<PAGE>
                                  United States
                       Securities and Exchange Commission

                             Washington, D.C. 20549

                                    FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Period Ended October 31, 2001.

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Transition Period from __________ to __________.

                         Commission file number 0-22651

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

                             3DFX INTERACTIVE, INC.
             (Exact name of registrant as specified in its charter)

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

             CALIFORNIA                               77-0390421
             ----------                               ----------
   (State or Other Jurisdiction of         (IRS Employer Identification No.)
    Incorporation or Organization)


                               4435 FORTRAN DRIVE
                           SAN JOSE, CALIFORNIA 95134

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

               (Address of Principal Executive Office) (Zip Code)

                         TELEPHONE NUMBER (408) 591-3508

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

              (Registrant's telephone number, including area code)

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

              (Former name, former address and former fiscal year,
                          if changed since last report)

--------------------------------------------------------------------------------
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common Stock, No Par Value --- 39,799,364 shares as of December 14, 2001

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


<PAGE>
                             3dfx Interactive, Inc.

                                      Index

<TABLE>
<CAPTION>
                                                                                                        PAGE
<S>                                                                                                     <C>
PART 1     FINANCIAL INFORMATION

           Item 1.    Financial Statements

                      Consolidated Statement of Net Liabilities in Liquidation at October 31, 2001........1

                      Condensed Consolidated Balance Sheet of Discontinued Operations at January 31,
                      2001................................................................................2

                      Consolidated Statement of Changes in Net Liabilities in Liquidation for the
                      period from March 27, 2001 to October 31, 2001......................................3

                      Condensed Consolidated Statements of Discontinued Operations for the period
                      from February 1, 2001 to March 26, 2001 and for the three and nine months
                      ended October 31, 2000..............................................................4

                      Condensed Consolidated Statements of Cash Flows of Discontinued Operations for
                      the period from February 1, 2001 to March 26, 2001 and for the nine months
                      ended October 31, 2000..............................................................5

                      Notes to Condensed Consolidated Financial Statements................................6

           Item 2.    Management's Discussion and Analysis of Financial Condition and Results of
                      Discontinued Operations............................................................10

           Item 3.    Quantitative and Qualitative Disclosure about Market Risk..........................16

PART II.  OTHER INFORMATION

           Item 1.    Legal Proceedings..................................................................17

           Item 2.    Changes in Securities and Use of Proceeds..........................................17

           Item 3.    Defaults Upon Senior Securities....................................................17

           Item 4.    Submission of Matters to a Vote of Security Holders................................17

           Item 5.    Other Information..................................................................17

           Item 6.    Exhibits and Reports on Form 8-K...................................................17

SIGNATURES            ...................................................................................18
</TABLE>


<PAGE>
                          PART I FINANCIAL INFORMATION

ITEM 1 FINANCIAL STATEMENTS

                     3dfx INTERACTIVE, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF NET LIABILITIES IN LIQUIDATION
                                 (In thousands)

                                   (unaudited)

<TABLE>
<CAPTION>
                                                              October 31, 2001
                                                              ----------------
<S>                                                           <C>
ASSETS

  Cash and cash equivalents                                       $ 2,610
  Accounts receivable                                                  24
  Other current assets                                              1,013
  Contingent receivable (Note 1)
                                                                  -------
    Total assets                                                  $ 3,647
                                                                  =======

LIABILITIES

  Accounts payable                                                $24,333
  Other liabilities                                                   487
  Estimated costs during period of liquidation (Note 1)             2,956
  Contingent liabilities (Note 1)
                                                                  -------
    Total liabilities                                              27,776
                                                                  -------
    Net liabilities in liquidation                                $24,129
                                                                  =======
</TABLE>


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


                                      -1-


<PAGE>
                     3dfx INTERACTIVE, INC. AND SUBSIDIARIES
         CONDENSED CONSOLIDATED BALANCE SHEET OF DISCONTINUED OPERATIONS
                                 (In thousands)

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                           January 31,
                                                                              2001
                                                                           -----------
<S>                                                                        <C>
ASSETS
Current Assets:

    Cash and cash equivalents                                               $   9,391
    Accounts receivable, net of allowance for doubtful accounts
        of $9,992 at January 31, 2001                                           6,398
    Inventories, net                                                           22,358
    Deferred tax assets                                                        35,000
    Other current assets                                                        1,214
    Other assets held for sale                                                 45,245
                                                                            ---------
    Total current assets                                                    $ 119,606
                                                                            =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
    Accounts payable                                                        $  64,245
    Accrued liabilities                                                        11,642
    nVidia term loan                                                           15,000
    Other current liabilities                                                   6,366
                                                                            ---------
    Total current liabilities                                                  97,253
                                                                            ---------

Shareholders' Equity:
    Preferred stock, no par value, 5,000,000 shares authorized;
        none issued and outstanding                                                --
    Common stock, no par value, 50,000,000 shares authorized;
        39,787,740 shares issued and outstanding at January 31, 2001          430,922
    Warrants                                                                      242
    Accumulated other comprehensive loss                                       (1,722)
    Accumulated deficit                                                      (407,089)
                                                                            ---------
Total shareholders' equity                                                     22,353
                                                                            ---------
Total liabilities and shareholders' equity                                  $ 119,606
                                                                            =========
</TABLE>


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


                                      -2-


<PAGE>
                     3dfx INTERACTIVE, INC. AND SUBSIDIARIES
       CONSOLIDATED STATEMENT OF CHANGES IN NET LIABILITIES IN LIQUIDATION
                                 (In thousands)

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                             For the period from
                                                              March 27, 2001 to
                                                               October 31, 2001
                                                             -------------------
<S>                                                          <C>
Net assets in liquidation at March 27, 2001                       $ 20,457
    Selling, general and administrative expenses                    (3,901)
    Net gain on sale of assets held for sale                         3,227
    Decrease in deferred tax asset                                 (35,000)
                                                                  --------
Net liabilities in liquidation at April 30, 2001                    15,217

    Selling, general and administrative expenses                    (5,929)
    Net loss on sale of assets held for sale                          (948)
                                                                  --------
Net liabilities in liquidation at July 31, 2001                     22,094

    Selling, general and administrative expenses                    (1,268)
    Net loss on sale of assets held for sale                          (767)
                                                                  --------
Net liabilities in liquidation at October 31, 2001                $ 24,129
                                                                  ========
</TABLE>


