<PAGE>

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

                                  FORM 10-QSB

(Mark One)

   X     Quarterly report pursuant to Section 13 or 15(d) of the Securities
   -
                             Exchange Act of 1934
              For the quarterly period ended December 31, 1999 or
  __     Transition report pursuant to Section 13 or 15(d) of the Securities
                             Exchange Act of 1934
               For the transition period from ________to________


Commission File 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                    (IRS Employer
  incorporation or organization)                     Identification No.)


  6360 San Ignacio Avenue San Jose, CA                         95119-1231
--------------------------------------------------------------------------------
  (Address of principal executive offices)                     (Zip Code)

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


--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                     YES X                NO___
                        ---

State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practicable date.

          Common Shares Outstanding at December 31, 1999: 30,534,068

Transitional Small Business Disclosure Statement Format (Check One) YES __ NO X

        This report contains 22 pages. The exhibit Index is on page 20.
<PAGE>

                SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES

                                     INDEX

<TABLE>
<CAPTION>
                                                                                                Pages
                                                                                                -----
<S>                                                                                             <C>
Part I.      FINANCIAL INFORMATION
             ---------------------

             Item 1.  Financial Statements

                Consolidated Balance Sheets -
                 March 31, 1999 and December 31, 1999 (unaudited)                                    3

                Consolidated Statements of Operations -
                 Three and Nine Months Ended December 31, 1998 and 1999 (unaudited)                  4

                Consolidated Condensed Statements of Cash Flows -
                 Nine Months Ended December 31, 1998 and 1999 (unaudited)                            5

                Notes to Consolidated Financial Statements                                         6-9

             Item 2.  Management's Discussion and Analysis of Financial Condition
                      and Results of Operations                                                  10-18

             Item 3.  Quantitative and Qualitative Disclosures About Market Risk                    18

Part II.     OTHER INFORMATION                                                                   19-20
             -----------------

             Item 1   Legal Proceedings
             Item 2   Changes in Securities and Use of Proceeds
             Item 3   Defaults Upon Senior Securities
             Item 4   Submission of Matters to a Vote of Securities Holders
             Item 5   Other Information
             Item 6   Exhibits and Reports on Form 8-K

             Signatures                                                                             21

Exhibit 27.  Financial Data Schedule                                                                22
</TABLE>

                                 Page 2 of 22
<PAGE>

                        PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES
                          Consolidated Balance Sheets
                                (In thousands)

<TABLE>
<CAPTION>
Assets                                           March 31, 1999    December 31, 1999
------                                           --------------    -----------------
                                                                      (Unaudited)
<S>                                              <C>               <C>
Current Assets:
  Cash and cash equivalents                          $    247            $    642
  Accounts receivable, net of allowances of
     $150 at March 31, 1999 and
     $85 at December 31, 1999                             444                 595
  Prepaid expenses and other current assets               109                  86
                                                     --------          ----------
                                                          800               1,323

Fixed assets, net                                         290                 149
Other assets, net                                         969                 540
                                                     --------          ----------
                                                     $  2,059            $  2,012
                                                     ========          ==========

Liabilities and Shareholders' Equity
------------------------------------

Current Liabilities:
  Short-term borrowing                               $    225   $              --
  Current portion of long-term debt                       137                  --
  Notes payable                                            50                  25
  Accounts payable                                        450                 263
  Accrued expenses                                        478                 395
  Deferred revenue                                        235                   6
                                                     --------          ----------
                                                        1,575                 689
                                                     --------          ----------

Long-term debt, less current portion                       --               1,000
                                                     --------          ----------

Deferred tax liability                                     24                  24
                                                     --------          ----------

Commitments and Contingencies (Note 8)

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:
   26,214 shares at March 31, 1999
   and 30,534 shares at December 31, 1999              43,930              44,754
Accumulated deficit                                   (43,587)            (44,586)
Cumulative translation adjustment                         117                 131
                                                     --------          ----------
                                                          460                 299
                                                     --------          ----------

                                                     $  2,059            $  2,012
                                                     ========          ==========
</TABLE>

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

                                 Page 3 of 22
<PAGE>

                SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES
                     Consolidated Statements of Operations
                                  (Unaudited)
                     (In thousands, except per share data)

