option and stock
    purchase plans                      68          28           --              --                        28
Proceeds from issuance
    of common stock                  8,902       1,326           --              --                     1,326
                                    ------     -------     --------        --------                   -------

Balances, March 31, 2000            35,184     $45,284     $(44,379)       $     --                   $   905
                                    ======     =======     ========        ========                   =======

Net loss                                --          --       (2,085)             --       (2,085)      (2,085)
                                                                                        --------
Comprehensive income(loss)              --          --           --              --     $ (2,085)          --
                                                                                        ========
Common stock issued under
    stock option and stock
    purchase plans                     197          32           --              --                        32
Proceeds from issuance
    of common stock                  5,238         704           --              --                       704
                                    ------     -------     --------        --------                   -------

Balances, March 31, 2001            40,619     $46,020     $(46,464)       $     --                   $  (444)
                                    ======     =======     ========        ========                   =======

<FN>
                            The accompanying notes are an integral part of these
                                      consolidated financial statements.
</FN>
</TABLE>
                                                     22

<PAGE>

<TABLE>
                                      SILICON VALLEY RESEARCH, INC.
                                   Consolidated Statement of Cash Flows
                                              (in thousands)
<CAPTION>
                                                                                    Years Ended March 31,

                                                                                      2001          2000
                                                                                      ----          ----
<S>                                                                              <C>           <C>
Cash Flows from Operating Activities:

Net loss                                                                         $  (2,085)    $    (792)
Adjustments to reconcile net loss to net cash
     used in operating activities:
         Depreciation and amortization:
              Fixed assets                                                             102           137
              Software licenses and development costs                                  237           491
         Loss on sale of fixed assets                                                    7            41
         Write-off of bad debts                                                        255             -
         Gain on cancellation of debt                                                    -          (142)
         Changes in assets and liabilities:
              Accounts receivable                                                      161          (448)
              Other receivable                                                                      (151)
              Prepaid expenses and other current assets                               (221)          139
              Accounts payable                                                          67          (138)
              Accrued expenses                                                         (38)         (169)
              Deferred revenue                                                          82          (227)
              Other, net                                                               106            34
                                                                                 ---------     ---------
Net cash used in operating activities                                               (1,327)       (1,225)
                                                                                 ---------     ---------

Cash Flows from Investing Activities:

Acquisition of fixed assets                                                           (150)          (21)
Proceeds on sale of fixed assets                                                         -            11
Capitalization of software development costs and
     purchase of software licenses                                                     (45)         (143)
                                                                                 ---------     ---------
Net cash used in investing activities                                                 (195)         (153)
                                                                                 ---------     ---------

Cash Flows from Financing Activities:

Proceeds from subordinated debt financing                                                -         1,000
Principal payments of long-term debt                                                     -          (135)
Principal payments on notes payable                                                      -           (25)
Short-term borrowings                                                                  148             -
Proceeds from issuance of common stock and warrants                                    662         1,223
                                                                                 ---------     ---------
Net cash provided by financing activities                                              810         2,063
                                                                                 ---------     ---------

Effect of exchange rate changes on cash                                                  -          (117)
                                                                                 ---------     ----------

Net increase (decrease) in cash and cash equivalents                                  (712)          568
Cash and cash equivalents at beginning of year                                         815           247
                                                                                 ---------     ---------

Cash and cash equivalents at end of year                                         $     103     $     815
                                                                                 =========     =========
<FN>
                           The accompanying notes are an integral part of these
                                    consolidated financial statements.
</FN>
</TABLE>
                                                   23

<PAGE>

                          SILICON VALLEY RESEARCH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share price data)

NOTE 1   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

The Company designs,  develops, and markets a series of advanced  computer-aided
design  software  products  for use by  electronic  engineers  in the design and
engineering  of integrated  circuits and operates in one industry  segment.  The
Company  also  provides  the IC design  industry a  comprehensive  set of design
project support services  encompassing  nearly all aspects of the IC development
process, including cell-based APR, FPGA to Gate Array conversion,  custom analog
and digital layout and chip assembly  capability,  and CAD/EDA tool  application
methodology consulting services.

The Company has incurred  significant  losses for the last two fiscal years from
operations and does not believe the cash and cash generated from operations will
be  sufficient  to finance  operations  through  fiscal 2002 without  additional
working capital.  The Company is exploring financing  alternatives to supplement
its cash position.  Potential  sources of additional  financing  include private
equity financings,  mergers,  strategic  investments,  strategic partnerships or
various forms of debt financings.  Subsequent to year-end the Company executed a
stock  purchase  agreement  (see Note 13). The Company has  recently  introduced
updated  version of its existing  products and has plans to continue  developing
enhanced software  products.  There can be no assurance that the Company will be
able to execute additional forms of financing or that the Company will not incur
additional  losses until its recently  introduced and existing products generate
significant  revenue.  These events raise  substantial doubt about the Company's
ability to continue as a going concern.  The accompanying  financial  statements
have been prepared  assuming the Company will continue as a going  concern.  The
accompanying  financial  statements  do not include any  adjustments  that might
result from the outcome of these uncertainties.

Basis of Presentation

The consolidated  financial  statements  include the accounts of the Company and
its subsidiary:  Quality I.C. Corporation. All significant intercompany accounts
and  transactions  have been  eliminated.  Minority  interest  in net assets and
income (loss) for the years then ended are not significant.

Revenue Recognition

Revenues  comprise license fees for the Company's  software  products (except in
Japan where revenues comprise sales of the Company's software products) and fees
for services  complementing  its  products,  including  annual  maintenance  and
support, training and consulting. Revenue also includes design services.

Revenue is recognized when earned.  The Company's revenue  recognition  policies
are in  compliance  with  American  Institute  of Certified  Public  Accountants
Statements of Position 97-2 and 98-4, Software Revenue Recognition and SEC Staff
Accounting  Bulletin  101.  Revenue  from  licenses is  recorded  when a license
agreement has been executed,  the software has been delivered or shipped and the
customer  is  invoiced.  Software  maintenance  revenue,  including  maintenance
revenue bundled with the initial product license revenue,  is recognized ratably
over the  contract  period.  The  maintenance  revenue  bundled with the initial
product license  revenue is unbundled  based on prices for which  maintenance is
sold separately to customers. The maintenance component has not been significant
in the past.  Training,  consulting and design  revenues are recognized as these
services are performed.


                                       24

<PAGE>


                          SILICON VALLEY RESEARCH, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                     (in thousands, except share price data)

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
reported  amounts of revenues and expenses  during the reported  period.  Actual
results could differ materially from those estimates. Significant estimates used
in these  financial  statements  relate to realization  of capitalized  software
development costs and software licenses. It is at least reasonably possible that
management's estimate of revenue from software licenses could change in the near
term,  which could have a material  adverse  effect on the  Company's  financial
condition and results of operations.

