<PAGE>
 
                                                     TOTAL NUMBER OF PAGES IS 18
                                                                    PAGE 1 OF 18


                                 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, 1998

[_]  TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
     EXCHANGE ACT OF 1934

     For the transition period from ________________ to __________________

                        Commission File Number 0-27692

                                  ORCAD, INC.
            (Exact name of registrant as specified in its charter)

                     Incorporated in the State of Delaware
        (State or other jurisdiction of incorporation or registration)

                                  93-1062832
                     (I.R.S. Employer Identification No.)

               9300 S.W. Nimbus Avenue, Beaverton, Oregon  97008
         (Address of principal executive offices, including zip code)

                           Telephone: (503) 671-9500
             (Registrant's telephone number, including area code)


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.  [X] Yes  [_] No

The number of shares outstanding of the Company's Common Stock ($.01 par value)
as of September 30, 1998 was 9,344,575 shares.
<PAGE>
 
                                  OrCAD, INC.

                                     INDEX

<TABLE> 
<CAPTION> 
PART I.        FINANCIAL INFORMATION                                                         PAGE NO.
-----------------------------------------------------------------------------------------------------
<S>            <C>                                                                           <C>     
Item 1.        FINANCIAL STATEMENTS                                                                  
                                                                                                     
                    Consolidated Balance Sheets - September 30, 1998                                 
                    and December 31, 1997                                                           3
                                                                                                     
                    Consolidated Statements of Operations - Three months and nine months             
                    ended September 30, 1998 and 1997                                               4
                                                                                                     
                    Consolidated Statements of Cash Flows - Nine months                              
                    ended September 30, 1998 and 1997                                               5
                                                                                                     
               Notes to consolidated financial statements                                           6
                                                                                                     
Item 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF                                               
               FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                        9
                                                                                                     
                                                                                                     
                                                                                                     
PART II.       OTHER INFORMATION                                                                     
-----------------------------------------------------------------------------------------------------
                                                                                                     
Item 2.        Changes in Securities                                                               19
                                                                                                     
Item 6.        Exhibits and Reports on Form 8-K                                                    19
                                                                                                     
               SIGNATURES                                                                          20 
</TABLE> 

<PAGE>
 
                                 ORCAD, INC. 
                          CONSOLIDATED BALANCE SHEETS
                                (In thousands)

<TABLE>
<CAPTION>
                                                                         SEPTEMBER 30,                                         
                                                                             1998                        DECEMBER 31,             
                                                                          (Unaudited)                       1997                 
                                                                      -------------------            ------------------        
<S>                                                                   <C>                            <C>                      
ASSETS                                                                                                                          
CURRENT ASSETS:                                                                                                                 
     CASH AND CASH EQUIVALENTS                                        $             13,495            $           31,618        
     SHORT-TERM INVESTMENTS                                                         28,379                         3,408        
     TRADE ACCOUNTS RECEIVABLE, NET OF DOUBTFUL ACCOUNTS                                                                        
     AND SALES RETURN ALLOWANCES OF $915 AND $793                                    7,243                         8,800        
     INVENTORY, NET                                                                    245                           675        
     OTHER CURRENT ASSETS                                                            2,580                         3,348        
                                                                      --------------------            ------------------       
          TOTAL CURRENT ASSETS                                                      51,942                        47,849        
                                                                      --------------------            ------------------        
                                                                                                                                
INVESTMENTS, LONG-TERM                                                                   -                         2,722        
FIXED ASSETS, NET                                                                    3,750                         3,360        
PURCHASED SOFTWARE TECHNOLOGY, NET                                                     310                           474        
GOODWILL AND INTANGIBLE ASSETS, NET                                                  2,895                         2,378        
OTHER ASSETS                                                                           692                           124        
                                                                      --------------------             -----------------        
          TOTAL ASSETS                                                $             59,589             $          56,907        
                                                                      ====================             =================        
                                                                                                                                
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                            
CURRENT LIABILITIES:                                                                                                            
     ACCOUNTS PAYABLE                                                 $                273             $             661        
     ACCRUED PAYROLL AND RELATED LIABILITIES                                         2,003                         2,241        
     ACCRUED LIABILITIES                                                             2,926                         1,870        
     ACCRUED INCOME TAXES                                                              890                         1,081        
     DEFERRED REVENUE                                                                6,052                         4,881        
                                                                      --------------------             -----------------        
          TOTAL CURRENT LIABILITIES                                                 12,144                        10,734        
                                                                                                                                
DEFERRED TAXES                                                                          19                            19        
                                                                                                                                
STOCKHOLDERS' EQUITY:                                                                                                           
     COMMON STOCK                                                                       93                            92        
     ADDITIONAL PAID-IN CAPITAL                                                     37,928                        37,583        
     RETAINED EARNINGS                                                               9,526                         8,604        
     ACCUMULATED OTHER COMPREHENSIVE LOSS                                             (102)                          (78)       
     NOTES RECEIVABLE - EMPLOYEE STOCK PURCHASES                                       (19)                          (47)       
                                                                      --------------------             -----------------        
          TOTAL STOCKHOLDERS' EQUITY                                                47,426                        46,154        
                                                                      --------------------             -----------------        
          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  $             59,589             $          56,907        
                                                                      ====================             =================        
</TABLE>

                See notes to Consolidated Financial Statements.

