<PAGE>
                                           

                                           
                                    UNITED STATES                               
                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549
                                           
                                      FORM 10-Q
                                           
                                           
                                           
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 for the quarterly period ended June 30, 1997 or

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 for the transition period from           to          
                                               ---------    ---------
                  
Commission file number:  0-20923
    
    
    
                               SUMMIT DESIGN, INC.                            
            (Exact name of registrant as specified in its charter)
 
              DELAWARE                                      93-1137888
(State or other jurisdiction of                 (I.R.S. Employer Identification 
 incorporation or organization)                               Number)  
 
 
 
                             9305 S. W. GEMINI DRIVE,
                             BEAVERTON, OREGON  97008
                     (Address of principal executive office)
      Registrant's Telephone number, including area code:  (503) 643-9281
 

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        
                                                     -----       -----

As of August  5, 1997, the Registrant had outstanding 14,024,092 shares of 
Common Stock.

<PAGE>

                               SUMMIT DESIGN, INC.
                                      INDEX
                                           
                                           
                                           
PART I     FINANCIAL INFORMATION

Item 1   Condensed Consolidated Financial Statements

         Condensed Consolidated Balance Sheets as of June 30, 1997 
         (unaudited) and December 31, 1996.                                    3

         Condensed Consolidated Statements of Operations for the 
         three month periods ended June 30, 1997 and 1996 and for the
         six month periods ended June 30, 1997 and 1996 (unaudited).           4

         Condensed Consolidated Statements of Cash Flows for
         the six month periods ended June 30, 1997 and 1996 (unaudited).       5

         Notes to Condensed Consolidated Financial Statements.                 6

Item 2   Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                   8

PART II    OTHER INFORMATION

Item 1   Not Applicable                                         

Item 2   Not Applicable

Item 3   Not Applicable                                         

Item 4   Submission of Matters to a Vote of Security Holders                  25

Item 5   Not Applicable                                              

Item 6   Exhibits and Reports on Form 8-K                                     25

Signature                                                                     26

Exhibit Index                                                                 27



                                     -2-

<PAGE>

                               SUMMIT DESIGN, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (in thousands)
                                                                      


<TABLE>
<CAPTION>
                                                                  June 30, 1997      December 31, 1996
                                                              -------------------   -------------------
                                                                   (Unaudited)
<S>                                                           <C>                   <C>


                  ASSETS
Current assets:
 Cash and cash equivalents........................                    $  21,992              $  19,772
 Accounts receivable..............................                        5,925                  5,567
 Prepaid expenses and other.......................                          418                    487
                                                              -------------------    -------------------
   Total current assets...........................                       28,335                 25,826

Furniture and equipment, net......................                        2,214                  1,832
Notes receivable from related parties.............                          425                      -  
Deferred taxes....................................                          500                    500
Deposits and other assets.........................                          331                    468
                                                              -------------------   -------------------
     Total assets.................................                    $  31,805              $  28,626
                                                              -------------------   -------------------
                                                              -------------------   -------------------

                 LIABILITIES
Current liabilities:
 Long-term debt, current portion..................                    $     391              $     462
 Capital lease obligations, current portion.......                           41                     65
 Accounts payable.................................                        1,605                  1,454
 Accrued liabilities..............................                        3,030                  2,869
 Deferred revenue.................................                        3,372                  3,758
                                                              -------------------   -------------------
   Total current liabilities......................                        8,439                  8,608

Long-term debt, less current portion..............                          675                    675
Capital lease obligations, less current portion...                           70                     95
Deferred revenue, less current portion............                           84                     67
                                                              -------------------   -------------------
   Total liabilities..............................                        9,268                  9,445
                                                              -------------------   -------------------

Commitments and contingencies

              STOCKHOLDERS' EQUITY
Common stock, $.01 par value. Authorized 30,000 
shares; issued and outstanding 14,024 shares at 
June 30, 1997 and 13,873 shares at 
December 31, 1996.................................                          140                    139
Additional paid-in capital........................                       33,539                 33,235
Accumulated deficit...............................                      (11,142)               (14,193)
                                                              -------------------   -------------------
   Total stockholders' equity.....................                       22,537                 19,181
                                                              -------------------   -------------------
     Total liabilities and stockholders' equity...                    $  31,805              $  28,626
                                                              -------------------   -------------------
                                                              -------------------   -------------------
</TABLE>


The accompanying notes are an integral part of the condensed consolidated 
financial statements



                                    -3-

<PAGE>

                               SUMMIT DESIGN, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In thousands, except per share data)
                                  (Unaudited)
                                                                      
                                                                      
           
<TABLE>                                                           
<CAPTION>
                                                             Three Months Ended            Six Months Ended
                                                                  June 30,                     June 30,
                                                        ---------------------------    ----------------------------
                                                            1997           1996           1997           1996
                                                            ----           ----           ----           ----
<S>                                                         <C>            <C>           <C>             <C>
Revenue:
 Product licenses.................................          $  5,576       $  3,644       $  10,454      $  7,191
 Maintenance and services.........................             1,418            977           2,899         1,895
 Other............................................               125            142             267           284
                                                        ---------------------------    ----------------------------
   Total revenue..................................             7,119          4,763          13,620         9,370

Cost of revenue:
 Product licenses.................................               164            146             349           278
 Maintenance and services.........................               141            109             250           211
                                                        ---------------------------    ----------------------------
   Total cost of revenue..........................               305            255             599           489
                                                        ---------------------------    ----------------------------
     Gross profit.................................             6,814          4,508          13,021         8,881

Operating expenses:
 Research and development.........................             1,656          1,445           3,087         2,857
 Sales and marketing..............................             2,571          2,179           5,088         4,404
 General and administrative.......................               878            830           2,055         1,544
                                                        ---------------------------    ----------------------------
   Total operating expenses.......................             5,105          4,454          10,230         8,805

Income from operations............................             1,709             54           2,791            76
 
Interest expense..................................                (2)            (9)             (9)          (76)
Other income, net.................................               231              7             449            22
                                                        ---------------------------    ----------------------------
Income before income taxes........................             1,938             52           3,231            22
Income tax provision..............................               100             33             180           209
                                                        ---------------------------    ----------------------------
Net income (loss).................................          $  1,838       $     19        $  3,051       $  (187)
                                                        ---------------------------    ----------------------------
                                                        ---------------------------    ----------------------------
Net income (loss) per share.......................          $   0.13       $    0.0        $   0.21       $  (0.02)
                                                        ---------------------------    ----------------------------
                                                        ---------------------------    ----------------------------
Number of shares used in per share calculation....            14,650         12,679          14,758         12,609
</TABLE>


The accompanying notes are an integral part of the condensed consolidated 
financial statements                                                          
    


                                    -4-

<PAGE>

                               SUMMIT DESIGN, INC. 
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (In thousands)
                                    (Unaudited)
                                                                      
<TABLE>
<CAPTION>
                                                                                Six Months Ended
                                                                                    June 30,
                                                                             -----------------------
                                                                               1997           1996
                                                                            ---------      --------
<S>                                                                         <C>            <C>
Cash flows from operating activities:
   Net income (loss).................................................       $  3,051       $  (187)
   Adjustments to reconcile net income (loss) to net cash
    provided by operating activities:
       Depreciation and amortization ................................            397           426
       Loss on asset disposition.....................................              1             -  
       Changes in assets and liabilities:
           Accounts receivable.......................................           (358)        1,818
           Prepaid expenses and other................................             69          (107)
           Accounts payable..........................................            152          (228)
           Accrued liabilities.......................................            160            61
           Deferred revenue..........................................           (369)        1,795
           Other, net................................................            105          (123)
                                                                            ---------      --------
   Net cash provided by operating activities.........................          3,208         3,455
                                                                            ---------      --------
Cash flows from investing activities:
   Additions to furniture and equipment..............................           (747)         (397)
   Proceeds from sale of assets......................................              -             2
   Note receivable from employees....................................           (425)            -  
   Investment in joint venture.......................................              -          (100)
                                                                            ---------      --------
     Net cash used in investing activities...........................         (1,172)         (495)
                                                                            ---------      --------
Cash flows from financing activities:
   Issuance of common stock, net of issuance costs...................            305           118
   Issuance of TriQuest Preferred Stock..............................              -           987
   Repurchase of common stock........................................              -            (2)
   Proceeds from long-term debt......................................              -            54
   Short term borrowings.............................................              -        (1,050)
   Principal payments of debt obligations............................            (71)         (254)
   Principal payments of capital lease obligations...................            (50)         (116)
                                                                            ---------      --------
     Net cash provided by (used in) financing activities.............            184          (263)
                                                                            ---------      --------
     Increase in cash and cash equivalents...........................          2,220         2,697
Cash and cash equivalents, beginning of period.......................         19,772           704
                                                                            ---------      --------
Cash and cash equivalents, end of period.............................       $ 21,992       $ 3,401 
                                                                            ---------      --------
                                                                            ---------      --------

Supplemental disclosure of cash flow information:
   Cash paid during the period for:
       Interest......................................................       $      9       $    64
       Income taxes..................................................             38           188

Supplemental disclosure of non-cash investing and
   financing activities:
 Equipment acquired under capital leases                                           -            23
</TABLE>

                                           
The accompanying notes are an integral part of the condensed consolidated 
financial statements



                                    -5-
<PAGE>

                                 SUMMIT DESIGN, INC.
                 Notes to Condensed Consolidated Financial Statements
                                     (Unaudited)
                                           

1.     BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared by Summit
Design, Inc. ("the Company") in accordance with the rules and regulations of the
Securities and Exchange Commission.  Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted in
accordance with such rules and regulations.  In the opinion of management, the
accompanying unaudited financial statements reflect all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the financial
position of the Company, and its results of operations and cash flows.  These
financial statements should be read in conjunction with the audited financial
statements and notes thereto for the years ended December 31, 1996, 1995, and
1994 included in the Company's Form 10-K filed for December 31, 1996.

