<SUBMISSION>
<ACCESSION-NUMBER>0000907687-01-500003
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<ITEMS>2
<FILING-DATE>20010129
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>ACTEL CORP
<CIK>0000907687
<ASSIGNED-SIC>3674
<IRS-NUMBER>770097724
<STATE-OF-INCORPORATION>CA
<FISCAL-YEAR-END>0102
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>8-K/A
<ACT>34
<FILE-NUMBER>000-21970
<FILM-NUMBER>1517933
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>955 EAST ARQUES AVE
<CITY>SUNNYVALE
<STATE>CA
<ZIP>94086
<PHONE>4087391010
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>955 EAST ARQUES AVE
<STREET2>955 EAST ARQUES AVE
<CITY>SUNNYVALE
<STATE>CA
<ZIP>94086
</MAIL-ADDRESS>
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<DOCUMENT>
<TYPE>8-K/A
<SEQUENCE>1
<FILENAME>gf8kadj.txt
<DESCRIPTION>AMENDMENT NO. 1
<TEXT>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                     --------------------------------------


                                   FORM 8-K/A
                                (AMENDMENT NO. 1)

                                 CURRENT REPORT

     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


                     --------------------------------------


                                November 15, 2000
                Date of Report (Date of earliest event reported)


                     --------------------------------------


                                ACTEL CORPORATION
             (Exact name of registrant as specified in its charter)

   California                       0-21970                    77-0097724
 (State or other           (Commission File Number)         (I.R.S. Employer
 jurisdiction of                                          Identification Number)
  incorporation)

      955 East Arques Avenue
       Sunnyvale, California                              94086-4533
 (Address of principal executive offices)                 (Zip Code)

                                 (408) 739-1010
              (Registrant's telephone number, including area code)


                     --------------------------------------


                                 Not Applicable
          (Former name or former address, if changed since last report)






<PAGE>

         The undersigned Registrant hereby amends the following items, financial
statements,  exhibits  or other  portions  of its  Current  Report  on Form 8-K,
originally filed with the Securities  Exchange  Commission on November 30, 2000,
reporting the  acquisition  by Registrant of GateField  Corporation,  a Delaware
Corporation, as set forth in the pages attached hereto:


Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits

         (a)      Financial Statements of Business Acquired.

         The required  financial  statements of the business  acquired set forth
below include the Consolidated Financial Statements for the Years Ended December
31, 1998 and 1999 as well as the interim financial  statements for GateField for
the nine months ended September 30, 2000.



<PAGE>



                              GateField Corporation
                   Index to Consolidated Financial Statements
                     Years Ended December 31, 1998 and 1999




                                                             Page
Report of Independent Auditors                                 4

Consolidated Financial Statements

Consolidated Balance Sheets                                    5
Consolidated Statements of Operations and Comprehensive Loss   6
Consolidated Statements of Cash Flows                          7
Consolidated Statements of Stockholder's Equity                9
Notes to Consolidated Financial Statements                    11

<PAGE>



INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of GateField Corporation:

        We  have  audited  the  accompanying   consolidated  balance  sheets  of
GateField  Corporation  and its  subsidiaries at December 31, 1999 and 1998, and
the related  consolidated  statements  of  operations  and  comprehensive  loss,
stockholders'  deficit, and cash flows for each of the three years in the period
ended  December  31,  1999.  These  consolidated  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 in accordance with generally  accepted  auditing
standards.  Those standards 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.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

        In our opinion,  such consolidated  financial statements present fairly,
in all material respects,  the financial  position of the GateField  Corporation
and its  subsidiaries as of December 31, 1999 and 1998, and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.

        The accompanying  financial  statements have been prepared assuming that
the Company  will  continue as a going  concern.  As  discussed in Note 1 to the
financial  statements,  the Company's recurring losses from operations,  working
capital deficit, and stockholders'  deficiency raise substantial doubt about its
ability to continue as a going  concern.  Management's  plans  concerning  these
matters are also  described in Note 1. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.

DELOITTE & TOUCHE, LLP

San Jose, California

February 19, 2000


<PAGE>

                              GATEFIELD CORPORATION

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                1999        1998
                                                              ---------   ---------
                                                              (IN THOUSANDS, EXCEPT
                                                                 SHARE AMOUNTS)
<S>                                                           <C>         <C>
ASSETS
Current assets
  Cash and cash equivalents.................................  $  5,418    $  3,832
  Accounts receivable, less allowance for doubtful accounts
    of $536 in 1999 and $244 in 1998........................        33         463
  Inventories...............................................        --         117
  Other current assets......................................       205         556
                                                              --------    --------
    Total current assets....................................     5,656       4,968
Property and equipment, net.................................     1,423       1,783
Other assets................................................         6         102
                                                              --------    --------
    Total assets............................................  $  7,085    $  6,853
                                                              ========    ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
  Current portion of long-term obligations..................  $    244    $    393
  Accounts payable..........................................     1,586       1,372
  Accrued expenses..........................................       825       1,941
  Deferred revenues.........................................     3,562       4,772
                                                              --------    --------
    Total current liabilities...............................     6,217       8,478
Long-term obligations.......................................     8,079         330
                                                              --------    --------
    Total liabilities.......................................    14,296       8,808

Commitments and contingencies (Note 5)
Redeemable Preferred Stock
  $0.10 par value; 2,000,000 shares authorized; shares
  issued and outstanding: 318,000 in 1999 and 1998--at
  redemption value..........................................     3,086       3,083
Stockholders' deficit
  Common stock
    $0.10 par value; 65,000,000 shares authorized; shares
    issued and outstanding: 4,693,000 in 1999 and 4,193,000
    in 1998.................................................       469         419
  Additional paid-in capital................................    86,307      81,900
  Accumulated deficit.......................................   (96,584)    (86,620)
  Accumulated other comprehensive loss......................      (489)       (737)
                                                              --------    --------
    Total stockholders' deficit.............................   (10,297)     (5,038)
                                                              --------    --------
    Total liabilities and stockholders' deficit.............  $  7,085    $  6,853
                                                              ========    ========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.



                                                                   6

                              GATEFIELD CORPORATION

          CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                1999        1998        1997
                                                              ---------   ---------   ---------
                                                               (IN THOUSANDS, EXCEPT PER SHARE
                                                                          AMOUNTS)
<S>                                                           <C>          <C>        <C>
Revenues
  Product...................................................  $  1,348     $ 2,624    $  5,385
  Service...................................................       639       5,076      10,118
                                                              --------     -------    --------
    Total revenues..........................................     1,987       7,700      15,503
                                                              --------     -------    --------
Cost of revenues
  Product...................................................     1,135       4,648       6,421
  Service...................................................       162       2,659       4,482
                                                              --------     -------    --------
    Total cost of revenues..................................     1,297       7,307      10,903
                                                              --------     -------    --------
    Gross profit............................................       690         393       4,600
                                                              --------     -------    --------
Operating expenses
  Sales and marketing.......................................       783       4,112       9,664
  Research and development..................................     5,915       5,478       7,854
  General and administrative................................     2,739       3,256       4,202
  Loss/(gain) on sale of assets.............................       199      (4,392)     (2,019)
                                                              --------     -------    --------
    Total operating expenses................................     9,636       8,454      19,701
                                                              --------     -------    --------
Operating loss..............................................    (8,946)     (8,061)    (15,101)
                                                              --------     -------    --------
Other income (expense)
  Interest expense, net.....................................    (1,328)       (173)     (1,379)
  Other income (expense), net...............................       313         (34)      1,096
                                                              --------     -------    --------
    Total other expense.....................................    (1,015)       (207)       (283)
                                                              --------     -------    --------
Loss before extraordinary item..............................    (9,961)     (8,268)    (15,384)
Extraordinary item--loss on early extinguishment of debt....        --          --      (1,048)
                                                              --------     -------    --------
Net loss....................................................    (9,961)     (8,268)    (16,432)
Other comprehensive loss:
  Currency translation adjustments..........................      (248)       (193)       (496)
                                                              --------     -------    --------
Comprehensive loss..........................................  $(10,209)    $(8,461)   $(16,928)
                                                              ========     =======    ========
Loss attributable to common stockholders....................  $ (9,964)    $(8,405)   $(22,725)
                                                              ========     =======    ========
Basic and diluted net loss per share:
  Loss before extraordinary item............................  $  (2.30)    $ (2.00)   $  (7.15)
  Extraordinary item........................................        --          --       (0.35)
                                                              --------     -------    --------
Basic and diluted net loss per share........................  $  (2.30)    $ (2.00)   $  (7.50)
                                                              ========     =======    ========
Basic and diluted weighted average shares outstanding.......     4,332       4,125       3,030
                                                              ========     =======    ========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


<PAGE>


                                                                   7

                             GATEFIELD CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                      (IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
Operating activities
  Net loss..................................................  $(9,961)   $(8,268)   $(16,432)
  Reconciliation to net cash used in operating activities
    Depreciation and amortization...........................      894      1,866       3,124
    Subordinated convertible debt interest and debt
      extinquishment loss...................................    1,231         --       1,745
    Loss on disposition of property and equipment...........      199         70         722
    Gain on sale of assets..................................       --     (4,462)     (2,741)
    Stock compensation expense..............................       --         56           9
    Sales under capital leases..............................       --         --        (606)
    Collections under capital leases........................       --         --         620
    Changes in assets and liabilities
      Accounts receivable...................................      430      1,484       9,543
      Inventories...........................................      117        618         143
      Other assets..........................................      447        159          31
      Accounts payable and accrued expenses.................     (902)    (3,578)     (5,951)
      Deferred revenues.....................................   (1,210)     3,819      (1,549)
                                                              -------    -------    --------
        Net cash used in operating activities...............   (8,755)    (8,236)    (11,342)
                                                              -------    -------    --------
Investing activities:
  Property and equipment purchases..........................     (733)      (332)     (1,568)
  Proceeds from sale of assets..............................       --      5,400      12,750
  Proceeds from sale of short-term investments..............       --         98          --
                                                              -------    -------    --------
        Net cash provided by (used in) investing
          activities........................................     (733)     5,166      11,182
                                                              -------    -------    --------
Financing activities:
  Proceeds from issuance of convertible debt, net...........    8,000         --       2,650
  Proceeds from issuance of common stock....................    3,226      5,108         458
  Proceeds from issuance of redeemable preferred stock......       --      3,000       4,583
  Redemption of preferred stock.............................       --     (4,648)     (1,827)
  Proceeds from subscribed stock............................       --         --         761
  Proceeds from warrants....................................       --        161       1,589
  Bank financing, net.......................................       --         --      (3,203)
  Borrowings under debt obligations.........................       --         --         199
  Repayments of debt obligations............................     (400)      (676)     (2,161)
                                                              -------    -------    --------
        Net cash provided by financing activities...........   10,826      2,945       3,049
                                                              -------    -------    --------
Effect of exchange rate changes on cash and cash
  equivalents...............................................      248       (232)       (403)
                                                              -------    -------    --------
Net change in cash and cash equivalents.....................    1,586       (357)      2,486
Cash and cash equivalents, beginning of year................    3,832      4,189       1,703
                                                              -------    -------    --------
Cash and cash equivalents, end of year......................  $ 5,418    $ 3,832    $  4,189
                                                              =======    =======    ========
<PAGE>
                                                                 8

Supplemental disclosure of cash flow information
  Noncash activities
    Common stock issued for convertible debentures..........  $    --    $    --    $  5,998
    Preferred stock issued for convertible debentures.......  $    --    $    --    $  3,553
    Accretion of redeemable preferred stock (Note 9)........  $    --    $    --    $  5,866
    Accrued dividends on preferred stock....................  $     3    $   137    $    283
    Common stock issued for preferred stock.................  $    --    $    --    $  1,805
    Equipment acquired under capital leases.................  $    --    $   825    $     19
  Cash activities
    Cash paid during the year for interest..................  $   173    $   429    $    363
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.


