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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

(Mark one)

Commission file number: 000-31863

COMPUTER ACCESS TECHNOLOGY CORPORATION

(Exact name of registrant as specified in its charter)

(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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INDEX

COMPUTER ACCESS TECHNOLOGY CORPORATION

FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

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PART I

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K and certain information incorporated herein by reference contain forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements contained in this Report on Form 10-K that are not purely historical are forward-looking statements, including, without limitation, statements regarding our expectations, objectives, anticipations, plans, hopes, beliefs, intentions or strategies regarding the future. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements. Forward-looking statements include, without limitation, the statements regarding:

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All forward-looking statements included in this document are subject to additional risks and uncertainties further discussed under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—RISK FACTORS” and are based on information available to us on the date hereof. We assume no obligation to update any such forward-looking statements. It is important to note that our actual results could differ materially from those included in such forward-looking statements. These cautionary statements should be considered in the context of the factors listed below, as well as those disclosed from time to time in our reports on Forms 10-Q and 8-K and our Annual Reports to Stockholders.

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Item 1.     Business

Computer Access Technology Corporation is a provider of advanced verification systems for existing and emerging digital communications standards. Our products are used by semiconductor, device, system and software companies at each phase of their products’ lifecycles from development through production and market deployment.

We have expertise in the Bluetooth, Ethernet, Fibre Channel, IEEE 1394, InfiniBand, PCI Express, SCSI, Serial ATA, Serial Attached SCSI and USB standards and are actively engaged with our customers throughout their development and production processes in order to deliver solutions that meet their needs. Utilizing our easy to use, color-coded expert analysis software, the CATC Trace^™, our development products generate, capture, filter and analyze high-speed communications traffic, allowing our customers to quickly discover and correct persistent and intermittent errors and flaws in their product design. Our production products are used during the manufacturing process to ensure that our customers’ products comply with standards and operate with other devices, as well as assist system manufacturers to download software onto new computers.

We have two reportable operating segments: development products and production products. Further segment and geographic information is included in Note 10 of the Notes to Consolidated Financial Statements included in this report.

Computer Access Technology Corporation was incorporated in California in 1992 and reincorporated in Delaware in 2000. Our headquarters are located at 3385 Scott Boulevard, Santa Clara, California 95054. We maintain a World Wide Web site at www.catc.com. The reference to this World Wide Web site address does not constitute incorporation by reference of the information contained therein.

Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, and the Proxy Statement for our annual meeting of stockholders are made available, free of charge, on our website, www.catc.com, as soon as reasonably practicable after the reports have been filed with or furnished to the Securities and Exchange Commission.

Industry Background

The Demand for Digital Communications Is Growing

The demand for digital information has accelerated the need for communication among multiple electronic devices in various markets, including computers, telecommunications, networking, storage, consumer electronics, aerospace, automotive, industrial automation and medical instrumentation. This growing demand centers on the widespread need to transmit digital information. Communication among digital devices, or connectivity, occurs over a variety of physical media, such as copper wire and fiber optic cable, as well as over wireless frequencies.

Computer technology initially provided connectivity only among internal devices, such as the processor, memory and storage, and with external peripheral devices, such as the keyboard, mouse and printer. Today, computer technology also enables connectivity among multiple computing devices and across networks, such as local area networks, wide area networks, storage area networks, home area networks, personal area networks and the Internet. Telecommunications technology also currently enables connectivity among multiple devices, such as telephones, fax machines, pagers and personal digital assistants. Consumer electronics technology is progressively enabling connectivity among devices, such as Internet appliances, digital cameras, audio systems and televisions.

Communications Standards Are Becoming Increasingly Complex

Digital devices communicate by sending electronic signals through a transmission channel according to a specified protocol. A protocol is a set of detailed rules that governs and regulates the manner in which the signals

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are sent, received, and interpreted. The channel and the protocol are both typically specified in a formal communications standard. For communication to be successful, each device must implement and conform to the same standard.