The results of operations for the six months ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997 or any other future interim period, and the Company makes no
representations related thereto.

2.      ACQUISITION OF TRIQUEST DESIGN AUTOMATION, INC.

On February 28, 1997, the Company acquired TriQuest Design Automation, Inc., a
California corporation ("TriQuest").  TriQuest develops hardware description
language analysis and optimization tools for the design of high performance,
deep submicron integrated circuits.  The aggregate consideration for the
acquisition (including shares of common stock reserved for issuance upon
exercise of TriQuest options assumed by the Company) was 775,000 shares of
common stock.  The transaction was accounted for as a "pooling of interests" in
accordance with generally accepted accounting principles.  In compliance with
such principles, the Company's operating results have been restated to include
the results of TriQuest as if the acquisition had occurred at the beginning of
the first period presented.



3.      BALANCE SHEET COMPONENTS, (IN THOUSANDS)

                                          June 30, 1997       December 31, 1996
                                          -------------       -----------------
                                           (Unaudited)

Accounts Receivable:
 Trade ................................     $  6,364               $  6,000 
 Less allowance for doubtful accounts..         (439)                  (433)
                                            --------               ---------
                                            $  5,925               $  5,567
                                            --------               ---------
                                            --------               ---------
Furniture and equipment:
 Office furniture equipment............     $    556               $    513
 Computer equipment....................        3,622                  3,124
 Leasehold improvements................           66                     41
                                            --------               ---------
                                               4,244                  3,678
Less accumulated depreciation..........       (2,030)                (1,846)
                                            --------               ---------
                                            $  2,214               $  1,832
                                            --------               ---------
                                            --------               ---------


                                              -6-
<PAGE>

                                        SUMMIT DESIGN, INC.
                      Notes to Condensed Consolidated Financial Statements
                                          (Unaudited)
                                                                      



Accrued expenses:
 Commissions payable............................         $   60         $  173
 Payroll and related benefits...................          1,798          1,610
 Accrued management relocation costs............                            24
 Accounting and legal...........................            282            301
 Sales and state income taxes payable...........            219            115
 Other..........................................            671            647
                                                       --------       --------
   Total accrued expenses.......................         $3,030         $2,870
                                                       --------       --------
                                                       --------       --------
Long-term debt:
 Marketing grant payable to the Israeli government       $  364         $  364
 Chief Scientist grant payable to the Israeli         
 government.............................                    702            773
                                                       --------       --------
                                                          1,066          1,137
Less current portion............................           (391)          (462)
                                                       --------       --------
Non current portion.............................         $  675         $  675
                                                       --------       --------
                                                       --------       --------

4.      IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS


During February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128") and
Statement of Financial Accounting Standards No. 129  "Disclosure of Information
about Capital Structure" ("SFAS 129"), which are effective for the Company's
1997 fiscal year.  The Company's management has studied the implications of SFAS
128 and SFAS 129, and based on the initial evaluation, does not expect the
adoption to have a material impact on the Company's financial condition or
results of operations.

In June 1997, the FASB issued SFAS NO. 130, "Comprehensive Income." SFAS No. 
130 becomes effective in 1998 and requires reclassification of earlier 
financial statements for comparative purposes.  SFAS NO. 130 requires that 
changes in the amounts of certain items, including foreign currency 
translation adjustments and gains and losses on certain securities be shown 
in the financial statements.  SFAS No. 130 does not require a specific format 
for the financial statement in which comprehensive income is reported, but 
does require that an amount representing total comprehensive income be 
reported in that statement.  Management has not yet determined the effect, if 
any, of SFAS No. 130 on the consolidated financial statements.

Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments 
of an Enterprise and Related Information."  This Statement will change the way 
public companies report information about segments of their business in their 
annual financial statements and requires them to report selected segment 
information in their quarterly reports issued to shareholders.  It also 
requires entity-wide disclosures about the products and services an entity 
provides, the material countries in which it holds assets and reports 
revenues, and its major customers.  The Statement is effective for fiscal 
years beginning after December 15, 1997.  Management has not yet determined 
the effect, if any, of SFAS No. 131 on the consolidated financial statements.

5.      SUBSEQUENT EVENT

On July 11, 1997 the Company sold substantially all of the assets used in its 
business of developing and marketing its Test Development Series "TDS" 
Products (the "Asset Sale") to Credence Systems Corporation ("CSC") for $5 
million.  CSC will also assume certain liabilities, including the Company's 
obligations under TDS maintenance contracts entered into prior to the 
closing.  CSC also purchased $2 million of Visual interface licenses 
in the second quarter of 1997.  TDS product license, maintenance and services 
and other revenue for the three months ended June 30, 1997 and 1996 were 
$1,672,000 and $1,790,000 respectively, and for the six months ended June 30, 
1997 and 1996 were $3,530,000 and $3,642,000, respectively, and $7,331,000 
for the year ended December 31, 1996.

In addition to the transactions referenced in the above paragraph, the 
Company and CSC also entered into a Software OEM License agreement ("OEM 
Agreement") in which CSC agreed to purchase $16 million of Visual Testbench 
licenses over a thirty-month period subject to specified quarterly maximums 
and certain additional conditions. Additionally CSC entered into an 18 month 
maintenance agreement for $2 million associated with the Visual Testbench 
product.

Additionally, in July 1997, the Company entered into an agreement to lend up 
to $2.5 million to an independent software development company pursuant to a 
secured loan agreement. Borrowings under this agreement bear interest at 
prime rate plus 2%.


                                    -7-
<PAGE>



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


IMPORTANT NOTE ABOUT FORWARD LOOKING STATEMENTS

The following discussion contains forward looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934.  Predictions of future events are inherently uncertain. 
Actual events could differ materially from those predicted in the forward
looking statements as a result of the risks set forth in the following
discussion, and, in the particular, the risks discussed below under the
subheading "Additional Risk Factors that Could Affect Operating Results and
Market Price of Stock."

OVERVIEW

Summit was founded in December 1993 to act as the holding company for Test
Systems Strategies, Inc. ("TSSI") and SEE Technologies Software Environment for
Engineers Ltd. ("SEE Technologies"), (now Summit Design (EDA) Ltd.)
(collectively , the "Reorganization").  TSSI was founded in 1979 to develop and
market integrated circuit ("IC" or "chip") manufacturing test products. In
January 1993, TSSI retained a new Chief Executive Officer and began to
restructure its senior management team. Thereafter, the Company broadened its
strategy from focusing primarily on manufacturing test products to include
providing graphical Systems Level Design Automation ("SLDA") design creation and
verification tools and integrating these with its core technology. As part of
its strategy, in early 1994, TSSI acquired SEE Technologies, an Israeli company
that, through its predecessor, began operations in 1983 and had operated
primarily as a research and development and consulting company focused on the
electronic design automation ("EDA") and SLDA market. As a result of the
Reorganization, TSSI and SEE Technologies became wholly-owned subsidiaries of
Summit in the first quarter of 1994.

The Company's ongoing implementation of its strategy has involved significant
expenditures. Following the Reorganization, the Company significantly increased
its research and development expenditures to support the continued development
of SLDA and Design to Test products. To promote its products, the Company has
added sales and marketing staff, increasing its sales and marketing expenditures
by 147% from 1993 to 1996, and has restructured its key distributor
relationships. This concurrent effort to develop products and promote market
awareness and acceptance of its products in a new and evolving market
contributed to the Company's annual losses. Such losses were mitigated in part
in each of the six quarters following the Reorganization by revenue from initial
stocking orders from distributors and one-time sales of technology. The Company
introduced its first SLDA product, Visual HDL for VHDL 1.0, in the first quarter
of 1994. This product lacked compiled simulation and operated only on a PC
platform. In the third quarter of 1994, with the release of version 2.5, Summit
expanded the simulation capability of Visual HDL for VHDL and introduced its
UNIX-based version of this product.

Prior to the Reorganization, the Company's TDS product and related maintenance
revenue accounted for all of the Company's revenue.  Since the Reorganization,
the Company's revenue has been predominantly derived from two product lines,
Visual HDL, which includes Visual HDL for VHDL and Visual HDL for Verilog, and
TDS. 

Revenue consists primarily of fees for licenses of the Company's software
products, maintenance and customer training. Revenue from the sale of software
licenses is recognized at the later of the time of shipment or satisfaction of
all acceptance terms. Maintenance revenue is deferred and recognized ratably
over the term of the maintenance agreement, which is typically 12 months.
Revenue from customer training is recognized when the service is performed. The
Company sells its products through a direct sales force in North America and
selected European countries and through distributors in the Company's other


                                      -8-
<PAGE>




international markets. Revenue from product sales through distributors is
recognized net of the associated distributor discounts. Fees received for
granting distribution rights are deferred and recognized ratably over the term
of the distribution agreement. Although the Company has not adopted a formal
return policy, the Company generally reimburses customers in full for returned
products. Estimated sales returns are recorded upon delivery of the product.

The Company's products have a range of prices which depend on platform, HDL
language, functionality, duration of license and distribution channel. In
addition, the Company's products perform a variety of functions, certain of
which are, and in the future may be, offered as separate products or discrete
point solutions by the Company's existing and future competitors. For example,
certain companies currently offer design entry products without simulators.
There can be no assurance that such competition will not cause the Company to
offer point solutions instead of, or in addition to, the Company's current
software products. Such point solutions would be priced lower than the Company's
current product offerings and could cause the Company's average selling prices
to decrease. Accordingly, based on these and other factors, the Company expects
that average selling prices for its products will continue to fluctuate in the
future.

