Document/Exhibit Description Pages Size
1: 10-K Form 10-K Period Ended January 31, 2001 93± 418K
2: EX-2.4 Plan of Acquisition, Reorganization, Arrangement, 3 17K
Liquidation or Succession
3: EX-10.38 Material Contract 12 40K
4: EX-10.39 Material Contract 36 162K
5: EX-10.40 Material Contract 42 138K
6: EX-10.41 Material Contract 7 30K
7: EX-10.42 Material Contract 7 30K
8: EX-10.43 Material Contract 8 33K
9: EX-23.1 Consent of Experts or Counsel 1 7K
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year
ended January 31, 2001
or
[ ] Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the transition
period from _________ to _________.
Commission File Number: 000-22651
3DFX INTERACTIVE, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 77-0390421
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
4435 FORTRAN DRIVE, SAN JOSE, CA 95134
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (408) 935-4400
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, NO PAR VALUE
PREFERRED SHARE PURCHASE RIGHTS
(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 the 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. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing sale price of the common stock on May 9,
2001 of $.32 per share, as reported on the Nasdaq National Market, was
approximately $12,612,106. Shares of common stock held by officers, directors
and their affiliates have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
As of May 9, 2001, the registrant had outstanding 39,799,364 shares of
common stock.
DOCUMENTS INCORPORATED BY REFERENCE
None
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FORWARD-LOOKING STATEMENTS
Unless the context otherwise requires, the term "3dfx" when used in this
Form 10-K ("Report") refers to 3dfx Interactive, Inc., a California corporation,
and its consolidated subsidiaries and predecessors. This Report contains some
forward-looking statements within the meaning of the federal securities laws.
When used therein, the words "expects," "plans," "believes," "anticipating,"
"estimates," and similar expressions are intended to identify forward-looking
statements. Actual results and the timing of some events could differ materially
from those projected in or contemplated by the forward-looking statements due to
a number of factors, including without limitation those set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Discontinued Operations -- Risk Factors" below.
PART I
ITEM 1. BUSINESS
3dfx developed high performance, cost-effective graphics chips, graphics
boards, software and related technology that enable an interactive and realistic
3D experience across multiple hardware platforms, but is now in the process of
winding up its business.
In the fall of 2000, 3dfx began experiencing financial difficulties due
in part to substantially reduced demand in the retail channel for its products.
This reduced demand is attributable to a number of factors, including, in part,
its failure to introduce products in a timely manner and from disappointing
customer response to its existing products, as well as reduced demand in the
retail channel in general and the add-in graphics segment in particular. In
addition, 3dfx's high research and development costs and substantial debt
burden, together with the loss of several large customers due to 3dfx's May 1999
acquisition of STB Systems, Inc. and its inability to refinance its debt on
commercially reasonable terms, aggravated its financial difficulties. After
extensive exploration and evaluation of various strategic alternatives, the 3dfx
board of directors concluded that the liquidation, winding up and dissolution of
3dfx provided the best protection to 3dfx's creditors and was in the best
interests of its shareholders.
3dfx was incorporated in the State of California in August 1994.
REVIEW OF ALTERNATIVES
In September 2000, the 3dfx board of directors evaluated 3dfx's business
model and concluded that 3dfx could not continue to operate as a manufacturer of
both graphics chips and graphics boards in light of the losses that 3dfx
continued to incur in its graphics board business segment, and that it would be
necessary to quickly reposition 3dfx to focus principally on the development of
graphics chips and related technologies, and to further analyze the possible
termination or sale of the graphics board business. 3dfx began to explore
opportunities to sell its graphics board assets and transfer the liabilities
related to this business and to obtain an equity investment from a strategic
partner to enable 3dfx to implement its revised business strategy.
Beginning in mid-November 2000, 3dfx, with the assistance of its
financial advisor Robertson Stephens, undertook a review of 3dfx's strategic
alternatives, including obtaining new sources of financing and consideration of
a merger, reorganization or sale of some or all of the assets of 3dfx, and
3dfx's management and Robertson Stephens contacted both strategic and financial
parties to determine their interest in such transactions. After discussions with
selected parties and an extensive exploration and evaluation of possible
strategic alternatives to best protect 3dfx's creditors and maximize shareholder
value, the 3dfx board of directors determined in December 2000 that the sale of
certain 3dfx assets (including its core graphics processor assets) to a
wholly-owned subsidiary of NVIDIA Corporation ("NVIDIA Sub") was the alternative
available to 3dfx that would best permit 3dfx a reasonable likelihood of
satisfying the claims of its creditors and of placing it in a position to
provide a return to its shareholders. For further details regarding the terms of
3dfx's sale of assets to NVIDIA Sub, see "Management's Discussion and Analysis
of Financial Condition and Results of Discontinued Operations--Overview--Plan of
Dissolution and Asset Sale."
In addition, during this period members of 3dfx management worked with
Robertson Stephens to assess the strategic and financial viability of 3dfx
continuing as an independent concern following completion of the proposed asset
sale, at which time 3dfx's remaining operating assets would largely consist of
its graphics board business. Following its re-examination of the stand-alone
graphics board business, 3dfx's outstanding liabilities and its consideration of
all other available alternatives, the 3dfx board of directors concluded in
December 2000 that the liquidation, winding up and dissolution of 3dfx was the
alternative most reasonably likely to allow payment of its debts and liabilities
to its creditors and to maximize the return of value to its shareholders.
LIQUIDATION, WINDING UP AND DISSOLUTION
On December 15, 2000, the 3dfx board of directors approved the
liquidation, winding up and dissolution of 3dfx pursuant to a plan of
dissolution and the asset sale to NVIDIA Sub pursuant to an asset purchase
agreement executed by 3dfx, NVIDIA Corporation ("NVIDIA") and NVIDIA Sub on the
same date. Both proposals were also approved by 3dfx's shareholders at a special
shareholders meeting held on March 27, 2001.
1
3dfx has substantially reduced its costs in order to conserve its
resources. These cost-cutting measures include a reduction of a significant
portion of 3dfx's workforce, reduction in office space and other efforts to
reduce non-essential expenses. 3dfx has also been providing manufacturing
services to third parties to help cover the overhead associated with its Juarez,
Mexico manufacturing facility pending the sale or shut-down of that facility.
Due to these cost-cutting measures, 3dfx's operations have been substantially
curtailed. On March 30, 2001, 3dfx filed a certificate of election to liquidate,
wind up and dissolve with the California Secretary of State's office.
On April 18, 2001, 3dfx completed the sale of substantially all of its
assets to NVIDIA Sub. At the closing, NVIDIA Sub paid cash in the net amount of
$55.0 million in accordance with the asset purchase agreement ($70.0 million
cash, reduced by repayment of a $15.0 million bridge loan extended by NVIDIA Sub
to 3dfx). Subject to 3dfx in the future satisfying certain additional conditions
provided for in the asset purchase agreement, NVIDIA Sub will also deliver to
3dfx 1,000,000 shares of common stock of NVIDIA or a combination of up to $25.0
million in cash and a lesser number of shares of NVIDIA common stock. 3dfx is
not yet in a position to announce if, or when, it will be able to satisfy these
additional conditions.
The 3dfx plan of dissolution provides for the liquidation, winding up
and dissolution of 3dfx. The plan of dissolution provides for the liquidation of
3dfx's remaining assets, the winding up of its business and operations, and its
dissolution. To the extent that there are any remaining assets after the payment
of, or the provision for the payment of 3dfx's and its subsidiaries' debts and
liabilities, 3dfx will distribute such assets to its shareholders in one or more
distributions.
The plan of dissolution grants broad discretion and authority to 3dfx's
board of directors in the administration of the plan of dissolution, including
the engagement of employees and consultants to facilitate the dissolution of
3dfx, the provision for indemnification of 3dfx's directors and officers,
payment of all of its and its subsidiaries' debts and liabilities, establishment
of a liquidating trust and the determination of the timing and amount of
distributions. In addition, the plan of dissolution provides that 3dfx's board
of directors may amend the plan of dissolution, unless the board of directors
determines that such amendment would materially and adversely affect
shareholders' interests.
The actual amount and timing of, and record dates for, any distributions
to 3dfx's shareholders are not known at this time. These matters will be
determined in the sole discretion of the 3dfx board of directors or the trustees
of the liquidating trust, as the case may be, and will depend upon a variety of
factors, including the aggregate net proceeds received in the asset sale, the
proceeds derived by 3dfx from the sale of other assets, the ultimate amount of
known and unknown debts and liabilities of 3dfx and its subsidiaries, the
resolution of litigation and other contingent liabilities, and the amount of
liquidation-related expenses that must be satisfied out of 3dfx's assets.
Claims, liabilities and expenses continue to accrue, and 3dfx anticipates that
expenses for professional fees and other expenses of dissolution will be
significant. These expenses will reduce the amount of the assets available for
distribution to 3dfx shareholders.
At this time, 3dfx cannot determine if there will be any assets
remaining after paying for, or providing for the payment of, all of its and its
subsidiaries' debts and liabilities. 3dfx expects that pursuant to the terms of
the asset purchase agreement it will request that NVIDIA Sub provide all or a
portion of a one-time advance of up to $25.0 million cash advance in order to
enable 3dfx to pay the debts owed to its and its subsidiaries' creditors. If the
cash advance is made to 3dfx, then the number of NVIDIA shares receivable by
3dfx will be reduced by a number of shares determined by dividing the amount of
the advance by $50. 3dfx expects that if it obtains all or a portion of the
cash advance from NVIDIA Sub, it will have sufficient cash to pay all of its and
its subsidiaries' known current and determinable liabilities. However, the
amount of unknown or contingent liabilities cannot be quantified and could
decrease or eliminate any remaining assets available for distribution to 3dfx's
shareholders. Further, if 3dfx or its subsidiaries remain subject to any
contingent liabilities or become subject to additional contingencies, this could
require that it establish reserves that could delay any distribution to 3dfx
shareholders.
Because of the uncertainties as to the precise net realizable value of
3dfx's assets and the settlement amount of 3dfx's and its subsidiaries' debts
and liabilities, 3dfx cannot at this time determine the timing or amount of
distributions that may be made to its shareholders, if any. Only if there are
assets remaining at the time of 3dfx's dissolution will 3dfx shareholders
receive a distribution of those assets.
Assuming 3dfx receives shares of NVIDIA common stock in connection with
the asset sale, 3dfx may distribute the shares of NVIDIA common stock received
by it at or about the time of its dissolution directly to its shareholders, or
it may sell these shares in the open market or contribute the shares to a
liquidating trust for the benefit of 3dfx's shareholders. Further, 3dfx may
elect to directly distribute shares of NVIDIA common stock to some of its
shareholders, while distributing an equivalent per share value in cash to others
who would otherwise be entitled to receive a fractional amount or small number
of shares of NVIDIA common stock. At this time, 3dfx is unable to provide
specific information about the type or types of assets that 3dfx's shareholders
may receive or what the value of those assets might be at the time of
distribution, if a distribution is made to 3dfx's shareholders by 3dfx or a
liquidating trust at all.
The directors and officers of 3dfx will continue to oversee the
liquidation, winding up and dissolution of 3dfx. However, the board of directors
may determine that the use of a liquidating trust provides a better alternative
for completing the liquidation process.
2
If the assets and liabilities of 3dfx are transferred to a liquidating trust,
all shareholder distributions would be made directly from the trust after the
satisfaction of all of 3dfx's and its subsidiaries' debts and liabilities.
Upon filing a certificate of dissolution with the California Secretary
of State's office or a California court entering an order declaring 3dfx to be
wound up and dissolved, the stock transfer books of 3dfx will be closed as of
the close of business on such date. Thereafter, no assignments or transfers of
3dfx common stock will be recorded.
PATENTS AND PROPRIETARY RIGHTS
3dfx has sold substantially all of its intellectual property rights,
including but not limited to rights relating to patents, copyrights, trade
names, trade marks and domain names, to NVIDIA Sub as part of the asset sale
that closed in April 2001. 3dfx and NVIDIA Sub have entered into an agreement
whereby NVIDIA Sub granted to 3dfx a non-transferable license to continue to use
the name "3dfx" solely in connection with the winding up of its operations.
EMPLOYEES
As of April 30, 2001, 3dfx had approximately 417 employees, 31 of which
were employees were located in the United States, 385 of which were employed by
3dfx's Mexican subsidiary and worked in its Juarez, Mexico facility, and 1
employee worked in 3dfx's office in England. No employee of 3dfx is covered by
collective bargaining agreements, and 3dfx believes that its relationship with
its employees is good.
3dfx's relationship with its employees at its Mexican manufacturing
facility is regulated by the Mexican Federal Labor Law. The Mexican Federal
Labor Law contains detailed provisions regarding minimum employment conditions
and specifies rights that must be provided to all employees in Mexico. Other
Mexican federal laws require employers to make contributions to the Mexican
Social Security System and to establish and make specified contributions to
individual retirement savings and housing accounts at a commercial bank for all
employees. In addition, Mexican federal law requires the payment of substantial
severance amounts relative to the employees' wages in the event of the
termination of a Mexican employee and, in the event of a shut-down of 3dfx's
Mexican manufacturing facility, 3dfx may incur substantial severance costs.
Although Mexican laws heavily regulate employment relationships, aggregate labor
costs at 3dfx's Mexican facility are less than labor costs would be at a similar
facility in the United States. There can be no assurance, however, that these
laws will not be amended or supplemented in the future to increase the
compensation required to be paid to Mexican employees or the costs of compliance
with such laws. Any such change could have a material adverse effect on 3dfx's
business, financial condition and results of operations.
ITEM 2. PROPERTIES
3dfx leases approximately 77,805 square feet for its headquarters in one
building in San Jose, California pursuant to a lease that expires on April 30,
2007, with an option to extend the lease for an additional five-year term. In
addition, 3dfx leases approximately 52,040 square feet in a building adjacent to
its San Jose headquarters pursuant to a lease that expires in 2007, with an
option to extend the lease for an additional three-year term. In December 2000,
3dfx sold its Richardson facility to a third party for approximately
$25,435,000. 3dfx is currently leasing some space in that facility from the
purchaser. Under the terms of a lease agreement expiring in November 2007, 3dfx
leases a 136,800 square foot manufacturing facility in Juarez, Mexico.
3dfx is also currently leasing offices in Austin, Texas (27,179 square
feet expiring in August 2004), Eugene, Oregon (2,675 square feet expiring in
January 2002), Belfast, Northern Ireland (13,000 square feet expiring in April
2006), and London, England.
The foregoing facilities exceed 3dfx's operating requirements and 3dfx
is seeking to substantially reduce its lease obligations.
ITEM 3. LEGAL PROCEEDINGS
On December 21, 2000, CagEnt Technologies Inc. filed suit against 3dfx
in the Northern California District Federal Court. The complaint alleges patent
infringement relating to CagEnt's patent no. 5,856,829. The complaint seeks a
declaratory judgment of infringement, injunctive relief enjoining future
infringement and money damages caused by the alleged infringement, together with
pre-judgment and post-judgment interest, attorneys' fees and cost of suit. 3dfx
believes it has meritorious defenses to the claims against it and intends to
vigorously defend itself.
Pursuant to the terms of the asset purchase agreement among NVIDIA,
NVIDIA Sub and 3dfx, 3dfx and NVIDIA agreed to dismiss with prejudice the
infringement lawsuit that NVIDIA and 3dfx had filed against each other. Both
parties filed a joint stipulation for dismissal with the Northern California
District Federal Court on April 19, 2001. On April 26, 2001, the Court signed an
order granting such dismissals.
3dfx is also a party to various legal proceedings involving collection
matters and other matters against it. 3dfx is currently seeking resolutions that
are mutually acceptable to the parties involved in each of these matters.
However, there is no assurance that
3
resolutions will be achieved. Although the amount of any liability that could
arise with respect to these proceedings cannot be predicted accurately, 3dfx
believes that any liability that might result from such claims will not have a
material adverse effect on its financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
3dfx's common stock is currently quoted on the Nasdaq National Market
under the symbol "TDFX." The following table sets forth for the periods
indicated the high and low sale prices per share for 3dfx's common stock as
reported on the Nasdaq National Market.
[Download Table]
HIGH LOW
------ ------
FISCAL YEAR ENDING JANUARY 31, 2002
Second quarter (through May 9, 2001) ........ $ .38 $ .22
First quarter ............................... .38 .22
FISCAL YEAR ENDED JANUARY 31, 2001
Fourth quarter .............................. 4.52 0.09
Third quarter ............................... 7.75 2.97
Second quarter .............................. 10.38 6.69
First quarter ............................... 13.44 8.13
FISCAL YEAR ENDED JANUARY 31, 2000
Fourth quarter .............................. 10.56 8.50
Third quarter ............................... 15.19 7.53
Second quarter .............................. 21.25 13.13
First quarter ............................... 21.88 10.81
On May 9, 2001, the last reported sale price of 3dfx's common stock on
the Nasdaq National Market was $.32 per share. As of May 9, 2001, there were
approximately 452 holders of record of 3dfx's common stock. 3dfx has received a
delisting notice from Nasdaq due to its failure to maintain a minimum bid of at
least $1.00 per share. The notice provides that the 3dfx common stock will be
delisted effective as of the opening of business on May 16, 2001. At that time
trading of 3dfx's common stock will be conducted on the over-the-counter market.
Trading in 3dfx's common stock will cease altogether upon the filing by 3dfx of
a certificate of dissolution with the California Secretary of State's office.
DIVIDEND POLICY
3dfx has never declared or paid cash dividends on its capital stock.
However, under the terms of 3dfx's plan of dissolution, the 3dfx board of
directors is authorized to make a distribution to shareholders after paying or
otherwise providing for all of 3dfx's and its subsidiaries' debts and
liabilities. Because of the uncertainties as to the precise net realizable value
of 3dfx's assets and the settlement amount of 3dfx's and its subsidiaries' debts
and liabilities, 3dfx cannot at this time determine the timing and amount of
distributions that may be made to its shareholders, if any. Only if there are
assets remaining at the time of 3dfx's dissolution will 3dfx shareholders
receive a distribution of those assets.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Discontinued Operations" and the Financial Statements and the Notes thereto
included elsewhere in this Report.
On March 27, 2001, 3dfx's shareholders approved proposals to liquidate,
wind up and dissolve 3dfx pursuant to a plan of dissolution. 3dfx is proceeding
to wind up its affairs and dissolve. Accordingly, all activities of 3dfx are
presented as discontinued operations in the selected financial data below. See
Note 1 to Notes to Financial Statements for further discussion.
4
Effective as of February 1, 1999, 3dfx changed its fiscal year from a
fiscal year beginning January 1 and ending December 31, to a fiscal year
beginning February 1 and ending January 31. References in this Report to
"fiscal 2001" means the year ended January 31, 2001, to "fiscal 2000" means the
year ended January 31, 2000, and to "fiscal 1998" means the year ended December
31, 1998. The statement of discontinued operations data below reflects the
following:
- 3dfx took a $117.1 million charge for the impairment of goodwill
and other intangible assets. 3dfx's results of discontinued
operations for the year ended January 31, 2001 and financial
position at January 31, 2001 reflect the impact of this charge.
See Note 1 to Notes to Financial Statements for further
discussion of the impairment charge.
- 3dfx's merger with GigaPixel Corporation was consummated on July
21, 2000 and was treated as a purchase for financial reporting
and accounting purposes. 3dfx's results of discontinued
operations for the year ended January 31, 2001 and financial
position at January 31, 2001 reflect the impact of the GigaPixel
merger. See Note 3 to Notes to Financial Statements for further
discussion of the GigaPixel merger.
- 3dfx's merger with STB Systems, Inc. was consummated on
May 13, 1999 and was treated as a purchase for financial
reporting and accounting purposes. 3dfx's results of
discontinued operations for the year ended January 31, 2000 and
financial position at January 31, 2000 reflect the impact of the
STB merger. See Note 2 to Notes to Financial Statements for
further discussion of the STB merger.
- In July 1998, 3dfx reached a settlement with Sega in conjunction
with a lawsuit which 3dfx filed against Sega in August 1997.
Fiscal 1998 includes a one-time recognition of income based on
the settlement.
[Enlarge/Download Table]
MONTH
FISCAL YEAR ENDED ENDED
JANUARY 31, JANUARY
------------------------- 31,
2001 2000 1999
--------- --------- ---------
STATEMENT OF DISCONTINUED OPERATIONS DATA
Revenues ................................................... $ 233,067 $ 360,523 $ 17,048
Cost of revenues ........................................... 242,989 287,872 14,527
--------- --------- ---------
Gross profit (loss) ........................................ (9,922) 72,651 2,521
--------- --------- ---------
Operating expenses:
Research and development ............................... 65,394 66,062 3,340
Selling, general and administrative ................... 89,106 63,468 4,614
In process research and development .................... 66,250 4,302 --
Amortization of goodwill and other intangibles ......... 24,449 10,228 --
Impairment of goodwill and other intangibles ........... 117,065 -- --
Restructuring expense .................................. -- 4,382 --
--------- --------- ---------
Total operating expenses ............................ 362,264 148,442 7,954
--------- --------- ---------
Income (loss) from discontinued operations ................ (372,186) (75,791) (5,433)
Interests and other income (expense), net ................ (4,812) 2,180 322
--------- --------- ---------
Income (loss) from discontinued operations before
income taxes ........................................... (376,998) (73,611) (5,111)
Provision (benefit) for income taxes ...................... (36,472) (10,324) (1,636)
Net income (loss) from discontinued operations ............ $(340,526) $ (63,287) $ (3,475)
========= ========= =========
Basic net income (loss) per share from discontinued
operations ............................................. $ (10.63) $ (2.81) $ (0.22)
========= ========= =========
Diluted net income (loss) per share from discontinued
operations ............................................. $ (10.63) $ (2.81) $ (0.22)
========= ========= =========
Shares used in basic net income (loss) from
discontinued operations calculation .................... 32,041 22,536 15,641
========= ========= =========
Shares used in diluted net income (loss) from
discontinued operations calculation .................... 32,041 22,536 15,641
========= ========= =========
BALANCE SHEET OF DISCONTINUED OPERATIONS DATA
Cash, cash equivalents and short-term investments ......... $ 9,391 $ 65,830 $ 94,957
Working capital ........................................... 22,353 98,466 106,924
Total assets .............................................. 119,606 296,111 168,870
Other long-term liabilities ............................... -- 1,881 416
Accumulated deficit ....................................... (407,089) (66,563) (3,276)
Total shareholders' equity ................................ 22,353 187,234 123,018
[Enlarge/Download Table]
FISCAL YEAR ENDED
DECEMBER 31,
-------------------------------------
1998 1997 1996
-------- -------- --------
STATEMENT OF DISCONTINUED OPERATIONS DATA
Revenues ................................................... $202,601 $ 44,069 $ 6,390
Cost of revenues ........................................... 119,618 22,611 5,123
-------- -------- --------
Gross profit (loss) ........................................ 82,983 21,458 1,267
-------- -------- --------
Operating expenses:
Research and development ............................... 34,045 12,412 9,435
Selling, general and administrative .................... 35,441 11,390 6,642
In process research and development .................... -- -- --
Amortization of goodwill and other intangibles ......... -- -- --
Impairment of goodwill and other intangibles ........... -- -- --
Restructuring expense .................................. -- -- --
-------- -------- --------
Total operating expenses ............................ 69,486 23,802 16,077
-------- -------- --------
Income (loss) from discontinued operations ................ 13,497 (2,344) (14,810)
Interests and other income (expense), net ................ 15,869 630 59
-------- -------- --------
Income (loss) from discontinued operations before
income taxes ........................................... 29,366 (1,714) (14,751)
Provision (benefit) for income taxes ...................... 7,663 -- --
Net income (loss) from discontinued operations ............ $ 21,703 $ (1,714) $(14,751)
======== ======== ========
Basic net income (loss) per share from discontinued
operations ............................................. $ 1.45 $ (0.16) $ (1.74)
======== ======== ========
Diluted net income (loss) per share from discontinued
operations ............................................. $ 1.33 $ (0.16) $ (1.74)
======== ======== ========
Shares used in basic net income (loss) from
discontinued operations calculation .................... 14,917 10,767 8,467
======== ======== ========
Shares used in diluted net income (loss) from
discontinued operations calculation .................... 16,353 10,767 8,467
======== ======== ========
BALANCE SHEET OF DISCONTINUED OPERATIONS DATA
Cash, cash equivalents and short-term investments ......... $ 95,980 $ 34,921 $ 5,291
Working capital ........................................... 110,871 37,456 6,637
Total assets .............................................. 184,121 61,917 15,581
Other long-term liabilities ............................... 284 546 632
Retained earnings (accumulated deficit) ................... 199 (21,504) (19,790)
Total shareholders' equity ................................ 126,313 44,274 9,621
5
3dfx expects to file an amendment to its Current Report on Form 8-K
filed on May 3, 2001 presenting the pro forma impact of the sale of certain of
its assets to NVIDIA Sub on 3dfx's financial condition as of January 31, 2001.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF DISCONTINUED OPERATIONS
The following discussion contains forward-looking statements that
involve risks and uncertainties. 3dfx's actual results could differ materially
from those discussed in the forward-looking statements as a result of some
factors including those set forth under "-- Risk Factors" and elsewhere in this
Report. The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Consolidated Financial Statements
and Notes thereto appearing elsewhere in this Report.
OVERVIEW
3dfx developed high performance, cost-effective graphics chips, graphics
boards, software and related technology that enable an interactive and realistic
3D experience across multiple hardware platforms, but is now in the process of
winding up its business. As discussed below, on March 27, 2001, 3dfx's
shareholders approved proposals to liquidate, wind up and dissolve 3dfx pursuant
to a plan of dissolution. 3dfx is proceeding to wind up its affairs and
dissolve. Accordingly, all activities of 3dfx are presented as discontinued
operations.
Plan of Dissolution and Asset Sale
In the fall of 2000, 3dfx began experiencing financial difficulties due
in part to substantially reduced demand in the retail channel for its products.
This reduced demand is attributable to a number of factors, including, in part,
its failure to introduce products in a timely manner and from disappointing
customer response to its existing products, as well as reduced demand in the
retail channel in general and the add-in graphics segment in particular. In
addition, 3dfx's high research and development costs and substantial debt
burden, together with the loss of several large customers due to 3dfx's May 1999
acquisition of STB Systems, Inc. and its inability to refinance its debt on
commercially reasonable terms, aggravated its financial difficulties. After
extensive exploration and evaluation of various strategic alternatives, the 3dfx
board of directors concluded that the liquidation, winding up and dissolution of
3dfx provided the best protection to 3dfx's creditors and was in the best
interests of its shareholders.