                                       3
<PAGE>
 
                                  OrCAD, Inc.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In thousands, except per share data)
                                  (Unaudited)

<TABLE> 
<CAPTION> 
                                                                       Three-months ended                   Nine-months ended      
                                                               --------------------------------     -------------------------------
                                                                September 30,    September 30,       September 30,   September 30,
                                                                    1998             1997                1998            1997     
                                                               ---------------  ---------------     --------------  --------------- 
<S>                                                            <C>              <C>                 <C>             <C> 
Revenue:                                                                                                                            
   Product                                                     $         7,842  $         7,961     $       25,345  $        24,889 
                                                                                                                                    
   Service                                                               3,394            2,292              9,433            6,142 
                                                               ---------------  ---------------     --------------  --------------- 
        Total revenue                                                   11,236           10,253             34,778           31,031 

Cost and expenses:                                                                                                                  
   Cost of revenue - product                                               657            1,207              2,219            3,600 
                                                                                                                                    
   Cost of revenue - service                                               690              426              1,865            1,219 
                                                                                                                                    
   Research and development                                              2,833            2,879              8,619            8,367 
                                                                                                                                    
   Marketing and sales                                                   4,559            3,849             13,844           11,090 
                                                                                                                                    
   General and administrative                                            1,410            1,209              4,044            3,499 
                                                                                                                                    
   Merger and acquisition related charges                                    -                -              4,081            2,203 
                                                               ---------------  ---------------     --------------  --------------- 
        Total  cost and expenses                                        10,149            9,570             34,672           29,978 
                                                               ---------------  ---------------     --------------  --------------- 
Income from operations                                                   1,087              683                106            1,053 
                                                                                                                                    
Other income (expense):                                                                                                             
   Interest income, net                                                    363              465              1,274            1,368 
                                                                                                                                    
   Other, net                                                               19              (29)               (24)             (11)
                                                               ---------------  ---------------     --------------  --------------- 
                                                                           382              436              1,250            1,357 
                                                               ---------------  ---------------     --------------  --------------- 
Income before income taxes                                               1,469            1,119              1,356            2,410 
                                                                                                                                    
   Income tax expense                                                      474              405                434              876 
                                                               ---------------  ---------------     --------------  --------------- 
                                                                                                                                    
Net income                                                     $           995  $           714     $          922  $         1,534 
                                                               ===============  ===============     ==============  =============== 
                                                                                                                                    
Basic net income  per share                                    $          0.11  $          0.08     $         0.10  $          0.17 
                                                               ===============  ===============     ==============  =============== 
                                                                                                                                    
Diluted net income per share                                   $          0.10  $          0.08     $         0.10  $          0.16 
                                                               ===============  ===============     ==============  =============== 
                                                                                                                                    
Shares used in basic net income per share calculation                    9,342            9,172              9,300            9,147 
                                                               ===============  ===============     ==============  =============== 
                                                                                                                                    
Shares used in diluted net income per share calculation                  9,495            9,501              9,511            9,422 
                                                               ===============  ===============     ==============  =============== 
</TABLE>
                See notes to Consolidated Financial Statements.

                                       4

<PAGE>
 
                                  OrCAD, Inc.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)
                                  (Unaudited)

<TABLE> 
<CAPTION> 
                                                                                               Nine-months ended
                                                                                   ---------------------------------------
                                                                                     September 30,           September 30,
                                                                                          1998                   1997
                                                                                   ----------------        ----------------
<S>                                                                                <C>                     <C> 
Cash flows from operating activities:                                              
  Net income                                                                         $          922          $       1,534
  Adjustments to reconcile net income to                                           
  net cash provided by operating activities:                                       
        Depreciation and amortization                                                         1,524                  1,286
        Provision for losses on trade accounts receivable and sales returns                     159                    165
        Provision for inventory reserves                                                        (60)                   (23)
        Deferred income taxes                                                                    (5)                     2
        Write-off of research and development costs acquired                                      -                  2,203
        Loss on disposal of assets                                                               30                     22
        Changes in assets and liabilities:                                            
        Trade accounts receivable                                                             2,342                 (1,921)
        Inventory                                                                               488                    244
        Other current assets                                                                    201                   (593)
        Accounts payable                                                                     (1,228)                  (262)
        Accrued payroll and related liabilities                                                (198)                   187
        Accrued liabilities                                                                     940                    493
        Deferred revenue                                                                      1,202                    799
        Accrued income taxes                                                                   (207)                  (413)
                                                                                     --------------          -------------
           Total adjustments                                                                  5,188                  2,189
                                                                                     --------------          -------------
    Net cash provided by operating activities                                                 6,110                  3,723

Cash flows from investing activities:                                              
  Acquisition of fixed assets                                                                (1,343)                (2,334)
  Acquisition of software technology                                                              -                 (2,450)
  Acquisition of intangible assets                                                             (956)                  (165)
  Proceeds from matured investment securities                                                91,588                149,626
  Purchases of investment securities                                                       (113,823)              (148,045)
                                                                                     --------------          -------------
    Net cash used in investing activities                                                   (24,534)                (3,368)
                                                                                   
Cash flows from financing activities:                                              
  Repayment of notes receivable - employee stock purchases, net                                  29                     17
  Repurchase of common stock                                                                      -                   (247)
  Issuance of common stock, net                                                                 347                    223
                                                                                     --------------          -------------
    Net cash provided by (used in) financing activities                                         376                     (7)

    Effects of exchange rate on cash                                                            (75)                   (11)
                                                                                     --------------          -------------
                                                                                   
           Net increase (decrease) in cash and cash equivalents                             (18,123)                   337
Cash and cash equivalents at the beginning of period                                         31,618                 28,077
                                                                                     --------------          -------------
Cash and cash equivalents at the end of period                                       $       13,495          $      28,414
                                                                                     ==============          =============
Supplemental Disclosures of Cash Flow Information:                                 
  Income taxes paid                                                                  $        1,005          $       1,105
</TABLE> 
               See notes to Consolidated Financial Statements.

                                       5

<PAGE>
 
                                  OrCAD, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       (In thousands except share data)
                                  (Unaudited)

1.   Basis of Presentation
     ---------------------

     The accompanying financial statements have been prepared in conformity with
     generally accepted accounting principles. However, certain information or
     footnote disclosures normally included in financial statements prepared in
     accordance with generally accepted accounting principles have been
     condensed, or omitted, pursuant to the rules and regulations of the
     Securities and Exchange Commission. In the opinion of management, the
     statements include all adjustments necessary (which are of a normal and
     recurring nature) for the fair presentation of the results of the interim
     periods presented. These financial statements should be read in conjunction
     with the Company's audited consolidated financial statements for the year
     ended December 31, 1997, as included in the Company's Annual Report on Form
     10-KSB as filed with the Securities and Exchange Commission. Restated
     financial statements resulting from the merger with MicroSim Corporation
     are included in Summit Design, Inc.'s report on Form S-4/A filed with the
     Securities and Exchange Commission on November 10, 1998.