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


                                      -3-


<PAGE>
                     3DFX INTERACTIVE, INC. AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF DISCONTINUED OPERATIONS
                      (In thousands, except per share data)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                       For the
                                                                        Period            Three             Nine
                                                                      February 1,         Months            Months
                                                                        2001 to           Ending            Ending
                                                                       March 26,        October 31,       October 31,
                                                                          2001             2000              2000
                                                                      -----------       -----------       -----------
<S>                                                                   <C>               <C>               <C>
Revenues                                                               $      --         $  39,189         $ 214,757
Cost of revenues                                                              --            60,935           199,903
                                                                       ---------         ---------         ---------
Gross profit (loss)                                                           --           (21,746)           14,854
                                                                       ---------         ---------         ---------
Operating expenses:
  Research & development                                                      --            18,767            54,830
  Selling, general and administrative                                      7,801            15,399            50,750
  In-process research & development                                           --                --            66,250
  Amortization of goodwill and intangibles                                    --             9,667            17,993
  Impairment of goodwill and other intangibles                                --           117,065           117,065
                                                                       ---------         ---------         ---------
Total operating expenses                                                   7,801           160,898           306,888
                                                                       ---------         ---------         ---------
Loss from discontinued operations                                         (7,801)         (182,644)         (292,034)
Other income (expense), net                                                  182               696               215
                                                                       ---------         ---------         ---------
Loss from discontinued operations before income taxes                     (7,619)         (181,948)         (291,819)
Provision (benefit) for income taxes                                      (4,992)           (3,375)             (313)
                                                                       ---------         ---------         ---------
Net loss from discontinued operations                                  $  (2,627)        $(178,573)        $(291,506)
                                                                       =========         =========         =========
Net loss per share from discontinued operations:

  Basic                                                                $   (0.07)        $   (4.53)        $   (9.69)
                                                                       =========         =========         =========
  Diluted                                                              $   (0.07)        $   (4.53)        $   (9.69)
                                                                       =========         =========         =========
Shares used in net loss per share from discontinued operations:

  Basic                                                                   39,788            39,442            30,077
                                                                       =========         =========         =========
  Diluted                                                                 39,788            39,442            30,077
                                                                       =========         =========         =========
</TABLE>


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


                                      -4-


<PAGE>
                     3DFX INTERACTIVE, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS OF DISCONTINUED OPERATIONS
                                 (In thousands)

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                      For the Period        Nine Months
                                                                                  from February 1, 2001        Ending
                                                                                    to March 26, 2001     October 31, 2000
                                                                                  ---------------------   ----------------
<S>                                                                               <C>                     <C>
Cash flows from operating activities:

  Net loss from discontinued operations                                                 $  (2,627)           $(291,506)

Adjustments to reconcile net income to net cash from operating activities:

  Depreciation                                                                                 --               18,181
  Amortization                                                                                 --               17,993
  Stock compensation                                                                           --                1,539
  Write-off of acquired in-process research & development                                      --               66,250
  Impairment of goodwill and other intangibles                                                 --              117,065
  Deferred tax benefit related to write-off of intangibles                                     --               (2,426)
  Decrease in allowance for doubtful accounts                                              (5,573)              (1,986)
  Changes in assets and liabilities:
    Accounts receivable                                                                    10,725               40,349
    Inventory                                                                                 183                 (729)
    Other assets                                                                              544               11,622
    Accounts payable                                                                           --                1,588
    Accrued and other liabilities                                                         (11,394)              (6,050)
    Deferred revenue                                                                           --               (3,355)
                                                                                        ---------            ---------
      Net cash used in discontinued operating activities                                   (8,142)             (31,465)
                                                                                        ---------            ---------
Cash flows from investing activities:

 Sales of short-term investments                                                              188               24,012
 Purchases of property and equipment                                                           --              (13,711)
 Merger with GigaPixel Corporation                                                             --                5,319
                                                                                        ---------            ---------
      Net cash provided by investment activities                                              188               15,620
                                                                                        ---------            ---------
Cash flows from financing activities:

  Proceeds from issuance of common stock, net                                                  --                2,238
  Principal payments of capitalized lease obligations, net                                     --                 (588)
  Proceeds on short-term debt, net                                                             --                5,983
                                                                                        ---------            ---------
      Net cash provided by financing activities                                                --                7,633
                                                                                        ---------            ---------
Net decrease in cash and cash equivalents                                                  (7,954)              (8,212)
Cash and cash equivalents at beginning of period                                            9,391               41,818
                                                                                        ---------            ---------
Cash and cash equivalents at end of period                                              $   1,437            $  33,606
                                                                                        =========            =========
</TABLE>


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


                                      -5-


<PAGE>
                             3DFX INTERACTIVE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - The Company and its Significant Accounting Policies:

        3dfx Interactive, Inc. ("3dfx") was incorporated in California on August
24, 1994. 3dfx developed high performance, cost-effective graphics chips,
graphics boards, software and related technology that enable an interactive and
realistic 3D experience across multiple hardware platforms. 3dfx has
subsidiaries in the United States, Mexico and other key markets in the world.
The condensed consolidated financial statements include the financial statements
of 3dfx and its wholly owned subsidiaries. All significant inter-company
transactions and accounts have been eliminated.

        The unaudited condensed consolidated financial statements included
herein have been prepared by 3dfx pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information or footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. In the opinion of 3dfx, the accompanying unaudited
condensed consolidated financial statements contain all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the financial
information included therein. While 3dfx believes that the disclosures are
adequate to make the information not misleading, it is suggested that these
financial statements be read in conjunction with the audited financial
statements and accompanying notes included in 3dfx's Annual Report on Form 10-K
for the fiscal year ended January 31, 2001 as filed with the Securities and
Exchange Commission.

        As described below, on March 27, 2001, 3dfx's shareholders approved
proposals to liquidate, wind up and dissolve 3dfx pursuant to a plan of
dissolution. 3dfx is proceeding to wind up its affairs and dissolve.
Accordingly, all activities of 3dfx as of March 27, 2001 are presented under the
liquidation basis of accounting. Under the liquidation basis of accounting,
assets are stated at their estimated net realizable values and liabilities are
stated at their anticipated settlement amount, if reasonably estimable. See
"Activities While in Liquidation" below. Additionally, 3dfx's common stock has
been delisted from the NASDAQ National Market effective May 16, 2001.

Asset Sale and Plan of Dissolution

        On December 15, 2000, 3dfx entered into an asset purchase agreement with
nVidia Corporation ("nVidia") and a subsidiary of nVidia ("nVidia Sub") under
which nVidia Sub would acquire certain of 3dfx's assets, including its core
graphics processor assets. Under the terms of the asset purchase agreement,
nVidia Sub agreed to pay 3dfx $70.0 million in cash and 2,000,000 shares (on a
post-split basis) of registered nVidia common stock, subject to the satisfaction
of certain conditions specified in the asset purchase agreement as described
below. Upon signing the asset purchase agreement, nVidia Sub loaned to 3dfx
$15.0 million in cash for working capital.

