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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K/A (Amendment No. 1)



FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934



(Mark one)



|x | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2003
|- | --------------------------------------------------------------------------------------------------------------------------------



| ̈ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

Commission file number: 000-31863



COMPUTER ACCESS TECHNOLOGY CORPORATION

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 77-0302527                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|3385 Scott Boulevard, Santa Clara, California                  |  | 95054                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



(408) 727-6600

(Registrants telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value

(Title of Class)



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 ̈



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)    Yes ̈No  x



The aggregate market value of the registrants Common Stock held by non-affiliates of the registrant on June 30, 2003, based upon the closing sale
price of $3.25 per share of Common Stock as of that date as reported on the Nasdaq National Market, was approximately $20.7 million. Shares of Common Stock held by officers, directors, and holders of more than 5% of the outstanding Common Stock have
been excluded from this calculation because such persons may be deemed to be affiliates. The determination of affiliate status is not necessarily conclusive for other purposes.



As of February 1, 2004, there were approximately 19,420,644 shares of the registrants Common Stock outstanding.



DOCUMENTS INCORPORATED BY REFERENCE



Portions of the registrants definitive proxy statement (the Proxy
Statement) to be mailed to stockholders in connection with the Registrants 2004 annual meeting of stockholders scheduled to be held in Santa Clara, California on Thursday, May 20, 2004, are incorporated by reference into Part III of this
report. Except as expressly incorporated by reference, the Proxy Statement shall not be deemed to be part of this report.



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EXPLANATORY NOTE



The Registrant hereby amends our annual report on Form 10-K for the year ended December 31, 2003 filed on February 20, 2004,
to correct in Item 8, a misclassification in the Consolidated Statements of Cash Flows for the year ended December 31, 2002, to include in Item 8 disclosure of Registrants acquisition of Verisys in June 2002, to include disclosure in Item 9A
(previously disclosed in Item 14) and to disclose in Item 14 that certain information is being incorporated by reference.



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INDEX

COMPUTER ACCESS TECHNOLOGY CORPORATION

FORM 10-K/A

AMENDMENT NO. 1

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003



|          |  |                                                                  |  |     
|--------- |  | ---------------------------------------------------------------- |  | ----
|          |  |                                                                 
|          |  |                                                                  |  | Page
|          | 
|PART II   |  |                                                                 
|          |  |                                                                 
|Item 8.   |  | Consolidated Financial Statements and Supplementary Data         |  | 35  
|          |  |                                                                 
|Item 9A.  |  | Controls and Procedures                                          |  | 56  
|          | 
|PART III  |  |                                                                 
|          |  |                                                                 
|Item 14.  |  | Principal Accountants and Fees                                   |  | 57  
|          | 
|PART IV   |  |                                                                 
|          |  |                                                                 
|Item 15.  |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K |  | 58  
|          | 
|Signature |  | 59                                                              



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Item 8.    
Consolidated Financial Statements and Supplementary Data



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                    |  |     
|--------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                    |  | Page
|                                                                                                    | 
|AUDITED FINANCIAL STATEMENTS                                                                        |  |     
|                                                                                                    | 
|Report of PricewaterhouseCoopers LLP, Independent Auditors                                          |  | 36  
|                                                                                                    | 
|Consolidated Balance Sheets as of December 31, 2003 and 2002                                        |  | 37  
|                                                                                                    | 
|Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and 2001          |  | 38  
|                                                                                                    | 
|Consolidated Statements of Stockholders Equity for the years ended December 31, 2003,2002 and 2001 |  | 39  
|                                                                                                    | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001          |  | 40  
|                                                                                                    | 
|Notes to Consolidated Financial Statements                                                          |  | 41  
|                                                                                                    | 
|Schedule II  Valuation and Qualifying Accounts                                                     |  | 61  



35



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REPORT OF INDEPENDENT AUDITORS



To the Board of Directors and Stockholders of

Computer Access Technology Corporation



In our opinion, the consolidated financial statements listed
in the accompanying index present fairly, in all material respects, the financial position of Computer Access Technology Corporation and its subsidiaries at December 31, 2003 and December 31, 2002, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the
accompanying indexpresent fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Companys management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



/s/ PricewaterhouseCoopers LLP



San Jose, California

January 27, 2004



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COMPUTER ACCESS TECHNOLOGY CORPORATION



CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)



|                                                                                                                                                                                    |  |              |        |   |      |   |        |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ | - | ---- | - | ------ | -
|                                                                                                                                                                                    |  | December 31, |       
|                                                                                                                                                                                    |  | 2003         |        |   | 2002 |  
|ASSETS                                                                                                                                                                              |  |              |        |   |      |   |        |  
|Current assets:                                                                                                                                                                     |  |              |        |   |      |   |        |  
|Cash and cash equivalents                                                                                                                                                           |  | $            | 34,116 |   |      | $ | 30,846 |  
|Short-term investments                                                                                                                                                              |  |              | 1,055  |   |      |   | 12,905 |  
|Trade accounts receivable, net of allowance for doubtful accounts of $148 and $157 at December 31, 2003 and 2002, respectively                                                      |  |              | 3,180  |   |      |   | 1,724  |  
|Inventories                                                                                                                                                                         |  |              | 907    |   |      |   | 1,032  |  
|Other current assets                                                                                                                                                                |  |              | 675    |   |      |   | 2,632  |  
|                                                                                                                                                                                    |  |              |        |   |      |   |        |  
|Total current assets                                                                                                                                                                |  |              | 39,933 |   |      |   | 49,139 |  
|Long-term investments                                                                                                                                                               |  |              | 9,367  |   |      |   |       |  
|Property and equipment, net                                                                                                                                                         |  |              | 768    |   |      |   | 999    |  
|Purchased intangible assets                                                                                                                                                         |  |              | 167    |   |      |   | 305    |  
|Other assets                                                                                                                                                                        |  |              | 114    |   |      |   | 87     |  
|                                                                                                                                                                                    |  |              |        |   |      |   |        |  
|                                                                                                                                                                                    |  | $            | 50,349 |   |      | $ | 50,530 |  
|                                                                                                                                                                                    |  |              |        |   |      |   |        |  
|                                                                                                                                                                                    |  |             
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                |  |              |        |   |      |   |        |  
|Current liabilities:                                                                                                                                                                |  |              |        |   |      |   |        |  
|Accounts payable                                                                                                                                                                    |  | $            | 393    |   |      | $ | 1,326  |  
|Accrued expenses                                                                                                                                                                    |  |              | 2,921  |   |      |   | 1,247  |  
|Accrued restructuring                                                                                                                                                               |  |              | 29     |   |      |   | 270    |  
|Deferred revenue                                                                                                                                                                    |  |              | 535    |   |      |   | 485    |  
|                                                                                                                                                                                    |  |              |        |   |      |   |        |  
|Total current liabilities                                                                                                                                                           |  |              | 3,878  |   |      |   | 3,328  |  
|Commitments (Note 9)                                                                                                                                                                |  |              |        |   |      |   |        |  
|Stockholders equity:                                                                                                                                                               |  |              |        |   |      |   |        |  
|Common Stock, $0.001 per share par value, 100,000,000 shares authorized, 19,409,529 shares and 19,425,625 shares issued and outstanding at
December 31, 2003 and 2002, respectively |  |              | 19     |   |      |   | 19     |  
|Additional paid-in capital                                                                                                                                                          |  |              | 52,595 |   |      |   | 53,210 |  
|Deferred stock-based compensation                                                                                                                                                   |  |              | (32    | ) |      |   | (324   | )
|Accumulated deficit                                                                                                                                                                 |  |              | (6,111 | ) |      |   | (5,703 | )
|                                                                                                                                                                                    |  |              |        |   |      |   |        |  
|Total stockholders equity                                                                                                                                                          |  |              | 46,471 |   |      |   | 47,202 |  
|                                                                                                                                                                                    |  |              |        |   |      |   |        |  
|                                                                                                                                                                                    |  | $            | 50,349 |   |      | $ | 50,530 |  
|                                                                                                                                                                                    |  |              |        |   |      |   |        |  



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



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COMPUTER ACCESS TECHNOLOGY CORPORATION



CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)