<TABLE>
<CAPTION>
                                             Three Months Ended              Nine Months Ended
                                                 December 31,                   December 31,
                                              1998        1999               1998          1999
                                              ----        ----               ----          ----
<S>                                         <C>          <C>                <C>           <C>
Revenue:
  License fees and other                     $    26     $   420            $   408       $   496
  Maintenance and services                       343         406                914         1,042
                                             -------     -------            -------       -------
  Total revenue                                  369         826              1,322         1,538
                                             -------     -------            -------       -------
Cost of revenue:
  License fees and other                          80          80                259           240
  Maintenance and services                       196         253                542           609
                                             -------     -------            -------       -------
  Total cost of revenue                          276         333                801           849
                                             -------     -------            -------       -------

Gross margin                                      93         493                521           689
                                             -------     -------            -------       -------

Operating expenses:
  Engineering, research and development          469         289              1,876         1,005
  Selling and marketing                          511          30              1,685           270
  General and administrative                     158         154                801           475
                                             -------     -------            -------       -------
  Total operating expenses                     1,138         473              4,362         1,750
                                             -------     -------            -------       -------

Operating income (loss)                       (1,045)         20             (3,841)       (1,061)
                                             -------     -------            -------       -------

Other income (expense):
  Interest income                                  7          --                 52            --
  Interest expense                               (13)        (25)               (42)          (46)
  Other, net                                      18          37                (17)          108
                                             -------     -------            -------       -------
  Total other income                              12          12                 (7)           62
                                             -------     -------            -------       -------

Income (loss) before provision for
  income taxes                                (1,033)         32             (3,848)         (999)

Provision for income taxes                        --          --                 --            --
                                             -------     -------            -------       -------
Net income (loss)                            $(1,033)    $    32            $(3,848)      $  (999)
                                             =======     =======            =======       =======


Net income (loss) per basic share            $ (0.04)    $  0.00            $ (0.15)      $ (0.04)
                                             =======     =======            =======       =======

Weighted-average common shares
  outstanding (basic)                         26,208      27,013             25,597        26,484
                                             =======     =======            =======       =======

Net income (loss) per diluted share          $ (0.04)    $  0.00            $ (0.15)      $ (0.04)
                                             =======     =======            =======       =======

Weighted-average common shares
  outstanding (diluted)                       26,208      33,023             25,597        26,484
                                             =======     =======            =======       =======
</TABLE>

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

                                 Page 4 of 22
<PAGE>

                SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES
                Consolidated Condensed Statements of Cash Flows
                                  (Unaudited)
                                (In thousands)

                                                         Nine Months Ended
                                                            December 31,
                                                         1998      1999
                                                       -------   -------
Cash Flows from Operating Activities:
Net loss                                               $(3,848)  $  (999)
Adjustments to reconcile net loss to net
cash used in operating activities:
  Depreciation and amortization:
   Fixed assets                                            232       106
   Software licenses and development costs                 525       379
  Gain on cancellation of debt                              --       (96)
  Loss on sale of fixed assets                              15        41
Changes in assets and liabilities, net:
  Accounts receivable                                       40      (151)
  Prepaid expenses and other current assets                147        23
  Accounts payable                                          20      (187)
  Accrued expenses                                        (233)      (83)
  Deferred maintenance revenue                             (95)     (229)
  Other, net                                                77        49
                                                       -------   -------

Net cash used in operating activities                   (3,120)   (1,147)
                                                       -------   -------

Cash Flows from Investing Activities:
Acquisition of fixed assets                                (52)      (16)
Proceeds from sale of fixed assets                          31        11
Capitalization of software development costs and
  purchase of software licenses                            (12)       --
                                                       -------   -------

Net cash used in investing activities                      (33)       (5)
                                                       -------   -------

Cash Flows from Financing Activities:
Proceeds from subordinated debt financing                   --     1,000
Principal payments of long-term debt                      (164)     (135)
Principal payments on notes payable                       (150)      (25)
Proceeds from issuance of common stock and warrants      2,095       693
                                                       -------   -------

Net cash provided by financing activities                1,781     1,533
                                                       -------   -------

Effect of exchange rate changes on cash                     32        14
                                                       -------   -------

Net increase (decrease) in cash and
  cash equivalents                                      (1,340)      395
Cash and cash equivalents at beginning
  of period                                              1,926       247
                                                       -------   -------

Cash and cash equivalents at end
  of period                                            $   586   $   642
                                                       =======   =======

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

                                 Page 5 of 22
<PAGE>

                SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         December 31, 1999 - Unaudited
                                (In thousands)

Note 1:  Basis of Presentation and Financial Statement Information

     The accompanying consolidated financial statements have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission for interim financial statements. Therefore, they do not include all
the disclosures which were presented in the Company's annual report on Form 10-
K. These financial statements do not include all disclosures required by
generally accepted accounting principles and accordingly, should be read in
conjunction with the consolidated financial statements and notes included as
part of the Company's latest annual report on Form 10-K.