        The asset sale to nVidia Sub was approved by 3dfx shareholders on March
27, 2001, and on April 18, 2001 substantially all of 3dfx's assets were sold to
nVidia Sub. Upon closing, 3dfx received $55.0 million in cash, which amount was
net of repayment of the $15.0 million cash loan 3dfx received upon signing the
asset purchase agreement. In addition, under the terms of the asset purchase
agreement, 3dfx and nVidia caused the pending patent litigation between the
parties to be dismissed with prejudice. Under the terms of the asset purchase
agreement, 3dfx may receive part or all of a one-time post-closing cash payment
of up to $25.0 million upon its request if it is not in breach of the asset
purchase agreement and it has expended all or substantially all of the $70.0
million cash consideration in payment of its liabilities and determines in good
faith that (i) the remaining portion of the cash consideration previously
received by it is not sufficient to pay its remaining liabilities, and (ii) such
remaining liabilities could and would be satisfied if 3dfx received the
post-closing cash payment and applied it to the payment of such liabilities, and
if nVidia Sub does not determine in good faith that the requested amount would
not permit 3dfx to pay in full its remaining liabilities. In the event that 3dfx
receives the post-closing cash payment, the 2,000,000 shares of nVidia common
stock comprising the remaining consideration otherwise payable to 3dfx under the
asset purchase agreement will be reduced by the number of shares equal to the
quotient determined by dividing the amount of the post-closing cash payment by
$25. In August 2001, nVidia's board of directors approved a two-for-one stock
split of nVidia's common stock for stockholders of record on August 28, 2001, to
be effected in the form of a 100% stock dividend. As a result of the stock
split, and as indicated above,


                                      -6-


<PAGE>
3dfx is entitled to receive 2,000,000 shares of nVidia common stock, subject to
the conditions set forth below.

        Irrespective of whether 3dfx receives a post-closing payment, the shares
of nVidia common stock will only become deliverable to 3dfx upon satisfaction of
certain conditions specified in the asset purchase agreement, including the
completion of the winding up of the business of 3dfx pursuant to 3dfx's plan of
dissolution, and 3dfx's certification that (i) all liabilities of 3dfx and its
subsidiaries have been paid in full or otherwise provided for and (ii) 3dfx has
or will be validly dissolved. In the event the contingencies are not met and the
remaining consideration from nVidia is not paid, 3dfx will have to explore other
options, including filing for bankruptcy. As a result of the contingencies
described above, the contingent receivable and related tax expense on the gain
have not been recorded in the accompanying consolidated statement of net
liabilities in liquidation as of October 31, 2001. The ultimate total of the
value of nVidia stock received by 3dfx, if any, is dependent on the number and
market value of shares received given the conditions described above.

        On December 15, 2000, the board of directors of 3dfx also approved a
plan of dissolution and on March 27, 2001 this plan of dissolution was approved
by 3dfx's shareholders. On March 30, 2001, 3dfx filed a certificate of election
to liquidate, wind up and dissolve with the California Secretary of State's
office. 3dfx is proceeding to wind up its affairs and is no longer operating or
generating revenues in the normal course of business. Accordingly, all of the
activities of 3dfx have been presented on a liquidation basis of accounting.

        3dfx has substantially reduced its costs in order to conserve its
resources. These cost cutting measures include a reduction of a significant
portion of 3dfx's workforce, reduction in office space and other efforts to
reduce non-essential expenses. 3dfx has also been providing manufacturing
services to third parties to help cover the overhead associated with its Juarez,
Mexico manufacturing facility pending the sale or shut-down of that facility.
The sales and costs of sales related to these operations are recorded as other
income and expense on the condensed consolidated statement of discontinued
operations for the period from February 1, 2001 to March 26, 2001 and as
selling, general, and administrative expense from March 27, 2001 to October 31,
2001.

Activities While in Liquidation

        During the nine months ended October 31, 2001, 3dfx disposed of most of
its inventory and other assets held for sale through the asset purchase
agreement with nVidia Sub as well as through sales to other parties. Any
remaining inventory and other assets held for sale have been written down to
their net realizable value, most of which equals zero. As 3dfx is in
liquidation, these remaining assets may be sold. 3dfx believes that any gains on
such sales that may be realized will be immaterial.

        During the nine months ended October 31, 2001, 3dfx terminated
substantially all of its remaining employees and continued to liquidate its
remaining assets, negotiate with third parties for resolutions of various
litigation matters that would be agreeable to all parties involved, and to reach
settlements with its vendors in reduction of its accounts payable, as well as to
reach mutually satisfactory settlements with the lessors to its facilities and
various equipment leases. At October 31, 2001, 3dfx had total future lease
obligations of $13.8 million, of which $2.3 million has been accrued. At October
31, 2001, 3dfx was still in negotiations to settle certain remaining leases
under which it has contractual obligations, which range from $0 to $11.5 million
and therefore no amounts have been recorded for this contingent liability. After
establishing a reserve for the winding up of its affairs, 3dfx used the
remaining proceeds received from the asset sale to nVidia Sub to pay a
significant portion of its and its subsidiaries' known and determinable debts
and liabilities.

        Changes in net liabilities for the period from March 27, 2001 to October
31, 2001 were a result of selling, general and administrative expenses of $11.1
million, which is comprised of operating expenses, accrued expenses and lease
termination expense, partially offset by the forgiveness of liabilities, a
decrease in the deferred tax asset of $35.0 million and the net gain on sale of
assets to nVidia Sub of $1.5 million, which was comprised of the following: (a)
a gain on the sale of inventory and other assets held for sale to nVidia Sub of
$14.3 million, which was comprised of the purchase by nVidia Sub of certain
inventory, fixed assets and intangible assets with net book values of $55.5
million offset by proceeds of $70.0 million and (b) losses of $12.8 million on
sale and impairment of inventory and other assets held for sale.


                                      -7-


<PAGE>
        3dfx expects to continue to incur certain administrative and other costs
associated with winding up its affairs. Should 3dfx qualify for its final
payment from nVidia Sub, 3dfx believes that it will have sufficient cash to pay
all of its and its subsidiaries' known current and determinable liabilities.
However, the amount of unknown or contingent liabilities cannot be quantified
and could decrease or eliminate any remaining assets available for distribution
to 3dfx's shareholders. Further, if 3dfx or its subsidiaries are subject to any
contingent liabilities, this could require that it establish reserves that could
delay any distribution to 3dfx shareholders. Because of the uncertainties as to
the precise net realizable value of 3dfx's assets and the settlement amount of
3dfx's and its subsidiaries' debts and liabilities, 3dfx cannot at this time
determine the timing or amount of distributions that may be made to its
shareholders, if any. Only if there are assets remaining at the time of 3dfx's
dissolution will 3dfx shareholders receive a distribution of those assets.