|                                                                                                                                                               |  |                          |        |   |      |   |        |      |  |   |        |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                                                                               |  | Years Ended December 31, |       
|                                                                                                                                                               |  | 2003                     |        |   | 2002 |   |        | 2001 | 
|Revenue                                                                                                                                                        |  | $                        | 15,250 |   |      | $ | 14,446 |      |  | $ | 16,770 |  
|Cost of revenue (inclusive of amortization of deferred stock-based compensation of $36, $138 and $387 in 2003, 2002, and 2001,
respectively)                   |  |                          | 3,038  |   |      |   | 2,995  |      |  |   | 4,259  |  
|Amortization of acquired developed technology                                                                                                                  |  |                          | 35     |   |      |   | 319    |      |  |   |       |  
|                                                                                                                                                               |  |                          |        |   |      |   |        |      |  |   |        |  
|Gross profit                                                                                                                                                   |  |                          | 12,177 |   |      |   | 11,132 |      |  |   | 12,511 |  
|                                                                                                                                                               |  |                          |        |   |      |   |        |      |  |   |        |  
|Operating expenses:                                                                                                                                            |  |                          |        |   |      |   |        |      |  |   |        |  
|Research and development (exclusive of amortization of deferred stock-based compensation of $127, $100, and $2,274 in 2003, 2002, and 2001,
respectively)      |  |                          | 5,206  |   |      |   | 7,382  |      |  |   | 7,278  |  
|Sales and marketing (exclusive of amortization of deferred stock-based compensation (recovery) of $80, $(119), and $286 in 2003, 2002, and
2001, respectively) |  |                          | 5,064  |   |      |   | 4,813  |      |  |   | 3,162  |  
|General and administrative (exclusive of non-cash stock-based compensation of $24, $414, and $1,083 in 2003, 2002, and 2001,
respectively)                     |  |                          | 2,351  |   |      |   | 5,159  |      |  |   | 2,933  |  
|Goodwill impairment                                                                                                                                            |  |                          |       |   |      |   | 1,427  |      |  |   |       |  
|Acquired in-process research and development                                                                                                                   |  |                          |       |   |      |   | 410    |      |  |   |       |  
|Amortization of purchased intangible assets                                                                                                                    |  |                          | 104    |   |      |   | 266    |      |  |   |       |  
|Restructuring expenses                                                                                                                                         |  |                          |       |   |      |   | 808    |      |  |   |       |  
|Amortization of deferred stock-based compensation                                                                                                              |  |                          | 231    |   |      |   | 395    |      |  |   | 3,643  |  
|                                                                                                                                                               |  |                          |        |   |      |   |        |      |  |   |        |  
|Total operating expenses                                                                                                                                       |  |                          | 12,956 |   |      |   | 20,660 |      |  |   | 17,016 |  
|                                                                                                                                                               |  |                          |        |   |      |   |        |      |  |   |        |  
|Loss from operations                                                                                                                                           |  |                          | (779   | ) |      |   | (9,528 | )    |  |   | (4,505 | )
|Other income, net                                                                                                                                              |  |                          | 641    |   |      |   | 727    |      |  |   | 1,868  |  
|                                                                                                                                                               |  |                          |        |   |      |   |        |      |  |   |        |  
|Loss before benefit from income taxes                                                                                                                          |  |                          | (138   | ) |      |   | (8,801 | )    |  |   | (2,637 | )
|Benefit from income taxes                                                                                                                                      |  |                          |       |   |      |   | (1,702 | )    |  |   | (70    | )
|                                                                                                                                                               |  |                          |        |   |      |   |        |      |  |   |        |  
|Net loss                                                                                                                                                       |  | $                        | (138   | ) |      | $ | (7,099 | )    |  | $ | (2,567 | )
|                                                                                                                                                               |  |                          |        |   |      |   |        |      |  |   |        |  
|Net loss per share:                                                                                                                                            |  |                          |        |   |      |   |        |      |  |   |        |  
|Basic and diluted                                                                                                                                              |  | $                        | (0.01  | ) |      | $ | (0.37  | )    |  | $ | (0.14  | )
|                                                                                                                                                               |  |                          |        |   |      |   |        |      |  |   |        |  
|Weighted average shares outstanding                                                                                                                            |  |                          |        |   |      |   |        |      |  |   |        |  
|Basic and diluted                                                                                                                                              |  |                          | 19,323 |   |      |   | 19,205 |      |  |   | 19,323 |  
|                                                                                                                                                               |  |                          |        |   |      |   |        |      |  |   |        |  



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



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COMPUTER ACCESS TECHNOLOGY CORPORATION



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(in thousands, except share data)



|                                                                   |  |              |   |                          |        |    |                                 |   |        |                                       |  |   |        |   |  |   |        |   |  |   |        |  
|------------------------------------------------------------------ |  | ------------ | - | ------------------------ | ------ | -- | ------------------------------- | - | ------ | ------------------------------------- |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                                                   |  | Common Stock |   | AdditionalPaid-InCapital |        |    | DeferredStock-BasedCompensation |   |        | RetainedEarnings (AccumulatedDeficit) |  |   | Total  |  
|                                                                   |  | Shares       |   |                          | Amount |    |                                 |   |       
|Balance as of December 31, 2000                                    |  | 18,498,929   |   |                          | $      | 18 |                                 | $ | 54,029 |                                       |  | $ | (7,853 | ) |  | $ | 3,963  |   |  | $ | 50,157 |  
|Exercise of common stock options                                   |  | 299,418      |   |                          |        | 1  |                                 |   | 180    |                                       |  |   |       |   |  |   |       |   |  |   | 181    |  
|Issuance of common stock through employee stock purchase plan      |  | 29,379       |   |                          |        |   |                                 |   | 137    |                                       |  |   |       |   |  |   |       |   |  |   | 137    |  
|Issuance of common stock options in exchange for services          |  |             |   |                          |        |   |                                 |   | 17     |                                       |  |   |       |   |  |   |       |   |  |   | 17     |  
|Tax benefit from exercise of stock options and stock purchase plan |  |             |   |                          |        |   |                                 |   | 61     |                                       |  |   |       |   |  |   |       |   |  |   | 61     |  
|Deferred stock-based compensation                                  |  |             |   |                          |        |   |                                 |   | (1,331 | )                                     |  |   | 703    |   |  |   |       |   |  |   | (628   | )
|Amortization of deferred stock-based compensation                  |  |             |   |                          |        |   |                                 |   |       |                                       |  |   | 4,658  |   |  |   |       |   |  |   | 4,658  |  
|Net loss                                                           |  |             |   |                          |        |   |                                 |   |       |                                       |  |   |       |   |  |   | (2,567 | ) |  |   | (2,567 | )
|                                                                   |  |              |   |                          |        |    |                                 |   |        |                                       |  |   |        |   |  |   |        |   |  |   |        |  
|Balance as of December 31, 2001                                    |  | 18,827,726   |   |                          |        | 19 |                                 |   | 53,093 |                                       |  |   | (2,492 | ) |  |   | 1,396  |   |  |   | 52,016 |  
|Exercise of common stock options                                   |  | 173,873      |   |                          |        |   |                                 |   | 216    |                                       |  |   |       |   |  |   |       |   |  |   | 216    |  
|Issuance of common stock through employee stock purchase plan      |  | 64,026       |   |                          |        |   |                                 |   | 210    |                                       |  |   |       |   |  |   |       |   |  |   | 210    |  
|Issuance of common stock in acquisition                            |  | 360,000      |   |                          |        |   |                                 |   | 1,270  |                                       |  |   |       |   |  |   |       |   |  |   | 1,270  |  
|Tax benefit from exercise of stock options and stock purchase plan |  |             |   |                          |        |   |                                 |   | 56     |                                       |  |   |       |   |  |   |       |   |  |   | 56     |  
|Deferred stock-based compensation                                  |  |             |   |                          |        |   |                                 |   | (1,635 | )                                     |  |   | 1,002  |   |  |   |       |   |  |   | (633   | )
|Amortization of deferred stock-based compensation                  |  |             |   |                          |        |   |                                 |   |       |                                       |  |   | 1,166  |   |  |   |       |   |  |   | 1,166  |  
|Net loss                                                           |  |             |   |                          |        |   |                                 |   |       |                                       |  |   |       |   |  |   | (7,099 | ) |  |   | (7,099 | )
|                                                                   |  |              |   |                          |        |    |                                 |   |        |                                       |  |   |        |   |  |   |        |   |  |   |        |  
|Balance as of December 31, 2002                                    |  | 19,425,625   |   |                          |        | 19 |                                 |   | 53,210 |                                       |  |   | (324   | ) |  |   | (5,703 | ) |  |   | 47,202 |  
|Exercise of common stock options                                   |  | 301,577      |   |                          |        |   |                                 |   | 316    |                                       |  |   |       |   |  |   |       |   |  |   | 316    |  
|Issuance of common stock through employee stock purchase plan      |  | 67,421       |   |                          |        |   |                                 |   | 142    |                                       |  |   |       |   |  |   |       |   |  |   | 142    |  
|Stock repurchase                                                   |  | (385,094     | ) |                          |        |   |                                 |   | (1,048 | )                                     |  |   |       |   |  |   | (270   | ) |  |   | (1,318 | )
|Deferred stock-based compensation                                  |  |             |   |                          |        |   |                                 |   | (25    | )                                     |  |   | 18     |   |  |   |       |   |  |   | (7     | )
|Amortization of deferred stock-based compensation                  |  |             |   |                          |        |   |                                 |   |       |                                       |  |   | 274    |   |  |   |       |   |  |   | 274    |  
|Net loss                                                           |  |             |   |                          |        |   |                                 |   |       |                                       |  |   |       |   |  |   | (138   | ) |  |   | (138   | )
|                                                                   |  |              |   |                          |        |    |                                 |   |        |                                       |  |   |        |   |  |   |        |   |  |   |        |  
|Balance as of December 31, 2003                                    |  | 19,409,529   |   |                          | $      | 19 |                                 | $ | 52,595 |                                       |  | $ | (32    | ) |  | $ | (6,111 | ) |  | $ | 46,471 |  
|                                                                   |  |              |   |                          |        |    |                                 |   |        |                                       |  |   |        |   |  |   |        |   |  |   |        |  