     In the opinion of management, the consolidated financial statements include
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the consolidated financial position, results of operations and
cash flows for the interim period.  The results of operations presented are not
necessarily indicative of the results to be expected for the full year or for
any other period.

     The report of Moss Adams LLP on the Company's fiscal 1999 consolidated
financial statements dated June 10, 1999 included an explanatory paragraph
regarding the Company's ability to continue as a going concern.  There can be no
assurance that the Company will not continue to incur significant operating
losses or that required additional financing will be available to meet the
Company's business plans in fiscal 2000 and beyond.


Note 2:  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:

<TABLE>
<CAPTION>
                                                            Three Months Ended         Nine Months Ended
                                                               December 31,                December 31,
                                                           1998          1999           1998           1999
                                                         -------        -------        ------         ------
<S>                                                      <C>            <C>            <C>            <C>
Net income (loss)                                        $(1,033)       $    32        $(3,848)       $  (999)
                                                         =======        =======        =======        =======

Weighted-average common shares
  outstanding (basic)                                     26,208         27,013         25,597         26,484

Weighted-average common stock equivalents:
  Stock options                                               --          1,168             --             --
  Warrants                                                    --          4,842             --             --
                                                         -------        -------        -------        -------
Weighted-average common shares
  outstanding (diluted)                                   26,208         33,023         25,597         26,484
                                                         =======        =======        =======        =======
</TABLE>

                                 Page 6 of 22
<PAGE>

                SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                         December 31, 1999 - Unaudited
                                (In thousands)

Note 3:  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. Annual financial
statements for prior periods will be reclassified, as required. The Company's
total comprehensive earnings were as follows:

<TABLE>
<CAPTION>
                                                 Three Months Ended       Nine Months Ended
                                                    December 31,             December 31,

                                                 1998        1999          1998         1999
                                                 ----        ----          ----         ----
<S>                                           <C>         <C>           <C>          <C>
Net income (loss)                             $(1,033)    $    32       $(3,848)     $  (999)
Other comprehensive (loss) gain                     6          --            33           14
                                              -------     -------       -------      -------
 Total comprehensive income (loss)            $(1,027)    $    32       $(3,815)     $  (985)
                                              =======     =======       =======      =======
</TABLE>

Note 4:     Statement of Cash Flows Information


                                                    Nine Months Ended
                                                      December 31,
                                                  1998           1999
                                                  ----           ----
Supplemental Cash Flow Information:
Cash paid during the period for:
  Interest                                      $    32        $    --
  Income Taxes                                       --             --

Note 5:     Balance Sheet Components
                                                March 31,     December 31,
                                                  1999           1999
                                                  ----           ----
Other Assets:
Software development costs                      $   799        $   799
Software licenses                                   979            979
                                                -------        -------
                                                  1,778          1,778
Less accumulated amortization                    (1,087)        (1,466)
                                                -------        -------
                                                    691            312
Prepaid royalties, net                               25             25
Goodwill                                            195            159
Other                                                58             44
                                                -------        -------
                                                $   969        $   540
                                                =======        =======

Accrued Expenses:
Payroll and related costs                       $   228        $   240
Taxes payable                                       106            106
Accrued professional fees                           108             21
Other                                                36             28
                                                -------        -------
                                                $   478        $   395
                                                =======        =======

                                 Page 7 of 22
<PAGE>

                SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                         December 31, 1999 - Unaudited
                                (In thousands)

Note 6:  Bank Lines of Credit

     On June 8, 1998, the Company's $2,000 line of credit with its bank expired
and the $285 outstanding under the line of credit became due and payable. $225
of this amount remained outstanding as of May 11, 1999. In addition, $137
outstanding on an equipment line with the same lender also became due and
payable. The amounts outstanding under its line of credit and equipment line of
credit are classified as current in the March 31, 1999 balance sheets. On May
11, 1999, the Company entered into a Settlement Agreement with the lender
whereby SVR agreed to issue a cash payment for a portion of the debt and to
issue warrants to purchase common stock ("Warrants") for cancellation of the
remainder. The Settlement Agreement required that SVR make the cash payment and
deliver the Warrants to the lender by June 8, 1999, which the Company did in
complete settlement of the debt.


Note 7:  Subordinated Debt Financing

     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
intends to use 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.


Note 8:  Commitments and Contingencies

     As with other companies in industries similar to Silicon Valley Research,
Inc., the Company is 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 the past, several of the Company's vendors initiated collection
actions against the Company because of its inability to pay its vendors due to
its previous cash shortage. Through the Credit Managers' Association, the
Company settled with 95% of its creditors during the fiscal quarter ended
September 30, 1999. The Company settled with the remaining 5% of its creditors
at a rate of 30% of their unsecured claims for a total amount of $5.