2.   Acquisitions
     ------------

     On September 20, 1998, OrCAD entered into an Agreement and Plan of
     Reorganization ("the Reorganization Agreement") with Summit Design, Inc.
     ("Summit"), a publicly held Delaware Corporation. Under the terms of the
     Reorganization Agreement, each share of issued and outstanding Common Stock
     of OrCAD will be converted into the right to receive 1.05 shares of common
     stock of Summit. In addition, each outstanding option to purchase shares of
     OrCAD Common Stock will be assumed by Summit. The Reorganization, which is
     expected to be accounted for as a pooling-of-interests, is subject to the
     approval of the OrCAD and Summit Stockholders as well as other standard
     closing conditions.

     On April 15, 1998, OrCAD U.K. Ltd., a wholly-owned subsidiary of the
     Company formed in March of 1998, purchased certain assets and assumed
     certain liabilities of ARS Microsystems Ltd., (ARS) for approximately $1.1
     million.  Of that amount, $1 million was allocated to goodwill and is being
     amortized over a five-year estimated life.  ARS was previously the
     Company's value added reseller in the United Kingdom.  The cost of the
     acquisition was allocated on the basis of the estimated fair value of the
     assets acquired and the liabilities assumed.

     On January 20, 1998 OCA Merger Corporation, a wholly-owned subsidiary of
     OrCAD, was merged with and into MicroSim Corporation ("MicroSim") and all
     of the issued and outstanding shares of MicroSim Common Stock and all of
     the rights to acquire MicroSim Common Stock were converted into and
     exchanged for 2,427,632 shares of OrCAD Common Stock ("the Merger"). The
     Merger was accounted for as a pooling-of-interests in 1998. The combined
     financial statements of OrCAD and MicroSim are included in this report and
     prior periods presented have been restated to reflect the Merger.

                                                                               6
<PAGE>
 
3.   Basic and Diluted Net Income Per Share
     --------------------------------------

     Basic net income per share was computed using the weighted average number
     of common shares outstanding during the period. Diluted net income per
     share was computed using the weighted average number of common shares
     outstanding and common equivalent shares from stock options, when dilutive,
     using the treasury stock method.

4.   Use of Estimates
     ----------------

     Generally accepted accounting principles require management to make
     estimates and assumptions that affect the reported amount of assets,
     liabilities and disclosure of contingent assets and liabilities at the date
     of the financial statements and the reported amounts of revenues and
     expenses during the reporting periods. Actual results could differ from
     those estimates.

5.   Revenue Recognition
     -------------------

     During the first quarter of 1998, the Company adopted Statement of Position
     ("SOP") 97-2, "Software Revenue Recognition" and SOP 98-4, "Deferral of the
     Effective Date of a Provision of SOP 97-2, 'Software Revenue Recognition.'"
     The provisions of SOP 97-2 have been applied to transactions entered into
     beginning January 1, 1998. SOP 97-2 generally requires revenue earned on
     software arrangements involving multiple elements to be allocated to each
     element based on the relative fair values of the elements. The revenue
     allocated to software products is generally recognized upon the delivery of
     the products. The revenue allocated to extended support agreements is
     recognized ratably over the term of the maintenance agreement and revenue
     allocated to service elements is recognized as the services are performed.

     OrCAD sells its products internationally, exclusive of Japan and the United
     Kingdom, through value added resellers (VARs) and recognizes revenue from
     sales to VARs after shipment of product and when no significant contractual
     obligations remain outstanding.

     OrCAD provides a thirty-day right of return and a ninety-day warranty that
     its products are free from defects. Estimated sales returns and estimated
     warranty costs are recorded upon shipment of the product.

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

6.   Software Development Costs
     --------------------------

     Under Statement of Financial Accounting Standards No. 86 ("SFAS 86"),
     software development costs are to be capitalized beginning when a product's
     technological feasibility has been established and ending when a product is
     made available for general release to customers. To date, the establishment
     of technological feasibility of the Company's products has occurred shortly
     before general release, and accordingly no costs have been capitalized.

7.   Income Taxes
     ------------

     The provision for income taxes has been recorded based on the Company's
     current estimate of the Company's annual effective tax rate.  This rate
     differs from the combined federal and state statutory rate of approximately
     38.5% primarily due to the benefit of the Company's foreign sales
     corporation, research and experimentation tax credits, and certain
     investment income which is exempt from federal tax.

                                                                               7
<PAGE>
 
8.   Cash Equivalents and Investments
     --------------------------------

     Cash equivalents consist of highly liquid investments with original
     maturity dates of three months or less. Cash equivalents are stated at cost
     and consist primarily of money market funds, municipal bonds and municipal
     notes. The carrying amount approximates fair value due to the short-term
     nature of these investments. Those instruments with original maturity dates
     greater than three months and less than one year from the balance sheet
     date are considered to be short-term investments. Investments with original
     maturity dates greater than one year from the balance sheet date are
     considered to be long-term investments. Investments, which primarily
     consist of corporate debt securities, auction rate receipts, market auction
     preferred notes, and municipal bonds, are reported at fair value, and are
     classified as available-for-sale securities. The cost of securities sold is
     determined using the specific identification method when computing realized
     gains and losses. Fair value is determined using available market
     information.