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



39



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COMPUTER ACCESS TECHNOLOGY CORPORATION, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                                   |  |                         |        |   |      |   |         |      |  |   |        |  
|-------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                                                                   |  | Year Ended December 31, |       
|                                                                                                   |  | 2003                    |        |   | 2002 |   |         | 2001 | 
|Cash flows from operating activities:                                                              |  |                         |        |   |      |   |         |      |  |   |        |  
|Net loss                                                                                           |  | $                       | (138   | ) |      | $ | (7,099  | )    |  | $ | (2,567 | )
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                         |        |   |      |   |         |      |  |   |        |  
|Depreciation and amortization                                                                      |  |                         | 757    |   |      |   | 581     |      |  |   | 453    |  
|Provision for doubtful accounts                                                                    |  |                         | (9     | ) |      |   | 60      |      |  |   | 11     |  
|Write-down of property and equipment in connection with restructuring                              |  |                         |       |   |      |   | 134     |      |  |   |       |  
|Write-down of property and equipment                                                               |  |                         | 19     |   |      |   |        |      |  |   |       |  
|Amortization of acquired developed technology                                                      |  |                         | 35     |   |      |   | 319     |      |  |   |       |  
|Goodwill impairment                                                                                |  |                         |       |   |      |   | 1,427   |      |  |   |       |  
|Acquired in-process research and development                                                       |  |                         |       |   |      |   | 410     |      |  |   |       |  
|Amortization of purchased intangible assets                                                        |  |                         | 104    |   |      |   | 266     |      |  |   |       |  
|Amortization of deferred stock-based compensation                                                  |  |                         | 267    |   |      |   | 533     |      |  |   | 4,030  |  
|Issuance of common stock in exchange for services                                                  |  |                         |       |   |      |   |        |      |  |   | 17     |  
|Amortization of premium on investments                                                             |  |                         | 464    |   |      |   |        |      |  |   |       |  
|Tax benefit from exercise of stock options and stock purchase plan                                 |  |                         |       |   |      |   | 56      |      |  |   | 61     |  
|Changes in assets and liabilities (net effect of business combination):                            |  |                         |        |   |      |   |         |      |  |   |        |  
|Trade Accounts receivable                                                                          |  |                         | (1,447 | ) |      |   | 488     |      |  |   | 1,080  |  
|Inventories                                                                                        |  |                         | 125    |   |      |   | (29     | )    |  |   | (6     | )
|Deferred tax assets                                                                                |  |                         |       |   |      |   | 276     |      |  |   | (122   | )
|Other assets, current and non-current                                                              |  |                         | 1,839  |   |      |   | (1,165  | )    |  |   | (287   | )
|Accounts payable                                                                                   |  |                         | (933   | ) |      |   | 585     |      |  |   | 59     |  
|Accrued expenses                                                                                   |  |                         | 1,671  |   |      |   | (340    | )    |  |   | (2,133 | )
|Accrued restructuring                                                                              |  |                         | (241   | ) |      |   | 270     |      |  |   |       |  
|Deferred revenue                                                                                   |  |                         | 50     |   |      |   | 265     |      |  |   | 220    |  
|Deferred rent                                                                                      |  |                         | 2      |   |      |   | (4      | )    |  |   | (9     | )
|                                                                                                   |  |                         |        |   |      |   |         |      |  |   |        |  
|Net cash provided by (used in) operating activities                                                |  |                         | 2,565  |   |      |   | (2,967  | )    |  |   | 807    |  
|Cash flows from investing activities:                                                              |  |                         |        |   |      |   |         |      |  |   |        |  
|Acquisition of property and equipment                                                              |  |                         | (545   | ) |      |   | (289    | )    |  |   | (978   | )
|Purchase of short-term investments                                                                 |  |                         | (4,392 | ) |      |   | (28,100 | )    |  |   | (5,620 | )
|Sale of short-term investments                                                                     |  |                         | 15,792 |   |      |   | 19,815  |      |  |   | 1,285  |  
|Purchase of long-term investments                                                                  |  |                         | (9,381 | ) |      |   |        |      |  |   |       |  
|Acquisition of subsidiary, net of cash assumed                                                     |  |                         |       |   |      |   | (980    | )    |  |   |       |  
|Other assets                                                                                       |  |                         | 91     |   |      |   |        |      |  |   | (282   | )
|                                                                                                   |  |                         |        |   |      |   |         |      |  |   |        |  
|Net cash provided by (used in) investing activities                                                |  |                         | 1,565  |   |      |   | (9,554  | )    |  |   | (5,595 | )
|Cash flows from financing activities:                                                              |  |                         |        |   |      |   |         |      |  |   |        |  
|Proceeds from exercise of stock options                                                            |  |                         | 316    |   |      |   | 216     |      |  |   | 181    |  
|Proceeds from employee stock purchase plan                                                         |  |                         | 142    |   |      |   | 210     |      |  |   | 137    |  
|Repurchases of common stock                                                                        |  |                         | (1,318 | ) |      |   |        |      |  |   |       |  
|                                                                                                   |  |                         |        |   |      |   |         |      |  |   |        |  
|Net cash provided by (used in) financing activities                                                |  |                         | (860   | ) |      |   | 426     |      |  |   | 318    |  
|                                                                                                   |  |                         |        |   |      |   |         |      |  |   |        |  
|Net increase (decrease) in cash and cash equivalents                                               |  |                         | 3,270  |   |      |   | (12,095 | )    |  |   | (4,470 | )
|Cash and cash equivalents at beginning of year                                                     |  |                         | 30,846 |   |      |   | 42,941  |      |  |   | 47,411 |  
|                                                                                                   |  |                         |        |   |      |   |         |      |  |   |        |  
|Cash and cash equivalents at end of year                                                           |  | $                       | 34,116 |   |      | $ | 30,846  |      |  | $ | 42,941 |  
|                                                                                                   |  |                         |        |   |      |   |         |      |  |   |        |  
|                                                                                                   |  |                         |       
|Supplemental information:                                                                          |  |                         |        |   |      |   |         |      |  |   |        |  
|Cash paid for (refunded from) income taxes                                                         |  | $                       | (2,868 | ) |      | $ | (1,013  | )    |  | $ | 2,759  |  
|                                                                                                   |  |                         |        |   |      |   |         |      |  |   |        |  



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



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COMPUTER ACCESS TECHNOLOGY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1THE
COMPANY:



Computer Access Technology Corporation (the
Company) was incorporated in California in February 1992 and reincorporated in Delaware in October 2000. The Company designs, manufactures and markets advanced verification systems for existing and emerging digital communications
standards such as Bluetooth, Ethernet, Fibre Channel, IEEE 1394, InfiniBand, PCI Express, SCSI, Serial ATA, Serial Attached SCSI and USB for semiconductor, device, system and software companies in North America, Europe and Asia.



NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:



Basis of presentation



The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation.



Use of estimates



The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.



Cash, cash equivalents and short-term investments



The Company classifies all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. Those with an original maturity greater than 90 days and current maturity of less than one year are
classified as short-term investments and those with an original maturity of greater than one year are classified as long-term investments. The Companys cash equivalents, short-term and long-term investments are placed in portfolios managed by
three professional money management firms. Cash equivalents, short-term and long-term investments consist principally of investments in commercial paper, investment quality corporate and municipal bonds, money market funds, collateralized mortgage
obligations, and U.S. government agency securities. The Company accounts for short-term investments in accordance with Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and
Equity Securities. Debt and equity securities are classified as available-for-sale securities and are reported at fair market value with any unrealized holding gains and losses reported as a separate component of stockholders equity. As
of December 31, 2003, there was no significant difference between the cost of investments and their respective fair market values.



Revenue recognition



Due to the significant software content of its products, the Company recognizes revenue in accordance with Statement of Position (SOP) 97-2,
Software Revenue Recognition. Under SOP 97-2, the Company recognizes revenue to distributors, resellers and end-users upon shipment provided that there is persuasive evidence of an arrangement, the product has been delivered, the fee is
fixed or determinable, and collection of the resulting receivable is reasonably assured. The Company does not provide distributors, resellers or end-user customers price protection, and only limited rights of return or exchange. Generally, the
Companys distributors do not maintain inventory; however, to the extent they do, the Company has the right, but not the obligation, under the terms of its distributor agreements to repurchase inventory at the sales price upon termination of
the



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COMPUTER ACCESS TECHNOLOGY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



relationship. When the Company has shipped a product but certain elements essential to its functionality of the product have not been delivered, revenue and
the associated cost of revenue are deferred until the remaining elements have been delivered. Software maintenance support revenue is deferred and recognized ratably over the maintenance support periods. Provisions for warranty costs are recorded at
the time products are shipped.



Fair value of financial
instruments



The reported amounts of certain of the
Companys financial instruments, including cash and cash equivalents, short-term and long-term investments, receivables, accounts payable and accrued expenses, approximate their fair value due to their short maturities.



Inventories



Inventories are stated at the lower of cost, determined using the first-in,
first-out method, or market value.



Property and equipment



Property and equipment are stated at cost. Depreciation
is calculated using the straight-line method over the estimated useful lives of the assets, which is generally three years for computers and software, and five years for all other assets.



Research and development



Research and development costs are charged to operations as incurred.



Software development costs incurred prior to the establishment of technological feasibility are included in research and
development and are expensed as incurred. Costs incurred from the establishment of technological feasibility, which the Company defines as the establishment of a working model, through the period of general market availability of the product are
capitalized, if material. To date, all software development costs have been expensed as incurred.



Purchase commitments



The Company accrues for losses under open purchase commitments at such time it is considered reasonably probable that such a loss will be incurred.



Income taxes



The Company accounts for income taxes under the liability method, which
requires, among other things, that deferred tax assets and liabilities be provided for temporary differences between the tax bases of the Companys assets and liabilities and their financial statement reported amounts. In addition, deferred tax
assets are recorded for the future benefit of utilizing net operating losses and research and development credit carry-forwards. A valuation allowance is provided against deferred tax assets unless it is more likely than not that they will be
realized.



Advertising and promotional costs



Advertising and promotional costs are charged to operations as incurred.
Advertising and promotional costs for the years ended December 31, 2003, 2002 and 2001 were $287,000, $398,000 and $256,000, respectively.