On December 15, 2000, 3dfx entered into an asset purchase agreement with
NVIDIA and NVIDIA Sub under which NVIDIA Sub would acquire certain of 3dfx's
assets, including its core graphics processor assets. Under the terms of the
asset purchase agreement, NVIDIA agreed to pay 3dfx $70.0 million in cash and
1,000,000 shares of registered NVIDIA common stock, subject to the satisfaction
of certain conditions specified in the asset purchase agreement as described
below. Upon signing the asset purchase agreement, NVIDIA loaned to 3dfx $15.0
million in cash for working capital.
The asset sale to NVIDIA Sub was approved by 3dfx shareholders on March
27, 2001, and on April 18, 2001 substantially all of 3dfx's assets were sold to
NVIDIA Sub. Upon closing, 3dfx received $55.0 million in cash, which amount was
net of repayment of the $15.0 million cash loan 3dfx received upon signing the
asset purchase agreement. In addition, under the terms of the asset purchase
agreement, 3dfx and NVIDIA caused the pending patent litigation between the
parties to be dismissed with prejudice. Under the terms of the asset purchase
agreement, 3dfx may receive part or all of a one-time post-closing cash advance
of up to $25.0 million upon its request if it is not in breach of the asset
purchase agreement, it has expended all or substantially all of the $70.0
million cash consideration in payment of its liabilities and determines in good
faith that (i) the remaining portion of the cash consideration previously
received by it is not sufficient to pay its remaining liabilities, and (ii) such
remaining liabilities could and would be satisfied if 3dfx received the
post-closing cash advance and applied it to the payment of such liabilities, and
if NVIDIA does not determine in good faith that the requested amount would not
permit 3dfx to pay in full its remaining liabilities. In the event that 3dfx
receives the post-closing cash advance, the 1,000,000 shares of NVIDIA common
stock comprising the remaining consideration otherwise payable to 3dfx under the
asset purchase agreement will be reduced by the number of shares equal to the
quotient determined by dividing the amount of the post-closing cash advance by
$50. Irrespective of whether 3dfx receives a post-closing advance, the shares of
NVIDIA common stock will only become deliverable to 3dfx upon satisfaction of
certain conditions specified in the asset purchase agreement, including the
completion of the winding up of the business of 3dfx pursuant to 3dfx's plan of
dissolution, and 3dfx's certification that (i) all liabilities of 3dfx and its
subsidiaries have been paid in full or otherwise provided for and (ii) 3dfx has
or will be validly dissolved.
On December 15, 2000, the board of directors of 3dfx also approved a
plan of dissolution and on March 27, 2001 this plan of dissolution was approved
by 3dfx's shareholders. On March 30, 2001, 3dfx filed a certificate of election
to liquidate, wind up and dissolve with the California Secretary of State's
office. 3dfx is proceeding to wind up its affairs and is no longer operating or
generating revenues in the normal course of business. Accordingly, all of the
activities of 3dfx have been presented as discontinued operations and assets
have been adjusted, as appropriate, to estimated net realizable value. During
the fiscal year ended January 31, 2001, 3dfx recorded a charge of $7.9 million
for the write-down of inventory and a charge of $5.5 million for the write-down
of property and equipment. 3dfx also recorded a charge of $117.1 million for the
impairment of goodwill and other intangibles during the fiscal year ended
January 31, 2001. In accordance with 3dfx's accounting policy, 3dfx assessed
impairment of its long-lived assets and determined that the carrying amount of
goodwill and other intangibles would not be recoverable due to the deteriorating
condition of its operations. The impairment loss was measured as the amount by
which the carrying amount of the assets exceeded the estimated fair value of the
assets, as determined using the present value of expected future cash flows.
6
3dfx has substantially reduced its costs in order to conserve its
resources. These cost cutting measures include a reduction of a significant
portion of 3dfx's workforce, reduction in office space and other efforts to
reduce non-essential expenses. 3dfx has also been providing manufacturing
services to third parties to help cover the overhead associated with its Juarez,
Mexico manufacturing facility pending the sale or shut-down of that facility.
Due to these cost-cutting measures, 3dfx's operations have been substantially
curtailed.
3dfx expects to continue to incur certain administrative and other costs
associated with winding up its affairs. However, 3dfx believes that it will have
sufficient cash to pay all of its and its subsidiaries' known current and
determinable liabilities. However, the amount of unknown or contingent
liabilities cannot be quantified and could decrease or eliminate any remaining
assets available for distribution to 3dfx's shareholders. Further, if 3dfx or
its subsidiaries are subject to any contingent liabilities, this could require
that it establish reserves that could delay any distribution to 3dfx
shareholders. Because of the uncertainties as to the precise net realizable
value of 3dfx's assets and the settlement amount of 3dfx's and its subsidiaries'
debts and liabilities, 3dfx cannot at this time determine the timing or amount
of distributions that may be made to its shareholders, if any. Only if there are
assets remaining at the time of 3dfx's dissolution will 3dfx shareholders
receive a distribution of those assets.
Miscellaneous
3dfx's sales have historically been concentrated among a limited number
of customers. Revenues derived from sales to Ingram Micro accounted for
approximately 16% and 13% of revenues for the fiscal years ended January 31,
2001 and January 31, 2000, respectively. Revenues derived from sales to D&H
Distributing accounted for approximately 10% of revenues for the fiscal year
ended January 31, 2001.
In connection with the grant of stock options to employees from
inception (August 1994) through the effective date of 3dfx's initial public
offering, 3dfx recorded aggregate deferred compensation of approximately $1.9
million, representing the difference between the deemed fair value of the common
stock for accounting purposes and the option exercise price at the date of
grant. This amount was presented as a reduction of shareholders' equity and was
amortized ratably over the vesting period of the applicable options. The
amortization of the deferred compensation for each of the fiscal years ended
January 31, 2000 and December 31, 1998 totaled $484,000 (of which $194,000 and
$290,000 were recorded as a charge to research and development expenses and
selling, general and administrative expenses, respectively). The remaining
deferred compensation at January 31, 2000 of $172,000 was fully amortized
during the fiscal year ended January 31, 2001 ($69,000 and $103,000
were recorded as a charge to research and development expenses and selling,
general and administrative expenses, respectively).
On October 20, 2000, 3dfx undertook a stock option exchange program,
allowing employees the opportunity to surrender their existing stock options in
exchange for a new grant of 50% of the number of original options with a new
exercise price of $2.00 per share. The options were to become fully vested on
June 30, 2001, and expire on June 30, 2002. This program was offered to certain
active employees whose options were granted on September 5, 2000, or earlier. On
October 20, 2000, options for 4.7 million shares were canceled and options for
2.35 million shares were granted under this program. As the market value of 3dfx
stock at the date of grant exceeded the exercise price for these options, 3dfx
recorded deferred compensation of $5.3 million to be amortized over the vesting
period. In accordance with Financial Accounting Standards Board Interpretation
No. 44 "Accounting for Certain Transactions Involving Stock Compensation" issued
in March 2000 ("FIN 44"), the repricing required 3dfx to account for the options
as variable from the date of modification to the date the award was exercised,
forfeited, or expired unexercised. On December 15, 2000, substantially all of
3dfx's United States and European employees were terminated or given notice of
termination and their unvested options were correspondingly canceled.
Amortization of deferred compensation taken for the options, all of which were
unvested, totaling $0.9 million for the fiscal year ended January 31, 2001, was
reversed, as was the remaining deferred compensation.
Overview of GigaPixel Merger and Treatment of IPR&D
In July 2000, a subsidiary of 3dfx completed a merger with GigaPixel
Corporation ("GigaPixel"), a Delaware corporation. As a result of the merger,
GigaPixel became a wholly-owned subsidiary of 3dfx. The merger was accounted for
under the purchase method of accounting. The purchase price of GigaPixel was
approximately $181.3 million and included $173.9 million of stock issued at fair
value (fair value being determined as the average price of 3dfx stock for a few
days before and after the announcement of the merger), $2.7 million in vested
stock option costs (being determined under the Black Scholes formula) and $4.7
million in estimated expenses of the transaction. The purchase price was
allocated as follows: $3.6 million to the estimated fair value of GigaPixel net
tangible assets purchased (as of July 21, 2000), $66.3 million to purchased
in-process research and development ("IPR&D"), $10.8 million to purchased
existing technology, $2.4 million to workforce-in-place, ($5.3) million to
deferred tax liabilities associated with certain intangibles acquired, and
$103.5 million to goodwill. The allocation of the purchase price to intangibles
was based upon an independent, third party appraisal and management's estimates.
The intangible assets and goodwill acquired had estimated and useful
lives and estimated annual amortization, as follows:
[Download Table]
Estimated Annual
Amount Useful Life Amortization
------------ ----------- ------------
Purchased existing technology ... $ 10,830,000 5 years $ 2,166,000
Workforce-in-place .............. 2,400,000 5 years 480,000
Goodwill ........................ 103,510,000 5 years 20,702,000
7
The value assigned to purchased IPR&D was determined by identifying
research projects in areas for which technological feasibility had not been
established. The value was determined by estimating the expected cash flows from
the projects once commercially viable, discounting the net cash flows back to
their present value and then applying a percentage of completion to the
calculated value as defined below. As described above, 3dfx recorded a charge of
$117.1 million for the impairment of goodwill and other intangibles. A portion
of the impaired goodwill and other intangibles originally arose as a result of
the GixaPixel acquisition.
Net Cash Flows. The net cash flows from the identified projects were
based on management estimates of revenues, research and development costs,
selling, general and administrative costs, royalty costs and income taxes from
those projects. These estimates were based on the assumptions mentioned below.
The research and development costs included in the model reflect costs to
sustain projects, but exclude costs to bring in-process projects to
technological feasibility.
Revenues. The estimated revenues were based on management projections of
each in-process project and these business projections were compared and found
to be in line with industry analysts' forecasts of growth in substantially all
of the relevant markets. Estimated total revenues from the IPR&D product areas
were expected to peak in the year ending January 31, 2005 and decline in 2006 as
other new products were expected to become available. These projections were
based on 3dfx's estimates of market size and growth, expected trends in
technology and the nature and expected timing of new product introductions by
GigaPixel and their competitors.
Gross Margin. Projected gross margins associated with the identified
projects were in line with comparable industry margins. Research and
development, as well as sales, general and administrative costs, were consistent
with the industry average of companies of comparable size and age.
Discount Rate. Discounting the net cash flows back to their present
value was based on the industry weighted average cost of capital ("WACC"). The
industry WACC was approximately 28%. The discount rate used in discounting the
net cash flows from IPR&D was 30%, a 200 basis point increase from the industry
WACC. This discount rate is higher than the industry WACC due to inherent
uncertainties surrounding the successful development of the IPR&D, market
acceptance of the technology, the useful life of such technology and the
uncertainty of technological advances which could potentially impact the
estimates described above.
Percentage of Completion. The percentage of completion for GigaPixel
technology was determined using costs incurred to date on each project as
compared to the remaining research and development to be completed to bring each
project to technological feasibility. The percentage of completion related to
GigaPixel technology was 72%.
In connection with the acquisition of GigaPixel, 3dfx recorded deferred
compensation for the unvested portion of GigaPixel options assumed by 3dfx in
the amount of approximately $6.9 million. This deferred compensation was to be
expensed over the remaining life of the unvested GigaPixel options assumed by
3dfx. For the fiscal year ended January 31, 2001, 3dfx recorded amortization of
deferred compensation related to the GigaPixel acquisition of $1.5 million,
which has been included in research and development expense. On December 15,
2000, all of the former GigaPixel employees were terminated and their unvested
options were canceled. Accordingly, the remaining unamortized deferred
compensation, which related to the unvested options, was reversed.
Overview of STB Merger and Treatment of IPR&D
In May 1999, 3dfx completed a merger with STB Systems, Inc. ("STB"). As
a result of the STB merger, STB became a wholly-owned subsidiary of 3dfx. The
STB merger was accounted for under the purchase method of accounting. The
purchase price of $139.3 million included $116.1 million of stock issued at fair
value (fair value being determined as the average price of 3dfx stock for a few
days before and after the announcement of the merger), $9.9 million in STB stock
option costs (being determined under both the Black-Scholes formula and in
accordance with the merger agreement) and $13.3 million in estimated expenses of
the transaction. The purchase price was allocated as follows: $85.6 million to
the estimated fair value of STB net tangible assets purchased (as of May 13,
1999), ($7.6) million to establish deferred tax liabilities associated with
certain intangibles acquired, $4.3 million to purchased in-process research and
development, $11.4 million to purchased existing technology, $4.4 million to
trademarks, $2.3 million to workforce-in-place, $1.0 million to executive
covenants and $37.9 million to goodwill. The allocation of the purchase price to
intangibles was based upon an independent third party appraisal and management's
estimates.
The value assigned to purchased IPR&D was determined by identifying
research projects in areas for which technological feasibility had not been
established. These include projects for 3dfx's Voodoo3 product, as well as other
specialized technologies totaling $4.3 million. The value was determined by
estimating the expected cash flows from the projects once commercially viable,
discounting the net cash flows back to their present value and then applying a
percentage of completion to the calculated value.
As described above, 3dfx recorded a charge of $117.1 million for the
impairment of goodwill and other intangibles. A portion of the impaired goodwill
and other intangibles originally arose as a result of the STB acquisition.
8
RESULTS OF DISCONTINUED OPERATIONS
As described above, 3dfx is proceeding to wind-up its affairs and is no
longer operating or generating revenues in the normal course of business.
Accordingly, the following discussion of results of discontinued operations is
not indicative of its future operations.
The following table sets forth certain statement of discontinued
operations data of 3dfx expressed as a percentage of revenue for each of the
periods indicated.
[Enlarge/Download Table]
FISCAL YEAR ENDED
-------------------------------------------------
JANUARY 31, DECEMBER 31,
-------------------------- ------------
2001 2000 1998
------ ------ ------
Revenues ................................................... 100.0% 100.0% 100.0%
Cost of revenues ........................................... 104.3% 79.8% 59.0%
------ ------ ------
Gross profit (loss) ..................................... (4.3%) 20.2% 41.0%
------ ------ ------
Operating expenses:
Research and development ................................ 28.1% 18.3% 16.8%
Selling, general and administrative ..................... 38.2% 17.6% 17.5%
In-process research and development ..................... 28.4% 1.2% 0.0%
Amortization of goodwill and other intangibles .......... 10.5% 2.8% 0.0%
Impairment of goodwill and other intangibles ............ 50.2% 0.0% 0.0%
Restructuring expense ................................... 0.0% 1.2% 0.0%
------ ------ ------
Total operating expenses ................................... 155.4% 41.1% 34.3%
------ ------ ------
Income (loss) from discontinued operations ................. (159.7%) (20.9%) 6.7%
Interest and other income (expense), net ................... (2.1%) 0.6% 7.8%
Provision (benefit) for income taxes ....................... (15.6) (2.9%) 3.8%
------ ------ ------
Net income (loss) from discontinued operations ............. (146.2%) (17.4%) 10.7%
====== ====== ======
YEARS ENDED JANUARY 31, 2001 (FISCAL 2001) AND JANUARY 31, 2000 (FISCAL 2000)
Revenues. Revenues are recognized upon product shipment. 3dfx's total
revenues were $233.1 million for the fiscal year ended January 31, 2001 and
$360.5 million for the fiscal year ended January 31, 2000. The decrease was
primarily attributable to a decline in demand for 3dfx's products due to a
number of factors, including, in part, its failure to introduce products in a
timely manner and from disappointing customer response to its existing products,
as well as reduced demand in the retail channel in general and the add-in
graphics segment in particular. Also, the impact arising from 3dfx's
announcement of its plan of dissolution caused revenues to significantly
decrease beginning in December 2000. Revenues for fiscal 2000 include board
level sales from May 13, 1999 (the date of the STB merger) through the end of
the fiscal year, which contributed a substantial amount of revenues for the
period; however, prior to the STB merger, substantially all 3dfx's revenues were
comprised of chip level sales. Revenues in fiscal 2001 were principally
attributable to sales of Voodoo5 and Voodoo3 products. Revenues in fiscal 2000
were derived in part from the sale of 3dfx's Voodoo Banshee, Voodoo2, and
Voodoo3 products.
Gross Profit. Gross profit consists of total revenues less cost of
revenues. Cost of revenues consists primarily of costs associated with the
purchase of components and the procurement of semiconductors from 3dfx's
contract manufacturers, labor and overhead associated with procurement,
assembly, testing, packaging, warehousing and shipping, and warranty costs.
3dfx's gross profit decreased by $82.6 million from a gross profit of $72.7
million in the year ended January 31, 2000 to a gross loss of ($9.9 million) in
year ended January 31, 2001. Gross profit (loss) as a percentage of revenues was
(4.3%) and 20.2% for the fiscal years ended January 31, 2001 and January 31,
2000, respectively. The decrease is attributable in part to the gross profit
generated from sales of board-level products, which have lower margins as
compared with the margins on chip-only products. In addition, the decrease in
gross profit as a percentage of revenues resulted from lower margins associated
with pricing pressure in the retail and commercial channel on the Voodoo3 and
Voodoo5 products sold during the year and the significant drop in market price
for 3dfx's remaining inventory in the fourth quarter of fiscal 2001. 3dfx also
took significant additional charges totaling $10.3 million related to the
write-down of inventory due to excess inventories resulting from lower than
anticipated sales volumes. Increased production costs as a result of decreased
production volumes during fiscal 2001 also had a negative impact on gross
margins.
Research and Development. Research and development expenses consist
primarily of compensation and other expenses related to research and development
personnel, occupancy costs of research and development facilities, depreciation
of capital equipment used in product development and engineering costs paid to
3dfx's foundries in connection with manufacturing start-up of new products.
Research and development expenses decreased 1.2% from $66.1 million in the
fiscal year ended January 31, 2000 to $65.4 million in the fiscal year ended
January 31, 2001. This decrease reflects a decrease in personnel costs and
engineering costs resulting from the termination of substantially all employees
in December 2000, mainly offset by an increase in personnel costs related to the
GigaPixel
9
merger and general engineering costs resulting from the development of Voodoo5
and other anticipated products during the first part of fiscal 2001.
Selling, General and Administrative. Selling, general and administrative
expenses include compensation and benefits for sales, marketing, finance and
administration personnel, commissions paid to independent sales representatives,
tradeshow, advertising and other promotional expenses and facilities expenses.
Selling, general and administrative expenses increased 40.3% from $63.5 million
in fiscal year ended January 31, 2000 to $89.1 million in the fiscal year ended
January 31, 2001. The selling, general and administrative expenses relating to
the operations of STB are included in the year ended January 2001, and from the
effective date of the STB merger, May 13, 1999, through January 31, 2000. The
selling, general and administrative expenses relating to the operations of
GigaPixel are included in the fiscal year ended January 31, 2001, from the
effective date of the GigaPixel merger, July 21, 2000. In addition, marketing
costs associated with the Voodoo5 product family launch in fiscal 2001 and
increased legal costs contributed to the increase in selling, general and
administrative expenses in fiscal 2001.
In-Process Research and Development. 3dfx recorded a one-time write-off
for IPR&D in connection with the GigaPixel merger of $66.3 million in the fiscal
year ended January 31, 2001, and a one-time write-off for IPR&D in connection
with the STB merger of $4.3 million in the fiscal year ended January 31, 2000.
Amortization of Goodwill and Other Intangibles. In connection with the
STB merger in fiscal 2000, 3dfx recorded assets representing goodwill of
approximately $37.9 million and intangibles of approximately $19.1 million.
Also, in connection with the GigaPixel merger in fiscal 2001, 3dfx recorded
assets representing goodwill of approximately $103.5 million and intangibles of
approximately $13.2 million. These amounts are being amortized ratably over the
amortization periods of the applicable assets. 3dfx recorded amortization
expense in the amount of $24.5 million and $10.2 for the fiscal years ended
January 31, 2001 and January 31, 2000, respectively.
Impairment of Goodwill and Other Intangibles. During the fiscal year
ended January 31, 2001, 3dfx recorded a charge of $117.1 million for the
impairment of goodwill and other intangibles as previously discussed.
Restructuring Expense. During the fiscal year ended January 31, 2000,
3dfx incurred restructuring expenses totaling approximately $4.4 million.
Approximately $2.6 million of this amount related to downsizing the expense
levels of 3dfx given 3dfx's fiscal 2000 financial losses.
Interest and Other Income (Expense), Net. Interest and other income
(expense), net, decreased from $2.2 million in the fiscal year ended January 31,
2000 to ($4.8 million) in the fiscal year ended January 31, 2001. During fiscal
2001 3dfx took a charge of $3.1 million, which is included in other income
(expense), for the write-off of a minority investment in a private company.
Also, 3dfx earned less interest income during fiscal 2001 due to significantly
lower invested cash balances. In fiscal 2000 and fiscal 2001, 3dfx incurred
interest expense on its revolving credit facility and its outstanding equipment
line of credit and capital lease balances.
Provision (Benefit) for Income Taxes. 3dfx recorded an income tax
benefit of $36.5 million for the fiscal year ended January 31, 2001, an
effective tax rate of 10%. 3dfx recorded a benefit for income taxes of $10.3
million for the fiscal year ended January 31, 2000, an effective tax rate of
14%. Management has assessed the realizability of deferred tax assets recorded
at January 31, 2001 based upon the weight of available evidence, including such
factors as expected future taxable income primarily related to the expected gain
on the sale of assets to NVIDIA Sub. Management believes that it is more likely
than not that 3dfx will not realize a portion of its deferred tax assets and,
accordingly, a valuation allowance of $46.8 million has been established for
such amounts at January 31, 2001.
ONE MONTH PERIOD ENDED JANUARY 31, 1999
As a result of 3dfx's change in fiscal year to January 31 from December
31 commencing on February 1, 1999, 3dfx has reported separately the one-month
period ended January 31, 1999. During this period, revenues for 3dfx were $17.0
million and were principally attributable to the sales of 3dfx's Voodoo Banshee
and Voodoo2 products. Costs of revenues were $14.5 million with gross profit as
a percent of revenues equal to approximately 15%. This is below the previous
year's gross profit percentage due primarily to the December 1998 announcement
of 3dfx's planned merger with STB. This contributed to lost revenues from former
customers and price reductions to existing customers as 3dfx announced its
intention to enter the graphics board business and compete with its existing
customer base. Research and Development expenditures were $3.3 million for the
period and Sales, General, and Administrative expenses were $4.6 million for the
period. Interest and Other Income was $0.3 million, derived primarily from
3dfx's cash balances. There was a tax benefit in the period ended January 31,
1999 in the amount of $1.6 million. This benefit equates to a tax rate of 32%
and is consistent with 3dfx's recent tax rate percentages.
YEARS ENDED JANUARY 31, 2000 (FISCAL 2000) AND DECEMBER 31, 1998 (FISCAL 1998)
Revenues. Revenues are recognized upon product shipment. 3dfx's total
revenues were $360.5 million for the fiscal year ended January 31, 2000 and
$202.6 million for the fiscal year ended December 31, 1998. Fiscal 2000 revenues
includes revenues of $299.6 million generated from sales of board-level products
incorporating Voodoo3 technology by STB following the May 13, 1999,
10
effective date of the merger. Revenues in fiscal 2000 were principally
attributable to sales of 3dfx's Voodoo3 and Voodoo Banshee products.
Substantially all of the revenues in fiscal 1998 were derived from sale of
3dfx's Voodoo Banshee chip and its Voodoo2 and Voodoo Graphics chipsets.
Gross Profit. Gross profit consists of total revenues less cost of
revenues. Cost of revenues consists primarily of costs associated with the
purchase of components and the procurement of semiconductors from 3dfx's
contract manufacturers, labor and overhead associated with procurement,
assembly, testing, packaging, warehousing and shipping, and warranty costs.
Gross profit as a percentage of revenues was 20% and 41% for the fiscal years
ended January 31, 2000 and December 31, 1998, respectively. The decrease can be
primarily attributed to the gross profit generated from the sales of board-level
products, which have lower margins as compared with the margins on chip-only
products. In addition, the decrease in gross profit as a percentage of revenues
resulted from lower margins associated with the Voodoo3 and Voodoo Banshee
products sold in fiscal 2000, as compared with the margins of Voodoo2 and Voodoo
Graphics products sold in fiscal 1998. 3dfx's future gross profits will be
affected by the overall level of sales; the mix of products sold in a period;
manufacturing yields; the impact of price protection credits granted to 3dfx's
customers; and 3dfx's ability to reduce product procurement costs.
Research and Development. Research and development expenses consist
primarily of compensation and other expenses related to research and development
personnel, occupancy costs of research and development facilities, depreciation
of capital equipment used in product development and engineering costs paid to
3dfx's foundries in connection with manufacturing start-up of new products.
Research and development expenses increased 94% from $34.0 million in the fiscal
year ended December 31, 1998 to $66.1 million in the fiscal year ended January
31, 2000. Included in the fiscal 2000 amount is $7.9 million in research and
development expenses attributable to the operations of STB following the May 13,
1999 effective date of the merger. Excluding the impact of expenses related to
STB's operations, research and development expenses increased 70% in fiscal 2000
as compared to the year ended December 31, 1998. This increase reflects an
increase in personnel costs, common cost allocations and engineering costs
resulting from the development of Voodoo3 and other future products. 3dfx
expects to continue to make substantial investments in research and development
and anticipates that research and development expenses will increase in absolute
dollars in future periods, although these expenses as a percentage of total
revenues will fluctuate.
Selling, General and Administrative. Selling, general and administrative
expenses include compensation and benefits for sales, marketing, finance and
administration personnel, commissions paid to independent sales representatives,
tradeshow, advertising and other promotional expenses and facilities expenses.
Selling, general and administrative expenses increased 79% from $35.4 million in
fiscal year ended December 31, 1998 to $63.5 million in the fiscal year ended
January 31, 2000. The increase is primarily attributable to the inclusion of
$36.8 million in expenses relating to the operations of STB following the May
13, 1999, effective date of the merger. Excluding the impact of expenses related
to STB's operations, selling, general and administrative expenses decreased 25%
for fiscal 2000, as compared to fiscal 1998. This decrease in selling, general
and administrative expenses is primarily a result of a reduction in selling
expenses due to 3dfx's elimination of the costs of many independent sales
representatives, which were supplanted by the combined 3dfx direct sales force,
partially offset by increases in 3dfx's bad debt expense. 3dfx expects that
selling, general and administrative expenses will increase in absolute dollars
in future periods, although such expenses as a percentage of total revenues will
fluctuate.
In-Process Research and Development. 3dfx also recorded a one-time
write-off for in-process research and development in connection with the STB
merger of $4.3 million in the fiscal year ended January 31, 2000.
Restructuring Expense. During the fiscal year ended January 31, 2000,
3dfx incurred restructuring expenses totaling approximately $4.4 million.
