<PAGE>   1
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                               -------------------
                                    FORM 10-Q
                              --------------------



(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2000

                                       OR

[x] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

                        COMMISSION FILE NUMBER: 333-83665

                                   SAGE, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                 <C>
                DELAWARE                                 77-0501710
    (STATE OR OTHER JURISDICTION OF                   (I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)                 IDENTIFICATION NO.)

   1601 MCCARTHY BOULEVARD, MILPITAS,                      95035
               CALIFORNIA
    (ADDRESS OF PRINCIPAL EXECUTIVE                      (ZIP CODE)
                OFFICES)
</TABLE>

                                 (408) 383-5300
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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

As of January 31, 2001, there were 13,891,019 shares of the Registrant's common
stock, $0.01 par value per share, outstanding.

================================================================================


<PAGE>   2

                                    SAGE INC

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                         PAGE
                                                                                                         ----
<S>                                                                                                      <C>
                          PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
        Condensed Consolidated Balance Sheets as of December 31, 2000 and March 31, 2000 (unaudited)       3

        Condensed Consolidated Statements of Operations for the three and nine months ended
        December 31, 2000 and 1999 (unaudited)                                                             4

        Condensed Consolidated Statements of Cash Flows for the nine months ended December
        31, 2000 and 1999 (unaudited)                                                                      5

        Condensed Consolidated Statement of Stockholders' Equity for the nine months ended
        December 31, 2000 (unaudited)                                                                      6

        Notes to Condensed Consolidated Financial Statements (unaudited)                                   7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations              9

Item 3. Quantitative and Qualitative Disclosures About Market Risks                                       13

                         PART II. OTHER INFORMATION

Item 1. Legal Proceedings                                                                                 24

Item 2. Changes in Securities and Use of Proceeds                                                         24

Item 3. Defaults Upon Senior Securities                                                                   24

Item 4. Submission of Matters to a Vote of Security Holders                                               24

Item 5. Other Information                                                                                 24

Item 6. Exhibits and Reports on Form 8-K                                                                  24
</TABLE>


                                       2
<PAGE>   3

                                            PART I
ITEM 1. FINANCIAL STATEMENTS

                                   SAGE, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                            (IN THOUSANDS, UNAUDITED)

<TABLE>
<CAPTION>
                                     ASSETS

                                                                           December 31,     March 31,
                                                                              2000            2000
                                                                           -----------      ---------
<S>                                                                         <C>             <C>
Current assets:
        Cash and cash equivalents                                           $  46,919       $  38,936
        Accounts receivable, net of allowances                                  6,835           3,398
        Inventory                                                               3,971           1,132
        Prepaids and other assets                                               1,667             765
                                                                            ---------       ---------
            Total current assets                                               59,392          44,231

Property and equipment, net of depreciation                                     4,476           1,180
Other non-current assets                                                        1,866              --
Goodwill and other intangible assets, net of amortization                     107,929              --
                                                                            ---------       ---------
                           Total assets                                     $ 173,663       $  45,411
                                                                            =========       =========


                      LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:
        Accounts payable                                                    $   2,791       $   1,755
        Accrued expenses and other liabilities                                  6,017           2,379
                                                                            ---------       ---------
                             Total current liabilities                          8,808           4,134
Commitments
Stockholders' equity (deficit):
       Common stock, $0.01 par value; 50,000,000 shares
            authorized; 13,888,000 and 10,468,000 issued and
            outstanding                                                           139             105
       Additional paid-in capital                                             200,367          54,889
       Notes receivable from stockholders                                        (558)            (75)
       Deferred compensation related to stock
            options and restricted stock                                         (162)           (372)
       Accumulated deficit                                                    (34,931)        (13,270)
                                                                            ---------       ---------
                           Total stockholders' equity                         164,855          41,277
                                                                            ---------       ---------
                            Total liabilities and stockholders' equity      $ 173,663       $  45,411
                                                                            =========       =========
</TABLE>

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


                                       3
<PAGE>   4

                                   SAGE, INC.
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                (IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)



<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED             NINE MONTHS ENDED
                                                                       DECEMBER 31,                  DECEMBER 31,
                                                                 -----------------------       -----------------------
                                                                   2000           1999           2000           1999
                                                                 --------       --------       --------       --------
<S>                                                              <C>            <C>            <C>            <C>
Revenue                                                          $  9,652       $  4,827       $ 24,726       $ 12,287

