<PAGE>

                                   UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C. 20549
                                          
                                    FORM 10-Q/A

                                 (AMENDMENT NO. 1)


 X  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934
    for the quarterly period ended March 31, 1998 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 Number)
    incorporation or organization)

                              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 May 12, 1998, the Registrant had outstanding 14,819,310 shares of 
Common Stock.

<PAGE>
                                                                        3/31/98

                                SUMMIT DESIGN, INC.
                                       INDEX

<TABLE>
<S>       <C>                                                                 <C>
PART I    FINANCIAL INFORMATION

Item 1    Condensed Consolidated Financial Statements

          Condensed Consolidated Balance Sheets as of March 31, 1998 
          (unaudited) and December 31, 1997.                                   3

          Condensed Consolidated Statements of Operations for the 
          three month periods ended March 31, 1998 and 1997 (unaudited).       4
 
          Condensed Consolidated Statements of Cash Flows for
          the three month periods ended March 31, 1998 and 1997 (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 2    Changes in Securities and Use of Proceeds

Item 6    Exhibits and Reports on Form 8-K

Items 1, 3, 4 and 5  Not Applicable 

Signature

Exhibit Index
</TABLE>

Restatement of Financial Statements and Changes to Certain Information

The Registrant previously announced that it would revise the accounting 
treatment of its September 1997 acquisition of Simulation Technologies Corp. 
in response to comments received from the Securities and Exchange Commission. 
Accordingly, this Quarterly Report on Form 10-Q/A is being filed as Amendment 
No. 1 to the Registrant's Quarterly Report on Form 10-Q filed with the 
Securities and Exchange Commission on May 15, 1998 for the purpose of 
restating financial information and related disclosures for the three month 
period ended March 31, 1998. See Note 1 to the Condensed Consolidated 
Financial Statements.


                                       -2-
<PAGE>


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

<TABLE>
<CAPTION>

                                                   March 31, 1998  December 31, 1997
                                                   --------------  -----------------
                                                     (Restated)       (Restated)
                                                     (Unaudited) 
<S>                                                <C>             <C>
                      ASSETS
Current assets:
  Cash and cash equivalents                            $  20,402      $  19,973
  Accounts receivable, net                                 5,399          5,131
  Prepaid expenses and other                                 445            540
  Deferred income taxes                                    1,214          1,209 
                                                       ---------      ---------
    Total current assets                                  27,460         26,853

Furniture and equipment, net                               2,897          2,698
Intangibles, net                                           4,896          5,571
Goodwill, net                                              3,305          3,493
Deposits and other assets                                  1,026          1,055 
                                                       ---------      ---------
    Total assets                                       $  39,584      $  39,670
                                                       ---------      ---------
                                                       ---------      ---------
                    LIABILITIES
Current liabilities:
  Long-term debt, current portion                         $  134         $  134
  Capital lease obligation, current portion                   46             49 
  Accounts payable                                         1,259          1,211 
  Accrued liabilities                                      4,921          5,182 
  Deferred revenue                                         5,312          5,674
                                                       ---------      ---------
    Total current liabilities                             11,672         12,250

Long-term debt, less current portion                         192            194
Capital lease obligations, less current portion               31             43 
Deferred revenue, less current portion                       190              - 
Deferred taxes                                               941            987
                                                       ---------      ---------
    Total liabilities                                     13,026         13,474 
                                                       ---------      ---------

Commitments and contingencies

               STOCKHOLDERS' EQUITY
Common stock, $.01 par value.  Authorized 30,000
shares; issued and outstanding 16,049 shares at
March 31, 1998 and 15,841 shares at 
December 31, 1997                                            161            159
Additional paid-in capital                                52,700         51,412 
Treasury stock, at cost, 1,102 shares at 
March 31, 1998 and 939 shares at December 31, 1997       (13,885)       (11,555)
Accumulated deficit                                      (12,418)       (13,820)
                                                       ---------      ---------
    Total stockholders' equity                            26,558         26,196
                                                       ---------      ---------
      Total liabilities and stockholders' equity       $  39,584      $  39,670
                                                       ---------      ---------
                                                       ---------      ---------
</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
                                                           March 31,
                                                      -------------------
                                                        1998       1997
                                                      --------   --------
                                                     (Restated)
     <S>                                              <C>        <C>
     Revenue:
          Product licenses                            $  8,201   $  4,896 
          Maintenance and services                       2,064      1,482
          Other                                             92        142 
                                                      --------   --------
          Total revenue                                 10,357      6,520

     Cost of revenue:
          Product licenses                                 193        185 
          Maintenance and services                         225        110
          Amortization of 
           purchased technologies                          165          -
                                                      --------   --------
          Total cost of revenue                            583        295
                                                      --------   --------
          Gross profit                                   9,774      6,225
                                                      --------   --------
                                                      --------   --------
     Operating expenses:
          Research and development                       2,929      1,452 
          Sales and marketing                            3,048      2,531 
          General and administrative                     1,062      1,180 
          Amortization of
           intangibles and goodwill                        698          -
                                                      --------   --------
          Total operating expenses                       7,737      5,163
                                                      --------   --------
                                                      --------   --------