Early communications standards were relatively simple, typically involving low speed communications between two simple devices connected directly by copper wire. Current standards are increasingly complex, typically involving high-speed communications among multiple sophisticated devices indirectly linked to other devices and across various physical media, including copper wire, fiber optic cables, and wireless technologies with rapidly fluctuating frequencies. As a result, standards that were specified initially in only a few pages of text may now extend to over a thousand pages. The specifications for these standards are broadly available, which facilitates interoperability of hardware and software products from different manufacturers.

A standard is typically introduced by several leading technology and infrastructure companies. These core or promoter companies comprise the nucleus of independent communications standards groups, sometimes referred to as implementers’ forums, trade associations or special interest groups. These groups assist in the development, implementation, promotion, and compliance with the standards. As commercial interest in a standard increases, the communications standards group typically expands to include system and device manufacturers and service providers. The promoter companies typically remain closely associated with the standard throughout its lifecycle.

A standard is implemented over a lifecycle that includes three overlapping phases: development, production and market deployment. During the development phase, key component manufacturers develop and produce important building blocks such as semiconductors, embedded software, protocol stacks and device drivers which will be used by others in the industry to create products. During the production phase, system and device manufacturers apply these building blocks to construct their unique products and applications. The market deployment phase includes the introduction and sale of products and applications to end users in the market. Similarly, products associated with a particular standard follow their own unique lifecycle from development through production and deployment.

Emerging Standards Promote Digital Communications

Many distinct communications standards are emerging to meet the growing demand for digital connectivity in the computer, telecommunications, networking, storage, consumer electronics and other industries. The characteristics of each standard, including its principal uses, physical medium, transmission speed and distance covered, vary greatly. Examples of existing and emerging standards include the following:

Bluetooth.    The Bluetooth standard, or Bluetooth wireless technology, enables low speed, wireless connectivity among computers, telecommunication devices, such as mobile telephones, and consumer electronics devices, such as personal digital assistants and headphones. Bluetooth was introduced in 1998. The promoter group consists of Agere, Ericsson, IBM, Intel, Microsoft, Motorola, Nokia and Toshiba. Bluetooth operates through radio waves with rapidly fluctuating frequencies at speeds of up to 1 million bits (megabits) per second, or Mbps, over distances of up to 100 meters. Bluetooth products are just reaching the consumer markets at the present time and already Bluetooth is being enhanced further through version 1.2 of the Bluetooth specification published in late 2003. These recent changes in the specification are designed to enhance the usability and acceptance of Bluetooth including: shorter connection times, less interference with other devices operating in the same 2.4 GHz band, improved voice channel capabilities, better support for devices that operate simultaneously in multiple “piconets” and increased security.

Ethernet.    Ethernet enables high-speed connection among computers and peripheral devices in local area networks. Ethernet was introduced in 1980 by Digital Equipment Corporation, Intel, and Xerox and, in 1983, the Institute of Electrical and Electronics Engineers, Inc. (IEEE) released the first IEEE standard for Ethernet technology. Ethernet technology operates over coaxial cable, twisted pair wiring or fiber optic cable at speeds of

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up to 10 Mbps over distances of up to 2,000 meters. The IEEE has released newer versions of the Ethernet technology including: Fast Ethernet in 1995, which operates at speeds of up to 100 Mbps, Wireless Ethernet in 1997 that operates at speeds up to 10 Mbps, Gigabit Ethernet in 1998, which operates at speeds of up to 1 gigabits per second, or Gbps, and 10 Gbps Ethernet released in June 2002.

Fibre Channel.    Fibre Channel enables reliable, cost-effective information storage and delivery at very high-speeds. Fibre Channel development started in 1988 and the American National Standards Institute (ANSI) standards body approved the first revision in 1994. Fibre Channel is designed to operate at speeds of 1, 2, and 4 Gbps and gives users the option to develop storage networks with configuration choices at different price points, levels of scalability and availability. Fibre Channel is a layered protocol that supports additional storage or networking protocols such as SCSI, IP, VI, and ESCON, thus offering many choices for storage connectivity, cluster computing and network interconnect.