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COMPUTER ACCESS TECHNOLOGY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Concentrations of credit risk



Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of
cash and cash equivalents, short-term and long-term investments and accounts receivable.



The Company limits its exposure to loss by placing its cash and cash equivalents, short-term and long-term investments primarily with financial institutions in the United States of America. The Company has not
experienced any losses on its deposits of cash and cash equivalents. The Company performs ongoing credit evaluations of its customers financial condition and historically has not experienced significant bad debts related to accounts
receivable.



Revenue and accounts receivable of the customers
comprising more than 10% of revenue or trade accounts receivable are summarized as follows:



|                     |  |                        |   |  |      |   |  |      |  
|-------------------- |  | ---------------------- | - |  | ---- | - |  | ---- | -
|                     |  | Year EndedDecember 31, |  
|                     |  | 2003                   |   |  | 2002 |   |  | 2001 |  
|Revenue:             |  |                        |   |  |      |   |  |      |  
|Company A            |  | 16                     | % |  | 18   | % |  | 27   | %
|Company B            |  | 17                     | % |  | 10   | % |  | *    | %
|                     |  |                        |  
|Accounts receivable: |  |                        |   |  |      |   |  |      |  
|Company A            |  | 15                     | % |  | 21   | % |  | 32   | %
|Company B            |  | 13                     | % |  | 11   | % |  | *    | %
|Company C            |  | 10                     | % |  | *    | % |  | *    | %

---

|* | less than 10% of revenue or trade accounts receivable for the period.
|- | ---------------------------------------------------------------------



Sales to Companies A and B are to Asia, and sales to Company C are within North America. Companies A and B have purchased development and production
products and Company C has purchased development products.



Comprehensive income (loss)



Comprehensive
income (loss) is defined as changes in equity of a company from transactions, other events and circumstances, excluding transactions resulting from investments by owners and distributions to owners. There is no difference between net income (loss)
and comprehensive income (loss) for the Company in any of the periods presented.



Foreign currency translation



The functional currency of the Companys foreign subsidiary is the U.S. dollar. All assets and liabilities denominated in foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenue, costs
and expenses are translated at the average rates of exchange prevailing during the period. Gains and losses resulting from foreign currency translations and transactions are included in the consolidated statements of operations and have not been
significant.



Net loss per share



Basic net loss per share is calculated by dividing net loss for the period
by the weighted average number of shares of Common Stock outstanding during the period. The calculation of diluted net loss per share excludes



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COMPUTER ACCESS TECHNOLOGY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



potential Common Stock if their effect is anti-dilutive. Potential Common Stock consists of incremental common shares issuable upon the exercise of stock
options.



The following table sets forth the computation of
basic and diluted net loss per share for the periods indicated (in thousands except per share data):



|                                                                                                                                                     |  |                         |        |   |      |   |        |      |  |   |        |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                                                                     |  | Year Ended December 31, |       
|                                                                                                                                                     |  | 2003                    |        |   | 2002 |   |        | 2001 | 
|Numerator:                                                                                                                                           |  |                         |        |   |      |   |        |      |  |   |        |  
|Net loss                                                                                                                                             |  | $                       | (138   | ) |      | $ | (7,099 | )    |  | $ | (2,567 | )
|                                                                                                                                                     |  |                         |        |   |      |   |        |      |  |   |        |  
|                                                                                                                                                     |  |                         |       
|Denominator:                                                                                                                                         |  |                         |        |   |      |   |        |      |  |   |        |  
|Weighted average shares outstanding                                                                                                                  |  |                         | 19,323 |   |      |   | 19,205 |      |  |   | 18,733 |  
|                                                                                                                                                     |  |                         |        |   |      |   |        |      |  |   |        |  
|Denominator for basic calculation                                                                                                                    |  |                         | 19,323 |   |      |   | 19,205 |      |  |   | 18,733 |  
|Dilutive effect of stock options                                                                                                                     |  |                         |       |   |      |   |       |      |  |   |       |  
|                                                                                                                                                     |  |                         |        |   |      |   |        |      |  |   |        |  
|Denominator for diluted calculation                                                                                                                  |  |                         | 19,323 |   |      |   | 19,205 |      |  |   | 18,733 |  
|                                                                                                                                                     |  |                         |        |   |      |   |        |      |  |   |        |  
|                                                                                                                                                     |  |                         |       
|Net loss per share:                                                                                                                                  |  |                         |        |   |      |   |        |      |  |   |        |  
|Basic and diluted                                                                                                                                    |  | $                       | (0.01  | ) |      | $ | (0.37  | )    |  | $ | (0.14  | )
|                                                                                                                                                     |  |                         |        |   |      |   |        |      |  |   |        |  
|Total common stock equivalents, related to options outstanding, excluded from the computation of earnings per share as their effect is
anti-dilutive |  |                         | 2,510  |   |      |   | 3,730  |      |  |   | 1,258  |  
|                                                                                                                                                     |  |                         |        |   |      |   |        |      |  |   |        |  



Stock-based
compensation



The Company measures stock-based employee
compensation arrangements in accordance with the provisions of Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, as amended by Financial Accounting Standards Board (FASB)
interpretation (FIN) No. 44, Accounting for Certain Transactions Involving Stock-Based Compensation, an interpretation of ABP Opinion No. 25, and recognizes the related expense in accordance with (FIN) No. 28, Accounting for
Stock Appreciation Rights and Other Variable Stock Option or Award Plans. The Company has adopted the disclosure provisions of SFAS No. 148, Accounting for Stock-Based Compensation, Transition and Disclosure. This statement amends SFAS
No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based compensation and requires prominent disclosure in both the
annual and interim financial statements of the method of accounting used and the financial impact of stock-based compensation. As permitted by SFAS No. 123, the Company accounts for stock options granted as prescribed under Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, which recognizes compensation cost based upon the intrinsic value of the award.



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COMPUTER ACCESS TECHNOLOGY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The pro forma disclosures of the difference between the compensation expense included in net income
(loss) and the related cost measured by the fair value method are presented below.



Fair value disclosures



The weighted-average fair values of options granted during the years ended December 31, 2003, 2002 and 2001, were $2.22, $3.44 and $5.01, respectively. In determining the fair value of options granted in each of the periods, the Company
used the Black Scholes option pricing model and assumed the following:



|                         |  |                         |  |             |  |            
|------------------------ |  | ----------------------- |  | ----------- |  | -----------
|                         |  | Year Ended December 31,
|                         |  | 2003                    |  | 2002        |  | 2001       
|Expected life (in years) |  | 5                       |  | 5           |  | 5          
|Risk-free interest rate  |  | 2.29%-3.23%             |  | 2.62%-6.88% |  | 3.24%-5.04%
|Volatility               |  | 48-77%                  |  | 100%        |  | 100%       
|Dividend yield           |  | 0%                      |  | 0%          |  | 0%         



Had compensation costs
been determined based upon the fair value on the grant date for awards under the Companys 2000 Stock Incentive Plan (the Plan), consistent with the methodology prescribed under SFAS No. 148, the Companys pro forma net
loss and pro forma basic and diluted net loss per share under SFAS No. 148 would have been (in thousands, except per share data):



|                                                                                                          |  |                         |        |   |      |   |        |      |  |   |        |  
|--------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                          |  | Year Ended December 31, |       
|                                                                                                          |  | 2003                    |        |   | 2002 |   |        | 2001 | 
|Net Loss, as reported                                                                                     |  | $                       | (138   | ) |      | $ | (7,099 | )    |  | $ | (2,567 | )
|Add: Amortization of deferred stock-based compensation included in as reported net loss                   |  |                         | 267    |   |      |   | 533    |      |  |   | 4,030  |  
|Deduct: Stock-based employee compensation expense determined under fair value based method for all grants |  |                         | (2,242 | ) |      |   | (3,242 | )    |  |   | (7,701 | )
|                                                                                                          |  |                         |        |   |      |   |        |      |  |   |        |  
|Pro forma                                                                                                 |  | $                       | (2,113 | ) |      | $ | (9,808 | )    |  | $ | (6,238 | )
|                                                                                                          |  |                         |        |   |      |   |        |      |  |   |        |  
|Net loss per share, as reported                                                                           |  |                         |        |   |      |   |        |      |  |   |        |  
|Basic and diluted                                                                                         |  | $                       | (0.01  | ) |      | $ | (0.37  | )    |  | $ | (0.14  | )
|Net loss per share, pro forma                                                                             |  |                         |        |   |      |   |        |      |  |   |        |  
|Basic and diluted                                                                                         |  | $                       | (0.11  | ) |      | $ | (0.51  | )    |  | $ | (0.33  | )



Recent accounting pronouncements



In May 2003, the Financial Accounting Standards Board
(FASB)issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This Statement establishes standards for how an issuer classifies and measures in its
statement of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances)
because that financial instrument embodies an obligation of the issuer. This Statement is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003, except for mandatory redeemable financial instruments of nonpublic entities. For nonpublic entities, mandatory redeemable financial instruments are subject to the provisions of this Statement for the first period
beginning after December 15, 2003. It is to be implemented by reporting the cumulative effect of a change



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COMPUTER ACCESS TECHNOLOGY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



in an accounting principle for financial instruments created before the issuance date of the statement and still existing at the beginning of the interim
period of adoption. The Company believes that the adoption of SFAS 150 will not have a material impact on its consolidated financial position or results of operations.



Segment information



The Company identifies its operating segments based on business activities and geographical location. Prior to the quarter ended March 31, 2003, the
Company had three reportable segments: development products, production products and connectivity products. For all periods presented, the Company has included historical connectivity product revenue under production product revenue. See Note 10 for
disclosure of segment information.