<PAGE>


                                                                   9
                              GATEFIELD CORPORATION
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
                                                           COMMON STOCK
                                                 --------------------------------
                                                                       ADDITIONAL   ACCUMULATED
                                                                        PAID-IN        OTHER      ACCUMULATED
                                                  SHARES     AMOUNT     CAPITAL     COMP. LOSS      DEFICIT      TOTAL
                                                 --------   --------   ----------   -----------   -----------   --------
                                                                             (IN THOUSANDS)

<S>               <C>                             <C>        <C>        <C>           <C>          <C>          <C>
Balances, January 1, 1997......................   2,322      $ 232      $59,300       $  (48)      $(55,490)    $  3,994
Exercise of common stock options...............      28          3          250           --             --          253
Compensation for accelerated vesting of stock
  options......................................      --         --           47           --             --           47
Sale of common stock to employees..............       9          1           78           --             --           79
Issuance of common stock to nonemployees for
  services.....................................       6          1           69           --             --           70
Issuance of common stock for debentures, net...     742         74        5,924           --             --        5,998
Discount on convertible debentures.............      --         --          875           --             --          875
Accrued dividends on preferred stock...........      --         --           63           --           (283)        (220)
Conversion of preferred stock to common
  stock........................................     455         45        1,760           --             --        1,805
Redemption of preferred stock..................      --         --                        --           (144)        (144)
Exercise of common stock warrants..............      10          1           55           --             --           56
Subscribed common stock........................      50          5          756           --             --          761
Accretion of preferred stock...................      --         --        5,866           --         (5,866)          --
Issuance of warrants...........................      --         --        1,589           --             --        1,589
Current translation adjustment.................      --         --           --         (496)            --         (496)
Net loss.......................................      --         --           --           --        (16,432)     (16,432)
                                                  -----      -----      -------       ------       --------     --------
Balances, December 31, 1997....................   3,622        362       76,632         (544)       (78,215)      (1,765)

Exercise of common stock options...............      74          7          381           --             --          388
Sale of common stock to employees..............      25          2          148           --             --          150
Issuance of common stock to nonemployees for
  services.....................................       1          1            5           --             --            6
Issuance of common stock.......................     459         46        4,536           --             --        4,582
Cash received for warrants.....................      --         --          161           --             --          161
Exercise of common stock warrants..............      12          1           37           --             --           38
Accretion of preferred stock...................      --         --           --           --           (137)        (137)
Current translation adjustment.................      --         --           --         (193)            --         (193)
Net loss.......................................      --         --           --                      (8,268)      (8,268)
                                                  -----      -----      -------       ------       --------     --------
Balances, December 31, 1998....................   4,193      $ 419      $81,900       $ (737)      $(86,620)     $(5,038)


<PAGE>


                                       10

Exercise of common stock options...............      17          1           83           --             --           84
Sale of common stock to employees..............       8          1           58           --             --           59
Issuance of common stock.......................     470         47        3,014           --             --        3,061
Exercise of common stock warrants..............       5          1           22           --             --           23
Discount on conversion of promissory note......      --         --        1,230           --             --        1,230
Accretion of preferred stock...................      --         --           --           --             (3)          (3)
Current translation adjustment.................      --         --           --          248             --          248
Net loss.......................................      --         --           --           --         (9,961)      (9,961)
                                                  -----      -----      -------       ------       --------     --------
Balances, December 31, 1999....................   4,693      $ 469      $86,307       $ (489)      $(96,584)    $(10,297)
                                                  =====      =====      =======       ======       ========     ========
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.


<PAGE>


                                       11

                              GATEFIELD CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

NOTE 1: ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATIONS

         GateField Corporation,  (the "Company"),  based in Fremont, California,
designs,  develops,  manufactures  and markets high  density,  high  performance
programmable logic solutions and related development software.  During 1998, the
Company disposed of its system engineering  services and custom solutions assets
(see  Note 3).  During  1997,  the  Company  disposed  of its  verification  and
simulation assets (see Note 3).

         On July 16,  1998 the  Company's  common  stock was  delisted  from the
Nasdaq National Market (a distinct tier of the Nasdaq Stock Market) and moved to
the Nasdaq SmallCap Market. Effective September 17, 1998 the Company's stock was
delisted  from The  Nasdaq  SmallCap  Market for  failure  to meet the  on-going
minimum bid price  requirement.  Since that time, the Company's stock has traded
on the OTC Bulletin Board.

         The Company  reviewed its strategies,  organization and expenses in the
fourth  quarter  of 1998 and as a result  of  management  actions,  reduced  its
monthly cash expenditures. Management's plan in 2000 is to maintain the level of
operating  expenses it established  in the fourth quarter of 1999,  begin volume
shipment of its .25-micron  standard ProASIC products  manufactured by Infineon,
and to obtain  additional  financing.  Because  the  Company  is  essentially  a
restart, its historical  financial  performance cannot and should not be used to
indicate future financial performance.

         In June 1999, the Company  effected a ten-for-one  reverse stock split.
All  shares  and per  share  amounts  in these  financial  statements  have been
adjusted to give effect to the stock split.

         BASIS OF PRESENTATION

         The  accompanying  financial  statements  have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of  liabilities  in the normal  course of  business.  As shown in the  financial
statements,  during  1999,  1998 and 1997,  the Company  incurred  net losses of
approximately  $10.0  million,  $8.3  million and $16.4  million,  respectively.
Additionally,  the Company had  stockholders'  deficits of  approximately  $10.3
million and $5.0  million at December  31, 1999 and 1998,  respectively,  and is
highly  dependent on its ability to obtain  sufficient  additional  financing in
order to fund the current and planned  operating  levels.  These  factors  among
others raise substantial doubt about the ability of the Company to continue as a
going concern for a reasonable period of time.

         The financial statements do not include any adjustments relating to the
recoverability  and  classification of recorded asset amounts or the amounts and
classification  of  liabilities  that might be  necessary  should the Company be
unable to continue as a going  concern.  The Company's  continuation  as a going
concern is dependent upon its ability to obtain additional financing to complete
its new product  development and begin commercial  sales, and ultimately  obtain
sufficient customer demand to attain profitable  operations.  Management intends
to  reduce  operating  expenses,  begin  sales  of  new  products  currently  in
development  and obtain  additional  financing to cover its additional cash flow
requirements until it reaches a break-even level of operations. No assurance can
be given that the Company will be successful in these efforts.

         Certain prior period amounts have been  reclassified  to conform to the
1999 presentation.  Such  reclassification  had no effect on previously reported
results of operations or financial position.

PRINCIPLES OF CONSOLIDATION AND PRESENTATION

         The  consolidated  financial  statements  include  the  accounts of the
Company  and  its  wholly  owned  subsidiary.   All  intercompany  accounts  and
transactions have been eliminated in consolidation.  The functional  currency of
the Company's foreign subsidiaries is the local currency.

ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS

         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 reported  amounts of revenues and expenses  during the reporting
period. Actual results could differ from those estimates.

BUSINESS RISKS AND UNCERTAINTIES

         The Company  participates  in a dynamic  high  technology  industry and
believes  that  changes  in any of the  following  areas  could  have a material
adverse  effect  on the  Company's  future  financial  position  or  results  of
operations:   dependence  on  independent   wafer   manufacturers  and  assembly
subcontractors; changes in certain strategic partners or customer relationships;
competitive  pressures  in the  form of new  products  or  price  reductions  on
existing products;  advances and trends in new technologies;  ability to capture
design wins; cyclical economic effects of the semiconductor industry; litigation
or claims against the Company based on intellectual property,  patent,  product,
regulatory  or other  factors  and the  Company's  ability to attract and retain
employees necessary to support its growth.

CASH EQUIVALENTS

         Cash and cash  equivalents  consist of cash on  deposit  with banks and
money market instruments with maturities of three months or less when acquired.

SHORT-TERM INVESTMENTS

         Short-term  investments  consist of Certificates of Deposit,  stated at
cost plus accrued interest, which approximates market.

CONCENTRATION OF CREDIT RISK

         Financial   instruments  that   potentially   subject  the  Company  to
concentrations of credit risk consist primarily of cash and cash equivalents and
trade accounts receivable. The Company invests in high credit quality short-term
money market  instruments  and  certificates of deposit and limits the amount of
credit exposure to any one entity.  The majority of the Company's trade accounts
receivables  are  derived  from  sales to  manufacturers  in the  semiconductor,
computer, military and aerospace industries. The Company performs ongoing credit
evaluations  of its  customers'  financial  condition  and  limits the amount of
credit extended when deemed necessary, but generally requires no collateral. The
Company maintains reserves for estimated potential credit losses.

INVENTORIES

         Inventories   are  stated  at  the  lower  of  standard   cost,   which
approximates actual cost on a first-in, first-out basis, or market.

PROPERTY AND EQUIPMENT

         Property and equipment  are stated at cost.  Equipment  acquired  under
capital  lease  obligations  is stated at the lower of fair value or the present
value  of  future  minimum  lease  payments  at  the  inception  of  the  lease.
Depreciation  and  amortization  is provided  over the shorter of the  estimated
useful  lives of the  assets or the life of the lease,  using the  straight-line
method.  An  impairment  loss is  recognized  when  estimated  future cash flows
expected to result from the use of the asset including disposition, is less than
the carrying value of the asset.

INCOME TAXES

         The Company follows Statement of Financial Accounting Standards No. 109
(SFAS No.  109),  "Accounting  for Income  Taxes,"  which  requires an asset and
liability  approach  to account for income  taxes and  requires  recognition  of
deferred tax liabilities and assets for the expected future tax  consequences of
temporary differences between the financial statement carrying amounts and the
 tax basis of assets  and  liabilities  and net  operating  loss and tax  credit
carryforwards.  Valuation  allowances  are provided when necessary to reduce net
deferred tax assets to an amount that is more likely then not to be realized.

STOCK-BASED COMPENSATION

         The Company  accounts for  stock-based  awards to  employees  using the
intrinsic  value method in accordance with  Accounting  Principles  Board No. 25
(APB No. 25), "Accounting for Stock Issued to Employees".

REVENUE RECOGNITION

         The Company  recognizes  product revenues at the time of shipment,  but
may  delay  revenue  recognition  until  products  are  installed  or  accepted,
depending on the particular product and contract terms.  Design and verification
service revenues are recognized as the services are performed. Revenues from the
sale of  maintenance  contracts are  recognized  over the term of the respective
contract.  ProASIC  products  are  shipped to Actel who in turn may ship them to
distributors  under  agreements  allowing  certain  rights of  return  and price
protection on unsold  merchandise.  Because of this two-layer  process of sales,
the Company  defers  recognition of revenue and related cost of revenue on sales
of  products  to  Actel  until  such  products  are  sold by  Actel  or  Actel's
distributors.

         In 1998,  the  Company  adopted  Statement  of Position  ("SOP")  97-2,
"Software  Revenue  Recognition,"  which  requires  revenue  earned on  software
arrangements  involving  multiple elements to be allocated to each element based
on the  relative  fair values of the  elements.  Revenue for  software  licenses
included in product  revenues is  recognized  when an agreement has been signed,
the product has been shipped,  the fee is fixed or determinable,  and collection
of resulting  receivable is probable.  Software support and maintenance  revenue
are deferred and amortized over the maintenance period on a straight-line basis.
Adoption  of this  statement  did not have a  material  impact on the  Company's
financial position, results of operations and cash flows.