Note 9:  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 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 Company has not yet determined the impact,
if any, of adopting this statement. The disclosures prescribed by Statement of
Position 98-1 will be effective for the year ending March 31, 2000 consolidated
financial statements.

                                 Page 8 of 22
<PAGE>

                SILICON VALLEY RESEARCH, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                         December 31, 1999 - Unaudited
                                (In thousands)


Note 10: Year 2000 Issues

     The "Year 2000 Issue" arises because most computer systems and programs
were designed to handle only a two-digit year, as opposed to a four-digit year.
When the year 2000 begins, these computers may interpret "00" as the year 1900
and could either stop processing date-related computations or could process them
incorrectly. As the Company's customers and potential customers devote resources
to this issue, resources previously allocated to other information systems
requirements may be redirected to address Y2K problems and issues. To the extent
that the Company's products are not selected as part of customers' overall Y2K
solution, redirection of these customer resources could have a material adverse
effect on the Company's results of operations and financial condition. In
addition, the Y2K Issue creates risk for the Company from unforeseen problems in
its internal computer systems and from interaction with third parties. Failure
on the Company's part, or on the part of third parties' computer systems could
have a material impact on the Company's ability to conduct its business and to
process and account for the transfer of funds electronically.

                                 Page 9 of 22
<PAGE>

ITEM 2.             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 the
Company's current view with respect to future events and financial performance.
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 2, elsewhere in this Form 10-QSB and as set forth in the Company's
form 10-K on file with the SEC, that could cause actual results to differ
materially from historical results or those anticipated. In this report, the
words "anticipates," "believes," "expects," "intends," "future," 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.

RESULTS OF OPERATIONS

REVENUE

     Revenue for the third quarter of fiscal year 2000, which ended December 31,
1999, was $826, an increase from $369 in the third quarter a year ago. Revenue
for the nine month period ended December 31, 1999 increased to $1,538 from
$1,322 over the nine month period ended December 31, 1998. Several key factors
contributed to the increase in revenue, including the Company's new distribution
agreement with The Shearwater Group, a global distributor and reseller of EDA
(Electronic Design Automation) software, the reorganization efforts made during
calendar 1999 and an increase in new license revenue resulting from sales of the
Company's new Linux based products. The sales improvement came as customers
upgraded products in anticipation of Y2K concerns and from steady sales of
design services as well as from sales of the Company's recent porting of its
existing software to Red Hat Linux 6.1. International sales, primarily in Europe
and the Far East, accounted for 3% of total revenue in the third quarter of
fiscal 2000 compared to international sales comprising 20% of the Company's
total revenue in the third quarter a year ago.

     A substantial portion of the Company's revenues in each quarter results
from shipments during the last month of that quarter, and for that reason among
others, the Company's revenues are subject to significant quarterly
fluctuations.  If revenue levels are below expectations, operating results may
be materially and adversely affected.  In addition, the Company's quarterly and
annual results may fluctuate as a result of many factors, including the size and
timing of software license fees and service contracts, timing of co-development
projects with customers, timing of operating expenditures, increased
competition, new product announcements and releases by the Company and its
competitors, gain or loss of significant customers or distributors, expense
levels, renewal of maintenance contracts, pricing changes by the Company or its
competitors, personnel changes, foreign currency exchange rates, and economic
conditions generally and in the electronics industry specifically.

     The Company's expense levels are based, in part, on its expectations as to
future revenue levels, which are difficult to predict.

COST OF REVENUE

     Cost of license fees and other for the third quarter of fiscal year 2000
was $80 just as in the third quarter of fiscal 1999.  Cost of license fees and
other for the nine months ended December 31, 1999 was $240, compared to $259 for
the nine months ended December 31, 1998.  Cost of sales of license fees and
other is primarily the amortization of software development costs and is not a
function of revenue.

     Cost of maintenance and services for the third quarter of fiscal year 2000
was $253 compared to $196 in the third quarter of fiscal 1999.  Cost of
maintenance and services for the nine months ended December 31, 1999 was $609
compared to $542 for the nine months ended December 31, 1998.  Cost of
maintenance and services is primarily the cost of providing design services,
technical support and technical documentation.  Cost

                                 Part 10 of 22
<PAGE>

of maintenance and services includes the design services costs of Quality I.C.
Corporation, which was acquired by the Company on March 31, 1998.