9.   Comprehensive Income
     ---------------------

     The Company adopted SFAS No. 130, "Reporting Comprehensive Income" on
     January 1, 1998. This statement establishes standards for reporting
     comprehensive income and its components in the consolidated financial
     statements. The objective of SFAS 130 is to report changes in equity that
     result from transactions and economic events other than transactions with
     owners. Comprehensive income is the total of net income and all other non-
     owner changes in equity. Adoption of SFAS 130 did not have a material
     affect on OrCAD's consolidated financial position, results of operations or
     cash flows for the three and nine month periods ended September 30, 1998
     and 1997. The reconciliation of net income to comprehensive income is as
     follows:

<TABLE>
<CAPTION>
                                                       Three Months            Nine Months
                                                    Ended September 30,    Ended September 30,
                                                   ---------------------  ---------------------
                                                      1998        1997      1998        1997
                                                   -----------  --------  ---------  ----------
     <S>                                           <C>          <C>       <C>        <C>
     Net income                                        $  995     $ 714      $ 922      $1,534
     Unrealized gain (loss) on investments, net            26        (2)        14          (6)
     Foreign currency translation adjustment              (11)      (20)       (38)        (14)
                                                       ------     -----      -----      ------
     Comprehensive income                              $1,010     $ 692      $ 898      $1,514
                                                       ======     =====      =====      ======
</TABLE>

                                                                               8
<PAGE>
 
          ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
                      CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

     OrCAD develops, markets, and supports software products that assist
electronics designers in the management of component data and in the design of
field-programmable gate arrays (FPGAs), including complex programmable logic
devices, analog and mixed analog-digital circuits, and printed circuit boards
(PCBs). OrCAD operates in a single business segment, comprising the electronic
design automation industry and serves most segments of the electronics industry,
including aerospace, telecom, industrial control, military, medical equipment,
and consumer products. OrCAD's products enable electronics designers to reduce
time to market, improve product capability, and reduce design costs. OrCAD's
Windows-based EDA solutions support the design process for mainstream
components, from schematic capture to programmable logic design and verification
to circuit simulation and printed circuit board layout. Over 240,000 products
bearing the OrCAD name have been sold worldwide since 1984.

     On September 20, 1998 OrCAD entered into an Agreement and Plan of
Reorganization ("the Reorganization Agreement") with Summit Design, Inc.
("Summit"), a publicly held Delaware Corporation. Under the terms of the
Reorganization Agreement, each share of issued and outstanding Common Stock of
OrCAD will be converted into the right to receive 1.05 shares of Summit common
stock ("the Reorganization"). In addition, each outstanding option to purchase
shares of OrCAD Common Stock will be assumed by Summit. The Reorganization is
expected to be accounted for as a pooling-of-interests. The Reorganization is
subject to regulatory, OrCAD, and Summit stockholder approval and standard 
closing conditions.

     On April 15, 1998, OrCAD U.K. Ltd., a wholly-owned subsidiary of the
Company formed in March of 1998, purchased certain assets and assumed certain
liabilities of ARS Microsystems Ltd., (ARS) for approximately $1 million.  Of
that amount, $1 million was allocated to goodwill and is being amortized over a
five-year estimated life.  ARS was previously the Company's value added reseller
in the United Kingdom.  The cost of the acquisition was allocated on the basis
of the estimated fair value of the assets acquired and the liabilities assumed.

     On January 20, 1998 OCA Merger Corporation, a wholly-owned subsidiary of
OrCAD, was merged with and into MicroSim Corporation ("MicroSim") and all of the
issued and outstanding shares of MicroSim common stock and all of the rights to
acquire MicroSim common stock were converted into and exchanged for 2,427,632
shares of OrCAD common stock, (the "Merger").  The Merger was accounted for as a
pooling-of-interests in 1998.

     The financial statements of OrCAD and its wholly owned subsidiary,
MicroSim, are included in this report and all prior periods have been restated
to reflect the Merger.  Results of operations of all acquisitions accounted for
as purchases are included in the Company's Consolidated Financial Statements
only from the date of acquisition forward. All intercompany balances have been
eliminated in consolidation.

                                                                               9
<PAGE>
 
RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
 
TOTAL REVENUE

     The Company derives revenue from the licensing of its software products and
from the provision of maintenance, training and consulting services to
customers. The Company recognizes revenue from software licenses after shipment
of product and when no significant contractual obligations remain outstanding.
Service revenue is derived primarily from extended support agreements that
provide customers access to product enhancements, technical support, and the
OrCAD Design Network ("ODN") which includes the OrCAD Knowledge Base, the OrCAD
Knowledge Exchange, OrCAD Tech Tips, and an electronic Technical Support
Connection. Revenue from each extended support agreement is deferred and
recognized ratably over the term of the support agreement. Revenue from customer
training and consulting is recognized as services are performed.

     Total revenue increased 10% to $11.2 million in the third quarter of 1998
from $10.3 million in the third quarter of 1997. The increase in total revenue
was due to growth in service revenue offset by a slight decrease in product
revenue. As a percentage of total revenue, product revenue decreased to 70% in
the third quarter of 1998 from 78% in the third quarter of 1997. Conversely,
service revenue increased as a percentage of total revenue to 30% in the third
quarter of 1998 from 22% in the third quarter of 1997.

     Product revenue decreased 1% to $7.8 million in the third quarter of 1998
from $8 million in the third quarter of 1997. The decline in product revenue is
primarily attributable to decreased sales related to the OrCAD PSpice product
family, slightly offset by increased sales in the OrCAD Capture and Layout
product families. Unfavorable economic conditions in Asia partially offset by
increases in North American and European product revenue also account for this
decline.

     Service revenue increased 48% to $3.4 million in the third quarter of 1998
from $2.3 million in the third quarter of 1997. The increase in service revenue
from the third quarter of 1997 to the third quarter of 1998 was primarily
attributable to increased sales of extended support agreements, training and
consulting services.