NET INCOME (LOSS) PER SHARE

         Basic earnings per share ("EPS")  excludes  dilution and is computed by
dividing net income or loss attributable to common  stockholders by the weighted
average of common shares  outstanding  for the period.  Diluted EPS reflects the
potential  dilution that could occur if  securities or other  contracts to issue
common stock (convertible preferred stock, warrants to purchase common stock and
common  stock  options  using the  treasury  stock  method)  were  exercised  or
converted into common stock.  The following  potential  weighted  average common
shares in the diluted EPS computation are excluded in net loss periods, as their
effect would be antidilutive.


                                                  1999       1998       1997
                                                --------   --------   -------

         Conversion of preferred stock........  208,250    514,200    171,800
         Warrants.............................  379,159    398,100    135,600
         Stock options........................  376,099    268,500    268,600
         Convertible Promissory Note..........  745,204         --         --



         In the  computation  of loss per  share,  loss  attributable  to common
stockholders  includes the accretion and dividends on Preferred  Stock  totaling
$6,293,000 in 1997 and the accrual of dividends on Preferred Stock of $3,000 and
$137,000 in 1999 and 1998, respectively.

COMPREHENSIVE LOSS

         In  1998,  the  Company  adopted  Statement  of  Financial   Accounting
Standards ("SFAS"), No. 130, "Reporting Comprehensive Income," which requires an
enterprise to report,  by major  components and as a single total, the change in
net assets during the period from nonowner sources.  Statements of comprehensive
loss  for  1999,  1998 and 1997  have  been  included  with  the  statements  of
operations.

GEOGRAPHIC AND OPERATING SEGMENT INFORMATION

         In 1998, the Company adopted SFAS No. 131,  "Disclosures about Segments
of an Enterprise and Related  Information," which establishes annual and interim
reporting   standards  for  an  enterprise's   business   segments  and  related
disclosures about its products, services,  geographic areas and major customers.
The Company has two reportable segments under SFAS No. 131 (Note 8).

RECENTLY ISSUED ACCOUNTING STANDARDS

         In June 1998, the FASB issued SFAS No. 133  "Accounting  for Derivative
Instruments and Hedging Activities." This statement requires companies to record
derivatives  on the  balance  sheet as assets or  liabilities,  measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
would be accounted  for  depending on the use of the  derivative  and whether it
qualifies for hedge accounting. SFAS No. 133 will be effective for the Company's
fiscal year ending December 31, 2001.  Management believes that these statements
will not have a significant impact on the Company's financial position,  results
of operations or cash flows.

NOTE 2: STRATEGIC ALLIANCES

PRODUCT MARKETING AGREEMENT

         In August 1998,  the Company and Actel  Corporation  ("Actel")  entered
into a Product Marketing Agreement (the "Marketing Agreement").  Under the terms
of the Marketing  Agreement,  Actel received exclusive,  worldwide  distribution
rights to the  Company's  standard  ProASIC FPGA  products  utilizing  less than
0.35-micron geometries, including FPGA products that are integrated with SRAM or
Flash memory and all resulting next generation  reduced process geometry ProASIC
FPGA products.  For these rights, Actel agreed to pay the Company an initial fee
of $1.0  million  and a $1.0  million  fee  upon  qualification  of the  initial
 .25-micron product. Revenue recognition of the $1.0 million initial fee received
has been deferred  until  delivery of  pre-production  quality parts to Actel of
products below 0.35-micron.

ACTEL LICENSE AGREEMENT

         In August 1998, the Company and Actel entered into a license  agreement
pursuant  to which the  Company  granted to Actel a fully  paid,  non-exclusive,
non-transferable  license  to sell and upon  certain  events,  make,  have made,
import and use the Company's  standard  ProASIC FPGA products below  0.35-micron
and all resulting next generation reduced process geometry ProASIC FPGA products
(the "Actel License Agreement").  Actel agreed to pay the Company a $1.0 million
fee for such  license.  Revenue  recognition  of the $1.0  million  license  fee
received has been deferred  until  delivery of  pre-production  quality parts to
Actel of products below 0.35-micron.

ROHM LICENSE AGREEMENT

         In July 1998,  the Company and Rohm Co., Ltd.  ("Rohm")  entered into a
license agreement (the "Rohm License  Agreement").  Pursuant to the Rohm License
Agreement,  the Company granted to Rohm for a license fee of $2.5 million: (i) a
worldwide,  nonexclusive  and  royalty-free  license  of the  Company's  ProASIC
Technology for Standard  ProASIC and embedded  products down to 0.35-micron with
no limitation on density;  and (ii) a license for 0.25-micron and below embedded
products  with a per unit  royalty.  Revenue  recognition  of the  $2.5  million
license fee was  initially  deferred but is currently  being  recognized  as the
underlying work is performed.

INFINEON LICENSE AGREEMENT

         In October 1997,  the Company and Infineon  Technologies,  ("Infineon")
formerly  Siemens AG entered into a license  agreement  (the  "Infineon  License
Agreement").  Pursuant to the Infineon  License  Agreement,  the Company sold to
Infineon for an unlimited, worldwide, non-exclusive right and license to use the
technology,  software,  engineering  services,  and equipment related to ProASIC
products;  50,000  shares of common stock and  warrants to purchase  9.9% of the
Company's outstanding common stock for a fee of $3,250,000. In 1997, the Company
received  $1,500,000,  of which  $761,000 was  allocated to the shares of Common
Stock (see Note 9) and  $739,000  was  allocated  to  warrants  net of a warrant
receivable of $161,000 (see Note 9). In 1998, the Company  received  $1,750,000,
of which $750,000 was recorded as Service Revenue for consulting  services,  and
$839,000  was  recorded as Product  Revenue for license  fees,  and $161,000 was
recorded as a receipt of cash for warrants issued in 1997.

NOTE 3: LOSS (GAIN) ON SALE OF ASSETS

DESIGN SERVICES

         In August 1998, the Company sold certain assets  relating to its Design
Services  products,  providing  prototyping  design  services  and  verification
services  for  electronic  systems,  integrated  circuits  and other  electronic
components,  located in Mt.  Arlington,  New Jersey to Actel. The purchase price
for such assets was (i) $5.4  million plus (ii)  contingent  payments to be paid
over a three-year period on a quarterly basis based on Design Services achieving
certain profitability levels which payments shall not exceed $1.0 million in the
aggregate.  The Design Services represented  approximately 17% of 1998 revenues.
See table below for details of the transaction.

VERIFICATION PRODUCT

         In  August  1997,   the  Company  sold  its  assets   relating  to  its
verification  products,  excluding the maintenance and support  business,  for a
total of $4,450,000.  As defined in the purchase  agreement,  all of the rights,
title and interest to the  intangible  assets of the XP and PXP  hardware  fault
simulation product business were sold for $2,200,000.  In a separate  agreement,
all of  the  assets  of the  Attest  division  were  sold  for  $2,250,000.  The
verification products represented  approximately 16% of 1997 revenues. See table
below for details of the transaction.

         In October 1997, as a result of the Company selling its rights,  title,
and interest in the assets of the XP and PXP hardware fault simulation  product,
the  Company  transferred  its  related  maintenance   contracts  to  Zycad  TSS
Corporation  ("Zycad TSS") in October 1997 for future royalties.  Zycad TSS is a
Company  formed  by former  employees  of the  Company  to  perform  maintenance
services.  The  agreement  with Zycad TSS entitles the Company to receive 30% of
all domestic  XP/PXP  maintenance  revenue in the first two years and 10% in the
third year.  In addition,  the Company is  generally  entitled to receive 10% of
Japanese revenues for the first five years up to a $1.8 million.

         LIGHTSPEED PRODUCT

         In April 1997,  the Company sold its  software and hardware  simulation
technology relating to its LightSpeed product family for $5,000,000. Revenues in
1997 were nominal. See table below for details of the transaction.

         QUALITY SYSTEMS SOFTWARE, INC.

         In May 1997, the Company sold its interest in QSS Inc. a distributor of
the DOORS  technology  for  $3,500,000.  See  table  below  for  details  of the
transaction.


<PAGE>

         Details of these transactions are as follows (in thousands):

<TABLE>
<CAPTION>

                                                                  YEARS ENDED DECEMBER 31,
                                     ----------------------------------------------------------------------------------
                                         1999            1998                               1997
                                     ------------   ---------------   -------------------------------------------------
                                     OTHER ASSETS   DESIGN SERVICES   VERIFICATION   LIGHTSPEED     QSS      1997 TOTAL
                                     ------------   ---------------   ------------   ----------   --------   ----------
<S>                                      <C>            <C>              <C>           <C>        <C>         <C>
Sales Price........................      $ --           $(5,400)         $(4,450)      $(5,000)   $(3,500)    $(12,950)
Net Assets disposed................         0               687            5,130         3,201        179     $  8,510
Liabilities incurred...............         0               251              245         1,454         --     $  1,699
Loss on disposition of other
  assets...........................       199                70               --            --         --          722
                                         ----           -------          -------       -------    -------     --------
  Loss (Gain) on sale of assets....      $199           $(4,392)         $   925       $  (345)   $(3,321)    $ (2,019)
                                         ====           =======          =======       =======    =======     ========
</TABLE>

<PAGE>


NOTE 4: LONG-TERM DEBT

         Debt obligations consist of the following:

                                                          DECEMBER 31,
                                                      -------------------
                                                        1999       1998
                                                      --------   --------

         Capital leases (see Note 5)................   $  323     $ 723
         Convertible Promissory Note................   $8,000     $  --
                                                       ------     -----
                                                       $8,323     $ 723
         Current portion............................     (244)     (393)
                                                       ------     -----
         Long term debt.............................   $8,079     $ 330
                                                       ======     =====


TERM LOANS

         In May 1999,  the Company issued a convertible  promissory  note in the
aggregate principal amount of $8.0 million (the Note). The Note accrues interest
at 5.22% per annum,  has a five-year  term and is secured by a lien  against all
the assets of the Company.  The Note is  convertible  into 420,000 shares of the
Company's  Series C-1 Convertible  Preferred  Stock.  The Series C-1 Convertible
Preferred Stock is in turn  convertible  into 1,230,769  shares of the Company's
common stock, or the equivalent price of $6.50 per share of common stock.

         The Note is convertible at the option of the noteholder. On the date of
issuance,  the Note  was  convertible  into  common  stock  at a price  equal to
approximately  a 13% discount (the  Conversion  Discount) to the closing  market
price as reported on the OTCBB. The Company  recognized the Conversion  Discount
of $1.2 million during the second quarter of 1999 as a non-cash interest expense
with a corresponding increase in the common stock additional paid in capital. In
1997, the Company obtained  promissory notes from key vendors that bear interest
rates from 12% to 18%. At  December  31, 1997 all  amounts  were  classified  as
current positions of long-term obligations.

SUBORDINATED CONVERTIBLE DEBENTURE NOTES

         In May 1996, the Company sold a total of  $10,000,000  of  subordinated
convertible debenture notes (the "Notes") to institutional  investors as part of
a  private  placement.  The  Notes  accrue  interest  at an  annual  rate of 6%,
beginning on the date of issue,  with the  principal due and payable three years
from the date of issue if and to the  extent  that the Notes are not  previously
converted.  The Notes were  convertible  at the option of the  noteholders  into
Common Stock at a price equal to 80% to 85% of the average closing bid price for
the Common Stock on the Nasdaq  National  Market for the five trading days prior
to the date of conversion.  During 1997, an aggregate of $5,998,000  ($5,700,000
of the original  principal of the Notes and $298,000 of accrued  interest)  were
converted into 741,800 shares of Common Stock.