ENGINEERING, RESEARCH AND DEVELOPMENT EXPENSES

     Engineering, research and development expenses for the third quarter of
fiscal year 2000 were $289 compared to $469 in the third quarter a year ago.
Comparing the third quarter of fiscal 2000 and the third quarter of fiscal 1999,
engineering, research and development expenses were 35% and 127% of total
revenue, respectively. Engineering, research and development expenses for the
nine months ended December 31, 1999 were $1,005 compared to $1,876 for the nine
months ended December 31, 1998. Comparing these periods, engineering, research
and development expenses were 65% and 142% of total revenue, respectively. The
decrease in engineering, research and development expenses is due to cost-
cutting measures instituted by management, including a reduction in personnel,
while maintaining an emphasis on new product research and development.

SELLING AND MARKETING EXPENSES

     Selling and marketing expenses for the third quarter of fiscal year 2000
decreased to $30 from $511 in the third quarter a year ago.  In the third
quarter of fiscal 2000 and the third quarter of fiscal 1999, selling and
marketing expenses were 4% and 138% of total revenue, respectively.  Selling and
marketing expenses for the nine months ended December 31, 1999 decreased to $270
from $1,685 for the nine months ended December 31, 1998.  Comparing the nine-
month periods, selling and marketing expenses were 18% and 127% of total
revenue, respectively. The decrease is due to the effects of the engagement of
The Shearwater Group as the Company's worldwide distributor and the Company's
cost-cutting measures, including a reduction in salaries and occupancy costs
due to the closure of the Company's sales offices in Japan and Taiwan. The
Company will use a distributor to service the Japan and Taiwan markets in the
future. Costs for the third quarter of fiscal 1999 include approximately $100
for one-time costs associated with the closing of a sales office in Japan.

GENERAL AND ADMINISTRATIVE EXPENSES

     General and administrative expenses decreased to $154 for the third quarter
of fiscal year 2000 from $158 in the third quarter a year ago.  In the third
quarter of fiscal 2000 and the third quarter of fiscal 1999, general and
administrative expenses were 19% and 43% of total revenue, respectively.
General and administrative expenses for the nine months ended December 31, 1999
decreased to $475 from $801 for the nine months ended December 31, 1998.
Comparing the nine month periods, general and administrative expenses were 31%
and 61% of total revenue, respectively.  The decrease is due to the effects of
the Company's cost-cutting measures, including a reduction in salaries and
professional fees.

OTHER INCOME (EXPENSE)

     Other income for the first nine months of fiscal year 2000 includes $133
gain recognized on the cancellation of indebtedness.  See Notes 6 and 8 to the
Consolidated Financial Statements

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, the Company has financed its operations primarily through
sales of equity securities and to a lesser extent, cash generated from
operations.  To date in fiscal 2000, the Company has received approximately
$1,000 cash proceeds from a subordinated debt/warrant financing.  During the
nine months ended December 31, 1999, cash and cash equivalents increased $395
from $247 to $642.  This increase resulted from cash provided by the financing
activities of $1,533 less cash used by operations of $1,147 and $5 of cash used
for investing activities.  The Company received approximately $613 from the
exercise of outstanding warrants.  A possible future source of cash for the
Company is the potential exercise of outstanding warrants if the Company's stock
price were to increase.

     The Company incurred a loss for the nine months ended December 31, 1999.
At December 31, 1999, the Company had an accumulated deficit of $44,586.  For
the quarter ended December 31, 1999, the Company

                                 Page 11 of 22
<PAGE>

reported net income of $32. The continuance of profitability is primarily
dependent upon the continued development and commercial acceptance of the
Company's products, the successful management of the business, management's
ability to strategically focus the Company and the distributor's marketing and
sales ability. There can be no assurance that profitable operations will
continue. In addition, the Company is experiencing negative cash flow from
operations and may continue to experience negative cash flow from operations
through fiscal 2000 and potentially thereafter.

     The Company's primary unused sources of funds at December 31, 1999
consisted of cash and cash equivalents of $642. On June 8, 1998, the Company's
$2,000 line of credit with its bank expired and the $285 outstanding under the
line of credit became due and payable. $225 of this amount remained outstanding
as of May 11, 1999. In addition, $137 outstanding on an equipment line with the
same lender also became due and payable. On May 11, 1999, the Company entered
into a Settlement Agreement with the lender whereby SVR agreed to issue a cash
payment for a portion of the debt and to issue warrants to purchase common stock
("Warrants") for cancellation of the remainder. The Settlement Agreement
required that SVR make the cash payment and deliver the Warrants to the lender
by June 8, 1999, which the Company did in full settlement of the debt.