Cash and Cash Equivalents

Cash and cash  equivalents  in the  statement  of cash flows and  balance  sheet
include cash on hand and  investments  with original or remaining  maturities at
the date of purchase of 90 days or less.

Concentration of Credit Risk

Financial  instruments  that  potentially  subject  the  Company to  significant
concentration of credit risk consists  principally of accounts  receivable.  The
composition  of  the  Company's   accounts   receivable   with  respect  to  the
semiconductor industry is characterized by generally short collection terms. The
Company's  accounts  receivable are derived from revenues  earned from customers
located primarily in the United States and Asia. Generally, the Company performs
ongoing  evaluation of its customer's  financial  condition and does not require
collateral,  allowances  for  potential  credit losses are  maintained  and such
losses  have been  within  management's  expectations.  At March 31,  2001,  two
customers accounted for 52% of the Company's total receivables.

Engineering, Research and Development Costs

Engineering,  research and development costs consist principally of research and
development  expenditures  in  connection  with new  products,  improvements  to
existing products,  maintenance, and documentation,  all of which are charged to
expense as incurred.

The Company capitalizes  software  development costs incurred after establishing
technological  feasibility  of the  product  (using the  working  model  concept
method) until the product is available for general release.

Capitalized  software  development  costs are  amortized and included in cost of
license fees and other revenues  using the greater of the amount  computed using
the ratio that current gross revenues for a product bear to the total of current
and  anticipated  future gross  revenues for that product or on a  straight-line
basis over the expected economic life of the product,  generally estimated to be
30 months.

Fixed Assets

Fixed  assets are  recorded at cost.  Equipment  acquired  under  capital  lease
obligations  is recorded at the lower of fair market value or the present  value
of the future minimum lease payments at the inception of the lease. Depreciation
of fixed assets is computed on the  straight-line  basis over  estimated  useful
lives of three to five years.  Leasehold  improvements  are  amortized  over the
shorter of their estimated useful lives or the remaining lease term. Capitalized
leases are generally  amortized over the shorter of the life of the lease or the
life  of  the  asset.   Software   licenses  are  generally   amortized  on  the
straight-line basis over 30 months.


                                       25

<PAGE>

                          SILICON VALLEY RESEARCH, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                     (in thousands, except share price data)

Earnings Per Share

The Company has adopted  Statement of  Financial  Accounting  Standards  No. 128
"Earnings  per Share" (FAS 128).  Under FAS 128,  the Company  presents  two EPS
amounts.  Basic EPS is calculated based on income or loss to common shareholders
and the  weighted-average  number  of shares  outstanding  during  the  reported
period.  Diluted EPS includes additional dilution from common stock equivalents,
such as stock  issuable  pursuant to the exercise of stock options and warrants.
Common  stock  equivalents  were not  included  in the  computation  of  diluted
earnings per share when the Company  reported a loss because to do so would have
been antidilutive for the periods presented.

The following is a reconciliation of the computation for basic and diluted EPS:

                                                          Year ended March 31,
                                                          --------------------

(in thousands)                                             2001           2000
                                                           ----           ----

Net loss                                                 $ (2,085)     $   (792)
                                                         ========      ========

Weighted-average common shares
     outstanding (basic)                                   36,616        28,172
Weighted-average common stock equivalents:
     Stock options                                           --            --
     Warrants                                                --            --
                                                         --------      --------
Weighted-average common shares
     outstanding (diluted)                                 36,616        28,172
                                                         ========      ========

Options to purchase  4,765 shares of common stock at prices  ranging from $0.135
to $6.50 per share were  outstanding at March 31, 2001, but were not included in
the computation of diluted EPS because inclusion of such options would have been
antidilutive.

Income Taxes

Income taxes are computed using the asset and liability method.  Under the asset
and liability method,  deferred income tax assets and liabilities are determined
based on the differences between the financial reporting and tax basis of assets
and liabilities and are measured using the currently enacted tax rates and laws.


                                       26

<PAGE>


                          SILICON VALLEY RESEARCH, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                     (in thousands, except share price data)

Stock-Based Compensation Plans

The Company  accounts for  stock-based  employee  compensation  arrangements  in
accordance  with the provisions of Accounting  Principles  Board Opinion No. 25,
"Accounting  for Stock Issued to  Employees,"  ("APB 25") and complies  with the
disclosure  provisions of Statement of Financial  Accounting  Standards No. 123,
"Accounting  for  Stock  Based   Compensation"   ("FAS  123").   Under  APB  25,
compensation cost is recognized over the vesting period based on the difference,
if any,  on the date of grant  between the fair  market  value of the  Company's
stock and the amount an employee  must pay to acquire the stock.  The  Company's
policy is to grant  options  with an exercise  price equal to the closing  trade
price of the Company's stock on the grant date. Accordingly, no compensation has
been recognized for its stock option plans.

Recent Accounting Pronouncements

In April 1998, the American  Institute of Certified  Public  Accountants  issued
Statement  of Position  98-1,  "Accounting  for the Costs of  Computer  Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides guidance
for  determining  whether  computer  software is  internal-use  software  and on
accounting  for the  proceeds  of  computer  software  originally  developed  or
obtained  for  internal use and then  subsequently  sold to the public.  It also
provides  guidance on capitalization of the costs incurred for computer software
developed or obtained for internal use. The Company has not yet  determined  the
impact,  if any, of adopting this statement.  The disclosures  prescribed by SOP
98-1 were  effective for the year ending March 31, 2000  consolidated  financial
statements.

In December 1999, the SEC issued Staff Accounting  Bulletin No. 101 ("SAB 101"),
Revenue Recognition in Financial  Statements." SAB 101 summarizes certain of the
SEC's views in applying  generally  accepted  accounting  principles  to revenue
rocognition in financial  statements.  SAB 101 was adopted during the year ended
March 31, 2001.  The  adoption of SAB 101 did not have a material  effect on the
Company's financial position or results of operations.

NOTE 2   FIXED ASSETS

Fixed assets comprise:                                           March 31, 2001
                                                                 --------------

Computer equipment                                                   $ 1,996
Office equipment                                                         532
                                                                     -------
                                                                       2,528
Less accumulated depreciation and amortization                        (2,364)
                                                                     -------
                                                                     $   164
                                                                     =======

There are no fixed assets acquired under capital leases included above.

NOTE 3   OTHER ASSETS

                                                                 March 31, 2001
Other assets comprise:
Software development costs                                           $   987
Software licenses                                                        979
                                                                     -------
                                                                       1,966
Less accumulated  amortization                                        (1,814)
                                                                     -------
                                                                         152
Goodwill                                                                  98
Other                                                                     15
                                                                     -------
                                                                     $   265
                                                                     =======

Software  development  costs  capitalized  during  2001 were $45 and the related
amortization  during the year was $217. Other consists  primarily of deposits on
facilities and deferred taxes.