     Income from operations                              2,037      1,062

     Interest expense                                       (1)        (7)
     Other income, net                                     289        218 
                                                      --------   --------
     Income before income taxes                          2,325      1,273 
     Income tax provision                                  923         80 
                                                      --------   --------
     Net income                                       $  1,402   $  1,193
                                                      --------   --------
                                                      --------   --------
     Earnings per share:
         Basic                                         $  0.09    $  0.09
                                                      --------   --------
                                                      --------   --------
         Diluted                                       $  0.09    $  0.08
                                                      --------   --------
                                                      --------   --------
     Number of shares used computing earnings 
         per share:
         Basic                                          14,910     13,902
                                                      --------   --------
                                                      --------   --------
         Diluted                                        16,190     14,829 
                                                      --------   --------
                                                      --------   --------
</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>
                                                        Three Months Ended
                                                             March 31,
                                                        ------------------
                                                          1998       1997
                                                        --------   -------
                                                       (Restated)
<S>                                                     <C>        <C>
Cash flows from operating activities:
  Net income                                            $  1,402   $  1,193 
  Adjustments to reconcile net income to net cash
    provided by operating activities:
     Depreciation and amortization                         1,117        207 
     Amortization of future contingent share liability       550          -
     Loss on asset disposition                                 -          1
     Deferred taxes                                          (51)         -
     Changes in assets and liabilities:
       Accounts receivable                                  (268)      (322)
       Prepaid expenses and other                             95        (22)
       Accounts payable                                       49        409 
       Accrued liabilities                                  (261)       (96)
       Deferred revenue                                     (172)      (918)
       Other, net                                            153         23 
                                                       ---------   --------
  Net cash provided by operating activities                2,614        475 
                                                       ---------   --------
Cash flows from investing activities:
  Additions to furniture and equipment                      (452)      (252)
  Notes receivable from related parties, net                (125)       (75)
                                                       ---------   --------
  Net cash used in investing activities                     (577)      (327)
                                                       ---------   --------
Cash flows from financing activities:
  Issuance of common stock, net of issuance costs            288         14
  Tax benefit of option exercises                            450          -
  Payments to acquire treasury stock                      (2,329)         -
  Principal payments of debt obligations                      (2)       (77)
  Principal payments of capital lease obligations            (15)       (35)
                                                       ---------   --------
  Net cash used in financing activities                   (1,608)       (98)
                                                       ---------   --------
  Increase in cash and cash equivalents                      429         50
Cash and cash equivalents, beginning of period            19,973     19,801
                                                       ---------   --------
Cash and cash equivalents, end of period               $  20,402  $  19,851
                                                       ---------   --------
                                                       ---------   --------
Supplemental disclosure of cash flow information:
  Cash paid during the period for:
  Interest                                                  $  1       $  9 
  Income taxes                                               547         38 
</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. ("Summit" or 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, 1997 1996 and 1995 included in the Company's Form 
10-K/A filed for December 31, 1997.

After discussion with the staff of the Securities and Exchange Commission 
(the "staff") the condensed consolidated financial statements as of March 31, 
1998 and for the three months ended March 31, 1998 have been restated to 
reflect a change in the original accounting treatment related to the 
September 1997 acquisition of Simulation Technologies Corp. "SimTech".

The Company allocated amounts to IPR&D and intangible assets in the third 
quarter of 1997 in a manner consistent with widely recognized appraisal 
practices and in consultation with their independent accountants 
PricewaterhouseCoopers LLP at the date of the acquisition of SimTech. 
Subsequent to the acquisition, the SEC staff expressed views that took issue 
with certain appraisal practices generally employed in determining the fair 
value of the IPR&D that was the basis for measurement of the Company's IPR&D 
charge.  The charge of $19.9 million, originally reported, was based upon the 
work of an independent valuation firm that had utilized the methodologies the 
SEC has since announced it does not consider appropriate. 

As a result of computing IPR&D using the SEC preferred methodology, the 
Company, in consultation with their independent accountants, has revised the 
amount originally allocated to IPR&D. In addition, Summit adjusted the 
discount on common shares paid to SimTech shareholders from 28% to 10% and 
allocated $4.4 million of the purchase price, associated with certain shares, 
to contingent compensation. The Company has reduced the amount originally 
allocated to IPR&D from $19.9 million to $11.7 million and increased the 
amounts allocated to purchased technology, identifiable intangibles, deferred 
tax liability, and goodwill from $1.0 million to $2.4 million, $1.0 million 
to $4.1 million, $0 to $1.3 million and $0 to $3.8 million, respectively.  
These amounts are being amortized on a straight line basis over periods 
ranging from two to five years. The $4.4 million allocated to compensation 
will be recorded as expense as the employment obligation lapses.

The restatement does not affect previously reported net cash flows for the 
periods.  The effect of this reallocation on previously reported condensed 
consolidated financial statements as of and for the three months ended March 
31, 1998 is as follows (in thousands except per share amounts, unaudited):

<TABLE>
<CAPTION>
                                        Three Months Ended
                                           March 31, 1998
Statements of Operations:            As Reported       Restated
                                     -----------       --------
<S>                                  <C>               <C>
Cost of revenues                        $  505           $  583
Gross margin                             9,852            9,774
Operating expenses                       6,525            7,737
Income from operations                   3,327            2,037
Net income                               2,637            1,042
Net income per share
          Basic                         $ 0.18           $ 0.09
          Diluted                       $ 0.16           $ 0.09
</TABLE>

<TABLE>
<CAPTION>
                                      March 31, 1998           December 31, 1997
Balance Sheets:                   As Reported   Restated    As Reported   Restated
                                  -----------   --------    -----------   --------
<S>                               <C>           <C>         <C>           <C>
Noncurrent assets                   $  5,977    $ 12,124      $  5,908    $ 12,817
Total assets                          33,437      39,584        32,761      39,670
Deferred tax liability                     0         941             0         987
Accumulated deficit                  (17,512)     (9,202)      (20,126)    (13,820)
Total shareholders' equity            21,297      26,558        20,275      26,196
</TABLE>

The results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998 or any other future interim period, and the Company makes no
representations related thereto.

2.   SOFTWARE REVENUE RECOGNITION

During the first quarter of 1998, the Company adopted Statements of Position 
(SOP) 97-2, "Software Revenue Recognition" and 98-4, "Deferral of the 
Effective Date of a Provision of SOP 97-2, "Software Revenue Recognition." 
The provisions of SOP's 97-2 and 98-4 have been applied to transactions 
entered into beginning January 1, 1998. SOP 97-2 generally requires revenue 
earned on software arrangements involving multiple elements to be allocated 
to each element based on vendor-specific objective evidence (VSOE) of the 
fair value of the various elements in a multiple element arrangement. The 
revenue allocated to product licenses generally is recognized upon delivery 
of the license. The revenue allocated to maintenance is recognized ratably 
over the term of the maintenance agreement and revenue allocated to services 
is recognized as the services are performed.