     Total North American revenue increased 22% to $7.7 million in the third
quarter of 1998 from $6.3 million in the third quarter of 1997. Total revenue
generated outside of North America decreased 10% to $3.6 million in the third
quarter of 1998 from $4 million in the third quarter of 1997. As a percentage of
the Company's total revenue, North American revenue increased to 68% in the
third quarter of 1998 from 61% in the third quarter of 1997. The increase in the
proportion of revenue generated within North America was primarily attributable
to decreased sales to Asian markets reflecting the unfavorable economic 
condition in that region.

                                                                              10
<PAGE>
 
COST OF REVENUE

     The cost of product revenue represents the costs associated with the
licensing of the Company's products, such as expenses of reproducing product
documentation, media and packaging, hardware locks, shipping costs, and
royalties paid to external developers. The cost of product revenue decreased 46%
to $657,000 in the third quarter of 1998 from $1.2 million in the third quarter
of 1997. The decreased cost of product revenue was primarily the result of
reduced materials costs, consolidation of the Company's Irvine, California
shipping function into the Beaverton, Oregon shipping operation, and reduced
royalty payments which accounted for cost reductions of $223,000, $183,000, and
$49,000, respectively, in the third quarter of 1998 compared to the third
quarter of 1997. As a percentage of product revenue, cost of product revenue
decreased to 8% in the third quarter of 1998 from 15% in the third quarter of
1997.

     The cost of service revenue includes the costs of providing software
maintenance, such as technical support, and the costs of providing consulting
and training services. The cost of service revenue increased 62% to $690,000 in
the third quarter of 1998 from $426,000 in the third quarter of 1997. This
increase was attributable to an increase in personnel costs and costs associated
with the delivery of services corresponding with the increased service revenue.
As a percentage of service revenue, the cost of service revenue remained
relatively flat increasing 1% to 20% in the third quarter of 1998 from 19% in
the third quarter of 1997.

RESEARCH AND DEVELOPMENT

     Research and development expenses include the costs of developing new
products and enhancements to existing products. Software development costs are
generally expensed as incurred because technological feasibility is generally
not established until shortly before the release of a new product and no
material development costs are incurred after establishment of technological
feasibility. Research and development expenses remained relatively constant
decreasing 2% to $2.8 million in the third quarter of 1998 from $2.9 million in
the third quarter of 1997. As a percentage of total revenue, research and
development expenses decreased to 25% in the third quarter of 1998 from 28% in
the third quarter of 1997.

MARKETING AND SALES

     Marketing and sales expenses include salaries, commissions and related
personnel costs, and other sales and promotional expenses. Marketing and sales
expenses increased 18% to $4.6 million in the third quarter of 1998 from $3.8
million in the third quarter of 1997. Total marketing and sales expenses
increased as a result of increased promotional activity and continued expansion
of the Company's sales and marketing organizations. The number of employees in
the Company's marketing and sales functions increased to 121 at September 30,
1998 from 91 at September 30, 1997. As a percentage of total revenue, marketing
and sales expenses increased to 41% in the third quarter of 1998 from 38% in the
third quarter of 1997.

                                                                              11
<PAGE>
 
GENERAL AND ADMINISTRATIVE

     General and administrative expenses include the costs associated with the
Company's executive office, human resources, finance, and administrative
functions. General and administrative expenses increased 17% to $1.4 million in
the third quarter of 1998 from $1.2 million in the third quarter of 1997. This
increase was primarily the result of rising administrative costs associated with
increased personnel, the Company's allowance for bad debt and travel
expenditures, which accounted for expense increases of $102,000, $62,000, and
$36,000, respectively, in the third quarter of 1998 compared to the third
quarter of 1997. The Company's increase in allowance for bad debt correlates
with a $615,000 increase in trade accounts receivable as of September 30, 1998
compared to the same period in 1997. As a percentage of total revenue, general
and administrative expenses remained relatively constant at 13% in the third
quarter of 1998 as compared to 12% in the third quarter of 1997.

INCOME FROM OPERATIONS

     In the third quarter of 1998, OrCAD generated income from operations of 
$1.1 million as compared to $683,000 for the same period in the prior year. The 
increase in income from operations in the third quarter of 1998 from the third 
quarter of 1997 was primarily attributable to lower cost of product revenue and 
lower costs in research and development measured as a percentage of revenue 
partially offset by increases in marketing and sales, and general and 
administrative costs measured as a percentage of revenue.

OTHER INCOME, NET

     Other income, net primarily consists of interest income, gains and losses
on the disposal of fixed assets, sublease income, royalty income, and foreign
currency gains and losses. Interest income consists primarily of the earnings on
available cash balances and marketable securities, which have generally been
invested in short-term money market investments, treasury bills and corporate
debt securities. Other income, net decreased to $382,000 in the third quarter of
1998 from $436,000 in the third quarter of 1997. The Company shifted certain of
its investment securities into securities that are generally exempt from federal
tax and yield interest at a lower rate than taxable investment securities in
which the Company previously invested. As a result of this change, other income,
net for the third quarter of 1998 decreased from the same period in the prior
year.

INCOME TAX EXPENSE

     The Company's effective tax rate differs from the combined federal and
state statutory rate of approximately 38.5% primarily due to the benefit of the
Company's foreign sales corporation, utilization of research and experimentation
tax credits, and certain investment income which is exempt from federal tax.
Income tax expense for the third quarter of 1998 was $474,000 as compared to
$405,000 for the third quarter of 1997.

                                                                              12
<PAGE>
 
RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
 
TOTAL REVENUE

     Total revenue increased 12% to $34.8 million for the first nine months of
1998 from $31 million for the first nine months of 1997. The increase in total
revenue was due to growth in both product and service revenue. As a percentage
of total revenue, product revenue decreased to 73% for the first nine months of
1998 from 80% for the first nine months of 1997. Conversely, service revenue
increased as a percentage of total revenue to 27% for the first nine months of
1998 from 20% for the first nine months of 1997.