                                       27

<PAGE>

                          SILICON VALLEY RESEARCH, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                     (in thousands, except share price data)

Note 4        Comprehensive Income (Loss)

The Company has adopted  Statement of Financial  Accounting  Standards  No. 130,
"Reporting  Comprehensive  Income."  This  Statement  requires  that  all  items
recognized under accounting standards as components of comprehensive earnings be
reported  in an  annual  financial  statement  that is  displayed  with the same
prominence as other annual  financial  statements.  This Statement also requires
that an entity classify items of other comprehensive earnings by their nature in
an annual financial statement.  Other comprehensive  earnings in these financial
statements include foreign currency translation adjustments. The Company's total
comprehensive earnings were as follows:

                                                               March 31,
                                                           2001          2000
                                                          ----            ----
Net loss                                                $(2,085)        $  (792)
Other comprehensive gain(loss)                                0            (117)
                                                        -------         -------
Total comprehensive income (loss)                       $(2,085)        $  (909)
                                                        =======         =======

NOTE 5   ACCRUED EXPENSES

Accrued expenses comprise:                                   March 31, 2001
                                                             --------------
Accrued payroll and related costs                                 $105
Accrued interest                                                    78
Other                                                               69
                                                                  ----
                                                                  $252
                                                                  ====

Other consists of accruals related to expenses  incurred in the normal course of
business, such as interest and sales expenses.

NOTE 6   bank borrowings and LONG-TERM DEBT

Long-term debt comprise:                                     March 31, 2001
                                                             --------------
Notes payable                                                     $926
Less current portion                                               --
                                                                  ----
                                                                  $926
                                                                  ====

In June 1999,  the Company  began a  subordinated  debt/warrant  financing.  The
financing  included  approximately  $1,000 of  three-year  notes and the sale of
approximately  8,000  Warrants  at $0.01  per  Warrant.  The debt  bears  simple
interest of 10% and the Warrants  have a five-year  term with an exercise  price
per share of $0.125. This financing  transaction  consists of two closings.  The
first  closing  took  place on June 7,  1999.  The  Company  received  $768 cash
proceeds from this closing.  This included $711 of three-year notes and the sale
of approximately 5,700 Warrants at $0.01 per Warrant.  The second closing was to
have taken place on July 15, 1999. The closing was extended until  September 24,
1999 pending negotiation of a workout with the Creditors'  Committee through the
Credit  Managers'  Association  to  resolve  accounts  payable  issues  that was
satisfactory to the majority of the investors.  An agreement was reached and the
Company received  approximately $312 cash proceeds from the second closing.  The
Company  has used  part of the  proceeds  from the  financing  to  complete  the
Settlement  Agreement with its lender and to pay other accounts payable and used
the balance of the proceeds to help fund its operations.  The Company's CEO, the
Company's  Chairman of the Board,  an  affiliate  of a Company  director and two
Company 10%  shareholders  participated  in the  financing.  These notes  mature
during the fiscal year ending March 31, 2003.


                                       28

<PAGE>

                          SILICON VALLEY RESEARCH, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                     (in thousands, except share price data)

In January  2001,  the Company  entered into an Agreement  with its bank for the
purchase of the Company's receivables. The agreement provides that the bank will
purchase up to $250 of the Company's domestic accounts receivable. The bank will
advance  the  Company  80% of  qualified  receivables.  In the  event  that  the
Company's  customers do not pay on the invoices  within 90 days of invoice date,
the Company may be required to return the amounts advanced to the bank.

NOTE 7   COMMITMENTS AND CONTINGENCIES

The  Company  leases its  corporate  headquarters  and IC design  offices in the
United States under operating leases expiring March 31, 2005 and March 31, 2001,
respectively.  Non-cancelable  rental payments over the term of leases exceeding
one year are as follows:


                         2002                          $     104
                         2003                                 82
                         2004                                 74
                         2005                                 67
                                                       ---------
                                                       $     327
                                                       =========

Subsequent to year end, the Company entered into a rental  agreement to lease IC
design  offices in Austin,  Texas  under a three year lease  commencing  July 1,
2001. Under the terms of the lease, the following non-cancelable rental payments
exceeding one year are as follows:

                         2002                          $      91
                         2003                                122
                         2004                                130
                         2005                                 33
                                                       ---------
                                                       $     376
                                                       =========

The  Company  is  generally  responsible  for  its  pro  rata  share  of  taxes,
maintenance  and  insurance  on the  facilities.  In  addition,  the  Company is
responsible  for phone and cubicle  rental at the new facility in Texas.  Rental
expense aggregated $217 and $191 in 2000 and 2001, respectively.

As a normal course of business the Company may be the subject of adverse  claims
and  litigation on a variety of matters.  In March 2001,  the Company filed suit
against a customer to recover  approximately  $220,000 for amounts  unpaid for a
license sale,  which is included in accounts  receivable at March 31, 2001.  The
customer has counterclaimed the following causes of action:  breach of contract,
breach of warranty,  and negligent  misrepresentation.  The Company believes the
counter claim is without merit. The Company also plans to vigorously  pursue its
cause of action. This matter is currently in the discovery stage and the outcome
is not known.

NOTE 8   SAVINGS AND INVESTMENT PLAN

The Company has the Silicon Valley  Research,  Inc.  Savings and Investment Plan
and Trust  ("the  Plan"),  qualified  under  Sections  401(k)  and 401(a) of the
Internal  Revenue Code.  The Plan  provides for  tax-deferred  automatic  salary
deductions  and  alternative  investment  options.  Employees  are  eligible  to
participate after completion of two months of employment. Participants may apply
for loans from their accounts.

The Plan  permits  Company  contributions  determined  annually  by the Board of
Directors.  Contributions authorized, if any, will not exceed amounts allowed by
Internal  Revenue Code  Section 404.  Allocation  of employer  contributions  to
participant's  accounts is  determined  by the Board of Directors at the time of
contribution.  The Company  contributed $1 and $0 to the Plan during fiscal 2000
and  2001,   respectively.   Administrative  costs  paid  by  the  Company  were
insignificant during fiscal 2000 and 2001.


                                       29

<PAGE>


                          SILICON VALLEY RESEARCH, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                     (in thousands, except share price data)

NOTE 9   CAPITAL STOCK

Preferred Stock

The  Company's  Board of Directors has the authority to issue up to 1,000 shares
of preferred stock and to determine the price, rights,  preferences,  privileges
and restrictions, including voting rights, without any further vote or action by
the Company's shareholders.

Stock Options

At March 31,  2001,  the Company has  reserved  5,971 shares of common stock for
issuance under its Employee Stock Option Plan and Directors'  Stock Option Plan.
Options  are  granted  under  the  Employee  Stock  Option  Plan by the Board of
Directors at an exercise  price equal to the fair market value as  determined by
the closing trading price on the grant date.  Generally,  the shares pursuant to
the options vest in equal monthly  installments  over four years  commencing one
month from date of grant.