SOP 98-4 defers for one year, the application of several paragraphs and 
examples in SOP 97-2 that limit the definition of vendor specific objective 
evidence (VSOE) of the fair value of various elements in a multiple element 
arrangement.

The Company analyzed the elements included in its multiple element 
arrangements and determined that the Company has sufficient evidence to 
allocate revenue to the license and maintenance components of its product 
licenses. The adoption of SOP's 97-2 and 98-4 did not have a significant 
effect on revenue recognized for the period ending March 31, 1998.

3.   BALANCE SHEET COMPONENTS (IN THOUSANDS)

<TABLE>
<CAPTION>
                                              March 31, 1998   December 31, 1997
                                              --------------   -----------------
                                               (Unaudited)
<S>                                           <C>              <C>
Accounts Receivable:
     Trade receivables                             $  5,991          $  5,723
     Less allowance for doubtful accounts              (592)             (592)
                                              --------------   --------------
                                                   $  5,399          $  5,131
                                              --------------   --------------
                                              --------------   --------------

Furniture and equipment:
     Office furniture equipment                      $  627            $  596 
     Computer equipment                               4,004             3,585
     Leasehold improvements                              69                66 
                                              --------------   --------------
                                                      4,700             4,247
Less: accumulated depreciation and 
  amortization                                       (1,803)           (1,549)
                                              --------------   --------------
                                                   $  2,897          $  2,698
                                              --------------   --------------
                                              --------------   --------------

Accrued expenses:
     Payroll and related benefits                  $  2,769          $  2,862 
     Sales and marketing                                547               435 
     Accounting and legal                               286               260 
     Federal and state income taxes payable             795               819 
     Sales taxes payable                                 68               114 
     Other                                              456               692
                                              --------------   --------------
     Total accrued expenses                        $  4,921          $  5,182
                                              --------------   --------------
                                              --------------   --------------
</TABLE>

                                       -6-

<PAGE>

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

4.   RECONCILIATION OF EARNINGS PER SHARE

On January 1, 1998, the Company adopted Statement of Financial Accounting 
Standards (SFAS) No. 128, "Earnings Per Share." In accordance with SFAS No. 
128, basic earnings per share is computed using the weighted average number of 
common shares outstanding during the period. Diluted earnings per share is 
computed using the weighted average number of common and dilutive common 
equivalent shares outstanding during the period. Dilutive common equivalent 
shares consist of common stock issuable upon exercise of stock options using 
the treasury stock method. The following provides a reconciliation of the 
numerators and denominators of the basic and diluted per share computations:

<TABLE>
<CAPTION>
                                                               March 31,
                                                         ---------------------
                                                             1998       1997   
                                                         ---------------------
                                                         (Restated)
              <S>                                        <C>          <C>
           Numerator:
             Net income                                    $  1,402   $  1,193
                                                           --------   --------
                                                           --------   --------
           Denominator:
             Denominator for basic earnings per share
                weighted average shares                      14,910     13,902

             Effect of dilutive securities:
                Employee stock options                        1,280        927
                                                           --------   -------- 

             Denominator for diluted earnings per share      16,190     14,829
                                                           --------   --------
                                                           --------   -------- 

           Net income per share - basic                     $  0.09    $  0.09
                                                           --------   --------
                                                           --------   -------- 

           Net income per share - diluted                   $  0.09    $  0.08
                                                           --------   --------
                                                           --------   -------- 
</TABLE>

5. SUBSEQUENT EVENT

On June 30, 1998, the Company acquired ProSoft Oy ("ProSoft"), a Company 
located in Finland. ProSoft develops software tools used to verify embedded 
systems software prior to the availability of a hardware prototype. The 
aggregate consideration for the acquisition (including shares of common stock 
reserved for issuance upon exercise of ProSoft options which were exchanged 
for options of the Company) was 248,334 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 financial statements have been restated to include the accounts 
of ProSoft as if the acquisition had occurred at the beginning of the first 
period presented herein. The effect of the combination did not have a 
material impact on the net sales and net income of the combined entity.



                                       -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 previously announced it would revise the accounting treatment of its 
September 1997 acquisition of SimTech in response to comments received from 
the Securities and Exchange Commission. The following discussion includes all 
changes that have been made related to the restatement.

Summit was founded in December 1993 to act as the holding company for Test 
Systems Strategies, Inc. ("TSSI") and 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 high level design automation ("HLDA") 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 HLDA 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 HLDA and Design to Test products. To promote its products, the 
Company added sales and marketing staff, increasing its sales and marketing 
expenditures by 187% from 1993 to 1997, 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 through 1995.  The Company 
introduced its first HLDA Plus 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 Test Development Series ("TDS") 
product and related maintenance revenue accounted for all of the Company's 
revenue. After the Reorganization and through June 30, 1997, the Company's 
revenue was predominantly derived from two product lines, Visual HDL, which 
includes Visual HDL for VHDL and Visual HDL for Verilog, and TDS.  As the 
result of the July 1997 sale of the TDS product line, Design to Test products 
are no longer a source of revenue for the Company.  With  the acquisition of 
TriQuest Design Automation, Inc. ("TriQuest") in February 1997 and Simulation 
Technologies Corp. ("SimTech"), in September 1997, the Company has also 
derived revenue from verification products which include hardware-software 
co-verification, code coverage, and HDL debugging products, as well as 
analysis, verification and Register Transfer Language ("RTL") optimization 
tools.