NOTE 3BALANCE SHEET COMPONENTS:



Inventories consist of the following (in thousands):



|                 |  |              |     |      |   |      
|---------------- |  | ------------ | --- | ---- | - | -----
|                 |  | December 31,
|                 |  | 2003         |     | 2002
|Raw materials    |  | $            | 334 |      | $ | 369  
|Work in progress |  |              | 250 |      |   | 259  
|Finished goods   |  |              | 323 |      |   | 404  
|                 |  |              |     |      |   |      
|                 |  | $            | 907 |      | $ | 1,032
|                 |  |              |     |      |   |      



Property and equipment
consists of the following (in thousands):



|                               |  |              |        |   |      |   |        |  
|------------------------------ |  | ------------ | ------ | - | ---- | - | ------ | -
|                               |  | December 31, |       
|                               |  | 2003         |        |   | 2002 |  
|Computers and equipment        |  | $            | 2,510  |   |      | $ | 1,991  |  
|Furniture and fixtures         |  |              | 170    |   |      |   | 302    |  
|Leasehold improvements         |  |              | 98     |   |      |   | 76     |  
|                               |  |              |        |   |      |   |        |  
|                               |  |              | 2,778  |   |      |   | 2,369  |  
|Less: Accumulated depreciation |  |              | (2,010 | ) |      |   | (1,370 | )
|                               |  |              |        |   |      |   |        |  
|                               |  | $            | 768    |   |      | $ | 999    |  
|                               |  |              |        |   |      |   |        |  



Accrued expenses
consist of the following (in thousands):



|                                         |  |              |       |      |   |      
|---------------------------------------- |  | ------------ | ----- | ---- | - | -----
|                                         |  | December 31,
|                                         |  | 2003         |       | 2002
|Employee compensation and benefits       |  | $            | 567   |      | $ | 463  
|Accrued warranty                         |  |              | 126   |      |   | 187  
|Accrued taxes                            |  |              | 1,365 |      |   |     
|Employee stock purchase plan withholding |  |              | 105   |      |   | 64   
|Other accrued expenses                   |  |              | 756   |      |   | 533  
|                                         |  |              |       |      |   |      
|                                         |  | $            | 2,919 |      | $ | 1,247
|                                         |  |              |       |      |   |      



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COMPUTER ACCESS TECHNOLOGY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



NOTE 4STOCK OPTION PLAN:



In August 2000, the Company adopted the Plan, which serves as a successor equity incentive program to the Companys
1994 Stock Option Plan, 2000 Stock Option/Stock Issuance Plan and Special 2000 Stock Option Plan. The Company adopted the 1994 Stock Option Plan in 1994 and the 2000 Stock Option/Stock Incentive Plan and Special 2000 Stock Option Plan in 2000, under
which shares of the Companys Common Stock were reserved for issuance to employees and consultants. As of December 31, 2003, the Company has reserved and registered under Form S-8 a total of 7,805,566 shares of Common Stock for issuance under
the Plan and all prior plans. Under the terms of the Plan, the number of shares of Common Stock available for grant automatically increases annually on the first trading day of each calendar year during the term of the Plan by an amount equal to 4%
of the total number of shares of Common Stock outstanding on the last trading day of December in the immediately preceding calendar year, not to exceed 2,500,000 shares per year. The Company has chosen not to reserve or register under Form S-8 the
annual increases for the calendar years ending December 31, 2002 and December 31, 2003 in the amounts of 777,025 and 776,381, respectively, unless and until such time as such shares are needed. Options issued under the Plan generally vest over four
years and have a life of ten years



A summary of the activity
under the Plan, is set forth below (in thousands, except per share data):



|                           |  |                          |   |  |                    |   |  |                               |     
|-------------------------- |  | ------------------------ | - |  | ------------------ | - |  | ----------------------------- | ----
|                           |  | OptionsAvailableforGrant |   |  | OptionsOutstanding |   |  | Weighted-AverageExercisePrice
|Balance, December 31, 2000 |  | 2,032                    |   |  | 2,154              |   |  | $                             | 2.05
|Options authorized         |  | 740                      |   |  |                   |   |  |                               |    
|Options granted            |  | (1,915                   | ) |  | 1,915              |   |  | $                             | 5.51
|Options exercised          |  |                         |   |  | (299               | ) |  | $                             | 7.51
|Options cancelled          |  | 447                      |   |  | (447               | ) |  | $                             | 5.04
|                           |  |                          |   |  |                    |   |  |                               |     
|                           |  |                          |  
|Balance, December 31, 2001 |  | 1,304                    |   |  | 3,323              |   |  | $                             | 3.78
|Options authorized         |  | 2,253                    |   |  |                   |   |  |                               |    
|Options granted            |  | (3,154                   | ) |  | 3,154              |   |  | $                             | 3.79
|Options exercised          |  |                         |   |  | (174               | ) |  | $                             | 1.24
|Options cancelled          |  | 2,701                    |   |  | (2,701             | ) |  | $                             | 4.65
|                           |  |                          |   |  |                    |   |  |                               |     
|                           |  |                          |  
|Balance, December 31, 2002 |  | 3,104                    |   |  | 3,602              |   |  | $                             | 3.26
|Options authorized         |  |                         |   |  |                   |   |  |                               |    
|Options granted            |  | (704                     | ) |  | 704                |   |  | $                             | 3.76
|Options exercised          |  |                         |   |  | (302               | ) |  | $                             | 1.05
|Options cancelled          |  | 602                      |   |  | (602               | ) |  | $                             | 4.05
|                           |  |                          |   |  |                    |   |  |                               |     
|                           |  |                          |  
|Balance, December 31, 2003 |  | 3,002                    |   |  | 3,402              |   |  | $                             | 3.41
|                           |  |                          |   |  |                    |   |  |                               |     



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COMPUTER ACCESS TECHNOLOGY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Significant option groups outstanding as of December 31, 2003, and related weighted-average exercise
price and contractual life information are as follows:



|               |                  |                     |                                                   |                     |                  |                |                                |       
|-------------- | ---------------- | ------------------- | ------------------------------------------------- | ------------------- | ---------------- | -------------- | ------------------------------ | ------
|Exercise Price |                  | Options Outstanding |                                                   | Options Exercisable
|               | Number of Shares |                     | Weighted-AverageRemaining ContractualLife (Years) |                     | Number of Shares |                | Weighted-AverageExercise Price
|               |                  | (in thousands)      |                                                   |                     |                  | (in thousands) |                                |       
|$0.35-$  1.98  |                  | 427                 |                                                   | 5.41                |                  | 398            |                                | $ 0.61
|$2.00-$  6.40  |                  | 2,741               |                                                   | 7.71                |                  | 1,306          |                                | 3.08  
|$9.31-$12.69   |                  | 234                 |                                                   | 6.99                |                  | 185            |                                | 10.11 
|               |                  |                     |                                                   |                     |                  |                |                                |       
|               |                  | 3,402               |                                                   | 7.37                |                  | 1,889          |                                | $ 3.25
|               |                  |                     |                                                   |                     |                  |                |                                |       



Stock-based
compensation



In connection with certain stock option
grants in 2000, 1999 and 1998, the Company recorded deferred stock-based compensation totaling $14,393,000 which represents the difference between the exercise price and the deemed fair value on the date of grant, which is recognized over the
vesting period of the related options. Amortization of deferred stock-based compensation was $267,000, $533,000 and $4.0 million in the years ended December 31, 2003, 2002 and 2001, respectively, of which $36,000, $138,000 and $387,000 was included
in cost of revenue in the years ended December 31, 2003, 2002 and 2001, respectively. Amortization of deferred stock-based compensation on grants prior to December 31, 2000 is estimated to be approximately $32,000 for the year ending December 31,
2004 and may change due to the granting of additional options or the cancellation of existing grants in future periods.



NOTE 5-EMPLOYEE BENEFIT PLANS:



Employee Stock Purchase Plan



In August 2000, the Company adopted the 2000 Employee Stock Purchase Plan (the Purchase Plan). The Purchase Plan permits eligible employees to
purchase Common Stock through payroll deductions up to 15% of an employees total compensation. The price of the Common Stock will generally be equal to 85% of the lower of the fair market value at the beginning of the offering period or the
end of the relevant purchase period. The maximum number of shares a participant may purchase on any single purchase date is 6,250 shares, and not more than 125,000 shares may be purchased in total by all participants on any purchase date. As of
December 31, 2003, a total of 685,766 shares of Common Stock have been reserved and registered under Form S-8 for issuance under the Purchase Plan. Under the terms of the Purchase Plan, the number of shares of Common Stock available for issuance
automatically increases annually on the first trading day of each calendar year during the term of the Purchase Plan by an amount equal to 1% of the total number of shares of Common Stock outstanding on the last trading day of December in the
immediately preceding calendar year, not to exceed 625,000 shares per year. The Company has chosen not to reserve or register under Form S-8 the annual increases for the calendar years ended December 31, 2002 and December 31, 2003 in the amounts of
194,256 and 194,095, respectively, unless and until such time as such shares are needed. A total of 67,421, 64,026 and 29,379 shares were issued under the Purchase Plan in the years ended December 31, 2003, 2002 and 2001, respectively.



