<PAGE>
                                       
                                UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                       
                                  FORM 10-Q
                                       
                                       
                                       
-------------------------------------------------------------------------------
X   Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 for the quarterly period ended September 30, 1997 or
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
    Transition report pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934 for the transition period from _________ to ________ 
-------------------------------------------------------------------------------

Commission file number:  0-20923
    
    
                                       
                              SUMMIT DESIGN, INC.
             (Exact name of registrant as specified in its charter)

               DELAWARE                               93-1137888
   (State or other jurisdiction of     (I.R.S. Employer Identification 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 November 4, 1997, the Registrant had outstanding 14,655,899 shares of 
Common Stock.

<PAGE>

                            SUMMIT DESIGN, INC.
                                   INDEX
                                      
                                      
                                      
PART I   FINANCIAL INFORMATION

Item 1  Condensed Consolidated Financial Statements

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

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

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

        Notes to Condensed Consolidated Financial Statements.                 6

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

Item 3  Not Applicable

PART II  OTHER INFORMATION

Item 2  Changes in Securities and Use of Proceeds                            27

Item 6  Exhibits and Reports on Form 8-K                                     27

Item 1 and Item 3 through Item 5       Not Applicable 

Signature                                                                    28

Exhibit Index                                                                29


                                      -2-
<PAGE>

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

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

               ASSETS
Current assets:
  Cash and cash equivalents .............           $  17,224             $  19,772
  Accounts receivable, net ..............               5,218                 5,567
  Prepaid expenses and other ............                 519                   487
                                           ------------------     -----------------
    Total current assets ................              22,961                25,826
  
Furniture and equipment, net ............               2,577                 1,832
Notes receivable from related parties ...                 490                     -
Purchased technology, net ...............               1,018                     -
Intangibles, net ........................                 727                     -
Deferred taxes ..........................               1,037                   500
Deposits and other assets ...............                 496                   468
                                           ------------------     -----------------
    Total assets ........................           $  29,306             $  28,626
                                           ------------------     -----------------
                                           ------------------     -----------------

             LIABILITIES
Current liabilities:
  Long-term debt, current portion .......           $     391             $     462
  Capital lease obligation, current 
  portion ...............................                  41                    65
  Accounts payable ......................               1,893                 1,454
  Accrued liabilities ...................               5,247                 2,869
  Deferred revenue ......................               5,033                 3,758
                                           ------------------     -----------------
    Total current liabilities ...........              12,605                 8,608

Long-term debt, less current portion ....                 675                   675
Capital lease obligations, less          
current portion .........................                  59                    95
Deferred revenue, less current portion ..                 333                    67

                                           ------------------     -----------------
    Total liabilities ...................              13,672                 9,445
                                           ------------------     -----------------

Commitments and contingencies

        STOCKHOLDERS' EQUITY
Common stock, $.01 par value.   
   Authorized 30,000 shares;  issued
   and outstanding 14,656  shares at
   September 30, 1997 and 13,873 shares    
   at December 31, 1996..................                 146                   139
Additional paid-in capital ..............              50,585                33,235
Accumulated deficit .....................            (23,552)              (14,193)
Treasury stock .   939 shares at  
   September 30, 1997 ...................            (11,545)                     -
                                           ------------------     -----------------
    Total stockholders' equity ..........              15,634                19,181
                                           ------------------     -----------------
    Total liabilities and 
    stockholders' equity ................           $  29,306             $  28,626
                                           ------------------     -----------------
                                           ------------------     -----------------
</TABLE>
                                       
       The accompanying notes are an integral part of the condensed 
                       consolidated financial statements


                                      -3-

<PAGE>
                                       
                             SUMMIT DESIGN, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (In thousands, except per share data)
                                (Unaudited)

<TABLE>
<CAPTION>
                                                Three Months               Nine Months
                                                    Ended                      Ended
                                                September 30,              September 30,
                                           ---------------------     ----------------------
                                              1997        1996          1997         1996
                                           ----------   --------     ----------   ---------
<S>                                         <C>         <C>           <C>          <C>
Revenue:
     Product licenses.....................  $  6,430    $ 3,801       $ 16,884     $10,992
     Maintenance and services.............     1,345      1,167          4,244       3,062
     Other................................        91        141            358         425
                                           ----------   --------     ----------   ---------
          Total revenue...................     7,866      5,109         21,486      14,479

Cost of revenue:
     Product licenses.....................       184        156            533         434
     Maintenance and services.............       171        122            421         333
                                           ----------   --------     ----------   ---------
          Total cost of revenue...........       355        278            954         767
                                           ----------   --------     ----------   ---------
               Gross profit...............     7,511      4,831         20,532      13,712
                                           ----------   --------     ----------   ---------

Operating expenses:
     Research and development.............     1,611      1,453          4,698       4,310
     Sales and marketing..................     2,690      2,357          7,778       6,761
     General and administrative...........       959        785          3,014       2,329
     In-process technology................    19,937          -         19,937           - 
                                           ----------   --------     ----------   ---------
          Total operating expenses........    25,197      4,595         35,427      13,400
                                           ----------   --------     ----------   ---------

Income (loss) from operations.............  (17,686)        236       (14,895)         312

Interest expense..........................       (1)       (17)           (10)        (93)
Other income, net.........................       348         27            797          49
Gain on sale of TDS product line..........     5,569          -          5,569           - 
                                           ----------   --------     ----------   ---------
Income (loss) before income taxes.........  (11,770)        246        (8,539)         268
Income tax provision......................       640         34            820         243
                                           ----------   --------     ----------   ---------
Net income (loss)......................... $(12,410)    $   212       $(9,359)    $     25
                                           ----------   --------     ----------   ---------
                                           ----------   --------     ----------   ---------
Net income (loss) per share................ $ (0.87)    $  0.02       $ (0.67)    $ (0.00)
                                           ----------   --------     ----------   ---------
                                           ----------   --------     ----------   ---------
Number of shares used in per share
calculation...............................    14,250      12,959         14,039      12,608
</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>
                                                             Nine Months Ended
                                                               September 30,
                                                           -----------------------
                                                             1997          1996
                                                           ---------     ---------
<S>                                                      <C>             <C>
Cash flows from operating activities:
   Net income (loss).................................... $   (9,359)        $  25
   Adjustments to reconcile net income (loss) to net 
     cash provided by operating activities:
       Depreciation and amortization....................        624           663
       Gain on sale of TDS product line.................     (5,569)            -
       Writeoff of acquired in-process technology.......     19,937             -
       Loss on asset disposition........................         (1)            5
       Changes in assets and liabilities:
           Accounts receivable..........................        855         1,403
           Prepaid expenses and other...................          5           (99)
           Accounts payable.............................        434           (65)
           Accrued liabilities..........................      1,742           557
           Deferred revenue.............................      1,294         1,081
           Deferred taxes...............................        537             -
           Other, net...................................        (76)          194
                                                           ---------     ---------
    Net cash provided by operating activities...........      9,349         3,764
                                                           ---------     ---------
Cash flows from investing activities:
    Additions to furniture and equipment................     (1,252)         (553)
    Acquisitons, net of cash received...................     (3,819)            -
    Proceeds from sale of TDS product line, net.........      4,643             -
    Proceeds from sale of assets........................          8             6
    Notes receivable from related parties...............       (490)            -
    Invest in Joint Venture.............................          -          (100)
                                                           ---------     ---------
       Net cash used in investing activities............       (910)         (647)
                                                           ---------     ---------
Cash flows from financing activities:
    Issuance of common stock, net of issuance costs             700           119
    Payments to acquire treasury stock..................    (11,555)            -
    Issuance of TriQuest Preferred Stock................          -           986
    Stock issuance costs................................          -           674
    Repurchase of common stock..........................          -            (2)
    Proceeds from long-term debt........................          -            73
    Short term borrowings...............................          -          (164)
    Principal payments of debt obligations..............        (71)         (347)
    Principal payments of capital lease obligations.....        (61)       (1,050)
                                                           ---------     ---------
       Net cash used in financing activities............    (10,987)       (1,059)
                                                           ---------     ---------
       Increase (decrease) in cash and cash 
         equivalents....................................     (2,548)        2,058