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. Revenue earned on software arrangements involving 
multiple elements is allocated to each element based on vendor-specific 
objective evidence (VSOE) of the fair value of the various elements within 
the arrangement. 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 international 

                                       -8-

<PAGE>

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 and duration of license. 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 may continue to 
fluctuate in the future.

The Company entered into a joint venture with Anam, effective April 1, 1996, 
pursuant to which the joint venture corporation (Summit Design Asia Ltd. 
("Summit Asia")) acquired exclusive rights to sell, distribute and support 
all of Summit's products in the Asia-Pacific region, excluding Japan. Prior 
to that date, Anam was an independent distributor of the Company's products 
in Korea. 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. For the three months ended March 
31, 1998 and 1997, Anam and Summit Asia together accounted for 3.9% and 4.5% 
of the Company's revenue, respectively.

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 are 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. The Company is currently restructuring the 
ownership and responsibilities of Summit Asia. There can be no assurance that 
any restructuring would result in Summit Asia becoming profitable or that 
revenue attributable to sales in the Asia Pacific region, excluding Japan, 
would increase. 

Approximately 32% and 53% of the Company's total revenue for the three months 
ended March 31, 1998 and 1997, respectively, were attributable to sales made 
outside the United States. The decline in the percentage of revenue from 
sales made outside the United States in 1998 is primarily the result of (1) 
domestic sales to one customer, (2) the loss of Design to Test product sales 
in the last half of 1997 as a result of the sale of the product line, which 
had a strong international market, and (3) the addition of revenue from 
products acquired in the SimTech acquisition which had a principally domestic 
market. 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)

-------------------
(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 16 for a discussion of factors that could affect future 
performance.

                                       -9-
<PAGE>

On February 28, 1997, Summit completed its acquisition of TriQuest. TriQuest 
develops HDL analysis, optimization, and verification  tools for the design 
of high performance, deep submicron integrated circuits.  The transaction has 
been accounted for as a "pooling of interest" in accordance with generally 
accepted accounting principles.

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 twelve 
months has been primarily due to increased revenue associated with the 
Company's HLDA Plus products.  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 three months ended March 31, 
1997 were attributable to the TDS products.  As of July 1, 1997, TDS products 
ceased 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 has not recognized deferred revenue associated with such 
contracts after June 30, 1997.

The Company maintained exclusive rights to its Visual Testbench technology 
and CSC agreed 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 beginning July 1997.  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.

On September 9, 1997, the Company acquired SimTech, a company that develops 
and distributes hardware-software co-verification, code coverage and HDL 
debugging software. The aggregate consideration for the acquisition was 
1,256,800 shares of Summit common stock, 723,200 options to purchase Summit 
common stock and $3,875,000 in cash. The transaction was accounted for using 
the purchase method of accounting. Accordingly, the results of operations for 
the period from September 9, 1997 are included in the consolidated statements 
of operations. The purchase price was allocated to the net assets acquired 
based on their estimated fair market values at the date of acquisition.

After discussion with the staff of the Securities and Exchange Commission 
(the "staff") the condensed consolidated financial statements as of March 31, 
1998 and for the three months ended March 31, 1998 have been restated to 
reflect a change in the original accounting treatment related to the 
September 1997 acquisition of SimTech.

The Company allocated amounts to IPR&D and intangible assets in the third 
quarter of 1997 in a manner consistent with widely recognized appraisal 
practices and in consultation with their independent accountants 
PricewaterhouseCoopers LLP at the date of the acquisition of SimTech. 
Subsequent to the acquisition, the SEC staff expressed views that took issue 
with certain appraisal practices generally employed in determining the fair 
value of the IPR&D that was the basis for measurement of the Company's IPR&D 
charge.  The charge of $19.9 million, originally reported, was based upon the 
work of an independent valuation firm that utilized methodologies the SEC has 
since announced it does not consider appropriate. 

As a result of computing IPR&D using the SEC preferred methodology, the 
Company, in consultation with their independent accountants, has revised the 
amount originally allocated to IPR&D from $19.9 million to $11.7 million. In 
addition, Summit adjusted the discount on common shares paid to SimTech 
shareholders from 28% to 10% and allocated $4.4 million of the purchase 
price, associated with certain shares, to contingent compensation. The 
Company has reduced the amount originally allocated to IPR&D and increased 
the amounts allocated to purchased technology, identifiable intangibles, 
deferred tax liability, and goodwill from $1.0 million to $2.4 million, $1.0 
million to $4.1 million, $0 to $1.3 million and $0 to $3.8 million, 
respectively.  These amounts are being amortized on a straight line basis 
over periods ranging from two to five years. The $4.4 million allocated to 
compensation will be recorded as expense as the employment obligation lapses. 
The restatement does not affect previously reported net cash flows for the 
periods.

The value assigned to purchased in-process technology was related primarily 
to two research projects for which technological feasibility had not been 
established, V-CPU ($8.1 million) and HDL Score ($3.1 million).  The value 
was determined by estimating the net cash flows from the sale of products 
resulting from the completion of such projects, and discounting the net cash 
flows back to their present value.  The Company then estimated the stage of 
completion of the products at the date of the acquisition based on the code 
that had been completed at the date of acquisition as compared to total 
estimated code at completion.  The percentages derived from such calculation 
were then applied to the net present value of future cash flows to determine 
the in-process technology charge.