401(k) Profit Sharing Plan



In January 1996, the Company adopted the Computer Access Technology
Corporation 401(k) Profit Sharing Plan (the 401(k) Plan) covering full-time employees located in the United States of America. The 401(k) Plan



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COMPUTER ACCESS TECHNOLOGY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



is intended to qualify under Section 401(a) of the Internal Revenue Code, so that contributions to the 401(k) Plan by employees or by the Company, and the
investment earnings thereon, are not taxable to employees until withdrawn from the 401(k) Plan and so that the Company can deduct contributions, if any, when made. Pursuant to the 401(k) Plan, employees may elect to reduce their current compensation
by up to the statutorily prescribed annual limit, generally $12,000 in 2003, and to have the amount of such reduction contributed to the 401(k) Plan. The 401(k) Plan permits, but does not require, that the Company provide additional matching
contributions to the 401(k) Plan on behalf of all participants. In the years ended December 31, 2003, 2002 and 2001, the Company made contributions of $0, $172,000 and $184,000, respectively.



NOTE 6 RESTRUCTURING



During the quarters ended June 30, 2002 and December 31, 2002, the Company
implemented two separate restructuring plans designed to consolidate operations and reduce costs. The Company had restructuring expenses of $808,000 for the year ended December 31, 2002. The restructuring plans included the closure of our facilities
in San Diego, California and Netanya, Israel and a reduction in staff by a total of 34 positions, primarily in research and development. Obligations related to subleasing may continue until 2004 as estimated and accrued for as of December 31, 2003.



The following table summarizes the components of the accrued
restructuring (in thousands):



|                                                             |  |                    |     |                |   |                |  |             |     |       |   |    |  |   |    
|------------------------------------------------------------ |  | ------------------ | --- | -------------- | - | -------------- |  | ----------- | --- | ----- | - | -- |  | - | ---
|                                                             |  | Employee Severance |     | Office Closure |   | Office Closure |  | Other Costs |     | Total
|Restructuring expenses, year ended December 31, 2002         |  | $                  | 446 |                | $ | 167            |  | $           | 134 |       | $ | 61 |  | $ | 808
|Asset disposals made during the year ended December 31, 2002 |  |                    |    |                |   |               |  |             | 134 |       |   |   |  |   | 134
|Cash payments made during the year ended December 31, 2002   |  |                    | 249 |                |   | 99             |  |             |    |       |   | 56 |  |   | 404
|                                                             |  |                    |     |                |   |                |  |             |     |       |   |    |  |   |    
|Accrued restructuring balance, December 31, 2002             |  |                    | 197 |                |   | 68             |  |             |    |       |   | 5  |  |   | 270
|Cash payments made during the year ended December 31, 2003   |  |                    | 197 |                |   | 39             |  |             |    |       |   | 5  |  |   | 241
|                                                             |  |                    |     |                |   |                |  |             |     |       |   |    |  |   |    
|Accrued restructuring balance, December 31, 2003             |  | $                  |    |                | $ | 29             |  | $           |    |       | $ |   |  | $ | 29 
|                                                             |  |                    |     |                |   |                |  |             |     |       |   |    |  |   |    



NOTE 7INCOME TAXES:



The benefit from income taxes included the following (in
thousands):



|          |  |                         |   |      |   |        |      |  |   |      |  
|--------- |  | ----------------------- | - | ---- | - | ------ | ---- |  | - | ---- | -
|          |  | Year Ended December 31, |  
|          |  | 2003                    |   | 2002 |   |        | 2001 | 
|Current:  |  |                         |   |      |   |        |      |  |   |      |  
|Federal   |  | $                       |  |      | $ | (1,980 | )    |  | $ | 51   |  
|State     |  |                         |  |      |   | 2      |      |  |   | 1    |  
|          |  |                         |   |      |   |        |      |  |   |      |  
|          |  |                         |  |      |   | (1,978 | )    |  |   | 52   |  
|          |  |                         |   |      |   |        |      |  |   |      |  
|          |  |                         |  
|Deferred: |  |                         |   |      |   |        |      |  |   |      |  
|Federal   |  |                         |  |      |   | 154    |      |  |   | 11   |  
|State     |  |                         |  |      |   | 122    |      |  |   | (133 | )
|          |  |                         |   |      |   |        |      |  |   |      |  
|          |  |                         |  |      |   | 276    |      |  |   | (122 | )
|          |  |                         |   |      |   |        |      |  |   |      |  
|          |  | $                       |  |      | $ | (1,702 | )    |  | $ | (70  | )
|          |  |                         |   |      |   |        |      |  |   |      |  



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COMPUTER ACCESS TECHNOLOGY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The reconciliation between the effective tax rates and statutory federal income tax rate is shown in
the following table:



|                                                  |  |                         |   |  |       |   |  |       |  
|------------------------------------------------- |  | ----------------------- | - |  | ----- | - |  | ----- | -
|                                                  |  | Year Ended December 31, |  
|                                                  |  | 2003                    |   |  | 2002  |   |  | 2001  |  
|Statutory federal income tax rate                 |  | 34.0                    | % |  | 34.0  | % |  | 34.0  | %
|State taxes, net of federal income tax benefit    |  | 5.8                     |   |  | 5.5   |   |  | 5.0   |  
|Amortization of deferred stock-based compensation |  | 49.4                    |   |  | (2.1  | ) |  | (52.0 | )
|Research and development credit                   |  | 138.5                   |   |  | 4.0   |   |  | 9.7   |  
|Deferred tax asset valuation allowance            |  | (238.6                  | ) |  | (16.8 | ) |  |      |  
|Other                                             |  | 10.9                    |   |  | (5.3  | ) |  | 6.0   |  
|                                                  |  |                         |   |  |       |   |  |       |  
|Effective tax rate                                |  | 0.0                     | % |  | 19.3  | % |  | 2.7   | %
|                                                  |  |                         |   |  |       |   |  |       |  



The significant
components of deferred tax assets and liabilities consist of the following (in thousands):



|                                |  |              |        |   |      |   |        |  
|------------------------------- |  | ------------ | ------ | - | ---- | - | ------ | -
|                                |  | December 31, |       
|                                |  | 2003         |        |   | 2002 |  
|Deferred tax assets:            |  |              |        |   |      |   |        |  
|Accrued expenses                |  | $            | 1,461  |   |      | $ | 1,197  |  
|Allowance for doubtful accounts |  |              | 59     |   |      |   | 63     |  
|Depreciation and amortization   |  |              | 193    |   |      |   | 213    |  
|Valuation allowance             |  |              | (1,713 | ) |      |   | (1,473 | )
|                                |  |              |        |   |      |   |        |  
|                                |  | $            |       |   |      | $ |       |  
|                                |  |              |        |   |      |   |        |  



The Company has
provided a full valuation allowance for its net deferred tax assets as it cannot predict that these amounts will be realized through taxable income from future operations, or by carry-back to prior years taxable income.



At December 31, 2003, the Company had federal and state net operating loss
carry-forwards of approximately $580,000 and $3.6 million, respectively, available to reduce future federal and state taxable income. The Companys federal net operating loss carry-forward will expire in 2023 and its state net operating loss
carry-forwards will expire in 2012 and 2013.



At December 31,
2003, the Company had federal and state research and development credit carry-forwards of approximately $450,000 and $650,000, respectively, available to reduce future federal and state tax liabilities. The Companys federal research and
development credit carry-forwards will expire in 2022 and 2023 and there is no expiration date for the state research and development credit carry-forwards.



NOTE 8RELATED PARTY TRANSACTIONS:



Prior to the quarter ended September 30, 2003, we reported related party revenue and accounts receivables for Toyo Corporation, one of the Companys
distributors and a holder of our stock and Agilent Technologies, a holder of our stock. Beginning with the quarter ended September 30, 2003, these entities are no longer considered related parties as they do not meet the qualifications for related
parties.



The Company had direct sales to Philips
Semiconductors, a stockholder and one of the Companys affiliates, totaling $10,000, $28,000, and $85,000, in the years ended December 31, 2003, 2002 and 2001, respectively. As



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COMPUTER ACCESS TECHNOLOGY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



of December 31, 2003 and 2002, the Company had receivable balances with Philips Semiconductors of $0 and $28,000, respectively.



In May 2000, the Company loaned $125,000 to Albert Lee, its Vice President,
Operations, pursuant to a promissory note. The principal amount of the loan and all interest that had accrued at a rate of 8.00% was timely repaid in full by Mr. Lee in May 2003.



NOTE 9COMMITMENTS:



Leases



The Company leases its principal executive and administrative office facility under a non-cancelable operating lease. The lease expires in December 2009.
In 2000, the Company entered into non-cancelable operating leases in Netanya, Israel and San Diego, California that expire in September 2005 and July 2004, respectively. The Netanya lease was cancelled in conjunction with the Companys
restructuring plan in the quarter ended June 2002. As of December 31, 2003, all amounts owed under the San Diego facility lease are included in accrued restructuring. Rent expense for the years ended December 31, 2003, 2002 and 2001, was
approximately $262,000, $333,000 and $379,000, respectively.



As of December 31, 2003, future minimum lease payments under the non-cancelable facilities leases are as follows (in thousands):



|                        |  |                 |      
|----------------------- |  | --------------- | -----
|Year Ending December 31 |  | OperatingLeases
|2004                    |  | $               | 291  
|2005                    |  |                 | 254  
|2006                    |  |                 | 264  
|2007                    |  |                 | 274  
|2008                    |  |                 | 285  
|Thereafter              |  |                 | 271  
|                        |  |                 |      
|Total minimum payments  |  | $               | 1,639
|                        |  |                 |      



NOTE 10REPORTABLE SEGMENTS
AND GEOGRAPHIC INFORMATION:



The Company has two
reportable segments categorized by product type: development products and production products. Prior to the quarter ended March 31, 2003, the Company had three reportable segments: development products, production products and connectivity products.
For the years ended December 31, 2003, connectivity product revenue and segment gross profit were $106,000 and $50,000, respectively. For the year ended December 31, 2002, connectivity product revenue and segment gross loss were $267,000 and
$108,000, respectively. Connectivity products are now included in the production products segment information below and under the caption Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations
elsewhere in this report.