Cost of revenue                                                     5,175          2,612         12,590          7,149
Amortization of intangibles charged to cost of revenue                250             --            563             --
                                                                 --------       --------       --------       --------

Gross profit                                                        4,227          2,215         11,573          5,138
                                                                 --------       --------       --------       --------

Operating expenses:

             Research and development                               2,016          1,039          5,708          2,844

             Charge for in-process technology                          --             --          7,200          2,500

             Selling, general and administration                    3,134          1,722          8,869          4,076

             Amortization of goodwill and other intangibles         5,937             --         13,375             --

             Stock compensation (Note 1)                               58            147            210            514
                                                                 --------       --------       --------       --------

                          Total operating expenses                 11,145          2,908         35,362          9,934
                                                                 --------       --------       --------       --------

Loss from operations                                               (6,918)          (693)       (23,789)        (4,796)

Interest and other income (expense), net                              591            266          2,128            349
                                                                 --------       --------       --------       --------

Net loss                                                         $ (6,327)      $   (427)      $(21,661)      $ (4,447)
                                                                 ========       ========       ========       ========

Number of primary and dilutive shares (Note 2)                     13,752          6,642         12,492          6,547
                                                                 ========       ========       ========       ========

Primary earnings per share  (Note 3)                             $  (0.46)      $  (0.06)      $  (1.73)      $  (0.68)
                                                                 ========       ========       ========       ========
</TABLE>

<TABLE>
<S>                                                             <C>             <C>            <C>            <C>
NOTE 1: Stock-based compensation charges:
             Research and development                            $     23       $     55       $     82       $    211
             Selling, general and administration                       35             92            128            303
                                                                 --------       --------       --------       --------
                 Total                                           $     58       $    147       $    210       $    514
                                                                 ========       ========       ========       ========
</TABLE>

NOTE 2: Fully diluted earnings per share are not reported as the results would
be anti-dilutive.

NOTE 3: Includes results of Faroudja for the period from June 8, 2000 to
December 31, 2000.


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

                                       4
<PAGE>   5

                                   SAGE, INC.
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                            (IN THOUSANDS, UNAUDITED)

<TABLE>
<CAPTION>
                                                                                NINE MONTHS ENDED DECEMBER 31,
                                                                                ------------------------------
                                                                                  2000                1999
                                                                                ---------           ---------
<S>                                                                             <C>                 <C>
Cash flows from operating activities:
    Net loss                                                                    $ (21,661)          $  (4,447)
    Adjustments to reconcile net loss to net
       cash used in operating activities:
          Charge for in-process technology                                          7,200               2,500
          Depreciation                                                                816                 319
          Amortization of goodwill and other intangibles                           13,938                  --
          Stock compensation                                                          210                 514
          Changes in assets and liabilities:
             Accounts receivable                                                   (1,716)             (1,235)
             Inventories                                                           (1,210)               (506)
             Prepaid expenses and other assets                                       (713)               (355)
             Accounts payable                                                         532               1,111
             Accrued expenses and other liabilities                                (3,105)                371
                                                                                ---------           ---------
                Net cash used in operating activities                              (5,709)             (1,728)
                                                                                ---------           ---------

Cash flows from investing activities:
    Acquisition of property and equipment                                          (3,259)             (1,031)
    Payment of deposits                                                            (1,866)                 --
    Net cash acquired with Faroudja                                                18,667                  --
                                                                                ---------           ---------
                Net cash provided by (used in) investing activities                13,542              (1,031)
                                                                                ---------           ---------

Cash flow from financing activities:
          Shareholder receivables                                                    (483)                 --
          Proceeds from issuance of common stock upon
             exercise of stock options                                                633                  85
          Net proceeds from issuance of common stock
             in connection with license agreement                                      --                 500
          Net proceeds from issuance of common stock
             in connection of Initial Public Offering                                  --              37,248
          Net proceeds from issuance of preferred stock                                --               2,937
                                                                                ---------           ---------
                Net cash provided by financing activities                             150              40,770
                                                                                ---------           ---------

Net increase in cash and cash equivalents                                           7,983              38,011

                                                                                ---------           ---------
Cash and cash equivalents at beginning of period                                   38,936               2,473
                                                                                ---------           ---------