IEEE 1394.    The IEEE 1394 standard, commonly known as 1394, FireWire or i.Link, enables high-speed connectivity among computers, peripheral devices and consumer electronic devices, including audio systems, television sets, digital cameras, video recorders, video players and game consoles. 1394a was introduced in 1987 and was ratified by the IEEE in 1995. The promoter group includes Apple, Canon, Hewlett-Packard, IBM, Intel, Microsoft, NEC, Philips, Sony, Sun Microsystems, Texas Instruments and Yamaha. 1394a enables connectivity through copper wire at speeds of up to 400 Mbps over distances of up to four and one-half meters. This speed increases to up to 3.2 Gbps over distances of up to 100 meters in the 1394b standard approved by the IEEE in April 2002.

InfiniBand.    The InfiniBand standard enables high-speed connectivity inside computers and among computers and storage devices in complex storage area networks. InfiniBand was introduced in 1999 and is used largely in enterprise database, high performance computing (HPC) and storage applications. The promoter group consists of Dell, Hewlett-Packard, IBM, Intel, Microsoft and Sun Microsystems. InfiniBand operates over copper wire and fiber optic cable at speeds of up to 10 Gbps over distances of up to ten meters for copper wire and ten kilometers for fiber optic cable.

PCI Express.    PCI Express is an emerging standard first introduced in 2002 and is intended to enhance the Peripheral Connect Interface (PCI) architecture spanning multiple computer market segments: clients (desktop and mobile), servers (standard and enterprise), embedded computers and communication devices. PCI Express provides system original equipment manufacturers, or OEMs, and peripheral developers the ability to realize product versatility and market differentiation without the burden of maintaining obsolete interfaces or losing compatibility. The promoter group consists of Hewlett-Packard, Dell, IBM, Intel and Microsoft. PCI Express currently runs at 2.5 Gbps per lane in each direction, providing a total bandwidth of 16 GBps in a 32-lane configuration. It is anticipated that future frequency increases will further enhance total bandwidth.

SCSI.    The Small Computer System Interface (SCSI) is a high-speed, intelligent protocol allowing different peripheral devices and hosts to be interconnected. SCSI is the primary interface for attaching high performance disk subsystems to Unix and Windows based servers and workstations. SCSI was invented in the 1970’s by Shugart Associates and was initially called Shugart Associates Systems Interface (SASI), an 8 bit parallel bus providing 1.5 million bytes (Megabytes) per second, or MBps, throughput. American National Standards Institute (ANSI) accepted this as a standard and renamed it SCSI in 1986. Since then SCSI has gone through several evolutions designed to bring faster data transfers, longer cable lengths and higher reliability. The SCSI protocol has evolved to a 16-bit, differential interface transferring data at 320 MBps.

Serial ATA.    The Serial ATA standard enables high-speed, low cost internal storage connections for desktops and mobile computers. Serial ATA was introduced in 2000 and is expected to replace Parallel ATA, the standard used to connect storage devices such as hard drives, DVD and CD drives to the motherboard. The promoter group consists of APT Technologies, Dell, Intel, Maxtor and Seagate. Serial ATA operates over copper wire at speeds up to 3 Gbps over distances of up to one meter.

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Serial Attached SCSI.    Initiated in December 2001 by the SCSI Trade Association, Serial Attached SCSI (SAS) was designed to be the logical evolution of SCSI to satisfy the data center requirements of scalability, performance, reliability and manageability, while leveraging a common low cost electrical and physical connection interface from Serial ATA. SAS provides universal interconnect with Serial ATA, while offering logical SCSI compatibility along with the reliability, performance and manageability of parallel SCSI. SAS is positioned primarily for enterprise class storage devices. SAS allows each host to address up to 4,096 devices via expanders. SAS’s flexibility allows single or multiple lane communications with devices, with a 3 Gbps four lane wide connection providing 12 Gbps total throughput.