Development products are advanced
verification systems that assist product developers to efficiently design reliable and interoperable systems and devices. Production products are production verification systems and connectivity solutions designed to assist manufacturers in the
volume production of reliable devices and systems. The Company has no inter-segment revenue.



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COMPUTER ACCESS TECHNOLOGY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Company analyzes segment revenue and cost of revenue, but does not allocate operating expenses,
including stock-based compensation, or assets to segments. Accordingly, the Company has presented only revenue and gross profit by segment.



Segment information (in thousands):



|                                        |  |                     |        |                    |   |                                           |  |   |       |   |  |   |       
|--------------------------------------- |  | ------------------- | ------ | ------------------ | - | ----------------------------------------- |  | - | ----- | - |  | - | ------
|                                        |  | DevelopmentProducts |        | ProductionProducts |   | UnallocatedStock-basedCompensationExpense |  |   | Total
|Year Ended December 31, 2003            |  |                     |        |                    |   |                                           |  |   |       |   |  |   |       
|Segment revenue from external customers |  | $                   | 13,684 |                    | $ | 1,566                                     |  | $ |      |   |  | $ | 15,250
|Segment gross profit                    |  | $                   | 11,236 |                    | $ | 977                                       |  | $ | (36   | ) |  | $ | 12,177
|                                        |  |                     |        |                   
|Year Ended December 31, 2002            |  |                     |        |                    |   |                                           |  |   |       |   |  |   |       
|Segment revenue from external customers |  | $                   | 12,357 |                    | $ | 2,089                                     |  | $ |      |   |  | $ | 14,446
|Segment gross profit                    |  | $                   | 9,998  |                    | $ | 1,272                                     |  | $ | (138  | ) |  | $ | 11,132
|                                        |  |                     |        |                   
|Year Ended December 31, 2001            |  |                     |        |                    |   |                                           |  |   |       |   |  |   |       
|Segment revenue from external customers |  | $                   | 12,522 |                    | $ | 4,248                                     |  | $ |      |   |  | $ | 16,770
|Segment gross profit                    |  | $                   | 10,817 |                    | $ | 2,081                                     |  | $ | (387  | ) |  | $ | 12,511



Geographic information
(in thousands):



|                             |  |         |        |                  |   |       
|---------------------------- |  | ------- | ------ | ---------------- | - | ------
|                             |  | Revenue |        | Long-LivedAssets
|Year Ended December 31, 2003 |  |         |        |                  |   |       
|North America                |  | $       | 7,315  |                  | $ | 10,416
|Europe                       |  |         | 1,888  |                  |   |      
|Asia                         |  |         | 6,041  |                  |   |      
|Rest of world                |  |         | 6      |                  |   |      
|                             |  |         |        |                  |   |       
|Total                        |  | $       | 15,250 |                  | $ | 10,416
|                             |  |         |        |                  |   |       
|                             |  |        
|Year Ended December 31, 2002 |  |         |        |                  |   |       
|North America                |  | $       | 5,883  |                  | $ | 1,391 
|Europe                       |  |         | 2,696  |                  |   |      
|Asia                         |  |         | 5,817  |                  |   |      
|Rest of world                |  |         | 50     |                  |   |      
|                             |  |         |        |                  |   |       
|Total                        |  | $       | 14,446 |                  | $ | 1,391 
|                             |  |         |        |                  |   |       
|                             |  |        
|Year Ended December 31, 2001 |  |         |        |                  |   |       
|North America                |  | $       | 7,369  |                  | $ | 1,233 
|Europe                       |  |         | 2,673  |                  |   | 225   
|Asia                         |  |         | 6,648  |                  |   |      
|Rest of world                |  |         | 80     |                  |   |      
|                             |  |         |        |                  |   |       
|Total                        |  | $       | 16,770 |                  | $ | 1,458 
|                             |  |         |        |                  |   |       



Revenues are
attributed to countries based on delivery locations. Sales to foreign customers accounted for 52.0%, 59.3%, and 56.1% of revenue during the years ended December 31, 2003, 2002 and 2001, respectively.



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COMPUTER ACCESS TECHNOLOGY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



NOTE 11  WARRANTIES



The Company offers warranties on certain products and records at the time of shipment an estimate for future costs
associated with warranty claims. The Company accrues these costs based upon historical experience and its estimate of the level of future warranty costs. The Company assesses the adequacy of its warranty reserve on a quarterly basis and makes
adjustments, if needed.



The following table reconciles the
changes in the Companys warranty reserve for the year ended December 31, 2003 (in thousands):



|                                                                                    |  |   |      |  
|----------------------------------------------------------------------------------- |  | - | ---- | -
|Balance as of December 31, 2002                                                     |  | $ | 187  |  
|Accrual for warranty reserve for sales made during the year ended December 31, 2003 |  |   | 126  |  
|Warranty costs for the year ended December 31, 2003                                 |  |   | (34  | )
|Warranty expirations during the year ended December 31, 2003                        |  |   | (153 | )
|                                                                                    |  |   |      |  
|Total                                                                               |  | $ | 126  |  
|                                                                                    |  |   |      |  



NOTE 12  STOCK REPURCHASE
PROGRAM



On January 30, 2003, the Company announced that
its Board of Directors had authorized a stock repurchase program under which up to 1 million shares of the Companys outstanding Common Stock could be acquired in the open market. The Company set up a Rule 10b5-1 plan for purchases of the
shares that allows the Company to repurchase shares at times when it would ordinarily not be in the market because of self-imposed blackout periods. Repurchases are effected by Needham & Company, Inc. Purchases under the program are funded from
available working capital. There is no guarantee as to the exact number of shares that will be repurchased and the Company has the option to discontinue stock repurchases at any time.



During the year ended December 31, 2003, the Company purchased approximately 385,000 shares under the stock repurchase
program at a cost of approximately $1.3 million.



NOTE 13 
ACQUISITIONS



On May 9, 2002, the Company entered into an
Agreement and Plan of Merger with Verisys and its shareholders (Merger Agreement) pursuant to which the Company acquired Verisys. The transaction closed on June 4, 2002, and was accounted for under the purchase method of accounting. The
accompanying consolidated financial statements include the results of operations of Verisys subsequent to June 4, 2002. Verisys previously operated in Aptos, California prior to moving all of its personnel and operations to the Companys Santa
Clara, California facility in January 2003. Verisys was founded in 1992 and developed, manufactured and sold bus analysis tools for the SCSI market.



Pursuant to the Merger Agreement, the Company paid $825,000 and issued 360,00 shares of its Common Stock, of which 61,200 shares have been retained to
secure certain Verisys obligations under the Merger Agreement for a period of eighteen months, in exchange for all of the outstanding shares of Verisys common stock. The Companys cost to acquire Verisys was calculated to be $2.3 million.
Verisys currently operates as a wholly owned subsidiary of the Company.



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COMPUTER ACCESS TECHNOLOGY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The total initial purchase price of Verisys is as follows (in thousands):



|                                         |  |   |      
|---------------------------------------- |  | - | -----
|Cash paid                                |  | $ | 825  
|Value of securities issued               |  |   | 1,271
|Estimated transaction costs and expenses |  |   | 191  
|                                         |  |   |      
|                                         |  | $ | 2,287
|                                         |  |   |      



The cost to acquire
Verisys has been allocated to the assets acquired and liabilities assumed according to their respective fair values, with the excess purchase price being allocated to goodwill. The purchase price allocation is as follows (in thousands):



|                                    |  |   |       |  
|----------------------------------- |  | - | ----- | -
|Net liabilities assumed             |  | $ | (440  | )
|Intangible assets acquired:         |  |   |       |  
|Goodwill                            |  |   | 1,427 |  
|In-process research and development |  |   | 410   |  
|Acquired developed technology       |  |   | 380   |  
|Non-compete agreements              |  |   | 280   |  
|Core technology                     |  |   | 230   |  
|                                    |  |   |       |  
|Total purchase price allocation     |  | $ | 2,287 |  
|                                    |  |   |       |  



The Company allocated
the purchase to Verisys tangible assets and specific intangible assets such as in-process research and development, developed technology, non-compete agreements and core technology, based on its analysis and review of an independent valuation
report.



Goodwill represents the excess of the purchase price
for Verisys over the fair value of the underlying net identifiable assets.



In-process research and development represents that portion of the purchase price of an acquisition related to the research and development activities which (i) have not demonstrated their technological feasibility,
and (ii) have no alternative future uses. Accordingly, the Company recognized an in-process research and development expense of $410,000 during the three months ended June 30, 2002 in conjunction with the acquisition. At the time of the acquisition,
Verisys had one major development project in process, and analyzer to support the Ultra320 protocol. The Company valued the in-process research and development using an income approach that utilized the estimated future discounted cash flows form
the Ultra320 analyzer project. The net cash flows from the identified project were based on estimates of revenue, costs of revenue, research and development expenses, selling, marketing, general and administrative expenses, capital charges, and
applicable net income taxes. These estimated future cash flows were discounted by 25%. This rate was based on the industry segment for the technology, nature of the products being developed, the additional risk related to its development and the
level of completion.



The acquired developed technology, which
is comprised of products that are already technologically feasible, mainly includes the SV-8320, SV-8160, and SV-4080 SCSI analyzers. As of December 31, 2002, the Company is amortizing the remaining acquired developed technology on a straight-line
basis over an estimated useful life of two years.