Approximately $2.6 million of this amount related to downsizing the expense
levels of 3dfx given 3dfx's fiscal 2000 financial losses. In August 1999, 3dfx
recorded a restructuring charge of $1.8 million, representing a one-time
reduction in workforce related to the merger with STB.
Amortization of Goodwill and Other Intangibles. In connection with the
STB merger, 3dfx recorded assets representing goodwill of approximately $37.9
million and intangibles of approximately $19.1 million. These amounts will be
amortized ratably over the amortization periods of the applicable assets. For
the fiscal year ended January 31, 2000, 3dfx recorded $10.2 million in related
amortization.
Interest and Other Income (Expense), Net. Interest and other income
(expense), net decreased from $15.9 million in the fiscal year ended December
31, 1998 to $2.2 million in the fiscal year ended January 31, 2000. The decrease
is primarily related to a one-time recognition of income in fiscal 1998 as a
result of the Sega litigation settlement, as well as decreased earnings from
lower invested cash balances. In addition, in fiscal 2000 3dfx incurred interest
expense on its revolving credit facility and its outstanding equipment line of
credit and capital lease balances.
Provision (Benefit) For Income Taxes. 3dfx recorded an income tax
benefit of $10.3 million for the fiscal year ended January 31, 2000, an
effective tax rate of 14%. 3dfx recorded a provision for income taxes of $7.7
million for the fiscal year ended December 31, 1998, an effective tax rate of
26%.
11
Management assessed the realizability of deferred tax assets recorded
based upon the weight of available evidence, including such factors as the
expected future taxable income. Management believed that it was more likely than
not that 3dfx would not realize a portion of its deferred tax assets and,
accordingly, a valuation allowance of $11.1 million was established for such
amounts at January 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
As of January 31, 2001, 3dfx had net working capital of $22.4 million
including cash and cash equivalents of $9.4 million. Net cash used in operating
activities during the fiscal year ended January 31, 2001 of approximately $49.7
million was due primarily to a net loss of $340.5 million, deferred income taxes
of $28.0 million, and a decrease in accrued and other liabilities of $16.6
million, partially offset by the immediate write-off of acquired in-process
research and development of $66.3 million, depreciation of $24.1 million and
amortization of goodwill and other intangibles of $24.4 million, impairment of
goodwill and other intangibles of $117.1 million, write-down of fixed assets of
$5.5 million, as well as decreases in accounts receivable, inventory and other
assets of $58.8 million, $22.7 million and $9.0 million, respectively. Net cash
used in operating activities in the fiscal year ended January 31, 2000 of
approximately $33.5 million was due primarily to a net loss of $63.3 million,
and increases of $5.3 million in other assets, decreases in accrued expenses of
$8.3 million, partially offset by adjustments of depreciation of $14.9 million
and amortization of $10.2 million, and the in-process research and development
write-off of $4.3 million, as well as decreases in accounts receivable and
inventory of $7.1 million and $5.3 million, respectively. Net cash provided by
operating activities in fiscal 1998 was due primarily to net income of $21.7
million, and increases of $28.5 million in accounts payable and $13.3 million in
accrued liabilities, partially offset by increases of $20.1 million in inventory
due to the increase in manufacturing to meet customer demand and $24.9 million
in accounts receivable associated with the generation of revenues.
Net cash provided by investing activities in the fiscal year ended
January 31, 2001 of approximately $20.8 million due to net sales of short term
investments of $24.0 million, net proceeds from the GigaPixel merger of $5.3
million, and proceeds from the sale of property and equipment of $9.1 million,
partially offset by purchases of property and equipment of $17.7 million. Net
cash used in investing activities was approximately $5.4 million and $10.9
million in the fiscal years ended January 31, 2000 and December 31, 1998,
respectively, and was due in each period to the purchase of investments and to
the purchase of property and equipment. In addition, $8.7 million was used in
the merger of STB, offset by cash acquired as a result of the merger of $29.9
million in fiscal year 2000, 3dfx does not have any significant capital spending
or purchase commitments other than normal purchase commitments and commitments
under leases.
Net cash used in financing activities for the fiscal year ended January
31, 2001 of approximately $3.5 million was primarily due to net payments of a
$20.5 million on a revolving credit facility and a term loan, offset by proceeds
from the $15.0 million term loan from NVIDIA Sub provided under the terms of the
asset purchase agreement and proceeds of $4.1 million from the issuance of
common stock. 3dfx has repaid in full all of its indebtedness under its $25
million revolving credit facility and its $3.0 million term loan. Net cash
provided by financing activities was approximately $7.0 million in the fiscal
year ended January 31, 2000, due primarily to net proceeds on the drawdown from
its line of credit, partially offset by the net repurchase of common stock of
$1.9 million and payments on its capital lease obligations. Net cash provided by
financing activities was approximately $58.1 million in the fiscal year ended
December 31, 1998, due primarily to proceeds from a public offering in March
1998.
3dfx has been obligated under a five-year agreement to lease a facility
in Richardson, Texas, which was previously the corporate headquarters of STB.
Construction of the 210,000 square foot facility was completed in December 1998.
The total cost of the land and building was approximately $22.8 million. 3dfx
previously entered into an interest rate swap agreement that fixed the interest
rate on a majority of the lease obligation at 7.55%. During the fourth quarter
of fiscal 2001, the swap agreement was cancelled in exchange for a cash payment
by 3dfx of approximately $300,000. During January 2001, 3dfx exercised its
option to cause the building to be sold and entered into an operating lease for
approximately 50% of the space for the next six months. The proceeds of the sale
were used to retire the underlying debt. A net loss of $2.1 million was recorded
on the sale of the building, which is reflected in other income (expense) for
fiscal 2001.
3dfx held an option to purchase real estate adjoining its Texas
headquarters. The option entitled 3dfx to purchase the real estate for $3.9
million, but the option would increase to the current market value of the real
estate if the option was not exercised before December 31, 2000. 3dfx exercised
the option in December 2000, and has sold the real estate to a third party for
$6.7 million, resulting in a gain of $2.8 million, which is reflected in other
income (expense) for fiscal 2001.
3dfx's principal anticipated liquidity requirements involve reaching
settlements with its vendors in reduction of its accounts payable, as well as
reaching mutually satisfactory settlements with the lessors to its facilities
and equipment leases. In addition, unknown or contingent liabilities could
require substantial cash resources. 3dfx is seeking to address each of the
foregoing liquidity requirements, as well as the continuing expenses associated
with the winding up of its business and the overhead associated with its Juarez,
Mexico manufacturing facility, with its remaining cash and other resources.
On April 18, 2001, 3dfx completed the sale of substantially all of its
assets to NVIDIA Sub and at the closing received cash in the net amount of $55.0
million. Subject to 3dfx in the future satisfying certain additional conditions
provided for in the NVIDIA asset purchase agreement, NVIDIA Sub will also pay to
3dfx 1,000,000 shares of common stock of NVIDIA or a combination of up to
12
$25.0 million in cash and a lesser number of shares of NVIDIA common stock. 3dfx
is also seeking to liquidate its remaining assets and to reduce its lease
obligations through negotiations with its lessors and/or assignments or
subleases of its leased properties.
3dfx believes that it will have sufficient cash to pay all of its and
its subsidiaries' known current and determinable liabilities. However, the
amount of unknown or contingent liabilities cannot be quantified and could
decrease or eliminate any remaining assets. At this time, 3dfx cannot determine
if there will be any assets remaining after paying for, or providing for the
payment of, all of its and its subsidiaries' debts and liabilities. Only if
there are assets remaining after the payment or provision for 3dfx's and its
subsidiaries' debts and liabilities, will 3dfx shareholders receive a
distribution of those assets.
IMPACT OF ADOPTION OF NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS 133, as amended, requires
that all derivative instruments be recorded on the balance sheet at their fair
market value. Changes in the fair market value of derivatives are recorded each
period in current earnings or comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction, and if so, the type of
hedge transaction. Substantially all of 3dfx's revenues and the majority of its
costs are denominated in U.S. dollars, and 3dfx has not entered into any
derivative contracts. The effective date of SFAS 133, as amended, is for fiscal
quarters of fiscal years beginning after June 15, 2000. As 3dfx holds no
derivative financial instruments at January 31, 2001, 3dfx does not expect that
the adoption of SFAS 133 will have a material effect on its financial position
or results of discontinued operations.
RISK FACTORS
This Report contains certain forward-looking statements within the
meaning of the federal securities laws. 3dfx's actual results and the timing of
certain events could differ greatly from those anticipated in these
forward-looking statements as a result of known and unknown factors, including
the risks faced by 3dfx described below. The risks and uncertainties described
below are not the only ones facing 3dfx. Additional risks and uncertainties not
presently known by 3dfx or that 3dfx does not currently believe are important
may also harm 3dfx's business operations. If any of the following risks actually
occur, 3dfx's business, financial conditions or results of operations could be
seriously harmed. The following factors and other information in this Report
should be considered carefully in evaluating 3dfx and an investment in 3dfx's
common stock.
3DFX CANNOT DETERMINE AT THIS TIME THE AMOUNT OF DISTRIBUTIONS TO ITS
SHAREHOLDERS, OR WHETHER ANY DISTRIBUTIONS WILL BE MADE, BECAUSE THERE ARE A
VARIETY OF FACTORS, SOME OF WHICH ARE OUTSIDE OF 3DFX'S CONTROL, THAT COULD
AFFECT THE ABILITY OF 3DFX TO MAKE DISTRIBUTIONS TO ITS SHAREHOLDERS.
3dfx cannot determine at this time the amount of or whether there will
be any distributions to its shareholders because that determination depends on a
variety of factors, including, but not limited to, the value of 3dfx's remaining
assets, the amount of 3dfx's and its subsidiaries' known and unknown debts and
liabilities to be paid in the future, the resolution of pending litigation and
other contingent liabilities, 3dfx's ability to reduce its lease obligations,
general business and economic conditions and other matters. Examples of
uncertainties that could reduce the value or eliminate distributions to 3dfx
shareholders include the following:
- The amount of 3dfx's and its subsidiaries' debts and liabilities
and the estimate of the costs and expenses of 3dfx's
dissolution, including any resulting tax liabilities. If actual
debts, liabilities, costs and expenses exceed 3dfx's
expectations, actual net proceeds will be reduced and may result
in no distributions to shareholders at all.
- If liabilities of 3dfx or its subsidiaries that are unknown or
contingent later arise or become fixed in amount and must be
satisfied or reserved for as part of the dissolution.
- If the resolution of pending or future litigation, including the
lawsuit with CagEnt Technologies Inc., results in greater than
anticipated liabilities or expenses.
- 3dfx will be entitled to receive an advance of up to $25 million
from NVIDIA Sub only if the advance will pay 3dfx's and its
subsidiaries' remaining debts and liabilities. If the advance is
made, the number of shares of common stock of NVIDIA receivable
by 3dfx from the asset sale will be reduced.
- Delays in completing the dissolution of 3dfx could result in
additional expenses and result in no distributions to 3dfx
shareholders.
- A decline in the value of NVIDIA's common stock.
For the foregoing reasons, there can be no assurance that there will be
any distribution to shareholders.
13
3DFX MAY NOT BE ABLE TO SATISFY ITS DEBT OBLIGATIONS AND MAY FILE OR BE FORCED
INTO BANKRUPTCY BY ITS CREDITORS.
The proceeds provided by the asset sale to NVIDIA Sub may not be
sufficient to satisfy all of 3dfx's known and unknown outstanding debts and
liabilities. In the event that the proceeds from the NVIDIA asset sale are
insufficient to pay its outstanding debts and other liabilities, 3dfx's
creditors will be able to foreclose on any collateral granted by 3dfx to secure
its indebtedness, and may force 3dfx into involuntary bankruptcy. Further, in
the event that there are insufficient proceeds to pay or otherwise provide for
3dfx debts and obligations, there will be no assets available for distribution
to 3dfx's shareholders.
THE TIMING OF THE DISSOLUTION OF 3DFX IS NOT KNOWN AND THEREFORE 3DFX CANNOT
DETERMINE THE TIMING OF ANY DISTRIBUTIONS TO ITS SHAREHOLDERS.
Several factors affect the timing of 3dfx's ability to dissolve,
including the timing of the sale of 3dfx's remaining assets, 3dfx's ability to
determine the amount of its and its subsidiaries' known and unknown debts and
liabilities and 3dfx's ability to resolve litigation and other contingent
liabilities. Any delay in the dissolution of 3dfx will result in a delay in
making distributions, if any, to 3dfx shareholders.
3DFX IS UNABLE TO SPECIFY THE TYPE OF ASSETS THAT MAY BE DISTRIBUTED TO 3DFX'S
SHAREHOLDERS, IF ANY DISTRIBUTION IS MADE.
3dfx expects to receive a combination of cash and shares of NVIDIA
common stock from the asset sale to NVIDIA Sub. 3dfx also expects to receive
additional proceeds from the sale of its remaining assets, although it may not
be successful in doing so. 3dfx may distribute the shares of NVIDIA common stock
received by it upon its dissolution directly to its shareholders, or it may sell
these shares in the open market or contribute the shares to a liquidating trust
for the benefit of 3dfx's shareholders. Further, 3dfx may elect to directly
distribute shares of NVIDIA common stock to some of its shareholders, while
distributing an equivalent per share value in cash to others who would otherwise
be entitled to receive a fractional amount or small number of shares of NVIDIA
common stock. At this time, 3dfx is unable to provide specifics about the type
of assets that 3dfx's shareholders may receive or what the value of those assets
might be at the time of distribution.
3DFX'S SHAREHOLDERS COULD BE REQUIRED TO RETURN DISTRIBUTIONS IF CONTINGENT
RESERVES ARE INSUFFICIENT TO SATISFY 3DFX'S LIABILITIES.
If 3dfx (or a liquidating trust to which 3dfx's assets are transferred)
makes a distribution to its shareholders but maintains inadequate reserves for
the payment of its and its subsidiaries debts and liabilities, each shareholder
could be required to return any additional amounts owed, up to the amount of the
total distribution that the shareholder received. A distribution to 3dfx's
shareholders could be delayed or diminished due to the need to make adequate
provisions for 3dfx's and its subsidiaries' debt and liabilities, including
contingent liabilities associated with lawsuits and threatened claims against
3dfx and its subsidiaries.
The determination of whether a distribution is made and the amount of
the distribution depends on 3dfx's ability to pay, or provide for the payment
of, its and its subsidiaries' debts and liabilities, including contingent
liabilities related to lawsuits and threatened claims. If these contingent
liabilities later arise or become fixed in amount, 3dfx will be required to pay,
or provide for the payment of, such liabilities from any remaining assets. This
could result in the delay of distributions to 3dfx shareholders and the
substantial reduction or elimination of any distributions.
If 3dfx's or its subsidiaries' creditors believe that 3dfx has not
adequately reserved assets for the payment of its or its subsidiaries' debts and
liabilities, these creditors may be able to obtain from a court an injunction
that prohibits 3dfx from making distributions to its shareholders. This action
could delay or substantially diminish the distributions to be made to 3dfx's
shareholders or holders of beneficial interests of the liquidating trust, as the
case may be.
3DFX MAY NOT BE ABLE TO DISPOSE OF ITS REMAINING ASSETS FOR VALUES EQUALING OR
EXCEEDING THOSE CURRENTLY DESIRED BY 3DFX.
Many factors affect the prices that 3dfx may receive for 3dfx's
remaining assets, including availability of buyers for these assets and
perceived quality of these assets. Many of these factors are beyond 3dfx's
control. As a result of the foregoing, 3dfx may not be able to sell or otherwise
dispose of its assets for prices equaling or exceeding those desired by 3dfx or
currently offered in the asset sale.
3DFX'S BOARD OF DIRECTORS MAY AMEND THE PLAN OF DISSOLUTION.
3dfx's board of directors and shareholders have adopted a plan of
dissolution for the liquidation, winding up and dissolution of 3dfx. 3dfx's
board of directors has reserved the right, in its sole discretion, to amend the
plan of dissolution unless it determines that the amendment would materially and
adversely affect 3dfx's shareholders' interests.
14
SINCE A MAJORITY OF 3DFX'S SHAREHOLDERS HAVE APPROVED OF THE DISSOLUTION OF
3DFX, SALES OF THE REMAINING ASSETS WOULD NOT BE SUBJECT TO SHAREHOLDER
APPROVAL.
Since a majority of 3dfx's shareholders have approved of the dissolution
of 3dfx, the 3dfx board of directors has broad authority to sell any or all of
the remaining assets of 3dfx on such terms as the board of directors determines
advisable or appropriate, even if those terms may not be acceptable to 3dfx
shareholders. 3dfx shareholders will not have a subsequent opportunity to vote
on any disposition of 3dfx's remaining assets.
3DFX COMMON STOCK WILL BE DELISTED FROM THE NASDAQ NATIONAL MARKET ON
MAY 16, 2001.
The trading price of 3dfx's common stock has declined significantly in
recent periods. 3dfx has received a delisting notice from Nasdaq due to its
failure to maintain a minimum bid of at least $1.00 per share. The notice
provides that the 3dfx common stock will be delisted effective as of the opening
of business on May 16, 2001. Once delisting occurs, the 3dfx common stock will
likely be traded in the over-the-counter bulletin board of the National
Association of Securities Dealers, Inc. or in the so-called "pink sheets." The
delisting of 3dfx's common stock would mean that, among other things, fewer
investors would have access to trade 3dfx's common stock, thus reducing demand
for the stock. In addition, 3dfx's common stock would be subject to penny stock
regulations, which could cause fewer brokers and market makers to execute trades
in 3dfx's common stock. These factors would likely cause 3dfx's common stock
price to further decrease.
The penny stock regulations require that broker-dealers who recommend
penny stocks to persons other than institutional accredited investors must make
a special suitability determination for the purchaser, receive the purchaser's
written agreement to the transaction prior to the sale and provide the purchaser
with risk disclosure documents that identify risks associated with investing in
penny stocks. Furthermore, the broker-dealer must obtain a signed and dated
acknowledgement from the purchaser demonstrating that the purchaser has actually
received the required risk disclosure document before effecting a transaction in
penny stock. These requirements have historically resulted in reducing the level
of trading activity in securities that become subject to the penny stock rules.
Holders of 3dfx's common stock would likely find it more difficult to sell their
shares of common stock, which would likely have an adverse effect of the market
price of the common stock.
ONCE 3DFX IS DISSOLVED OR ALL OF ITS ASSETS ARE TRANSFERRED TO A LIQUIDATING
TRUST, IT WILL CLOSE ITS STOCK TRANSFER BOOKS AND NO TRANSFER OF 3DFX'S COMMON
STOCK WILL BE RECORDED.
Once 3dfx is dissolved or all of its assets are transferred to a
liquidating trust, it will close its stock transfer books and no transfer of
3dfx's common stock will be recorded. Thereafter, certificates representing 3dfx
common stock will not be assignable or transferable on 3dfx's books except by
will, intestate succession or operation of law. The equity interests of all of
3dfx's shareholders will be fixed on the basis of their respective stock
holdings at the close of business on the final record date for the distribution
of all remaining assets of 3dfx, and after the final record date, any
distributions made by 3dfx will be made solely to the shareholders of record on
such date, except as may be necessary to reflect subsequent transfers recorded
on 3dfx's books as may be necessary to reflect subsequent transfers of 3dfx's
common stock as a result of any assignments by will, intestate succession or
operation of law. For any other trades after the final record date, the seller
and purchaser of 3dfx's stock will need to negotiate and rely on contractual
obligations between themselves with respect to the right to a liquidating
distribution arising from ownership of 3dfx's common stock.
3DFX IS AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO ITS STOCK PRICE
VOLATILITY.
Historically, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. 3dfx may be the target of litigation like this. Securities
litigation would result in substantial costs and divert management's attention
and resources, which would seriously harm 3dfx's ability to complete its
dissolution and may reduce or eliminate the assets available for distribution to
3dfx shareholders.
3DFX MAY BE SUBJECT TO CLAIMS OF FRAUDULENT CONVEYANCE BY 3DFX'S CREDITORS.
3dfx has incurred substantial indebtedness. Under federal and state
fraudulent conveyance statutes in a bankruptcy, reorganization or rehabilitation
case or similar proceeding or a lawsuit by unpaid creditors of 3dfx, under
certain circumstances, such court could void the asset sale to NVIDIA Sub or the
sale of its remaining assets and/or take other action detrimental to 3dfx and
its shareholders. These circumstances include the findings that, at the time
3dfx consummated the asset sale, (i) the assets were sold to hinder, delay or
defraud current or future creditors or (ii) (A) 3dfx received less than
reasonably equivalent value or fair consideration for its assets and (B) 3dfx,
(1) was insolvent or was rendered insolvent by reason of an asset sale, (2) was
engaged, or about to engage, in a business or transaction for which its assets
constituted unreasonably small capital, (3) intended to incur, or believed that
it would incur, debts beyond its ability to pay as such debts matured (as all of
the foregoing terms are defined in or interpreted under such fraudulent
conveyance statutes) or (4) was a defendant in an action for money damages, or
had a judgment for money damages docketed against it (if, in either case, after
final judgment, the judgment is unsatisfied).
The measure of insolvency for purposes of the foregoing considerations
will vary depending upon the federal or local law that is being applied in any
such proceeding. Generally, however, 3dfx would be considered insolvent if, at
the time it consummated an asset sale, either (i) the fair market value (or fair
saleable value) of its assets is less than the amount required to pay its total
existing debts
15
and liabilities (including the probable liability on contingent liabilities) as
they become absolute and mature or (ii) it is incurring debts beyond its ability
to pay as such debts mature.
3DFX MAY BE UNABLE TO NEGOTIATE SETTLEMENTS WITH RESPECT TO ITS REMAINING
LIABILITIES.
3dfx is currently in the process of negotiating settlements with respect
to its and its subsidiaries' remaining debts and liabilities which include
property leases, contracts and trade payables. If 3dfx is unable to successfully
negotiate satisfactory resolutions of these obligations, it will have less or no
cash proceeds to distribute to its shareholders.
3DFX WILL CONTINUE TO INCUR THE EXPENSE OF COMPLYING WITH REPORTING REQUIREMENTS
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT").
3dfx is obligated to comply with applicable reporting requirements of
the Exchange Act, even though compliance with such reporting requirements is
economically burdensome. The Exchange Act provides for an exemption which allows
an issuer to terminate its reporting obligations under the Exchange Act if it
has less than 300 record holders or less than 500 record holders and its total
assets have not exceeded $10.0 million on the last day of each of the issuer's
most recent three fiscal years. At this time, 3dfx has approximately 452 record
holders and has had in excess of $10.0 million in total assets for the last
three fiscal years. As such, 3dfx is unable to terminate its reporting
obligations. 3dfx cannot predict if, and when, it will meet the requirements for
the exemption. The expenses for the preparation and filing of periodic reports
will reduce the cash available for distribution to 3dfx shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate risk. 3dfx's cash equivalents are exposed to financial
market risk due to fluctuation in interest rates, which may affect interest
income. Due to the short term nature of the investment portfolio, 3dfx would not
expect operating results or cash flows to be affected to any significant degree
by the effect of a sudden change in market interest rates. 3dfx does not use its
investment portfolio for trading or other speculative purposes.
Foreign currency exchange risk. Substantially all of 3dfx's sales and
expenses are denominated in U.S. dollars, and, as a result, 3dfx has relatively
little exposure to foreign currency exchange risk. 3dfx does not currently enter
into forward exchange contracts to hedge exposures denominated in foreign
currencies or any other derivative financial instruments for trading or
speculative purposes. However, in the event exposure to foreign currency risk
increases, 3dfx may choose to hedge those exposures.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements and supplemental data
required by this item and set forth at the pages indicated in Item 14(a) of this
Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The current executive officers and directors of 3dfx are as follows:
[Enlarge/Download Table]
NAME AGE POSITION
---- --- --------
Alex Leupp .................... 61 President, Chief Executive Officer and Director
Scott D. Sellers .............. 32 Executive Vice President, Chief Technical Officer and Director
Richard A. Heddleson .......... 50 Chief Financial Officer
Gordon A. Campbell(1) (2) .... 56 Chairman of the Board of Directors
James L. Hopkins .............. 56 Director
James Whims (1)(2) ............ 46 Director
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
ALEX LEUPP has served as President and Chief Executive Officer of 3dfx
since December 1999 and has served as a director of 3dfx since October 1998.
From December 1998 until November 1999, Mr. Leupp was President and Chief
Executive Officer of Chip Express Corporation, a semiconductor company. Mr.
Leupp spent 12 years with Siemens Microelectronics, Inc, a semiconductor
company, where his most recent position was President and Chief Executive
Officer.
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SCOTT D. SELLERS has served as Chief Technical Officer of 3dfx since May
1999. Between August 1998 and May 1999, Mr. Sellers served as Senior Vice
President, Product Development for 3dfx. Mr. Sellers co-founded 3dfx in August
1994 and served as Vice President, Research and Development from January 1995 to
August 1998. He has also served as a director of 3dfx since March 1995. Mr.
Sellers was Principal Engineer at MediaVision Technology, Inc., a multimedia
computer products company, from June 1993 to June 1994.
RICHARD A. HEDDLESON has served as Chief Financial Officer since October
2000. Prior to joining 3dfx, Mr. Heddleson served as Chief Financial Officer of
Evoke Software Corporation from February 1997 to February 2000, and as Chief
Financial Officer at Resumix, Inc. from April 1993 to June 1996.
GORDON A. CAMPBELL has served as the Chairman of the Board of Directors
of 3dfx since August 1994 when he co-founded 3dfx. Mr. Campbell also served as
President and Chief Executive Officer of 3dfx from January 1995 to December
1996. Prior to joining 3dfx, Mr. Campbell founded Techfarm, Inc., a venture
capital investment firm, and has served as President since September 1993. In
1985, Mr. Campbell founded Chips and Technologies, Inc. or CHIPS, a
semiconductor and related device company, and served as Chairman, Chief
Executive Officer and President of CHIPS until July 1993. Mr. Campbell founded
SEEQ Technology, Inc. or SEEQ, a semiconductor and related device company, in
1981. He served as President and Chief Executive Officer of SEEQ from 1981 to
1985. Mr. Campbell currently serves as a director of Palm, Inc. and Bell
Microproducts, Inc., is the Chairman of the board of Cobalt Networks, Inc. and
is the managing partner of TechFund Capital, a venture capital fund, since
August 1997.
JAMES L. HOPKINS has served as a director of 3dfx since 3dfx's merger
with STB in May 1999. Mr. Hopkins is the Chairman, President and Chief Executive
Officer of Micrografx, Inc., a provider of graphics software. Mr. Hopkins served
as a Managing Director of Hoak Breedlove Wesneski & Co., an investment banking
firm from September 1999 to October 2000. Mr. Hopkins served as an officer of
3dfx from May 1999 (upon completion of the 3dfx/STB merger) to September 1999.