The Company has entered into a joint venture with Anam, effective April 1, 
1996, pursuant to which the joint venture corporation (Summit Asia) sells, 
distributes and supports all of Summit's products in the Asia-Pacific region, 
excluding Japan.  Summit Asia has acted in such capacity since April 1, 1996. 
Prior to that date, Anam was an independent distributor of the Company's 
products. The amount of revenue from sales through Summit Asia which is 
remitted to the Company is fixed by the joint venture agreement at a 
percentage which approximates the percentage applicable to sales through Anam 
prior to the formation of the joint venture. Excluding one-time sales of 
technology, sales through Anam accounted for 2.4% and 3.6% of the Company's 
total revenue and for 21.7% and 33.8% of the Company's revenue attributable 
to the Asia-Pacific region excluding Japan for the years ended December 31, 
1995 and 1994, respectively.  For the year ended December 31, 1996, Anam and 
Summit Asia together accounted for 3.8% of the Company's revenue and 31.0% of 
the Company's revenue attributable to the Asia-Pacific region excluding Japan.

The Company accounts for its ownership interest in Summit Asia on the equity
method of accounting and, as a result, the Company's pro rata share of the
earnings and losses of Summit Asia will be recognized as income or losses in the
Company's income statement in "Other income, net." The Company does not expect
Summit Asia to recognize a profit for the foreseeable future and thus does not
expect to recognize income from its investment in Summit Asia for the
foreseeable future, if at all. 

Approximately 37%, 40%, 45% and 50% of the Company's total revenue for the three
months ended June 30, 1997 and 1996, and for the six months ended June 30, 1997
and 1996, respectively, were attributable to sales made outside the United
States. The Company expects that international revenue will continue to
represent a significant portion of its total revenue. The Company's
international revenue is currently denominated in U.S. dollars. As a result,
increases in the value of the U.S. dollar relative to foreign currencies could
make the Company's products more expensive and, therefore, potentially less
competitive in those markets. The Company pays the expenses of its international
operations in local currencies and does not engage in hedging transactions with
respect to such obligations. International sales and operations are subject to
numerous risks, including tariff regulations and other trade barriers,
requirements for licenses, particularly with respect to the export of certain
technologies, collectability of accounts receivable, changes in regulatory
requirements, difficulties in staffing and managing foreign operations and
extended payment terms. 

--------------------------
(1) This paragraph contains forward-looking statements reflecting current 
expectations.  There can be no assurance that the Company's actual future 
performance will meet the Company's current expectations.  Investors are 
strongly encouraged to review the section entitled "Additional Risk Factors 
That Could Affect Operating Results and Market Price of Stock" commencing on 
page 17 for a discussion of factors that could affect future performance.

                                   -9-
<PAGE>


On February 28, 1997, Summit completed its acquisition of TriQuest Design   
Automation ("TriQuest"). TriQuest develops HDL analysis and  optimization 
tools for the design of high performance, deep submicron integrated 
circuits. The transaction is being accounted for as a "pooling of 
interest" in accordance with generally accepted accounting principals.
  
Effective July 1, 1997 the Company sold substantially all of the assets used 
in its business of developing and marketing its Test Development Series 
"TDS" Products (the "Asset Sale") to Credence Systems Corporation ("CSC").  
The increase in the Company's product licenses revenue during the last nine 
quarters has been primarily due to increased revenue associated with the 
Company's SLDA products, and the Asset Sale will allow the Company to focus 
on the development and marketing of these products.
  
Substantially all of the Company's Design to Test product license revenue and 
related maintenance and services revenue for the year ended December 31, 1996 
and the six months ended June 30, 1997 were attributable to the TDS products. 
As of July 1, 1997, TDS products will cease to be a source of such revenues. 
CSC assumed the Company's obligations under TDS maintenance contracts entered 
into prior to the closing and the Company will not recognize deferred revenue 
associated with such contracts after June 30, 1997. The Company believes that 
its cost of revenue and operating expenses will decrease in absolute dollars 
in the near term due to the absence of costs and expenses associated with the 
TDS products and the related maintenance contracts.(1)
  
Summit maintained  exclusive rights to its Visual Testbench technology and 
CSC entered into an agreement to purchase a minimum of $16,000,000 of Visual 
Testbench licenses over a thirty-month period subject to specified quarterly 
maximums and certain additional conditions and $2,000,000 of maintenance over 
an eighteen month period. At the completion of the thirty month period, under 
certain conditions, CSC may obtain shared ownership to the Visual Testbench 
for sales into the ATE marketplace.

-------------------------
(1) This paragraph contains forward-looking statements reflecting current 
expectations.  There can be no assurance that the Company's actual future 
performance will meet the Company's current expectations.  Investors are 
strongly encouraged to review the section entitled "Additional Risk Factors 
That Could Affect Operating Results and Market Price of Stock" commencing on 
page 17 for a discussion of factors that could affect future performance.

                                       -10-
<PAGE>


RESULTS OF OPERATIONS
  
The following table sets forth for the periods indicated, certain financial data
as a percentage of revenue.
<TABLE>
                                              Three Months                  Six Months 
                                             Ended June 30,                Ended June 30,
                                           -------------------           -------------------
                                           1997           1996           1997           1996
                                           ----           ----           ----           ----
<S>                                        <C>            <C>            <C>            <C>
Revenue:
     Product licenses................     78.3%          76.5%          76.8%           76.8%
     Maintenance and services........     19.9           20.5           21.2            20.2
     Other...........................      1.8            3.0            2.0             3.0
                                         -----          -----          -----           -----
         Total revenue...............    100.0          100.0          100.0           100.0
Cost of revenue:            
     Product licenses................      2.3            3.1            2.6             3.0
     Maintenance and services........      2.0            2.3            1.8             2.2
                                         -----          -----          -----           -----
         Total cost of revenue.......      4.3            5.4            4.4             5.2
                                         -----          -----          -----           -----
         Gross profit................     95.7           94.6           95.6            94.8
Operating expenses:
     Research and development........     23.3           30.3           22.7            30.5
     Sales and marketing.............     36.1           45.7           37.3            47.0
     General and administrative (a)..     12.3           17.5           15.1            16.5
                                         -----          -----          -----           -----
         Total operating expenses....     71.7           93.5           75.1            94.0
                                         -----          -----          -----           -----
Income from operations...............     24.0            1.1           20.5             0.8
Other income (expense), net..........      3.2            0.0            3.2            (0.6)
                                         -----          -----          -----           -----
Income (loss) before income taxes....     27.2            1.1           23.7             0.2
Income tax provision.................      1.4            0.7            1.3            (2.2)
                                         -----          -----          -----           -----
Net income (loss)....................     25.8%           0.4%          22.4%           (2.0)%
                                         -----          -----          -----           -----
                                         -----          -----          -----           -----
</TABLE>
(a) General and administrative expenses for the six months ended June 30, 1997
    include a one-time charge of $379,000 (2.8% of revenue) for costs relating 
    to the acquisition of TriQuest.
  
TOTAL REVENUE
  
The Company's revenue is comprised of product licenses revenue, maintenance and
services revenue and other revenue.  Total revenue increased by 50% from $4.8
million for the three months ended June 30, 1996 to $7.1 million for the three
months ended June 30, 1997 and total revenue increased by 45.5% from $9.4
million for the six months ended June 30, 1996 to $13.6 million for the six
months ended June 30, 1997. 

Sales through one distributor accounted for 11.4% and 9.8% and sales through 
another distributor accounted for 5.7% and 9.3% of the Company's total 
revenue for the three months ended June 30, 1997 and 1996, respectively.  
Sales through one distributor accounted for 13.5% and 14.9% and sales through 
another distributor accounted for 5.2% and 10.7% of the Company's total 
revenue for the six months ended June 30, 1997 and 1996, respectively.  Sales 
to one customer accounted for 28.3 % of total revenue for the three months 
ended June 30, 1997 and 15.6% of total revenue for the six months ended June 
30, 1997.  Sales to two additional customers accounted for 12.0% and 10.7%, 
respectively, of the Company's total revenue for the three months ended June 
30, 1996.  No single customer accounted for more than 10% of the Company's 
total revenue for the six months ended June 30, 1996.
  
PRODUCT LICENSES REVENUE
  
The Company's product licenses revenue is derived from license fees from the
Company's SLDA and Design to Test products. Product licenses revenue increased
by 53% from $3.6 million for the three months ended 


                                    -11-
<PAGE>


June 30, 1996 to $5.6 million for the three months ended June 30, 1997, and 
increased by 45.5% from $7.2 million for the six months ended June 30, 1996 
to $10.5 million for the six months ended June 30, 1997.  Revenue from SLDA 
and Design to  Test products accounted for 82.8% and 17.2% of product 
licenses revenue for the three months ended June 30, 1997 and June 30, 1996, 
respectively, and 71.0% and 29.0%, of product licenses revenue for the six 
months ended June 30, 1997 and June 30, 1996, respectively.  Revenue from 
SLDA and Design to Test products accounted for 80.4% and 19.6%, respectively, 
of product licenses revenue for the six months ended June 30, 1997 and 70.9% 
and 29.1%, respectively, of product licenses revenue for the six months ended 
June 30, 1996. Because of the addition of SLDA functionality to Visual 
Testbench version 2.0, beginning with the release of version 2.0 in December 
1996, the Company recognizes revenue from Visual Testbench products as SLDA 
revenue instead of Design to Test revenue.
  
SLDA revenue increased 78.3 % from $2.6 million for the three months ended 
June 30, 1996 to $4.6 million for the three months ended June 30, 1997. SLDA 
revenue increased 64.9% from $5.1 million for the six months ended June 30, 
1996 to $8.4 million for the three months ended June 30, 1997.  The increase 
in SLDA revenue for the three months ended June 30, 1997, over the same 
period in 1996 was primarily attributable to sales of Visual interface 
licenses to a single customer and the increase in revenue for the six months 
ended June 30, 1997 was primarily attributable to revenue from the TriQuest 
product portfolio that was not shipping in the comparable period in 1996 and 
sales to the single customer.  Significant sales to the single customer are 
expected to continue over the next ten quarters pursuant to contractual 
arrangements with that customer.