Cash and cash equivalents, beginning of period..........     19,772           704
                                                           ---------     ---------
Cash and cash equivalents, end of period................   $ 17,224     $   2,762 
                                                           ---------     ---------
                                                           ---------     ---------
Supplemental disclosure of cash flow information:
    Cash paid during the period for:
       Interest.........................................   $     10      $     64
       Income taxes.....................................        104           188
Supplemental disclosure of non-cash investing
 and financing activities:
       Equipment acquired under capital lease...........          -            23
Acquisition, net of cash acquired:
    Net current assets, other than cash acquired........   $ (1,600)
    Furniture and equipment.............................        377
    In-process technology...............................     19,937
    Purchased technology and intangibles................      1,772
    Stock issued........................................    (16,667)
    Cash used, net of cash acquired.....................     (3,819)
</TABLE>

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

                                    -5-
<PAGE>

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

1.  BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared by Summit 
Design, Inc. ("the Company") in accordance with the rules and regulations of 
the Securities and Exchange commission.  Certain information and footnote 
disclosures normally included in financial statements prepared in accordance 
with generally accepted accounting principles have been condensed or omitted 
in accordance with such rules and regulations.  The December 31, 1996 balance 
sheet was derived from the audited financial statements but does not include 
all of the disclosures required by generally accepted accounting principles. 
In the opinion of management, the accompanying unaudited financial statements 
reflect all adjustments, consisting only of normal recurring adjustments, 
necessary to present fairly the financial position of the Company, and its 
results of operations and cash flows.  These financial statements should be 
read in conjunction with the audited financial statements and notes thereto 
for the years ended December 31, 1996, 1995, and 1994 included in the 
Company's Form 10-K filed for December 31, 1996.

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

2.  ACQUISITION OF TRIQUEST DESIGN AUTOMATION, INC.

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

The following presents the previously separate results of operations of 
TriQuest for the year ended December 31, 1996 and for the two months ended 
February 28, 1997:

                                 December 31, 1997     February 28, 1997
                                 -----------------     -----------------
                                  (In thousands, except per share data)

      Revenues                       $   151               $   199
                                     -------               -------
                                     -------               -------
      Net loss                       $ 1,425               $   143
                                     -------               -------
                                     -------               -------

3.  SALE OF TDS PRODUCT LINE

On July 11, 1997 the Company sold substantially all of the assets used in its 
business of developing and marketing its Test Development Series "TDS" 
Products (the "Asset Sale") to Credence Systems Corporation ("CSC") for $5 
million.  CSC assumed certain liabilities, including the Company's 
obligations under TDS maintenance contracts entered into prior to the 
closing.  CSC also agreed to purchase $2 million of Visual interface licenses 
in the second quarter of 1997.  TDS product license, maintenance and services 
and other revenue for the three months ended September 30, 1997 and 1996 were 
$0 and $1,758,000, respectively, and for the nine months ended September 30, 
1997 and 1996 were $3,530,000 and $5,400,000, respectively, and $7,331,000 
for the year ended December 31, 1996.

The Company and CSC also entered into a Software OEM License agreement ("OEM 
Agreement") in which CSC agreed to purchase $16 million of Visual Testbench 
licenses over a thirty-month period beginning July 1997 subject to specified 
quarterly maximums and certain additional conditions. Additionally CSC 
entered into an 18 month maintenance agreement beginning July 1997 for $2 
million associated with the Visual Testbench product.

                                -6-

<PAGE>


                              SUMMIT DESIGN, INC.
                 Notes to Condensed Consolidated Financial Statements
                                  (Unaudited)
                                           
4.  ACQUISITION OF SIMULATION TECHNOLOGIES CORP.

On September 9, 1997, the Company acquired Simulation Technologies Corp. 
("SimTech"), a Minnesota Corporation.  SimTech develops and distributes 
hardware-software co-verification, code coverage and HDL debugging software. 
The aggregate consideration for the acquisition (including shares of common 
stock reserved for issuance upon exercise of SimTech options assumed by the 
Company) was 1,980,000 shares of Summit common stock valued at $16,667,000 
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 financial statements. 
 The purchase price was allocated to the net assets acquired based on their 
estimated fair market values at the date of acquisition.  The fair value of 
tangible assets acquired and liabilities assumed were $1.3 million and $2.1 
million, respectively.  In addition, $19.9 million was allocated to 
in-process technology which had not reached technological feasibility and had 
no probable alternative uses, which the Company expensed as of the 
acquisition date.  The remainder of the purchase price was allocated to 
Purchased technology ($1,037,000) and identifiable intangibles ($735,000), 
which are being amortized on a straight-line basis over three and five years 
respectively.

The following table reflects unaudited pro forma combined results of 
operations of the Company and SimTech on a basis that the acquisition had 
taken place at the beginning of the fiscal year for each of the periods 
presented, excluding the effect of the one time charge of in-process 
technology:

                                 December 31, 1996     September 30, 1997
                                 -----------------     -----------------
                                  (In thousands, except per share data)

      Revenues                      $ 24,038              $ 25,325
                                    --------              --------
                                    --------              --------
      Net Income                    $  2,872              $  8,409
                                    --------              --------
                                    --------              --------
      Net income per common share   $   0.21              $   0.53
                                    --------              --------
                                    --------              --------
      Number of shares used in
         per share calculation        13,629                15,827
                                    --------              --------
                                    --------              --------

In management's opinion, the unaudited pro forma combined results of 
operations are not indicative of the actual results that would have occurred 
had the acquisition been consummated at the beginning of 1996 or at the 
beginning of 1997 or under the ownership and management of the Company.

In connection with this transaction the Company also repurchased 939,000 
shares of Summit common stock in private transactions at an average price of 
$12.30 per share for an aggregate of $11,555,000 in cash.