         In February 1997, the Company completed a $3,500,000  private placement
with investors whereby the Company issued 6% Subordinated Convertible Debentures
(the  Debentures)  with  warrants to purchase  50,000  shares of Common Stock at
$22.50 per share. The warrants are valued at $850,000 and recorded as a discount
to the  debentures.  The  Debentures  accrue  interest  at an annual rate of 6%,
beginning on the date of issue,  with principal due and payable three years from
the date of issue,  if and to the extent that the  Debentures are not previously
converted.  The Debentures are  convertible at the option of the holder into the
Company's Common Stock at a discount up to 20% from market price (the Conversion
Discount)  resulting  in  debenture  discount  of  $875,000.  In May  1997,  the
Debentures  were  converted  into  100,000  shares  of the  Company's  Series  A
Convertible  Preferred Stock ("Series A Stock") having an aggregate stated value
of $3,500,000.  In addition,  Preferred Stock Purchase  Warrants (the "Preferred
Warrants")  were issued to the holders of the  Debentures to purchase a total of
42,858 shares of the Series A Stock.  The conversion of the debentures to Series
A Stock resulted in a debt  extinguishment  loss of $1,048,000.  During the year
ended  December 31,  1997, a total of $456,000 was recorded as interest  expense
relating to the Debentures and $272,000 was recorded as accrued dividends on the
Series A Stock. The interest expense and dividend  principally  include a charge
for the Conversion Discount and default discounts. During 1997, 51,972 shares of
the Series A Preferred  Stock were  converted to 454,693 shares of the Company's
Common  Stock.  In  August  1997,  the  Company  redeemed  all of the  remaining
outstanding  shares of the Company's  Series A Stock and the Preferred  Warrants
for $1,827,000 and all of the  outstanding  common stock warrants were exchanged
for 35,000 warrants for the Company's Common Stock at an exercise price of $5.30
per share. A preferred dividend of $144,000 was recognized for the excess of the
redemption price over the carrying amount of the preferred  stock.  During 1997,
10,500 of the warrants were exercised for $56,000.

NOTE 5: LEASES AND COMMITMENTS

         The Company leases its facilities and other  equipment  under operating
lease  agreements,  which expire at various dates through 2004. The Company also
leases certain manufacturing equipment under capital leases that expire in 2001.
Approximate  future minimum lease payments under these leases are as follows (in
thousands):

                                                           CAPITAL   OPERATING
         YEAR                                               LEASES     LEASES
         ------                                            --------   ---------

         2000                                                  $269         298
         2001                                                    81         275
         2002                                                    --         290
         2003                                                    --         299
         2004                                                    --         178
                                                               ----      ------
                                                                350      $1,340
                                                                         ======
         Less amount representing imputed interest.........      27
                                                               ----
                                                                323
         Less current portion..............................     244
                                                               ----
                                                               $ 79
                                                               ====

         Accumulated  depreciation  of equipment  under capital  leases  totaled
$517,915 and $747,000 at December 31, 1999 and 1998, respectively.  Depreciation
expense on equipment  under capital  leases was $257,867 in 1999 and $127,000 in
1998 and $203,000 in 1997.

         The Company leases office  facilities under an operating  lease,  which
expires in July 2004.  Rent expense of $538,000,  $948,000  and  $1,582,000  was
incurred  in 1999,  1998,  and 1997,  respectively.  A portion of the  Company's
facilities had been sublet and sublease income received was $291,583,  $491,000,
and $76,000 during 1999, 1998, and 1997, respectively.

NOTE 6: SELECTED BALANCE SHEET INFORMATION

         Selected  Balance  Sheet  information  is  summarized  as  follows  (in
thousands):

                                                               DECEMBER 31,
                                                            -------------------
                                                              1999       1998
                                                            --------   --------

Accounts receivable
  Accounts receivable.....................................   $  569     $  707
  Less allowance for doubtful accounts....................     (536)      (244)
                                                             ------     ------
                                                             $   33     $  463
                                                             ======     ======
Inventories
  Finished goods..........................................       --        117
                                                             ------     ------
                                                             $   --     $  117
                                                             ======     ======
Property and equipment
  Engineering, manufacturing, and general office
    equipment.............................................   $2,562     $3,761
  Leasehold improvements..................................      205      1,064
  Equipment under capital lease...........................      865      1,752
                                                             ------     ------
                                                              3,632      6,577
Accumulated depreciation and amortization.................   (2,209)    (4,794)
                                                             ------     ------
                                                             $1,423     $1,783
                                                             ======     ======
Accrued expenses
  Salaries and commissions................................   $  348     $  521
  Other accrued expenses..................................      477      1,420
                                                             ------     ------
                                                             $  825     $1,941
                                                             ======     ======



<PAGE>


NOTE 7: INCOME TAXES

         The Company was not required to pay income taxes in 1999,  1998 or 1997
due to its net operating loss carryforwards.

         The following is a reconciliation  of the provision for income taxes at
the U.S. federal income tax rate to the income taxes reflected in the Statements
of Operations:


                                                    1999       1998       1997
                                                  --------   --------   --------

Computed "expected" tax benefit.................  $(3,486)   $(2,811)    (5,587)
State tax.......................................     (665)      (504)    (1,514)
Other...........................................      553       (162)       544
Valuation Allowance.............................    3,598      3,477      6,557
                                                  -------    -------    -------
Income tax benefit..............................  $    --    $    --    $    --
                                                  =======    =======    =======


Significant  components of the  Company's  deferred tax asset are as follows (in
thousands):


                                                                DECEMBER 31,
                                                            -------------------
                                                              1999       1998
                                                            --------   --------

         Deferred Tax Assets:
         Net operating loss carryforwards.................  $30,809    $24,457
         Tax credit carryforwards.........................    2,659      3,529
         Capitalized research and development costs.......      638        433
         Depreciation.....................................      253        853
         Accruals and reserves not currently deductible...      338      3,318
                                                            -------    -------
           Total gross deferred tax assets................   34,697     32,590
         Valuation allowance..............................  (34,697)   (32,590)
                                                            -------    -------
           Total deferred tax assets......................  $    --    $    --
                                                            =======    =======



         The net  change in the total  valuation  allowance  for the year  ended
December  31,  1999  was a net  increase  of  $2,107,000.  The  increase  in the
valuation  allowance was primarily a result of increased net operating  loss and
tax  credit   carryforwards  and  capitalized  research  and  development  costs
generated in 1999 which the Company provided a full valuation  allowance against
based on the Company's evaluation of the likelihood of realization of future tax
benefits resulting from the deferred tax assets.

         Net  pretax  foreign  income  (losses)  were  $65,000,  ($405,000)  and
($93,000) in 1999,  1998 and 1997,  respectively.  The Company has net operating
loss  carryforwards  of  approximately  $80,700,000 for federal tax purposes and
$18,162,000  for state tax purposes  that will begin to expire in 2005 and 2000,
respectively.  Of the $18,162,000 net operating loss carryforwards for state tax
purposes,  $94,000 will expire in 2000,  $3,056,000  in 2001 and  $8,042,000  in
2002.  The Company's tax credit  carryforwards  of $1,922,000 and $1,133,000 are
available to reduce future federal and California income taxes, respectively. Of
the  $1,922,000  tax credit  carryforwards  for  federal  income  tax  purposes,
$636,000 will expire in 2000,  $962,000 in 2001 and $39,000 in 2002. The Company
also has foreign net operating loss  carryforwards of  approximately  $3,057,000
that may be used to offset future foreign taxable income.

         The Tax Reform Act of 1986 and California Conformity Act of 1987 impose
substantial  restrictions  on the  utilization  of net operating  losses and tax
credit  carryforwards  in the event of an  "ownership  change" as defined by the
Internal Revenue Code. If there should be such a change,  the Company's  ability
to utilize the stated carryforwards could be significantly limited.

NOTE 8: GEOGRAPHIC SEGMENT AND OPERATING INFORMATION

         Operating  segments are defined as components  of an  enterprise  about
which separate financial information is available that is evaluated regularly by
the chief operating  decision-maker.  Using this definition the Company operates
in two reportable segments: product and services and follows the requirements of
SFAS 131, "Disclosures about Segments of an Enterprise and Related Information."
In 1997 through 1999 these segments  reflect the Company's  transition  from the
design,  development and marketing of special purpose systems for the EDA market
to the design,  development,  and  marketing of high density,  high  performance
programmable logic solutions and related development  software.  Included in the
product segment are all hardware, software and license revenue and costs related
to the Company's  proprietary  technology.  Included in the service  segment are
fees and costs  associated  with the  maintenance  of hardware  systems  related
software and consulting  services  related to the design of  programmable  logic
solutions.  The Company evaluated  performance and allocates  resources based on
the gross margin of the reportable  segments and does not identify assets to any
segment.

NET REVENUES BY REPORTABLE SEGMENT (IN THOUSANDS):

                                                          DECEMBER 31,
                                                 ------------------------------
                                                   1999       1998       1997
                                                 --------   --------   --------
Product
  Revenues.....................................   $1,348    $ 2,624    $ 5,385
  Cost of Revenues.............................    1,135      4,648      6,421
                                                  ------    -------    -------
    Gross Margin...............................   $  213    $(2,024)   $(1,036)
                                                  ======    =======    =======
Services
  Revenues.....................................   $  639    $ 5,076    $10,118
  Cost of Revenues.............................      162      2,659      4,482
                                                  ------    -------    -------
    Gross Margin...............................   $  477    $ 2,417    $ 5,636
                                                  ======    =======    =======

NET REVENUES TO UNAFFILIATED CUSTOMERS BY GEOGRAPHIC REGION (IN THOUSANDS):

                                                  1999       1998       1997
                                                --------   --------   --------

United States.................................   $1,696     $5,613    $ 9,565
Japan.........................................      291      1,947      4,382
Other.........................................        0        140      1,556
                                                 ------     ------    -------
                                                 $1,987     $7,700    $15,503
                                                 ======     ======    =======

         The  amounts  reported  for  Japan and other  reflect  amounts  sold by
foreign  subsidiaries.  Included in the United States revenue  amounts are sales
directly  to Japan and other  Asian  countries  amounting  to  $291,000 in 1999,
$217,000 in 1998 and $1,648,000 in 1997.  Outside the United States, the Company
operated  three  subsidiaries  in  Europe,  one  subsidiary  in  Japan  and also
supported a branch office in Taiwan.  All these subsidiaries have been or are in
the process of being shut down and  dissolved.  For the years ended December 31,
1999, 1998 and 1997,  export sales  (including  sales by foreign  subsidiaries),
principally  to Europe and Japan,  comprised  approximately  15%, 38% and 38% of
consolidated  revenues,  respectively.  During 1999,  Rohm accounted for 47% and
Zycad TSS  accounted  for 18% of  consolidated  revenues.  During 1998 and 1997,
Infineon  accounted  for  22%  and  Intel  Corporation   accounted  for  16%  of
consolidated revenues, respectively.

     LONG-LIVED ASSETS BEFORE DEPRECIATION BY GEOGRAPHIC LOCATION ARE AS FOLLOWS
     (IN THOUSANDS):
                                                           1999       1998
                                                         --------   -------
         Long-lived assets
         United States.................................   $3,631     $5,949
         Japan.........................................       --         94
         Other.........................................       --        635
                                                          ------     ------
                                                          $3,631     $6,678
                                                          ======     ======

NOTE 9: STOCKHOLDERS' EQUITY

REDEEMABLE PREFERRED STOCK

         On November 10, 1997, the Board of Directors authorized the designation
of 1,000,000  shares of preferred  stock, par value $0.10 per share, as Series B
Preferred  Stock  ("Series B Preferred  Stock").  In November  1997, the Company
issued 1,000,000 shares of Series B Preferred Stock for $4.6 million. Each share
is  convertible  into .45825  shares of Common  Stock at the  discretion  of the
holder and accrues a dividend of $0.137475  per share per annum.  The holders of
outstanding  shares  of  Series B  Preferred  Stock  are  entitled  to vote as a
separate  class with  respect to certain  actions (as  defined by the  preferred
stock  agreement) by the Company.  The Company has granted  demand  registration
rights for the common stock to be issued pursuant to the conversion.