Summit released the commercial version of the V-CPU hardware/software 
coverification product in the first quarter of 1998, consistent with 
expectations at the time of the acquisition.  A market requirement for 
extensive embedded system component interfaces called bus functional models 
("BFM") and instruction set simulators ("ISS") was underestimated in the 
introduction schedule and has caused delays in initial sales of the product. 
Summit introduced the HDL Score product in the second quarter of 1998, 
approximately four months later than originally anticipated, due to delays in 
completing the control logic support functionality that was essential for 
product introduction to take place.  For 1998, the Company estimates that 
revenues from the sales of the products acquired in connection with the 
SimTech acquisition will fall short of forecast by 10%. (2) The Company's 
forecast of revenues for 1999 reflects that the shortfall of revenues in 1998 
related to HDL Score will be realized in 1999 and that V-CPU will have 
revenues that are approximately 50% of those originally estimated due to the 
delays in availability of BFM's and ISS's. (2) Although these delays affected 
the timing of the realization of revenue from these products as originally 
estimated by Summit, Summit believes the aggregate revenue streams originally 
anticipated from these products will be realized and that there has been no 
material change in expected return on investment related to these products. 
(2) However, there can be no assurance that Summit will realize revenue for 
V-CPU and HDL Score in the amounts estimated, and actual revenue realized 
from either or both of these products may be significantly lower than 
expected. (1)

In connection with the acquisition of SimTech, the Company repurchased 
939,000 shares of common stock in private transaction at an average price of 
$12.30 per share for $11,555,000 in September 1997.

On December 23, 1997, the Company announced that the Board of Directors had 
authorized the repurchase of up to 750,000 shares of the Company's Common 
Stock. From January 1, 1998 to May 12, 1998, the Company repurchased 162,500 
shares of its common stock at a cost of $2.3 million.

-------------------
(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 16 for a discussion of factors that could affect future 
performance.

(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 16 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>
<CAPTION>
                                           Three Months Ended 
                                                 March 31,
                                          --------------------
                                            1998        1997
                                          --------    --------
                                         (Restated)
<S>                                       <C>         <C>
Revenue:
     Product licenses                         79.2%       75.1%
     Maintenance and services                 19.9        22.7
     Other                                     0.9         2.2
                                          --------    --------
     Total revenue                           100.0       100.0
Cost of revenue:
     Product licenses                          1.8         2.8
     Maintenance and services                  2.2         1.7
     Amortization of
      developed technologies                   1.6           -
                                          --------    --------
     Total cost of revenue                     5.6         4.5
                                          --------    --------
     Gross profit                             94.4        95.5
Operating expenses:
     Research and development                 28.3        22.3
     Sales and marketing                      29.4        38.8
     General and administrative (a)           10.3        18.1
     Amortization of intangibles
      and goodwill                             6.7           -
                                          --------    --------
     Total operating expenses                 74.7        79.2
                                          --------    --------
                                          --------    --------
Income from operations                        19.7        16.3
Other income (expense), net                    2.7         3.2
                                          --------    --------
Income before income taxes                    22.4        19.5
Income tax provision                           8.9         1.2
                                          --------    --------
Net income                                    13.5%       18.3%
                                          --------    --------
                                          --------    --------
</TABLE>

(a)  General and administrative expenses for the three months ended March 31,
     1997 include a one-time charge of $379,000 (5.8% of revenue) for costs 
     relating to the acquisition of TriQuest.

TOTAL REVENUE

Total revenue increased by 58.8% from $6.5 million for the three months ended 
March 31, 1997 to $10.4 million for the three months ended March 31, 1998. 
Sales through one distributor accounted for 17.3% and 15.8% of the Company's 
total revenue for the three months ended March 31, 1998 and 1997, 
respectively. Sales to CSC accounted for 31.2% of the Company's total revenue 
for the three month period ended March 31, 1998. Such revenue included $2.9 
million of Visual Testbench license sales made pursuant to the Company's 
contract with CSC. See "Overview." No customer accounted for more than 10% of 
the Company's total revenue for the three months ended March 31, 1997.

REVENUE

PRODUCT LICENSES

The Company's product licenses revenue is derived from license fees from the 
Company's HLDA Plus products and additionally from Design to Test products 
through June 30, 1997. Product licenses revenue increased by 67.5% from $4.9 
million for the three months ended March 31, 1997 to $8.2 million for the 
three months ended March 31, 1998.  Due to the sale of the TDS product line 
in July of 1997, revenue from HLDA Plus products accounted for 100% of 
product licenses revenue for the three months ended March 31, 1998. During 
the three months ended March 31, 1997, HLDA Plus and Design to Test revenues 
accounted for 77.7% and 22.3% of product license revenue, respectively.

                                       -11-
<PAGE>

HLDA license revenue increased 115.8% from $3.8 million for the three months 
ended March 31, 1997 to $8.2 million for the three months ended March 31, 
1998. The increase in HLDA license revenue over the same period in 1997 was 
primarily attributable to sales to a single customer, revenue from the 
Verification products portfolio that was not shipping in the comparable 
period in 1997, and growth in the installed base of HLDA customers. Sales to 
the single customer are expected to continue over the next seven quarters 
pursuant to contractual arrangements with the customer.(2)

MAINTENANCE AND SERVICES

The Company's maintenance and services revenue is derived from maintenance 
contracts related to the Company's HLDA products and training classes offered 
to purchasers of the Company's software products.  Maintenance and services 
revenue increased 39.3% from $1.5 million for the three months ended March 
31, 1997 to $2.1 million for the three months ended March 31, 1998. The 
increase is primarily attributable to maintenance contracts for verification 
products acquired in the SimTech acquisition, a maintenance contract with one 
customer, an increase in the installed base of HLDA Plus customers over the 
previous comparable period, less a decrease of Design to Test maintenance 
revenue of $743,000, due to the sale of the TDS product line.

OTHER

Other revenue consists of revenue from one-time technology sales and fees 
received for granting distribution rights. Other revenue decreased 35.2% from 
$142,000 for the three months ended March 31, 1997 to $92,000 for the three 
months ended March 31, 1998. In May 1997 a distribution agreement expired; 
and as a result the distribution rights fees paid at the inception of the 
agreement and amortized into revenue at $50,000 each quarter over the 
agreement period are no longer be a source of other revenue. No material 
costs were associated with other revenue for the three months ended  March 
31, 1998 and 1997.