Universal Serial Bus.    The Universal Serial Bus standard (USB) enables low, medium and high-speed connectivity between computers and peripheral devices, including keyboards, mice, printers, scanners, joysticks and cameras, using plug and play technology. USB was introduced in 1995 and replaces the serial, parallel, mouse and keyboard ports. The specifications for the second version of USB, or USB 2.0, were released in April 2000. The promoter group for USB consists of Agere, Hewlett-Packard, Intel, Lucent, Microsoft, NEC and Philips. USB enables connectivity through copper wires at speeds of up to 480 Mbps over distances of up to five meters.

Other Standards.    There are many other existing and emerging communications standards at different stages in their respective lifecycles such as Digital Subscriber Line, or DSL, 802.11, Home RF and Global System for Mobile communication, or GSM.

Products

We offer advanced development and production verification systems for the Bluetooth, Fibre Channel, IEEE 1394, InfiniBand, PCI Express, SCSI, Serial ATA, Serial Attached SCSI and USB standards, as well as production products for the USB and Bluetooth standards. We currently sell all of the products listed below:

Development Products

Our development products are advanced verification systems that assist hardware and software manufacturers in the efficient design of reliable and interoperable systems and devices. Most of these systems utilize our proprietary intuitive expert analysis software, the CATC Trace, which displays communications traffic in searchable, color-coded packets. Our development products consist of the following:

Bluetooth.    Our Bluetooth development products include:

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Fibre Channel.    Our Fibre Channel development product is the FCTracer^™. The FCTracer, introduced in the first quarter of 2003, is a powerful Fibre Channel test and debug analyzer that combines non-intrusive, multi-port recording with hardware triggering and FC-4 level protocol decoding. The FCTracer allows designers and validation engineers to pinpoint intermittent problems in Fibre Channel networks and provides high-level traffic reports that help identify and explain performance issues.

IEEE 1394.    Our IEEE 1394 development product is the FireInspector^™. The FireInspector was introduced in the second quarter of 1998. FireInspector was the first of our bus and protocol analyzers to incorporate our proprietary BusEngine real-time protocol processor technology. The FireInspector Plus version permits simultaneous 1394 traffic generation.

InfiniBand.    Our Infiniband development products include:

PCI Express.    Our PCI Express development products include:

SCSI.    Our SCSI development product is the Verisys SV-8320^™ analyzer. The SV-8320, introduced in the first quarter of 2002, provides fast and accurate debug, test and verification of Ultra320 SCSI devices and systems. Its unique combination of analysis power and portability enables OEMs to bring SCSI compatible products to market faster.

Serial ATA (SATA).    Our SATA development products include:

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Serial Attached SCSI (SAS).    Our Serial Attached SCSI development product is the SASTracer^™ analyzer. The SASTracer, introduced in the fourth quarter of 2003, is CATC’s first system that supports the advanced protocol analysis of 1.5 and 3 Gbps SAS in 1-, 2- and 4-wide configurations. The SASTracer is able to logically group multiple related bus transactions allowing developers to quickly understand complex SAS transactions. SASTracer’s features were especially designed for the multiple ways in which SAS systems can be configured.

Universal Serial Bus (USB).    Our USB development products include:

Production Products

Our production verification systems are designed to assist computer manufacturers in volume production of reliable USB devices and systems and software downloads onto new computers. Our production products consist of the following:

EL200^™.    EL200, an industrial device that links USB 2.0 and Ethernet 10/100, was introduced in the first quarter of 2002. The EL200 is used on the production line by computer manufacturers and assembly houses for loading software on the hard drives of newly manufactured systems. The EL200 device connects a computer operating under the DOS operating system to an Ethernet network through a USB 2.0 port. EL200 conforms to both USB 2.0 and Ethernet specifications and is capable of effective data transfer speeds of 40 Mbps, significantly faster than the previous version, the EL2.