         In addition, the Certificate of Designation of the Series B Convertible
Preferred  Stock  requires the Company to maintain a listing on a public  market
(as  defined in the  agreement).  In the event of  default,  the  holders of the
Series B Preferred Stock can redeem the preferred stock at a redemption price of
$4.5825  in cash per share  plus  accrued  and  unpaid  dividends  thereon or be
convertible,  at the option of the  holder,  into .611  shares of Common  Stock.
Effective  September 17, 1998 the  Company's  stock was delisted from The Nasdaq
SmallCap Market. In October 1998 certain holders of its Series B Preferred Stock
requested  redemption and on December 16, 1998 the Company redeemed an aggregate
of 981,997  shares of its Series B  Preferred  Stock at a price equal to $4.5825
per share plus accrued and unpaid  dividends  for an aggregate  cash  redemption
price of  approximately  $4.6 million.  A total of 18,003 shares of the Series B
Preferred Stock remain outstanding as of December 31, 1999.

         On August 14, 1998,  the Company issued 300,000 shares of the Company's
Series C Convertible  Preferred  Stock ("Series C Preferred  Stock"),  par value
$0.10,  for an  aggregate  purchase  price of  $3,000,000  to Actel  Corporation
("Actel").  The Series C Preferred Stock are initially  convertible into 200,000
shares of the Company's common stock, are entitled to certain liquidation rights
and are redeemable in the event that all of the Company's remaining  outstanding
shares of Series B Preferred Stock are redeemed.

         COMMON STOCK

         The  Company's  Certificate  of  Incorporation  was duly  amended  by a
proposal  by the Board of  Directors  on  November  10,  1997 and by vote of the
stockholders  at the Annual  Meeting of  Stockholders  on December 15, 1997,  to
increase the Company's Common Stock from 40,000,000  shares to 65,000,000 shares
of Common Stock  authorized at $0.10 par value.  At December 31, 1999 there were
4,693,038  shares of the Company's  Common Stock  outstanding  including  50,000
unissued shares of subscribed stock.

         In October  1997,  the  Company  entered  into a  $3,250,000  Strategic
Partnership Agreement with Infineon, which principal terms included the delivery
of technology,  software, equipment, engineering services, a warrant to purchase
Common  Stock,  and 50,000  shares of Common  Stock.  The Company has valued the
Common  Stock at $761,000  and the warrant to purchase  common stock at $900,000
(see Warrants).  At December 31, 1997, $739,000 cash related to the warrants had
been received and the remaining  $161,000 was received  during 1998. At December
31, 1999, subscribed stock represents cash received for this Common Stock, which
has not been issued as of that date.

         In March 1999, the Company's Board of Directors  approved a ten for one
reverse stock split of the Company's  common stock.  In June 1999, the Company's
shareholders  approved  the  reverse  stock  split.  The  reverse  split  became
effective on June 30, 1999 (the  "Effective  Date").  No fractional  shares were
issued. In lieu of any such fractional share interest,  each holder will receive
cash in an amount equal to the product  obtained by multiplying  (i) the closing
sales price of the Company's  Common Stock on the Effective  Date as reported on
the OTCBB by (ii) the number of shares of Common  Stock held by such holder that
would otherwise have been exchanged for such fractional share interest.

STOCK COMPENSATION PLANS

EMPLOYEE PLANS.

         The 1993 Stock Option Plan (the "1993 Plan"), as amended,  provides for
300,000 shares of Common Stock to be issued under the 1993 Plan.

         The 1996 Stock Option Plan (the "1996 Plan"), as amended,  provides for
200,000 shares of Common Stock to be issued under the 1996 Plan.

         The 1999 Stock Option Plan (the "1999 Plan"), as amended,  provides for
300,000 shares of Common Stock to be issued under the 1999 Plan.

         Under the Company's stock option Plans, incentive stock options granted
must have a per share  exercise price of not less than the fair market value per
share at the date of grant.  Non-qualified  stock options may be granted at such
price as may be determined by the Board of Directors.  Dependent  upon the Plan,
options  generally  vest at specific  intervals over a three to four year period
and expire eight to ten years after the grant date. In the event of termination,
the Company has the right to cancel any vested  options not exercised  within 90
days of termination.

         In July  1997,  the  Board of  Directors  authorized  the  exchange  of
outstanding stock options held by all employees for new options with an exercise
price of $4.70 per share,  the fair  market  value of the  Common  Stock on such
date. In return,  participating  employees  who chose to exchange  their options
agreed  to accept  stock  options  which  will vest on a  quarterly  basis  upon
achievement of certain  management  goals to be  established  quarterly for each
such  employee,  or in any event,  in July 1999,  should the  employee  still be
employed  by the  Company.  Options  covering  a total of  174,410  shares  were
exchanged under this program.  The effect of such exchange  reduced the weighted
average  exercise  price of the  outstanding  options  from  $17.90 to $8.00 per
share.

         Activity under the employee stock option plans is as follows:

                                                           OPTIONS OUTSTANDING
                                                           --------------------
                                                                      WEIGHTED-
                                                SHARES                 AVERAGE
                                               AVAILABLE              EXERCISE
                                               FOR GRANT    SHARES      PRICE
                                               ---------   --------   ---------

Balance, January 1, 1997.....................   105,592     329,812    $18.80
Granted......................................  (374,319)    374,319      4.20
Exercised....................................        --     (27,800)    13.70
Cancelled....................................   336,034    (336,034)    16.60
                                               --------    --------    ------
Balance, December 31, 1997...................    67,307     340,297      6.80
Additional shares authorized.................   125,000          --        --
Retire 1984 Plan.............................   (58,631)         --        --
Granted......................................  (172,283)    172,283      6.30
Exercised....................................        --     (74,254)     5.30
Cancelled....................................   101,580    (101,531)    11.70
                                               --------    --------    ------
Balance, December 31, 1998...................    62,973     336,795      5.40
Additional shares authorized.................   300,000
Granted......................................  (175,700)    175,700      6.49
Exercised....................................        --     (16,310)     4.70
Cancelled....................................    26,760     (26,760)     6.70
                                               --------    --------    ------
Balance, December 31, 1999...................   214,033     469,425    $ 5.73
                                               ========    ========    ======

         The weighted  average per share fair value of the stock options granted
in 1999, 1998 and 1997 was $6.49, $6.30 and $4.20, respectively. At December 31,
1999, 1998 and 1997,  outstanding  options under the employee stock option plans
were  exercisable  for 184,009,  141,533 and 142,321  shares,  respectively  and
exercisable  at  weighted-average  exercise  prices of $5.25,  $4.90 and  $6.80,
respectively.  All  outstanding  options  are  nonqualified  options  and  /  or
incentive stock options.



<PAGE>


             The  following  tables  summarize  information  about stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>

                                                       OPTIONS OUTSTANDING           OPTIONS EXERCISABLE
                                     -----------------------------------------   --------------------------
                                                    WEIGHTED-AVG
                 EXERCISE PRICE        NUMBER        REMAINING     WEIGHTED-AVG     NUMBER      WEIGHTED-AVG
         --------------------------  OUTSTANDING    CONTRACTUAL      EXERCISE     EXERCISABLE     EXERCISE
          FROM               TO      AT 12/31/99       LIFE          PRICE        AT 12/31/99      PRICE
         -------           --------   -----------   ------------   ------------   -----------   ------------
<S>       <C>              <C>         <C>             <C>           <C>           <C>            <C>
          $4.70            $ 4.70      139,353         6.18          $ 4.70        139,353        $ 4.70
          $5.30            $ 5.30      147,297         8.96          $ 5.30         36,831        $ 5.30
          $6.44            $ 6.44      169,200         9.67          $ 6.44              0        $   --
          $7.63            $17.50       13,575         6.99          $11.96          7,825        $14.92
          -----            ------      -------         ----          ------        -------        ------
          $4.70            $17.50      469,425         8.33          $ 5.73        184,009        $ 5.25
          =====            ======      =======         ====          ======        =======        ======
</TABLE>

<PAGE>



NON-EMPLOYEE PLANS.

         During 1995,  stockholders  approved a  Non-Employee  Directors'  stock
option plan (the  "Director  Option Plan") whereby 20,000 shares of common stock
have been reserved for issuance.  Under the Company's Director Option Plan, each
non-employee  director initially elected to the Board of Directors in the future
will be granted an option,  upon his or her initial  election as a director,  to
purchase  1,500  shares of common  stock.  Each  non-employee  director  is also
entitled to receive an option for 750 shares on the date of each Annual  Meeting
of Stockholders. All options granted under the Director Option Plan have or will
have an exercise price equal to the fair market value of the common stock on the
date of grant and expire ten years  from the date of grant  (subject  to earlier
termination  in the event the  optionee  ceases  to serve as a  director  of the
Company).  Under the Director Option Plan, options from an Initial Grant vest in
full two years after the date of grant.  Options  from an Annual  Grant vest one
year after the date of grant and the right to exercise vested options  terminate
one year after a Director  ceases to be a director.  The Company  granted 1,500,
3,750 and 3,750 options to purchase Common Stock at $8.10 to $15.00 per share to
non-employee directors in 1999, 1998 and 1997, respectively,  of which 3,750 and
1,500 option grants were canceled in 1999 and 1998, respectively.

EMPLOYEE STOCK PURCHASE PLAN

         Through the  Company's  1999  Employee  Stock  Purchase Plan (the "1999
Plan"),  eligible  employees of the Company may purchase  common stock at 85% of
the fair  market  value of the stock at the  beginning  or end of each  offering
period (12 months except for the initial  period which is 18 months),  whichever
is lower. Each participant may contribute up to 15% of total compensation,  to a
maximum of $25,000 annually.  Additionally,  each participant is prohibited from
participation if he owns more than 5% of the Company's common stock. The maximum
number of shares  available  for  purchase  under the plan during any  six-month
purchase  period is 20,000 shares,  thus, the plan is designed to last a minimum
of five purchase periods. The 1999 Plan was approved by the stockholders in June
1999 with an initial  100,000  shares of which 19,362  shares were issued at the
end of the first purchase  period in February 2000, at a purchase price of $3.35
per  share.  Simultaneous  with  the  creation  of the  1999  Plan  the  Company
terminated  its 1987 ESPP (the "Old Plan") which was created in May 1987 with an
initial  10,000  shares of Common  Stock and added to over the ensuing  years in
blocks of 20,000 until a total of 70,000  shares had been  authorized  by May of
1998,  of which a total of 60,500  shares had been issued at December  31, 1999.
During 1999,  8,083 shares were purchased  under the Old Plan for prices ranging
from $6.20 to $7.60 with an average price of $6.89 per share.  The fair value of
the 1999 awards under both plans was not considered significant.