5.  NOTE RECEIVABLE

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

6.  BALANCE SHEET COMPONENTS, (IN THOUSANDS)

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

Accounts Receivable:
  Trade receivables.......................   $   5,667          $    6,000 
  Less allowance for doubtful accounts....        (449)               (433)
                                           ------------------  -----------------
                                             $   5,218          $    5,567
                                           ------------------  -----------------
                                           ------------------  -----------------
Furniture and equipment:
  Office furniture equipment.............    $       530        $      513
  Computer equipment.....................          4,401             3,124
  Leasehold improvements.................             66                41
  In-process assets......................            102                -  
                                           ------------------  -----------------
                                                   5,099             3,678  
Less: accumulated depreciation...........         (2,522)           (1,846)
                                           ------------------  -----------------
                                              $    2,577        $    1,832
                                           ------------------  -----------------
                                           ------------------  -----------------


                                      -7-

<PAGE>

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



Accrued expenses:
  Commissions payable....................     $       46         $     173
  Payroll and related benefits...........          2,314             1,610
  Accrued management relocation costs....            160                24
  Accounting and legal...................            418               301
  Federal and state income taxes payable.          1,256                18
  Sales taxes payable....................            117                96
  Other..................................            936               647
                                           ------------------  -----------------
     Total accrued expenses..............     $    5,247         $   2,869
                                           ------------------  -----------------
                                           ------------------  -----------------
Long-term debt:
  Marketing grant payable to the Israeli      $      364         $     364
    government Chief Scientist grant
    payable to the Israeli government....            702               773
                                           ------------------  -----------------
Total long-term debt.....................          1,066             1,137
Less current portion.....................           (391)             (462)
                                           ------------------  -----------------
Non current portion......................      $     675       $       675
                                           ------------------  -----------------
                                           ------------------  -----------------


7.  IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

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

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

Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments 
of an Enterprise and Related Information."  This Statement will change the 
way public companies report information about segments of their business in 
their annual financial statements and requires them to report selected 
segment information in their quarterly reports issued to shareholders.  It 
also requires entity-wide disclosures about the products and services an 
entity provides, the material countries in which it holds assets and reports 
revenues, and its major customers.  The Statement is effective for fiscal 
years beginning after December 15, 1997.  Management has no yet determined 
the effect, if any, of SFAS No.131 on the consolidated financial statements.

In October 1997, the AICPA issued SOP 97-2, "Software Revenue Recognition", 
which supersedes SOP 91-1 and is effective for transactions entered into in 
years beginning after December 15, 1997. Management is currently studying the 
implications of this Statement and does not expect adoption to have a material 
impact on the Company's financial condition or results of operations.


                                  -8-

<PAGE>



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

IMPORTANT NOTE ABOUT FORWARD LOOKING STATEMENTS

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

OVERVIEW

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

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

Prior to the Reorganization, the Company's TDS product and related 
maintenance revenue accounted for all of the Company's revenue.  After the 
Reorganization, the Company's revenue has been predominantly derived from two 
product lines, Visual HDL, which includes Visual HDL for VHDL and Visual HDL 
for Verilog, and TDS.  As of July 1, 1997 with the sale of the TDS product 
line, Design to Test products are no longer a source of revenue.  With the 
acquisition of TriQuest Design Automation ("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 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. 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 markets. Revenue from 
product sales through distributors is recognized net of the associated 
distributor 

                                  -9-

<PAGE>

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 has entered into a joint venture with Anam, effective April 1, 
1996, pursuant to which the joint venture corporation (Summit Asia) shall 
acquire exclusive rights to sell, distribute and support all of Summit's 
products in the Asia-Pacific region, excluding Japan.  Summit Asia has acted 
in such capacity since April 1, 1996. Prior to that date, Anam was an 
independent distributor of the Company's products 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. Excluding one-time sales of technology, sales through Anam 
accounted for 2.4% and 3.6% of the Company's total revenue and for 21.7% and 
33.8% of the Company's revenue attributable to the Asia-Pacific region 
excluding Japan for the years ended December 31, 1995 and 1994, respectively. 
For the year ended December 31, 1996, Anam and Summit Asia together 
accounted for 3.8% of the Company's revenue for the nine months ended 
September 30, 1997. Summit Asia accounted for 3.0% of the Company's revenue.

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 is recognized as income or losses in 
the Company's income statement in "Other income, net." The Company does not 
expect Summit Asia to recognize a profit for the foreseeable future and thus 
does not expect to recognize income from its investment in Summit Asia for 
the foreseeable future, if at all. 

Approximately 24%, 51%, 37% and 51% of the Company's total revenue for the 
three months ended September 30, 1997 and 1996, and for the nine months ended 
September 30, 1997 and 1996, respectively, were attributable to sales made 
outside the United States. The decline in the percentage of revenue from 
sales made outside the United States for the three and nine months ended 
September 30, 1997 as compared to the same periods in 1996 is primarily the 
result of domestic sales to one customer. 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)

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 is 
being accounted for as a "pooling of interest" in accordance with generally 
accepted accounting principals.

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

                                      -10-
<PAGE>

Effective July 1, 1997 the Company sold substantially all of the assets used 
in its business of developing and marketing its Test Development Series "TDS" 
Products (the "Asset Sale") to Credence Systems Corporation ("CSC").  The 
increase in the Company's product licenses revenue during the last nine 
quarters has been primarily due to increased revenue associated with the 
Company's SLDA products.  The Asset Sale will allow the Company to focus on 
the development and marketing of these products.

Substantially all of the Company's Design to Test product license revenue and 
related maintenance and services revenue for the year ended December 31, 1996 
and the nine months ended September 30, 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 will not 
recognize 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 beginning July 1997 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 
(including shares of common stock reserved for issuance upon exercise of 
SimTech options assumed by the Company) was 1,980,000 shares of 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 financial 
statements. The purchase price was allocated to the net assets acquired based 
on their estimated fair market values at the date of acquisition. The fair 
value of tangible assets acquired and liabilities assumed were $1.3 million 
and $2.1 million, respectively. In addition, $19.9 million was allocated to 
in-process technology which had not reached technological feasibility and had 
no probable alternative uses, which the Company expensed as of the 
acquisition date. The remainder of the purchase price was allocated to 
Purchased technology ($1,097,000) and identifiable intangibles ($735,000), 
which are being amortized on a straight-line basis over three and five years 
respectively.

The Company's net loss per share for the three and nine months ended 
September 30, 1997 was $(0.87) and (0.67), respectively. Common stock 
equivalents are excluded from the calculation of earnings per share when the 
effect on earnings per share is antidilutive. Had the common stock 
equivalents been included in the earnings per share calculation, net loss per 
share for the three months and nine months ended September 30, 1997 would 
have been $(0.82) and $(0.63), respectively.