Cash and cash equivalents at end of period                                      $  46,919           $  40,484
                                                                                =========           =========

Supplemental disclosure of cash flow information:
    Interest paid                                                               $       2           $       5
                                                                                =========           =========
Non-cash investing and financing activities:
    Issuance of common and preferred stock in lieu
       of debt repayment                                                        $      --           $      --
                                                                                =========           =========
    Issuance of common stock in connection with
       acquisition of Faroudja                                                  $ 144,879           $      --
                                                                                =========           =========
</TABLE>



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


                                       5
<PAGE>   6

                                   SAGE, INC.
            CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                            (IN THOUSANDS, UNAUDITED)


<TABLE>
<CAPTION>
                                                                                                Deferred
                                                                                   Notes      Compensation
                                                Common Stock        Additional   Receivable    Related to
                                           ----------------------     Paid-in       from          Stock     Accumulated
                                            Shares        Amount      Capital   Stockholders     Options       Deficit       Total
                                           ---------    ---------    ---------  ------------  ------------  -----------   ---------
<S>                                        <C>          <C>          <C>        <C>           <C>           <C>           <C>
Balance at March 31, 2000 ..............      10,468    $     105    $  54,889   $     (75)     $    (372)   $ (13,270)   $  41,277
Issuance  of  common stock
  upon exercise of stock options .......         239            3          630          --             --           --          633
Issuance of common stock in
  connection with acquisition
     of Faroudja .......................       3,181           31      144,848          --             --           --      144,879
Issuance of promissory note ............                                              (500)                                    (500)
Repayment of notes receivable ..........          --           --           --          17             --           --           17
Amortization of deferred
  stock based compensation .............          --           --           --          --            210           --          210
Net loss ...............................          --           --           --          --             --      (21,661)     (21,661)

Balance at December 31, 2000 ...........      13,888    $     139    $ 200,367   $    (558)     $    (162)   $ (34,931)   $ 164,855
                                           =========    =========    =========   =========      =========    =========    =========
</TABLE>




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


                                       6
<PAGE>   7

                                   SAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. BASIS OF PRESENTATION

        The condensed consolidated financial statements included herein have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and note disclosures
normally included in the annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted for
interim financial reporting. These condensed consolidated financial statements
should be read in conjunction with our financial statements and notes thereto
for the three years ended March 31, 2000 that are included in our S-1
Registration Statement filing with the Securities and Exchange Commission. We
believe that the accompanying financial statements reflect all adjustments,
consisting solely of normal, recurring adjustments, that are necessary for fair
presentation of the results of the interim periods presented. The results of
operations presented for the periods ended December 31, 2000 are not necessarily
indicative of the results to be expected for the full fiscal year. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates.

2. EARNINGS PER SHARE

        Primary earnings per share are computed by dividing the net loss for the
period by the weighted average number of common shares outstanding during that
period. Diluted earnings per share have not been calculated for all periods
since the result would be anti-dilutive. All share and per share amounts have
been adjusted in all periods presented to reflect a three-for-one reverse split
effective October 1, 1999.

3. MERGER WITH FAROUDJA

               On February 18, 2000 Sage and Faroudja, Inc. agreed to merge in a
transaction accounted for as a purchase. The total purchase price of $154.7
million included the issuance of Sage Common Stock valued at $133.9 million, the
assumption of Faroudja stock options and warrants valued at $16.8 million and
estimated direct transaction costs of $4.0 million. On June 7, 2000,
shareholders of Sage and Faroudja approved the Merger Agreement between the
companies, under which shareholders of Faroudja received 0.285 shares of Sage
Common Stock for every share held. Based on the value of Sage stock on June 7,
2000 the purchase price of Faroudja would have been approximately $64 million.
In compliance with US GAAP, Sage is required to value the transaction at $154.7
million based on the price of Sage stock on the date the proposal was originally
announced.