Prior to the 3dfx/STB merger, Mr. Hopkins was the Chief Financial Officer and
Vice President of Strategic Marketing for STB and served in these capacities
since December 1994. Mr. Hopkins' responsibilities in these positions included
directing European sales and marketing, managing specialized technology products
and planning financial strategy.
JAMES WHIMS has served as a director of 3dfx since November 1996. Mr.
Whims has been a Partner at Techfarm since November 1996. From November 1994
until July 1996, Mr. Whims was the Executive Vice President of Sony Computer
Entertainment, a video game hardware and software company. From 1990 until July
1994, Mr. Whims was Executive Vice President of the Consumer Division of The
Software Toolworks, Inc., a diversified software company. From 1985 to 1988, Mr.
Whims served as Vice President of Sales of Worlds of Wonder, Inc., a toy
products company, which he co-founded.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 (a) of the Exchange Act requires 3dfx's officers and
directors, and persons who own more than 10% of a registered class of 3dfx's
equity securities, to file reports of ownership on Form 3 and changes in
ownership on Form 4 or Form 5 with the Securities and Exchange Commission or SEC
and the National Association of Securities Dealers, Inc. Such officers,
directors and 10% shareholders are also required by SEC rules to furnish 3dfx
with copies of all such forms that they file. Based solely on its review of the
copies of such forms received by 3dfx, or written representations from some
reporting persons that no Forms 5 were required for such persons, 3dfx believes
that its officers, directors and ten percent shareholders have complied with all
Section 16(a) filing requirements applicable to them in fiscal 2001, except that
each of Richard Burns and Stephen A. Lapinski will be filing a Form 5 late.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Gordon Campbell
and James Whims. No executive officer of 3dfx serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of 3dfx's board of directors or
Compensation Committee.
COMPENSATION OF DIRECTORS
Members of 3dfx's board of directors do not receive compensation for
their services as directors. The 3dfx Interactive, Inc. 1997 Director Option
Plan (the "Director Plan") provides that options shall be granted to
non-employee directors of 3dfx pursuant to an automatic nondiscretionary grant
mechanism. Pursuant to such automatic grant mechanism, in fiscal 2001, directors
received the following grants:
[Download Table]
NAME SHARES EXERCISE PRICE
---- ------ --------------
Gordon A. Campbell........................................ 11,000 $7.41
James L. Hopkins.......................................... 5,000 $7.41
James Whims............................................... 6,000 $7.41
George T. Haber........................................... 13,500 $7.41
Andrei M. Manoliu......................................... 13,500 $7.41
17
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth for the years ended December 31, 1998,
January 31, 2000 and January 31, 2001 the compensation earned by (a) 3dfx's
Chief Executive Officer during the fiscal year ended January 31, 2001, (b) each
of the other top four executive officers whose salary and bonus for the fiscal
year ended January 31, 2001 was in excess of $100,000 for services rendered in
all capacities to 3dfx for that year and (c) an individual for whom disclosure
would have been provided pursuant to clause (b) but for the fact that the
individual was not serving as an executive officer of 3dfx throughout the entire
fiscal year ended January 31, 2001 (collectively, the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
[Enlarge/Download Table]
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ----------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
FISCAL SALARY COMPENSATION OPTIONS (#) COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) BONUS ($) (2) (3) ($)
--------------------------- ------ -------- --------- ------------ ------------- ------------
Alex Leupp (4) .................... 2001 $375,000 $ 50,000 $ 8,250 -- --
President, Chief Executive 2000 44,771 50,000 1,500 806,000(4) --
Officer and Director 1998 -- -- -- 13,500(5) --
Scott D. Sellers .................. 2001 $260,000 -- -- 186,000 --
Executive Vice President, 2000 209,230 26,667 -- 270,000 --
Chief Technical Officer and 1998 177,121 25,500 -- 50,000 --
Director
Richard Burns (6) ................. 2001 $205,961 $ 50,000 $118,245(7) 230,000 --
Senior Vice President of 2000 148,077 25,000 56,630 70,000 --
World Wide Sales 1998 -- -- -- -- --
Stephen A. Lapinski (8) ........... 2001 $175,383 $196,000 -- 400,000 --
Senior Vice President, World 2000 -- -- -- -- --
Wide Marketing 1998 -- -- -- -- --
Philip Carmack (9) ................ 2001 $123,269 $203,140 -- 160,000 --
Senior Vice President of 2000 -- -- -- -- --
Engineering 1998 112,961 40,000 -- 5,000 --
Richard A. Heddleson (10) ........ 2001 $ 63,462 -- -- 325,000 --
Chief Financial Officer 2000 -- -- -- -- --
1998 -- -- -- -- --
(1) The salary for the month ended January 31, 1999 for Mr. Sellers
was $15,385.
(2) Represents car allowances, except where otherwise indicated.
(3) Except as otherwise indicated, these shares are subject to
exercise under stock options granted under 3dfx's 1995 Employee
Stock Plan.
(4) Mr. Leupp became the President and Chief Executive Officer of
3dfx in December 1999. Prior to that time he served as an
independent director of 3dfx. Included within the number of
options granted to Mr. Leupp as indicated in the table above in
fiscal 2000 are 6,000 options granted to him in his capacity as
a director of 3dfx under the Director Plan.
(5) The options were granted to Mr. Leupp under the Director Plan.
(6) Mr. Burns resigned from 3dfx in March 2001.
(7) Represents commission paid to Mr. Burns in fiscal year 2000.
18
(8) Mr. Lapinski's employment with 3dfx terminated without cause in
March 2001.
(9) Mr. Carmack resigned from 3dfx in December 2000.
(10) Mr. Heddleson joined 3dfx on October 24, 2000; his current
annualized salary is $275,000.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information relating to stock options
awarded to each of the Named Executive Officers during the year ended January
31, 2001. Except as otherwise noted, all such options were awarded under 3dfx's
1995 Employee Stock Plan.
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INDIVIDUAL GRANTS
---------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL STOCK PRICE
UNDERLYING OPTIONS EXERCISE APPRECIATION FOR
OPTIONS GRANTED TO PRICE OPTION TERM (1)
GRANTED EMPLOYEES IN PER EXPIRATION -------------------------
NAME (2)(3)(4) FISCAL 2001(5) SHARE DATE 5% 10%
---- --------- -------------- -------- ---------- --- ---
Alex Leupp 400,000 13.5% $ 3.09 03/31/03 194,825 409,116
Scott D. Sellers 186,000 6.3% $ 3.09 03/31/03 90,593 190,239
Richard Burns 50,000(6) 1.7% $ 8.94 02/16/10 281,116 712,403
180,000 6.1% $ 3.09 03/31/03 87,671 184,102
Stephen A. Lapinski 150,000(6) 5.1% $ 6.88 05/30/10 843,348 1,644,742
75,000(6) 2.5% $ 4.47 09/05/10 421,674 534,302
175,000 5.9% $ 3.09 03/31/03 85,236 178,988
Philip Carmack 160,000 5.4% $ 3.09 03/31/03 77,930 163,646
Richard A. Heddleson 325,000 11.0% $ 4.13 10/23/10 1,827,253 2,139,201
----------
(1) Potential gains are net of the exercise price but before taxes
associated with the exercise. The 5% and 10% assumed annual
rates of compounded stock appreciation based upon the exercise
price per share are mandated by the rules of the SEC and do not
represent 3dfx's estimate or projection of the future common
stock price. Actual gains, if any, on stock option exercises are
dependent on the future financial gains, if any, on stock option
exercises are dependent on the future financial performance of
3dfx, overall market conditions and the option holders'
continued employment through the vesting period. This table does
not take into account any appreciation in the fair market value
of 3dfx common stock from the date of grant to the date of this,
other than the columns reflecting assumed rates of appreciation
of 5% and 10%.
(2) Except as otherwise indicated, options become exercisable 50% on
June 30, 2001, and the remaining 50% on March 31, 2002.
(3) Options were granted at an exercise price equal to the fair
market value of 3dfx's common stock on the date of grant. The
exercise price may be paid in cash, check, promissory note,
delivery of already-owned shares of 3dfx's common stock subject
to some conditions, authorization to 3dfx to retain from the
total number of shares for which the option is exercised that
number of shares having a fair market value on the date of
exercise equal to the exercise price for the total number of
shares as to which the option is exercised, delivery of a
properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to 3dfx the amount
of sale or loan proceeds required to pay the exercise price, or
any combination of the foregoing methods of payment or such
other consideration or method of payment to the extent permitted
under applicable law.
(4) These shares are subject to exercise under stock options granted
under 3dfx's 1995 Employee Stock Plan.
(5) The calculation is based on the aggregate number of options
granted to employees in fiscal 2001, excluding the options that
were canceled in October 2000.
(6) The options vest 25% in the first year following the date of
grant and 2.083% per month thereafter.
19
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
None of the Named Executive Officers exercised any Options in fiscal
year ended January 31, 2001. The following table sets forth some information
regarding the stock options held as of January 31, 2001 by the Named Executive
Officers.
[Enlarge/Download Table]
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
SHARES OPTIONS AT VALUE OF UNEXERCISED
ACQUIRED JANUARY 31, 2001 IN-THE-MONEY OPTIONS AT
ON (#) (1) JANUARY 31, 2001 ($) (2)
EXERCISE VALUE ------------------------------ -------------------------------
NAMES (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----- -------- ------------ ----------- ------------- ----------- -------------
Alex Leupp ............... -- -- 7,906 400,000 -- --
Scott D. Sellers ......... -- -- -- 211,000 -- --
Richard Burns ............ -- -- -- 180,000 -- --
Stephen A. Lapinski ...... -- -- -- 175,000 -- --
Philip Carmack ........... -- -- -- -- -- --
Richard A. Heddleson ..... -- -- -- 325,000 -- --
(1) Options granted under 3dfx's 1995 Employee Stock Plan may be
exercised by the holder thereof prior to vesting with the shares
purchased thereby subject to repurchase by 3dfx until fully
vested. The table presents options as exercisable according to
the vesting schedule of the option.
(2) Based upon the last sale price of 3dfx's common stock on January
31, 2001, $0.34 per share, minus the exercise price.
EMPLOYMENT AGREEMENTS, SEVERANCE ARRANGEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
3dfx is a party to employment agreements with some of its senior
executive officers, including Alex Leupp, Scott Sellers, Stephen Lapinski,
Richard Burns and Al Woodhull. These employment agreements were amended
effective February 1, 2001. Prior to their amendment, these agreements provided
for limited severance and other benefits (continued payment of base pay for up
to one year and reimbursement of COBRA premiums for group medical coverage) if
3dfx terminated the executive's employment without cause, and before the
occurrence of a change of control. Following a change of control, which was
defined to include the closing of certain types of transactions that would
include the asset sale with NVIDIA Sub, the agreements provided for a lump sum
severance payment equal to one times the executive's base salary (1.25x in the
case of 3dfx's chief executive officer, Dr. Leupp) plus one times the
executive's targeted bonus for the year (1.25x in the case of Dr. Leupp). As
amended, these agreements provide for a smaller lump sum severance payment and
COBRA premium reimbursement benefits. Except with respect to Mr. Burns, who was
entitled to receive a lump sum severance benefit immediately upon termination of
his employment, the lump sum severance benefits to be paid to the other senior
executive officers are not payable until after 3dfx's payment of all of its
fixed and ascertainable debts and liabilities.
On December 21, 2000, Mr. Carmack resigned from 3dfx. On March 9, 2001,
Messrs. Woodhull and Lapinski were terminated by 3dfx without cause, and on
March 2, 2001, Mr. Burns' employment with 3dfx expired pursuant to the terms of
his employment agreement with 3dfx.
Pursuant to a letter agreement entered into with Scott Sellers, in the
event there is a change of control of 3dfx and such executive is terminated
other than for cause within one year following the effective date of such change
of control, 25% of Mr. Sellers' stock subject to 3dfx's repurchase option under
a restricted stock purchase agreement shall be released from this repurchase
option (or all of such stock if less than 25% of Mr. Sellers' stock remains
subject to 3dfx's repurchase option). For purposes of this letter agreement a
"change of control" means the (i) the sale of all or substantially all of 3dfx's
assets, or (ii) a consolidation or merger of 3dfx with or into any other
corporation (other than a wholly-owned subsidiary of 3dfx) or engagement in a
transaction or series of transactions in which more than 50% of the voting power
of 3dfx is disposed. Termination other than for cause includes constructive
termination resulting from (i) the reduction of such employee's rate of
compensation, (ii) the reduction of such employee's scope of engagement or (iii)
the requirement that such employee provide services at a location more than 50
miles from the employee's office location as of the date of the letter
agreement.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS
3dfx has adopted provisions in its articles of incorporation that
eliminate to the fullest extent permissible under California law the liability
of its directors to 3dfx for monetary damages. Such limitation of liability does
not affect the availability of equitable remedies such as injunctive relief or
rescission. 3dfx's bylaws provide that 3dfx shall indemnify its directors and
officers to the fullest extent permitted by California law, including in
circumstances in which indemnification is otherwise discretionary under
California law. 3dfx has entered into indemnification agreements with its
officers and directors containing provisions which may require 3dfx, among other
20
things, to indemnify the officers and directors against some liabilities that
may arise by reason of their status or service as directors or officers (other
than liabilities arising from willful misconduct of a culpable nature), and to
advance their expenses incurred as a result of any proceeding against them as to
which they could be indemnified.
At the present time, there is no pending litigation or proceeding
involving a director, officer, employee or other agent of 3dfx in which
indemnification would be required or permitted. 3dfx is not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Notwithstanding any statement to the contrary in any of 3dfx's previous
or future filings with the Securities and Exchange Commission, this Report of
the Compensation Committee of the Board of Directors shall not be deemed "filed"
with the Securities and Exchange Commission and shall not be incorporated by
reference into any such filings.
Introduction
Prior to 3dfx's initial public offering in June 1997, the 3dfx board of
directors was primarily responsible for establishing and administering 3dfx's
compensation policies. In this role, and consistent with 3dfx's status as a
privately held corporation, the board of directors determined the Chief
Executive Officer's salary directly and reviewed and approved employment
compensation matters for other management personnel. The Compensation Committee
was established in March 1997. During fiscal 2001, the Compensation Committee
initially consisted of James Whims and George T. Haber, although Mr. Haber
resigned from 3dfx's board of directors and the Compensation Committee effective
December 15, 2000. Mr. Gordon Campbell was subsequently elected to serve on the
Compensation Committee together with Mr. Whims. In general, the Committee is
responsible for reviewing and recommending for approval by the board of
directors of 3dfx's compensation practices, including executive salary levels
and variable compensation programs. With respect to the compensation of 3dfx's
Chief Executive Officer, the Committee reviews and submits to the board of
directors for approval the various elements of the Chief Executive Officer's
compensation. With respect to other executive officers, the Committee reviews
the recommendations for such individuals presented by the Chief Executive
Officer and the basis therefor and approves or modifies the compensation
packages for such individuals.
The board of directors administers 3dfx's 1995 Employee Stock Option
Plan, the 1997 Supplementary Stock Option Plan, the 1999 Supplementary Stock
Option Plan, the Directors Option Plan and the 1997 Employee Stock Purchase
Plan, although the board of directors has delegated to the Compensation
Committee the authority to act as administrator under the 1995 Employee Stock
Option Plan, the 1997 Supplementary Stock Option Plan and the 1999 Supplementary
Stock Option Plan with respect to option grants to non-executive officer
employees.
General Compensation Philosophy
The primary objectives of 3dfx's historical executive compensation
policies included the following:
- To attract, motivate and retain a highly qualified executive
management team
- To link executive compensation to 3dfx's financial performance,
as well as to defined individual management objectives
established by the Committee
- To compensate competitively with the practices of similarly
situated technology companies
- To create management incentives designed to enhance shareholder
value
The Committee's historical compensation philosophy sought to align the
interests of shareholders and management by tying compensation to 3dfx's
financial performance, either directly in the form of salary and bonuses paid in
cash or indirectly in the form of appreciation of stock options and stock
purchase rights granted to employees through 3dfx's equity incentive programs.
Following the 3dfx board of directors' adoption of a plan of dissolution and
approval of the asset sale to NVIDIA Sub, the Compensation Committee implemented
a modified compensation policy designed to incentivize 3dfx's executives to
expend all efforts necessary to maximize remaining shareholder value consistent
with the plan of dissolution, including all efforts necessary to close the sale
of assets to NVIDIA Sub, maximize of the value of other 3dfx assets, and settle
3dfx's and its subsidiaries' debts and liabilities.
Executive Compensation
3dfx's executive compensation programs consist of two principal
components: cash-based compensation and equity-based compensation. These
components are intended to retain, motivate and reward 3dfx executives who are
expected to perform their duties consistent with the goal of maximizing
shareholder value.
21
Cash-based compensation. Cash-based compensation consists of salary
(base pay) and bonus pay, where the executive's target bonus pay is a percentage
of his salary.
Equity Incentive Programs. Equity incentives, including stock options
and stock purchase rights granted pursuant to 3dfx's 1995 Employee Stock Option
Plan and the 1997 Employee Stock Purchase Plan, directly align the economic
interests of 3dfx's management and employees with those of its shareholders.
Additionally, grants may be made to executive officers under the 1997
Supplementary Stock Option Plan and under the 1999 Supplementary Stock Option
Plan in connection with the initial employment of such executive officer. Stock
options are a particularly strong incentive because they are valuable to
employees only if the fair market value of 3dfx's common stock increases above
the exercise price, which is set at the fair market value of 3dfx's common stock
on the date the option is granted.
Executive Employment Agreements. 3dfx entered into employment agreements
with some of its senior executive officers in fiscal 2001, including Alex Leupp,
Scott Sellers, Stephen Lapinski, Richard Burns and Al Woodhull. These employment
agreements, which provide for both salary and target bonus compensation, were
amended effective February 1, 2001. Prior to their amendment, these agreements
provided for limited severance and other benefits (continued payment of base pay
for up to one year and reimbursement of COBRA premiums for group medical
coverage) if 3dfx terminated the executive's employment without cause, and
before the occurrence of a change of control. Following a change of control,
which was defined to include the closing of certain types of transactions that
would include the asset sale with NVIDIA Sub, the agreements provided for a lump
sum severance payment equal to one times the executive's base salary (1.25x in
the case of 3dfx's chief executive officer, Dr. Leupp) plus one times the
executive's targeted bonus for the year (1.25x in the case of Dr. Leupp).
Upon the announcement of the proposed asset sale to NVIDIA Sub and the
dissolution of 3dfx, 3dfx laid off a substantial portion of its workforce in
order to conserve its resources. In order to assure the dedication and continued
efforts of 3dfx's executives through the critical transition period up to the
closing of the asset sale, the Compensation Committee, as well as another
independent director (James L. Hopkins), and 3dfx's executives negotiated
amendments to the employment agreements. The purpose of the amendments was
twofold: first, to create an incentive for each executive to continue his
employment until the closing of the asset sale, and during this period to devote
substantially all of his efforts to the enhancement of shareholder value; and
second, to conserve resources by reducing the amount of the severance benefit to
which the executive would be entitled if he continued in the employment of 3dfx
through the closing of the asset sale. The amended agreements were effective as
of February 1, 2001.
For all executives except Mr. Burns, the amended agreements provide, in
lieu of the prior severance arrangements, that lump sum severance and COBRA
premium reimbursement benefits will be paid to the executive if (i) the closing
of the asset sale occurs within 12 months following the amendment (which it
did), and (ii) the executive remains employed through the closing of the asset
sale or 3dfx otherwise elects to terminate the executive without cause. The
amount of the lump sum severance benefit is equal to one times (1.25x in the
case of Dr. Leupp) the sum of the executive's base salary and 50% of his
targeted bonus, reduced by the base salary paid to the executive during the
period from February 1 through the closing date of the asset sale. The lump sum
severance benefit is not payable to the executives until after 3dfx's payment of
all of its fixed and ascertainable debts and liabilities. The amended agreements
also specify the board of directors' expectations for each executive to devote
his efforts to collection of outstanding receivables, negotiation of favorable
terms for the settlement of 3dfx liabilities, increasing cash recovered in the
sale of remaining inventories, and other specific duties.
In the case of Mr. Burns, the amended agreement provides, in lieu of the
prior severance arrangement, that he will receive a lump sum severance benefit
equal to one times his base salary upon termination of his employment. His
employment duties are limited to collecting or resolving certain outstanding
retail accounts receivable for which he is principally responsible. Upon
substantial completion of these duties, his employment terminated.
The Compensation Committee and Mr. Hopkins determined that the amended
agreements were in the best interests of 3dfx because of the enhanced
shareholder value achievable through the targeted efforts of its executives. The
amended agreements created an incentive on the part of 3dfx's executives to work
toward achieving increased cash liquidity for 3dfx's creditors and shareholders,
while also reducing the severance obligation triggered by the closing of the
asset sale to NVIDIA Sub.
Compensation of Chief Executive Officers
In determining the CEO's compensation, the Committee considers
comparative financial and compensation data of selected peer companies. During
fiscal 2001, Alex Leupp, 3dfx's President and Chief Executive Officer, received
a salary of $375,000. For fiscal 2001, the Committee set a bonus of $187,500, of
which Dr. Leupp received $50,000. The Committee believes Dr. Leupp's
compensation is comparable to that paid to the chief executive officers of
3dfx's peer companies. The terms of Dr. Leupp's amended employment agreement, as
well as the bases for such terms, are otherwise set forth above.
3dfx grants stock options to its Chief Executive Officer based primarily
on the Committee's evaluation of his ability to influence 3dfx's growth and
profitability. The Committee determines the size of the option grant based on
its estimate of the equity incentive value of the Chief Executive Officer's
existing unvested option position. In fiscal 2001, 3dfx granted Dr. Leupp
options to acquire 400,000 shares of 3dfx common stock.
Tax Deductibility of Executive Compensation
Section 162 of the Code limits the federal income tax deductibility of
compensation paid to 3dfx's Chief Executive Officer and to each of the other
four most highly-compensated executive officers. 3dfx may deduct such
compensation only to the extent that during any fiscal year the compensation
paid to such individual does not exceed $1 million or meet some specified
conditions (including
22
shareholder approval). Based on 3dfx's current compensation plans and policies
and regulations interpreting this provision of the Code, 3dfx and the Committee
believe that, for the near future, there is little risk that 3dfx will lose any
significant tax deduction for executive compensation.
Summary
The 3dfx board of directors and the Compensation Committee intend that
its compensation program shall be fair and motivating and shall be successful in
retaining qualified employees and in linking compensation directly to the
interests of 3dfx shareholders. The 3dfx board of directors and the Compensation
Committee intend to review this program on an ongoing basis to evaluate its
continued effectiveness.
THE COMPENSATION COMMITTEE OF THE
3DFX BOARD OF DIRECTORS
James Whims
Gordon A. Campbell
3DFX STOCK PRICE PERFORMANCE GRAPH
The stock price performance graph set forth below under the caption
"Performance Graph" shall not be deemed to be incorporated by reference by any
general statement incorporating by reference this Report into any filing under
the Securities Act or under the Exchange Act, except to the extent that 3dfx
specifically incorporates this information by reference, and shall not otherwise
be deemed "filed with" or "soliciting material" under such laws. The following
graph compares 3dfx's cumulative total shareholder return with those of the
Nasdaq Stock Market (U.S.) Index and the Nasdaq Electronic Components Index. The
graph assumes that $100 was invested on June 25, 1997 (the effective date of
3dfx's initial public offering) in 3dfx's common stock, (ii) the Nasdaq Stock
Market (U.S.) Index and (iii) the Nasdaq Electronic Components Index, including
reinvestment of dividends. Note that historic stock price performance is not
necessarily indicative of future stock price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG 3DFX INTERACTIVE, INC., THE
NASDAQ STOCK MARKET (U.S.) INDEX AND THE NASDAQ ELECTRONIC COMPONENTS INDEX
PERFORMANCE GRAPH
3DFX INTERACTIVE, NASDAQ STOCK NASDAQ ELECTRONIC INC. MARKET (U.S.)
COMPONENTS
[PERFORMANCE GRAPH]
[Download Table]
3dfx Nasdaq Stock Market Nasdaq Electronic
Interactive, Inc. (U.S.) Components
------------------ --------------------- -----------------------
6/25/97 100.00 100.00 100.00
6/97 121.59 99.81 98.17
9/97 152.27 116.70 127.43
12/97 204.55 109.29 95.53
3/98 256.82 127.90 105.12
6/98 155.68 131.41 97.73
9/98 102.27 118.58 101.54
12/98 114.77 154.10 147.58
4/99 157.95 178.25 161.81
7/99 121.59 185.64 192.92
10/99 87.50 208.66 230.61
23
[Download Table]
1/00 77.27 278.08 332.61
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of May 9, 2001 information regarding
the beneficial ownership of 3dfx's outstanding common stock by:
- Each person known by 3dfx to own beneficially more than 5% of
the outstanding common stock
- Each director and each Named Executive Officer
- All directors and executive officers of 3dfx as a group
The following calculations of the percentage of outstanding shares are
based on 39,799,364 shares of 3dfx's common stock outstanding as of May 9, 2001.
Beneficial ownership is determined in accordance with the rules of the
Securities Exchange Commission and generally includes voting or investment power
with respect to securities, subject to community property laws, where
applicable. Information for each five percent shareholder is derived solely from
filings with the SEC on or before May 9, 2001.
Shares of the common stock subject to options that are presently
exercisable or exercisable within 60 days of May 9, 2001 are deemed outstanding
and beneficially owned by the person holding such options for the purpose of
computing the percentage of ownership of such person but are not treated as
outstanding for the purpose of computing the percentage of any other person.
These options are separately set forth below in the column titled "Options."
[Enlarge/Download Table]
NAME AND ADDRESS (1) SHARES OPTIONS TOTAL PERCENTAGE
-------------------- --------- ------- --------- ----------
FIVE PERCENT SHAREHOLDERS:
CTI Limited ................................ 3,908,472 -- 3,908,472 9.8%
1775 Broadway, 26th Floor
New York, NY 10019
David A. Rocker (3) ........................ 3,587,590 -- 3,587,590 9.0%
c/o Rocker Partners, L.P
45 Rockerfeller Plaza, Suite 1759
New York, New York 10111
George T. Haber ............................ 2,430,972 -- 2,430,972 6.1%
890 Robb Road
San Jose, California 94306
DIRECTORS AND OFFICERS:
Alex Leupp ................................. -- 12,469 12,469 *
Gordon A. Campbell ......................... 381,632(4) 82,000 463,632 1.2%
James Whims ................................ 2,400 60,750 63,150 *
James L. Hopkins ........................... 2,498 82,985 85,483 *
Richard Burns .............................. -- -- -- --
Scott D. Sellers ........................... -- 171,720 171,720 --
Stephen A. Lapinski ........................ -- -- -- --
Philip Carmack.............................. -- -- -- --
Richard A. Heddleson ....................... -- -- -- --
All executive officers and
directors as a group (9 persons) ........... 386,530 409,924 796,454 2.0%
----------
24
* Less than 1%.