     Product revenue increased 2% to $25.3 million for the first nine months of
1998 from $24.9 million for the first nine months of 1997. The slight increase
in product revenue is primarily attributable to increased sales in the Company's
Capture and Layout product families, offset by decreased sales related to the
OrCAD PSpice product family. Increased North American and European revenue was
partially offset by decreased revenue in Asian markets as a result of
unfavorable economic conditions in that region.

     Service revenue increased 54% to $9.4 million for the first nine months of
1998 from $6.1 million for the first nine months of 1997. The increase in
service revenue in the respective periods was primarily attributable to the
increased sales of extended support agreements, training and consulting.

     Total North American revenue increased 25% to $24.2 million for the first
nine months of 1998 from $19.3 million for the first nine months of 1997. Total
revenue generated outside of North America decreased 10% to $10.6 million for
the first nine months of 1998 from $11.7 million for the first nine months of
1997. As a percentage of the Company's total revenue, North American revenue
increased to 70% for the first nine months of 1998 from 62% for the first nine
months of 1997. The increase in the proportion of revenue generated within North
America was attributable to decreased sales to Asian markets reflecting the
unfavorable economic conditions in that region.

COST OF REVENUE

     The cost of product revenue decreased 38% to $2.2 million for the first
nine months of 1998 from $3.6 million for the first nine months of 1997. The
decreased cost of product revenue was primarily the result of reduced materials
costs, the consolidation of the Company's Irvine, California shipping function
into the Beaverton, Oregon operation, and reduced freight charges, which 
accounted for cost reductions of $681,000, $502,000,and $109,000, respectively,
in the first nine months of 1998 compared to the first nine months of 1997. As a
percentage of product revenue, cost of product revenue decreased to 9% for the
first nine months of 1998 from 14% for the first nine months of 1997.

     The cost of service revenue increased 53% to $1.9 million for the first
nine months of 1998 from $1.2 million for the first nine months of 1997. This
increase was primarily attributable to increased sales of maintenance contracts
and the expansion of the Company's Enterprise Services organization. As a
percentage of service revenue, the cost of service revenue remained constant at
20% for the first nine months of 1998 and for the corresponding period of 1997.

                                                                              13
<PAGE>
 
RESEARCH AND DEVELOPMENT

     Research and development expenses increased 3% to $8.6 million for the
first nine months of 1998 from $8.4 million for the first nine months of 1997.
The increase in research and development expenses was primarily attributable to
increased third-party consulting costs partially offset by a decrease in
personnel costs. As a percentage of total revenue, research and development
expenses decreased to 25% for the first nine months of 1998 from 27% for the
first nine months of 1997.

MARKETING AND SALES

     Marketing and sales expenses increased 25% to $13.8 million for the first
nine months of 1998 from $11.1 million for the first nine months of 1997. Total
marketing and sales expenses increased as a result of increased promotional
activity and continued expansion of the Company's sales and marketing
organizations. The number of employees in the Company's marketing and sales
functions increased to 121 at September 30, 1998 from 91 at September 30, 1997.
As a percentage of total revenue, marketing and sales expenses increased to 40%
for the first nine months of 1998 from 36% for the first nine months of 1997.

GENERAL AND ADMINISTRATIVE

     General and administrative expenses increased 16% to $4 million for the
first nine months of 1998 from $3.5 million for the first nine months of 1997.
This increase was primarily the result of increased administrative costs
associated with investor relations expenditures and the Company's allowance for
bad debt, which accounted for expense increases of $197,000 and $178,000,
respectively, in the first nine months of 1998 compared to the first nine months
of 1997. The Company's increase in allowance for bad debt correlates with a
$615,000 increase in trade accounts receivable as of September 30, 1998 compared
to the same period in 1997. As a percentage of total revenue, general and
administrative expenses increased to 12% in the first nine months of 1998 from
11% for the first nine months of 1997.

MERGER AND ACQUISITION RELATED CHARGES

     In the first nine months of 1998, OrCAD incurred merger-related charges of
$4.1 million in connection with the MicroSim Merger relating primarily to
financial advisory fees, legal and accounting services, personnel severance
costs and the cancellation and continuation of contractual obligations.
Personnel severance costs relate primarily to the termination of approximately
35 employees, most of which were employed by MicroSim in connection with a plan
of eliminating and redirecting certain of MicroSim's general, administrative,
sales, and marketing related functions to OrCAD's Beaverton, Oregon facility.
OrCAD also recognized certain costs for asset impairments and the cancellation
and continuation of contractual obligations related primarily to MicroSim's
facility lease as a result of eliminating and redirecting the aforementioned
operating functions in Irvine, California. The cash outflows for each of the
respective merger and acquisition related charges through the nine month period
ended September 30, 1998 are as follows: personnel severance-$1.4 million;
legal, accounting, investment banking and investor relations-$1.2 million;
continuation and cancellation of contractual obligations-$57,000; asset
impairment $114,000; and other $260,000. Payments related to the continuation
and cancellation of contractual obligations are being made in accordance with
the terms of the agreements that existed prior to the consummation of the merger
with MicroSim. All other remaining amounts are expected to be disbursed by the
end of 1998.

INCOME FROM OPERATIONS

     For the first nine months of 1998, OrCAD generated income from operations 
of $106,000 as compared to $1.1 million for the same period in the prior year. 
Excluding merger and acquisition related charges of $4.1 million and $2.2 
million in the first nine months of 1998 and 1997, respectively, income from 
operations was $4.2 million and $3.3 million for the first nine months of 1998 
and 1997, respectively. The increase in income from operations in the first nine
months of 1998 from the same period in 1997, excluding merger and acquisition 
related charges, was primarily attributable to lower cost of product revenue and
lower expenses in research and development measured as a percentage of revenue 
partially offset by increases in marketing and sales, and general and 
administrative expenses measured as a percentage of revenue.