        The allocation of purchase price, based in part upon an independent
appraisal was as follows (in thousands):

<TABLE>
<CAPTION>
                                                           ANNUAL        USEFUL
                                             AMOUNT     AMORTIZATION      LIFE
                                            --------    ------------    --------
<S>                                         <C>         <C>             <C>
Purchase Price Allocation:
   Tangible net assets                      $ 25,652      $     --            --
   Intangible assets acquired:
    Developed technology                       5,000         1,000       5 years
    Trademark and trade name                   2,500           500       5 years
    Assembled workforce                          940           188       5 years
    Customer list                              2,800           933       3 years
    Goodwill                                 110,626        22,124       5 years
   In-process research and development         7,200            --            --
                                            --------      --------
Total purchase price                        $154,718      $ 24,745
                                            --------      --------
</TABLE>

        Based on the results of this valuation, Sage reported a charge of $7.2
million for the write off of in-process technology, and approximately $13,9
million for amortization of intangibles for the nine months ended December 31,
2000. The table below reflects


                                       7
<PAGE>   8

the unaudited pro-forma combined results of Sage and Faroudja, as if the merger
had taken place at the beginning of the nine months ended December 31, 2000 and
1999. The pro-forma information includes certain adjustments including non-cash
charges for amortization of intangibles amounting to $18.6 million for the nine
months ended December 31, 2000 and 1999, respectively. Both periods exclude a
charge of $7.2 million for in-process technology. The pro-forma information does
not necessarily reflect the actual results that would have occurred nor is it
necessarily indicative of future results of operations of the combined
companies.

<TABLE>
<CAPTION>
                                              NINE MONTHS ENDED DECEMBER 31,
                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                          -------------------------------------
                                            2000                         1999
                                          --------                     --------
<S>                                       <C>                          <C>
Net revenue                               $ 26,393                     $ 23,328
Net loss                                   (22,588)                     (21,129)
Net loss per share:
    Basic and diluted                     $  (1.65)                    $  (2.83)
Weighted average shares outstanding:
    Primary and diluted                     13,662                        7,454
</TABLE>


4. INVENTORIES

        Inventories consisted of the following (in thousands):

<TABLE>
<CAPTION>
                 DECEMBER 31, 2000     MARCH 31, 2000
                 -----------------     --------------
<S>              <C>                   <C>
Raw materials        $1,330                $  306
Work-in-process       1,038                    --
Finished goods        1,603                   826
                     ------                ------
Total                $3,971                $1,132
                     ======                ======
</TABLE>


5. SEGMENT INFORMATION

        Sage operates in one reportable segment, which is the development and
sale of display processor integrated circuits ("ICs") and related circuit
boards, systems, and accompanying software to support the display industry.

        Sage has operations in the United States and India. The India operation
was established in January 1996. The results of the India operation for the
three and nine months ended December 31, 2000 and 1999 and its total assets as
of the respective dates were not material to Sage's consolidated financial
statements.


                                       8
<PAGE>   9

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

        You should read the following discussion in conjunction with our
consolidated financial statements and the notes thereto included in the
prospectus issued in conjunction with our Initial Public Offering in November
1999. The results described below are not necessarily indicative of the results
to be expected in any future period. Certain statements in this discussion and
analysis are forward-looking statements within the meaning of the federal
securities laws. These forward-looking statements are subject to certain risk
and uncertainties that could cause actual results to differ materially from
historical results or our predictions.

OVERVIEW

        We design, develop and market high performance digital display
processors used for digital displays and video processing. Flat panel displays
and other emerging digital display devices have substantial advantages over
their traditional analog counterparts, and markets for these products are
beginning to grow rapidly. Display signals are characterized by several
important attributes: resolution, frame refresh rate, scanning format and color
depth. Combinations of these characteristics are called modes, and there are
over 100 different modes used today to display images on PCs and televisions.
These modes must be recognized and processed to produce a high quality image on
a display. Display manufacturers seek display processing solutions that can
function effectively with the large number of existing and emerging signal
modes, ensure the compatibility of new displays with the large installed base of
PCs and provide consumers with plug and play capability.

        We offer state-of-the-art digital display processors that provide,
highly integrated analog-to-digital conversion, signal reformatting and color
processing capabilities. Our solutions are compatible with all commercially
available display signal modes and display types and are designed with a common
architecture, configurable software and modular components that can be easily
and rapidly incorporated into digital display devices. We sell our processing
solutions to leading display manufacturers, including NEC, Toshiba, Fujitsu,
Sanyo and Samsung.