Design to Test revenue decreased slightly from $1.1 million for the three months
ended June 30, 1996 to $1.0 million for the three months ended June 30, 1997 and
remained stable at $2.1 million for the six months ended June 30, 1997 and 1996.
This decrease was anticipated as a result of entering into a definitive
agreement on May 19, 1997 to sell substantially all of the assets used in the
business of developing and marketing the TDS Products.
  
MAINTENANCE AND SERVICES REVENUE
  
The Company's maintenance and services revenue is derived from maintenance
contracts related to the Company's SLDA and Design to Test products and training
classes offered to purchasers of the Company's software products. Maintenance
and services revenue increased 45.1% from $977,000 for the three months ended
June 30, 1996 to $1.4 million for the three months ended June 30, 1997. 
Maintenance and services revenue increased 53.0% from $1.9 million for the six
months ended June 30, 1996 to $2.9 million for the six months ended June 30,
1997.  The increase was primarily attributable to an increase in maintenance
revenue related to growth in the installed base of SLDA customers over the last
year, net of a slight decrease in Design to Test maintenance revenue.  Design to
Test maintenance and services revenue was $695,000 and $710,000 for the three
months ended June 30, 1997 and 1996, respectively, and $1.4 million and $1.5
million for the six months ended June 30, 1997 and 1996, respectively.
  
OTHER REVENUE
  
Other revenue consists of revenue from one-time technology sales and fees 
received for granting distribution rights. For the three months ended June 
30, 1997 and 1996, respectively, other revenue was comprised of $125,000 and 
$142,000 of distribution rights fees. For the six months ended June 30, 1997 
and 1996, respectively, other revenue was comprised of $267,000 and $284,000 
of distribution rights fees.  In May 1997 a distribution agreement expired; 
the distribution rights fees paid at the inception of the agreement and 
amortized to revenue at $50,000 each quarter over the agreement period will 
no longer be a source of other revenue.  Total other revenue relating to the 
TDS product line amounted to $42,000 and $50,000 for the six months ended 
June 30, 1997 and June 30, 1996, respectively.  No material costs were 
associated with other revenue for the three months and six months ended  June 
30, 1997 and 1996.
  
  
COST OF REVENUE
  
COST OF PRODUCT LICENSES REVENUE
  
Cost of product licenses revenue includes product packaging, software
documentation, labor and other costs associated with handling, packaging and
shipping product and other production related costs. The cost of 


                                    -12-
<PAGE>



product license revenue increased from $146,000 for the three months ended 
June 30, 1996 to $164,000 for the three months ended June 30, 1997 and from 
$278,000 for the six months ended June 30, 1996 to $349,000 for the six 
months ended June 30, 1997. As a percentage of product licenses revenue, the 
cost of product licenses revenue decreased from 3.1% of product license 
revenue to 2.3% of product license revenue for the three months ended June 
30, 1996 and 1997, respectively, and also decreased from 3.0% to 2.6% of 
product license revenue for the six month ended June 30, 1996 and 1997, 
respectively. The decrease in the cost of product license revenue as a 
percent of revenue for the three months and six months ended June 30, 1997 
over the same periods in 1996 was due primarily to a varying product mix 
during the periods.

COST OF MAINTENANCE AND SERVICES REVENUE
  
Cost of maintenance and services revenue, which consists primarily of 
personnel costs for customer support and training classes offered to 
purchasers of the Company's products, increased 29.4% from $109,000 for the 
three months ended June 30, 1996 to $141,000 for the three months ended June 
30, 1997 and increased 18.5% from $211,000 for the six months ended June 30, 
1996 to $250,000 for the six months ended June 30, 1997.  As a percentage of 
maintenance and services revenue, the cost of maintenance and services 
revenue decreased from 2.3% for the three months ended June 30, 1996 to 2.0% 
for the three months ended June 30, 1996 and decreased from 2.3% for the six 
months ended June 30, 1996 to 1.8% for the six months ended June 30, 1997.  
Additionally, the Company operated below forecasted staffing levels during 
the first half of 1997, but anticipates increasing headcount during the 
second half of 1997.
  
  
OPERATING EXPENSES
  
RESEARCH AND DEVELOPMENT
  
Research and development expenses consist of the engineering and operations 
support costs of developing new products and enhancements to existing 
products and performing quality assurance activities. Research and 
development expenses increased 14.6% from $1.4 million for the three months 
ended June 30, 1996 to $1.7 million for the three months ended June 30, 1997. 
Research and development expenses increased 8.1% from $2.9 million for the 
six months ended June 30, 1996 to $3.1 million for the six months ended June 
30, 1997. As a percentage of total revenue, research and development expenses 
decreased from 30.3% for the three months ended June 30, 1996 to 23.3% for 
the three months ended June 30, 1997 and also decreased as a percentage of 
revenue from 30.5% for the six months ended June 30, 1996 to 22.7% for the 
six months ended June 30, 1997 due to the increase in total revenue for 1997. 
The Company believes that significant investment in research and development 
is required to remain competitive in its markets.
  
Software development costs are accounted for in accordance with Financial
Accounting Standards Board Statement No. 86, under which the Company is required
to capitalize software development costs after technological feasibility has
been established. To date, development costs have been expensed as incurred
since technological feasibility generally has not been established until shortly
before the release of a new product, and no material development costs have been
incurred after establishment of technological feasibility.
  
SALES AND MARKETING
  
Sales and marketing expenses, consisting primarily of salaries, commissions 
and promotional costs, increased 18.0% from $2.2 million for the three months 
ended June 30, 1996 to $2.6 million for the three months ended June 30, 1997 
and increased 15.5% from $4.4 million for the six months ended June 30, 1996 
to $5.1 million for the six months ended June 30, 1997.  The increase was 
attributable to the addition of ten sales and marketing personnel and the 
related increased commissions and travel expenses. As a percentage of total 
revenue, sales and marketing expenses decreased from 45.7% for the three 
months ended June 30, 1996 to 36.1% for the three months ended June 30, 1997 
and decreased from 47.0% for the six months ended June 30, 1996 to 37.4% for 
the six months ended June 30, 1997.  The percentage decrease was attributable 
to the increase in total revenue for 1997.
 
                                       -13-

<PAGE>

GENERAL AND ADMINISTRATIVE

General and administrative expenses consist primarily of the corporate, 
finance, human resource, information services, administrative, and legal and 
accounting expenses of the Company. General and administrative expenses 
increased 5.8% from $830,000 for the three months ended June 30, 1996 to 
$878,000 for the three months ended June 30, 1997 and increased 33.1% from 
$1.5 million for the six months ended June 30, 1996 to $2.1 million for the 
six months ended June 30, 1997, which includes a $379,000 one-time charge for 
costs associated with the acquisition of TriQuest. Excluding this one-time 
charge, expenses increased by $132,000 (8.5%) for the six months ended June 
30, 1997 as compared to the same period in the prior year. As a percentage of 
total revenue, excluding the one time charge for costs associated with the 
acquisition of TriQuest, general and administrative expenses decreased from 
17.4% for the three months ended June 30, 1996 to 12.3% for the three months 
ended June 30, 1997 and decreased from 16.5% for the six months ended June 
30, 1996 to 12.3% for the six months ended June 30, 1997. The decrease as a 
percentage of total revenue was attributable to the increase in total revenue 
in 1997. The sale of the TDS product line is not expected to significantly 
affect general and administrative expense. The Company expects general and 
administrative expenses to increase in absolute dollars to support future 
sales and operations, including acquired operations, and the additional costs 
associated with being a public company.(2)

INTEREST EXPENSE

Interest expense decreased from $9,000 for the three months ended June 30, 
1996 to $2,000 for the three months ended June 30, 1997 and decreased from 
$76,000 for the six months ended June 30, 1996 to $9,000 for the six months 
ended June 30, 1997 due to decreased borrowings under the Company's bank 
line of credit, long term debt and capital leases obligations.

OTHER INCOME, NET

Other income consists of interest income associated with available cash 
balances, gains or losses from the sale of property and equipment, the 
Company's pro rata share of earnings and losses of Summit Design Asia and 
foreign exchange rate differences resulting from paying operating expenses of 
foreign operations in the local currency. Other income was $7,000 for the 
three months ended June 30, 1996 and $231,000 for the three months ended June 
30, 1997 and $22,000 for the six months ended June 30, 1996 and $449,000 for 
the six months ended June 30, 1997. The increase in other income was 
primarily due to increased interest earned on the Company's cash holdings.

INCOME TAX PROVISION

The income tax provision decreased from $176,000 for the three months ended 
June 30, 1996 to $80,000 for the three months ended June 30, 1997 and 
decreased from $209,000 for the six months ended June 30, 1996 to $180,000 
for the six months ended June 30, 1997. The decrease was primarily 
attributable to the Company, as of June 1996, no longer being required to 
pay Japanese withholding tax of approximately 10% on its Japanese sales. The 
provision for the three months and six months ended June 30, 1997 is 
comprised primarily of Federal alternative minimum tax and Israeli income 
taxes. The Company's regular Federal tax liability is fully offset by the 
utilization of net operating loss carryforwards. The Federal alternative 
minimum tax results from the limitation on the use of net operating loss 
carryforwards for alternative minimum tax purposes.

----------
(2) This statement is a forward-looking statement reflecting current 
expectations. There can be no assurance that the Company's actual future 
performance will meet the Company's current expectations. Investors are 
strongly encouraged to review the section entitled "Additional Risk Factors 
That Could Affect Operating Results and Market Price of Stock" commencing on 
page 17 for a discussion of factors that could affect future performance.