Note 2 - Balance Sheet Components (in Thousands):

Inventory:

<TABLE>
<CAPTION>
                                                      January 31, 2001
<S>                                                   <C>
Raw materials                                             $ 1,972
Work in-process                                                70
Finished goods                                             20,316
                                                          -------
  Total inventory                                         $22,358
                                                          =======
</TABLE>


Other assets held for sale:


<TABLE>
<CAPTION>
                                                      January 31, 2001
<S>                                                   <C>
Computer Equipment                                        $ 8,268
Purchased computer software                                 7,653
Furniture and equipment                                     4,428
Goodwill and other intangibles                             20,765
Other assets                                                4,131
                                                          -------
  Other assets held for sale                              $45,245
                                                          =======
</TABLE>


Estimated Costs During Period of Liquidation:


<TABLE>
<CAPTION>
                                                     October 31, 2001
<S>                                                  <C>
Income taxes payable                                      $  265
Accrued salaries, wages and benefits                       1,407
Deferred tax liability                                        --
Accrued leases payable                                       406
Other accrued liabilities                                    878
                                                          ------
  Estimated costs during period of liquidation            $2,956
                                                          ======
</TABLE>


Accrued Liabilities:


<TABLE>
<CAPTION>
                                                     January 31, 2001
<S>                                                  <C>
Income taxes payable                                      $    96
Accrued salaries, wages and benefits                        3,524
Deferred tax liability                                      4,735
Accrued leases payable                                         --
Other accrued liabilities                                   3,287
                                                          -------
  Accrued Liabilities                                     $11,642
                                                          =======
</TABLE>


Note 3 - Net Loss Per Share:

        Basic net loss per share is computed using the weighted average number
of common shares outstanding during the periods. Diluted net loss per share is
computed using the weighted average number of common and potentially dilutive
common shares during the periods presented.


                                      -8-


<PAGE>
Diluted loss per share was the same as basic loss per share for the three and
nine months ended October 31, 2000. During the three and nine month periods
ended October 31, 2000, options to purchase approximately 5,761,000 and
5,860,000 shares of common stock, respectively, were outstanding but not
included in the calculation because they were anti-dilutive. In June 2001, 3dfx
granted to Richard A. Heddleson, 3dfx's Chief Financial Officer, 800,000 stock
options at an exercise price of $.38 per share. During the period from February
1, 2001 to March 26, 2001, options to purchase approximately 3,276,380 shares of
common stock were outstanding but not included in the calculation because they
were anti-dilutive.

Note 4 - Comprehensive Loss:

        Total comprehensive loss for the period February 1, 2001 to March 26,
2001 was $3.4 million, comprised of $700,000 from an unrealized loss on
investment in 3Dlabs and net loss from discontinued operations of $2.7 million.
Other comprehensive income (loss) for the three months ended October 31, 2000
was an unrealized loss of ($.6) million, representing a loss from investing
activities, resulting in total comprehensive loss of ($179.2) million. Other
comprehensive income (loss) for the nine months ended October 31, 2000 was an
unrealized loss of ($3.9) million, representing a loss from investing
activities, resulting in total comprehensive income (loss) of ($295.4) million.

NOTE 5 - Legal Contingencies:

        On December 21, 2000, CagEnt Technologies Inc. filed suit against 3dfx
in the Northern California District Federal Court. The complaint alleged patent
infringement relating to CagEnt's patent no. 5,856,829. The complaint sought a
declaratory judgment of infringement, injunctive relief enjoining future
infringement and money damages caused by the alleged infringement, together with
pre-judgment interest, attorneys' fees and cost of suit. On August 2, 2001, 3dfx
reached a settlement with CagEnt, under which CagEnt and 3dfx agreed to release
all claims against each other. 3dfx did not make or agree to make any payment to
CagEnt as part of the settlement. The settlement of CagEnt's claim will not
affect the contemplated liquidation and winding up of 3dfx's business pursuant
to the 3dfx plan of dissolution.

        In February 2000 MCI Worldcom, Inc. filed a suit against STB Systems,
Inc., a wholly owned subsidiary of 3dfx, in the 192nd District Court in Dallas
County, Texas. The complaint involves a dispute over the amount owed by STB
Systems, Inc. for services rendered by MCI Worldcom, Inc.

        3dfx is also a party to various legal proceedings involving collection
matters and other matters against it. 3dfx is currently seeking resolutions that
are mutually acceptable to the parties involved in each of these matters.
However, there is no assurance that resolutions will be achieved. Although the
amount of any liability that could arise with respect to these proceedings
cannot be predicted accurately, 3dfx believes that any liability that might
result from such claims will not have a material adverse effect on its financial
position.


                                      -9-


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

        The following Management's Discussion and Analysis of Financial
Condition and Results of Discontinued Operations 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. Any statements contained in
this document, including without limitation statements to the effect that 3dfx
or its management "believes," "expects," "anticipates," "plans," "may," "will,"
"projects," "continues," or "estimates," or statements concerning "potential,"
or "opportunity" or other variations thereof or comparable terminology or the
negative thereof, that are not statements of historical fact should be
considered forward-looking statements. These forward-looking statements are
based on current expectations and entail various risks and uncertainties that
could cause actual results to differ materially from those projected in the
forward-looking statements. Some of such risks and uncertainties are set forth
below under "Risk Factors".

Overview

        3dfx developed high performance, cost-effective graphics chips, graphics
boards, software and related technology that enable an interactive and realistic
3D experience across multiple hardware platforms, but is now in the process of
winding up its business. As discussed below, on March 27, 2001, 3dfx's
shareholders approved proposals to liquidate, wind up and dissolve 3dfx pursuant
to a plan of dissolution and to sell certain of its assets to nVidia US
Investment Company ("nVidia Sub"), a wholly owned subsidiary of nVidia
Corporation ("nVidia"). 3dfx is continuing to wind up its affairs and dissolve.
Accordingly, all activities of 3dfx are presented on a liquidation basis in the
accompanying condensed consolidated financial statements. Additionally, 3dfx's
common stock has been delisted from the NASDAQ National Market effective May 16,
2001.

Asset Sale and Plan of Dissolution

        On December 15, 2000, 3dfx entered into an asset purchase agreement with
nVidia and nVidia Sub under which nVidia Sub would acquire certain of 3dfx's
assets, including its core graphics processor assets. Under the terms of the
asset purchase agreement, nVidia Sub agreed to pay 3dfx $70.0 million in cash
and 2,000,000 shares (on a post-split basis) of registered nVidia common stock,
subject to the satisfaction of certain conditions specified in the asset
purchase agreement as described below. Upon signing the asset purchase
agreement, nVidia Sub loaned to 3dfx $15.0 million in cash for working capital.