ADDITIONAL STOCK PLAN INFORMATION

         In October 1995, the Financial  Accounting  Standards Board issued SFAS
No. 123, which  establishes  financial  accounting  and reporting  standards for
stock-based  employee  compensation  plans.  This statement defines a fair value
based  method of  accounting  for an  employee  stock  option of similar  equity
instrument. Under this method, compensation costs are measured at the grant date
based on the value of the  award and are  recognized  over the  service  period,
which  is  the  vesting  period.  The  Company  continues  to  account  for  its
stock-based  awards using the intrinsic  value method in accordance with APB No.
25 and its related  interpretations.  Had  compensation  cost for the  Company's
various  stock option plans been  determined  consistent  with SFAS No. 123, the
Company's net loss and diluted net loss attributable to common  stockholders per
share  would have been  changed  to the pro forma  amounts  indicated  below (in
thousands,  except  net loss  attributable  to  common  stockholders  per  share
amounts):

                                                           DECEMBER 31,
                                                ------------------------------
                                                  1999       1998       1997
                                                --------   --------   --------
Net loss attributable to common
  stockholders...................  As reported  $ (9,964)  $(8,405)   $(22,725)
                                   Pro forma     (10,593)   (9,116)    (23,562)
Diluted net loss per share.......  As reported     (2.30)    (2.00)      (7.50)
                                   Pro forma       (2.45)    (2.20)      (7.80)

         The fair value of each option  grant is  estimated on the date of grant
using  Black-Scholes  option-pricing  model with the following  weighted average
assumptions  used for  grants  in 1999,  1998  and 1997  respectively;  expected
volatility of 137% for 1999, 157% for 1998 and 145% for 1997,  dividend yield of
0%, risk-free interest rates of 4.78%, 4.60%, and 5.91% for 1999, 1998, and 1997
respectively,  and expected lives from the grant date of 7.5 years for 1999, 6.5
years for 1998, and 3.5 years for 1997.

WARRANTS

         At December 31, 1999, total warrants outstanding were 377,625. Purchase
price of the securities subject to these warrants range from $5.30 to $14.40 and
they expire at various dates through November 2005.

         In April 1999,  James R. Fiebiger  exercised 5,000 warrants  granted in
July 1997 at an option price of $4.70 per share.

         In November 1997, the Company  entered into a Stock Purchase  Agreement
("the  Agreement") in connection  with the Series B Preferred  Stock  financing.
Pursuant to this  Agreement,  the Company  issued  warrants to purchase  997,751
shares of common stock at $1.00 per share. In January 1998, the warrants expired
in  accordance  with the  Agreement  upon  approval  by the  stockholders  of an
increase in the Company's  authorized common stock and the closing of the common
stock financing contemplated by the Agreement.

         In October 1997, the Company  entered into a licensing  agreement under
which the Company  granted a stock warrant to purchase  9.9% of its  outstanding
shares of Common Stock to a strategic  partner at an exercise price equal to 80%
of the Market Price of the Company's Common Stock on the trading day immediately
prior to the date of exercise, subject to a minimum exercise price of $10.00 per
share.  Market  Price is  defined as the last  trade  price for common  stock as
reported on the Nasdaq.  In the event that the strategic  partners'  interest is
decreased to less than 9.9% by future equity offerings, they will have the right
to increase the stock warrant under the same  conditions as the equity  offering
to maintain its 9.9%  interest in the  Company.  The term of this warrant is for
five years and is exercisable  as follows:  the first 1/3 shares after 6 months,
an additional 1/3 shares after 12 months, and the final 1/3 after 18 months. The
fair value of the  warrants was  $900,000 at grant,  which has been  included in
additional paid-in capital.

         In July 1997,  the Board of  Directors  approved the exchange of Common
Stock warrants and nonqualifying stock options held by certain directors for new
Common Stock  warrants to purchase  20,256 shares of Common Stock at an exercise
price of $4.70 per  shares,  the fair market  value of the common  stock on that
date of  exchange.  The effect of such  exchange  reduced the  weighted  average
exercise  price of the warrants and  nonqualifying  options from $19.70 to $4.70
per share.  In November  1997,  a director  was issued  warrants to purchase 750
shares of Common  Stock at an  exercise  price of $14.40 per share.  In February
1998,  certain  directors  exercised  their warrants for 13,756 shares of Common
Stock.

         In February  1997,  the Company  issued  50,000  warrants at $22.50 per
share in conjunction with the $3,500,000  convertible  debentures.  The value of
the warrants was $850,000 and was recorded as a discount to the  debentures.  In
August 1997, the 50,000 warrants were exchanged for 35,000 warrants at $5.30 per
share. During 1997, 10,500 warrants were exercised for $56,000.

NOTE 10

EMPLOYEE BENEFIT PLANS

         Through the  Company's  elective  401(k)  savings  plan,  eligible U.S.
employees of the Company may  contribute up to 17.6% of their pre-tax  earnings,
subject  to current  IRS  restrictions.  Under the plan,  the  Company  may make
discretionary  matching  contributions  up to  $1,500  or 25%  of an  employee's
contributions.  The participants  vest in the Company's  contribution  over five
years. Company  contributions to this plan were $38,000 in 1999, $73,000 in 1998
and $161,000 in 1997.


<PAGE>


                              GateField Corporation
                   Index to Consolidated Financial Statements
                      Nine Months Ended September 30, 2000




                                                                  Page
Consolidated Financial Statements

Consolidated Balance Sheets                                        31
Consolidated Statements of Operations and Comprehensive Loss       32
Consolidated Statements of Cash Flows                              34
Notes to Consolidated Financial Statements                         36


<PAGE>


                              GATEFIELD CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                 September 30,
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)                           2000 (unaudited)
-------------------------------------------------------------------------------
ASSETS
Current assets:
    Cash and cash equivalents                                     $     338
    Accounts receivable, less allowance for doubtful
          accounts of $6 in 2000 and $536 in 1999                         -
    Other current assets                                                186
                                                                  ---------
          Total current assets                                          524

Property and equipment, net                                           1,267
Other assets                                                            100
                                                                  ---------
          Total assets                                            $   1,891
                                                                  =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
    Accounts payable                                              $     128
    Accrued expenses                                                  1,151
    Deferred revenues                                                 2,651
    Current portion of long-term obligations                            141
                                                                  ---------
          Total current liabilities                                   4,071

Long-term obligations                                                 3,750
                                                                  ---------
          Total  liabilities                                          7,821
  Redeemable  Preferred  Stock-at  redemption value:
          $0.10 par value; 2,000,000 shares authorized; shares
          issued and outstanding: 0 in 2000 and 318,000 in 1999           -

Stockholders' deficit:
    Common stock:
          $0.10 par value; 65,000,000 shares authorized; shares
          issued and outstanding: 6,177,000 in 2000 and 4,693,000
           in 1999                                                      618
    Additional paid-in capital                                       97,400
    Accumulated other comprehensive loss                               (469)
    Accumulated deficit                                            (103,479)
                                                                  ---------
          Total stockholders' deficit                                (5,930)
                                                                  ---------
          Total liabilities and stockholders' deficit             $   1,891
                                                                  =========

     See Accompanying Notes To Condensed Consolidated Financial Statements.

<PAGE>


<TABLE>
<CAPTION>
                               GATEFIELD CORPORATION
     CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                                   (unaudited)

                                                                 Three Months Ended                 Nine Months Ended
                                                                    September 30,              September 30,       September 30,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                         2000          1999               2000                1999
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>               <C>               <C>               <C>
Revenues:
    Product                                                    $   312           $   377           $   937           $ 1,001
    Service                                                          -                33                 -               523
                                                                -------           ------           -------             ------
       Total revenues                                              312               410               937             1,524
                                                                -------           ------           -------             ------
Cost of revenues:
    Product                                                         87               395               240               964
    Service                                                          -                10                 -               149
                                                                -------           ------           -------             ------
       Total cost of revenues                                       87               405               240             1,113
                                                                -------           ------           -------             ------
       Gross margin                                                225                 5               697               411
                                                                -------           ------           -------             ------
Operating expenses:
    Sales and marketing                                             61               183               281               568
    Research and development                                     2,395             1,090             5,811             3,515
    General and administrative                                     714               661             1,380             2,094
                                                                -------           ------           -------             ------
       Total operating expenses                                  3,170             1,934             7,472             6,177
                                                                -------           ------           -------             ------

Operating loss                                                  (2,945)           (1,929)           (6,775)           (5,766)
                                                                -------           ------           -------             ------

Other income (expense):
    Interest expense, net                                          (47)              (66)             (129)           (1,287)
    Other income (expense), net                                     (1)              120                11                89
                                                                -------           ------           -------            -------
       Total other income (expense)                                (48)               54              (118)           (1,198)
                                                                -------           ------           -------            -------
Net loss                                                        (2,993)           (1,875)           (6,893)           (6,964)

Other comprehensive gain (loss):
    Currency translation adjustments                                 -                93               (20)              128
                                                                -------           ------           -------           --------
Comprehensive loss                                             $(2,993)          $(1,782)          $(6,913)          $(6,836)
                                                                ========         =======           ========          =========
Loss attributable to common stockholders                       $(2,994)          $(1,876)          $(6,896)          $(6,967)
                                                                ========         =======           ========          =========
Basic and diluted net loss per share                           $ (0.49)          $ (0.44)          $ (1.28)          $ (1.65)
                                                                ========         =======           ========          =========
Basic and diluted weighted average shares outstanding            6,170             4,222             5,394             4,211
                                                                ========         =======           ========          =========

</TABLE>

See Accompanying Notes To Condensed Consolidated Financial Statements.



<PAGE>


<TABLE>
<CAPTION>

                              GATEFIELD CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)



                                                                            Nine Months Ended September 30,
(In thousands)                                                                    2000             1999
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                   <C>
Operating activities:
    Net loss                                                                  $  (6,893)          $  (6,964)
    Reconciliation to net cash used in operating activities:
       Depreciation and amortization                                                264                 695
       Non-cash subordinated convertible debt interest                                -               1,231
       Changes in assets and liabilities:
         Accounts receivable                                                         33                 412
         Inventories                                                                 -                 (358)
         Other assets                                                               (75)               (479)
         Accounts payable and accrued expenses                                   (1,127)               (118)
         Deferred revenues                                                         (911)               (800)
                                                                                --------             ------
            Net cash used in operating activities                                (8,709)             (6,381)
                                                                                --------            -------
    Investing activities:
     Property and equipment purchases, net                                         (108)               (830)
                                                                                --------           --------
            Net cash provided (used) in investing activities                       (108)               (830)
                                                                                 --------          --------
    Financing activities:
     Proceeds from issuance of convertible note                                   3,750               8,000
     Proceeds from issuance of common stock                                         149               3,226
     Principal payments on long term debt & capital lease obligations              (182)               (329)
                                                                                 --------          --------
           Net cash provided by financing activities                              3,717              10,897

    Effect of exchange rate changes on cash and cash equivalents                     20                (118)
                                                                                 --------          --------

    Net change in cash and cash equivalents                                      (5,080)              3,568

    Cash and cash equivalents, beginning of period                                5,418               3,832
                                                                                 -------           --------


    Cash and cash equivalents, end of period                                  $     338            $  7,400
                                                                                ==========         ========

Supplemental disclosure of cash flow information:
    Cash activities:
       Cash paid during the year for interest                                 $      26            $    159



</TABLE>

See Accompanying Notes To Condensed Consolidated Financial Statements.


<PAGE>





                              GATEFIELD CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 30, 2000

1. BASIS OF PRESENTATION

         The  accompanying  financial  statements  have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of  liabilities  in the normal  course of  business.  As shown in the  financial
statements,  during the quarters  ended  September 30, 2000 and 1999,  GateField
Corporation, ("GateField" or the "Company") incurred net losses of approximately
$2,993,000  and  $1,782,000,   respectively.   Additionally,   the  Company  had
stockholders'  deficits of  approximately  $5,930,000  at September 30, 2000 and
$10,297,000  at  December  31,  1999,  and  is  highly  dependent  on  obtaining
additional  financing in order to fund the current and planned operating levels.
These  factors  among  others raise  substantial  doubt about the ability of the
Company to continue as an independent  going concern for a reasonable  period of
time.