COST OF REVENUE

PRODUCT LICENSES

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 plus the amortization of 
purchased technology acquired in the SimTech purchase. The cost of product 
licenses revenue increased 4.3% from $185,000 for the three months ended 
March 31, 1997 to $193,000 for the three months ended March 31, 1998. As a 
percentage of product licenses revenue, the cost of product licenses revenue 
decreased from 3.8% of product license revenue for the three months ended 
March 31, 1997 to 2.4% of product license revenue for the three months ended 
March 31, 1998.  This decrease was primarily due to leveraging fixed costs 
across increased product license revenue.

MAINTENANCE AND SERVICES

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 104.5% from $110,000 for the 
three months ended March 31, 1997 to $225,000 for the three months ended 
March 31, 1998.  As a percentage of maintenance and services revenue, the 
cost of maintenance and services revenue increased from 7.4% for the three 
months ended March 31, 1997 to 10.9% for the three months ended March 31, 
1998. The 3.5% increase in the cost of maintenance and services revenue as a 
percent of revenue for the three months ended March 31, 1998 over the same 
period in 1997 was primarily the result of the Company operating below 
forecasted staffing levels during the first half of 1997.  

AMORTIZATION OF PURCHASED TECHNOLOGIES

The Company recorded $2.4 million of purchased technologies (intangibles) as 
part of the SimTech acquisition which are being amortized to cost of revenue 
on a straight line basis over periods ranging from two to five years 
beginning September 9, 1997. The Company expensed $165,000 for the three 
months ended March 31, 1998.

-----------------------
(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 16 for a discussion of factors that could affect 
     future performance.

                                       -12-

<PAGE>

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 101.7% from $1.5 million for the three months 
ended March 31, 1997 to $2.9 million for the three months ended March 31, 
1998. As a percentage of total revenue, research and development expenses 
increased from 22.3% for the three months ended March 31, 1997 to 28.3% for 
the three months ended March 31, 1998. A significant amount of the increase 
was attributable to compensation expense in the amount of $550,000 for the 
three months ended March 31, 1998 recorded in connection with the Company's 
acquisition of SimTech in September 1997. The Company is recording $4.4 
million of compensation expense for shares issued as part of the acquisition 
which are contingent upon continued employment and are expensed as the 
employment obligation lapses. The Company's research and development staff 
increased from 61 for the three months ended March 31, 1997 to 93 for the 
three months ended March 31, 1998. This increase is primarily attributable to 
the addition of 28 engineers through the acquisition of Simtech in September 
of 1997 and the hiring of 19 additional engineers, less a decrease of 15 
engineers due to the sale of the TDS product line on in July of 1997.  The 
Company continues to believe that significant investment in research and 
development is required to remain competitive in its markets, and the Company 
therefore anticipates that research and development expense will increase in 
absolute dollars in future periods, but may vary as a percent of revenue. (2)

SALES AND MARKETING

Sales and marketing expenses, consisting primarily of salaries, commissions 
and promotional costs, increased 20.4% from $2.5 million for the three months 
ended March 31, 1997 to $3.0 million for the three months ended March 31, 
1998.  The increase over 1997 was attributable to expenses related to the 
marketing of new products acquired with the purchase of SimTech and 
additional commissions directly related to the increase in gross sales over 
the comparable period in 1997. As a percentage of total revenue, sales and 
marketing expenses decreased from 38.8% for the three months ended March 31, 
1997 to 29.4% for the three months ended March 31, 1998.  The decrease as a 
percentage of revenue was primarily attributable to the increase in total 
revenue for 1998. In the future, the Company expects sales and marketing 
expenses to continue to increase in absolute dollars.(2)

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 
decreased 10.0% from $1.2 million for the three months ended March 31, 1997 
which includes a $379,000 one-time charge for costs associated with the 
acquisition of TriQuest, to $1.1 million for the three months ended March 31, 
1998.  Excluding this one-time charge, expenses increased by $261,000 (22.1%) 
for the three months ended March 31, 1998 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 12.3% for the three months ended March 
31, 1997 to 10.3% for the three months ended March 31, 1998. The decrease as 
a percentage of total revenue was attributable to the increase in total 
revenue in 1998.  The Company expects general and administrative expenses to 
increase in absolute dollars to support future sales and operations.(2)

AMORTIZATION OF INTANGIBLES AND GOODWILL

The Company recorded $4.1 million in intangibles (excluding $2.4 million of 
purchased technologies) and $3.8 million of goodwill as part of the SimTech 
acquisition, which are amortized to expense on a straight line basis over 
periods ranging from two to five years beginning September 9, 1997. The 
Company expensed $698,000 for the three months ended March 31, 1998.

-----------------
(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 16 for a discussion of factors that could affect future performance.

                                       -13-
<PAGE>

INTEREST EXPENSE

Interest expense decreased from $7,000 for the three months ended March 31, 
1997 to $1,000 for the three months ended March 31, 1998 due to decreased 
long term debt and capital leases obligations. The Company incurred no 
interest expense associated with the Company's bank line of credit for the 
three months ended March 31, 1998.

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 the earnings and losses of Summit Asia and 
foreign exchange rate differences resulting from paying operating expenses of 
foreign operations in the local currency.  Other income was $218,000 for the 
three months ended March 31, 1997 and $289,000 for the three months ended 
March 31, 1998.  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 increased from $80,000 for the three months ended 
March 31, 1997 to $923,000 for the three months ended March 31, 1998. The 
provision for the three months ended March 31, 1997 reflects an effective 
rate of 6.5% of taxable income and is comprised of federal alternative 
minimum tax and Israeli income taxes. In the first quarter of 1997, the 
Company utilized net operating loss carryforwards to offset a considerable 
portion of U.S. federal and state taxable income. The 1998 income tax 
provision reflects the Company's estimated consolidated tax rate for federal, 
state and foreign taxes of approximately 40% of taxable income. The 
difference between the Company's estimated effective rate and the statutory 
rate for the year ending December 31, 1998 is primarily due to an increased 
effective tax rate on U.S. income arising from non-deductible amortization of 
goodwill and non-deductible compensation expense associated with shares 
issued in connection with the acquisition of SimTech offset by reduced tax 
rates on the Company's income generated from operations in Israel.