Under the Directors' Stock Option Plan, options are granted automatically on the
effective date of the Plan to existing Board of Director members or upon initial
election or  appointment  of a member of the Board of Directors for 45 shares of
the  Company's  common  stock,  and  thereafter  annually  for 9  shares  of the
Company's  common  stock at an exercise  price equal to the fair market value as
determined by the closing trading price on the grant date. Generally, 25% of the
shares  pursuant to the  options  vests one year from the date of grant with the
remaining  shares  vesting  in equal  monthly  installments  over the next three
years.

At March 31, 2001, options to purchase 1,846 shares of common stock were vested,
and 1,762 shares of common stock were available for future grant.
<TABLE>
The following table summarizes stock option activity under the Company's Plans:
<CAPTION>

                                                 For the year ended              For the year ended
                                                    March 31, 2001                 March 31, 2000
                                                    --------------                 --------------
                                                          Weighted-Average                   Weighted-Average
                                              Shares       Exercise Price     Shares          Exercise Price
                                              ------       --------------     ------          --------------
<S>                                             <C>           <C>                <C>              <C>
Outstanding at beginning of year                3,568         $  0.29            1,399            $  0.72
Granted                                         1,661            0.19            3,154               0.14
Exercised                                        (197)           0.16              (58)              0.47
Forfeited                                        (267)           0.41             (927)              0.38
                                            ---------                        ---------
Outstanding at end of year                      4,765         $  0.26            3,568            $  0.29
                                            =========                        =========

Options exercisable at year-end                 1,846                             765
</TABLE>
<TABLE>
The following table summarizes  information about stock options  outstanding and
exercisable at March 31, 2001:
<CAPTION>

                             Options Outstanding                                       Options Exercisable
                      ----------------------------------                          -----------------------------
                                           Weighted-
                          Shares            Average             Weighted-            Shares       Weighted-
Range of              Outstanding           Remaining            Average          Exercisable      Average
Exercise Prices         at 3/31/01      Contractual Life      Exercise Price        at 3/31/01   Exercise Price
<S>                       <C>                   <C>               <C>                  <C>             <C>
$ 0.13 - $ 0.13           2,510                 8.58              $ 0.13               889             $0.13
$ 0.14 - $ 0.21           1,080                 7.81                0.17               300              0.17
$ 0.22 - $ 0.88           1,132                 6.91                0.54               614              0.67
$ 1.44 - $ 3.50              40                 5.11                1.89                40              1.89
$ 6.50 - $ 6.50               3                 3.47                6.50                 3              6.50
                          -----               ------            --------             -----          --------
                          4,765                 7.97              $ 0.26             1,846            $ 0.37
                          =====               ======              ======             =====            ======
</TABLE>
<TABLE>
The Company  applies the  provisions  of APB 25 and related  interpretations  in
accounting  for  compensation  expense under the Employee Stock Option Plan, the
Directors'  Stock  Option  Plan  and  the  Employee  Stock  Purchase  Plan.  Had
compensation  expense under these plans been determined pursuant to FAS 123, the
Company's  net income  (loss) per share for the years  ended  March 31, 2000 and
2001 would have been as follows:
<CAPTION>

                                       30

<PAGE>

                                                                                   2001            2000
                                                                                   ----            ----
<S>                                         <C>                                  <C>             <C>
Net loss                                    As reported                          $(2,085)        $  (792)
                                            Pro forma                            $(2,308)        $(1,126)

Net loss per share (basic)                  As reported                          $ (0.06)        $ (0.03)
                                            Pro forma                            $ (0.06)        $ (0.04)

Net loss per share (diluted)                As reported                          $ (0.06)        $ (0.03)
                                            Pro forma                            $ (0.06)        $ (0.04)
</TABLE>
The fair value of each option  grant is estimated on the date of the grant using
the Black-Scholes  multiple  option-pricing model with the following assumptions
used for grants in 2000 and 2001, respectively;  expected volatility of 143% and
152%;  weighted-average  risk-free  interest  rates  of  5.91%  and  5.37%,  and
weighted-average  expected  lives of 3.00 and 2.23.  The  weighted-average  fair
value of options granted in 2000 and 2001 was $0.1058 and $0.134, respectively.

Warrants

The  following  warrants to purchase  shares of the  Company's  common stock are
outstanding and fully vested at March 31, 2001:

         Expiring During
         the Fiscal                                        Number of Common
         Year Ending               Exercise Price         Shares Under Warrants
         -----------               --------------         ---------------------
         3/31/03                            $0.53                    826
         3/31/06                            $0.37                    270
                                                               ---------
                                                                   1,096
                                                               =========

During the fiscal year ended March 31, 2001, 4,951 warrants were exercised.

Employee Stock Purchase Plan

The 1993 Employee Stock  Purchase  Plan,  under which 650 shares of common stock
have been reserved for issuance, allows substantially all employees to subscribe
to shares of  common  stock  during  participation  periods  set by the Board of
Directors at a purchase price which is the lower of 85% of the fair market value
at the beginning or the end of each period. There were 10 and 0 shares of common
stock issued under the plan in 2000 and 2001, respectively, leaving a balance of
331 shares available for issuance at March 31, 2001.


                                       31

<PAGE>

                          SILICON VALLEY RESEARCH, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                     (in thousands, except share price data)

NOTE 10  INCOME TAXES

The provision for income taxes consists of the following:

Years ended March 31,                                        2001          2000
                                                             ----          ----

Current:
Federal                                                     $   -         $   -
State                                                           -             -
Deferred                                                       15             -
Foreign                                                         -             -
                                                            -----         -----
         Total provision                                    $  15         $   -
                                                            =====         =====

Deferred  income taxes result from temporary  differences in the  recognition of
certain  expenses for financial and income tax  reporting.  The net deferred tax
assets at March 31 consists of the following:

                                                                           2001
                                                                           ----
Allowances and accruals not currently deductible                        $    91
Net operating losses and other credits                                   14,370
                                                                        -------
         Total deferred tax assets                                       14,461
Less: valuation allowance                                               (14,461)
                                                                        -------
         Net deferred tax asset                                         $     0
                                                                        =======

The Company has provided for a valuation  allowance  when it is more likely than
not that some  portion or all of the net  deferred  asset will not be  realized.
Based upon a number of  factors,  including  the lack of a history  of  profits,
management  believes  that  there  is  sufficient   uncertainty   regarding  the
realization  of deferred  assets such that a full  valuation  allowance has been
provided.

At March 31, 2001, the Company had available federal and state tax net operating
loss  carryforwards  of  approximately  $36,600  and $8,700,  respectively.  The
federal and state tax net operating loss carryforwards  expire from 2001 to 2020
and 2001 to 2005,  respectively.  The Company has federal and state research and
development credit  carryforwards of approximately $727 and $513,  respectively,
expiring from 2007 through 2018. These credits may be available to offset future
taxes.