         The financial statements do not include any adjustments relating to the
recoverability  and  classification of recorded asset amounts or the amounts and
classification  of  liabilities  that might be  necessary  should the Company be
unable to continue as a going  concern.  The Company's  continuation  as a going
concern is dependent upon its ability to obtain additional financing to complete
its new product  development and begin commercial  sales, and ultimately  obtain
sufficient customer demand to attain profitable operations.  No assurance can be
given that the Company will be successful in these efforts.

         Interim  results of operations  are not  necessarily  indicative of the
results to be expected for the full year. The Company's  interim fiscal quarters
ended on  September  30,  2000 and 1999,  respectively.  In the  opinion  of the
Company,  all adjustments  (consisting  only of normal,  recurring  adjustments)
necessary to present  fairly the financial  position,  results of operations and
cash flows at September 30, 2000, and for all periods presented, have been made.
These  condensed  financial  statements  should be read in conjunction  with the
financial  statements and notes thereto  included in the Company's  December 31,
1999 Annual Report on Form 10-K.

2.   CONVERTIBLE PROMISSORY NOTE

         In August 2000, the Company issued a convertible promissory note in the
aggregate  principal  amount of $2,750,000 (the "August 2000 Note").  The August
2000 Note  accrues  interest  at 6.25% per annum,  has a  five-year  term and is
secured by a lien against all the assets of the Company. The August 2000 Note is
convertible into 96,250 shares of the Company's Series C-2 convertible preferred
stock.  The Series C-2 convertible  preferred stock is in turn  convertible into
523,810 shares of the Company's  common stock, at the equivalent  price of $5.25
per share of common stock.  The August 2000 Note is convertible at the option of
the noteholder.

3. SUBSEQUENT EVENTS

CONVERTIBLE PROMISSORY NOTE

         In October 2000,  the Company issued a convertible  promissory  note in
the  aggregate  principal  amount of $3,250,000  (the "October 2000 Note").  The
October 2000 Note accrues  interest at 5.96% per annum, has a five-year term and
is secured by a lien  against all the assets of the  Company.  The October  2000
Note is convertible  into 113,750 shares of the Company's Series C-2 convertible
preferred  stock.  The  Series  C-2  convertible  preferred  stock  is  in  turn
convertible into 619,048 shares of the Company's common stock, at the equivalent
price of $5.25 per share of common stock.  The October 2000 Note is  convertible
at the option of the noteholder.

SPECIAL MEETING OF STOCKHOLDERS

         On November 10, 2000, the Company held a Special Meeting of its
stockholders to approve and adopt an Amended and Restated  Agreement and Plan of
Merger  dated May 31,  2000 by and  among  the  Company,  Actel  Corporation,  a
California  corporation  and a principal  stockholder of the Company  ("Actel"),
GateField  Acquisition  Corporation,  a Delaware  Corporation  and  wholly-owned
subsidiary  of  Actel  ("GAC"),  and  Idanta  Partners  Ltd.,  a  Texas  Limited
Partnership  and  principal  stockholder  of  the  Company.   Pursuant  to  this
agreement,  GAC will merge with and into the Company with the Company continuing
as the surviving corporation and a wholly-owned subsidiary of Actel.


<PAGE>


(b)      Pro Forma Financial Information.

         The  following  unaudited  pro forma  combined  condensed  consolidated
financial  statements  are presented for  illustrative  purposes only and do not
purport to be indicative of the  consolidated  financial  position or results of
operations  for future  periods or the  results  that  actually  would have been
realized had Actel Corporation ("Actel") and GateField Corporation ("GateField")
been a consolidated company during the specified periods. Further, non recurring
Purchase  Accounting  adjustments are excluded from the pro forma adjustments in
the unaudited pro forma  condensed  Statement of  Operations.  The unaudited pro
forma condensed consolidated financial statements,  including the notes thereto,
are  qualified  in  their  entirety  by  reference  to,  and  should  be read in
conjunction with the historical  consolidated financial statements and the notes
thereto of Actel which were previously reported in Actel's Annual Report on Form
10-K for the year ended December 31, 1999, and the Quarterly Report on Form 10-Q
for the quarter ended October 1, 2000.

         The  following  unaudited  pro forma  combined  condensed  consolidated
financial  statements  are  based  on  the  respective  historical  audited  and
unaudited  consolidated  financial statements and the notes thereto of Actel and
GateField after giving effect to the acquisition of GateField using the purchase
method of  accounting as if the  transaction  had occured on January 1, 1999 and
the  assumptions  and  adjustments  described  below.  The  purchase  price  was
allocated  to the  estimated  fair  value of  assets  acquired  and  liabilities
assumed.  The preliminary  purchase price  allocation is based on an independent
appraisal and management estimates.  The purchase price allocation is subject to
further  refinement and change over the next year.  Management is in the process
of  completing  its  plans  related  to  the   integration  of  GateField,   and
accordingly, the amounts recorded related to GateField are based on management's
current estimate of those costs.

         This  Current  Report on Form 8-K contains  forward-looking  statements
within the meaning of Section 27A of the  Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934.

         The required pro forma  unaudited  financial  information  is set forth
below.


                         PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>

Table of Contents                                                                               Page
<S>                                                                                               <C>
Unaudited Pro Forma Combined Condensed Consolidated Balance Sheet -  October 1, 2000              39

Unaudited Pro Forma Combined Condensed Consolidated Statement of Operations
 - Year ended December 31, 1999                                                                   40

Unaudited Pro Forma Combined Condensed Consolidated Statement of Operations
 - Nine Months ended October 1, 2000                                                              41


Unaudited Notes to Pro Forma Combined Condensed Consolidated Financial Statements                 42
</TABLE>


                                ACTEL CORPORATION

       PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET - UNAUDITED

                      As of October 1, 2000 (In thousands)
<TABLE>
<CAPTION>

                                                           Actel         GateField            Adjustments            Combined
                                                       ------------    -------------    ------------    ---       ------------
<S>                                                   <C>             <C>              <C>             <C>       <C>
Assets
Current assets:
   Cash and cash equivalents.......................    $     14,062    $         338                              $     14,400
   Short-term investments..........................         161,624               --         (24,001)    A             137,623
   Accounts receivable, net........................          25,799               --             (45)    B              25,754
   Inventories, net................................          26,486               --                                    26,486
   Deferred income taxes...........................          21,378               --                                    21,378
   Prepaid expenses and other current assets.......           2,054              186             (78)    D               2,162
                                                       ------------    -------------    ------------              ------------
         Total current assets......................         251,403              524         (24,124)                  227,803
Property and equipment, net........................          11,014            1,267                                    12,281
Goodwill, net......................................          22,847               --          15,525     E              38,372
Other non-goodwill intangible assets, net..........           2,385               --           6,504     F               8,889
Other assets, net..................................          22,830              100         (10,172)    C,G            12,758
                                                       ------------    -------------    ------------              ------------
                                                       $    310,479    $       1,891         (12,267)             $    300,103
                                                       ============    =============    ============              ============
Liabilities and Shareholders' Equity
Current liabilities:
   Accounts payable................................    $     11,616    $         128                              $     11,744
   Accrued salaries and employee benefits..........          13,844               --                                    13,844
   Other accrued liabilities.......................           3,501            1,151             (45)    B               4,607
   Income taxes payable............................           6,457               --          (5,282)    N               1,175
   Deferred income.................................          42,365            2,651          (2,000)    H              43,016
   Current portion of long-term obligations........              --              141                                       141
                                                       ------------    -------------    ------------              ------------
         Total current liabilities.................          77,783            4,071          (7,327)                   74,527
   Long-term obligations...........................              --            3,750          (3,750)    I                  --
   Deferred tax liability..........................             949               --           2,642     C               3,591
                                                       ------------    -------------    ------------              ------------
         Total liabilities.........................          78,732            7,821          (8,435)                   78,118

Commitments and contingencies
Shareholders' equity:
   Common stock....................................              24              618            (618)     J                 24
   Additional paid-in capital......................         141,535           97,400         (93,598)     J            145,337
   Accumulated earnings / (Deficit) ...............          90,390         (103,479)         90,806      K             77,717
   Unearned compensation cost......................              --               --            (422)     L               (422)
   Note receivable from officer....................            (368)              --                                      (368)
   Accumulated other comprehensive income / (loss).             166             (469)                                     (303)
                                                       ------------    -------------    ------------              ------------
          Total shareholders' equity/(deficit)......        231,747           (5,930)         (3,832)                  221,985
                                                       ------------    -------------    ------------              ------------
                                                       $    310,479    $       1,891         (12,267)             $    300,103
                                                       ============    =============    ============              ============
The  accompanying  notes  are an  integral  part of these  unaudited  pro  forma consolidated financial statements.
</TABLE>

<PAGE>


                                ACTEL CORPORATION

  PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED

                      FOR THE YEAR ENDED DECEMBER 31, 1999

                    (In thousands, except per share amounts)


<TABLE>
<CAPTION>

                                                           Actel         GateField            Adjustments            Combined

<S>                                                    <C>             <C>             <C>              <C>       <C>
Net revenues......................................     $    171,661    $      1,987                               $    173,648
Costs and expenses:
   Cost of revenues...............................           66,387           1,297                                     67,684
   Research and development.......................           32,338           5,915             327      L              38,580
   Selling, general, and administrative...........           45,903           3,721                                     49,624
   Amortization of goodwill and other
     acquisition-related intangibles..............            2,226              --           7,927      M              10,153
   Restructuring charge...........................            1,963              --                                      1,963
   Purchased in-process research and development..              600              --                                        600
                                                       ------------    ------------    ------------               ------------
         Total costs and expenses.................          149,417          10,933           8,254                    168,604
Income (loss) from operations.....................           22,244          (8,946)         (8,254)                     5,044
Interest expense..................................               --          (1,328)            208      B              (1,120)
Interest income and other, net....................            3,642             313            (208)     B               3,747
                                                       ------------    ------------    ------------               ------------
Income before tax provision and equity in
 net loss of equity method investee...............           25,886          (9,961)         (8,254)                     7,671
Equity in net (loss) of equity method investee                 (193)             --             193      M                  --
Tax provision.....................................            8,055              --          (3,062)     N               4,993
                                                       ------------    ------------    ------------               ------------
Net income (loss).................................     $     17,638    $     (9,961)         (4,999)              $      2,678
                                                       ============    ============    ============               ============
Net income per share:
   Basic..........................................     $       0.81    $     (2.30)                               $       0.12
                                                       ============    ============                               ============
   Diluted........................................     $       0.76    $     (2.30)                               $       0.12
                                                       ============    ============                               ============
Shares used in computing net income per share:
   Basic..........................................           21,664           4,332                                     21,664
                                                       ============    ============                               ============
   Diluted........................................           23,058           4,332                                     23,058
                                                       ============    ============                               ============
</TABLE>

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

<PAGE>

<TABLE>
<CAPTION>

                                ACTEL CORPORATION

  PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED

                    FOR THE NINE MONTHS ENDED OCTOBER 1, 2000

                    (In thousands, except per share amounts)