                                     -14-

<PAGE>

VARIABILITY OF OPERATING RESULTS

The Company has experienced significant quarterly fluctuations in operating 
results and cash flows and it is likely that these fluctuations will continue 
in future periods. These fluctuations have been, and may in the future be, 
caused by a number of factors, including the rate of acceptance of new 
products, corporate acquisitions and consolidations, product, customer and 
channel mix, the size and timing of orders, lengthy sales cycles, the timing 
of new product announcements and introductions by the Company and its 
competitors, seasonal factors, rescheduling or cancellation of customer 
orders, the Company's ability to continue to develop and introduce new 
products and product enhancements on a timely basis, the level of 
competition, purchasing and payment patterns and product enhancements on a 
timely basis, the level of competition, purchasing and payment patterns, 
pricing policies of the Company and its competitors, product quality issues, 
currency fluctuations and general economic conditions.

The Company has generally recognized a substantial portion of its revenue in 
the last month of each quarter, with this revenue concentrated in the latter 
part of the month. Any significant deferral of purchases of the Company's 
products could have a material adverse effect on the Company's business, 
financial condition and results of operations in any particular quarter, and 
to the extent that significant sales occur earlier than expected, operating 
results for subsequent quarters may be adversely affected. The Company's 
revenue is difficult to forecast for several reasons. The market for certain 
of the Company's software products is evolving. The Company's sales cycle is 
typically six to nine months and varies substantially from customer to 
customer. In addition, a significant portion of the Company's sales are made 
through indirect channels and can be harder to predict. The Company 
establishes its expenditure levels for product development, sales and 
marketing and other operating activities based primarily on its expectations 
as to future revenue. As a result, if revenue in any quarter falls below 
expectations, expenditure levels could be disproportionately high as a 
percentage of revenue, and the Company's operating results for that quarter 
would be adversely affected. Based upon the factors described above, the 
Company believes that its quarterly revenue, expenses and operating results 
are likely to vary significantly in the future, that period-to-period 
comparisons of its results of operations are not necessarily meaningful and 
that, as a result, such comparisons should not be relied upon as indications 
of the Company's future performance. Moreover, although the Company's revenue 
has increased in recent periods, there can be no assurance that the Company's 
revenue will grow in future periods or that the Company will remain 
profitable on a quarterly or annual basis. Due to the foregoing or other 
factors, it is likely that the Company's results of operations may be below 
investors' and market analysts' expectations in some future quarters, which 
could have a severe adverse effect on the market price of the Company's 
Common Stock.

EFFECTIVE CORPORATE TAX RATES

The Company is taxed in its jurisdictions of operations based on the extent 
of taxable income generated in each jurisdiction. For income tax purposes, 
revenue is attributed to the taxable jurisdiction where the sales 
transactions generating the revenue were initiated. All sales transactions 
by Summit Design (EDA) Ltd., the Company's Israeli subsidiary, to the 
Company were recorded as arm's length transactions based on an intercompany 
pricing agreement. All sales transactions by the Company are to unrelated 
parties and are based upon prevailing market prices. There is no offset of 
taxes between the United States and Israel. The Israeli operations are 
performed entirely by Summit Design (EDA) Ltd., which is a separate taxable 
Israeli entity.

The Company's future effective tax rate depends in part on the availability 
of United States and Israeli net operating loss ("NOLs") and credit 
carryforwards. As of December 31, 1996, the Company had recorded U.S. 
federal and state NOLs of approximately $9.0 million and $5.6 million, 
respectively and Israeli NOLs of approximately $4.7 million. Neither the 
United States nor the Israeli taxing authorities have verified the accuracy 
or availability of the Company's NOLs and credit carryforward amounts. In 
addition, such amounts are subject to limitation in certain circumstances, 
including as a result of certain changes of ownership or 


                                     -15-

<PAGE>

operations. Thus, due to a change in ownership resulting from the 
Reorganization and a subsequent preferred stock financing, a portion of the 
federal and state NOLs are limited as to the timing of their availability for 
use. The portion of affected NOL that is available for use each year is 
approximately $1.7 million for federal purposes and $1.2 million for state 
purposes. The remaining portion of the NOLs (including all Israeli NOLs) is 
not subject to this limitation and is generally available for use against 
future taxable income, if any. There can be no assurance as to the amount of 
such NOLs or carryforwards that will be available to the Company, if any, or 
that the Company will be able to avail itself of such benefits.(1)

In addition to its NOLs and credit carryforwards, the Company is currently 
scheduled to receive tax benefits over the next several years under a tax 
holiday in Israel. The Company's existing Israeli production facility has 
been granted "Approved Enterprise" status under the Israeli Investment Law, 
which entitles the Company to reductions in the tax rate normally applicable 
to Israeli companies with respect to the income generated by its "Approved 
Enterprise" programs. In particular, the tax holiday covers the seven-year 
period beginning the first year in which Summit Design (EDA) Ltd. generates 
taxable income from its "Approved Enterprise" (after using any available 
NOLs), provided that such benefits will terminate in 2006 regardless of 
whether the seven-year period has expired. The tax holiday provides that, 
during such seven-year period, a portion of the Company's taxable income from 
its Israeli operations will be taxed at favorable tax rates. The termination 
or reduction of the Company's Israeli tax benefits would have a material 
adverse effect on the Company's overall actual effective tax rate. The 
Company has recently applied for "Approved Enterprise" status with respect 
to a new project and intends to apply in the future with respect to 
additional projects. There can be no assurance that the Company will be 
granted any approvals and therefore there can be no assurance the Company 
will continue to receive favorable tax status, if at all. 

The Company has concluded that a valuation allowance is required to reduce 
the net deferred tax asset to $500,000 after taking into consideration the 
Company's cumulative losses and the fact that the Company has a limited 
history of generating net income on an annual basis and also the fact that 
the generation of future taxable income is dependent on many uncertain 
factors, including market acceptance of its existing and future SLDA 
products.

The Company is also subject to the risk that United States and foreign tax 
laws and rates may change in a future period or periods, and that any such 
changes may materially adversely affect the Company's tax rate. As a result 
of the factors described above and other related factors, there can be no 
assurance that the Company will maintain a favorable tax rate in future 
periods. Any increase in the Company's effective tax rate, or variations in 
the effective tax rate from period to period, could have a material adverse 
effect on the Company's business, financial condition and results of 
operations.

LIQUIDITY AND CAPITAL RESOURCES

The Company completed its initial public offering in October 1996, raising 
$16.2 million, net of offering expenses. Prior to the IPO, the Company had 
financed its operations primarily through the private placement of 
approximately $15.4 million of capital stock, as well as capital equipment 
leases, borrowings under its bank line of credit, Israeli research and 
development grants and cash generated from operations. As of June 30, 1997, 
the Company had approximately $22.0 million in cash and cash equivalents and 
a $1.0 million bank line of credit with United States National Bank of 
Oregon ("the Bank"). The line of credit expires on April 30, 1998. 
Borrowings thereunder accrue interest at specified percentages above the 
prime lending rate based on the Company's ratio of debt to tangible net 
worth. Advances under the line of credit are limited to a specified 
percentage of eligible accounts receivable (as defined in the line of 
credit). Borrowings under the line of credit are collateralized by the 
Company's accounts receivable, inventory and general intangible 

----------
(1) This paragraph contains forward-looking statements reflecting current 
expectations. There can be no assurance that the Company's actual future 
performance will meet the Company's current expectations. Investors are 
strongly encouraged to review the section entitled "Additional Risk Factors 
That Could Affect Operating Results and Market Price of Stock" commencing on 
page 17 for a discussion of factors that could affect future performance.


                                     -16-
<PAGE>

assets, including its intellectual property rights. As of June 30, 1997, the 
Company had no borrowings outstanding under this line of credit.

The Company is obligated to lend up to $2.5 million to an independent 
software development company pursuant to a secured loan agreement entered in 
July 1997. Borrowings under the agreement bear interest at prime rate plus 2%.

As of June 30, 1997, the Company had working capital of approximately $19.9
million.

Net cash generated by operating activities was approximately $3.2 million and 
$3.5 million for the six months ended June 30, 1997 and 1996, respectively. 
Cash generated by operating activities resulted primarily from profitable 
operations for the six months ended June 30, 1997, and from the significantly 
improved collection of accounts receivable and an increase in deferred 
revenues for the six months ended June 30, 1996. 

Net cash used in investing activities was approximately $1.2 million and 
$495,000 for the six months ended June 30, 1997 and 1996, respectively. Net 
cash used in investing activities was related to the acquisition of 
furniture and equipment in 1997 and 1996, $425,000 of loans to employees in 
1997 and a $100,000 investment in a joint venture in 1996.

Net cash provided by financing activities for the six months ended June 30, 
1997,was approximately $184,000. Approximately $305,000 was provided by the 
issuance of common stock, while approximately $121,000 was used for repayment 
of debt and capital lease obligations. Net cash used in financing activities 
for the six months ended June 30, 1996, was approximately $263,000 which 
resulted from approximately $1.4 million of cash used for repayment of short 
term borrowings, long-term debt and capital lease obligations off set by 
$54,000 of cash provided by proceeds from long-term debt and approximately 
$1.1 million of cash provided from the issuance of Summit common and TriQuest 
preferred stock.