(1) Except as otherwise noted, address is c/o 3dfx Interactive,
Inc., 4435 Fortran Drive, San Jose, CA 95134.
(2) Information with respect to CTI Limited was obtained from a
Schedule 13G filed with the SEC, which indicates that CTI
Limited has no voting power with respect to the shares
beneficially held, but does share dispositive power over these
shares that are held in customer accounts.
(3) Information with respect to David A. Rocker was obtained from a
Schedule 13G filed with the SEC, which indicates that Mr. Rocker
has sole dispositive power over all of the shares indicated by
virtue of his position as the sole managing partner of Rocker
Partners, L.P., and through Rocker Offshore Management Company,
Inc., an investment advisor to Compass Holdings, Ltd.
(4) Includes 77,084 shares held by Techfarm, L.P., 3,854 held by
Techfarm Management Inc. (dba Techfarm, Inc.), and 300,694
shares held by Gordon A. Campbell. Mr. Campbell is President of
Techfarm, Inc., the general partner of Techfarm, L.P.
("Techfarm"), and Mr. Campbell disclaims beneficial ownership of
the shares held by Techfarm, L.P. and Techfarm Management Inc.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Techfarm provides management services to 3dfx for which 3dfx pays a fee
of $5,000 per month. Gordon Campbell, the Chairman of the board of directors of
3dfx, and James Whims, a director of 3dfx, are each officers of Techfarm. 3dfx
made total payments to Techfarm for such management services during fiscal years
2001, 2000 and 1998 of $65,000, $55,000 and $60,000, respectively. In addition,
Mr. Whims provides consulting services to 3dfx for which 3dfx pays a fee of
$5,000 per month. 3dfx made total payments to Mr. Whims in fiscal years 2001,
2000 and 1998 of $45,000, $45,000 and $60,000, respectively.
3dfx has an agreement with Quantum3D, a supplier of advanced graphics
subsystems based on 3dfx's technology, pursuant to which 3dfx will supply
graphic boards and components to Quantum3D. Gordon Campbell, Chairman of the
board of directors of 3dfx, is a director, significant investor in and
shareholder of Quantum3D. Sales to Quantum3D fiscal years 2001, 2000 and 1998 of
$2.8 million, $1.6 million and $670,000, respectively. As of January 31, 2001,
3dfx had an outstanding trade receivable from Quantum3D of approximately
$85,000.
During fiscal year 2001, George T. Haber, a significant shareholder and
former member of the Company's board of directors, provided consulting services
to 3dfx for $400,000. At January 31, 2001, 3dfx had an outstanding receivable
due from this shareholder of $1.1 million.
In April 1999, 3dfx invested an amount of $3.1 million in exchange for a
minority interest in Quantum 3D in the form of Convertible Preferred Shares in
connection with Quantum 3D's private round of financing. These terms and pricing
of these shares was equivalent to other unaffiliated third participants in the
financing round.
In March 2000, 3dfx sold the Specialized Technology Group (STG), a
business unit that provides digital video products, multi-output MPEG decoder
cards and multi-monitor display adapters to a company of which Vanessa Ogle is
President, Enseo, Inc. ("Enseo"). Ms. Ogle is a former employee of 3dfx and is
the daughter of William E. Ogle. Mr. Ogle served as the Executive Vice President
and Vice Chairman of the board of directors of 3dfx until he resigned these
positions in January 2000. The transaction was accounted for as an asset sale,
comprised primarily of inventory and accounts receivable, in a leveraged buyout
by the STG management group. 3dfx will maintain a minority equity interest in
STG following the sale. The amount of the transaction was $5.1 million, and as a
result, 3dfx recorded a note receivable in the amount of $3.0 million. The note
is payable in accordance with a payment schedule, beginning February 1, 2001 and
concluding November 1, 2004.
3dfx and William Ogle, a former Executive Vice President and Vice
Chairman of the Board of Directors until his resignation in January 2000,
brought claims against each other before the American Arbitration Association
relating to the employment agreement, as amended, between the parties and other
matters relating to Mr. Ogle's relationship with 3dfx. On November 29, 2000,
3dfx and Mr. Ogle executed a Settlement Agreement and Mutual Release, which has
been approved by the arbitrator on December 4, 2000. Pursuant to the terms of
the settlement agreement, 3dfx paid Mr. Ogle $300,000 as a parachute payment
pursuant to his employment agreement with 3dfx, and released Mr. Ogle from all
obligations under his employment agreement. In lieu of making the $300,000
parachute payment to Mr. Ogle, 3dfx transferred a condominium owned by 3dfx and
all personal property therein to Mr. Ogle, as well as paid to Mr. Ogle an amount
equal to all unpaid taxes and assessments accrued or accruing for the fiscal
year 2000, pro-rated to November 29, 2000. Additionally, beginning in February
2001, 3dfx assigned 50% of all future principal and interest payments payable by
Enseo under that certain promissory note dated March 1, 2000, executed by Enseo
in favor of 3dfx in the principal amount of $3.0 million. 3dfx also agreed that
any indemnification agreements executed between 3dfx or STB and Mr. Ogle will
remain in full force and effect as it relates to claims asserted against Mr.
Ogle in his capacity as an officer or director of 3dfx or STB for acts taking
place prior to Mr. Ogle's resignation.
3dfx believes that all of the transactions set forth above were made on
terms no less favorable to 3dfx than could have been obtained from unaffiliated
third parties. All future transactions between 3dfx and its officers, directors,
principal shareholders and their affiliates will be approved by a majority of
the board of directors, including a majority of the independent and
disinterested outside directors, and will continue to be on terms no less
favorable to 3dfx than could be obtained from unaffiliated third parties.
25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements.
The following financial statements are filed as part of this Report.
[Enlarge/Download Table]
PAGE
----
Report of Independent Accountants ............................................................. F-1
Consolidated Balance Sheets as of January 31, 2000 and January 31, 2001 ....................... F-2
Consolidated Statements of Operations for the years ended December 31, 1998, January 31,
2000 and January 31, 2001 and for the month ended January 31, 1999 ............................ F-3
Consolidated Statement of Changes in Shareholders' Equity for the years ended
December 31, 1998, January 31, 2000 and January 31, 2001 and for the month ended
January 31, 1999 .............................................................................. F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1998, January 31,
2000 and January 31, 2001 and for the month ended January 31, 1999 ............................ F-5
Notes to Consolidated Financial Statements .................................................... F-6
(a)(2) Financial Statement Schedules.
[Enlarge/Download Table]
Report of Independent Accountants on Financial Statement Schedule ............................. S-1
Schedule II Valuation and Qualifying Accounts for the years ended December 31, 1998,
January 31, 2000 and January 31, 2001 and for the month ended January 31, 1999 ................ S-2
(b) Reports on Form 8-K.
Current Report on Form 8-K filed on January 26, 2001 discussing
the amendment to employment agreements between the Registrant and each
of Alex Leupp, Scott D. Sellers, Richard Burns, Stephen A. Lapinski and
Alfred R. Woodhull relating to severance payments and COBRA premium
reimbursement benefits. The Current Report also discussed the amendment
to the report of PricewaterhouseCoopers LLP relating to the Registrant's
2000 consolidated financial statements to add an explanatory paragraph
regarding the Registrant's ability to continue as a going concern.
(c) Exhibits.
[Download Table]
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
2.1(1) Agreement and Plan of Reorganization by and between the
Registrant and STB Systems, Inc. dated as of December 13, 1998
and the related Stock Option Agreement and form of Voting
Agreement
2.2(9) Agreement and Plan of Reorganization by and between the
Registrant and GigaPixel Corporation dated as of March 27,
2000, including selected annexes (attached as Appendix A to the
Proxy Statement/Prospectus/Information Statement)
2.3(11) Asset Purchase Agreement, dated December 15, 2000, by and among
the Registrant, NVIDIA Corporation and Titan Acquisition Corp.
No. 2
2.4* Registrant's Plan of Dissolution, as approved by Registrant's
shareholders on March 27, 2001
3.1(9) The Registrant's Restated Articles of Incorporation
3.2(5) Certificate of Determination of Rights Preferences and
Privileges of Series A Participating Preferred Stock of
Registrant
3.3(12) The Registrant's Amended and Restated Bylaws
4.1(2) Specimen Common Stock Certificate
4.2(5) Preferred Shares Rights Agreement dated October 30, 1998,
between Registrant and BankBoston, N.A., Rights Agent
10.1(2) Form of Indemnification Agreement between the Registrant and
each of its directors and officers
10.2(13) 1995 Employee Stock Plan, as amended
10.3(2) 1997 Director Option Plan and form of Director Stock Option
Agreement thereunder
10.4(13) 1997 Employee Stock Purchase Plan, as amended
26
[Download Table]
10.5(2) Lease Agreement dated August 7, 1996 between Registrant and
South Bay/Fortan, and Tenant Estoppel Certificate dated March
25, 1997 between Registrant and CarrAmerica Realty Corporation
for San Jose, California office
10.6(2) Investors' Rights Agreement dated September 12, 1996, Amendment
No. 1 to Investors' Rights Agreement dated November 25, 1996,
Amendment No. 2 to Investors' Rights Agreement dated December
18, 1996 and Amendment No. 3 to Investors' Rights Agreement
dated March 27, 1997 by and among the Registrant and holders of
the Registrant's Series A, Series B and Series Preferred Stock
10.7(3) Warrant to purchase shares of Common Stock issued to Creative
Labs, Inc.
10.8(2) Form of Restricted Stock Purchase Agreement between the
Registrant and certain shareholders
10.9(2) Change of Control Letter Agreement between the Registrant and
Scott D. Sellers
10.10(4) Software License and Co-marketing Agreement made as of June,
1997 by and between Electronic Arts, Inc. and the Registrant
10.11(4) Master Equipment Lease dated July 1, 1997 by and between the
Registrant and Pentech Financial Services, Inc.]
10.12(3) Lease Agreement dated as of January 6, 1998 by and between the
Registrant and GEOMAXX
10.13(3) 1997 Supplementary Stock Option Plan and form of Stock Option
Agreement thereunder
10.14(8) 1999 Supplementary Stock Option Plan and form of Stock Option
Agreement thereunder
10.15(12) Indemnity Escrow Agreement dated as of July 20, 2000, by and
among the Registrant, GigaPixel Corporation, Galapagos
Acquisition Corp. and U.S. Trust Company, N.A.
10.16(12) Consulting Agreement dated as of July 20, 2000, by and between
the Registrant and George T. Haber
10.17(12) Noncompetition Agreement dated as of July 20, 2000, by and
between the Registrant and George T. Haber
10.18(12) Contingent Recourse Non-Negotiable Promissory Note dated as of
July 20, 2000, made by George T. Haber for the benefit of
GigaPixel Corporation
10.19(12) Lock Up Agreement dated as of July 20, 2000, by and between the
Registrant and George T. Haber
10.20(12) Employment Agreement for Executive Officer dated as of July 20,
2000, by and between Gigapixel Corporation and Philip Carmack
10.21(12) Contingent Recourse Non-Negotiable Promissory Note dated as of
July 20, 2000, made by Philip Carmack for the benefit of
GigaPixel Corporation
10.22(12) Performance Bonus Agreement dated as of July 20, 2000, by and
between GigaPixel Corporation and Philip Carmack
10.23(14) GigaPixel Corporation 1997 Employee Incentive Plan
27
[Download Table]
10.24(10) Employment Agreement by and between the Registrant and Alex M.
Leupp, as amended effective February 1, 2001
10.25(10) Employment Agreement by and between the Registrant and Scott D.
Sellers, as amended effective February 1, 2001
10.26(10) Employment Agreement by and between the Registrant and Richard
Burns, as amended effective February 1, 2001
10.27(10) Employment Agreement by and between the Registrant and Stephen
A. Lapinski, as amended effective February 1, 2001
10.28(10) Employment Agreement by and between the Registrant and Alfred
R. Woodhull, as amended effective February 1, 2001
10.29(11) Credit Agreement dated December 15, 2000 by and between the
Registrant and Titan Acquisition Corp. No. 2
10.30(11) Security Agreement dated December 15, 2000 by and between the
Registrant and Titan Acquisition Corp. No. 2
10.31(11) Trademark Assignment Agreement, by and between 3dfx Interactive
Inc. and Titan Acquisition Corp. No. 2
10.32(11) Patent License Agreement dated December 15, 2000 by and
between the Registrant, NVIDIA Corporation and Titan
Acquisition Corp. No. 2
10.33(11) Patent Standstill Agreement, dated as of December 15, 2000, by
and between NVIDIA Corporation and the Registrant
10.34(15) Lease Agreement dated December 6, 1988 by and between STB de
Mexico S.A. C.V. (formerly known as Industrias Fronterizas de
Chihuahua, S.A. de C.V.) (a subsidiary of STB Systems, Inc., as
lessee) and Complejo Industrial Fuentes, S.A. de C.V. lessor),
including an Agreement for Modification dated February 25, 1994
by and between the same parties
10.35(16) Modification Agreement dated October 4, 1996 by and between STB
de Mexico, S.A. de C.V. and Complejo Industrial Fuentes, S.A.
de C.V.
10.36(16) Lease Contract dated October 4, 1996 by and between STB de
Mexico, S.A. de C.V. (as lessee) and Complejo Industrial
Fuentes, S.A. de C.V. (as lessor)
10.37(7) Amendment to Lease Agreement dated January 30, 1997 by and
between STB de Mexico, S.A. de C.V. (as lessee) and Complejo
Industrial Fuentes, S.A. de C.V.
10.38* Settlement Agreement and Mutual Release dated November 29, 2000
by and between the Registrant and William E. Ogle
10.39* Lease Agreement dated July 23, 1998 by and between CarrAmerica
Realty L.P. and the Registrant, and an amendment thereto
10.40* Lease Agreement dated May 27, 1999 by and between Balstones
Estate Limited and STB Systems, Inc.
10.41* Lease Schedule No. 1000063905 dated December 15, 1997 by and
between Banc One Leasing Corporation and STB Systems, Inc.
10.42* Lease Schedule No. 1000064617 dated April 17, 1998 by and
between Banc One Leasing Corporation and STB Systems, Inc.
10.43* Lease Schedule No. 1000063259 dated October 31, 1997 by and
between Banc One Leasing Corporation and STB Systems, Inc.
21.1 Subsidiaries of the Registrant
(a) STB Systems, Inc.
(b) 3dfx International
(c) GigaPixel Corporation
(d) STB Assembly, Inc.
(e) STB de Mexico, S.A. de C.V.
23.1* Consent of PricewaterhouseCoopers LLP, Independent Accountants
24.1* Power of Attorney (included on signature page)
+ Confidential treatment has been granted for portions of these
agreements. Omitted portions have been filed separately with the
Commission.
* Filed herewith.
(1) Incorporated by reference to Schedule 13D filed by STB Systems, Inc.
dated December 23, 1998 with respect to the Registrant.
(2) Incorporated by reference to the exhibits filed with the Registrant's
Registration Statement on Form S-1 (File No. 333-25365) which was
declared effective on June 25, 1997.
(3) Incorporated by reference to the exhibits filed with the Registrant's
Registration Statement on Form S-1 (File No. 333-46119) filed with the
Commission on February 11, 1998.
(4) Incorporated by reference to the exhibits filed with the Registrant's
Quarterly Report on Form 10-Q for the period ended June 30, 1997.
(5) Incorporated by reference to the exhibits filed with the Registrant's
Registration Statement on Form 8-A which was filed with the Commission
on November 9, 1998.
(6) Incorporated by reference to the exhibits filed with the Registrant's
Quarterly Report on Form 10-Q for the period ended June 30, 1998.
(7) Incorporated by reference to exhibits filed with STB Systems, Inc.'s
Annual Report on Form 10-K for the fiscal year ended October 31, 1997.
(8) Incorporated by reference to Exhibit 4.1 filed with the Registrant's
Registration Statement on Form S-8 (File No. 333-86661) which was filed
with the Commission on September 7, 1999.
(9) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-4 (File No. 333-38678) which was filed
with the Commission on June 6, 2000.
(10) Incorporated by reference to exhibits filed with the Registrant's
Current Report on Form 8-K filed on January 26, 2001.
(11) Incorporated by reference to exhibits filed with NVIDIA Corporation's
Registration Statement on Form S-4 (File No. 333-54406) which was filed
with the Commission on January 26, 2001.
28
(12) Incorporated by reference to exhibits filed with the Registrant's
Quarterly Report on Form 10-Q filed on September 14, 2000.
(13) Incorporated by reference to the Registrant's Registration Statement on
Form S-8 (File No. 333-42156), which was filed with the Commission on
July 25, 2000.
(14) Incorporated by reference to the Registrant's Registration Statement on
Form S-8 (File No. 333-42152) which was filed with the Commission on
July 25, 2000.
(15) Incorporated by reference to Exhibit 10.1 of the STB Systems, Inc.'s
Registration Statement on Form S-1 (File No. 333-87612) filed with the
Commission on December 21, 1994.
(16) Incorporated by reference to Exhibit 10.1 of the STB Systems, Inc.'s
Registration Statement (File No. 333-14313) filed with the Commission
on October 17, 1996.
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Annual
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: May 16, 2001
3dfx INTERACTIVE, INC.
By: /s/ ALEX LEUPP
-------------------------------------
Alex Leupp
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Alex Leupp and Richard A. Heddleson, and
each of them, his true and lawful attorneys-in-fact and agents, each with full
power of substitution and resubstitution, to sign any and all amendments to this
Annual Report on Form 10-K and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, or any of them, shall do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF
THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED:
[Enlarge/Download Table]
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ALEX LEUPP President, Chief Executive Officer and Director May 16, 2001
------------------------------------- Director (Principal Executive Officer)
(Alex Leupp)
/s/ RICHARD A. HEDDLESON Vice President, Administration and Chief May 16, 2001
------------------------------------- Financial Officer (Principal Financial and
(Richard A. Heddleson) Accounting Officer)
/s/ GORDON A. CAMPBELL Chairman of the board May 16, 2001
-------------------------------------
(Gordon A. Campbell)
/s/ JAMES HOPKINS Director May 16, 2001
-------------------------------------
(James Hopkins)
/s/ SCOTT D. SELLERS Director May 16, 2001
-------------------------------------
(Scott D. Sellers)
/s/ JAMES WHIMS Director May 16, 2001
-------------------------------------
(James Whims)
30
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of 3dfx Interactive, Inc.
In our opinion, the accompanying consolidated balance sheets of
discontinued operations and the related consolidated statements of discontinued
operations, of shareholders' equity of discontinued operations and of cash flows
of discontinued operations present fairly, in all material respects, the
financial position of 3dfx Interactive, Inc. and its subsidiaries, at January
31, 2001 and 2000, and the results of their discontinued operations and their
cash flows for each of the years ended January 31, 2001, January 31, 2000 and
December 31, 1998, and for the one month ended January 31, 1999, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements 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.
As discussed in Note 1, in March 2001, the Company's shareholders
approved proposals to liquidate, wind-up and dissolve the Company pursuant to a
plan of dissolution. The Company is proceeding to wind-up its affairs and
dissolve. Accordingly, all activities of the Company are presented as
discontinued operations in the accompanying consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
San Jose, California
March 27, 2001, except for Note 1 and Note 10,
which are as of April 26, 2001
F-1
3DFX INTERACTIVE, INC.
CONSOLIDATED BALANCE SHEETS OF DISCONTINUED OPERATIONS
(IN THOUSANDS)
[Enlarge/Download Table]
JANUARY 31, JANUARY 31,
2001 2000
---------- ----------
ASSETS
Current Assets:
Cash and cash equivalents .............................................. $ 9,391 $ 41,818
Short-term investments ................................................. -- 24,012
Accounts receivable less allowance for doubtful accounts
of $9,992 and $6,681 ........................................... 6,398 66,160
Inventory, net ......................................................... 22,358 45,065
Deferred tax assets .................................................... 35,000 13,082
Other current assets ................................................... 1,214 15,325
Other assets held for sale ............................................. 45,245 --
--------- ---------
Total current assets .................................. 119,606 205,462
Property and equipment, net .................................................... -- 40,269
Goodwill and other intangibles ................................................. -- 45,651
Other assets ................................................................... -- 4,729
--------- ---------
$ 119,606 $ 296,111
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Line of credit ......................................................... $ -- $ 25,000
Accounts payable ....................................................... 64,245 60,879
Accrued liabilities .................................................... 11,642 20,385
Nvidia term loan ....................................................... 15,000 --
Other current liabilities .............................................. 6,366 732
--------- ---------
Total current liabilities ................................. 97,253 106,996
--------- ---------
Capital lease obligations, less current portion ................................ -- 1,881
--------- ---------
Commitments and Contingencies (Note 10)
Shareholders' Equity:
Preferred stock, no par value, 5,000,000 shares authorized; none
issued and outstanding ......................................... -- --
Common stock, no par value, 50,000,000 shares authorized;
39,787,740 and 24,442,370 shares issued and outstanding ........ 430,922 251,883
Warrants .............................................................. 242 242
Deferred compensation ................................................. -- (172)
Accumulated other comprehensive income (loss) ......................... (1,722) 1,844
Accumulated deficit ................................................... (407,089) (66,563)
--------- ---------
Total shareholders' equity ................................ 22,353 187,234
--------- ---------
$ 119,606 $ 296,111
========= =========
The accompanying notes are an integral part of these financial statements.
F-2
3DFX INTERACTIVE, INC.
CONSOLIDATED STATEMENTS OF DISCONTINUED OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
[Enlarge/Download Table]
FISCAL YEAR ENDED ONE
---------------------------------------------- MONTH ENDED
JANUARY 31, JANUARY 31, DECEMBER 31, JANUARY 31,
2001 2000 1998 1999
---------- ---------- ----------- ---------
Revenues .............................................. $ 233,067 $ 360,523 $202,601 $ 17,048
Cost of revenues ...................................... 242,989 287,872 119,618 14,527
--------- --------- -------- --------
Gross profit (loss) ................................... (9,922) 72,651 82,983 2,521
--------- --------- -------- --------
Operating expenses:
Research and development ........................... 65,394 66,062 34,045 3,340
Selling, general and administrative ................ 89,106 63,468 35,441 4,614
In-process research and development ................ 66,250 4,302 -- --
Amortization of goodwill and other intangibles ..... 24,449 10,228 -- --
Impairment of goodwill and other intangibles ....... 117,065 -- -- --
Restructuring expense .............................. -- 4,382 -- --
--------- --------- -------- --------
Total operating expenses ................... 362,264 148,442 69,486 7,954
--------- --------- -------- --------
Income (loss) from discontinued operations ............ (372,186) (75,791) 13,497 (5,433)
Interest and other income (expense), net .............. (4,812) 2,180 15,869 322
--------- --------- -------- --------
Income (loss) from discontinued operations before
income taxes ....................................... (376,998) (73,611) 29,366 (5,111)
Provision (benefit) for income taxes .................. (36,472) (10,324) 7,663 (1,636)
--------- --------- -------- --------
Net income (loss) from discontinued operations ........ $(340,526) $ (63,287) $ 21,703 $ (3,475)
========= ========= ======== ========
Net income (loss) per share from discontinued
operations:
Basic .............................................. $ (10.63) $ (2.81) $ 1.45 $ (0.22)
========= ========= ======== ========
Diluted ............................................ $ (10.63) $ (2.81) $ 1.33 $ (0.22)
========= ========= ======== ========
Shares used in net income (loss) per share from
discontinued operations calculations:
Basic .............................................. 32,041 22,536 14,917 15,641
--------- --------- -------- --------
Diluted ............................................ 32,041 22,536 16,353 15,641
--------- --------- -------- --------
The accompanying notes are an integral part of these financial statements.
F-3
3DFX INTERACTIVE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY OF DISCONTINUED DISCONTINUED
OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
[Enlarge/Download Table]
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
---------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT WARRANTS
------ ------ ----------- --------- --------
Balance at December 31, 1997 ..................... -- -- 12,566,630 $ 66,717 $242
Issuance of common stock in connection
with secondary public offering, less
issuance costs ................................. 2,463,140 54,752
Issuance of common stock under stock
option and purchase plans ...................... 643,451 2,301
Common stock repurchased ......................... (2,154) (1)
Tax benefit related to exercise of
stock options .................................. 2,800
Amortization of deferred compensation ............
Net income from discontinued operations ..........
------ ------ ----------- --------- ----
Balance at December 31, 1998 ..................... -- -- 15,671,067 126,569 242
Issuance of common stock under stock
option plan .................................... 44,815 140
Amortization of deferred compensation ............
Net loss from discontinued operations ............
------ ------ ----------- --------- ----
Balance at January 31, 1999 ...................... -- -- 15,715,882 126,709 242
Issuance of common stock under stock
option and purchase plans ...................... 977,235 4,899
Common stock repurchased ......................... (517,501) (6,775)
Amortization of deferred compensation ............
STB acquisition .................................. 8,266,754 127,050
Components of comprehensive loss from
discontinued operations:
Net loss from discontinued operations ..........
Unrealized gain on investment ..................
Total comprehensive loss from
discontinued operations
------ ------ ----------- --------- ----
Balance at January 31, 2000 ...................... 24,442,370 251,883 242
Issuance of common stock under stock
option and purchase plans ...................... 791,618 4,108
Common stock repurchased ......................... (1,224) (3)
GigaPixel acquisition ............................ 14,554,976 174,934
Amortization of deferred compensation ............
Cancellation of unvested GigaPixel options .......
Components of comprehensive loss from
discontinued operations:
Net loss from discontinued operations ..........
Unrealized loss on investment ..................
Total comprehensive loss from
discontinued operations ........................