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, 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 


-----------------
(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 16 for a discussion of factors that could affect future performance. 

                                       -14-
<PAGE>

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

Prior to 1996, the Company had experienced losses for income tax purposes in 
the United States.  The Company is now profitable in the United States and 
expects to pay income taxes at or near the statutory tax rate on its U.S. 
taxable earnings.  The Company expects its effective tax rate on U.S. 
earnings to be in excess of the statutory rate for the foreseeable future due 
to non-deductible charges for goodwill and certain compensation charges 
associated with stock issued to certain shareholders in connection with the 
SimTech acquisition. As of December 31, 1997, the Company has recognized the 
benefit of its U.S. net operating loss carryforwards and tax credit 
carryforwards in their financial statements.

The Company's Israeli operations are performed entirely by Summit Design 
(EDA) Ltd., which is a separate taxable Israeli entity.  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 periods, 
a portion of the Company's taxable income from its Israeli operations will be 
taxed at favorable tax rates. 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 have favorable tax status in Israel.  
Management of the Company intends to permanently reinvest earnings of the 
Israeli subsidiary outside the U.S.  If such earnings were remitted to the 
U.S., additional U.S. federal and foreign taxes may be due. 

The Company has foreign income tax net operating losses of approximately $5.6 
million at December 31, 1997.  These foreign losses were generated in Israel 
over several years and have not yet received final assessment from the 
Israeli government.  Consequently, management is uncertain as to the 
availability of a substantial portion of such foreign loss carryforwards.

The Company is also subject to 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, results of operations and cash flows.

                                       -15-
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations primarily through a public offering 
in 1996 the private placement 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 March 31, 1998, 
the Company had approximately $20.4 million in cash and cash equivalents and 
a $1.0 million bank line of credit with a major financial institution (the 
"Bank"). The line of credit expires on April 30, 1999. 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 assets, including its intellectual property rights. As of 
March 31, 1998, the Company had no borrowings outstanding under this line of 
credit.

As of March 31, 1998, the Company had working capital of approximately $15.8 
million.

Net cash generated by operating activities was approximately $2.6 million and 
$475,000 for the three months ended March 31, 1998 and 1997, respectively. 
Cash generated by operating activities resulted primarily from profitable 
operations and improved cash collections less the decrease in deferred 
revenue and accrued liabilities for the three months ended March 31, 1998 and 
primarily from profitable operations less a decrease in deferred revenue for 
the three months ended March 31, 1997. 

Net cash used in investing activities was approximately $577,000 and $327,000 
for the three months ended March 31, 1998 and 1997, respectively. Net cash 
used in investing activities was related to the acquisition of furniture and 
equipment and a loan to an independent software company for the three months 
ended March 31, 1998 and the acquisition of furniture and equipment and a 
loan to an employee for the three months ended March 31, 1997.

Net cash used by financing activities was approximately $1.6 million and 
$98,000 for the three months ended March 31, 1998 and 1997, respectively.  
For the three months ended March 31, 1998 the use of cash was primarily from 
repurchasing 162,500 shares of the Company's common stock, less proceeds from 
the issuance of common stock and a tax benefit from option exercises.  For 
the three months ended March 31, 1997, the use of cash was primarily for 
repayment of debt and capital lease obligations.

The Company presently believes that its current cash and cash equivalent, 
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 generated net income in the first quarter of 1998,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 

-------------------
(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.

                                       -16-
<PAGE>

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, results of operations or cash flows 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 HLDA 

Prior to July 1997, the Company's revenue was 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 ceased to be a source of revenue.  With the acquisition of 
TriQuest in February 1997 and SimTech in September 1997, the Company also 
derives revenue from verification products which include hardware-software 
co-verification, code coverage, and HDL debugging products as well as 
analysis, verification and RTL optimization tools.

The Company believes that HLDA 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 HLDA products. The Company commercially shipped its 
first HLDA product, Visual HDL for VHDL, in the first quarter of 1994. For 
the years ended December 31, 1997, 1996 and 1995, respectively, revenue from 
HLDA products and related maintenance contracts represented 76.5%, 63.5%, and 
43.6%, respectively, of the Company's total revenue. The Company's HLDA 
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 HLDA 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 

                                       -17-
<PAGE>

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 HLDA products will achieve broad market 
acceptance. A decline in the demand for, or the failure to achieve broad 
market acceptance of, the Company's HLDA products will have a material 
adverse effect on the Company's business, financial condition, results of 
operations or cash flows.

Although demand for HLDA products has increased in recent years, the market 
for HLDA 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 HLDA products. If the market for HLDA 
products fails to grow or grows more slowly than the Company currently 
anticipates, the Company's business, financial condition, results of 
operations or cash flows would be materially adversely affected.

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 
Visual Testbench product, 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, 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. As part of this agreement, CSC must purchase a 
minimum of $16.0 million of Visual Testbench licenses over a thirty month 
period beginning in July 1997. As of March 31, 1998 the Company had sold $9.1 
million of Visual Testbench licenses pursuant to this agreement. The Company 
will need to replace this revenue when the $16.0 million purchase obligation 
is satisfied and the failure of the Company to replace this revenue would 
have a material adverse affect on the Company's operating results.

COMPETITION

The EDA industry is highly competitive and the Company expects competition to 
increase as other EDA companies introduce HLDA products.  In the HLDA 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 HLDA 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 HLDA 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, results of operations, or cash flows.

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 
HLDA 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, results of 
operations, or cash flows. 

                                       -18-
<PAGE>

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, results of operations or cash flows.

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, results of operations, or cash 
flows. 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. 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, results of operations or cash flows 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, results of operations or cash 
flows will be materially adversely affected.