                                   -11-
<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    Nine Months Ended
                                              September 30,         September 30,
                                           ------------------    ------------------
                                             1997      1996        1997      1996
                                           --------  --------    --------  --------
<S>                                       <C>       <C>         <C>       <C>
Revenue:
     Product licenses. . . . . . . . .       81.7 %    74.4 %      78.6 %    75.9 %
     Maintenance and services. . . . .       17.1      22.8        19.8      21.2
     Other . . . . . . . . . . . . . .        1.2       2.8         1.6       2.9
                                           --------  --------    --------  --------
         Total revenue . . . . . . . .      100.0     100.0       100.0     100.0
Cost of revenue:
     Product licenses. . . . . . . . .        2.3       3.1         2.5       3.0
     Maintenance and services. . . . .        2.2       2.4         2.0       2.3
                                           --------  --------    --------  --------
         Total Cost of revenue . . . .        4.5       5.5         4.5       5.3
                                           --------  --------    --------  --------
         Gross profit. . . . . . . . .       95.5      94.5        95.5      94.7
Operating expenses:
     Research and development. . . . .       20.5      28.5        21.9      29.8
     Sales and marketing . . . . . . .       34.2      46.1        36.2      46.7
     General and administrative (a). .       12.2      15.3        14.0      16.1
     In-process technology . . . . . .      253.4       -          92.8       -  
                                           --------  --------    --------  --------
         Total operating expenses. . .      320.3      89.9       164.9      92.6
                                           --------  --------    --------  --------
Income-from operations . . . . . . . .     (224.8)      4.6       (69.4)      2.1
Other income (expense), net. . . . . .       75.2       0.2        29.6      (0.2)
                                           --------  --------    --------  --------
Income (loss) before income taxes. . .     (149.6)      4.8       (39.8)      1.9
Income tax provision . . . . . . . . .        8.2       0.7         3.8       1.7
                                           --------  --------    --------  --------
Net income (loss) . . . . . .. . . . .     (157.8) %    4.1 %     (43.6) %    0.2 %
                                           --------  --------    --------  --------
                                           --------  --------    --------  --------
</TABLE>

(a)  General and administrative expenses for the nine months ended September 
     30, 1997 include a one-time charge of $379,000 (1.8% of revenue) for 
     costs relating to the acquisition of TriQuest.

TOTAL REVENUE

The Company's revenue is comprised of product licenses revenue, maintenance 
and services revenue and other revenue.  Total revenue increased by 54% from 
$5.1 million for the three months ended September 30, 1996 to $7.9 million 
for the three months ended September 30, 1997 and total revenue increased by 
48.4% from $14.5 million for the nine months ended September 30, 1996 to 
$21.5 million for the nine months ended September 30, 1997. 

Sales through one distributor accounted for 12.3% and 13.5% of the Company's 
total revenue for the three months ended September 30, 1997 and 1996, 
respectively.  Sales through one distributor accounted for 12.9% and 15.5% of 
the Company's total revenue for the nine months ended September 30, 1997 and 
1996, respectively.  Sales to one customer accounted for 41.4 % of total 
revenue for the three months ended September 30, 1997 and 25% of total 
revenue for the nine months ended September 30, 1997.   No single customer 
accounted for more than 10% of the Company's total revenue for the three 
months and nine months ended September 30, 1996.

                                     -12-

<PAGE>

PRODUCT LICENSES REVENUE

The Company's product licenses revenue is derived from license fees from the 
Company's SLDA Design and Verification products and additionally, from Design 
to Test products through June 30, 1997.  Product licenses revenue increased 
by 69.2% from $3.8 million for the three months ended September 30, 1996 to 
$6.4 million for the three months ended September 30, 1997, and increased by 
53.6% from $11.0 million for the nine months ended September 30, 1996 to 
$16.9 million for the nine months ended September 30, 1997.

Because of the addition of SLDA functionality to Visual Testbench beginning 
with the release of Version 2.0 in December 1996, the Company recognizes 
revenue from Visual Testbench products as SLDA revenue instead of Design to 
Test revenue.

SLDA revenue increased 135% from $3.4 million for the three months ended 
September 30, 1996 to $7.9 million for the three months ended September 30, 
1997. SLDA revenue increased 98% from $9.1 million for the nine months ended 
September 30, 1996 to $18.0 million for the nine months ended September 30, 
1997.  The increase in SLDA revenue for the three months and nine months 
ended September 30, 1997 over the same period in 1996 was primarily 
attributable to sales to a single customer and to revenue from the 
Verification product portfolio that was not shipping in the comparable period 
in 1996.  Significant sales to the single customer are expected to continue 
over the next nine quarters pursuant to contractual arrangements with that 
customer. 

As a result of the sale of all of the assets used in the business of 
developing and marketing the TDS Products effective July 1, 1997, there were 
no Design to Test revenues for the three months ended September 30, 1997 as 
compared to $1 million for the three months ended September 30, 1996.

MAINTENANCE AND SERVICES REVENUE

The Company's maintenance and services revenue is derived from maintenance 
contracts and training classes offered to purchasers of the Company's 
software products.  Maintenance and services revenue increased 15.3% from 
$1.17 million for the three months ended September 30, 1996 to $1.35 million 
for the three months ended September 30, 1997.  Maintenance and services 
revenue increased 38.6% from $3.1 million for the nine months ended September 
30, 1996 to $4.2 million for the nine months ended September 30, 1997. 

The increase in maintenance and services revenue for the three months ended 
September 30, 1997 over the same period in 1996, was comprised of $940,000 
attributable to additional maintenance revenue related to growth in the 
installed base of SLDA customers over the previous year, less $761,000 of 
Design to Test maintenance revenue for the three months ended September 30, 
1996 for which there was no revenue in the comparable period in 1997 as a 
result of the sale of the TDS product line.

OTHER REVENUE

Other revenue consists of revenue from one-time technology sales and fees 
received for granting distribution rights. For the three months ended 
September 30, 1997 and 1996, respectively, other revenue was comprised of 
$91,000 and $141,000 of distribution rights fees. For the nine months ended 
September 30, 1997 and 1996, respectively, other revenue was comprised of 
$358,000 and $425,000 of distribution rights fees.  In May 1997 a 
distribution agreement expired; and, as a result, the distribution rights 
fees paid at the inception of the agreement and amortized to revenue at 
$50,000 each quarter over the agreement period  will no longer be a source of 
other revenue.  Total other revenue relating to the TDS product line amounted 
to $42,000 and $75,000 for the nine months ended September 30, 1997 and 
September 30, 1996, respectively.  No material costs were associated with 
other revenue for the three months and nine months ended  September 30, 1997 
and 1996.

                                     -13-

<PAGE>

COST OF REVENUE

COST OF PRODUCT LICENSES REVENUE

Cost of product licenses revenue includes product packaging, software 
documentation, labor and other costs associated with handling, packaging and 
shipping product and other production related costs plus the amortization of 
purchased technology acquired in the SimTech purchase. The cost of product 
license revenue increased from $156,000 for the three months ended September 
30, 1996 to $184,000 for the three months ended September 30, 1997 and 
increased from $434,000 for the nine months ended September 30, 1996 to 
$533,000 for the nine months ended September 30, 1997.  As a percentage of 
product licenses revenue, the cost of product licenses revenue decreased from 
4.1% of product license revenue to 2.8% of product license revenue for the 
three months ended September 30, 1996 and 1997, respectively, and also 
decreased from 3.9% to 3.2% of product license revenue for the nine months 
ended September 30, 1996 and 1997, respectively.  The decrease in the cost of 
product license revenue as a percent of product license revenue for the three 
months and nine months ended September 30, 1997 over the same periods in 1996 
was due primarily to spreading fixed costs over increased revenues and cost 
savings from delivering verification products electronically.