        Since our inception, we have focused primarily on the design and sale of
high performance display processor ICs and will continue to do so as this is a
high-growth volume market serving major mass-market manufacturers of displays
and televisions. However, we also have systems business supplying system
solutions to other market channels, and as of the December 2000 quarter, such
system sales actually represented 49.9% of our total revenue. These systems
comprise board level products, each including a display processor IC, which we
sell into the embedded display market through a network of distributors and OEM
customers, and a box level product which we sell into the home theater market
through a wide network of dealers and installers. We expect our IC business will
grow rapidly, while our system business remains static or even declines over
time resulting in ICs accounting for a growing majority of total revenue over
the next few years. Because board level products typically have lower margins
than ICs we expect this to have a beneficial impact on our gross margin. Even
though system activities are not our primary focus, we intend to continue to
offer products into the markets for the foreseeable future. Our board level
products provide a level of systems expertise that enables our major customers
to develop and customize their product offerings. Our box products, sold under
Faroudja's brand name, provide a powerful high-quality marketing umbrella which
serves to shelter and promote a quality image for all out video processing
products, including video processing ICs that may be developed and offered to
the market.

        We recognize revenue at the time we ship products to our customers who
generally have a short lead-time and maintain relatively limited inventory. In
the case of systems products sold through distributors who may have limited
return rights, we do not recognize revenue until we have received evidence that
they have sold the inventory to their end customer.

        Since November 1996, we have introduced a succession of new display
processor chips, starting with the Cheetah family and now featuring the Jaguar
family. The process technology of these chips has progressed from a .6 micron,
through .5 and .35 micron to .25 micron and we are currently planning our first
 .18-micron products. Our IC product development road map is driven by (i)
introduction of increasingly lower geometry levels of process technology to
reduce cost and improve performance; (ii) increasing levels of feature
integration such as integrated analog to digital conversion ("ADC") and digital
receiver so as to lower total system cost to our customer while increasing our
average selling price; (iii) addition of incremental features such as AutoSet
which simplifies end user calibration, Active Color Management which allows a
manufacturer to ensure consistent color appearance on panels sourced from
different vendors, and Picture in Picture (PiP) Auto detect to locate and
optimize the color and brightness of video window and background screen, and
(iv) customization of our various technology and IP cores to produce a wider
range of ICs with optimized price and performance levels for different market
segments. Whereas at the beginning of fiscal 1999 we offered only one IC, the


                                       9
<PAGE>   10

Cheetah 2, we now offer a series of eight different ICs, targeted at analog or
digital interface monitors, low or high resolution screens, and monitors (PC) or
consumer products (televisions, DVDs and projectors).

        Currently, we produce packaged, assembled and tested semiconductor
products. However, we intend to assume greater responsibility over this process
for our next generations of display processors by separately subcontracting for
the production of wafers, the assembly of the completed semiconductor, and their
testing. While this transition to a new manufacturing model will expose us to
greater responsibilities for semiconductor yields and the coordination of the
assembly and testing process, we believe that our gross margins should improve
and that the transition should result in our having greater control over the
manufacturing process.

        In November 1999, Sage completed an initial public offering of 3,450,000
shares of Common Stock at an initial offering price of $12.00 per share, raising
$37.2 million, net of underwriting commission and related expenses.

        On February 18, 2000 Sage and Faroudja agreed to merge in a transaction
that was accounted for as a purchase. Faroudja is a developer and provider of
home theater systems that incorporate their proprietary decoding, de-interlacing
and video enhancement technologies. The total purchase price of $154.7 million
included the issuance of Sage Common Stock valued at $133.9 million, the
assumption of Faroudja stock options and warrants valued at $16.8 million, and
direct transaction costs of approximately $4.0 million. On June 7, 2000,
shareholders of Sage and Faroudja approved the Merger Agreement between the
companies, under which shareholders of Faroudja received 0.285 shares of Sage
Common Stock for every share held. Based on the value of Sage stock on June 7,
2000 the purchase price of Faroudja would have been approximately $64 million.
In compliance with US GAAP, Sage is required to value the transaction at $154.7
million based on the price of Sage stock on the date the proposal was originally
announced. As a result of the products and technology acquired in this
transaction, we have significantly strengthened our position in the consumer
display market with system level products targeted at the home theater and
broadcast markets, and have already developed the first of a new range of IC
products to serve the growing television, DVD and internet appliance markets.