The Company presently believes that its current cash and cash equivalents, 
together with funds expected to be generated from operations, will satisfy 
the Company's anticipated working capital and other cash requirements for at 
least the next 12 months.(2)

ADDITIONAL RISK FACTORS THAT COULD AFFECT OPERATING RESULTS AND MARKET PRICE OF
STOCK

HISTORY OF OPERATING LOSSES; FLUCTUATIONS IN QUARTERLY RESULTS

While the Company has generated net income on an annual basis in 1996 and 
the first two quarters of 1997, there can be no assurance that the Company 
will be profitable in the future. In addition, the Company has experienced 
significant quarterly fluctuations in operating results and cash flows and 
it is likely that these fluctuations will continue in future periods. These 
fluctuations have been, and may in the future be, caused by a number of 
factors, including the rate of acceptance of new products, corporate 
acquisitions and consolidations, product, customer and channel mix, the size 
and timing of orders, lengthy sales cycles, the timing of new product 
announcements and introductions by the Company and its competitors, seasonal 
factors, rescheduling or cancellation of customer orders, the Company's 
ability to continue to develop and introduce new products and product 
enhancements on a timely basis, the level of competition, purchasing and 
payment patterns, pricing policies of the Company and its competitors, 
product quality issues, currency fluctuations and general economic conditions.

The Company has generally recognized a substantial portion of its revenue in 
the last month of each quarter, with this revenue concentrated in the latter 
part of the month. Any significant deferral of purchases of the Company's 
products could have a material adverse effect on the Company's business, 
financial condition and 

----------
(2) This statement is a forward-looking statement reflecting current 
expectations. There can be no assurance that the Company's actual future 
performance will meet the Company's current expectations. Investors are 
strongly encouraged to review the section entitled "Additional Risk Factors 
That Could Affect Operating Results and Market Price of Stock" commencing on 
this page for a discussion of factors that could affect future performance.

                                     -17-

<PAGE>

results of operations in any particular quarter, and to the extent that 
significant sales occur earlier than expected, operating results for 
subsequent quarters may be adversely affected. The Company's revenue is 
difficult to forecast for several reasons. The market for certain of the 
Company's software products is evolving. The Company's sales cycle is 
typically six to nine months and varies substantially from customer to 
customer. The Company operates with little product backlog because its 
products are typically shipped shortly after orders are received. In 
addition, a significant portion of the Company's sales are made through 
indirect channels and can be harder to predict. The Company establishes its 
expenditure levels for product development, sales and marketing and other 
operating activities based primarily on its expectations as to future 
revenue. As a result, if revenue in any quarter falls below expectations, 
expenditure levels could be disproportionately high as a percentage of 
revenue, and the Company's operating results for that quarter would be 
adversely affected. Based upon the factors described above, the Company 
believes that its quarterly revenue, expenses and operating results are 
likely to vary significantly in the future, that period-to-period 
comparisons of its results of operations are not necessarily meaningful and 
that, as a result, such comparisons should not be relied upon as indications 
of the Company's future performance. Moreover, although the Company's 
revenue has increased in recent periods, there can be no assurance that the 
Company's revenue will grow in future periods or that the Company will 
remain profitable on a quarterly or annual basis. Due to the foregoing or 
other factors, it is likely that the Company's results of operations may be 
below investors' and market analysts' expectations in some future quarters, 
which could have a severe adverse effect on the market price of the 
Company's Common Stock.

PRODUCT CONCENTRATION; UNCERTAINTY OF MARKET ACCEPTANCE OF SLDA

The Company's revenue is predominantly derived from two product lines, Visual 
HDL, which includes Visual HDL for VHDL and Visual HDL for Verilog, and TDS. 
Effective July 1, 1997, as a result of the Asset Sale, TDS products will 
cease to be a source of such revenue. The Company believes that Visual HDL 
products will continue to account for substantially all of its revenue in 
the future. As a result, factors adversely affecting sales of these products, 
including increased competition, inability to successfully introduce enhanced 
or improved versions of these products, product quality issues and 
technological change, could have a material adverse effect on the Company's 
business, financial condition and results of operations.

The Company's future success depends primarily upon the market acceptance of 
its existing and future SLDA products. The Company commercially shipped its 
first SLDA product, Visual HDL for VHDL, in the first quarter of 1994. For 
the three months and the six months ended June 30, 1997 and for the years 
ended December 31, 1996, 1995 and 1994, respectively, revenue from SLDA 
products and related maintenance contracts represented 76.5%, 74.1%, 60.9%, 
43.6% and 34.8%, respectively, of the Company's total revenue. The Company's 
SLDA products incorporate certain unique design methodologies and thus 
represent a departure from industry standards for design creation and 
verification. The Company believes that broad market acceptance of its SLDA 
products will depend on several factors, including the ability to 
significantly enhance design productivity, ease of use, interoperability 
with existing EDA tools, price and the customer's assessment of the 
Company's financial resources and its technical, managerial, service and 
support expertise. The Company also depends on its distributors to assist 
the Company in gaining market acceptance of its products. There can be no 
assurance that sufficient priority will be given by the Company's 
distributors to marketing the Company's products or whether such 
distributors will continue to offer the Company's products. There can be no 
assurance that the Company's SLDA products will achieve broad market 
acceptance. A decline in the demand for, or the failure to achieve broad 
market acceptance of, the Company's SLDA products will have a material 
adverse effect on the Company's business, financial condition and results of 
operations.

Although demand for SLDA products has increased in recent years, the market 
for SLDA products is still emerging and there can be no assurance that it 
will continue to grow or that, even if the market does grow, businesses will 
continue to purchase the Company's SLDA products. If the market for SLDA 
products fails to grow or grows more slowly than the Company currently 
anticipates, the Company's business, financial condition and results of 
operations would be materially adversely affected.


                                     -18-
<PAGE>

Traditionally, EDA customers have been risk averse in accepting new design 
methodologies. Because many of Summit's tools embody new design 
methodologies, this risk aversion on the part of potential customers presents 
an ongoing marketing and sales challenge to the Company and makes the 
introduction and acceptance of new products unpredictable. The Company's 
newest product, Visual Testbench, introduced in the fourth quarter of 1995, 
provides a new methodology and requires a change in the traditional design 
flow for creating IC test programs. The Company anticipates a lengthy period 
of test marketing for the Visual Testbench product. Accordingly, the Company 
cannot predict the extent, if any, to which it will realize revenue from 
Visual Testbench in excess of the revenue expected to be received pursuant to 
an OEM agreement entered into in July 1997. The failure of Visual Testbench 
to achieve market acceptance will have a material adverse effect on the 
Company's business, financial condition and results of operations. 

COMPETITION

The EDA industry is highly competitive and the Company expects competition to 
increase as other EDA companies introduce SLDA products. In the SLDA market, 
the Company principally competes with Mentor Graphics and a number of smaller 
firms. Indirectly, the Company also competes with other firms that offer 
alternatives to SLDA and could potentially offer more directly competitive 
products in the future. Certain of these companies have significantly greater 
financial, technical and marketing resources and larger installed customer 
bases than the Company. Some of the Company's current and future competitors 
offer a more complete range of EDA products and may distribute products that 
directly compete with the Company's SLDA products by bundling such products 
with their core product line. In addition, the Company's products perform a 
variety of functions, certain of which are, and in the future may be, offered 
as separate products or discrete point solutions by the Company's existing 
and future competitors. For example, certain companies currently offer design 
entry products without simulators. There can be no assurance that such 
competition will not cause the Company to offer point solutions instead of, 
or in addition to, the Company's current software products. Such point 
solutions would be priced lower than the Company's current product offerings 
and could cause the Company's average selling prices to decrease, which could 
have a material adverse effect on the Company's business, financial condition 
and results of operations. 

The Company competes on the basis of certain factors including product 
capabilities, product performance, price, support of industry standards, ease 
of use, first to market and customer technical support and service. The 
Company believes that it competes favorably overall with respect to these 
factors. However, in particular cases, the Company's competitors may offer 
SLDA products with functionality which is sought by the Company's prospective 
customers and which differs from that offered by the Company. In addition, 
certain competitors may achieve a marketing advantage by establishing formal 
alliances with other EDA vendors. Further, the EDA industry in general has 
experienced significant consolidation in recent years, and the acquisition of 
one of the Company's competitors by a larger, more established EDA vendor 
could create a more significant competitor. There can be no assurance that 
the Company will be able to compete successfully against current and future 
competitors or that competitive pressures faced by the Company will not have 
a material adverse effect on its business, financial condition and results of 
operations. There can be no assurance that the Company's current and future 
competitors will not be able to develop products comparable or superior to 
those developed by the Company or to adapt more quickly than the Company to 
new technologies, evolving industry trends or customer requirements. 
Increased competition could result in price reductions, reduced margins and 
loss of market share, all of which could have a material adverse effect on 
the Company's business, financial condition and results of operations.

                                     -19-
<PAGE>

DEPENDENCE ON ELECTRONICS INDUSTRY MARKET

Because the electronics industry is characterized by rapid technological 
change, short product life cycles, fluctuations in manufacturing capacity 
and pricing and margin pressures, certain segments, including the computer, 
semiconductor, semiconductor test equipment and telecommunications 
industries, have experienced sudden and unexpected economic downturns. 
During these periods, capital spending is commonly curtailed and the number 
of design projects often decreases. Because the Company's sales are 
dependent upon capital spending trends and new design projects, negative 
factors affecting the electronics industry could have a material adverse 
effect on the Company's business, financial condition and results of 
operations. A number of electronics companies, including customers of the 
Company, have recently experienced a slowdown in their businesses. The 
Company's future operating results may reflect substantial fluctuations from 
period to period as a consequence of such industry patterns, general economic 
conditions affecting the timing of orders from customers and other factors.