COST OF MAINTENANCE AND SERVICES REVENUE

Cost of maintenance and services revenue, which consists primarily of 
personnel costs for customer support and training classes offered to 
purchasers of the Company's products, increased 40.2% from $122,000 for the 
three months ended September 30, 1996 to $171,000 for the three months ended 
September 30, 1997 and increased 26.4% from $333,000 for the nine months 
ended September 30, 1996 to $421,000 for the nine months ended September 30, 
1997.  As a percentage of maintenance and services revenue, the cost of 
maintenance and services revenue increased from 10.5% for the three months 
ended September 30, 1996 to 12.7% for the three months ended September 30, 
1997 and decreased from 10.9% for the nine months ended September 30, 1996 to 
9.9% for the nine months ended September 30, 1997. The decrease in the cost 
of maintenance and services revenue as a percent of revenue for the nine 
months ended September 30, 1997 over the same period in 1996 was primarily 
the result of the Company operating below forecasted staffing levels during 
the first half of 1997.  The Company has increased headcount during the third 
quarter of 1997.

OPERATING EXPENSES

RESEARCH AND DEVELOPMENT

Research and development expenses consist of the engineering and operations 
support costs of developing new products and enhancements to existing 
products and performing quality assurance activities. Research and 
development expenses increased 10.9% from $1.5 million for the three months 
ended September 30, 1996 to $1.6 million for the three months ended September 
30, 1997.  Research and development expenses increased 9% from $4.3 million 
for the nine months ended September 30, 1996 to $4.7 million for the nine 
months ended September 30, 1997. As a percentage of total revenue, research 
and development expenses decreased from 28.4% for the three months ended 
September 30, 1996 to 20.5% for the three months ended September 30, 1997 and 
also decreased as a percentage of revenue from 29.8% for the nine months 
ended September 30, 1996 to 21.9% for the nine months ended September 30, 
1997.  During the three months ended September 30, 1997, in connection with 
the sale of the TDS product line on July 1, 1997, the Company's research and 
development staff decreased by 15 engineers. With the acquisition of SimTech 
on September 9, 1997 the Company added 28 engineers.  Additionally, the 
Company hired 18 new engineers during the third quarter of 1997.  The Company 
continues to believe that significant investment in research and development 
is required to remain competitive in its markets.

                                     -14-

<PAGE>

Software development costs are accounted for in accordance with Financial 
Accounting Standards Board Statement No. 86, under which the Company is 
required to capitalize software development costs after technological 
feasibility has been established. To date, development costs have been 
expensed as incurred since technological feasibility generally has not been 
established until shortly before the release of a new product, and no 
material development costs have been incurred after establishment of 
technological feasibility.

SALES AND MARKETING

Sales and marketing expenses, consisting primarily of salaries, commissions 
and promotional costs, increased 14.1% from $2.4 million for the three months 
ended September 30, 1996 to $2.7 million for the three months ended September 
30, 1997 and increased 15% from $6.8 million for the nine months ended 
September 30, 1996 to $7.8 million for the nine months ended September 30, 
1997.  The increase for the nine months ended September 30, 1997 over the 
same period in 1996 was attributable to the addition of ten sales and 
marketing personnel and the related increased commissions and travel 
expenses. As a percentage of total revenue, sales and marketing expenses 
decreased from 46.1% for the three months ended September 30, 1996 to 34.2% 
for the three months ended September 30, 1997 and decreased from 46.7% for 
the nine months ended September 30, 1996 to 36.2% for the nine months ended 
September 30, 1997.  The decrease as a percentage of revenue was primarily 
attributable to the increase in total revenue for 1997.

GENERAL AND ADMINISTRATIVE

General and administrative expenses consist primarily of the corporate, 
finance, human resource, information services, administrative, and legal and 
accounting expenses of the Company.  General and administrative expenses 
increased 22.2% from $785,000 for the three months ended September 30, 1996 
to $959,000 for the three months ended September 30, 1997 and increased 29.4% 
from $2.3 million for the nine months ended September 30, 1996 to $3.0 
million for the nine months ended September 30, 1997, which includes a 
$379,000 one-time charge for costs associated with the acquisition of 
TriQuest.  Excluding this one-time charge, general and administrative 
expenses increased by $306,000 (13.1%) for the nine months ended September 
30, 1997 as compared to the same period in the prior year.  As a percentage 
of total revenue, excluding the one time charge for costs associated with the 
acquisition of TriQuest, general and administrative expenses decreased from 
15.4% for the three months ended September 30, 1996 to 12.2% for the three 
months ended September 30, 1997 and decreased from 16.1% for the nine months 
ended September 30, 1996 to 12.3% for the nine months ended September 30, 
1997.  The decrease as a percentage of total revenue was attributable to the 
increase in total revenue in 1997.  The Company expects general and 
administrative expenses to increase in absolute dollars to support future 
sales and operations, including acquired operations, and the additional costs 
associated with being a public company.(2)

ACQUIRED IN-PROCESS TECHNOLOGY

For the three months ended September 30, 1997, $19.9 million of the purchase 
price for the acquisition of Simulation Technologies, Corp. ($22.1 million) 
was allocated to in-process technology and accordingly, was expensed as of 
the acquisition date (September 9, 1997).  The amount allocated to the 
in-process technology represented the estimated fair value determined based 
upon known valuation techniques in the high technology industry.  The 
technological feasibility of in-process technology had not been established 
and had no alternative future use at the time of the acquisition.

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

                                     -15-


<PAGE>

INTEREST EXPENSE

Interest expense decreased from $17,000 for the three months ended September 
30, 1996 to $1,000 for the three months ended September 30, 1997 and 
decreased from $93,000 for the nine months ended September 30, 1996 to 
$10,000 for the nine months ended September 30, 1997 due to decreased 
borrowings under the Company's bank line of credit, long term debt and 
capital leases obligations.

OTHER INCOME, NET

Other income consists of interest income associated with available cash 
balances, gains or losses from the sale of property and equipment, the 
Company's pro rata share of the earnings and losses of Summit Design Asia and 
foreign exchange rate differences resulting from paying operating expenses of 
foreign operations in the local currency.  Other income was  $27,000 for the 
three months ended September 30, 1996 and $348,000 for the three months ended 
September 30, 1997  and $49,000 for the nine months ended September 30, 1996 
and $797,000 for the nine months ended September 30, 1997.  The increase in 
other income was primarily due to increased interest earned on the Company's 
cash holdings.

GAIN ON SALE OF TDS PRODUCT LINE

On July 11, 1997 the Company sold substantially all of the assets used in its 
business of developing and marketing its Test Development Series "TDS" 
Products to CSC for $5 million.  CSC assumed certain liabilities, including 
the Company's obligations under TDS maintenance contracts entered into prior 
to the closing.  The Company has recorded a gain on the sale of $5,569,000.