        The asset sale to nVidia Sub was approved by 3dfx shareholders on March
27, 2001, and on April 18, 2001 substantially all of 3dfx's assets were sold to
nVidia Sub. Upon closing, 3dfx received $55.0 million in cash, which amount was
net of repayment of the $15.0 million cash loan 3dfx received upon signing the
asset purchase agreement. In addition, under the terms of the asset purchase
agreement, 3dfx and nVidia Sub caused the pending patent litigation between the
parties to be dismissed with prejudice. Under the terms of the asset purchase
agreement, 3dfx may receive part or all of a one-time post-closing cash payment
of up to $25.0 million upon its request if it is not in breach of the asset
purchase agreement, it has expended all or substantially all of the $70.0
million cash consideration in payment of its liabilities and determines in good
faith that (i) the remaining portion of the cash consideration previously
received by it is not sufficient to pay its remaining liabilities, and (ii) such
remaining liabilities could and would be satisfied if 3dfx received the
post-closing cash payment and applied it to the payment of such liabilities, and
if nVidia Sub does not determine in good faith that the requested amount would
not permit 3dfx to pay in full its remaining liabilities. In the event that 3dfx
receives the post-closing cash payment, the 2,000,000 shares of nVidia common
stock comprising the remaining consideration otherwise payable to 3dfx under the
asset purchase agreement will be reduced by the number of shares equal to the
quotient determined by dividing the amount of the post-closing cash payment by
$25. In August 2001, nVidia's board of directors approved a two-for-one stock
split of nVidia's common stock for stockholders of record on August 28, 2001, to
be effected in the form of a 100% stock dividend. As a result of the stock
split, and as indicated above 3dfx is entitled to receive 2,000,000 shares of
nVidia's common stock, subject to the conditions set forth below.


                                      -10-


<PAGE>
        Irrespective of whether 3dfx receives a post-closing payment, the shares
of nVidia common stock will only become deliverable to 3dfx upon satisfaction of
certain conditions specified in the asset purchase agreement, including the
completion of the winding up of the business of 3dfx pursuant to 3dfx's plan of
dissolution, and 3dfx's certification that (i) all liabilities of 3dfx and its
subsidiaries have been paid in full or otherwise provided for and (ii) 3dfx has
or will be validly dissolved. In the event the contingencies are not met and the
remaining consideration from nVidia is not paid, 3dfx will have to explore other
options, including filing for bankruptcy. As a result of the contingencies
described above, a contingent receivable and related tax expense on the gain
have not been recorded in the accompanying consolidated statement of net
liabilities in liquidation as of October 31, 2001. The ultimate total of the
value of nVidia stock received by 3dfx, if any, is dependent on the number and
market value of shares received given the conditions described above.

        On December 15, 2000, the board of directors of 3dfx also approved a
plan of dissolution and on March 27, 2001 this plan of dissolution was approved
by 3dfx's shareholders. On March 30, 2001, 3dfx filed a certificate of election
to liquidate, wind up and dissolve with the California Secretary of State's
office. 3dfx is proceeding to wind up its affairs and is no longer operating or
generating revenues in the normal course of business. Accordingly, all of the
activities of 3dfx have been presented on a liquidation basis of accounting.

        3dfx has substantially reduced its costs in order to conserve its
resources. These cost cutting measures include a reduction of a significant
portion of 3dfx's workforce, reduction in office space and other efforts to
reduce non-essential expenses. 3dfx has also been providing manufacturing
services to third parties to help cover the overhead associated with its Juarez,
Mexico manufacturing facility pending the sale or shut-down of that facility.
The sales and costs of sales related to these operations are recorded as other
income and expense on the condensed consolidated statement of discontinued
operations for the period from February 1, 2001 to March 26, 2001 and as
selling, general, and administrative expense from March 27, 2001 to October 31,
2001.

Activities While in Liquidation

        During the nine months ended October 31, 2001, 3dfx disposed of most of
its inventory and other assets held for sale through the asset purchase
agreement with nVidia Sub as well as through sales to other parties. Any
remaining inventory and other assets held for sale have been written down to
their net realizable value, most of which equals zero. As 3dfx is in
liquidation, these remaining assets may be sold. 3dfx believes that any gains on
such sales that may be realized will be immaterial.

        During the nine months ended October 31, 2001, 3dfx terminated
substantially all of its remaining employees and continued to liquidate its
remaining assets, negotiate with third parties for resolutions of various
litigation matters that would be agreeable to all parties involved, and to reach
settlements with its vendors in reduction of its accounts payable, as well as to
reach mutually satisfactory settlements with the lessors to its facilities and
equipment leases. At October 31, 2001, 3dfx had total future lease obligations
of $13.8 million, of which $2.3 million has been accrued. At October 31, 2001,
3dfx was still in negotiations to settle certain remaining leases under which
they have contingent contractual obligations, which range from $0 to $11.5
million and therefore no amounts have been recorded for this contingent
liability. After establishing a reserve for the winding up of its affairs, 3dfx
used the remaining proceeds received from the asset sale to nVidia Sub to pay a
significant portion of its and its subsidiaries' known and determinable debts
and liabilities.

        Changes in net liabilities for the period from March 27, 2001 to October
31, 2001 were a result of selling, general and administrative expenses of $11.1
million, which is comprised of operating expense, accrued expenses and lease
termination expense, partially offset by the forgiveness of liabilities, a
decrease in the deferred tax asset of $35.0 million and the net gain on sale of
assets to nVidia Sub of $1.5 million, which was comprised of the following: (a)
a gain on the sale of inventory and other assets held for sale to nVidia Sub of
$14.3 million, which was comprised of the purchase by nVidia Sub of certain
inventory, fixed assets and intangible assets with net book values of $55.5
million offset by proceeds of $70.0 million and (b) losses of $12.8 million on
sale and impairment of inventory and other assets held for sale.

        3dfx expects to continue to incur certain administrative and other costs
associated with winding up its affairs. Should 3dfx qualify for its final
payment from nVidia Sub, 3dfx believes that it will have sufficient cash to pay
all of its and its subsidiaries' known


                                      -11-


<PAGE>
current and determinable liabilities. However, the amount of unknown or
contingent liabilities cannot be quantified and could decrease or eliminate any
remaining assets available for distribution to 3dfx's shareholders. Further, if
3dfx or its subsidiaries are subject to any contingent liabilities, this could
require that it establish reserves that could delay any distribution to 3dfx
shareholders. Because of the uncertainties as to the precise net realizable
value of 3dfx's assets and the settlement amount of 3dfx's and its subsidiaries'
debts and liabilities, 3dfx cannot at this time determine the timing or amount
of distributions that may be made to its shareholders, if any. Only if there are
assets remaining at the time of 3dfx's dissolution will 3dfx shareholders
receive a distribution of those assets.

Statement of Changes in Net Liabilities in Liquidation

        During the period from March 27, 2001 to April 30, 2001, 3dfx incurred
selling, general and administrative costs of $3.9 million and recorded a
decrease in deferred tax asset of $35.0 million. During this period 3dfx also
incurred a net gain on sale of assets held for sale of $3.2 million, which was
comprised of the following: (a) a gain on the sale of inventory and other assets
held for sale to nVidia Sub of $14.3 million, which was comprised of the
purchase by nVidia Sub of certain inventory, fixed assets and intangible assets
with net book values of $55.5 million offset by proceeds of $70.0 million and
(b) losses of $11.1 million on sale and impairment of inventory and other assets
held for sale.