A  reconciliation  between  the  provision  for  income  taxes  computed  at the
statutory rate and the effective rate reflected in the Consolidated Statement of
Operations is as follows:

Years ended March 31,                                        2001          2000
                                                             ----          ----
Provision (benefit) at U.S. statutory rate                $  (840)      $  (320)
Tax losses not currently benefited                            275          (560)
Change in valuation allowance                                 580           880
                                                            -----         -----
         Tax provision                                    $    15       $     0
                                                            =====         =====

NOTE 11  SUPPLEMENTAL CASH FLOW INFORMATION

Years ended March 31,                                        2001          2000
                                                             ----          ----
Cash paid during the period for:
Interest                                                  $     -       $    46
Income taxes                                              $     -       $     -

Noncash investing and financing activities:
         Common stock issued in exchange for
            note payable                                  $    74       $     -


                                       32

<PAGE>

                          SILICON VALLEY RESEARCH, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                     (in thousands, except share price data)

NOTE 12  BUSINESS SEGMENTS

In June 1997, the FASB issued  Statement of Financial  Accounting  Standards No.
131 ("FAS  131"),  "Disclosures  About  Segments  of an  Enterprise  and Related
Information." This statement  establishes standards for the way companies report
information  about operating  segments in annual financial  statements.  It also
establishes  standards  for related  disclosures  about  products and  services,
geographic areas and major customers. The disclosures prescribed by FAS 131 were
effective  for the  Company's  consolidated  financial  statements  for the year
ending March 31, 2000.

The Company has provided segment  information based on geographic  regions.  All
segments derive the majority of their revenues from software licenses,  with the
exception  of Quality  I.C.  Corporation,  which  generates  the majority of its
revenues from services.  Transactions  between segments are accounted for on the
same basis as those with outside  parties,  except that they are eliminated when
presented on a consolidated basis.
<TABLE>
The  following  table  summarizes  the United  States,  European,  Japanese  and
Taiwanese operations of the Company:
<CAPTION>
                                          United States                                     Adjustments
                                                  Quality                                       and
                                         SVR     I.C. Corp    Europe     Japan      Taiwan  Eliminations  Consolidated
                                       --------  ---------  ---------  --------- --------   ------------  ------------
<S>                                   <C>        <C>        <C>        <C>        <C>        <C>          <C>
Year ended March 31, 2000

Sales to unaffiliated customers       $   1,051  $     980  $      24  $      10  $     -    $      -     $   2,065
Transfer between geographic
 regions                                      -          -          -          -        -           -             -
                                      ---------  ---------  ---------  ---------  -------    --------     ---------
Total sales                           $   1,051  $     980  $      24  $      10  $     -    $      -     $   2,065
                                      =========  =========  =========  =========  =======    ========     =========

Operating income (loss)               $    (945) $    (101) $      24  $       8  $    19    $      -     $    (995)
                                      =========  =========  =========  =========  =======    ========     =========

Identifiable assets                   $   2,308  $     203  $       -  $       -  $     -    $      -     $   2,511
                                      =========  =========  =========  =========  =======    ========     =========

Year ended March 31, 2001

Sales to unaffiliated customers       $     249  $     933  $       -  $       -  $     -    $      -     $   1,182
Transfer between geographic
 regions                                      -          -          -          -        -           -             -
                                      ---------  ---------  ---------  ---------  -------    --------     ---------
Total sales                           $     249  $     933  $       -  $       -  $     -    $      -     $   1,182
                                      =========  =========  =========  =========  =======    ========     =========

Operating income (loss)               $  (2,100) $      15  $       -  $       -  $     -    $      -     $  (2,085)
                                      ========   =========  =========  =========  =======    ========     =========

Identifiable assets                   $   1,169  $     181  $       -  $       -  $     -    $      -     $   1,350
                                      =========  =========  =========  =========  =======    ========     =========
</TABLE>

Included in total United States revenue are export sales of $59 and $38 for 2000
and 2001, respectively,  principally to the Far East. Total consolidated revenue
outside of the United States was $93 and $38 in 2000 and 2001, respectively.


                                       33

<PAGE>

A  small  number  of  customers  account  for a  significant  percentage  of the
Company's total revenue as follows:


                                               Year ended March 31,
                                               --------------------

                                            Customer     2001     2000
                                            --------     ----     ----

                                             A            14%      *
                                             B            18%      *
                                             C            11%      *
                                             D            24%      16%
                                             E            18%      13%
                                             F            *        12%

         * less than 10% of consolidated revenue


NOTE 13 SUBSEQUENT EVENT

Subsequent  to  year-end,  on June 27,  2001,  the Company  entered into a stock
purchase  agreement.  The  agreement  provides  for the sale of up to  2,500,000
shares of stock at $0.115 per share.  The stated  closing date is June 29, 2001,
which can be extended  by the  Company  for 15 days.  The Company has elected to
extend the closing date.

                                       34

<PAGE>

Item  8.  Changes  In and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

None

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
Section 16(a) of the Exchange Act

The following sets forth certain  information  regarding the executive  officers
and directors of the Registrant:

Executive  officers  serve at the  discretion  of the Board of  Directors of the
Registrant.

James O. Benouis (age 33) became  President and Chief  Operating  Officer of the
Company in March 1998 and was appointed Chief Executive  Officer in August 1998.
Mr.  Benouis came to us from Quality I.C.  Corporation  ("QIC"),  an  integrated
circuit design services company based in Austin, Texas, which was acquired by us
in March 1998, where he was President from 1995 to 1998. While at QIC, his roles
included project  leadership for all IC design projects,  software  enhancements
and  daily  business  operation  management.  He  holds a degree  in  Electrical
Engineering from the University of Texas.

David  G.  Arscott  (age  56) is  General  Partner  and  Co-Founder  of  Compass
Technology Partners which invests in public and private technology companies. He
began his career with Citicorp  Venture  Capital  Limited and in 1973 opened its
West Coast office. In 1978, Mr. Arscott  co-founded  Arscott Norton & Associates
which formed three venture  capital funds. He is a director and past Chairman of
Lam  Research  Corporation  and a  director  of  Cyberstate  University.  He has
formerly served as President and Director of the Western  Association of Venture
Capitalists.  Mr.  Arscott  earned his B.A.  degree  from the College of Wooster
(1966) and his MBA from the University of Michigan.