------ ------ ----------- --------- ----
Balance at January 31, 2001 ...................... -- -- 39,787,740 $ 430,922 $242
====== ====== =========== ========= ====
[Enlarge/Download Table]
ACCUMULATED
OTHER
DEFERRED COMPREHENSIVE ACCUMULATED
COMPENSATION INCOME (LOSS) DEFICIT TOTAL
------------ -------------- ----------- ---------
Balance at December 31, 1997 ..................... $(1,181) $ -- $ (21,504) $ 44,274
Issuance of common stock in connection
with secondary public offering, less
issuance costs ................................. 54,752
Issuance of common stock under stock
option and purchase plans ...................... 2,301
Common stock repurchased ......................... (1)
Tax benefit related to exercise of
stock options .................................. 2,800
Amortization of deferred compensation ............ 484 484
Net income from discontinued operations .......... 21,703 21,703
------- ------- --------- ---------
Balance at December 31, 1998 ..................... (697) 199 126,313
Issuance of common stock under stock
option plan .................................... 140
Amortization of deferred compensation ............ 41 41
Net loss from discontinued operations ............ (3,475) (3,475)
------- ------- --------- ---------
Balance at January 31, 1999 ...................... (656) (3,276) 123,019
Issuance of common stock under stock
option and purchase plans ...................... 4,899
Common stock repurchased ......................... (6,775)
Amortization of deferred compensation ............ 484 484
STB acquisition .................................. 127,050
Components of comprehensive loss from
discontinued operations:
Net loss from discontinued operations .......... (63,287) (63,287)
Unrealized gain on investment .................. 1,844 1,844
---------
Total comprehensive loss from
discontinued operations ........................ (61,443)
------- ------- --------- ---------
Balance at January 31, 2000 ...................... (172) 1,844 (66,563) 187,234
Issuance of common stock under stock
option and purchase plans ...................... 4,108
Common stock repurchased ......................... (3)
GigaPixel acquisition ............................ (6,946) 167,988
Amortization of deferred compensation ............ 1,741 1,741
Cancellation of unvested GigaPixel options ....... 5,377 5,377
Components of comprehensive loss from
discontinued operations:
Net loss from discontinued operations .......... (340,526) (340,526)
Unrealized loss on investment .................. (3,566) (3,566)
---------
Total comprehensive loss from
discontinued operations ........................ (344,092)
------- ------- --------- ---------
Balance at January 31, 2001 ...................... $ -- $(1,722) $(407,089) $ 22,353
======= ======= ========= =========
The accompanying notes are an integral part of these financial statements.
F-4
3DFX INTERACTIVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS OF DISCONTINUED OPERATIONS
(IN THOUSANDS)
[Enlarge/Download Table]
FISCAL YEAR ENDED ONE MONTH
--------------------------------------------- ENDED
JANUARY 31, JANUARY 31, DECEMBER 31, JANUARY 31,
2001 2000 1998 1999
---------- ---------- ----------- ----------
Cash flows from operating activities:
Net income (loss) from discontinued operations .......... $(340,526) $(63,287) $ 21,703 $ (3,475)
Adjustments to reconcile net income (loss) from
discontinued operations tonet cash used in
discontinued operating activities:
Depreciation ....................................... 24,126 14,930 5,249 675
Amortization of goodwill and other intangibles ..... 24,449 10,228 -- --
Amortization of deferred stock compensation ........ 1,741 484 484 40
Write-off of acquired in-process research and
development ...................................... 66,250 4,302 -- --
Write-down of fixed assets ......................... 5,521 -- -- --
Impairment of goodwill and other intangibles ....... 117,065 -- -- --
Increase (decrease) in allowance for doubtful
accounts ......................................... 3,311 (646) 1,972 4,449
Gain on disposal of property and equipment, net .... (711) -- -- --
Tax benefit related to exercise of stock options ... -- -- 2,800 --
Deferred income taxes .............................. (27,989) 398 (7,171) --
Changes in assets and liabilities:
Accounts receivable ............................. 58,823 7,087 (24,920) 4,341
Inventory ....................................... 22,707 5,339 (20,146) 6,008
Other assets .................................... 8,971 (5,318) (2,285) 327
Accounts payable ................................ 3,155 1,765 28,531 (11,195)
Accrued and other liabilities ................... (16,619) (8,738) 13,346 (869)
--------- -------- -------- --------
Net cash provided by/(used in) discontinued
operating activities ............................. (49,726) (33,456) 19,563 301
--------- -------- -------- --------
Cash flows from investing activities:
Sales (purchases) of short-term investments, net ... 24,012 (893) 2,926 (18,330)
Purchases of property and equipment ................ (17,683) (25,733) (13,844) (1,459)
Proceeds from disposal of property and equipment ... 9,117 -- -- --
Acquisitions of GigaPixel and STB Systems .......... 5,319 21,243 -- --
--------- -------- -------- --------
Net cash provided by/(used in) investing
activities ....................................... 20,765 (5,383) (10,918) (19,789)
--------- -------- -------- --------
Cash flows from financing activities:
Proceeds from secondary public offering, net ....... -- -- 54,752 --
Proceeds from issuance (repurchase) of common
stock, net ....................................... 4,105 (1,876) 2,300 140
Principal payments of capitalized lease
obligations, net ................................. (2,081) (358) (935) 108
Proceeds from Nvidia term loan ..................... 15,000 -- -- --
Proceeds (payments) on line of credit, net ......... (20,490) 9,209 (777) --
--------- -------- -------- --------
Net cash provided by/(used in) financing
activities ....................................... (3,466) 6,975 55,340 248
--------- -------- -------- --------
Net (decrease) increase in cash and cash equivalents ....... (32,427) (31,864) 63,985 (19,240)
Cash and cash equivalents at beginning of period ........... 41,818 73,682 28,937 92,922
--------- -------- -------- --------
Cash and cash equivalents at end of period ................. $ 9,391 $ 41,818 $ 92,922 $ 73,682
========= ======== ======== ========
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest ........... $ 1,804 $ 1,289 $ 141 $ 3
Cash paid during the period for income taxes ....... 390 2,361 6,200 --
The accompanying notes are an integral part of these financial statements.
F-5
3DFX INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- 3DFX AND ITS SIGNIFICANT ACCOUNTING POLICIES:
3dfx
3dfx Interactive, Inc. ("3dfx" or "the Company") was incorporated in
California on August 24, 1994. 3dfx developed high performance, cost-effective
graphics chips, graphics boards, software and related technology that enable an
interactive and realistic 3D experience across multiple hardware platforms. 3dfx
has subsidiaries in the United States, Mexico, and other key markets in the
world. The consolidated financial statements include the financial statements of
3dfx and its wholly owned subsidiaries. All significant intercompany
transactions and accounts have been eliminated.
In March 1999, the Company's board of directors determined that it would
be in the best interest of 3dfx and its shareholders to change its fiscal year
from a December fiscal year to a year beginning on February 1 and ending on
January 31, beginning on February 1, 1999. Accordingly, 3dfx has separately
presented the results of discontinued operations and cash flows for the one
month period ended January 31, 1999.
As described below, on March 27, 2001, 3dfx's shareholders approved
proposals to liquidate, wind-up and dissolve 3dfx pursuant to a plan of
dissolution. 3dfx is proceeding to wind-up its affairs and dissolve.
Accordingly, all activities of 3dfx are presented as discontinued operations in
the accompanying consolidated financial statements.
Asset Sale and Plan of Dissolution
In the fall of 2000, 3dfx began experiencing financial difficulties due
in part to substantially reduced demand in the retail channel for its products.
This reduced demand is attributable to a number of factors, including, in part,
its failure to introduce products in a timely manner and from disappointing
customer response to its existing products, as well as reduced demand in the
retail channel in general and the add-in graphics segment in particular. In
addition, 3dfx's high research and development costs and substantial debt
burden, together with the loss of several large customers due to 3dfx's May 1999
acquisition of STB Systems, Inc. and its inability to refinance its debt on
commercially reasonable terms, aggravated its financial difficulties. After
extensive exploration and evaluation of various strategic alternatives, the 3dfx
board of directors concluded that the liquidation, winding up and dissolution of
3dfx provided the best protection to 3dfx's creditors and was in the best
interests of its shareholders.
On December 15, 2000, 3dfx entered into an asset purchase agreement with
Nvidia Corporation ("Nvidia") and a subsidiary of Nvidia ("Nvidia Sub") under
which Nvidia Sub would acquire certain of 3dfx's assets, including its core
graphics processor assets. Under the terms of the asset purchase agreement,
Nvidia agreed to pay 3dfx $70.0 million in cash and 1,000,000 shares of
registered Nvidia common stock, subject to the satisfaction of certain
conditions specified in the asset purchase agreement as described below. Upon
signing the asset purchase agreement, Nvidia loaned to 3dfx $15.0 million in
cash for working capital.
The asset sale to Nvidia Sub was approved by 3dfx shareholders on March
27, 2001, and on April 18, 2001 substantially all of 3dfx's assets were sold to
Nvidia Sub. Upon closing, 3dfx received $55.0 million in cash, which amount was
net of repayment of the $15.0 million cash loan 3dfx received upon signing the
asset purchase agreement. In addition, under the terms of the asset purchase
agreement, 3dfx and Nvidia caused the pending patent litigation between the
parties to be dismissed with prejudice. Under the terms of the asset purchase
agreement, 3dfx may receive part or all of a one-time post-closing cash advance
of up to $25.0 million upon its request if it is not in breach of the asset
purchase agreement and it has expended all or substantially all of the $70.0
million cash consideration in payment of its liabilities and determines in good
faith that (i) the remaining portion of the cash
F-6
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
consideration previously received by it is not sufficient to pay its remaining
liabilities, and (ii) such remaining liabilities could and would be satisfied if
3dfx received the post-closing cash advance and applied it to the payment of
such liabilities, and if Nvidia does not determine in good faith that the
requested amount would not permit 3dfx to pay in full its remaining liabilities.
In the event that 3dfx receives the post-closing cash advance, the 1,000,000
shares of Nvidia common stock comprising the remaining consideration otherwise
payable to 3dfx under the asset purchase agreement will be reduced by the number
of shares equal to the quotient determined by dividing the amount of the
post-closing cash advance by $50. Irrespective of whether 3dfx receives a
post-closing advance, the shares of Nvidia common stock will only become
deliverable to 3dfx upon satisfaction of certain conditions specified in the
asset purchase agreement, including the completion of the winding up of the
business of 3dfx pursuant to 3dfx's plan of dissolution, and 3dfx's
certification that (i) all liabilities of 3dfx and its subsidiaries have been
paid in full or otherwise provided for and (ii) 3dfx has or will be validly
dissolved.
On December 15, 2000, the board of directors of 3dfx also approved a
plan of dissolution and on March 27, 2001 this plan of dissolution was approved
by 3dfx's shareholders. On March 30, 2001, 3dfx filed a certificate of election
to liquidate, wind up and dissolve with the California Secretary of State's
office. 3dfx is proceeding to wind up its affairs and is no longer operating or
generating revenues in the normal course of business. Accordingly, all of the
activities of 3dfx have been presented as discontinued operations and assets
have been adjusted, as appropriate, to estimated net realizable value. During
the fiscal year ended January 31, 2001, 3dfx recorded a charge of $7.9 million
for the write-down of inventory and a charge of $5.5 million for the write-down
of property and equipment. 3dfx also recorded a charge of $117.1 million for the
impairment of goodwill and other intangibles during the fiscal year ended
January 31, 2001. In accordance with 3dfx's accounting policy, 3dfx assessed
impairment of its long-lived assets and determined that the carrying amount of
goodwill and other intangibles would not be recoverable due to the deteriorating
condition of its operations. The impairment loss was measured as the amount by
which the carrying amount of the assets exceeded the estimated fair value of the
assets, as determined using the present value of expected future cash flows.
3dfx has substantially reduced its costs in order to conserve its
resources. These cost cutting measures include a reduction of a significant
portion of 3dfx's workforce, reduction in office space and other efforts to
reduce non-essential expenses. 3dfx has also been providing manufacturing
services to third parties to help cover the overhead associated with its Juarez,
Mexico manufacturing facility pending the sale or shut-down of that facility.
Due to these cost-cutting measures, 3dfx's operations have been substantially
curtailed.
3dfx expects to continue to incur certain administrative and other costs
associated with winding up its affairs. However, 3dfx believes that it will have
sufficient cash to pay all of its and its subsidiaries' known current and
determinable liabilities. However, the amount of unknown or contingent
liabilities cannot be quantified and could decrease or eliminate any remaining
assets available for distribution to 3dfx's shareholders. Further, if 3dfx or
its subsidiaries are subject to any contingent liabilities, this could require
that it establish reserves that could delay any distribution to 3dfx
shareholders. Because of the uncertainties as to the precise net realizable
value of 3dfx's assets and the settlement amount of 3dfx's and its subsidiaries'
debts and liabilities, 3dfx cannot at this time determine the timing or amount
of distributions that may be made to its shareholders, if any. Only if there are
assets remaining at the time of 3dfx's dissolution will 3dfx shareholders
receive a distribution of those assets.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Revenue recognition
Revenue from product sales is generally recognized upon product
shipment. Revenue resulting from development contracts has been recognized under
the percentage of completion method based upon costs incurred relative to total
contract costs or when the related contractual obligations have been fulfilled
and fees were billable. Costs associated with development contracts are included
in research and development.
Cash equivalents and investments
3dfx considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. At January 31, 2001 and
2000, approximately $5,000,000 and $30,291,000, respectively, of money market
funds and commercial paper instruments, the fair value of which approximate
cost, are included in cash and cash equivalents and short-term investments.
F-7
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Investments in debt and equity securities which have maturities greater
than three months from the date of acquisition are classified as "available for
sale". Investments classified as "available for sale" are reported at fair value
with unrealized gains and losses, net of related tax, if any, reported as a
separate component of shareholders' equity. The unrealized loss of $1.7 million
at January 31, 2001 and the unrealized gain of $1.8 million at January 31, 2000
related to an investment in common stock of a public company. This investment,
which totaled $1.2 million and $4.8 million at January 31, 2001 and 2000,
respectively, is included in other current assets.
Concentration of credit risk
Financial instruments that potentially subject 3dfx to significant
concentrations of credit risk consist principally of cash equivalents and
accounts receivable.
3dfx invests primarily in money market accounts, commercial paper
instruments and term notes. Cash equivalents and short-term investments are
maintained with high quality institutions and their composition and maturities
are regularly monitored by management.
3dfx performs ongoing credit evaluations of its customers' financial
condition and maintains an allowance for uncollectible accounts receivable based
upon the expected collectibility of all accounts receivable. There were no
customers which accounted for greater than 10% of accounts receivable at January
31, 2001, and one customer accounted for 11.4% of accounts receivable at January
31, 2000.
The following table summarizes the revenues from customers in excess of
10% of the total revenues:
[Enlarge/Download Table]
FISCAL YEAR ENDED ONE MONTH
------------------------------------------ ENDED
JANUARY 31, JANUARY 31, DECEMBER 31, JANUARY 31,
2001 2000 1998 1999
----------- ----------- ------------ -----------
A ............................ 16% 13% -- --
B ............................ 10% -- -- --
C ............................ -- -- 32% --
D ............................ -- -- 26% 24%
E ............................ -- -- 16% 25%
F ............................ -- -- -- 12%
Inventory
Inventory is stated at the lower of cost or market, cost being
determined under the first-in, first-out method.
Other assets held for sale
Other assets held for sale are stated at the lower of cost or
management's best estimate of net realizable value.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, generally three years or less.
Long-lived assets held and used by 3dfx are reviewed for impairment
whenever events or changes in circumstances indicate that their net book value
may not be recoverable. An impairment loss is recognized if the sum of the
expected future cash flows (undiscounted and before interest) from the use of
the asset is less than the net book value of the asset. The amount of the
impairment loss will generally be measured as the difference between net book
values of the assets and their estimated fair values.
F-8
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
During the fiscal year ended January 31, 2001, the Company was obligated
under a five-year agreement to lease a facility in Richardson, Texas, which was
previously the corporate headquarters of STB Systems. Construction of the
210,000 square foot facility was completed in December 1998. The total cost of
the land and building was approximately $22.8 million. The Company previously
entered into an interest rate swap agreement that fixed the interest rate on a
majority of the lease obligation at 7.55%. During the fourth quarter of fiscal
2001, the swap agreement was canceled in exchange for a cash payment of
approximately $300,000. During January 2001, the Company exercised its option to
cause the building to be sold and entered into an operating lease for
approximately 50% of the space for the next six months. The proceeds of the sale
were used to retire the underlying debt. A net loss of $2.1 million was recorded
on the sale of the building, which is reflected in other income (expense) for
fiscal 2001.
The Company held an option to purchase real estate adjoining its Texas
headquarters. The option entitled the Company to purchase the real estate for
$3.9 million, but the option would increase to the current market value of the
real estate if the option was not exercised before December 31, 2000. The
Company exercised the option in December 2000, and has sold the real estate to a
third party for $6.7 million, resulting in a gain of $2.8 million, which is
reflected in either income (expense) for fiscal 2001.
Research and software development costs
Research and development costs are charged to operations as incurred.
Software development and prototype costs incurred prior to the establishment of
technological feasibility are included in research and development and are
expensed as incurred. Software development costs incurred subsequent to the
establishment of technological feasibility through the period of general market
availability of the product are capitalized, if material. To date, all software
development costs incurred subsequent to the establishment of technological
feasibility have been expensed as incurred due to their immateriality.
Stock-based compensation
The Company accounts for its stock option plans and employee stock
purchase plan in accordance with provisions of the Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and
complies with the disclosure provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation". If there
is any compensation cost under the rules of APB 25, the expense is amortized
using a straight-line method over the vesting period. In accordance with SFAS
No. 123, the Company provides additional pro forma disclosures in Note 8.
Comprehensive income (loss) from discontinued operations
For the fiscal year ended January 31, 2001, comprehensive loss from
discontinued operations, including net loss from discontinued operations and an
unrealized loss on an available for sale investment was $344.1 million. For the
fiscal year ended January 31, 2000, comprehensive loss from discontinued
operations, including net loss from discontinued operations and an unrealized
gain on an available for sale investment was $61.4 million.
Earnings (loss) per share from discontinued operations
Basic earnings (loss) per share is computed using the weighted average
number of common shares outstanding during the periods. Diluted earnings (loss)
per share is computed using the weighted average number of common and
potentially dilutive common shares outstanding during the periods, except those
that are antidilutive. Reconciliations of the numerators and denominators of the
basic and diluted per share computations are as follows (in thousands):
F-9
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
[Enlarge/Download Table]
FISCAL YEAR ENDED ONE MONTH
----------------------------------------------------- ENDED
JANUARY 31, JANUARY 31, DECEMBER 31, JANUARY 31,
2001 2000 1998 1999
---------- ---------- ----------- ----------
Net income (loss) from discontinued
operations available to common
shareholders (numerator) ...................... $(340,526) $(63,287) $21,703 $ (3,475)
--------- -------- ------- --------
Weighted average shares outstanding
(denominator for basic computations) .......... 32,041 22,536 14,917 15,641
========= ======== ======= ========
Effect of dilutive securities-common stock
equivalents ................................... -- -- 1,436 --
Weighted average shares outstanding
(denominator for diluted computation) ......... 32,041 22,536 16,353 15,641
========= ======== ======= ========
Basic income (loss) per share from
discontinued operations ....................... $ (10.63) $ (2.81) $ 1.45 $ (0.22)
========= ======== ======= ========
Diluted income (loss) per share from
discontinued operations ....................... $ (10.63) $ (2.81) $ 1.33 $ (0.22)
========= ======== ======= ========
During the fiscal years ended January 31, 2001 and 2000, the one month
period ended January 31, 1999 and the fiscal year ended December 31, 1998,
options to purchase approximately 5,664,000, 6,484,389, 3,499,000, and 560,392
shares and warrants to purchase approximately 36,960, 36,960, 36,960, and 36,960
shares, respectively, were outstanding but are not included in the computation
because they are antidilutive.
Recent accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS 133, as amended, requires
that all derivative instruments be recorded on the balance sheet at their fair
market value. Changes in the fair market value of derivatives are recorded each
period in current earnings or comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction, and if so, the type of
hedge transaction. Substantially all of 3dfx's revenues and the majority of its
costs are denominated in U.S. dollars, and 3dfx has not entered into any
derivative contracts. The effective date of SFAS 133, as amended, is for fiscal
quarters of fiscal years beginning after June 15, 2000. As the Company holds no
derivative financial instruments at January 31, 2001, the Company does not
expect that the adoption of SFAS 133 will have a material effect on its
financial position or results of operations.
NOTE 2 -- ACQUISITION OF STB SYSTEMS, INC.:
In May 1999, 3dfx completed a merger with STB Systems, Inc. ("STB"). As
a result of the merger, STB became a wholly-owned subsidiary of 3dfx. The STB
merger was accounted for under the purchase method of accounting. The purchase
price of $139.3 million included $116.1 million of stock issued at fair value
(fair value being determined as the average price of 3dfx stock for a period of
a few days before and after the announcement of the merger), $9.9 million in STB
stock option costs (being determined under the Black-Scholes formula) and $13.3
million in estimated expenses of the transaction. The purchase price was
allocated as follows: $85.6 million to the estimated fair value of STB net
tangible assets purchased (as of May 13, 1999), ($7.6) million to establish
deferred tax liabilities associated with certain intangibles acquired, $4.3
million to purchased in-process research and development ("IPR&D"), $11.4
million to purchased existing technology, $4.4 million to trademarks, $2.3
million to workforce-in-place, $1.0 million to executive covenants and $37.9
million to goodwill. The allocation of the purchase price to intangibles was
based upon an independent, third party appraisal and management's estimates.
The value assigned to purchased IPR&D was determined by identifying
research projects in areas for which technological feasibility had not been
established. These include projects for Voodoo3 as well as other specialized
technologies totaling $4.3 million. The value was determined by estimating the
expected cash flows from the projects once commercially viable, discounting the
net cash flows back to their present value and then applying a percentage of
completion to the calculated value.
F-10
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
As described in Note 1, the Company recorded a charge of $117.1 million
for the impairment of goodwill and other intangibles. A portion of the impaired
goodwill and other intangibles originally arose as a result of the STB
acquisition.
Pro forma results of discontinued operations for the combined company as
if the transaction had been consummated at the beginning of the periods
presented are as follows (in thousands):
[Enlarge/Download Table]
FISCAL YEAR ENDED
-----------------------------------
JANUARY 31 DECEMBER 31,
2000 1998
----------- -----------
(unaudited)
Revenues ............................................................. $ 441,312 $ 467,441
Net income (loss) from discontinued operations ....................... $ (81,061) $ 9,110
Basic net income (loss) per share from discontinued operations ....... $ (3.39) $ 0.40
Diluted net income (loss) per share from discontinued operations ..... $ (3.39) $ 0.37
On a combined basis, there were no material transactions between the
Company and STB during the periods presented except for sales of product by the
Company to STB which have been eliminated.
NOTE 3 -- ACQUISITION OF GIGAPIXEL CORPORATION:
In July 2000, 3dfx completed a merger with GigaPixel Corporation, a
Delaware corporation ("GigaPixel"). As a result of the merger, GigaPixel became
a wholly-owned subsidiary of 3dfx. The merger was accounted for under the
purchase method of accounting. The purchase price of GigaPixel was approximately
$181.3 million and included $173.9 million of stock issued at fair value (fair
value being determined as the average price of 3dfx stock for a period of a few
days before and after the announcement of the merger), $2.7 million in vested
GigaPixel stock option costs (being determined under the Black Scholes formula)
and $4.7 million in estimated expenses of the transaction. The purchase price
was allocated as follows: $3.6 million to the estimated fair value of GigaPixel
net tangible assets purchased (as of July 21, 2000), $66.3 million to purchased
in-process research and development, $10.8 million to purchased existing
technology, $2.4 million to workforce-in-place, ($5.3) million to deferred tax
liabilities associated with certain intangibles acquired, and $103.5 million to
goodwill. The allocation of the purchase price to intangibles was based upon an
independent, third party appraisal and management's estimates.
The intangible assets and goodwill acquired had estimated and useful
lives and estimated first year amortization, as follows:
[Download Table]
ESTIMATED ANNUAL
AMOUNT USEFUL LIFE AMORTIZATION
------------ ----------- ------------
Purchased existing technology ..... $ 10,830,000 5 years $ 2,166,000
Workforce-in-place ................ 2,400,000 5 years 480,000
Goodwill .......................... 103,510,900 5 years 20,702,180
The value assigned to purchased IPR&D was determined by identifying
research projects in areas for which technological feasibility had not been
established. The value was determined by estimating the expected cash flows from
the projects once commercially viable, discounting the net cash flows back to
their present value and then applying a percentage of completion to the
calculated value as defined below.
As described in Note 1, the Company recorded a charge of $117.1 million
for the impairment of goodwill and other intangibles. A portion of the impaired
goodwill and other intangibles originally arose as a result of the GigPixel
acquisition.
Net Cash Flows. The net cash flows from the identified projects were
based on management estimates of revenues, research and development costs,
selling, general and administrative costs, royalty costs and income taxes from
those projects. These estimates were based on the assumptions mentioned below.
The research and
F-11
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
development costs included in the model reflect costs to sustain projects, but
exclude costs to bring in-process projects to technological feasibility.
Revenues. The estimated revenues were based on management projections of
each in-process project and these business projections were compared and found
to be in line with industry analysts' forecasts of growth in substantially all
of the relevant markets. Estimated total revenues from the IPR&D product areas
were expected to peak in the year ending January 31, 2005 and decline in 2006 as
other new products were expected to become available. These projections were
based on our estimates of market size and growth, expected trends in technology
and the nature and expected timing of new product introductions by GigaPixel and
their competitors.
Gross Margins. Projected gross margins associated with the identified
projects were in line with comparable industry margins. Research and
development, as well as sales, general and administrative costs were consistent
with the industry averages of companies of comparable size and age.
Discount Rate. Discounting the net cash flows back to their present
value was based on the industry WACC. The industry WACC was approximately 28%.
The discount rate used in discounting the net cash flows from IPR&D was 30%, a
200 basis point increase from the industry WACC. This discount rate is higher
than the industry WACC due to inherent uncertainties surrounding the successful
development of the IPR&D, market acceptance of the technology, the useful life
of such technology and the uncertainty of technological advances which could
potentially impact the estimates described above.
Percentage of Completion. The percentage of completion for GigaPixel
technology was determined using costs incurred to date on each project as
compared to the remaining research and development to be completed to bring each
project to technological feasibility. The Company anticipates beginning to ship
product incorporating this technology in the calendar year 2001. The percentage
of completion related to GigaPixel technology was 72.
Pro forma results of discontinued operations for the combined company as
if the transaction had been consummated at the beginning of the period presented
are as follows (in thousands):
[Enlarge/Download Table]
FISCAL YEAR ENDED
JANUARY 31, 2001
-----------------
(UNAUDITED)
Revenues ............................................................. $ 239,011
Net loss from discontinued operations ................................ (281,649)
Basic and diluted net loss per share from discontinued operations .... (7.16)
On a combined basis, there were no material transactions between the
Company and GigaPixel during the periods presented.
In connection with the acquisition of GigaPixel, the Company recorded
deferred compensation for the unvested portion of GigaPixel options assumed by
3dfx in the amount of approximately $6.9 million. This deferred compensation was
to be expensed over the remaining life of unvested the GigaPixel options assumed
by 3dfx. For the fiscal year ended January 31, 2001, the Company recorded
amortization of deferred compensation related to the GigaPixel acquisition of
$1.5 million which has been included in research and development expense. On
December 15, 2000, all of these employees were terminated and their unvested
options were canceled. Accordingly, the remaining unamortized deferred
compensation, all of which related to the unvested options, was reversed.