        During the quarter ended July 31, 2001, 3dfx incurred selling, general
and administrative expenses of $5.9 million, which were comprised of equipment
expense, including current period lease payments and the accrual of certain
future lease payments, personnel expense and the accrual of future anticipated
salary, severance and associated benefit expenses, current period facilities
expenses and current period legal, banking and other professional service
expenses, offset by discounts received from vendors. In addition, 3dfx incurred
an additional $900,000 in losses on the sale of and impairment of assets held
for sale during the quarter ended July 31, 2001. Not included in the accrual of
future expenses were approximately $12.0 million in facilities lease payments on
properties that 3dfx is currently attempting to sublease. In addition, as a
result of the contingencies described above relating to the receipt of the
remaining consideration from Nvidia, the contingent receivable and related tax
expense on the gain resulting from the asset sale have not been recorded in the
accompanying consolidated statement of net liabilities in liquidation as of July
31, 2001.

        During the quarter ended October 31, 2001, 3dfx incurred selling,
general and administrative expenses of $1.3 million, which were comprised of
current period facilities expenses, severance and associated benefit expenses
for employees of STB de Mexico, payment of unaccrued income taxes in the United
Kingdom and lease termination expenses associated with the Company's facility in
Belfast, Northern Ireland, and current period legal, and other professional
service expenses, offset by discounts received from vendors. In addition, 3dfx
incurred an additional $767,000 in losses on the sale and impairment of assets
held for sale during the quarter ended October 31, 2001. Not included in the
accrual of future expenses were approximately $11.5 million in facilities lease
payments on properties that 3dfx is currently attempting to assign. In addition,
as a result of the contingencies described above relating to the receipt of the
remaining consideration from Nvidia, the contingent receivable and related tax
expense on the gain resulting from the asset sale have not been recorded in the
accompanying consolidated statement of net liabilities in liquidation as of
October 31, 2001.

Liquidity and Capital Resources

        As of October 31, 2001, 3dfx had cash, and cash equivalents of $2.6
million.

        On April 18, 2001, 3dfx completed the sale of substantially all of its
assets to nVidia Sub and at the closing received cash in the net amount of $55.0
million pursuant to an asset purchase agreement. After establishing a reserve
for the winding up of its affairs, 3dfx used the remaining proceeds received
from the asset sale to nVidia Sub to pay a significant portion of its and its
subsidiaries' known and determinable debts and liabilities. Subject to 3dfx in
the future satisfying certain additional conditions provided for in the asset
purchase agreement, nVidia Sub is obligated to pay to 3dfx 2,000,000 shares of
common stock of nVidia (taking into account the stock split effected by nVidia
in August 2001) or a combination of up to $25.0 million in cash and a lesser
number of shares of nVidia common stock. 3dfx is also seeking to liquidate its
remaining assets.


                                      -12-


<PAGE>
        3dfx's principal anticipated liquidity requirements involve reaching
settlements with its vendors in reduction of its accounts payable, as well as
reaching mutually satisfactory settlements with the lessors to its facilities
and equipment leases. 3dfx may also seek to assign or sublease its leased
properties. In addition, unknown or contingent liabilities could require
substantial cash resources. Management cannot reasonably estimate the amount of
future obligations at this time. 3dfx is seeking to address each of the
foregoing liquidity requirements, as well as the continuing expenses associated
with the winding up of its business and the overhead associated with its Juarez,
Mexico manufacturing facility, with its remaining cash and other resources.

        Should 3dfx qualify for its final payment from nVidia Sub, 3dfx believes
that it will have sufficient cash to pay all of its and its subsidiaries' known
current and determinable liabilities. However, the amount of unknown or
contingent liabilities cannot be quantified and could decrease or eliminate any
remaining assets. At this time, 3dfx cannot determine if there will be any
assets remaining after paying for, or providing for the payment of, all of its
and its subsidiaries' debts and liabilities. Only if there are assets remaining
after the payment or provision for 3dfx's and its subsidiaries' debts and
liabilities, will 3dfx shareholders receive a distribution of those assets.

RISK FACTORS

        This report contains certain forward-looking statements within the
meaning of the deferral securities laws. 3dfx's actual results and the timing of
certain events could differ greatly from those anticipated in these
forward-looking statements as a result of known and unknown factors, including
the risks faced by 3dfx described below. The risks and uncertainties described
below are not the only ones facing 3dfx. Additional risks and uncertainties not
presently known by 3dfx or that 3dfx does not currently believe are important
may also harm 3dfx's business operations. If any of the following risks actually
occur, 3dfx's business, financial conditions or results of operations could be
seriously harmed. The following factors and other information in this Report
should be considered carefully in evaluating 3dfx and an investment in 3dfx's
common stock.

3DFX CANNOT DETERMINE AT THIS TIME THE AMOUNT OF DISTRIBUTIONS TO ITS
SHAREHOLDERS, OR WHETHER ANY DISTRIBUTIONS WILL BE MADE, BECAUSE THERE ARE A
VARIETY OF FACTORS, SOME OF WHICH ARE OUTSIDE OF 3DFX'S CONTROL, THAT COULD
AFFECT THE ABILITY OF 3DFX TO MAKE DISTRIBUTIONS TO ITS SHAREHOLDERS.

        3dfx cannot determine at this time the amount of or whether there will
be any distributions to its shareholders because that determination depends on a
variety of factors, including, but not limited to, the value of 3dfx's remaining
assets, the amount of 3dfx's and its subsidiaries' known and unknown debts and
liabilities (including those relating to real estate leases) to be paid in the
future, the resolution of pending litigation and other contingent liabilities,
general business and economic conditions and other matters. Examples of
uncertainties that could reduce the value or eliminate distributions to 3dfx
shareholders include the following:

        -       3dfx will be entitled to receive an advance of up to $25.0
                million from nVidia Sub only if the advance will pay 3dfx's and
                its subsidiaries' remaining debts and liabilities. If the
                advance is made, the number of shares of common stock of nVidia
                receivable by 3dfx from the asset sale will be reduced.

        -       Delays in completing the dissolution of 3dfx could result in
                additional expenses and result in no distributions to 3dfx
                shareholders.

        -       The amount of 3dfx's and its subsidiaries' debts and liabilities
                and the estimate of the costs and expenses of 3dfx's
                dissolution, including any resulting tax liabilities. If actual
                debts, liabilities, costs and expenses exceed 3dfx's
                expectations, actual net proceeds will be reduced and may result
                in no distribution to shareholders at all.

        -       If liabilities of 3dfx or its subsidiaries that are unknown or
                contingent later arise or become fixed in amount and must be
                satisfied or reserved for as part of the dissolution.

        -       If the resolution of pending or future litigation results in
                greater than anticipated liabilities or expenses.


                                      -13-


<PAGE>
        -       A decline in the value of nVidia's common stock.

        For the foregoing reasons, there can be no assurance that there will be
any distribution to shareholders, even if the asset sale is completed.