OTHER INCOME, NET

     Other income, net decreased to $1.3 million for the first nine months of
1998 from $1.4 million for the first nine months of 1997. The Company shifted
certain of its investment securities into securities that are generally exempt
from federal tax and yield interest at a lower rate than taxable investment
securities in which the Company previously invested. As a result of this change,
other income for the nine months of 1998 decreased from the same period in the
prior year.

                                                                              14
<PAGE>
 
INCOME TAX EXPENSE

     The effective tax rate for the first nine months of 1998 was 32%. This rate
differs from the combined federal and state statutory rate of approximately
38.5% primarily due to the benefit of the Company's foreign sales corporation,
utilization of research and experimentation tax credits, and certain investment
income which is exempt from federal tax. Income tax expense for the first nine
months of 1998 was $434,000 as compared to $876,000 for the first nine months of
1997.

LIQUIDITY AND CAPITAL RESOURCES

     Total cash and cash equivalents were $13.5 million at September 30, 1998 as
compared to $31.6 million at December 31, 1997. Cash provided by operations was
$6.1 million for the first nine months of 1998 as compared to $3.7 million for
the first nine months of 1997. The increase in cash provided by operations from
the first nine months of 1998 as compared to the first nine months of 1997 was
primarily due to collections of accounts receivable. Cash used in investment
activities was $24.5 million for the first nine months of 1998 as compared to
$3.4 million for the corresponding period in 1997. The increase in cash used in
investment activities during the first nine months of 1998 as compared to the
first nine months of 1997 was due primarily to purchases of investment
securities partially offset by maturities thereof. Cash provided by financing
activities was $376,000 for the first nine months of 1998 as compared to $7,000
used in financing activities during the first nine months of 1997. The increase
in cash provided by financing activities in the first nine months of 1998 was
primarily due to proceeds from the issuance of common stock upon the exercise of
stock options.

     The Company has available borrowing capacity consisting of a commitment for
a $3.0 million line of credit from a commercial bank. The Company believes that
current cash and investment balances, cash flows from operations and the unused
line of credit are sufficient to meet current and anticipated future capital
requirements for at least the next twelve months. The Company currently does not
have any material commitments for capital expenditures. OrCAD has from time to
time evaluated and continues to evaluate opportunities for acquisitions and
expansion. Any such transactions, if consummated, may use a portion of the
Company's working capital or necessitate additional bank borrowings. No
assurance can be given that additional borrowing capacity will be available or
that if available, such financing will be obtainable on terms favorable to the
Company or its stockholders.

YEAR 2000

     The Company is aware of the potential inability of computer programs to
adequately process date information after December 31, 1999 (the year 2000
issue).  The Company has anticipated problems surrounding the year 2000 issue
and modified its product offerings as necessary to make them year 2000
compliant.  All currently marketed and supported OrCAD products for Microsoft
Windows NT and Windows 95 are year 2000 compliant. The Company makes no
assurances that its DOS products, which are no longer being sold or marketed,
are year 2000 compliant.  The year 2000 issue with regard to OrCAD's Microsoft
Windows NT and Windows 95 products is not expected to have a material adverse
effect on the Company's financial condition or results of operations.

                                                                              15
<PAGE>
 
     In addition, the Company will be implementing a program to review the year
2000 compliance status of computer software programs licensed from third parties
and used in its internal business processes to obtain appropriate assurances of
year 2000 compliance from manufacturers of these products. The Company believes
that it will be able to complete its year 2000 compliance review and make any
necessary modifications prior to the end of 1999. The Company further believes
that such a review and modification, if necessary, will not require the Company
to incur any additional material expense. However, the compliance of systems
acquired from third parties is dependent on factors outside the Company's
control. If key systems, or a significant number of systems fail as a result of
year 2000 problems, the Company could incur substantial expense and experience a
disruption of business operations, which would potentially have a material
adverse effect on the Company's business.

     Furthermore, the purchasing patterns of customers and potential customers
may be affected by year 2000 issues as companies may be required to devote
significant resources to correct or patch their current software systems for
year 2000 compliance. These expenditures may result in reduced funds available
to purchase the Company's software products that could have a materially adverse
effect on the Company's financial condition and results of operations. There can
be no assurance that there will not be any year 2000 related operating problems
or material expenses that will occur with OrCAD's computer systems or in
connection with the interface with OrCAD's major vendors or suppliers.

VARIABILITY OF OPERATING RESULTS

     The Company's quarterly operating results may vary significantly in the
future depending on factors such as demand for the Company's products, the
timely development and market acceptance of new products and upgrades to
existing products, the impact of competitive products and pricing, length of
sales cycles, timing of significant orders, seasonal factors, mix of direct and
indirect sales, product mix, domestic and international economic conditions,
changes in the financial condition of or the relationship with distributors,
changes in tax rates, merger and acquisition activities, the integration of
acquired entities, and market conditions in the EDA industry.

     A substantial portion of the Company's revenue in each quarter results from
orders booked in that quarter. The Company's expense levels are based, in part,
on its expectations as to future revenue. If revenue levels are below
expectations, operating results are likely to be adversely affected. In
particular, net income may be disproportionately affected by a reduction in
revenue because only a small portion of the Company's expenses varies with its
revenue.

     The Company sells its software products and provides services to customers
throughout the world.  Managing global operations presents challenges associated
with organizational alignment, cultural and language differences.  Moreover,
each region in the global EDA market exhibits unique characteristics that can
cause purchasing patterns to differ significantly from period to period.
Although international markets provide the Company with significant revenue
opportunities, periodic downturns, trade balance issues, political instability
and fluctuations in interest and foreign currency exchange rates are all risks
that could affect global product and service demand.  Many countries are
currently experiencing banking and currency difficulties that could lead to
economic recession in those countries which could result in a decline in the
purchasing power of the Company's customers in those countries.  This in turn
could result in the cancellation or delay of orders for the Company's products
from customers in those countries, thus adversely affecting the Company's
operations.