Non-compete
agreements represent the value of non-compete agreements the Company has with certain former Verisys executives. As of December 31, 2002, the Company is amortizing the remaining non-compete agreements on a straight-line basis over an estimated
useful life of three years.



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COMPUTER ACCESS TECHNOLOGY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Core technology represents the value of the underlying proprietary technology of Verisys
products. As of December 31, 2002, the Company is amortizing the remaining core technology on a straight-line basis over an estimated useful life of two years.



As a result of the decline in the Companys market valuation and reduced SCSI sales, the Company performed the required impairment tests of
goodwill and indefinite-lived intangible assets as of September 30, 2002, in accordance with SFAS 142, Goodwill and Other Intangible Asset. These tests were based upon an independent valuation performed by an outside valuation
specialist that utilized a combination of income and market value approaches. It was determined that, as of September 30, 2002, there was full impairment of goodwill within the development products segment of $1.4 million, and partial impairment of
acquired developed technology, non-compete agreements and core technology of $147,000, $59,000 and $135,000, respectively. As of December 31, 2003, the net carrying value of acquired developed technology, non-compete agreements and core technology
was $26,000, $111,000 and $30,000, respectively.



Quarterly Results of
Operations (unaudited)



The following table sets forth the
Companys historical unaudited quarterly consolidated statement of operations data for the eight quarters ended December 31, 2003. This quarterly information has been prepared on a basis consistent with the Companys audited consolidated
financial statements and, the Company believes, includes all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the information shown. The Companys quarterly operating results have fluctuated and may
continue to fluctuate significantly as a result of a variety of factors. Operating results for any quarter are not necessarily indicative of results for any future quarter or for a full year.



|                                     |  |                                       |        |   |          |   |        |           |  |   |          |   |  |   |        |  
|------------------------------------ |  | ------------------------------------- | ------ | - | -------- | - | ------ | --------- |  | - | -------- | - |  | - | ------ | -
|                                     |  | Fiscal Year Quarters Ended            |       
|                                     |  | Mar. 31,                              |        |   | June 30, |   |        | Sept. 30, |  |   | Dec. 31, |  
|                                     |  | (in thousands, except per share data) |       
|Statement of Operations Data:        |  |                                       |        |   |          |   |        |           |  |   |          |   |  |   |        |  
|                                     |  |                                       |        |  
|Year ended December 31, 2003         |  |                                       |        |   |          |   |        |           |  |   |          |   |  |   |        |  
|Revenue                              |  | $                                     | 3,262  |   |          | $ | 3,856  |           |  | $ | 3,995    |   |  | $ | 4,137  |  
|Gross profit                         |  |                                       | 2,589  |   |          |   | 3,056  |           |  |   | 3,172    |   |  |   | 3,360  |  
|Income (loss) from operations        |  |                                       | (624   | ) |          |   | (78    | )         |  |   | (128     | ) |  |   | 51     |  
|Net income (loss)                    |  | $                                     | (463   | ) |          | $ | 120    |           |  | $ | (1       | ) |  |   | 206    |  
|Net income (loss) per share:         |  |                                       |        |   |          |   |        |           |  |   |          |   |  |   |        |  
|Basic                                |  | $                                     | (0.02  | ) |          | $ | 0.01   |           |  | $ | (0.00    | ) |  | $ | 0.01   |  
|Diluted                              |  | $                                     | (0.02  | ) |          | $ | 0.01   |           |  | $ | (0.00    | ) |  | $ | 0.01   |  
|Weighted average shares outstanding: |  |                                       |        |   |          |   |        |           |  |   |          |   |  |   |        |  
|Basic                                |  |                                       | 19,443 |   |          |   | 19,442 |           |  |   | 19,411   |   |  |   | 19,389 |  
|Diluted                              |  |                                       | 19,443 |   |          |   | 19,980 |           |  |   | 19,411   |   |  |   | 20,508 |  
|                                     |  |                                       |        |  
|Year ended December 31, 2002         |  |                                       |        |   |          |   |        |           |  |   |          |   |  |   |        |  
|Revenue                              |  | $                                     | 3,422  |   |          | $ | 3,493  |           |  | $ | 4,016    |   |  | $ | 3,515  |  
|Gross profit                         |  |                                       | 2,738  |   |          |   | 2,824  |           |  |   | 2,877    |   |  |   | 2,693  |  
|Loss from operations                 |  |                                       | (1,870 | ) |          |   | (2,087 | )         |  |   | (3,624   | ) |  |   | (1,947 | )
|Net loss                             |  | $                                     | (1,007 | ) |          | $ | (809   | )         |  | $ | (2,777   | ) |  | $ | (2,506 | )
|Net loss per share:                  |  |                                       |        |   |          |   |        |           |  |   |          |   |  |   |        |  
|Basic                                |  | $                                     | (0.05  | ) |          | $ | (0.04  | )         |  | $ | (0.14    | ) |  | $ | (0.13  | )
|Diluted                              |  | $                                     | (0.05  | ) |          | $ | (0.04  | )         |  | $ | (0.14    | ) |  | $ | (0.13  | )
|Weighted average shares outstanding: |  |                                       |        |   |          |   |        |           |  |   |          |   |  |   |        |  
|Basic and diluted                    |  |                                       | 18,911 |   |          |   | 19,083 |           |  |   | 19,401   |   |  |   | 19,425 |  



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Item 9A.    Controls and Procedures.



As of the end of the period covered by this annual report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer (principal executive officer) and Chief
Financial Officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC filings. It should be noted that the design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.



There have been no significant changes in our internal controls or in other
factors which could significantly affect internal controls subsequent to our most recent evaluation of our internal controls.



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PART III



Item 14.    
Principal Accountants and Fees.



The information required by this item is incorporated by reference to our proxy statement for the 2004 annual meeting of stockholders.





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PART IV



Item 15.    
Exhibits, Financial Statement Schedules, and Reports on Form 8-K



|a. | The following documents are filed as part of this report:
|-- | ---------------------------------------------------------



|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | 
|1. |  | Financial Statements: The following financial statements are filed as part of this report under Item 8  Consolidated Financial Statements and Supplementary Data beginning at
page 35: Consolidated Balance Sheet; Consolidated Statements of Operations; Consolidated Statements of Stockholders Equity; and Consolidated Statements of Cash Flows.                                                                    
|   | 
|2. |  | Financial Statement Schedules: See Report of Independent Auditors on Financial Statement Schedule on page 60 and Schedule IIValuation and Qualifying Accounts on page 61, previously
filed in Registrants Form 10-K filed with the Commission on February 20, 2004. All other schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or the notes
thereto.
|   | 
|3. |  | Exhibits: See Exhibit Index on page 58.                                                                                                                                                                                                                                                                                                                                                                                     



|b. | Reports on Form 8-K: On October 23, 2003, and November 18, 2003 we filed a Form 8-K to announce the filing of a press release on each of those respective dates.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



|c. | Exhibits:
|-- | ---------



EXHIBIT INDEX



|           |  |                                                          
|---------- |  | ---------------------------------------------------------
|ExhibitNo. |  | Document Name                                            
|           | 
|23.1       |  | Consent of Independent Accountants.                      
|           | 
|31.1       |  | Section 302 Certification of Principal Executive Officer.
|           | 
|31.2       |  | Section 302 Certification of Principal Financial Officer.
|           | 
|32.1       |  | Section 906 Certification of Principal Executive Officer.
|           | 
|32.2       |  | Section 906 Certification of Principal Financial Officer.



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SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) 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.



|                    |  |  |  |                                        |  |     |  |                                                                    
|------------------- |  |  |  | -------------------------------------- |  | --- |  | -------------------------------------------------------------------
|Date: March 2, 2004 |  |  |  | Computer Access Technology Corporation
|                    |  |  |  |                                       
|                    |  |  |  |                                        |  | By: |  | /s/    CARMINE NAPOLITANO                                          
|                    |  |  |  |                                        |  |     |  |                                                                    
|                    |  |  |  |                                        |  |     |  | Carmine Napolitano President, Chief Financial Officer
and Secretary



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REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE



To the Board of Directors of Computer Access Technology Corporation



Our audits of the consolidated financial statements referred to in our
report dated January 27, 2004 appearing in this Annual Report on Form 10-K/A of Computer Access Technology Corporation also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K/A. In our opinion, this
financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.



/s/ PricewaterhouseCoopers LLP



San Jose, California

January 27, 2004



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SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS



|                                |  |                              |  |                            |  |             |  |            |  |                       
|------------------------------- |  | ---------------------------- |  | -------------------------- |  | ----------- |  | ---------- |  | ----------------------
|Description                     |  | Balance atBeginningof Period |  | Charged toCost andExpenses |  | Acquisition |  | Deductions |  | Balance atEnd ofPeriod
|Year Ended December 31, 2003:   |  |                              |  |                            |  |             |  |            |  |                       
|Allowance for doubtful accounts |  | 157                          |  |                           |  |            |  | 9          |  | 148                   
|                                |  |                              |  |                            | 
|Year Ended December 31, 2002:   |  |                              |  |                            |  |             |  |            |  |                       
|Allowance for doubtful accounts |  | 91                           |  | 70                         |  | 6           |  | 10         |  | 157                   
|                                |  |                              |  |                            | 
|Year Ended December 31, 2001:   |  |                              |  |                            |  |             |  |            |  |                       
|Allowance for doubtful accounts |  | 90                           |  | 11                         |  |            |  | 10         |  | 91                    



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