3DFX MAY NOT BE ABLE TO SATISFY ITS DEBT OBLIGATIONS AND MAY FILE OR BE FORCED
INTO BANKRUPTCY BY ITS CREDITORS.

        The proceeds provided by the asset sale to nVidia Sub may not be
sufficient to satisfy all of 3dfx's known and unknown outstanding debts and
liabilities. In the event that the proceeds from the nVidia asset sale are
insufficient to pay its outstanding debts and other liabilities, 3dfx's
creditors will be able to foreclose on any collateral granted by 3dfx to secure
its indebtedness, and may force 3dfx into involuntary bankruptcy. Further, in
the event that there are insufficient proceeds to pay or otherwise provide for
3dfx debts and obligations, there will be no assets available for distribution
to 3dfx's shareholders.

THE TIMING OF THE DISSOLUTION OF 3DFX IS NOT KNOWN AND THEREFORE 3DFX CANNOT
DETERMINE THE TIMING OF ANY DISTRIBUTIONS TO ITS SHAREHOLDERS.

        Several factors affect the timing of 3dfx's ability to dissolve,
including the timing of the sale of 3dfx's remaining assets, 3dfx's ability to
determine the amount of its and its subsidiaries' known and unknown debts and
liabilities and 3dfx's ability to resolve litigation and other contingent
liabilities. Any delay in the dissolution of 3dfx will result in a delay in
making distributions, if any, to 3dfx shareholders.

3DFX IS UNABLE TO SPECIFY THE TYPE OF ASSETS THAT MAY BE DISTRIBUTED TO 3DFX'S
SHAREHOLDERS, IF ANY DISTRIBUTION IS MADE.

        3dfx expects to receive a combination of cash and shares of nVidia
common stock from the asset sale to nVidia Sub. 3dfx also expects to receive
additional proceeds from the sale of its remaining assets, although it may not
be successful in doing so. 3dfx may distribute the shares of nVidia common stock
received by it upon its dissolution directly to its shareholders, or it may sell
these shares in the open market or contribute the shares to a liquidating trust
for the benefit of 3dfx's shareholders. Further, 3dfx may elect to directly
distribute shares of nVidia common stock to some of its shareholders, while
distributing an equivalent per share value in cash to others who would otherwise
be entitled to receive a fractional amount or small number of shares of nVidia
common stock. At this time, 3dfx is unable to provide specifics about the type
of assets that 3dfx's shareholders may receive or what the value of those assets
might be at the time of distribution.

3DFX'S SHAREHOLDERS COULD BE REQUIRED TO RETURN DISTRIBUTIONS IF CONTINGENT
RESERVES ARE INSUFFICIENT TO SATISFY 3DFX'S LIABILITIES.

        If 3dfx (or a liquidating trust to which 3dfx's assets are transferred)
makes a distribution to its shareholders but maintains inadequate reserves for
the payment of its and its subsidiaries debts and liabilities, each shareholder
could be required to return any additional amounts owed, up to the amount of the
total distribution that the shareholder received. A distribution to 3dfx's
shareholders could be delayed or diminished due to the need to make adequate
provisions for 3dfx's and its subsidiaries' debt and liabilities, including
contingent liabilities associated with lawsuits and threatened claims against
3dfx and its subsidiaries.

        The determination of whether a distribution is made and the amount of
the distribution depends on 3dfx's ability to pay, or provide for the payment
of, its and its subsidiaries' debts and liabilities, including contingent
liabilities related to lawsuits and threatened claims. If these contingent
liabilities later arise or become fixed in amount, 3dfx will be required to pay,
or provide for the payment of, such liabilities from any remaining assets. This
could result in the delay of distributions to 3dfx shareholders and the
substantial reduction or elimination of any distributions.

        If 3dfx's or its subsidiaries' creditors believe that 3dfx has not
adequately reserved assets for the payment of its or its subsidiaries' debts and
liabilities, these creditors may be able to obtain from a court and injunction
that prohibits 3dfx from making distributions to its shareholders. This action
could delay or substantially diminish the distributions to be made to 3dfx's
shareholders or holders of beneficial interests of the liquidating trust, as the
case may be.


                                      -14-


<PAGE>
3DFX MAY NOT BE ABLE TO DISPOSE OF ITS REMAINING ASSETS FOR VALUES EQUALING OR
EXCEEDING THOSE CURRENTLY DESIRED BY 3DFX.

        Many factors affect the prices that 3dfx may receive for 3dfx's
remaining assets, including availability of buyers for these assets and
perceived quality of these assets. Many of these factors are beyond 3dfx's
control. As a result of the foregoing, 3dfx may not be able to sell or otherwise
dispose of its assets for prices equaling or exceeding those desired by 3dfx or
currently offered in the asset sale.

3DFX'S BOARD OF DIRECTORS MAY AMEND THE PLAN OF DISSOLUTION.

        3dfx's board of directors and shareholders have adopted a plan of
dissolution for the liquidation, winding up and dissolution of 3dfx. 3dfx's
board of directors has reserved the right, in its sole discretion, to amend the
plan of dissolution unless it determines that the amendment would materially and
adversely affect 3dfx's shareholders' interests.

SINCE A MAJORITY OF 3DFX'S SHAREHOLDERS HAVE APPROVED OF THE DISSOLUTION OF
3DFX, SALES OF THE REMAINING ASSETS WOULD NOT BE SUBJECT TO SHAREHOLDER
APPROVAL.

        Since a majority of 3dfx's shareholders have approved of the dissolution
of 3dfx, the 3dfx board of directors has broad authority to sell any or all of
the remaining assets of 3dfx on such terms as the board of directors determines
advisable or appropriate, even if those terms may not be acceptable to 3dfx
shareholders. 3dfx shareholders will not have a subsequent opportunity to vote
on any disposition of 3dfx's remaining assets.

3DFX'S COMMON STOCK HAS BEEN DELISTED FROM THE NASDAQ NATIONAL MARKET EFFECTIVE
MAY 16, 2001.

        As a result of the decline in the trading price of 3dfx's common stock,
3dfx's common was delisted effective as of the opening of business on May 16,
2001. 3dfx's common stock is currently traded in over-the-counter bulletin board
of the National Association of Securities Dealers, Inc. The delisting of 3dfx's
common stock means that, among other things, fewer investors have access to
trade 3dfx's common stock, which may reduce demand for the stock. These factors
may adversely affect 3dfx's common stock price.

ONCE 3DFX IS DISSOLVED OR ALL OF ITS ASSETS ARE TRANSFERRED TO A LIQUIDATING
TRUST, IT WILL CLOSE ITS STOCK TRANSFER BOOKS AND NO TRANSFER OF 3DFX'S COMMON
STOCK WILL BE RECORDED.