     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. At the
first closing, which took place on June 7, 1999, the Company received $768 cash
proceeds. This included $711 of three-year notes and the sale of approximately
5,700 Warrants at $0.01 per Warrant. The second closing was scheduled for July
15, 1999. The second 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. An agreement was
reached and the Company received approximately $312 cash proceeds from the
second closing. The Company used part of the proceeds from the financing to
complete the Settlement Agreement with its lender and to pay other accounts
payable. The Company intends to use 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.

     The Company's operations have required substantial cash in the past; for
example, $1,147 during the first nine months of fiscal 2000. Management has
implemented cost reducing measures and expects revenues to increase during the
remainder of fiscal 2000. However, the Company is required to pay several
creditors approximately $177 during calendar year 2000 in settlement of a
workout agreement. Assuming management is successful with their cost reduction
and revenue achievement programs, the Company expects to fund future
operations without requiring additional financing. However, it is possible
that it could require additional financing to fund future operations.

     The Company may issue a series of Preferred Stock with rights, preferences,
or privileges senior to those of the Common Stock. It has 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 its Common Stock was delisted from trading on the NASDAQ
national market in November, 1998, and now trades in the over-the-counter
market, its 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 the
Company's continued development and marketing of our products and services. In
addition, substantial curtailment of its operations may be required which could
result in bankruptcy.

OTHER FACTORS AFFECTING FUTURE RESULTS

Recent and Expected Losses; Accumulated Deficit.  Although for the quarter ended
-----------------------------------------------
December 31, 1999 the Company reported net income of $32, for the nine months
ended December 31, 1999, we incurred a net loss of approximately $999.  We had
an accumulated deficit of approximately $44,586 as of December 31, 1999.  We may
incur future losses.  There is no assurance that we will generate positive cash
flow from operations or that

                                 Page 12 of 22
<PAGE>

we will sustain profitability in the future. To the extent we grow or incur
losses, our operating and investing activities may use cash and, consequently,
require us to obtain additional sources of financing in the future or to reduce
operating expenses.

Need for Future Financing.  As described above, under Management Discussion and
-------------------------
Analysis-Liquidity and Capital Resources, as long as our revenues continue to
increase as anticipated, we do not expect to require additional financing to
fund our operations in the future.  However, if we cannot achieve anticipated
revenues, we may require additional funding due to the cash requirements 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, 1997,
1998 and 1999 contain 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. We may require substantial additional
funds in the near future. If we are unable to generate sufficient cash from
operations or if necessary, raise sufficient funds to cover the cost of our
operations, it is likely that any independent accountant's report on our future
financial statements will include a similar explanatory paragraph.

Dependence on Certain Customers and Resellers.  We have entered into an
---------------------------------------------
agreement with The Shearwater Group that provides that The Shearwater Group
will be the exclusive worldwide distributor for all of our products for a
minimum term of one year, such exclusivity may be extended upon the achievement
of certain sales goals for an additional one year period. While The Shearwater
Group has a financial incentive to sell our products and their initial sales
performance has been good, they have no contractual obligation to sell our
products. We cannot offer you assurance that the distributor will be able to
successfully distribute and support our products on a timely basis or that
such distributor will not reduce their efforts devoted to selling our
products. The loss of, or changes in, the relationship with, or performance
by, our distributor could have an adverse effect on our business. A small
number of customers account for a significant percentage of our total revenue.

                  PERCENTAGE OF OUR TOTAL REVENUE BY CUSTOMER

<TABLE>
<CAPTION>
                     CUSTOMER                  FISCAL 1997      FISCAL 1998     FISCAL 1999
                     --------                  -----------      -----------     -----------
<S>                                            <C>              <C>             <C>
HAL Computer Systems, Inc., a subsidiary of             14%             N/A             N/A
Fujitsu Ltd.

Lucent Technologies                                     19%             N/A             N/A

Motorola, Inc.                                          13%             13%             18%

Aspec Technology                                        N/A             20%             N/A
</TABLE>

     We cannot assure you 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:

--   extremely rapid technological change
--   frequent new product introductions and enhancements
--   evolving industry standards
--   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

                                 Page 13 of 22
<PAGE>

our current products and to develop and introduce new products on a timely and
cost-effective 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. 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.

     We announced a new product named DCP (Design Cockpit Platform).  However,
there is no guarantee that:

--   this new product will gain market acceptance
--   we will be successful in developing and marketing product enhancements

--   we will be successful in developing other new products that respond to
     technological change, evolving industry standards and changing customer
     requirements
--   we will not experience difficulties that could delay or prevent the
     successful development introduction and marketing of these products or
     product enhancements
--   our 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 Linux operating
systems and we intend for all of our future products to operate in the Unix
operating system as well as the Linux operating system. 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 we find 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. You 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 of our 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.