INCOME TAX PROVISION

The income tax provision increased from $34,000 for the three months ended 
September 30, 1996 to $640,000 for the three months ended September 30, 1997 
and increased from $243,000 for the nine months ended September 30, 1996 to 
$820,000 for the nine months ended September 30, 1997.  The Company utilized 
substantially all of its U.S. Federal and State net operating loss 
carryforwards to offset a considerable portion of U.S. taxable income for the 
nine months ending September 30, 1997.  The provision of $820,000 for the 
nine months ended September 30, 1997 is comprised of $1,357,000 of Federal, 
State and foreign taxes payable, less $537,000 of deferred tax benefit 
recognized for research and development credits and alternative minimum tax 
credits.  The provision for the nine months ended September 30, 1996 is 
comprised primarily of Japanese withholding tax on sales in Japan through 
June 1996 and alternative minimum tax.

VARIABILITY OF OPERATING RESULTS

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

The Company has generally recognized a substantial portion of its revenue in 
the last month of each quarter, with this revenue concentrated in the latter 
part of the month.  Any significant deferral of purchases of the 

                                       -16-
<PAGE>

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

EFFECTIVE CORPORATE TAX RATES

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

The Company's future effective tax rate depends in part on the availability 
of United States and Israeli net operating loss ("NOLs") and credit 
carryforwards. As of December 31, 1996, the Company had recorded U.S. federal 
and state NOLs of approximately $9.0 million and $5.6 million, respectively 
and Israeli NOLs of approximately $4.7 million. In addition the Company has 
$1 million in credit carry forwards for U.S. tax purposes as of December 31, 
1996. Neither the United States nor the Israeli taxing authorities have 
verified the accuracy or availability of the Company's NOLs and credit 
carryforward amounts. However, as a result of the Asset Sale and the Company's 
current taxable income in the United States for the nine months ended 
September 30, 1997, the Company expects to utilize substantially all of the 
U.S. NOLs to offset current taxable income during 1997.(1)

In addition to its NOLs and credit carryforwards, the Company is currently 
scheduled to receive tax benefits over the next several years under a tax 
holiday in Israel. The Company's existing Israeli production facility has 
been granted "Approved Enterprise" status under the Israeli Investment Law, 
which entitles the Company to reductions in the tax rate normally applicable 
to Israeli companies with respect to the income generated by its "Approved 
Enterprise" programs. In particular, the tax holiday covers the seven-year 
period beginning the first year in which Summit Design (EDA) Ltd. generates 
taxable income from its "Approved Enterprise" 

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

                                       -17-
<PAGE>


(after using any available NOLs), provided that such benefits will terminate 
in 2006 regardless of whether the seven-year period has expired. The tax 
holiday provides that, during such seven-year period, a portion of the 
Company's taxable income from its Israeli operations will be taxed at 
favorable tax rates. The termination or reduction of the Company's Israeli 
tax benefits would have a material adverse effect on the Company's overall 
actual effective tax rate. The Company has recently applied for "Approved 
Enterprise" status with respect to a new project and intends to apply in the 
future with respect to additional projects. There can be no assurance that 
the Company will be granted any approvals and therefore there can be no 
assurance the Company will continue to receive favorable tax status in 
Israel. 

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

LIQUIDITY AND CAPITAL RESOURCES

The Company completed its initial public offering in October 1996, raising 
$16.2 million, net of offering expenses.  Prior to the IPO, the Company had 
financed its operations primarily through the private placement of 
approximately $15.4 million of capital stock, as well as capital equipment 
leases, borrowings under its bank line of credit, Israeli research and 
development grants and cash generated from operations.  As of September 30, 
1997, the Company had approximately $17.2 million in cash and cash 
equivalents and a $1.0 million bank line of credit with United States 
National Bank of Oregon ("the Bank"). The line of credit expires on April 30, 
1998.  Borrowings thereunder accrue interest at specified percentages above 
the prime lending rate based on the Company's ratio of debt to tangible net 
worth. Advances under the line of credit are limited to a specified 
percentage of eligible accounts receivable (as defined in the line of 
credit). Borrowings under the line of credit are collateralized by the 
Company's accounts receivable, inventory and general intangible assets, 
including its intellectual property rights. As of September 30, 1997, the 
Company had no borrowings outstanding under this line of credit.

The Company is obligated to lend up to $2,500,000 to an independent software 
development company pursuant to a secured loan agreement entered into during 
July 1997. Borrowings under the agreement bear interest at prime rate plus 2%.

As of September 30, 1997, the Company had working capital of approximately 
$10.3 million.

Net cash generated by operating activities was approximately $9.3 million and 
$3.8 million for the nine months ended September 30, 1997 and 1996, 
respectively. Cash generated by operating activities resulted primarily from 
profitable operations plus the increase in accounts payable, accrued 
liabilities and deferred revenue and a decrease in accounts receivable for 
the nine months ended September 30, 1997. Cash generated from operating 
activities for the nine months ended September 30, 1996 resulted primarily 
from the significant collection of accounts receivable and an increase in 
deferred revenue. 

Net cash used in investing activities was approximately $910,000 and $647,000 
for the nine months ended September 30, 1997 and 1996, respectively. Net cash 
used in investing activities for the nine months ended September 30, 1997 was 
related primarily to the acquisition of Simulation Technologies, Corp. in 
September 1997, the purchase of furniture and equipment and loans to related 
parties less the cash provided from the sale of the TDS product line. Net 
cash used in investing activaities for the nine months ended September 30, 
1996 related to the acquisition of furniture and equipment  and a $100,000 
investment in a Joint Venture.

Net cash used in financing activities for the nine months ended September 30, 
1997,was approximately $11.0 million.  Approximately $ 11.6 million was used 
to purchase treasury stock and $100,000 was used for repayment of long-term 
debt and capital lease obligations; $700,000 was provided by the issuance of 
common

                                       -18-
<PAGE>

stock.  Net cash used in financing activities for the nine months ended 
September 30, 1996, was approximately $1.1 million. For the nine months ended 
September 30, 1996 approximately $1.6 million of cash was used for repayment 
of short term borrowings, long-term debt and capital lease obligations which 
was off set by $73,000 of cash provided by proceeds from long-term debt and 
approximately $1.1 million of cash provided from the issuance of Summit 
common and TriQuest preferred stock less IPO issuance costs of $674,000.

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

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

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

                                       -19-

<PAGE>

PRODUCT CONCENTRATION; UNCERTAINTY OF MARKET ACCEPTANCE OF SLDA

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 SLDA products will continue to account for a 
substantially all of its revenue in the future. As a result, factors 
adversely affecting sales of these products, including increased competition, 
inability to successfully introduce enhanced or improved versions of these 
products, product quality issues and technological change, could have a 
material adverse effect on the Company's business, financial condition and 
results of operations.