        Once 3dfx is dissolved or all of its assets are transferred to a
liquidating trust, it will close its stock transfer books and no transfer of
3dfx's common stock will be recorded. Thereafter, certificates representing 3dfx
common stock will not be assignable or transferable on 3dfx's books except by
will, intestate succession or operation of law. The equity interests of all of
3dfx's shareholders will be fixed on the basis of their respective stock
holdings at the close of business on the final record date for the distribution
of all remaining assets of 3dfx, and after the final record date, any
distributions made by 3dfx will be made solely to the shareholders of record on
such date, except as may be necessary to reflect subsequent transfers recorded
on 3dfx's books as may be necessary to reflect subsequent transfers of 3dfx's
common stock as a result of any assignments by will, intestate succession or
operation of law. For any other trades after the final record date, the seller
and purchaser of 3dfx's stock will need to negotiate and rely on contractual
obligations between themselves with respect to the right to a liquidating
distribution arising from ownership of 3dfx's common stock.

3DFX IS AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO ITS STOCK PRICE
VOLATILITY.

        Historically, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. 3dfx may be the target of litigation like this. Securities
litigation would result in substantial costs and divert management's attention
and resources, which would seriously harm 3dfx's ability to complete its
dissolution and may reduce or eliminate the assets available for distribution to
3dfx shareholders.

3DFX MAY BE SUBJECT TO CLAIMS OF FRAUDULENT CONVEYANCE BY 3DFX'S CREDITORS.

        3dfx has incurred substantial indebtedness. Under federal and state
fraudulent conveyance statutes in a bankruptcy, reorganization or rehabilitation
case or similar proceeding or a lawsuit by unpaid creditors of 3dfx, under
certain circumstances, such court could void the asset sale to nVidia Sub or the
sale of its remaining assets and/or take other action


                                      -15-


<PAGE>
detrimental to 3dfx and its shareholders. These circumstances include the
findings that, at the time 3dfx consummated the asset sale, (i) the assets were
sold to hinder, delay or defraud current or future creditors or (ii) (A) 3dfx
received less than reasonably equivalent value or fair consideration for its
assets and (B) 3dfx, (1) was insolvent or was rendered insolvent by reason of an
asset sale, (2) was engaged, or about to engage, in a business or transaction
for which its assets constituted unreasonably small capital, (3) intended to
incur, or believed that it would incur, debts beyond its ability to pay as such
debts matured (as all of the foregoing terms are defined in or interpreted under
such fraudulent conveyance statutes) or (4) was a defendant in an action for
money damages, or had a judgment for money damages docketed against it (if, in
either case, after final judgment, the judgment is unsatisfied).

        The measure of insolvency for purposes of the foregoing considerations
will vary depending upon the federal or local law that is being applied in any
such proceeding. Generally, however, 3dfx would be considered insolvent if, at
the time it consummated an asset sale, either (i) the fair market value (or fair
saleable value) of its assets is less than the amount required to pay its total
existing debts and liabilities (including the probable liability on contingent
liabilities) as they become absolute and mature or (ii) it is incurring debts
beyond its ability to pay as such debts mature.

3DFX MAY BE UNABLE TO NEGOTIATE SETTLEMENTS WITH RESPECT TO ITS REMAINING
LIABILITIES.

        3dfx is currently in the process of negotiating settlements with respect
to its and its subsidiaries' remaining debts and liabilities which include
property leases, contracts and trade payables. If 3dfx is unable to successfully
negotiate satisfactory resolutions of these obligations, it will have less or no
cash proceeds to distribute to its shareholders.

3DFX WILL CONTINUE TO INCUR THE EXPENSE OF COMPLYING WITH REPORTING REQUIREMENTS
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT").

        3dfx is obligated to comply with applicable reporting requirements of
the Exchange Act, even though compliance with such reporting requirements is
economically burdensome. The Exchange Act provides for an exemption which allows
an issuer to terminate its reporting obligations under the Exchange Act if it
has less than 300 record holders or less than 500 record holders and its total
assets have not exceeded $10.0 million on the last day of each of the issuer's
most recent three fiscal years. At this time, 3dfx has approximately 480 record
holders and has had in excess of $10.0 million in total assets for the last
three fiscal years. As such, 3dfx is unable to terminate its reporting
obligations. 3dfx cannot predict if, or when, it will meet the requirements for
the exemption. The expenses for the preparation and filing of periodic reports
will reduce the cash available for distribution to 3dfx shareholders.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK


        3dfx's cash equivalents are exposed to financial market risks due to
fluctuations and interest rates, which may affect interest income. Due to the
short term nature of 3dfx's investment portfolio, 3dfx would not expect
operating results or cash flows to be affected to any significant degree by the
effect of a sudden change in market interest rates. 3dfx does not use its
investment portfolio for trading or other speculative purposes.


                                      -16-


<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

        On December 21, 2000, CagEnt Technologies Inc. filed suit against 3dfx
in the Northern California District Federal Court. The complaint alleges patent
infringement relating to CagEnt's patent no. 5,856,829. The complaint sought a
declaratory judgment of infringement, injunctive relief enjoining future
infringement and money damages caused by the alleged infringement, together with
pre-judgment and post-judgment interest, attorneys' fees and cost of suit. On
August 2, 2001, 3dfx reached a settlement with CagEnt, under which CagEnt and
3dfx agreed to release all claims against each other. 3dfx did not make or agree
to make any payment to CagEnt as part of the settlement. The settlement of
CagEnt's claim will not affect the contemplated liquidation and winding up of
3dfx's business pursuant to the 3dfx plan of dissolution.

        In February 2000 MCI Worldcom, Inc. filed a suit against STB Systems,
Inc., a wholly owned subsidiary of 3dfx, in the 192nd District Court in Dallas
County, Texas. The complaint involves a dispute over the amount owed by STB
Systems, Inc. for services rendered by MCI Worldcom, Inc.

        3dfx is also a party to various legal proceedings involving collection
matters and other matters against it. 3dfx is currently seeking resolutions that
are mutually acceptable to the parties involved in each of these matters.
However, there is no assurance that resolutions will be achieved. Although the
amount of any liability that could arise with respect to these proceedings
cannot be predicted accurately, 3dfx believes that any liability that might
result from such claims will not have a material adverse effect on its financial
position.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

        None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None

ITEM 5. OTHER INFORMATION

        None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a) Exhibits

               None

        (b) Reports on Form 8-K

                (i)     Current Report on Form 8-K filed on August 3, 2001
                        disclosing the settlement of the lawsuit between 3dfx
                        and CagEnt Technologies, Inc. on August 2, 2001.


                                      -17-


<PAGE>
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 thereunto duly authorized.

Dated: December 14, 2001

                                                3DFX INTERACTIVE, INC.
                                                (Registrant)

                                                By: /s/ RICHARD A. HEDDLESON
                                                -----------------------------
                                                Richard A. Heddleson
                                                Chief Financial Officer
                                                (Principal Financial Officer
                                                and Duly Authorized Officer)



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