                                 Page 14 of 22
<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:

-  future announcements concerning our competitor's or our quarterly variations
   in operating results
-  the introduction of technological innovations, new products, or changes in
   product pricing policies
-  proprietary rights or other litigation, or
-  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 us.  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:

-  uncertainties of 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
-  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 our license revenues in the last month
of the quarter, with these revenues frequently concentrated in the last two
weeks of the quarter.  Our 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 and we may or may not become profitable.

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 our quarterly operating
results are likely to vary significantly in the future.  Our actual results
could vary materially as a result of a variety of factors, including, without
limitation:

-  the high average selling price and long sales cycle for our products
-  the relatively small number of orders per quarter

                                 Page 15 of 22
<PAGE>

-  dependence on sales to a limited number of large customers
-  timing of receipt of orders
-  successful product introduction
-  acceptance of our products and increased competition

Dependence Upon Semiconductor and Electronics Industries; General Economic and
------------------------------------------------------------------------------
Market Conditions.  At Silicon Valley Research, Inc., we are 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.  Our customers' 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 25% of the total revenue in fiscal 1997, 32% in
1998, 36% in 1999 and 2% in the first nine months of 2000.  Declining revenues
from international sales were a result of the reduction in capital expenditures
by semiconductor manufacturers, particularly in Asia, as a result of the current
financial crisis in that region, and increased competition in the EDA software
market.  We expect that international sales through our distributor will
continue to account for a significant portion of our revenue.  However, this
revenue involves a number of inherent risks, including:

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

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

     Effective December 1998, we discontinued operating our Tokyo office and in
March 1999, we discontinued operating our Taiwan office.  In the future, we will
use The Shearwater Group or another distributor to service the Japanese and
Taiwanese markets.

Competition.  The EDA software market in which Silicon Valley Research, Inc.
-----------
competes 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 integrated circuit 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 we do.  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
-  price

                                 Page 16 of 22
<PAGE>

-  support of industry standards
-  ease of use
-  delivery schedule
-  product enhancement
-  customer technical support and service

     Competition from other EDA companies that choose to enter the integrated
circuit physical design market could present particularly formidable competition
due to their large installed customer base and their ability to offer a complete
integrated circuit design solution.  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.  We cannot assure you 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 our business,
operating results and financial condition.

Management Transition.  Here at Silicon Valley Research, Inc., we are
---------------------
experiencing a period of management transition that has placed, and may continue
to place, a significant strain on our resources, including our personnel.  James
O. Benouis joined the Company in March 1998 as our President and Chief Operating
Officer.  On August 4, 1998, Mr. Benouis was appointed our Chief Executive
Officer.  Effective April 2, 1999, Laurence G. Colegate, Jr. resigned as Chief
Financial Officer.

     Our ability to manage growth successfully will require our management
personnel to work together effectively and will require us to improve our
operational, management and financial systems and controls.  If our management
is unable to bring about this transition effectively, our business, competitive
position, results of operations and financial condition will be materially and
adversely affected.  See "Dependence on Key Personnel" below.

Dependence on Key Personnel.  Our success depends to a significant extent upon a
---------------------------
number of key technical and management employees, in particular, Robert R.
Anderson, Chairman, and James O. Benouis, President and Chief Executive Officer.
We do not currently have "key man" life insurance on Mr. Anderson or Mr.
Benouis.  The loss of services of Mr. Anderson or Mr. Benouis or any of our
other key employees could have a material adverse effect on us.  See "Management
Transition" above.

     Also, our success depends in large part on our ability to attract and
retain highly skilled technical, managerial, sales and marketing personnel.
Competition for such talented personnel is intense.  We cannot assure you that
we will be successful in retaining our key technical and management personnel or
in attracting and retaining the personnel we require now in order to grow.

Proprietary Rights.  Silicon Valley Research, Inc. relies on contract, trade
------------------
secret and copyright law to protect its technology.  Competitors may develop
similar or superior technologies 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 is 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 block our ability to sell products in the United States and
abroad, and could result in an award of substantial damages.  In the event of a
claim of infringement, Silicon Valley Research, Inc. and our customers could be
required to obtain one or more licenses from third parties.

                                 Page 17 of 22
<PAGE>

We cannot assure you that either our customers or we could obtain necessary
licenses from third parties at a reasonable cost or at all.