Kemal Ian  Benouis  (age 36) joined us as Director  of Sales and  Marketing  and
General  Counsel in February  2001 and became a member of our Board of Directors
in March  2001.  Mr.  Benouis  has over six  years of sales  experience  holding
positions  including  National  Sales Manager for eLaw.com and Corporate  Market
Sales Representative and Information  Technology  Consultant for West Group, the
largest legal  publisher in the United States.  Prior to that, Mr. Benouis was a
District Hospital  Representative for Pfizer, Inc. As an Officer in the US Army,
he held  positions such as Company  Executive  Officer,  Battalion  Intelligence
Officer and UH-60 Blackhawk  Helicopter Pilot and participated in Operation Just
Cause.  Mr. Benouis holds a Bachelor of Science in Engineering  Management  from
the US Military Academy, West Point. He also received a Juris Doctorate from the
University  of  Houston  Law Center  ("UHLC")  in May 1997.  While at UHLC,  Mr.
Benouis  won the  1997  State  Bar of  Texas  Computer  Section  Annual  Writing
Competition and was a member of the Intellectual Property Law Review.

Section 16(a) of the Securities  Exchange Act of 1934, as amended (the "Exchange
Act"),  requires our directors and executive officers,  and persons who own more
than ten percent of a registered  class of our equity  securities,  to file with
the SEC initial  reports of  ownership  and reports of changes in  ownership  of
Common Stock and other equity securities of the Company. Officers, directors and
greater than ten percent  beneficial  owners are required by SEC  regulations to
furnish us with copies of all reports they file under Section 16(a).

To our  knowledge,  based  solely on our  review of the  copies of such  reports
furnished to us and written  representation that no other reports were required,
all Section 16(a) filing requirements applicable to our officers,  directors and
greater than ten-percent  beneficial owners were complied with during the fiscal
year ended March 31, 2001 with the  exception  of Form 4's for Robert  Anderson,
J.F Shea Co.,  Inc.  and David  Arscott for the month of October  2000 that were
filed on November 15, 2000.


                                       35

<PAGE>

Item 10.  Executive Compensation
<TABLE>
The following table sets forth  information  concerning the compensation paid to
the persons who served as our Chief Executive Officer during fiscal 2001 and our
three most highly  compensated  executive officers who were serving as executive
officers at the end of fiscal 2001 whose salary and bonus for fiscal 2001 was at
least $100,000 for all services in all capacities to us during fiscal 2001, 2000
and 1999.
<CAPTION>
                                          Summary Compensation Table

                                              Annual                                    Long-Term
                                           Compensation                                Compensation
                                     ------------------------                   ---------------------------
                                                             Other Annual                       All Other
Name and                     Fiscal      Salary       Bonus    Compensation        Options       Compensation
Principal Position            Year        ($)          ($)       ($) (1)             (#)           ($) (2)
------------------           ------      ------      -------     -------           -------       ------------
<S>                           <C>        <C>             <C>                            <C>         <C>
James O. Benouis              2001       175,000         0           --                 0           7,800
    President and             2000       182,292         0           --         1,500,000           8,125
    Chief Executive Officer   1999       175,000         0           --                 0           7,800

<FN>

(1)      Such Other Annual Compensation did not exceed the lesser of (i) $50,000
         or (ii) 10% of such executive officer's salary and bonus combined.

(2)      All Other  Compensation  paid to the executive  officer is comprised of
         auto allowances.
</FN>
</TABLE>
                          Option Grants in Fiscal 2001
<TABLE>
There were no options granted to James Benouis is Fiscal 2001.
<CAPTION>

                                     Fiscal Year End Option Values (1)

                                         Number of Securities                  Value of Unexercised In-the-
                                        Underlying Unexercised                       Money Options at
                                     Options at Fiscal Year End(#)                Fiscal Year End ($)(2)
                                    ------------------------------                ----------------------
Name                                Exercisable      Unexercisable              Exercisable    Unexercisable
---                                 -----------      -------------              -----------    -------------
<S>                                   <C>              <C>                         <C>            <C>
James O. Benouis                      741,246          1,108,754                   18,594         33,906
----------------------
<FN>
(1)      There were no  exercises of options to purchase our Common Stock by the
         person named in the Summary Compensation Table during fiscal 2001.
(2)      Based on the difference  between the exercise price and the fair market
         value of the options on March 30,  2001.  The fair market  value is the
         closing price of a share of our common stock, which was $0.17.
</FN>
</TABLE>
Directors  received no fee for serving as directors in fiscal 2001.  Each of our
non-employee  directors  received  options under the Company's  1990  Directors'
Stock  Option  Plan  (the  "Directors'   Plan").   Under  the  Directors'  Plan,
non-employee  directors are granted an annual option to purchase 9,000 shares of
our Common Stock.  They are also granted an option to purchase  45,000 shares of
our  Common  Stock  upon  appointment  to the Board of  Directors.  The  options
typically vest over four years, with 25% vesting one year from date of grant and
the remaining vesting monthly at a rate of 1/48 thereafter.

Under our 1988 Stock Option Plan, in the event of a dissolution  or  liquidation
of the  Company,  a  merger  in which we are not the  surviving  corporation,  a
transaction  or  series  of  transactions  in  which  50% or  more  of the  then
outstanding voting stock is sold or otherwise transferred to a single transferee
or group of related transferees,  or the sale of all or substantially all of the
assets of the Company, any or all outstanding options may be assumed or replaced
by the successor  corporation,  which assumption or replacement shall be binding
on all optionees.  In the alternative,  the successor corporation may substitute
equivalent options or provide  substantially  similar consideration to optionees
as was  provided


                                       36

<PAGE>

to  shareholders  (after  taking into  account the  existing  provisions  of the
options).  The successor  corporation  may also issue,  in place of  outstanding
shares of the Company  held by the  optionee,  substantially  similar  shares or
other  property  subject to  repurchase  restrictions  no less  favorable to the
optionee.

Under our Directors'  Plan, in the event of a Transfer of Control (as defined in
the Directors'  Plan) of the Company,  any  unexercisable or unvested portion of
outstanding options will be immediately exercisable and vested in full as of the
date 10 days prior to the date of the  Transfer of  Control.  In  addition,  the
Board of Directors of the Company,  in its sole discretion,  may arrange for the
acquiring  corporation  to either  assume the Company's  rights and  obligations
under outstanding options or substitute substantially equivalent options for the
acquiring  corporation's  stock for outstanding  options.  Any options which are
neither  assumed or substituted by the acquiring  corporation in connection with
the Transfer of Control nor  exercised as of the date of the Transfer of Control
will  terminate  and cease to be  outstanding  as of the date of the Transfer of
Control.