UPT2^™.    UPT2, our third generation USB production verification system, was introduced in the fourth quarter of 2001. UPT2 is used as a universal verification system on the production line by integrated circuit,

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circuit board, computer system and hub manufacturers to verify compliance with the USB specifications and is capable of testing up to eight USB host ports simultaneously.

USB4DOS^™.    USB4DOS, a software product for the DOS operating system, was introduced in the first quarter of 1999. It provides USB support under DOS for production line verification and embedded applications. USB4DOS is either sold separately or bundled with our EL200 product.

HPT^™.    The host production tester, or HPT, our first generation USB port verification system, was introduced in the third quarter of 1996. HPT is used on the production line by integrated circuit, circuit board and computer system manufacturers to verify compliance with USB specifications. It is capable of verifying compliance in computers with one or two USB ports in less than ten seconds.

Customers

We sell our products directly as well as through various sales channel partners including, international distributors, manufacturers representatives and value-added resellers. Our end-users include semiconductor, computer systems, software, data storage, communications, automotive, aerospace, and software companies. Collectively, our top five customers including, international distributors, manufacturers representatives and value-added resellers, accounted for approximately 41.6% of our revenue in the year ended December 31, 2003. For the year ended December 31, 2003, LeColn Technology Co. Ltd., our primary distributor in Taiwan and China, accounted for 17.1% of our revenue, and Toyo, our primary distributor in Japan, accounted for 16.3% of our revenue. No other customer accounted for 10% or more of our revenue. Approximately 52% and 59.3% of our revenue was from sales to international customers in the years ended December 31, 2003 and 2002, respectively.

Sales and Distribution

Our marketing efforts focus on developing corporate and product strategies and increasing our brand and product awareness. Our marketing organization leads the creation of our strategic corporate direction and develops our product roadmap, including market studies, business potential analysis, competitive positioning, functional requirements and product lifecycle planning. Our product strategy focuses on continuously expanding the capability of our products and the breadth of our product lines to address an increasingly large portion of our customers’ needs. Our brand and product awareness initiatives center on our strategic relationships with the core or promoter companies and also include active participation in communications standards groups, trade shows, compliance workshops and industry conferences. Our marketing organization also provides technical and strategic sales support to our direct sales personnel, and to our sales channel partners, including in-depth product training, technical manuals, sales tools, pricing, marketing communications, marketing research, trademark administration and other support functions. We intend to continue to focus our marketing efforts on these initiatives in the future.

Our sales efforts are dedicated to establishing and maintaining long-term customer relationships. This focus emphasizes customer satisfaction and includes the expertise and resources necessary for customers to use our products successfully. We provide product documentation, technical information and software updates through our web site. We intend to continue to provide our customers with comprehensive technical support services and believe that this is critical to remaining competitive. We offer software maintenance support contracts for certain of our development products entitling customers to product updates and telephone technical support.

Our distribution channels included a direct sales force, a network of international distributors, manufacturer’s representatives, and value-added resellers. We continually monitor our manufacturer’s representatives’ and distributors’ sales performance and, where applicable, support efforts, in order to provide high quality customer service to our customers and increase revenue.

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Our direct sales force maintains close contact with our key customers and also provides support to our manufacturer’s representatives. Our direct sales force also maintains close contact with our international distributors, which provide both sales and support in the countries they cover. To date, we have established relationships with distributors and manufacturer’s representatives in over 25 countries in Asia, North America and Europe. In addition, we intend to expand our distribution efforts by pursuing relationships with additional distributors and manufacturer’s representatives in our current and future markets.

Research and Development

We believe our future success depends largely upon our ability to develop new products for established and emerging communications standards and to continue to improve our existing products. Accordingly, our research and development efforts are focused on enhancing our products to address both existing and new markets.