Concentration of Stock Ownership.  Our present directors, executive officers and
--------------------------------
5% shareholders and their affiliates beneficially own approximately 56% of the
outstanding common stock as of December 31, 1999.  As a result, these
shareholders may be able to exercise significant influence over all matters
requiring shareholder approval, including the election of directors and approval
of significant corporate transactions.  Such concentration of ownership may have
the effect of delaying or preventing a change in control of Silicon Valley
Research, Inc.

Depressive Effect of Warrants.  We have a substantial number of common stock
-----------------------------
warrants outstanding with an exercise price of $0.125 (5,216) and of $0.37
(1,983).  These warrants may have the effect of causing our stock price to be
lower than it would be otherwise.  During the third fiscal quarter of 2000, the
Company received approximately $613 from the exercise of warrants.

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 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.  We have not yet
determined the impact, if any, of adopting this statement.  The disclosures
prescribed by Statement of Position 98-1 will be effective for the year ending
March 31, 2000 consolidated financial statements.

Year 2000 Issue.  The "Year 2000 Issue" arises because most computer systems and
---------------
programs were designed to handle only a two-digit year, as opposed to a four-
digit year.  When the year 2000 begins, these computers may interpret "00" as
the year 1900 and could either stop processing date-related computations or
could process them incorrectly.  As our customers and potential customers devote
resources to this issue, resources previously allocated to other information
systems requirements may be redirected to address Y2K problems and issues.  To
the extent that our products are not selected as part of customers' overall Y2K
solution, redirection of these customer resources could have a material adverse
effect on our results of operations and financial condition.  In addition, the
Y2K Issue creates risk for us from unforeseen problems in our internal computer
systems and from interaction with third parties.  Failure on our part, or on the
part of third parties' computer systems could have a material impact on our
ability to conduct our business and to process and account for the transfer of
funds electronically.  The Company's management has evaluated the effect of Y2K
on its systems and software products and does not anticipate any material
adverse effects from Y2K on its operations or financial position.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not Applicable

                                 Page 18 of 22
<PAGE>

                          PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings:

          As with other companies in industries similar to Silicon Valley
          Research, Inc., the Company is 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 the past, several
          of the Company's vendors initiated collection actions against the
          Company because of its inability to pay its vendors due to its
          previous cash shortage. Through the Credit Managers' Association, the
          Company settled with 95% of its creditors during the fiscal quarter
          ended September 30, 1999. The Company settled with the remaining 5% of
          its creditors at a rate of 30% of their unsecured claims for a total
          amount of $5,000.

Item 2.   Changes in Securities and Use of Proceeds:

          In June 1999, the Company began a subordinated debt/warrant financing.
          The financing included approximately $1,000,000 of three-year notes
          and the sale of approximately 8,000,000 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 $768,200 cash proceeds from this
          closing. This included $711,000 of three-year notes and the sale of
          approximately 5,700,000 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 $311,800 cash proceeds from the second closing.
          The Company used part of the proceeds from the financing to complete
          the Settlement Agreement with its lender and to pay other accounts
          payable and intends to use 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.

          The Company received $504,380.50 from the exercise of 4,035,044
          warrants, which were issued at an exercise price of $0.125 per share.
          The Company received $86,046.83 from the exercise of 232,559 warrants,
          which were issued at an exercise price of $0.37 per share. The Company
          received $22,260.00 from the exercise of 42,000 warrants, which were
          issued at an exercise price of $0.53 per share.

Item 3.   Defaults Upon Senior Securities: Not Applicable

Item 4.   Submission of Matters to a Vote of Securities Holders: Not Applicable


Item 5.   Other Information: Not Applicable

                                 Page 19 of 22
<PAGE>

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

                      (A)  Exhibits:

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

(a)(1)    The financial statements filed as part of this Report at Item 1 are
          listed in the Index to Financial Statements and Financial Statement
          Schedules on page 2 of this Report.

(a)(2)    The following exhibits are filed with this Quarterly Report on Form
          10-Q:

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 (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).

10.03     Contract with The Shearwater Group, Inc. dated November 11, 1999

27.00     Financial Data Schedule


                      (B)  Reports on Form 8-K:

No Reports on Form 8-K were filed during the quarter covered by this report.

                                 Page 20 of 22
<PAGE>

                                   SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                    SILICON VALLEY RESEARCH, INC.



Date: February 14, 2000             /s/ James O. Benouis
      -----------------             ---------------------------------
                                    James O. Benouis
                                    President and
                                    Chief Executive Officer

                                    (Chief Financial and Accounting
                                    Officer)

                                 Page 21 of 22