RESULTS OF OPERATIONS

        The following tables set forth, for the periods indicated, certain
condensed consolidated statement of operations data reflected as a percentage of
revenues. Our results of operations are reported as a single business segment.

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED          NINE MONTHS ENDED
                                                 -------------------------   -------------------------
                                                 DECEMBER 31,  DECEMBER 31,  DECEMBER 31,  DECEMBER 31,
                                                    2000          1999          2000          1999
                                                 -----------   -----------   -----------   -----------
<S>                                              <C>           <C>           <C>           <C>
Revenues ....................................       100.0%        100.0%        100.0%        100.0%
Cost of revenues ............................        56.2          54.1          53.2          58.2
                                                   ------        ------        ------        ------
Gross margin (loss) .........................        43.8          45.9          46.8          41.8
Operating expenses:
    Research and development ................        20.9          21.5          23.1          23.1
    Charge for in-process technology ........          --            --          29.1          20.3
    Selling, general and administration .....        32.5          35.7          35.9          33.2
    Amortization of intangibles .............        61.5            --          54.1            --
    Stock based compensation ................         0.6           3.0           0.8           4.2
                                                   ------        ------        ------        ------
         Total operating expenses ...........       115.5          60.2         143.0          80.8
                                                   ------        ------        ------        ------
Loss from operations ........................       (71.7)        (14.3)        (96.2)        (39.0)
Interest income (expense), net ..............         6.1           5.5           8.6           2.8
                                                   ------        ------        ------        ------
Net loss ....................................       (65.6)%        (8.8)%       (87.6)%       (36.2)%
                                                   ======        ======        ======        ======
</TABLE>


                                       10
<PAGE>   11

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999

        Revenues. Our total revenues were $9.7 million and $4.8 million in the
three months ended December 31, 2000 and 1999, respectively, representing an
increase of about 100.0%. Revenues from our digital display processor IC product
line increased by 55.0% between the December 2000 and 1999 quarters as a result
of additional customer design wins and the addition of new products to our IC
product range. Unit sales of ICs increased by 23.0% in the December 2000 quarter
while ASPs declined by about 5.6%. This resulted in increases in IC sales
revenues of only 16.1% in the December 2000 quarter compared to 46.3% in the
December 1999 quarter. This decline is primarily the result of the changing of
product mix and the erosion of the selling price of the Jaguar D chip. We
continue to expect sales of digital display processor IC products to grow faster
than the home theater, circuit board and other products in future periods.
Revenues from one customer, Toshiba, accounted for 15.0% of total revenues for
the three months ended December 31, 2000.

        Gross margin. Our gross margin was 43.8% and 45.9% for the three months
ended December 31, 2000 and 1999, respectively. The decrease in gross margin for
the three months ended December 31, 2000 compared to the three months ended
December 31, 1999 was due to the decline in the ASP of our Jaguar D chip to meet
competitive pressures in the Analog interface market, and increased costs of the
Cheetah 4 chip as a result of increases in foundry price.

        Research and development. Our research and development expenses were
$2.0 million and $1.0 million for the three months ended December 31, 2000 and
1999, respectively. Research and development expenses represented 20.9% and
21.5% of revenues for the three months ended December 31, 2000 and 1999,
respectively. Our research and development expenses consist primarily of
compensation and personnel related expenses and costs for purchased materials,
designs and tooling which can fluctuate significantly from period to period as a
result of our product development cycles. The increase in spending on purchased
materials, designs and tooling is attributable to the development of the new
range of Jaguar and FLI products that began to be introduced this quarter. We
expect similar increases in future quarterly research and development expenses
as we increase product development efforts in connection with our next
generation of semiconductors, and focus on developing the Faroudja technology.

        Selling, general and administration. Selling, general and administration
expenses were $3.1 million and $1.7 million for the three months ended December
31, 2000 and 1999, respectively. The increase in selling, general and
administration expenses was largely the result of increased promotional
activities in support of new Jaguar product developments and introductions, and
the inclusion of Faroudja activities. Our selling, general and administration
expenses consist primarily of compensation and personnel related expenses and
commissions paid to independent sales representatives. The compensation and
personnel related expenses increased by 5.9% to $1.5 million in the December
2000 quarter compared to 22.5% in the three months ended December 31, 1999. The
increase in the December 2000 quarter partially reflects increases in headcount
following the move from San Jose, CA to Milpitas, CA. As a percentage of
revenues, our selling, general and administration expenses declined to 32.3% of
revenues for the three months ended December 31, 2000 as compared to 35.7% of
revenues for the three months ended December 31, 1999.