As of December 31, 2003, we employed 29 people in our research and development organization that is comprised of hardware and software design engineers with expertise in the design and application of computer and communications systems and devices, semiconductor devices, embedded software, software drivers and software applications. As part of our research and development activities, we are also engaged in formal and informal relationships with our customers worldwide as well as with special interest groups for emerging communications standards. Our research and development expenses were approximately $5.2 million, $7.4 million, and $7.3 million in the years ended December 31, 2003, 2002, and 2001, respectively.

Technology

We believe we have a competitive advantage as a result of our knowledge and expertise in multiple communications standards, computer and software architecture and advanced ASIC and programmable logic design. This expertise is enhanced by our advanced design tools and collaboration among our various design teams. The following is a summary of our technology position:

Vertically Integrated Technology.    We have a broad, vertically integrated technology base that includes the knowledge and expertise to:

We believe this technology base, coupled with the specific experience gained by designing previous generations of our products, enables us to quickly provide reliable, easy to use and cost-effective products, for new and emerging standards.

Expertise in Multiple Standards.    We have expertise in several communications standards including Bluetooth, Ethernet, Fibre Channel, IEEE 1394, InfiniBand, PCI Express, SCSI, Serial ATA, Serial Attached SCSI and USB and intend to extend our technology base to support additional emerging standards.

Computer Architecture and Software.    We have expertise in computer architecture and software, including many forms of internal and external device connectivity. Our products include substantial software content at various levels, including embedded software, software drivers, and software applications, and for different devices, computers and operating systems, such as DOS, Windows, Linux and Unix. Our computer architecture and software expertise generally allow us to bring easy to use, reliable and flexible products to market rapidly.

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Semiconductor and Programmable Logic Design.    Our ability to integrate a complex design into an ASIC results in a product that we believe offers higher performance at lower power levels and at lower costs than other commercially available products. The combination of programmable logic design techniques and non-volatile, or flash, memory adds flexibility and reliability to our products and allows us to add new features and capabilities to our products.

Universal Protocol Analyzer System^™.    The Universal Protocol Analyzer System (UPAS) is our modular architecture for communications protocol analysis, test and verification. The UPAS includes a base unit, which utilizes plug-in modules that support different protocols and a modular software architecture. The modules observe and capture specific protocol traffic and present it to the user for further analysis. Additional modules allow for generation of both legal and illegal protocol traffic, assisting engineers in exercising their new designs, resulting in improved quality and interoperability of their new products. The modularity of the UPAS accelerates our development time for new protocol modules, which reduces our time to market, while reducing the total cost of ownership of our products for our customers.

Manufacturing

We use outside contract manufacturing services for printed circuit board fabrication, assembly and testing. We conduct final assembly, testing and quality assurance at our facility in Santa Clara, California for a majority of our products. We outsource the manufacture of our lower volume, higher margin products to several facilities located in the Silicon Valley area. We outsource the turnkey manufacturing and assembly of our higher volume, lower margin products to several facilities located in Asia. This approach enables us to focus on our design strengths, reduce fixed costs and capital expenditures, and provide flexibility to better meet market demand. We do not have long-term contracts with any of our contract manufacturers. We design and develop a number of the key components of our products, including our ASIC, printed circuit boards and mechanical packaging. Although we use standard parts and components for our products where possible, we currently purchase a few key components used in the manufacture of our products from single or limited sources.

Competition

Our markets are highly competitive, and we expect competition to intensify in the future. Our competitors are diverse and offer a variety of solutions directed at various segments of this marketplace. We believe the principal factors of competition include:

We believe we compete favorably with respect to each of these factors and have gained significant market share in some of our target markets as a result. We believe our success has been driven by our vertically integrated technology, ability to generate customer loyalty and ability to anticipate market trends.