DEPENDENCE ON THIRD PARTIES FOR PRODUCT INTEROPERABILITY

Because the Company's products must interoperate with EDA products of other 
companies, particularly simulation and synthesis products, the Company must 
have timely access to third party software to perform development and 
testing of its products. Although the Company has established relationships 
with a variety of EDA vendors to gain early access to new product 
information, these relationships may be terminated by either party with 
limited notice. In addition, such relationships are with companies that are 
current or potential future competitors of the Company, including Synopsys, 
Mentor Graphics and Cadence. For example, the Company's Visual HDL for 
Verilog product is currently designed to work exclusively with the Verilog 
XL simulator product sold by Cadence. If any of these relationships were 
terminated and the Company was unable to obtain, in a timely manner, 
information regarding modifications of third party products necessary for 
modifying its software products to interoperate with these third party 
products, the Company could experience a significant increase in development 
costs, the development process would take longer, product introductions 
would be delayed and the Company's business, financial condition and results 
of operations could be materially adversely affected.

NEW PRODUCTS AND TECHNOLOGICAL CHANGE; EVOLVING INDUSTRY STANDARDS

The EDA industry is characterized by extremely rapid technological change, 
frequent new product introductions and evolving industry standards. The 
introduction of products embodying new technologies and the emergence of new 
industry standards can render existing products obsolete and unmarketable. In 
addition, customers in the EDA industry require software products that allow 
them to reduce time to market, differentiate their products, improve their 
engineering productivity and reduce their design errors. The Company's future 
success will depend upon its ability to enhance its current products, 
develop and introduce new products that keep pace with technological 
developments and emerging industry standards and address the increasingly 
sophisticated needs of its customers. There can be no assurance that the 
Company will be successful in developing and marketing product enhancements 
or new products that respond to technological change or emerging industry 
standards, that the Company will not experience difficulties that could 
delay or prevent the successful development, introduction and marketing of 
these products, or that its new products will adequately meet the 
requirements of the marketplace and achieve market acceptance. If the 
Company is unable, for technological or other reasons, to develop and 
introduce products in a timely manner in response to changing market 
conditions, industry standards or other customer requirements, particularly 
if such product releases have been pre-announced, the Company's business, 
financial condition and results of operations will be materially adversely 
affected.


                                     -20-

<PAGE>

Software products as complex as those offered by the Company may contain 
errors that may be detected at any point in the products' life cycles. The 
Company has in the past discovered software errors in certain of its 
products and has experienced delays in shipment of products during the 
period required to correct these errors. There can be no assurance that, 
despite testing by the Company and by current and potential customers, 
errors will not be found, resulting in loss of, or delay in, market 
acceptance and sales, diversion of development resources, injury to the 
Company's reputation or increased service and warranty costs, any of which 
could have a material adverse effect on the Company's business, financial 
condition and results of operations.

DEPENDENCE ON DISTRIBUTORS

The Company relies on distributors for licensing and support of its products 
outside of North America. Approximately 43%, 49%, 46%, 42% and 38% of the 
Company's revenue for the six months ended June 30, 1997 and 1996 and for the 
years ended December 31, 1996, 1995 and 1994, respectively, were attributable 
to sales made through distributors. The Company has also entered into a joint 
venture with Anam pursuant to which the joint venture corporation (Summit 
Design Korea, Inc. ("Summit Asia")) sells, distributes and supports all of 
the Company's products in the Asia-Pacific region, excluding Japan. Summit 
Asia has acted in such capacity since April 1, 1996. Prior to that date, Anam 
was an independent distributor of the Company's products. During the first 
quarter of 1997, the Company entered into a distribution agreement with ATE 
pursuant to which ATE was granted exclusive rights to sell, distribute and 
support Summit's Visual Testbench products within Japan until October 1998, 
subject to the Company's ability to terminate the relationship if ATE fails 
to meet quarterly sales objectives. The agreement may also be terminated by 
either party for breach. In addition, in the first quarter of 1996, the 
Company entered into a three-year, exclusive distribution agreement for its 
SLDA products in Japan with Seiko. In the event Seiko fails to meet specified 
quotas for two or more quarterly periods, exclusivity can be terminated by 
Summit, subject to Seiko's right to pay a specified fee to maintain 
exclusivity. The agreement is renewable for successive five-year terms by 
mutual agreement of the Company and Seiko and is terminable by either party 
for breach. For the year ended December 31, 1996 and six months ended June 
30, 1997, all sales of the Company's products in the Asia-Pacific region were 
through Summit Asia, ATE and Seiko. There can be no assurance the 
relationships with Summit Asia, ATE and Seiko will be effective in 
maintaining or increasing sales relative to the levels experienced prior to 
such relationships. The Company also has independent distributors in Europe 
and is dependent on the continued viability and financial stability of its 
distributors. Since the Company's products are used by skilled design 
engineers, distributors must possess sufficient technical, marketing and 
sales resources and must devote these resources to a lengthy sales cycle, 
customer training and product service and support. Only a limited number of 
distributors possess these resources. In addition, Summit Asia, ATE and 
Seiko, as well as the Company's other distributors, may offer products of 
several different companies, including competitors of the Company. There can 
be no assurance that the Company's current distributors will continue to 
market or service and support the Company's products effectively, that any 
distributor will continue to sell the Company's products or that the 
distributors will not devote greater resources to products of other 
companies. The loss of, or a significant reduction in, revenue from the 
Company's distributors could have a material adverse effect on the Company's 
business, financial condition and results of operations.

INTERNATIONAL SALES AND OPERATIONS

Approximately 50%, 52% and 39% of the Company's revenue for the years ended 
December 31, 1996, 1995 and 1994, respectively, were attributable to sales 
made outside the United States. The Company expects that international 
revenue will continue to represent a significant portion of its total 
revenue. The Company's international revenue is currently denominated in 
U.S. dollars. As a result, increases in the value of the U.S. dollar 
relative to foreign currencies could make the Company's products more 
expensive and, therefore, 


                                    -21-

<PAGE>

potentially less competitive in those markets. The Company pays the expenses 
of its international operations in local currencies and does not engage in 
hedging transactions with respect to such obligations. International sales 
and operations are subject to numerous risks, including tariff regulations 
and other trade barriers, requirements for licenses, particularly with 
respect to the export of certain technologies, collectability of accounts 
receivable, changes in regulatory requirements, difficulties in staffing and 
managing foreign operations and extended payment terms. There can be no 
assurance that such factors will not have a material adverse effect on the 
Company's future international sales and operations and, consequently, on 
the Company's business, financial condition and results of operations.

In order to successfully expand international sales, the Company may need to 
establish additional foreign operations, hire additional personnel and 
recruit additional international distributors. This will require significant 
management attention and financial resources and could adversely affect the 
Company's operating margins. In addition, to the extent that the Company is 
unable to effect these additions in a timely manner, the Company's growth, 
if any, in international sales will be limited. There can be no assurance 
that the Company will be able to maintain or increase international sales of 
the Company's products, and failure to do so could have a material adverse 
effect on the Company's business, financial condition and results of 
operations.

MANAGEMENT OF GROWTH AND ACQUISITIONS

Summit's ability to achieve significant growth will require it to implement 
and continually expand its operational and financial systems, recruit 
additional employees and train and manage current and future employees. 
Summit expects any such growth will place a significant strain on its 
operational resources and systems. Failure effectively to manage any such 
growth would have a material adverse effect on Summit's business, financial 
condition and results of operations.

On February 28, 1997, Summit completed its acquisition of TriQuest. As a 
result of the acquisition, Summit's operating expenses are expected to 
increase. There can be no assurance that the integration of TriQuest's 
business can be successfully completed in a timely fashion, or at all, or 
that the revenues from TriQuest will be sufficient to support the costs 
associated with TriQuest's business, without adversely affecting Summit's 
operating margins. Any failure to successfully complete the integration in a 
timely fashion or to generate sufficient revenues from the acquired business 
could have a material adverse effect on Summit's business and results of 
operations. In addition, Summit regularly evaluates acquisition 
opportunities. Future acquisitions by Summit could result in potentially 
dilutive issuance's of equity securities, the incurrence of debt and 
contingent liabilities and amortization expenses related to goodwill and 
other intangible assets, which could materially adversely affect Summit's 
results of operations. Product and technology acquisitions entail numerous 
risks, including difficulties in the assimilation of acquired operations, 
technologies and products, diversion of management's attention to other 
business concern, risks of entering markets in which Summit has no or 
limited prior experience and potential loss of key employees of acquired 
companies. Summit's management has had limited experience in assimilating 
acquired organizations and products into Summit's operations. No assurance 
can be given as to the ability of Summit to integrate successfully any 
operations, personnel or products that have been acquired or that might be 
acquired in the future, and the failure of Summit to do so could have a 
material adverse effect on Summit's results of operations.

OPERATIONS IN ISRAEL

The Company's research and development operations related to its SLDA 
products are located in Israel and may be affected by economic, political 
and military conditions in that country. Accordingly, the Company's 
business, financial condition and results of operations could be materially 
adversely affected if hostilities involving Israel should occur. This risk 
is heightened due to the restrictions on the Company's ability to 
manufacture or transfer outside of Israel any technology developed under 
research and development grants from the government of Israel as described 
in "--Israeli Research, Development and Marketing Grants." In addition, 
while all of the Company's sales are denominated in U.S. dollars, a portion 
of the Company's 


                                     -22-

<PAGE>

annual costs and expenses in Israel are paid in Israeli currency. These 
costs and expenses were approximately $4.3, $4.3 and $2.9 million in 1996, 
1995 and 1994, respectively. Payment in Israeli currency subjects the 
Company to foreign currency fluctuations and to economic pressures resulting 
from Israel's generally high rate of inflation, which has been approximately 
11%, 8% and 15% during 1996, 1995, and 1994, respectively. The Company's 
primary expense which is paid in Israeli currency is employee salaries for 
research and development activities. As a result, an increase in the value 
of Israeli currency in comparison to the U.S. dollar could increase the cost 
of research and development expenses and general and administrative 
expenses. There can be no assurance that currency fluctuations, changes in 
the rate of inflation in Israel or any of the other aforementioned factors 
will not have a material adverse effect on the Company's business, financial 
condition or results of operations. In addition, coordination with and 
management of the Israeli operations requires the Company to address 
differences in culture, regulations and time zones. Failure to successfully 
address these differences could be disruptive to the Company's operations.