The Company's future success depends primarily upon the market acceptance of 
its existing and future SLDA products. The Company commercially shipped its 
first SLDA product, Visual HDL for VHDL, in the first quarter of 1994. For 
the three months and the nine months ended September 30, 1997 and for the 
years ended December 31, 1996, 1995 and 1994, respectively, revenue from SLDA 
products and related maintenance contracts represented 100%, 83.6%, 60.9%, 
43.6% and 34.8%, respectively, of the Company's total revenue. The Company's 
SLDA products incorporate certain unique design methodologies and thus 
represent a departure from industry standards for design creation and 
verification. The Company believes that broad market acceptance of its SLDA 
products will depend on several factors, including the ability to 
significantly enhance design productivity, ease of use, interoperability with 
existing EDA tools, price and the customer's assessment of the Company's 
financial resources and its technical, managerial, service and support 
expertise. The Company also depends on its distributors to assist the Company 
in gaining market acceptance of its products. There can be no assurance that 
sufficient priority will be given by the Company's distributors to marketing 
the Company's products or whether such distributors will continue to offer 
the Company's products. There can be no assurance that the Company's SLDA 
products will achieve broad market acceptance. A decline in the demand for, 
or the failure to achieve broad market acceptance of, the Company's SLDA 
products will have a material adverse effect on the Company's business, 
financial condition and results of operations.

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

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, if any, to which it will realize revenue from Visual 
Testbench in excess of the revenue expected to be received pursuant to an OEM 
agreement entered into in July 1997.  

COMPETITION

The EDA industry is highly competitive and the Company expects competition to 
increase as other EDA companies introduce SLDA products.  In the SLDA market, 
the Company principally competes with Mentor 

                                       -20-

<PAGE>

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

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

DEPENDENCE ON ELECTRONICS INDUSTRY MARKET

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

DEPENDENCE ON THIRD PARTIES FOR PRODUCT INTEROPERABILITY

Because the Company's products must interoperate with EDA products of other 
companies, particularly simulation and synthesis products, the Company must 
have timely access to third party software to perform development and testing 
of its products. Although the Company has established relationships with a 
variety of EDA vendors to gain early access to new product information, these 
relationships may be terminated by either party with limited notice. In 
addition, such relationships are with companies that are current or potential 
future competitors of the Company, including Synopsys, Mentor Graphics and 
Cadence. If any of these relationships were terminated and the Company was 

                                       -21-

<PAGE>

unable to obtain, in a timely manner, information regarding modifications of 
third party products necessary for modifying its software products to 
interoperate with these third party products, the Company could experience a 
significant increase in development costs, the development process would take 
longer, product introductions would be delayed and the Company's business, 
financial condition and results of operations could be materially adversely 
affected.

NEW PRODUCTS AND TECHNOLOGICAL CHANGE; EVOLVING INDUSTRY STANDARDS

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

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

DEPENDENCE ON DISTRIBUTORS

The Company relies on distributors for licensing and support of its products 
outside of North America. Approximately 34%, 48%, 46%, 42% and 38% of the 
Company's revenue for the nine months ended September 30, 1997 and 1996 and 
for the  years ended December 31, 1996, 1995 and 1994, respectively, were 
attributable to sales made through distributors. The Company has also entered 
into a joint venture with Anam pursuant to which the joint venture 
corporation (Summit Design Korea, Inc. ("Summit Asia")) shall acquire 
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. During the first quarter 
of 1997, the Company entered into a distribution agreement with ATE pursuant 
to which ATE was granted exclusive rights to sell, distribute and support 
Summit's Visual Testbench products within Japan until October 1998, subject 
to the Company's ability to terminate the relationship if ATE fails to meet 
quarterly sales objectives. The agreement may also be terminated by either 
party for breach. In addition, in the first quarter of 1996, the Company 
entered into a three-year, exclusive distribution agreement for its SLDA 
products in Japan with Seiko.  In the event Seiko fails to meet specified 
quotas for two or more quarterly periods, exclusivity can be terminated by 
Summit, subject to Seiko's right to pay a specified fee to maintain 
exclusivity. The agreement is renewable for successive five-year terms by 
mutual agreement of the Company and Seiko and is terminable by either party 
for breach. In March 1997, the Company entered into a three-year distribution 
agreement with Kanematsu USA Inc. to which Kanematsu was granted exclusive 
distribution rights to see, distribute and support certain verification 
products in Japan.  For the year ended December 31, 1996 and nine months 
ended September 30, 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 

                                       -22-

<PAGE>

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 and results of 
operations.

INTERNATIONAL SALES AND OPERATIONS

Approximately 24%, 37%, 50%, 52% and 39% of the Company's revenue for the 
three months and nine months ended September 30, 1997 and the years ended 
December 31, 1996, 1995 and 1994, respectively, were attributable to sales 
made outside the United States. The decline in the percent of revenue from 
sales made outside the United States for the three and nine months ended 
September 30, 1997 is related primarily to domestic sales to one customer. 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. There can be no assurance that such factors will not 
have a material adverse effect on the Company's future international sales 
and operations and, consequently, on the Company's business, financial 
condition and results of operations.

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

MANAGEMENT OF GROWTH AND ACQUISITIONS

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

On February 28, 1997, Summit completed its acquisition of TriQuest 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 
and results of operations.  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, 

                                       -23-

<PAGE>

which could materially adversely affect Summit's results of operations.  
Product and technology acquisitions entail numerous risks, including 
difficulties in the assimilation of acquired operations, technologies and 
products, diversion of management's attention to other business concern, 
risks of entering markets in which Summit has no or limited prior experience 
and potential loss of key employees of acquired companies.  Summit's 
management has had limited experience in assimilating acquired organizations 
and products into Summit's operations. No assurance can be given as to the 
ability of Summit to integrate successfully any operations, personnel or 
products that have been acquired or that might be acquired in the future, and 
the failure of Summit to do so could have a material adverse effect on 
Summit's results of operations.

OPERATIONS IN ISRAEL

The Company's research and development operations related to its SLDA 
products are located in Israel and may be affected by economic, political and 
military conditions in that country. Accordingly, the Company's business, 
financial condition and results of operations could be materially adversely 
affected if hostilities involving Israel should occur. This risk is 
heightened due to the restrictions on the Company's ability to manufacture or 
transfer outside of Israel any technology developed under research and 
development grants from the government of Israel as described in "--Israeli 
Research, Development and Marketing Grants." In addition, while all of the 
Company's sales are denominated in U.S. dollars, a portion of the Company's 
annual costs and expenses in Israel are paid in Israeli currency. These costs 
and expenses were approximately $4.3, $4.3 and $2.9 million in 1996, 1995 and 
1994, respectively.   Payment in Israeli currency subjects the Company to 
foreign currency fluctuations and to economic pressures resulting from 
Israel's generally high rate of inflation, which has been approximately 11%, 
8% and 15% during 1996, 1995, and 1994, respectively. The Company's primary 
expense which is paid in Israeli currency is employee salaries for research 
and development activities. As a result, an increase in the value of Israeli 
currency in comparison to the U.S. dollar could increase the cost of research 
and development expenses and general and administrative expenses. There can 
be no assurance that currency fluctuations, changes in the rate of inflation 
in Israel or any of the other aforementioned factors will not have a material 
adverse effect on the Company's business, financial condition or results of 
operations. In addition, coordination with and management of the Israeli 
operations requires the Company to address differences in culture, 
regulations and time zones. Failure to successfully address these differences 
could be disruptive to the Company's operations.