                                       37

<PAGE>


Item 11.  Security Ownership of Certain Beneficial Owners and Management
<TABLE>
The following  table sets forth certain  information  as of June 29, 2001,  with
respect to the beneficial ownership of our Common Stock by (i) all persons known
by us to be the  beneficial  owners  of more than 5% of the  outstanding  Common
Stock of SVR, (ii) each director of SVR,  (iii) the persons named in the Summary
Compensation Table below and (iv) all executive officers and directors of SVR as
a group.
<CAPTION>
Name and Address of Beneficial                            Amount and Nature of                     Percent
   Owner or Identity of Group                             Beneficial Ownership(1)                of Class(2)
--------------------------------                          ------------------------------         -----------
<S>                                                             <C>                                 <C>
J.F. Shea Co., Inc. (3),...........................             7,444,373                           18.3
       655 Brea Canyon Road
       Walnut, CA  91789

James O. Benouis (4),..............................             3,062,418                            7.4
       7608 Highway 71 West, Suites C & D
       Austin, TX  78735

David G. Arscott (5),..............................             2,586,449                            6.3
       1550 El Camino Real, Suite 275
       Menlo Park, CA  94025


Kemal Ian Benouis (6),.............................                12,499                              *
       3001 Bee Caves Road, Suite 200
       Austin, TX  78746

All executive officers and directors as a group (7)
(3 persons) .......................................             5,661,367                           13.6
----------
     * Less than 1 %
<FN>
(1)      Unless otherwise  indicated  below,  each person or entity named in the
         table has sole  voting and sole  investment  power with  respect to all
         shares shown as beneficially owned,  subject to community property laws
         where applicable.

(2)      Percentage of ownership is based on  40,730,342  shares of Common Stock
         outstanding on June 29, 2001.

(3)      Includes  7,380,115  shares  held  directly  by  J.F.  Shea  Co.,  Inc.
         ("JFSCI")  and  64,258  shares  held by the E&M RP Trust  (of which Mr.
         Edmund H. Shea, Jr., Vice President and Director of JFSCI, is trustee).

(4)      Includes 926,663 shares subject to options  exercisable  within 60 days
         of June 29, 2001.

(5)      Includes 878,842 shares held by Compass Chicago Partners, L.P., 101,656
         shares held by Compass Management  Partners,  L.P. and 1,554,478 shares
         held by Compass  Technology  Partners,  L.P.  Mr.  Arscott is a General
         Partner of Compass Chicago Partners, L.P., Compass Management Partners,
         L.P.  and Compass  Technology  Partners,  L.P.  Mr.  Arscott  disclaims
         beneficial  ownership  of the portion of the shares and  warrants  that
         exceeds his proportionate  interest in the limited  partnerships.  Also
         includes 24,098 shares and 27,375 shares subject to options exercisable
         within 60 days of June 29, 2001 held directly by Mr. Arscott.

(6)      Includes 12,499 shares subject to options exercisable within 60 days of
         June 29, 2001.

(7)      Includes 966,537 shares subject to options  exercisable  within 60 days
         of June 29, 2001.
</FN>
</TABLE>
                                       38

<PAGE>

Item 12.  Certain Relationships and Related Transactions

On March  26,  2001,  we issued a  Warrant  Reduction  Offer  (the  "Offer")  to
investors who held warrants to purchase shares of our Common Stock  ("Warrants")
at an exercise price of $0.53 per share (the "$0.53 Warrants"). Under the Offer,
such  investors  were able to exercise the $0.53  Warrants at a reduced price of
either  $0.13 per share or $0.115  per share.  Investors  who  exercised  at the
$0.115 price were  prohibited from selling the shares acquired from the exercise
for 60 days  commencing  from the exercise date.  Investors who exercised at the
$0.13 price had no restrictions on the sale of the underlying  shares. The Offer
expired on Friday,  April 6, 2001.  2,413,735  Warrants were exercised at $0.115
per share and  135,000  Warrants  were  exercised  at $0.13 per  share,  raising
$295,129.53.  Affiliates of a SVR director and one 10% shareholder  participated
in the Offer as follows:

               David G. Arscott,  a director and 5% shareholder of SVR exercised
               67,568  Warrants held by Compass Chicago  Partners,  LP at $0.115
               per share for a total  exercise  price of $7,770.32.  Mr. Arscott
               also  exercised  13,514  Warrants  held  by  Compass   Management
               Partners,  LP at $0.115 per share for a total  exercise  price of
               $1,554.11.  Mr. Arscott also exercised  135,136  Warrants held by
               Compass Technology  Partners,  LP at $0.115 per share for a total
               exercise price of $15,540.64. Mr. Arscott is a General Partner of
               Compass Technology Partners,  L.P., and Compass Chicago Partners,
               L.P.

               J.F. Shea Co., Inc., a 10% shareholder of SVR,  exercised 839,000
               Warrants  at  $0.115  per  share  for a total  exercise  price of
               $96,485.00.

On October  13,  2000,  we issued a Warrant  Reduction  Offer (the  "Offer")  to
investors who held warrants to purchase shares of our Common Stock  ("Warrants")
at an exercise price of $0.37 per share (the "$0.37 Warrants"). Under the Offer,
such  investors  were able to exercise the $0.37  Warrants at a reduced price of
either  $0.175 per share or $0.155 per share.  Investors  who  exercised  at the
$0.155 price were  prohibited from selling the shares acquired from the exercise
for 60 days  commencing  from the exercise date.  Investors who exercised at the
$0.175 price had no restrictions on the sale of the underlying shares. The Offer
expired on Friday, October 20, 2000. 1,341,220 Warrants were exercised at $0.155
per share and  248,729  Warrants  were  exercised  at $0.175 per share,  raising
$251,416.68.  One  officer/director of SVR, affiliates of a SVR director and one
10% shareholder participated in the Offer as follows:

               Robert  R.  Anderson,  an  officer/director  of SVR at the  time,
               exercised  77,629  Warrants  at  $0.155  per  share  for a  total
               exercise price of $12,032.50.

               David G. Arscott, a director and 5% shareholder of SVR, exercised
               55,228  Warrants held by Compass Chicago  Partners,  LP at $0.155
               per share for a total  exercise  price of $8,560.34.  Mr. Arscott
               also  exercised   5,552  Warrants  held  by  Compass   Management
               Partners,  LP at $0.155 per share for a total  exercise  price of
               $860.56.  Mr.  Arscott also  exercised  113,367  Warrants held by
               Compass Technology  Partners,  LP at $0.155 per share for a total
               exercise price of $17,571.89. Mr. Arscott is a General Partner of
               Compass Technology Partners,  L.P., and Compass Chicago Partners,
               L.P.

               J.F. Shea Co., Inc., a 10% shareholder of SVR,  exercised 872,093
               Warrants  at  $0.155  per  share  for a total  exercise  price of
               $135,174.42.

In fiscal year 2000, we undertook a  subordinated  debt  financing  comprised of
promissory notes ("Notes"), and warrants to purchase additional shares of Common
Stock  ("Warrants").  The Notes are three-year notes with an aggregate principal
amount of $1,000,000,  including  second closing Notes as described  below.  The
Notes earn  simple  interest  at a rate of ten  percent  per year.  We issued an
aggregate of 8,000,000  Warrants at $0.01 per Warrant,  including second closing
Warrants as described  below.  Each  Warrant  will  purchase one share of Common
Stock at the exercise price of $0.125 per share,  and has an expiration  date of
June 16, 2004.