NOTE 4 -- BALANCE SHEET COMPONENTS (IN THOUSANDS):
[Download Table]
JANUARY 31, JANUARY 31,
2001 2000
---------- ----------
Inventory, net:
Raw material .............. $ 1,972 $26,708
Work-in-progress .......... 70 8,940
Finished goods ............ 20,316 9,417
------- -------
$22,358 $45,065
------- -------
F-12
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
[Download Table]
JANUARY 31, JANUARY 31,
2001 2000
---------- ----------
Other assets held for sale:
Computer equipment ........................... $ 8,268 $ --
Purchased computer software .................. 7,653 --
Furniture and equipment ...................... 4,428 --
Goodwill and other intangibles ............... 20,765 --
Other assets ................................. 4,131 --
------- ----
$45,245 $ --
======= ====
As described in Note 1, during the fiscal year ended January 31, 2001,
the Company recorded a charge of $117.1 million for the impairment of goodwill
and other intangibles, as well as a charge of $5.5 million for the write-down of
computer equipment, purchased computer software, and furniture and equipment.
[Download Table]
JANUARY 31, JANUARY 31,
2001 2000
---------- ----------
Property and equipment:
Computer equipment ............................ $ -- $ 27,108
Purchased computer software ................... -- 18,035
Furniture and equipment ....................... -- 28,113
------- --------
73,256
Less: Accumulated depreciation ............... -- (32,987)
------- --------
$ -- $ 40,269
======= ========
[Download Table]
JANUARY 31, JANUARY 31,
2001 2000
---------- ----------
Accrued liabilities:
Income taxes payable .......................... $ 96 $ 4,807
Accrued salaries, wages and benefits .......... 3,524 4,150
Sales returns reserves ........................ -- 1,245
Accrued marketing costs ....................... -- 3,104
Deferred tax liability ........................ 4,735 5,513
Other accrued liabilities ..................... 3,287 1,566
------- -------
$11,642 $20,385
======= =======
NOTE 5 -- RESTRUCTURING CHARGES:
During the fiscal year ended January 31, 2000, 3dfx incurred
restructuring expenses totaling approximately $4,382,000. Approximately
$2,552,000 of these amounts related to downsizing the expense levels of 3dfx
given 3dfx's fiscal 2000 financial losses, and $1,830,000 related to a one-time
reduction in workforce related to the merger with STB.
NOTE 6 -- DEBT:
As discussed in Note 1, upon signing the Asset Purchase Agreement on
December 15, 2000, Nvidia loaned to 3dfx $15 million for working capital under a
term loan with interest payable at a rate of 6.1% per annum. At January 31,
2001, the Company had accrued interest payable of approximately $114,000. The
full amount of this term loan was secured by the collateral identified to be
acquired under the Asset Purchase Agreement. Upon closing
F-13
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
of the asset sale to Nvidia on April 18, 2001, 3dfx received $55 million in
cash, which amount was net of repayment of the $15 million loan.
During the fiscal year ended January 31, 2001, the Company recorded
liabilities of $5.9 million reflecting future payments due within twelve months
under software license agreements. At January 31, 2001, the full amount of this
liability remained outstanding and is presented as other current liabilities.
3dfx had a line of credit agreement with a bank, which provided for
maximum borrowings in an amount up to the lesser of 80% of eligible accounts
receivable or $25.0 million. Borrowings under the line were secured by $25.0
million of cash and short-term investments and all of 3dfx's owned assets and
bore interest at Libor plus 100 basis points. The agreement required that 3dfx
maintain certain levels of tangible net worth and generally prohibited 3dfx from
paying cash dividends. In November 2000, the $25.0 million cash and short-term
investments previously pledged to secure the line of credit was used to payoff
the entire outstanding balance on the line of credit. The line of credit expired
on December 19, 2000. At January 31, 2001 and 2000, $0 and $25,000,000 was
outstanding under this line of credit.
3dfx had a $3.0 million term loan which was payable in 60 monthly
installments of principal and interest beginning on November 1, 1997. The term
loan bore interest at Libor plus 250 basis points. At January 31, 2000,
$1,944,000, was outstanding under the term loan. The term loan was repaid during
fiscal 2001 and at January 31, 2001 there was no balance outstanding.
3dfx has a lease line of credit with a bank, which provides for the
purchase of up to $5 million of property and equipment. Borrowings under this
line are secured by all of 3dfx's owned assets and bear interest at the bank's
prime rate plus 0.75% per annum. The agreement requires that 3dfx maintain
certain financial ratios and levels of tangible net worth, profitability and
liquidity. The equipment line of credit expires in December 2001. At January 31,
2001 and 2000, there were no borrowings outstanding under this equipment line of
credit.
NOTE 7 -- SHAREHOLDERS' EQUITY:
Common stock
3dfx has issued 1,646,250 shares of its common stock to founders and
investors. The shares either vested immediately or vested on various dates
through 1999. 3dfx can buy back unvested shares at the original price paid by
the purchasers in the event the purchasers' employment with 3dfx is terminated
for any reason. There were no such repurchases in fiscal 2001, 2000 or 1998.
During the year ended January 31, 2001, no employees exercised any
options to purchase shares of common stock which are subject to a right of
repurchase by 3dfx. However, during the fiscal years ended January 31, 2000 and
December 31, 1998, certain employees exercised options to purchase 22,041 and
44,640 shares of common stock, respectively, which are subject to a right of
repurchase by 3dfx at the original share issuance price. The repurchase right
lapses over a period generally ranging from two to four years. During the fiscal
years ended January 31, 2001 and 2000 and December 31, 1998, 1,224, 12,501 and
2,154 shares of common stock, respectively, were repurchased. At January 31,
2001 no shares of common stock were subject to repurchase. At January 31, 2000,
approximately 8,917 shares were subject to repurchase.
On June 16, 1999, 3dfx announced a stock repurchase program, whereby
3dfx was authorized by its board of directors to repurchase shares of its common
stock in the open market. In accordance with the program, 3dfx subsequently
repurchased 505,000 shares of its common stock for approximately $6.8 million.
In March 1998, 3dfx completed a secondary public offering of 2,900,000
shares of common stock at a price of $23.75 per share. Of the 2,900,000 shares
offered, 2,028,140 were sold by 3dfx and 871,860 were sold by selling
shareholders. 3dfx received cash of approximately $45.5 million, net of
underwriting discounts and commissions and other offering costs. 3dfx did not
receive any of the proceeds from the sale of shares by the selling shareholders.
On March 23, 1998, the 3dfx's underwriters exercised an option to purchase an
additional 435,000 shares of
F-14
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
common stock at a price of $23.75 per share to cover over-allotments. 3dfx
received cash of approximately $9.3 million, net of underwriting discounts and
commissions and other offering costs.
Convertible preferred stock
For the fiscal years ended January 31, 2001 and 2000, there were
5,000,000 shares of preferred stock authorized, with none issued or outstanding.
Warrants
In January 1996, 3dfx entered into a line of credit. To secure the line,
3dfx issued to the lessor a warrant to purchase 19,886 shares of Series B
Convertible Preferred Stock at an exercise price of $4.40. The warrant expires
on January 1, 2003. The warrant was deemed by management to have a nominal value
at the date of grant. Upon completion of 3dfx' IPO, this warrant was exchanged
for a warrant to purchase common stock. A portion of this warrant has been
executed and exchanged for 12,926 shares of 3dfx common stock. 3dfx has reserved
6,960 shares of common stock for the exercise of this warrant.
In 1996, 3dfx issued to a university a warrant to purchase 5,000 shares
of Series C Convertible Preferred Stock at an exercise price of $7.50 per share.
This warrant was deemed to have a value of approximately $40,000 at the date of
grant and the related cost was recognized as other expense and research and
development expense, respectively, during 1996. The warrant for 5,000 shares
expires on December 31, 2001. Upon completion of 3dfx's IPO, the warrant for
5,000 shares was exchanged for a warrant to purchase common stock. 3dfx has
reserved 5,000 shares of common stock for the exercise of this warrant.
On December 3, 1997, 3dfx issued a warrant to purchase 25,000 shares of
common stock at a exercise price of $13.875 per share in conjunction with
developing a relationship with another company. The warrant is fully exercisable
and expires December 3, 2002. 3dfx valued the warrant under the Black-Scholes
formula at approximately $200,000. The warrant value was amortized over a
one-year period as a cost of revenue. 3dfx has reserved 25,000 shares of common
stock for the exercise of this warrant.
As of January 31, 2001, 3dfx had reserved 36,960 shares of common stock
for the exercise of warrants.
NOTE 8 -- STOCK OPTION PLANS:
The 1995 Plan
In May 1995, 3dfx adopted a Stock Plan (the "1995 Plan") which provides
for granting of incentive and nonqualified stock options to employees,
consultants and directors of 3dfx. In May 1998, May 1999, and July 2000, 3dfx's
shareholders approved an increase of 1,700,000, 2,000,000, and 2,500,000 shares,
respectively, of common stock to be reserved for issuance under the 1995 Plan.
As of January 31, 2001, 8,875,000 shares of common stock have been reserved for
issuance under the 1995 Plan.
Options granted under the 1995 Plan are generally for periods not to
exceed ten years, and are granted at prices not less than 100% and 85%, for
incentive and nonqualified stock options, respectively, of the fair market value
on the date of grant. Incentive stock options granted to shareholders who own
greater than 10% of the outstanding stock are for periods not to exceed five
years, and must be issued at prices not less than 110% of the fair market value
of the stock on the date of grant. Options granted under the 1995 Plan generally
vest 25% on the first anniversary of the grant date and 1/48th of the option
shares each month thereafter, with full vesting occurring on the fourth
anniversary of the grant date.
The 1997 Plan
In October 1997, 3dfx adopted the 1997 Supplementary Stock Plan (the
"1997 Plan"), which provides for granting of nonqualified stock options to
employees (excluding officers, consultants and directors) of 3dfx. Under the
1997 Plan, 1,200,000 shares of common stock have been reserved for issuance at
January 31, 2001.
F-15
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Options granted under the 1997 Plan are generally for periods not to
exceed ten years and are granted at the fair market value of the stock on the
date of grant. Options granted under the 1997 Plan generally vest 25% on the
first anniversary of the grant date and 1/48th of the option shares each month
thereafter, with full vesting occurring on the fourth anniversary of the grant
date.
The 1999 Plan
In July 1999, 3dfx adopted the 1999 Supplementary Stock Plan (the "1999
Plan"), which provides for granting of nonqualified stock options to employees
(excluding officers, consultants and directors) of 3dfx and reserved 1,000,000
shares of common stock for issuance under the 1999 Plan. At January 31, 2001,
1,000,000 shares of Common Stock have been reserved for issuance under the 1999
Plan.
Options granted under the 1999 Plan are generally for periods not to
exceed ten years and are granted at the fair market value of the stock on the
date of grant. Options granted under the 1999 Plan generally vest 25% on the
first anniversary of the grant date and 1/48th of the option shares each month
thereafter, with full vesting occurring on the fourth anniversary of the grant
date.
Directors' Option Plan
In March 1997, 3dfx adopted a 1997 Directors' Option Plan. Under this
plan options to purchase 150,000 shares of common stock may be granted. The plan
provides that options may be granted at a price not less than fair value of a
share at the date of grant. The Director's Option Plan provides for an initial
option grant to purchase 12,500 shares of common stock to each new non-employee
director of 3dfx at the date he or she becomes a director. Each non-employee
director and Chairman of the Board of Directors will annually be granted an
option to purchase 5,000 and 10,000 shares of common stock, respectively,
beginning with the 1998 annual meeting of shareholders. If a director serves on
either the Audit Committee or Compensation Committee, on an annual basis he or
she will be granted an option to purchase 1,000 shares of common stock,
beginning with the 1997 annual meeting of shareholders. Options granted under
the Directors' Plan are generally for ten years and are granted at the fair
market value of the stock on the date of grant. The initial 12,500 option grant
vests at a rate of 1/48 per month following the date of grant. The annual option
grant of 5,000, 10,000 or 1,000 vests at a rate of 1/12 per month following the
date of grant.
The following is a summary of activity under the 1995 Plan, the 1997
Plan, the 1999 Plan and the Directors' Option Plan during the periods ended
December 31, 1998, January 31, 1999, January 31, 2000 and January 31, 2001:
[Enlarge/Download Table]
OPTIONS WEIGHTED
AVAILABLE FOR OPTIONS AVERAGE
GRANT OUTSTANDING EXERCISE PRICE
------------- ----------- --------------
Balance at December 31, 1997 ..................... 366,050 2,505,984 $ 6.38
Additional shares authorized ..................... 2,400,000 -- --
Granted ...................................... (3,617,765) 3,617,765 $15.72
Exercised .................................... -- (478,104) $ 1.34
Canceled ..................................... 2,098,488 (2,098,488) $19.16
Repurchased .................................. 2,154 -- $ 0.27
---------- ----------
Balance at December 31, 1998 ..................... 1,248,927 3,547,157 $ 9.02
Grants in January 1999 ....................... (83,850) 83,850 $12.38
Exercises in January 1999 .................... -- (44,815) $ 3.13
Cancellations in January 1999 ................ 87,192 (87,192) $ 7.80
---------- ----------
Balance at January 31, 1999 ...................... 1,252,269 3,499,000 $ 9.21
Additional shares authorized ..................... 3,000,000 -- --
F-16
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
[Download Table]
Options related to acquisition of STB ....... (566,913) 566,913 $10.72
Grants ...................................... (4,800,897) 4,800,897 $11.68
Exercised ................................... -- (692,088) $ 3.60
Canceled .................................... 1,677,832 (1,690,333) $12.46
Repurchased ................................. 12,501 -- $ 0.32
---------- ----------
Balance at January 31, 2000 ...................... 574,792 6,484,389 $10.92
Additional shares authorized ..................... 3,350,000 -- --
Options related to acquisition of GigaPixel . (815,355) 815,355 $ 0.16
Grants ...................................... (7,529,819) 7,529,819 $ 3.69
Exercised ................................... -- (188,940) $ 5.48
Canceled .................................... 9,745,922 (9,745,922) $ 7.38
Repurchased ................................. 1,224 -- $ 0.44
---------- ----------
Balance at January 31, 2001 ...................... 5,326,764 4,894,701 $ 5.64
========== ==========
At January 31, 2001 and 2000, and December 31, 1998, 4,807,044,
1,129,810,and 768,183, respectively, of common stock options were vested and
exercisable. On December 15, 2000, substantially all of 3dfx's United States and
European employees were terminated or given notice of termination and their
unvested options were correspondingly canceled. Upon termination, employees have
90 days to exercise vested options. Therefore, at January 31, 2001, all vested
options related to these terminated employees remained outstanding.
In connection with the grant of stock options to employees from
inception (August 1994) through the effective date of 3dfx's IPO, 3dfx recorded
aggregate deferred compensation of approximately $1.9 million, representing the
difference between the deemed fair value of the common stock for accounting
purposes and the option exercise price at the date of grant. This amount was
presented as a reduction of shareholders' equity and was amortized ratably over
the vesting period of the applicable options. The amortization of the deferred
compensation for each of the fiscal years ended January 31, 2000 and December
31, 1998 totaled $484,000 (of which $194,000 and $290,000 were recorded as a
charge to research and development expenses and selling, general and
administrative expenses, respectively). The remaining deferred compensation at
January 31, 2000 of $172,000 was fully amortized during the fiscal year ended
January 31, 2001 ($69,000 was recorded as a charge to research and development
expenses and $103,000 was recorded as a charge to selling, general and
administrative expenses).
In October 1998, substantially all outstanding options with an exercise
price in excess of $10.88 per share were canceled and replaced with new options
having an exercise price of $10.88, the fair market value on the date that the
employees accepted the repricing. A total of 1,409,790 options were repriced.
This repricing excluded executive officers. In December 1998, a repricing for
executive officers occurred where substantially all outstanding options with an
exercise price in excess of $13.13 per share were canceled and replaced with new
options having an exercise price of $13.13, the fair market value on the date
that the executive officers accepted the repricing. A total of 330,000 options
were repriced. In both the October and December repricings, any option holder
accepting such offer was not permitted to exercise the repriced option (both
vested and unvested shares) in the first twelve months following the date of the
applicable repricing.
On October 20, 2000, the Company undertook a stock option exchange
program, allowing employees the opportunity to surrender their existing stock
options in exchange for a new grant of 50% of the original options with a new
exercise price of $2.00 per share. The options were to become fully vested on
June 30, 2001, and expire on June 30, 2002. This program was offered to certain
active employees whose options were granted on September 5, 2000, or earlier. On
October 20, 2000, options for 4.70 million shares were canceled and options for
2.35 million shares were granted under this program. As the market value of 3dfx
stock at the date of grant exceeded the exercise price for these options the
Company recorded deferred compensation of $5.3 million to be amortized over the
vesting period. In accordance with Financial Accounting Standards Board
Interpretation No. 44 ("FIN 44") "Accounting for Certain transaction Involving
Stock Compensation" issued in March 2000, the repricing required the Company to
account for the options as variable from the date of modification to the date
the award was exercised, forfeited, or expired unexercised. On December 15,
2000, substantially all of 3dfx's United States and European employees were
terminated or given notice of termination and their unvested options were
correspondingly canceled. Amortization of deferred compensation taken for the
options, all of which were
F-17
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
unvested, totaling $0.9 million for the fiscal year ended January 31, 2001, was
reversed, as was the remaining deferred compensation.
Information relating to stock options outstanding under the 1995 Plan,
the 1997 Plan, the 1999 Plan and the Directors' Plan at January 31, 2000 is as
follows:
[Enlarge/Download Table]
OPTIONS OUTSTANDING
--------------------------------------------------
WEIGHTED OPTIONS EXERCISABLE
AVERAGE ----------------------------
REMAINING WEIGHTED WEIGHTED
RANGE OF NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ----------- --------------- ----------- --------------
$ 0.16 623,860 9.50 $ 0.16 623,860 $ 0.16
$ 0.20 - 2.00 588,431 2.70 1.60 588,431 1.60
$ 3.09 991,000 9.70 3.09 991,000 3.09
$ 3.46 - 4.47 506,252 9.68 4.24 506,252 4.24
$ 6.87 - 8.50 367,403 8.47 7.41 279,747 7.42
$ 8.88 1,117,646 8.83 8.88 1,117,645 8.88
$ 8.91 - 13.25 511,403 7.54 11.33 511,403 11.33
$15.04 - 17.00 167,806 7.92 16.73 167,806 16.73
$23.21 - 23.25 20,900 7.18 23.24 20,900 23.24
-------------- --------- ------ ------ --------- ------
4,894,701 8.23 5.64 4,807,044 5.64
========= ====== ====== ========= ======
Employee Stock Purchase Plan
In March 1997, 3dfx's board of directors approved an Employee Stock
Purchase Plan. Under this plan, employees of 3dfx can purchase common stock
through payroll deductions. A total of 1,600,000 shares have been reserved for
issuance under this plan. In July 2000, 3dfx's shareholders approved an increase
of 850,000 shares to be reserved for issuance under the Employee Stock Purchase
Plan and an annual increase to the number of shares reserved to take effect on
the date of the Annual Meeting of Shareholders commencing with the 2001 Annual
Meeting of Shareholders and ending with the 2006 Annual Meeting of Shareholders,
equal to the lesser of (i) 600,000 shares or (ii) 1.5% of the outstanding shares
of the Company on such date. As of January 31, 2001, 998,553 shares have been
purchased under the Employee Stock Purchase Plan.
Certain Pro Forma Disclosures
3dfx accounts for its stock option plans and the Employee Stock Purchase
Plan in accordance with the provisions of APB 25. Had 3dfx recorded compensation
costs based on the estimated grant date fair value, as defined by SFAS 123, for
awards granted under its stock option plans and the Employee Stock Purchase
Plan, 3dfx's net income (loss) from discontinued operations and net income
(loss) per share from discontinued operations would have been (in thousands,
except per share data):
[Enlarge/Download Table]
YEAR ONE MONTH
ENDED YEAR ENDED ENDED
JANUARY 31, DECEMBER 31, JANUARY
------------------------ ----------- 31,
2001 2000 1998 1999
--------- -------- ----------- -----------
Pro forma net income (loss) from discontinued
operations ....................................... $(359,208) $(75,915) $16,067 $(3,913)
Pro forma basic net income (loss) per share from
F-18
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
[Enlarge/Download Table]
discontinued operations .......................... $(11.21) $(3.37) $ 1.08 $(0.25)
Pro forma diluted net income (loss) per share from
discontinued operations .......................... $(11.21) $(3.37) $ 0.98 $(0.25)
The pro forma effect on net income (loss) from discontinued operations
and net income (loss) per share from discontinued operations for fiscal 2001,
2000 and 1998 is not representative of the pro forma effect on net income (loss)
from discontinued operations and net income (loss) per share from discontinued
operations in future years because it does not take into consideration pro forma
compensation expense related to grants made prior to 1995.
For the fiscal years ended January 31, 2001 and 2000 and December 31,
1998 the fair value of each option on the date of grant was determined utilizing
the Black-Scholes model.
The following assumptions were used for the stock option plans and the
Employee Stock Purchase Plan for the years ended January 31, 2001 and 2000 and
December 31, 1998:
[Enlarge/Download Table]
YEAR ENDED YEAR ENDED
JANUARY 31, DECEMBER 31,
------------------------- ------------
2001 2000 1998
------ ------ ------------
Stock option plans:
Expected dividend yield .......................... -- -- --
Expected stock price volatility .................. 70% 70% 70%
Risk free interest rate .......................... 4.6% 5.7% 5.1%
Expected life (years) ............................ 0.5 6.5 5.9
Employee stock purchase plan:
Expected dividend yield .......................... -- -- --
Expected stock price volatility .................. 70% 70% 70%
Risk free interest rate .......................... 4.6% 5.2% 4.8%
Expected life (years) ............................ 0.5 0.5 0.5
The weighted average fair value of stock options granted in the fiscal
years ended January 31, 2001 and 2000 and December 31, 1998 was $4.82, $8.04 and
$13.12 per share, respectively.
Benefit Plan
As of January 31, 2001, 3dfx had two 401(k) Savings Plans which plans
allow all United States employees to participate by making salary deferral
contributions to the 401(k) Savings Plans. 3dfx may make discretionary
contributions to the 401(k) Savings Plans upon approval by the board of
directors. Through January 31, 2001, 3dfx has contributed to one of the 401(k)
Savings Plans but not the other.
NOTE 9 -- INCOME TAXES:
Income before income taxes and the significant components of the
provision for income taxes comprise the following (in thousands):
[Enlarge/Download Table]
FISCAL YEAR ENDED ONE MONTH
------------------------------------------------ ENDED
JANUARY 31, JANUARY 31, DECEMBER 31, JANUARY 31,
2001 2000 1998 1999
--------- --------- ------------ ----------
Income (loss) from discontinued operations
F-19
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
[Enlarge/Download Table]
before income taxes ........................ $(376,998) $(73,611) $ 29,366 $(5,111)
========= ======== ======== =======
Provision for income taxes
Current:
Federal .................................. $ (2,925) $ (8,936) $ 12,309 $(1,513)
State .................................... -- (1,558) 2,525 (124)
Foreign .................................. 442 -- -- --
--------- -------- -------- -------
(2,483) (10,494) 14,834 (1,637)
--------- -------- -------- -------
Deferred:
Federal .................................. (29,740) 148 (6,252) 1
State .................................... (4,249) 22 (919) --
--------- -------- -------- -------
(33,989) 170 (7171) 1
--------- -------- -------- -------
Total provision for income taxes ................. $ (36,472) $(10,324) $ 7,663 $(1,636)
========= ======== ======== =======
The components of net deferred income tax assets are as follows (in
thousands):
[Download Table]
JANUARY 31, JANUARY 31,
2001 2000
---------- ----------
Deferred Tax Assets:
Net operating losses ...................... $ 63,370 $ 9,876
Expenses not currently deductible ......... 15,976 11,867
Tax credit carryforwards .................. 2,422 2,421
-------- --------
Deferred Tax Assets ....................... 81,768 24,164
Deferred Tax Liability:
Intangible Assets ......................... (4,735) (5,513)
-------- --------
Gross Deferred tax asset ......................... 77,033 18,651
Less: valuation allowance ....................... (46,768) (11,082)
-------- --------
Net deferred income tax assets ................... $ 30,265 $ 7,569
======== ========
3dfx's actual provision differs from the provision (benefit) computed by
applying the statutory federal income tax rate to income (loss) from
discontinued operations before income taxes as follows (in thousands):
[Enlarge/Download Table]
YEAR ENDED
--------------------------------------------- MONTH ENDED
JANUARY 31, JANUARY 31, DECEMBER 31, JANUARY 31,
2001 2000 1998 1999
---------- ---------- ----------- -----------
Tax provision (benefit) at statutory federal tax rate .. $(128,179) $(25,028) $ 10,278 $(1,738)
State taxes, net of federal tax benefit ................ (20,175) (3,959) 1,687 (147)
R&D credit ............................................. -- -- (692) --
In process research and development .................... 22,525 1,723 -- --
Amortization of goodwill and other intangibles ......... 8,313 4,097 -- --
Impairment of goodwill and other intangibles ........... 39,802 -- -- --
Change in valuation allowance .......................... 35,686 12,577 (4,299) --
Other, net ............................................. 5,556 266 689 249
--------- -------- -------- -------
Total provision (benefit) for taxes .................... $ (36,472) $(10,324) $ 7,663 $(1,636)
========= ======== ======== =======
At January 31, 2001, 3dfx had net operating loss carryforwards for
federal and state income tax purposes of approximately $164 million and $128
million, respectively. If not utilized, the federal and state net operating
losses will begin to expire beginning in 2011 and 2001, respectively.
Management has assessed the realizability of deferred tax assets
recorded at January 31, 2001 based upon the weight of available evidence,
including such factors as expected future taxable income primarily related to
the expected gain on sale of assets to Nvidia. Management believes that it is
more likely than not that the Company will
F-20
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
not realize a portion of its deferred tax assets and, accordingly, a valuation
allowance of $46.8 million has been established for such amounts at January 31,
2001.