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

DEPENDENCE ON KEY PERSONNEL

The Company's future success depends in large part on the continued service 
of its key technical and management personnel and its ability to continue to 
attract and retain highly-skilled technical, sales and marketing and 
management personnel. The Company has entered into employment agreements with 
certain of its executive officers, however, such agreements do not guarantee 
the services of these employees and do not contain noncompetition provisions. 
Competition for personnel in the software industry in general, and the 

                                       -24-

<PAGE>

EDA industry in particular, is intense, and the Company has at times in the 
past experienced difficulty in recruiting qualified personnel. There can be 
no assurance that the Company will retain its key personnel or that it will 
be successful in attracting and retaining other qualified technical, sales 
and marketing and management personnel in the future. The loss of any key 
employees or the inability to attract and retain additional qualified 
personnel may have a material adverse effect on the Company's business, 
financial condition and results of operations. The Company does not carry 
"key person" life insurance on any of its key personnel. Additions of new 
personnel and departures of existing personnel, particularly in key 
positions, can be disruptive and can result in departures of additional 
personnel, which could have a material adverse effect on the Company's 
business, financial condition and results of operations. 

ISRAELI RESEARCH, DEVELOPMENT AND MARKETING GRANTS

Summit's Israeli subsidiary has obtained research and development grants from 
the Office of the Chief Scientist (the "Chief Scientist") in the Israeli 
Ministry of Industry and Trade of approximately $232,000 and $608,000 in 1993 
and 1995, respectively. As of September 30, 1997, the Company was obligated 
to pay back approximately $232,000 and $470,000 for the 1993 and 1995 grants, 
respectively. Such obligations are collateralized by all tangible and 
intangible assets of the Israeli subsidiary. The terms of the grants prohibit 
the manufacture of products developed under these grants outside of Israel 
and the transfer of the technology developed pursuant to these grants to any 
person, without the prior written consent of the Chief Scientist. The 
Company's Visual HDL for VHDL products have been developed under grants from 
the Chief Scientist and thus are subject to these restrictions. If the 
Company is unable to obtain the consent of the government of Israel, the 
Company would be unable to take advantage of potential economic benefits such 
as lower taxes, lower labor and other manufacturing costs and advanced 
research and development facilities that may be available if such technology 
and manufacturing operations could be transferred to locations outside of 
Israel. In addition, the Company would be unable to minimize risks particular 
to operations in Israel, such as hostilities involving Israel.  Although the 
Company is eligible to apply for additional grants from the Chief Scientist, 
it has no present plans to do so. The Company also received a Marketing Fund 
Grant from the Israeli Ministry of Industry and Trade for an aggregate of 
$423,000. The grant must be repaid at the rate of 3% of the increase in 
exports over the 1993 export level of all Israeli products, until repaid. As 
of September 30, 1997, approximately $364,000 was outstanding under the grant.

LIMITATIONS ON PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

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

The Company provides its SLDA products to end-users primarily under 
"shrink-wrap" license agreements included within the packaged software. In 
addition, the Company delivers certain of its verification products 
electronically under an electronic version of a "shrink-wrap" license 
agreement. These "shrink-wrap" license 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 

                                       -25-

<PAGE>

in costly litigation, cause product delays or require the Company to enter 
into royalty or licensing agreements. Such royalty or license agreements, if 
required, may not be available on terms acceptable to the Company or at all. 
Failure to protect its proprietary rights or claims of infringement could 
have a material adverse effect on the Company's business, financial condition 
and results of operations.

POSSIBLE VOLATILITY OF STOCK PRICE

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


                                       -26-


<PAGE>

PART II

Item 1.  Legal Proceedings

         Not applicable

Item 2.  Changes in Securities and Use of Proceeds

         (c)  In July and September 1997, the Company issued and sold 4,780 and
              25,671 shares of the Company's Common Stock that were not 
              registered under the Securities Act of 1933, as amended (the
              "Securities Act"), at prices of $0.33 and $1.95, respectively 
              upon exercise of stock options. In September 1997, in connection 
              with the Company's acquisition of SimTech, the Company issued 
              1,256,777 shares of the Company's Common Stock to the existing 
              shareholders of SimTech in exchange for outstanding shares of 
              capital stock of SimTech. The shares were not registered under the
              Securities Act, and such issuances were deemed to be exempt from 
              registration in reliance on Section 4(2) of the Securities Act as 
              a transaction not involving a public offering. The recipients of 
              the securities represented their intentions to acquire the 
              securities for investment only and had access to all relevant 
              information regarding the Company necessary to evaluate the 
              investment.

         (d)  The effective date of the Company's first registration 
              statement, filed on Form S-1 under the Securities Act of 1933 
              (No. 333-6445), was October 17, 1996 (the "Registration 
              Statement"). The class of securities registered was Common 
              Stock. The offering commenced on October 18, 1996 and all 
              securities were sold in the offering. The managing underwriters 
              for the offering were Robertson, Stephens & Company LLC and 
              Needham & Company.

                  A total of 4,600,000 shares were registered pursuant to 
              the Registration Statement. The Company sold 2,000,000 shares 
              of its Common Stock for its own account, for an aggregate 
              offering price of $19,000,000, and 2,600,000 shares of its 
              Common Stock for the account of certain selling stockholders, 
              for an aggregate offering price of $24,700,000.

                  The Company incurred expenses of approximately $2,776,000, 
              of which $1,330,000 represented underwriting discounts and 
              commissions and $1,446,000 represented estimated other 
              expenses. A portion of the underwriting discounts and 
              commissions represented direct or indirect payments to 
              directors, officers, general partners of the Reigstrant or 
              their associates; to persons owing ten (10) percent or more of 
              any class of equity securities of the Company; or to affiliates 
              of the Company. The net offering proceeds to the Company after 
              total expenses was $16,224,000.

                  As of September 30, 1997, the Company had used all of the 
              net proceeds from the offering as follows:  $897,000 for the 
              purchase and installation of machinery and quipment, $473,000 
              for the repayment of indebtedness and $14,854,000 for working 
              capital. The use of the proceeds from the offering does not 
              represent a material change in the use of proceeds described in 
              the prospectus.

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

              10.15  Bank Line of Credit Agreement between Registrant and U.S.
                     National Bank of Oregon dated June 24, 1997.
              10.22  Loan Agreement between Registrant and Dasys, Inc. dated 
                     July 16, 1997.
              11.1   Statement of Computation of Net Income per Share
              27     Financial Data Schedule
    
         (b)  Reports on Form 8-K
    
              On September 24, 1997, the Company filed a report  on Form 8-K 
              dated September 9, 1997 in conjunction with the acquisition of 
              Simulation Technologies, Corp. ("SimTech").  On November 12, 
              1997, the Company amended this filing on Form 8-K /A to include 
              the financial statements of SimTech and the pro forma combined 
              financial statements for the Company and SimTech.
    
         
                                       -27-

<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:    November 13, 1997

                                       -28-

<PAGE>

EXHIBIT INDEX







EXHIBIT 10.15 Bank Line of Credit Agreement between Registrant and U.S. 
              National Bank of Oregon dated June 24, 1997.



EXHIBIT 10.22 Loan Agreement between Registrant and Dasys, Inc. dated 
              July 16, 1997.



EXHIBIT 11.1  Statement of Computation of Net Income Per Share



EXHIBIT 27    Financial Data Schedule


                                       -29-