This financing transaction is comprised of two closings.  The first closing took
place on June 7, 1999. Five of the investors were 5%  shareholders,  officers or
directors at the time of the  offering  and  participated  in the  offering,  as
follows:

               J.F.  Shea Co.,  Inc.,  a 10%  shareholder  of SVR,  purchased  a
               $250,000 Note and 2,000,000 Warrants.


                                       39

<PAGE>

               Bay  Area  Micro-Cap  Fund,  L.P.,  a  10%  shareholder  of  SVR,
               purchased a $100,000 Note and 800,000 Warrants.

               David G. Arscott, a director and 5% shareholder of SVR, purchased
               a  $50,000  Note and  400,000  Warrants  for  Compass  Technology
               Partners,  L.P.,  and a $50,000  Note and  400,000  Warrants  for
               Compass Chicago  Partners,  L.P. Mr. Arscott is a General Partner
               of  Compass  Technology  Partners,   L.P.,  and  Compass  Chicago
               Partners, L.P.

               Roy L. Rogers, a 5% shareholder of SVR,  purchased a $50,000 Note
               and 400,000 Warrants for the Rogers Family Trust.

               Robert R. Anderson,  an officer and director of SVR,  purchased a
               $50,000 Note and 400,000 Warrants.

The second  closing was scheduled to close on July 15, 1999, but the closing was
postponed  until the  Company  reached a Workout  Agreement  through  the Credit
Managers Association. The Workout Agreement was reached and the closing occurred
on September 24, 1999 Six of the investors in this closing were 5% shareholders,
officers  or  directors  at the time of the  offering  and  participated  in the
offering, as follows:

               J.F.  Shea Co.,  Inc.,  a 10%  shareholder  of SVR,  purchased  a
               $80,000 Note and 640,000 Warrants.

               Bay  Area  Micro-Cap  Fund,  L.P.,  a  10%  shareholder  of  SVR,
               purchased a $60,000 Note and 480,000 Warrants.

               David G. Arscott, a director and 5% shareholder of SVR, purchased
               a $15,740.74  Note and 125,926  Warrants  for Compass  Technology
               Partners,  L.P.,  a  $15,740.74  Note and  125,926  Warrants  for
               Compass  Chicago  Partners,  L.P and a $5,925.92  Note and 47,408
               Warrants for Compass Management  Partners,  L.P. Mr. Arscott is a
               General Partner of Compass  Technology  Partners,  L.P.,  Compass
               Chicago Partners, L.P. and Compass Management Partners, L.P.

               Roy L. Rogers, a 5% shareholder of SVR,  purchased a $25,000 Note
               and 200,000 Warrants for the Rogers Family Trust.

               Robert R. Anderson,  an officer and director of SVR,  purchased a
               $10,000 Note and 80,000 Warrants.

               James O.  Benouis,  an officer and  director of SVR,  purchased a
               $46,296.30 Note and 370,370 Warrants.


                                       40

<PAGE>

PART IV

Item 13. Exhibits and Reports on Form 8-K

(A)      EXHIBITS

(a)(1)   The  financial  statements  filed as part of this  Report at Item 7 are
         listed in the Index to Financial  Statements  and  Financial  Statement
         Schedules on page 17 of this Report.

(a)(2)   The financial statement schedule filed as part of this Report at Item 7
         is listed in the Index to Financial  Statements and Financial Statement
         Schedules on page 17 of this Report.

(a)(3)   The  following  exhibits  are  filed  with this  Annual  Report on Form
         10-KSB:

Exhibit
Number        Description of Exhibit
-------       ----------------------

3.01     Registrant's Articles of Incorporation as amended to date (incorporated
         by reference to Exhibit 3.01 of Registrant's  Registration Statement on
         Form S-1 ( File No.  2-89943)  filed March 14,  1984,  as amended  (the
         "1984 Registration Statement")).

3.02     Registrant's   amendment   to  Amended   and   Restated   Articles   of
         Incorporation  filed  October 16, 1998  (incorporated  by  reference to
         Exhibit  3.02 of  Registrant's  Quarterly  Report  on Form 10-Q for the
         quarter ended September 30, 1998).

3.03     Registrant's  bylaws, as amended to date  (incorporated by reference to
         Exhibit 4.01 of the 1984 Registration Statement).

3.05     Amendment to Bylaws dated November 12, 1996  (incorporated by reference
         to Exhibit 3.04 of Registrant's  Quarterly  Report on Form 10-Q for the
         quarter ended December 31, 1996).

4.01     Warrant  Reduction  Offer  Statement  dated  October 13,  2000  between
         Silicon Valley Research, Inc. and certain warrant holders (incorporated
         by reference to Exhibit 4.01 of the  Registrant's  Quarterly  Report on
         Form 10-QSB for the quarter ended September 30, 2000).

4.02     Warrant  Reduction Offer Statement dated March 26, 2001 between Silicon
         Valley Research, Inc. and certain warrant holders.

21.01    Subsidiary of the Registrant

23.01    Consent of Moss Adams LLP

27.00    Financial Data Schedule


(B)      REPORTS ON FORM 8-K

No Reports on Form 8-K were filed during the fourth quarter of 2001.


                                       41

<PAGE>

                                   SIGNATURES

In accordance  with Section 13 or 15(d) of the Exchange Act, the  Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                    SILICON VALLEY RESEARCH, INC.
                                    (Registrant)
                                    Officer

Date:        July 13, 2001          By:  /s/ James O. Benouis
         -----------------               ---------------------------------------
                                    James O. Benouis, President, Chief Executive
                                           Officer and Chief Accounting Officer


                                POWER OF ATTORNEY

Each of the  officers and  directors  of Silicon  Valley  Research,  Inc.  whose
signature  appears below hereby  constitutes and appoints Robert R. Anderson and
James O. Benouis and each of them,  their true and lawful  attorneys and agents,
with full  power of  substitution,  each with  power to act  alone,  to sign and
execute on behalf of the  undersigned  any amendment or amendments to the annual
report on Form  10-KSB and to perform any acts  necessary  in order to file such
amendments,  and each of the undersigned does hereby ratify and confirm all that
said attorneys and agents or their or his  substitutes,  shall do or cause to be
done by virtue hereof.

In  accordance  with the  Exchange  Act,  this  report  has been  signed  by the
following  persons on behalf of the  Registrant and in the capacities and on the
dates indicated.

NAME/TITLE                                                  DATE


         /s/ James O. Benouis                                   July 13, 2001
----------------------------------------------              --------------------
James O. Benouis, President, Chief Executive
Officer and Director (Principal Executive and
Financial Officer)


         /s/ David G. Arscott                                   July 13, 2001
----------------------------------------------              --------------------
David G. Arscott, Director


         /s/ Kemal Ian Benouis                                  July 13, 2001
----------------------------------------------              --------------------
Kemal Ian Benouis, Director of Sales and
Marketing and Director


                                       42