                                                                              16
<PAGE>
 
     The Company is dependent upon the efforts and abilities of its senior
management, its research and development staff and a number of other key
management, sales, support, technical, and service personnel.  The Company has
recently increased its focus on the offering of professional services to its
customers, the growth of which is directly dependent upon the attraction and
retention of personnel.  The market for highly skilled employees is intensely
competitive.  To the extent that the Company is not able to retain, train,
attract and motivate highly skilled employees who are able to provide EDA and
other design services that satisfy customers' expectations, the Company's
business, operating results, and financial condition could be materially
adversely affected.

     Acquisitions of complimentary businesses are an integral part of the
Company's overall business strategy. There are several risks associated with
this strategy including, but not limited to, integration of sales channels,
training and education of sales forces for new product offerings, integration of
product development efforts, retention of key employees, retention of systems of
internal controls, and integration of information systems. All of these factors
can impair the Company's ability to forecast and meet quarterly revenue and
earnings targets and effectively manage the business for long-term growth.
While the Company is aware of, and is addressing such issues, there can be no
assurance that these challenges will be effectively met.

     OrCAD's success is dependent, in part, upon its proprietary technology.
The Company generally relies on patents, copyrights, trademarks, and trade
secret laws to establish and maintain its proprietary rights to its technology
and products. OrCAD has been issued a number of patents. There can be no
assurance that any of these patents will not be challenged, invalidated or
circumvented, or that any rights granted thereunder will provide competitive
advantages to the Company. In addition, the laws of some foreign countries may
not permit the protection of OrCAD's proprietary rights to the same extent as
the laws of the United States.

     Because of the existence of a large number of patents in the EDA industry
there can be no assurance that OrCAD products or any of their components do not
infringe on the patent rights of others. If a third party were to allege
infringement, OrCAD believes that, based on industry practice, any necessary
license or rights under such patents may be obtained on terms that would not
have a material adverse effect on the Company's business, operating results or
financial condition. Nevertheless, there can be no assurance that the necessary
licenses would be available on acceptable terms, or at all, or that the Company
would prevail in any such challenge. Some of the Company's products are designed
to include software or other intellectual property licensed from third parties.
It may be necessary in the future to seek or renew such licenses. The inability
to obtain certain licenses or other rights on favorable terms could have a
material adverse effect on the Company's business, operating results, or
financial condition.

     Software products of the complexity of OrCAD's may contain errors that may
be detected at any point in the products' life cycles. The Company has
discovered software errors in certain of its products in the past. The
correction of these errors has caused delays in shipment. There can be no
assurance, despite arduous testing by OrCAD, its customers, and potential
customers, that errors will not be detected. Errors may result in the loss of,
or delay in market acceptance and sales. Such errors may require the Company to
divert development resources, incur increased service and royalty costs and the
Company may suffer injury to its reputation. As such, there can be no assurance
that such errors will not have a material adverse effect on the Company's
business, financial condition, results of operations, or cash flows.

                                                                              17
<PAGE>
 
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS

     In September of 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
The standard also requires that changes in the derivatives' fair value be
recognized currently in results of operations unless specific hedge accounting
criteria are met. SFAS 133 is effective for fiscal years beginning after
September 15, 1999. The Company does not expect SAFS 133 to have a material
impact on its consolidated financial statements.

     In March of 1998, the American Institute of Certified Public Accountants
issued SOP 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." The statement requires that certain software costs
related to the development or purchase of software to be used in internal
business processes be capitalized and amortized over the estimated useful life
of the software. SOP 98-1 is effective for financial statements issued for
fiscal years beginning after December 15, 1998. Adoption of SOP 98-1 is not
expected to have a material effect on the results of Operations of OrCAD.

LEGAL PROCEEDINGS

     From time to time, OrCAD becomes involved in ordinary, routine or
regulatory legal proceedings incidental to the business of OrCAD. OrCAD is not
presently a party to any litigation, the outcome of which would have a material
adverse effect on OrCAD's business, financial condition or results of
operations.

                                                                              18
<PAGE>
 
PART II - OTHER INFORMATION

ITEM 2: CHANGES IN SECURITIES

     During the third quarter of 1998, the Company sold securities without
registration under the Securities Act of 1933 (the "Securities Act") upon the
exercise of stock options granted under the Company's stock option plans.  An
aggregate of 5,894 shares of Common Stock were issued at exercise prices ranging
from $.35 to $3.50.  These transactions were effected in reliance upon Rule 701
promulgated pursuant to the authority of the Securities and Exchange Commission
under Section 3(b) of the Securities Act.


ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

 
     (a)  Exhibits:
 
          2.1   Agreement and Plan of Reorganization*
          10.1  Employment Agreement with Michael F. Bosworth Dated September 
                17, 1998
          10.2  Employment Agreement with William Cibulsky Dated September 17,
                1998
          10.3  Employment Agreement with Donald G. Tannenbaum Dated September
                17, 1998
          10.4  Employment Agreement with Stuart Harrington Dated September 17,
                1998
          10.5  Employment Agreement with James M. Plymale Dated September 17,
                1998
          10.6  Employment Agreement with P. David Bundy Dated September 17,
                1998
          10.7  Employment Agreement with Phillip J. Kilcoin Dated September 17,
                1998
          10.8  Employment Agreement with Graham K. Sheldon Dated September 17,
                1998
          27.1  Financial Data Schedule
          27.2  Restated Financial Data Schedule

     (b)  Reports on Form 8-K

     The Company filed a report on Form 8-K on October 2, 1998, relating to the
Agreement and Plan of Reorganization (the "Merger Agreement") among Summit
Design, Inc., Hood Acquisition Corp., and OrCAD.

* Hereby incorporated by reference to the Company's report on Form 8-K filed on
October 2, 1998.

                                                                              19
<PAGE>
 
SIGNATURES

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

                                    OrCAD, Inc.



       Dated: November 13, 1998     /s/  P. David Bundy
                                    --------------------------------------------
                                    Vice President, Finance and Secretary
                                    (Principal Financial and Accounting Officer)

                                                                              20