                                                           Actel         GateField            Adjustments            Combined
                                                       ------------    ------------    ------------       ---     ------------
<S>                                                    <C>             <C>             <C>                <C>    <C>
Net revenues......................................     $    166,290    $        937                               $    167,227
Costs and expenses:
   Cost of revenues...............................           62,611             240                                     62,851
   Research and development.......................           26,564           5,811            174         L            32,549
   Selling, general, and administrative...........           35,685           1,661                                     37,346
   Amortization of goodwill and other
     acquisition-related intangibles..............            4,891              --          4,339         M             9,230
   Purchased in-process research and development..            5,558              --                                      5,558
                                                       ------------    ------------    -----------                ------------
          Total costs and expenses.................         135,309           7,712          4,513                     147,534
                                                       ------------    ------------    -----------                ------------
Income (loss) from operations.....................           30,981          (6,775)        (4,513)                     19,693
Interest expense..................................               --            (129)           212         B                83
Interest income and other, net....................            5,855              11           (212)        B             5,654
Gain on sale of Chartered Common stock............           28,329              --                                     28,329
                                                       ------------    ------------    -----------                ------------
Income before tax provision and equity in
 net loss of equity method investee...............           65,165          (6,893)        (4,513)                     53,759
Equity in net (loss) of equity method investee ...           (1,401)             --          1,401         M               --
Tax provision.....................................           25,774              --         (2,220)        N            23,554
                                                       ------------    ------------    -----------                ------------
Net income (loss).................................     $     37,990    $     (6,893)          (892)                     30,205
                                                       ============    ============    ===========                ============
Net income per share:
   Basic..........................................     $       1.63    $     (1.28)                               $       1.30
                                                       ============    ============                               ============
   Diluted........................................     $       1.45    $     (1.28)                               $       1.15
                                                       ============    ============                               ============
Shares used in computing net income per share:
   Basic..........................................           23,300           5,394                                     23,300
                                                       ============    ============                               ============
   Diluted........................................           26,207           5,394                                     26,207
                                                       ============    ============                               ============

</TABLE>

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


<PAGE>


                                ACTEL CORPORATION

         UNAUDITED NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS



Note 1.  Basis of Presentation

         On  November  15,  2000,  Actel  Corporation  ("Actel")  completed  the
acquisition  of all of the  outstanding  common stock of  GateField  Corporation
("GateField")  in a transaction to be accounted for using the purchase method of
accounting.  Actel paid $5.25 per share for the approximately 4.6 million shares
not  already  owned by Actel for a total cash  consideration  of $24.0  million.
Existing  Actel  investments  in GateField  are included in the purchase  price.
These  investments  include the 1.6 million  shares of  GateField  Common  stock
already  owned by Actel with an equity  accounting  book value of $5.4  million,
outstanding notes receivable from GateField with an equity accounting book value
of $6.5 million at November 15, 2000, and the  capitalized  value of the product
marketing  agreement  with  GateField  with a value of $6.0 million.  Actel also
incurred $106 thousand of acquisition  expenses including financial advisory and
direct  transaction  costs which will be included as a component of the purchase
price.

         All GateField  employee  stock options will be assumed by Actel and are
included in the  purchase  price  based on their fair values as of November  15,
2000. Any unvested GateField options to be assumed by Actel are also included as
part of the  purchase  price  based on their  fair  value of $3.8  million.  The
portion of the intrinsic value of the unvested options that will be deemed to be
earned over the remaining  vesting period of those options has been allocated as
part of the  purchase  price to unearned  compensation  and will be amortized to
operating  expenses over the  remaining  vesting  period.  The fair value of the
options to be assumed has been based on the Black-Scholes option pricing model.

         The  combined  total of cash paid,  existing  investments,  acquisition
costs and the value of stock options  assumed  amounts to a total purchase price
of approximately $45.7 million.

         In  accordance  with the  provisions  of  Accounting  Principles  Board
Opinion No. 16, "Business Combinations", all identifiable assets were assigned a
portion of the total consideration on the basis of their respective fair values.
The  consideration  was allocated as follows based on the valuation report of an
independent valuation specialist as of November 15, 2000 (in thousands):



       Net tangible assets (liabilities) of GateField....     $ (1,084)
       In-process research and development...............         5,088
       Acquired work-force...............................           476
       Developed technology..............................         5,808
       Core Technology...................................         2,896
       Tradename.........................................           326
       Patents...........................................           976
       Goodwill..........................................        26,680
       Unearned compensation costs.......................           923
       Net deferred tax asset............................         3,647
                                                          =============
                                                               $ 45,736

         A  portion  of the  purchase  price  has  been  allocated  to  acquired
in-process  research and  development  ("IPRD").  IPRD was identified and valued
through extensive interviews,  analysis of data provided by GateField concerning
developmental  products,  their  stage of  development,  the time and  resources
needed to complete them, and associated risks. The income approach,  which bases
the value of an asset on future earnings  capacity of the asset, was utilized in
valuing the IPRD.  This approach  values an asset based on the future cash flows
that could be potentially generated by the asset over its estimated useful life.
The future cash flows are discounted to their present value utilizing a discount
rate (25%) that would  provide  sufficient  return to a  potential  investor  to
estimate the value of the subject asset.  The estimated  completion  date of the
technology  is early 2001.  The present value of the cash flows over the life of
the asset is summed to equal the estimated value of the asset. The IPRD,  valued
at $5,088,000 using the income approach, was charged to expense upon the closing
of the acquisition.

         The  value  of the  assembled  workforce  was  estimated  using  a cost
approach.  This approach identifies the employees that would require significant
cost to replace and train. This analysis then estimates the fully burdened costs
(locating,  interviewing,  and hiring) attributed to each employee.  These costs
are summed up and tax-effected to estimate the value of the estimated workforce.
Actel  expects to amortize  the value  assigned  to the  acquired  workforce  of
$476,000 on a straight-line basis over an estimated remaining useful life of six
months.

         The amounts attributed to developed technology and core technology were
also valued using the income approach described above with discount rates of 15%
for  developed  technology  and 20%  for  core  technology.  The  value  of core
technology represents portions technology from previously  discontinued products
that can be applied to future revenue generating products. The value assigned to
developed  technology  is  based  on  technology  that  has  achieved  technical
feasibility.  The amounts  assigned to  developed  and core  technology  will be
amortized on a straight line basis over a useful life of five years.

         The value assigned to tradename  represents the value  attributable  to
the ProAsic  tradename owned by GateField.  The relief from royalty  methodology
was utilized to value the tradename.  This methodology assumes that the value of
the  asset  equals  the  amount a third  party  would  pay to use the  asset and
capitalize on the related benefits of the asset. Therefore, a revenue stream for
the asset is estimated,  and then an appropriate  royalty rate is applied to the
forecasted revenue to estimate the pre-tax income associated with the asset. The
pre-tax  income is then  tax-effected  to  estimate  the  after-tax  net  income
associated  with the asset.  Finally,  the after-tax net income is discounted to
the present value using an appropriate  rate of return (20%) that considers both
the risk of the asset and the associated cash flow  estimates.  Actel expects to
amortize  the value  assigned to the  tradename  of $326,000 on a  straight-line
basis over an estimated useful life of five years.

         As of the  valuation  date,  it was  assumed  that there was some value
attributable  to  the  GateField  patent  applications.   To  value  the  patent
applications,  the relief from royalty methodology  described above was utilized
using an 25% rate of return for present value discounting based on both the risk
of the asset and the associated cash flow  estimates.  Actel expects to amortize
the value  assigned to the patent  applications  of $976,000 on a  straight-line
basis over an estimated useful life of five years.

         Goodwill,  which  represents  the  excess of the  purchase  price of an
investment  in an acquired  business over the fair value of the  underlying  net
identifiable  assets,  will be  amortized  on a  straight-line  basis  over  its
estimated useful life of five years.

         The value of unearned compensation costs of approximately $923 thousand
was  derived  using  the  guidance  of  Financial   Accounting  Standards  Board
Interpretation  44 and will be amortized to operating expense over the remaining
vesting period of the underlying option grants.

         Deferred tax assets and  liabilities  have been recorded to reflect the
future benefits and obligations  associated with the  deductibility of GateField
net operating  loss  carryforwards  and the  non-deductibility  of  amortization
related to acquired goodwill and intangible assets.



Note 2.  Pro Forma Adjustments

(A) To record the cash paid by Actel to purchase the outstanding common stock of
GateField.

(B) To eliminate  the $45 in  intercompany  interest  receivable/payable  on the
Notes Receivable from GateField as well as the associated  intercompany interest
income/expense.

(C) To record the deferred tax asset (gross amount of $7,902) less  amortization
for the year ended  December  31, 1999 of $1,129 and for the nine  months  ended
October 1, 2000 of $846 associated with the net operating losses carried forward
to future  periods and the deferred tax liability  (gross amount of $4,255) less
amortization  for the year ended  December  31,  1999 of $1,003 and for the nine
months ended October 1, 2000 of $610 for the  non-deductibility  of amortization
on intangible assets and goodwill from the acquisition.

(D) To eliminate acquisition costs pre-paid by Actel that were incurred prior to
October 1, 2000.

(E) To  record  the  value  of  goodwill  (gross  amount  of  $26,680)  from the
acquisition of GateField less amortization for 1999 ($6,374) and the nine months
ended October 1, 2000 ($4,781).

(F) To record the value of the acquired workforce,  developed  technology,  core
technology,  tradename,  and patents  arising from the  acquisition of GateField
less amortization for the year ended December 31, 1999 and the nine months ended
October 1, 2000.

(G) To write  off the  October  1,  2000  book  value of Actel  debt and  equity
investments  in  GateField,  as well as the  capitalized  value  of the  product
marketing agreement with GateField.

(H) To eliminate $2 million in deferred  revenue  from  GateField  books that is
related to agreements with Actel.

(I) To eliminate notes payable to Actel from GateField books.

(J) To reflect the elimination of GateField's  common stock ( -$618) and paid-in
capital in excess of par value ( -$97,400)  and the  assumption  of  outstanding
GateField stock options ($3,802)

(K) Reflects the in-process  technology  charge of $5.1 million,  elimination of
GateField's  accumulated  deficit of $103.5  million,  as well as the cumulative
effect of  pro-forma  adjustments  on earnings  for the periods  presented.  The
in-process  research and development cost is treated as an expense and therefore
decreases the retained earnings.

(L) To record the portion of intrinsic value of unvested stock options that will
be  deemed  to be earned  over the  remaining  vesting  period  and the  related
deferred amortization expense.

(M) To eliminate the equity  accounting  charges for goodwill  amortization  and
equity in net loss of equity method  investee and to record the  amortization of
goodwill  and  identifiable  intangible  assets  related to the  acquisition  of
GateField as if the transaction had occurred on January 1, 1999.

(N) To reflect the lowered tax expense and reduction in taxes payable that would
be associated with deducting GateField expenses from Actel profit before tax.



<PAGE>




(C)      Exhibits.

23.1     Consent of Deloitte & Touche LLP, Independent Auditors



                                   SIGNATURES



         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this Report to be signed on its behalf by the
undersigned hereunto duly authorized.



                                                        ACTEL CORPORATION




            January 29, 2001                       By: /s/ Henry L. Perret
                                                       --------------------
                                                          Henry L. Perret
                                                      Vice President of Finance
                                                     and Chief Financial Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>2
<FILENAME>gf8kexib.txt
<DESCRIPTION>CONSENT OF DELOITTE & TOUCHE LLP
<TEXT>

Exhibit 23.1

                          INDEPENDENT AUDITORS' CONSENT


We consent to the incorporation by reference in this  Registration  Statement on
Form S-8 of Actel Corporation,  of our report dated February 19, 2000 related to
the consolidated  financial  statements of GateField  Corporation as of December
31, 1999 and 1998 and for the three years in the period ended  December 31, 1999
appearing in the Current Report on Form 8-K/A of Actel Corporation dated January
29, 2001.



/s/ Deloitte & Touche LLP


San Jose, California

January  29, 2001


</TEXT>
</DOCUMENT>
</SUBMISSION>