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Intellectual Property

We rely on a combination of copyright, trademark and trade secret laws to protect our intellectual property. In addition, we have six patent applications pending. However, we believe that factors such as the creativity and technological skills of our personnel, new product developments, frequent product enhancements, and reliable customer service are essential to establishing and maintaining a leadership position. Many of our products contain elements that we consider proprietary, including the CATC Trace expert software in our development products and the embedded software and software drivers in our production products.

Employees

As of December 31, 2003, we had 67 employees. Of these individuals, 22 were in sales and marketing, 29 were in research and development, 8 were in operations and 8 were in finance and administration. Our employees are not represented by any collective bargaining unit, and we believe our relations with our employees are satisfactory.

Item 2.     Properties

In December 2003, we moved our principal executive and administrative offices to a leased facility consisting of approximately 21,000 square feet of office space in Santa Clara, California. Our lease agreement expires in December 2009 subject to our option to extend the term of our lease an additional 5 years. We believe our existing facilities are adequate to meet our current and projected needs, and that suitable additional or substitute space will be available as needed.

Item 3.     Legal Proceedings

On December 29, 2000, we filed in the United States of America District Court for the Northern District of California a complaint against Catalyst Enterprises, Inc., alleging trademark and trade dress infringement, copyright infringement and unfair competition and seeking damages and attorneys’ fees. The case is referred to as Computer Access Technology Corporation v. Catalyst Enterprises, Inc., Case No. C 00 4852 DLJ.

The case was tried before a jury commencing October 28, 2002. On November 15, 2002, a unanimous jury returned a verdict finding that we own valid trademark rights in our CATC Trace design and that Catalyst infringed our trademark, that Catalyst violated the federal and state unfair competition statutes, and that Catalyst acted willfully when it violated the unfair competition statutes. The jury further found that Catalyst did not infringe our copyright and that we did not prove that our CATC Trace design is protectible trade dress. On November 26, 2002, the Court heard our request for injunctive relief and restitution under federal and state law and, by an order issued the same day, the Court stayed execution of the judgment and deferred ruling on the equitable relief claims pending resolution of Catalyst’s motion for judgment as a matter of law, or alternatively, for retrial.

On January 10, 2003, the Court held a hearing on Catalyst’s motion. On February 18, 2003, the Court granted Catalyst’s motion for a new trial on the claims of trademark infringement and violation of federal and state unfair competition statutes by Catalyst. The Court furthermore granted our motion for retrial on our claims of copyright and trade dress infringement.

On December 24, 2003, we announced that we had entered into a cross-licensing and settlement agreement with Catalyst. Under the terms of the settlement Catalyst did not admit any wrongdoing or liability and both parties agreed to bear their own costs of the litigation.

Except for the foregoing legal proceedings, we are not currently party to any material legal proceedings, however we are periodically subject to legal proceedings and claims that arise in the ordinary course of our business. While management currently believes the amount of ultimate liability, if any, with respect to these

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actions will not materially affect the financial position, results of operations, or liquidity of the Company, the ultimate outcome of any litigation is uncertain. Were an unfavorable outcome to occur, or if protracted litigation were to ensue, the impact could be material to the Company.

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

No matters were submitted to a vote of security holders during the fourth quarter of fiscal year 2003.

PART II

Item 5.     Market for Registrant’s Common Equity and Related Stockholder Matters

Market Information

Our Common Stock is traded publicly on the Nasdaq National Market under the symbol “CATZ.” Our stock began trading on November 10, 2000. The following table lists the high and low sales prices of our Common Stock for each fiscal period indicated beginning on January 1, 2002:

As of February 1, 2004, the approximate number of common stockholders of record was 30.

We have never declared or paid any cash dividends on our common stock. We currently intend to invest cash generated from operations, if any, to support the development of our business and do not anticipate paying cash dividends for the foreseeable future. Payment of future dividends, if any, will be at the discretion of our Board of Directors.

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Item 6.     Selected Financial Data

The following selected financial data are qualified by reference to and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto included elsewhere in this annual report on Form 10-K. The historical results are not necessarily indicative of future results.

Selected Consolidated Financial Data