NOTE 10 -- COMMITMENTS AND CONTINGENCIES:
3dfx leases, under noncancelable operating leases, certain of its
facilities and equipment. Rent expense on the operating leases for the fiscal
years ended January 31, 2001 and 2000 and December 31, 1998 was approximately
$6.0 million, $6.7 million, and $1.7 million, respectively. There were no
capital leases outstanding as of January 31, 2001. Future minimum lease payments
under operating leases are as follows (in thousands):
[Download Table]
OPERATING LEASES
----------------
2002 ............................................. $ 7,142
2003 ............................................. 5,845
2004 ............................................. 3,925
2005 ............................................. 3,360
2006 ............................................. 3,331
Thereafter ....................................... 5,551
-------
Total minimum lease payments .................. $29,154
=======
Purchase Commitments
3dfx's manufacturing relationship with Taiwan Semiconductor
Manufacturing Corporation ("TSMC") allows 3dfx to cancel all outstanding
purchase orders, but requires the repayment of all expenses incurred to date. As
of January 31, 2001, TSMC had incurred approximately $2.9 million of
manufacturing expenses on 3dfx's outstanding purchase orders, which has been
reflected within accrued liabilities at January 31, 2001.
Contingencies
On December 21, 2000, CagEnt Technologies, Inc. filed suit against 3dfx
in the Northern California District Federal Court. The complaint alleges patent
infringement relating to CagEnt's patent no. 5,856,829. The complaint seeks a
declaratory judgment of infringement, injunctive relief enjoining future
infringement and money damages caused by the alleged infringement, together with
pre-judgment and post-judgment interest, attorneys' fees and cost of suit. 3dfx
believes it has meritorious defenses to the claims against it and intends to
vigorously defend itself.
On September 21, 1998, 3dfx filed suit against Nvidia in Northern
California District Federal Court. The complaint alleged patent infringement
relating to Nvidia's use of multi-texturing technology in its RIVA TNT product.
On August 28, 2000, Nvidia filed suit against 3dfx in Northern California
District Federal Court. The complaint alleged infringement by 3dfx of five
Nvidia patents in the Voodoo3, Voodoo4, Voodoo5 and VSA-100 families of 3dfx
products. Pursuant to the terms of the asset purchase agreement as discussed in
Note 1, 3dfx and Nvidia agreed to dismiss with prejudice the infringement
lawsuits that Nvidia and 3dfx had filed against each other. Both parties filed a
joint stipulation for dismissal with the Northern California District Federal
Court on April 19, 2001. On April 26, 2001, the Court signed an order granting
such dismissals.
A securities class action lawsuit was filed October 9, 1998 in Dallas
County, Texas against STB Systems, Inc. ("STB"), which 3dfx acquired by merger
in May, 1999. The suit was brought against STB and some of its officers and
directors and the underwriters who participated in the STB secondary offering on
March 20, 1998. The petition alleges that the registration statement for the
secondary public offering contained false and misleading statements of material
facts and omitted to state material facts. The petition asserts claims under
Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, and
Sections 581-33A of the Texas Securities Act on behalf of a purported class of
persons who purchased or otherwise acquired STB common stock in the public
offering. The petition seeks recission and/or unspecified damages. That action
was removed to federal court in April 2000.
F-21
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
On December 17, 1999, a similar securities class action lawsuit was also
filed in the United States District Court for the Northern District of Texas,
Dallas Division, against STB and three of its officers and directors. The action
asserts claims under Sections 10 and 20 of the Securities Exchange Act of 1934.
On February 8, 2000, another similar class action lawsuit, asserting claims
under Sections 10 and 20 of the Securities Exchange Act of 1934, was filed
against STB and three of its officers and directors in the United States
District Court for the Northern District of Texas. All of these actions have
subsequently been consolidated, and the parties have now reached an agreement in
principle to settle their actions. The settlement, which has been approved by
the Court, does not reflect any admission of liability by any of the defendants.
The principal terms of the settlement call for the establishment of a settlement
fund consisting of $4.7 million which has been paid by insurance.
3dfx is also a party to various legal proceedings involving collection
matters and other matters against it. 3dfx is currently seeking resolutions that
are mutually acceptable to the parties involved in each of these matters.
However, there is no assurance that resolutions will be achieved. Although the
amount of any liability that could arise with respect to these proceedings
cannot be predicted accurately, 3dfx believes that any liability that might
result from such claims will not have a material adverse effect on its financial
position.
NOTE 11 -- RELATED PARTY TRANSACTIONS:
Since April 1995, a consulting company has been providing management
services to 3dfx for which 3dfx pays a monthly fee of $5,000. The Chairman and a
director of the board of directors of 3dfx are also officers of the consulting
company. Total payments or amounts accrued for such management services during
fiscal years 2001, 2000 and 1998 were $65,000, $55,000, and $60,000,
respectively.
During fiscal years 2001, 2000 and calendar year 1998 a member of the
board of directors provided consulting services to 3dfx. Total payments for such
consulting services in fiscal years 2001, 2000 and calendar year 1998 were
$45,000, $45,000 and $60,000, respectively.
During fiscal year 2001, a significant shareholder and former member of
the Company's board of directors provided consulting services to 3dfx for
$400,000. At January 31, 2001, 3dfx had an outstanding receivable due from this
shareholder of $1.1 million.
In April 1997, an officer of 3dfx resigned and subsequently founded
Quantum3D, Inc., a supplier of advanced graphic subsystems based on 3dfx
technology. Sales to Quantum3D, Inc. during fiscal years 2001, 2000 and calendar
year 1998 totaled $2.8 million , $1.6 million and $0.7 million respectively. As
of January 31, 2001, 3dfx has an outstanding trade receivable from Quantum3D,
Inc. of approximately $85,000.
In April 1999, 3dfx invested an amount of $3.1 million in exchange for a
minority interest in Quantum 3D in the form of convertible preferred shares in
connection with Quantum 3D's private round of financing. These terms and pricing
of these shares was equivalent to other unaffiliated third participants in the
financing round. During the fiscal year ended January 31, 2001, 3dfx fully
reserved for this investment, as management does not expect to be able to
recover the value of this investment. The charge taken for this investment is
included in interest and other income (expense).
In March 2000, 3dfx sold the Specialized Technology Group (STG), a
business unit that provides digital video products, multi-output MPEG decoder
cards and multi-monitor display adapters to a company of which a former 3dfx
employee, and daughter of a former Executive Vice President and Vice Chairman of
the board of directors of 3dfx, is President. 3dfx maintains a minority equity
interest in STG of $2.1 million at January 31, 2001 and had an outstanding notes
receivable from STG of $1.5 million at January 31, 2001.
NOTE 12 -- SEGMENT AND GEOGRAPHIC INFORMATION:
3dfx has adopted Statement of Financial Accounting Standards No. 131
"Disclosure about Segments of an Enterprise and Related Information". Based on
its operating management and financial reporting structure, 3dfx has
F-22
3DFX INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
determined that it has one reportable business segment: the design, development
and sale of graphics boards incorporating 3dfx's proprietary graphics chips. The
following is a summary of product revenue by geographic area based on the
location of shipments (in thousands):
[Enlarge/Download Table]
FISCAL YEAR ENDED ONE MONTH
--------------------------------------------------- ENDED
JANUARY 31, JANUARY 31, DECEMBER 31, JANUARY 31,
2001 2000 1998 1999
---------- ---------- ------------ ----------
United States .................................... $139,141 $193,941 $144,415 $ 9,325
International .................................... 93,926 166,582 58,186 7,723
-------- -------- -------- -------
Total ............................................ $233,067 $360,523 $202,601 $17,048
======== ======== ======== =======
All sales are denominated in United States dollars. For all periods
presented, substantially all of 3dfx's long-lived assets were located in the
United States.
F-23
SUPPLEMENTARY FINANCIAL DATA
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
[Enlarge/Download Table]
THREE MONTHS ENDED
------------------------------------------------------------------------
JANUARY 31, OCTOBER 31, JULY 31, APRIL 30,
2001 2000 2000 2000
---------- ---------- --------- -----------
Revenues ......................................... $ 18,310 $ 39,189 $ 66,989 $ 108,578
Gross profit (loss) .............................. (24,775) (21,746) 10,189 26,411
Net loss from discontinued operations ............ (49,020) (178,573) (100,496) (12,431)
Basic net loss per share from discontinued
operations .................................... $ (1.24) $ (4.53) $ (3.81) $ (0.51)
Diluted net loss per share from
discontinued operations ....................... $ (1.24) $ (4.53) $ (3.81) $ (0.51)
[Enlarge/Download Table]
THREE MONTHS ENDED
-----------------------------------------------------------------------
JANUARY 31, OCTOBER 31, JULY 31, APRIL 30,
2000 1999 1999 1999
---------- ---------- --------- ----------
Revenues ......................................... $ 109,388 $ 105,856 $ 104,836 $ 40,444
Gross profit ..................................... 12,638 17,232 28,528 14,254
Net loss from discontinued operations ............ (31,886) (17,618) (11,599) (2,184)
Basic net loss per share from discontinued
operations .................................... $ (1.31) $ (0.73) $ (0.50) $ (0.14)
Diluted net loss per share from
discontinued operations ....................... $ (1.31) $ (0.73) $ (0.50) $ (0.14)
On March 27, 2001, 3dfx's shareholders approved proposals to liquidate,
wind-up and dissolve 3dfx pursuant to a plan of dissolution. 3dfx is proceeding
to wind-up its affairs and dissolve. Accordingly, all activities of 3dfx are
presented as discontinued operations. See Note 1 to Notes to Financial
Statements for further discussion.
The quarterly financial information above reflects the following:
- During the quarter ended October 31, 2000, 3dfx took a $117.1 million
charge for the impairment of goodwill and other intangible assets.
3dfx's results of discontinued operations for the year ended January 31,
2001 and financial position at January 31, 2001 reflect the impact of
this change. See Note 1 to Notes to Financial Statements for further
discussion of the impairment charge.
- 3dfx's merger with GigaPixel Corporation was consummated on July 21,
2000 and was treated as a purchase for financial reporting and
accounting purposes. 3dfx's results of discontinued operations for the
year ended January 31, 2001 and financial position at January 31, 2001
reflect the impact of the GigaPixel merger. See Note 3 to Notes to
Financial Statements for further discussion of the GigaPixel merger.
- 3dfx's merger with STB Systems, Inc., which was consummated on May 13,
1999 and was treated as a purchase for financial reporting and
accounting purposes. 3dfx's results of discontinued operations for the
year ended January 31, 2000 and financial position at January 31, 2000
reflect the impact of the STB merger. See Note 2 to Notes to Financial
Statements for further discussion of the STB merger.
F-24
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders
of 3dfx Interactive, Inc.:
Our audits of the consolidated financial statements referred to in our
report (which contains an emphasis of matter paragraph relating to the plan of
dissolution, as described in Note 1 to the consolidated financial statements)
dated March 27, 2001, except as to Note 1 and Note 10, which are as of April 26,
2001, appearing in the 2001 Annual Report on Form 10-K of 3dfx Interactive, Inc.
also included an audit of the financial statement schedule listed in Item
14(a)(2) of this Form 10-K. 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
PricewaterhouseCoopers LLP
San Jose, California
March 27, 2001
S-1
SCHEDULE II
3DFX INTERACTIVE, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JANUARY 31, 2001, JANUARY 31, 2000, AND DECEMBER 31, 1998,
AND ONE MONTH ENDED JANUARY 31, 1999
(IN THOUSANDS)
[Enlarge/Download Table]
Charged to Assumed from
Beginning costs and STB Ending
balance expenses acquisition Deductions balance
--------- ---------- ------------ ---------- -------
Allowance for Doubtful Accounts:
Year ended January 31, 2001 .......... $ 6,681 $11,872 $ 0 $8,561 $ 9,992
Year ended January 31, 2000 .......... $ 6,729 $ 2,392 $ 598 $3,038 $ 6,681
Month ended January 31, 1999 ......... $ 2,280 $ 4,449 $ 0 $ 0 $ 6,729
Year ended December 31, 1998 ......... $ 308 $ 2,561 $ 0 $ 589 $ 2,280
Inventory Reserves:
Year ended January 31, 2001 .......... $18,496 $10,302 $ 0 $3,415 $25,383
Year ended January 31, 2000 .......... $ 7,828 $ 909 $18,000 $8,241 $18,496
Month ended January 31, 1999 ......... $ 7,828 $ 0 $ 0 $ 0 $ 7,828
Year ended December 31, 1998 ......... $ 661 $10,817 $ 0 $3,650 $ 7,828
S-2
3DFX INTERACTIVE, INC.
INDEX TO EXHIBITS
[Download Table]
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
2.1(1) Agreement and Plan of Reorganization by and between the
Registrant and STB Systems, Inc. dated as of December 13, 1998
and the related Stock Option Agreement and form of Voting
Agreement
2.2(9) Agreement and Plan of Reorganization by and between the
Registrant and GigaPixel Corporation dated as of March 27,
2000, including selected annexes (attached as Appendix A to the
Proxy Statement/Prospectus/Information Statement)
2.3(11) Asset Purchase Agreement, dated December 15, 2000, by and among
the Registrant, NVIDIA Corporation and Titan Acquisition Corp.
No. 2
2.4* Registrant's Plan of Dissolution, as approved by Registrant's
shareholders on March 27, 2001
3.1(9) The Registrant's Restated Articles of Incorporation
3.2(5) Certificate of Determination of Rights Preferences and
Privileges of Series A Participating Preferred Stock of
Registrant
3.3(12) The Registrant's Amended and Restated Bylaws
4.1(2) Specimen Common Stock Certificate
4.2(5) Preferred Shares Rights Agreement dated October 30, 1998,
between Registrant and BankBoston, N.A., Rights Agent
10.1(2) Form of Indemnification Agreement between the Registrant and
each of its directors and officers
10.2(13) 1995 Employee Stock Plan, as amended
10.3(2) 1997 Director Option Plan and form of Director Stock Option
Agreement thereunder
10.4(13) 1997 Employee Stock Purchase Plan, as amended
[Download Table]
10.5(2) Lease Agreement dated August 7, 1996 between Registrant and
South Bay/Fortan, and Tenant Estoppel Certificate dated March
25, 1997 between Registrant and CarrAmerica Realty Corporation
for San Jose, California office
10.6(2) Investors' Rights Agreement dated September 12, 1996, Amendment
No. 1 to Investors' Rights Agreement dated November 25, 1996,
Amendment No. 2 to Investors' Rights Agreement dated December
18, 1996 and Amendment No. 3 to Investors' Rights Agreement
dated March 27, 1997 by and among the Registrant and holders of
the Registrant's Series A, Series B and Series Preferred Stock
10.7(3) Warrant to purchase shares of Common Stock issued to Creative
Labs, Inc.
10.8(2) Form of Restricted Stock Purchase Agreement between the
Registrant and certain shareholders
10.9(2) Change of Control Letter Agreement between the Registrant and
Scott D. Sellers
10.10(4) Software License and Co-marketing Agreement made as of June,
1997 by and between Electronic Arts, Inc. and the Registrant
10.11(4) Master Equipment Lease dated July 1, 1997 by and between the
Registrant and Pentech Financial Services, Inc.]
10.12(3) Lease Agreement dated as of January 6, 1998 by and between the
Registrant and GEOMAXX
10.13(3) 1997 Supplementary Stock Option Plan and form of Stock Option
Agreement thereunder
10.14(8) 1999 Supplementary Stock Option Plan and form of Stock Option
Agreement thereunder
10.15(12) Indemnity Escrow Agreement dated as of July 20, 2000, by and
among the Registrant, GigaPixel Corporation, Galapagos
Acquisition Corp. and U.S. Trust Company, N.A.
10.16(12) Consulting Agreement dated as of July 20, 2000, by and between
the Registrant and George T. Haber
10.17(12) Noncompetition Agreement dated as of July 20, 2000, by and
between the Registrant and George T. Haber
10.18(12) Contingent Recourse Non-Negotiable Promissory Note dated as of
July 20, 2000, made by George T. Haber for the benefit of
GigaPixel Corporation
10.19(12) Lock Up Agreement dated as of July 20, 2000, by and between the
Registrant and George T. Haber
10.20(12) Employment Agreement for Executive Officer dated as of July 20,
2000, by and between Gigapixel Corporation and Philip Carmack
10.21(12) Contingent Recourse Non-Negotiable Promissory Note dated as of
July 20, 2000, made by Philip Carmack for the benefit of
GigaPixel Corporation
10.22(12) Performance Bonus Agreement dated as of July 20, 2000, by and
between GigaPixel Corporation and Philip Carmack
10.23(14) GigaPixel Corporation 1997 Employee Incentive Plan
[Download Table]
10.24(10) Employment Agreement by and between the Registrant and Alex M.
Leupp, as amended effective February 1, 2001
10.25(10) Employment Agreement by and between the Registrant and Scott D.
Sellers, as amended effective February 1, 2001
10.26(10) Employment Agreement by and between the Registrant and Richard
Burns, as amended effective February 1, 2001
10.27(10) Employment Agreement by and between the Registrant and Stephen
A. Lapinski, as amended effective February 1, 2001
10.28(10) Employment Agreement by and between the Registrant and Alfred
R. Woodhull, as amended effective February 1, 2001
10.29(11) Credit Agreement dated December 15, 2000 by and between the
Registrant and Titan Acquisition Corp. No. 2
10.30(11) Security Agreement dated December 15, 2000 by and between the
Registrant and Titan Acquisition Corp. No. 2
10.31(11) Trademark Assignment Agreement, by and between 3dfx Interactive
Inc. and Titan Acquisition Corp. No. 2
10.32(11) Patent License Agreement dated December 15, 2000 by and
between the Registrant, NVIDIA Corporation and Titan
Acquisition Corp. No. 2
10.33(11) Patent Standstill Agreement, dated as of December 15, 2000, by
and between NVIDIA Corporation and the Registrant
10.34(15) Lease Agreement dated December 6, 1988 by and between STB de
Mexico S.A. C.V. (formerly known as Industrias Fronterizas de
Chihuahua, S.A. de C.V.) (a subsidiary of STB Systems, Inc., as
lessee) and Complejo Industrial Fuentes, S.A. de C.V. lessor),
including an Agreement for Modification dated February 25, 1994
by and between the same parties
10.35(16) Modification Agreement dated October 4, 1996 by and between STB
de Mexico, S.A. de C.V. and Complejo Industrial Fuentes, S.A.
de C.V.
10.36(16) Lease Contract dated October 4, 1996 by and between STB de
Mexico, S.A. de C.V. (as lessee) and Complejo Industrial
Fuentes, S.A. de C.V. (as lessor)
10.37(7) Amendment to Lease Agreement dated January 30, 1997 by and
between STB de Mexico, S.A. de C.V. (as lessee) and Complejo
Industrial Fuentes, S.A. de C.V.
10.38* Settlement Agreement and Mutual Release dated November 29, 2000
by and between the Registrant and William E. Ogle
10.39* Lease Agreement dated July 23, 1998 by and between CarrAmerica
Realty L.P. and the Registrant, and an amendment thereto
10.40* Lease Agreement dated May 27, 1999 by and between Balstones
Estate Limited and STB Systems, Inc.
10.41* Lease Schedule No. 1000063905 dated December 15, 1997 by and
between Banc One Leasing Corporation and STB Systems, Inc.
10.42* Lease Schedule No. 1000064617 dated April 17, 1998 by and
between Banc One Leasing Corporation and STB Systems, Inc.
10.43* Lease Schedule No. 1000063259 dated October 31, 1997 by and
between Banc One Leasing Corporation and STB Systems, Inc.
21.1 Subsidiaries of the Registrant
(a) STB Systems, Inc.
(b) 3dfx International
(c) GigaPixel Corporation
(d) STB Assembly, Inc.
(e) STB de Mexico, S.A. de C.V.
23.1* Consent of PricewaterhouseCoopers LLP, Independent Accountants
24.1* Power of Attorney (included on signature page)
+ Confidential treatment has been granted for portions of these
agreements. Omitted portions have been filed separately with the
Commission.
* Filed herewith.
(1) Incorporated by reference to Schedule 13D filed by STB Systems, Inc.
dated December 23, 1998 with respect to the Registrant.
(2) Incorporated by reference to the exhibits filed with the Registrant's
Registration Statement on Form S-1 (File No. 333-25365) which was
declared effective on June 25, 1997.
(3) Incorporated by reference to the exhibits filed with the Registrant's
Registration Statement on Form S-1 (File No. 333-46119) filed with the
Commission on February 11, 1998.
(4) Incorporated by reference to the exhibits filed with the Registrant's
Quarterly Report on Form 10-Q for the period ended June 30, 1997.
(5) Incorporated by reference to the exhibits filed with the Registrant's
Registration Statement on Form 8-A which was filed with the Commission
on November 9, 1998.
(6) Incorporated by reference to the exhibits filed with the Registrant's
Quarterly Report on Form 10-Q for the period ended June 30, 1998.
(7) Incorporated by reference to exhibits filed with STB Systems, Inc.'s
Annual Report on Form 10-K for the fiscal year ended October 31, 1997.
(8) Incorporated by reference to Exhibit 4.1 filed with the Registrant's
Registration Statement on Form S-8 (File No. 333-86661) which was filed
with the Commission on September 7, 1999.
(9) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-4 (File No. 333-38678) which was filed
with the Commission on June 6, 2000.
(10) Incorporated by reference to exhibits filed with the Registrant's
Current Report on Form 8-K filed on January 26, 2001.
(11) Incorporated by reference to exhibits filed with NVIDIA Corporation's
Registration Statement on Form S-4 (File No. 333-54406) which was filed
with the Commission on January 26, 2001.
(12) Incorporated by reference to exhibits filed with the Registrant's
Quarterly Report on Form 10-Q filed on September 14, 2000.
(13) Incorporated by reference to the Registrant's Registration Statement on
Form S-8 (File No. 333-42156), which was filed with the Commission on
July 25, 2000.
(14) Incorporated by reference to the Registrant's Registration Statement on
Form S-8 (File No. 333-42152) which was filed with the Commission on
July 25, 2000.
(15) Incorporated by reference to Exhibit 10.1 of the STB Systems, Inc.'s
Registration Statement on Form S-1 (File No. 333-87612) filed with the
Commission on December 21, 1994.
(16) Incorporated by reference to Exhibit 10.1 of the STB Systems, Inc.'s
Registration Statement (File No. 333-14313) filed with the Commission
on October 17, 1996.
Dates Referenced Herein and Documents Incorporated by Reference
| Referenced-On Page |
|---|
| This ‘10-K’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| | 4/30/07 | | 4 |
| | 1/31/05 | | 9 | | 43 |
| | 11/1/04 | | 26 |
| | 1/1/03 | | 46 |
| | 12/3/02 | | 46 |
| | 6/30/02 | | 8 | | 48 | | | 4 |
| | 3/31/02 | | 20 |
| | 1/31/02 | | 5 | | | | | 10-K, NT 10-K |
| | 12/31/01 | | 46 |
| | 6/30/01 | | 8 | | 48 |
| Filed on: | | 5/16/01 | | 5 | | 31 |
| | 5/9/01 | | 1 | | 25 |
| | 5/3/01 | | 7 | | | | | 8-K |
| | 4/30/01 | | 4 | | | | | 10-Q, NT 10-Q |
| | 4/26/01 | | 4 | | 56 |
| | 4/19/01 | | 4 | | 52 |
| | 4/18/01 | | 3 | | 45 | | | 8-K, 8-K/A |
| | 3/30/01 | | 3 | | 38 |
| | 3/27/01 | | 2 | | 58 |
| | 3/9/01 | | 21 |
| | 3/2/01 | | 21 |
| | 2/1/01 | | 21 | | 60 |
| For Period End: | | 1/31/01 | | 1 | | 57 | | | NT 10-K |
| | 1/26/01 | | 27 | | 60 | | | 425, 8-A12G/A, 8-K |
| | 12/31/00 | | 13 | | 40 |
| | 12/21/00 | | 4 | | 52 |
| | 12/19/00 | | 45 | | | | | 425 |
| | 12/15/00 | | 2 | | 60 |
| | 12/4/00 | | 26 |
| | 11/29/00 | | 26 | | 60 |
| | 10/31/00 | | 55 | | | | | 10-Q, NT 10-Q |
| | 10/24/00 | | 20 |
| | 10/20/00 | | 8 | | 48 |
| | 9/14/00 | | 30 | | 61 | | | 10-Q |
| | 9/5/00 | | 8 | | 48 |
| | 8/28/00 | | 52 |
| | 7/25/00 | | 30 | | 61 | | | S-8 |
| | 7/21/00 | | 6 | | 55 | | | 8-K |
| | 7/20/00 | | 28 | | 59 |
| | 6/15/00 | | 14 | | 41 |
| | 6/6/00 | | 29 | | 60 | | | 10-K/A, S-4 |
| | 3/27/00 | | 27 | | 58 |
| | 3/1/00 | | 26 |
| | 2/8/00 | | 53 |
| | 1/31/00 | | 5 | | 57 | | | 10-K, 10-K/A |
| | 12/17/99 | | 53 |
| | 9/7/99 | | 29 | | 60 | | | S-8 |
| | 6/16/99 | | 45 |
| | 5/27/99 | | 29 | | 60 |
| | 5/13/99 | | 6 | | 55 | | | 8-K, 8-K/A |
| | 2/1/99 | | 6 | | 37 |
| | 1/31/99 | | 11 | | 57 |
| | 12/31/98 | | 6 | | 57 | | | 10-K405, 10-K405/A |
| | 12/23/98 | | 29 | | 60 | | | SC 13D |
| | 12/13/98 | | 27 | | 58 |
| | 11/9/98 | | 29 | | 60 | | | 8-A12G |
| | 10/30/98 | | 27 | | 58 |
| | 10/9/98 | | 52 |
| | 9/21/98 | | 52 |
| | 7/23/98 | | 29 | | 60 |
| | 6/30/98 | | 29 | | 60 | | | 10-Q, S-8 |
| | 4/17/98 | | 29 | | 60 |
| | 3/23/98 | | 45 |
| | 3/20/98 | | 52 |
| | 2/11/98 | | 29 | | 60 | | | S-1 |
| | 1/6/98 | | 28 | | 59 |
| | 12/31/97 | | 35 | | 47 | | | 10-K, 10-K/A |
| | 12/15/97 | | 29 | | 60 |
| | 12/3/97 | | 46 |
| | 11/1/97 | | 45 |
| | 10/31/97 | | 29 | | 60 |
| | 7/1/97 | | 28 | | 59 |
| | 6/30/97 | | 29 | | 60 | | | 10-Q |
| | 6/25/97 | | 24 | | 60 | | | 424B1 |
| | 3/27/97 | | 28 | | 59 |
| | 3/25/97 | | 28 | | 59 |
| | 1/30/97 | | 29 | | 60 |
| | 12/18/96 | | 28 | | 59 |
| | 11/25/96 | | 28 | | 59 |
| | 10/17/96 | | 30 | | 61 |
| | 10/4/96 | | 29 | | 60 |
| | 9/12/96 | | 28 | | 59 |
| | 8/7/96 | | 28 | | 59 |
| | 12/21/94 | | 30 | | 61 |
| | 8/24/94 | | 37 |
| | 2/25/94 | | 29 | | 60 |
| List all Filings |
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