The Company's Israeli production facility has been granted the status of an 
"Approved Enterprise" under the Israeli Investment Law for the Encouragement 
of Capital Investments, 1959 (the "Investment Law"). Taxable income of a 
company derived from an "Approved Enterprise" is eligible for certain tax 
benefits, including significant income tax rate reductions for up to seven 
years following the first year in which the "Approved Enterprise" has 
Israeli taxable income (after using any available net operating losses). The 
period of benefits cannot extend beyond 12 years from the year of 
commencement of operations or 14 years from the year in which approval was 
granted, whichever is earlier. The tax benefits derived from a certificate 
of approval for an "Approved Enterprise" relate only to taxable income 
attributable to such "Approved Enterprise" and are conditioned upon 
fulfillment of the conditions stipulated by the Investment Law, the 
regulations promulgated thereunder and the criteria set forth in the 
certificate of approval. In the event of a failure by the Company to comply 
with these conditions, the tax benefits could be canceled, in whole or in 
part, and the Company would be required to refund the amount of the canceled 
benefits, adjusted for inflation and interest. There can be no assurance 
that the Company's Israeli production facility will continue to operate or 
qualify as an "Approved Enterprise" or that the benefits under the "Approved 
Enterprise" regulations will continue, or be applicable, in the future. The 
loss of, or any material decrease in, these income tax benefits could have a 
material adverse effect on the Company's business, financial condition and 
results of operations. 

DEPENDENCE ON KEY PERSONNEL

The Company's future success depends in large part on the continued service 
of its key technical and management personnel and its ability to continue to 
attract and retain highly-skilled technical, sales and marketing and 
management personnel. The Company has entered into employment agreements 
with certain of its executive officers, however, such agreements do not 
guarantee the services of these employees and do not contain noncompetition 
provisions. Competition for personnel in the software industry in general, 
and the EDA industry in particular, is intense, and the Company has at times 
in the past experienced difficulty in recruiting qualified personnel. There 
can be no assurance that the Company will retain its key personnel or that 
it will be successful in attracting and retaining other qualified technical, 
sales and marketing and management personnel in the future. The loss of any 
key employees or the inability to attract and retain additional qualified 
personnel may have a material adverse effect on the Company's business, 
financial condition and results of operations. The Company does not carry 
"key person" life insurance on any of its key personnel. Additions of new 
personnel and departures of existing personnel, particularly in key 
positions, can be disruptive and can result in departures of additional 
personnel, which could have a material adverse effect on the Company's 
business, financial condition and results of operations. 

ISRAELI RESEARCH, DEVELOPMENT AND MARKETING GRANTS

Summit's Israeli subsidiary has obtained research and development grants from 
the Office of the Chief Scientist (the "Chief Scientist") in the Israeli 
Ministry of Industry and Trade of approximately $232,000 and $608,000 in 1993 
and 1995, respectively. As of June 30, 1997, the Company was obligated to 
pay back approximately $232,000 and $470,000 for the 1993 and 1995 grants, 
respectively. Such obligations are 


                                     -23-

<PAGE>

collateralized by all tangible and intangible assets of the Israeli 
subsidiary. The terms of the grants prohibit the manufacture of products 
developed under these grants outside of Israel and the transfer of the 
technology developed pursuant to these grants to any person, without the 
prior written consent of the Chief Scientist. The Company's Visual HDL for 
VHDL products have been developed under grants from the Chief Scientist and 
thus are subject to these restrictions. If the Company is unable to obtain 
the consent of the government of Israel, the Company would be unable to take 
advantage of potential economic benefits such as lower taxes, lower labor and 
other manufacturing costs and advanced research and development facilities 
that may be available if such technology and manufacturing operations could 
be transferred to locations outside of Israel. In addition, the Company 
would be unable to minimize risks particular to operations in Israel, such 
as hostilities involving Israel. Although the Company is eligible to apply 
for additional grants from the Chief Scientist, it has no present plans to 
do so. The Company also received a Marketing Fund Grant from the Israeli 
Ministry of Industry and Trade for an aggregate of $423,000. The grant must 
be repaid at the rate of 3% of the increase in exports over the 1993 export 
level of all Israeli products, until repaid. As of JUNE 30, 1997, 
approximately $364,000 was outstanding under the grant.

LIMITATIONS ON PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

The Company's success depends in part upon its proprietary technology. The 
Company relies on a combination of copyright, trademark and trade secret 
laws, confidentiality procedures, licensing arrangements and technical means 
to establish and protect its proprietary rights. As part of its 
confidentiality procedures, the Company generally enters into non-disclosure 
agreements with its employees, distributors and corporate partners, and 
limits access to, and distribution of, its software, documentation and other 
proprietary information. In addition, the Company's products are protected 
by hardware locks and software encryption techniques designed to deter 
unauthorized use and copying. Despite these precautions, it may be possible 
for a third party to copy or otherwise obtain and use the Company's products 
or technology without authorization, or to develop similar technology 
independently. 

The Company provides its SLDA products to end-users primarily under 
"shrink-wrap" license agreements included within the packaged software. These 
agreements are not negotiated with or signed by the licensee, and thus may 
not be enforceable in certain jurisdictions. In addition, the laws of some 
foreign countries do not protect the Company's proprietary rights as fully as 
do the laws of the United States. There can be no assurance that the 
Company's means of protecting its proprietary rights in the United States or 
abroad will be adequate or that competitors will not independently develop 
similar technology.

The Company could be increasingly subject to infringement claims as the 
number of products and competitors in the Company's industry segment grows, 
the functionality of products in its industry segment overlaps and an 
increasing number of software patents are granted by the United States 
Patent and Trademark Office. There can be no assurance that a third party 
will not claim such infringement by the Company with respect to current or 
future products. Any such claims, with or without merit, could be 
time-consuming, result in costly litigation, cause product delays or require 
the Company to enter into royalty or licensing agreements. Such royalty or 
license agreements, if required, may not be available on terms acceptable to 
the Company or at all. Failure to protect its proprietary rights or claims 
of infringement could have a material adverse effect on the Company's 
business, financial condition and results of operations.


                                     -24-

<PAGE>

POSSIBLE VOLATILITY OF STOCK PRICE

The stock markets have experienced price and volume fluctuations that have 
particularly affected technology companies, resulting in changes in the 
market prices of the stocks of many companies which may not have been 
directly related to the operating performance of those companies. Such broad 
market fluctuations may adversely affect the market price of the Common 
Stock. In addition, factors such as announcements of technological 
innovations or new products by the Company or its competitors, market 
conditions in the computer software or hardware industries and quarterly 
fluctuations in the Company's operating results may have a significant 
adverse effect on the market price of the Company's Common Stock.


PART II

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    The following matters were submitted to the stockholders at the Company's 
Annual Meeting of Stockholders held on May 28, 1997. Each of these matters 
was approved by a majority of the shares present at the meeting.

    1.   The election of a Class I director to serve for a term of one year, 
the election of two Class II directors to serve for a term of two years and 
the election of two Class III directors to serve for a term of three years:

                                 VOTES FOR               VOTES WITHHELD
                                 ---------               --------------

   CLASS I DIRECTOR

Steven P. Erwin                  10,531,425                    9,824


   CLASS II DIRECTORS

William V. Botts                 10,478,981                   62,268

Barbara M. Karmel                10,480,481                   60,678


   CLASS III DIRECTORS

Amihai Ben-David                 10,531,425                    9,824

Larry J. Gerhard                 10,529,925                   11,324


    2.   The ratification of the appointment of Coopers & Lybrand L.L.P. as 
the independent accountants for the Company for the fiscal year ending 
December 31, 1997:


      VOTES FOR             VOTES AGAINST                ABSTENTIONS
     -----------            -------------                -----------
     10,526,386                10,233                       4,630


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

    (a)  Exhibits

        3.2     Amended and Restated Bylaws, as amended.

        10.20+  Software OEM License Agreement between the Registrant, Test 
                Systems Strategies, Inc. and Credence Systems Corporation 
                dated May 19, 1997.

        10.21   Loan Agreement between the Registrant and Moshe Guy dated May 
                20, 1997.

        11.1    Statement of Computation of Net Income per Share.

        27      Financial Data Schedule.

        + Confidential treatment has been requested for certain portions 
          of this exhibit.

    (b)  Reports on Form 8-K

         No reports on Form 8-K were filed by the Company during the quarter 
         ended June 30, 1997.

Items 1, 2, 3 and 5 are not applicable and have been omitted.


                                     -25-

<PAGE>

SIGNATURES


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

                                  SUMMIT DESIGN, INC.


                                  By: /s/ C. ALBERT KOOB
                                     -------------------

                                          C. Albert Koob
                                          Vice President - Finance, 
                                          Chief Financial Officer and Secretary
                                          (Principal Financial and Accounting
                                          Officer and Duly Authorized Officer)


Date: August 13, 1997


                                     -26-

<PAGE>

EXHIBIT INDEX


EXHIBIT 3.2     Amended and Restated Bylaws, as amended.

EXHIBIT 10.20+  Software OEM License Agreement between Registrant, Test 
                Systems Strategies, Inc. and Credence Systems Corporation 
                dated May 19, 1997.

EXHIBIT 10.21   Loan Agreement between registrant and Moshe Guy dated May 20, 
                1997.

EXHIBIT 11.1    Statement of Computation of Net Income Per Share

EXHIBIT 27      Financial Data Schedule

+ Confidential treatment has been requested for certain portions 
  of this exhibit. 

                                     -27-