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 

                                       -19-
<PAGE>

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, results of 
operations or cash flows.

DEPENDENCE ON DISTRIBUTORS

The Company relies on distributors for licensing and support of its products 
outside of North America. Approximately 24%, 55%, 29%, 46% and 42% of the 
Company's revenue for the three months ended March 31, 1998 and 1997 and the 
years ended December 31, 1997, 1996 and 1995, 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 Asia 
acquired exclusive rights to sell, distribute and support 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. The Company is 
currently restructuring the ownership and responsibilities of Summit Asia.  
There can be no assurance that any restructuring would result in Summit Asia 
becoming profitable or that revenue attributable to sales in the Asia Pacific 
region, excluding Japan, would increase. 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 HLDA 
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. In March 1997, the Company entered into a three-year distribution 
agreement with Kanematsu USA Inc. pursuant to which Kanematsu was granted 
exclusive distribution rights to sell, distribute and support certain 
verification products in Japan.  For the three months ended March 31, 1998 
and the year ended December 31, 1997, all sales of the Company's products in 
the Asia-Pacific region were through Seiko, Summit Asia, ATE and Kanematsu.

There can be no assurance the relationships with Seiko, Summit Asia, ATE and 
Kanematsu 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, Seiko, Summit Asia, ATE and Kanematsu, 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, results of 
operations or cash flows.

INTERNATIONAL SALES AND OPERATIONS

Approximately 32%, 53%, 34%, 50% and 52% of the Company's revenue for the 
three months ended March 31, 1998 and 1997 and the years ended December 31, 
1997, 1996 and 1995, 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 

                                       -20-
<PAGE>

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, results of operations or cash flows. In addition, financial 
markets and economics in the Asia Pacific Region have been experiencing 
adverse conditions which could adversely affect demand for the Company's 
products in such region.

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, results of operations or cash 
flows.

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, results of operations or cash flows.

On February 28, 1997, Summit completed its acquisition of TriQuest and on 
September 9, 1997, Summit completed its acquisition of SimTech.  As a result 
of these acquisitions, Summit's operating expenses are expected to increase.  
There can be no assurance that the integration of TriQuest's and SimTech's 
business can be successfully completed in a timely fashion, or at all, or 
that the revenues from TriQuest and SimTech will be sufficient to support the 
costs associated with the acquired businesses, 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, 
financial condition, results of operations or cash flows.  In addition, 
Summit regularly evaluates acquisition opportunities.  Future acquisitions by 
Summit could result in potentially dilutive issuances 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 HLDA 
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 

                                       -21-
<PAGE>

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 annual 
costs and expenses in Israel are paid in Israeli currency. These costs and 
expenses were approximately $4.7, $4.3 and $4.3 million in 1997, 1996 and 
1995, 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 7%, 
11% and 8% during 1997, 1996, and 1995, 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, results of 
operations, or cash flows. 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, results of operations or cash flows. 

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 non-competition 
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, results of operations or cash flows. The Company has 
obtained a $1 million key person life insurance policy on its 
President/Chief Executive Officer. The Company recently hired a new Vice 
President of Worldwide Marketing and Sales and several new sales persons. The 
Company's future success will depend in part on the ability of these new 
persons to rapidly and effectively transition into their new positions. 
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, results of operations or cash flows. 

                                       -22-
<PAGE>

ISRAELI RESEARCH, DEVELOPMENT AND MARKETING GRANTS

Summit's Israeli subsidiary 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 December 31, 1997, all amounts had been repaid. 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 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 March 31, 1998, approximately $261,000 
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 HLDA Plus products to end-users primarily under 
"shrink-wrap" license agreements included within the packaged software In 
addition, the Company delivers certain of its verification products 
electronically under an electronic version of a "shrink wrap" license 
agreement. 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, results of operations or cash flows.

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 

                                       -23-
<PAGE>

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.

YEAR 2000

The Company is currently reviewing its products, internal systems and 
infrastructure in order to identify and modify those products and systems 
that are not Year 2000 compliant. The Company expects any required 
modification to be made on a timely basis and does not believe that the cost 
of any such modification will have a material adverse affect on the Company's 
operating results. There can be no assurance, however, that there will not be 
a delay in, or increased costs associated with, implementation of any such 
modifications and the Company's inability to implement such modifications 
could have an adverse effect on the Company's future operating results.


                                       -24-
<PAGE>

PART II

Item 1.   Legal Proceedings

          Not applicable

Item 2.   Changes in Securities

          From January 1, 1998 to March 31, 1998 the Company issued and sold 
          22,142 shares of Common Stock that were not registered under the 
          Securities Act of 1933 at prices ranging from $0.08 to $1.17 per 
          share upon exercise of stock options. Such issuances were made in 
          reliance upon the exemption from registration set forth in Rule 701 
          promulgated under the Securities Act of 1933.

Item 3.   Defaults Upon Senior Securities

          Not applicable

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

          Not applicable

Item 5.   Other Information

          Not applicable

Item 6    Exhibits and Reports on Form 8-K

          (a)  Exhibits

<TABLE>
          <S>      <C>
         *10.15    Bank line of credit agreement between the Registrant 
                   and U.S. National Bank of Oregon dated April 30, 1998
          27.1     Financial Data Schedule
</TABLE>

            *  Previously filed.

          (b)  Reports on Form 8-K
     
          Not applicable


                                       -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:     March 15, 1999

                                       -26-
<PAGE>

EXHIBIT INDEX

<TABLE>
<S>      <C>    <C>
*EXHIBIT  10.15  Bank line of credit agreement between the Registrant  
                 and U.S. National Bank of Oregon dated April 30, 1998 

 EXHIBIT  27.1   Financial Data Schedule

 EXHIBIT  27.2   Financial Data Schedule
</TABLE>

*  Previously filed.


                                       -27-