        Amortization of intangibles. As a result of the purchase transaction
noted above, we recorded $121.9 million of intangibles, which will be amortized
over the expected useful lives of between three and five years. In the
three-month period ended December 31, 2000, we amortized approximately $6.2
million, and expect to amortize $6.2 million per quarter in subsequent periods.

        Stock compensation. Stock compensation expenses amounted to $58,000 and
$147,000, for the three months ended December 31, 2000 and 1999, respectively.
Deferred compensation, representing the difference between the deemed fair
market value of our common stock on the date of grant and the exercise price of
stock options on the date of grant, is amortized on an accelerated basis as the
options vest.

        Interest and other income and (expense), net. Net interest and other
income amounted to $591,000 for the three months ended December 31, 2000
compared to $266,000 in the three months ended December 31, 1999. This increase
results from the investment of the proceeds of the IPO in November 1999 into
interest bearing accounts.

        Provision for income taxes. We incurred operating losses for the three
months ended December 31, 2000 and 1999 and therefore had no provision for
income tax in either period. As of March 31, 2000, we had $6.1 million in net
operating losses, which are available to offset future taxable income. If not
used, the net operating losses expire between 2010 and 2020.

                                       11
<PAGE>   12

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999

        Revenues. Our total revenues were $24.7 million and $12.3 million in the
nine months ended December 31, 2000 and 1999, respectively, representing an
increase of 101.2%. Unit sales of ICs increased by 148.9% in the nine months
ended December 31, 2000. This, along with lower ASPs resulted in increases in IC
sales revenues of only 93.4% in the December 2000 quarter compared to 339.9% for
the nine months ended December 31, 1999 quarter. This decline is primarily the
result of the changing of product mix and the erosion of the selling price of
the Cheetah 4 and Jaguar D chip. Revenues from one customer, NEC, accounted for
17.4% of total revenues for the nine months ended December 31, 2000.

        Gross margin. Our gross margin was 46.8% and 41.8% for the nine months
ended December 31, 2000 and 1999, respectively. The increase in gross margin for
the nine months ended December 31, 2000 compared to the nine months ended
December 31, 1999 was due to an increasing proportion of higher margin IC
products being sold compared to lower margin circuit board, system and other
products.

        Research and development. Our research and development expenses were
$5.7 million and $2.8 million for the nine months ended December 31, 2000 and
1999, respectively. Research and development expenses represented 23.1% of
revenues for each of the nine-month periods ending December 31, 2000 and 1999.
Our research and development expenses consist primarily of compensation and
personnel related expenses and costs for purchased materials, designs and
tooling which can fluctuate significantly from period to period as a result of
our product development cycles. The increase in spending on purchased materials,
designs and tooling is attributable to the development of the new range of
Jaguar and FLI products. We expect similar increases in future quarterly
research and development expenses as we increase product development efforts in
connection with our next generation of semiconductors, and focus on developing
the Faroudja technology.

        Charge for in-process technology. On June 7, 2000, shareholders of Sage
and Faroudja approved the Merger Agreement between the companies, in a purchase
transaction valued at $154.7 million. We are incorporating Faroudja technologies
into our proprietary display processing solutions to create video solutions for
the mass television market by combining Faroudja's decoding, deinterlacing and
image algorithms with our technology. The acquired in-process technology was
valued at $7.2 million, and we recorded an expense of this amount during the
nine months ended December 31, 2000. Our successful development of the product
is uncertain due to the challenges of integrating our technology with the
Faroudja technology. If we fail to successfully develop the product on a timely
basis, the introduction of new products could be prevented or delayed and
ultimately decrease our ability to compete for new business. Such failure would
negatively impact our future revenues and net income. The $2.5 million charge
for the three months ended December 31, 1999 represents in-process technology
related to a joint development agreement between Sage and Faroudja.

        Selling, general and administration. Selling, general and administration
expenses were $8.9 million and $4.1 million for the nine months ended December
31, 2000 and 1999, respectively. Our selling, general and administration
expenses consist primarily of compensation and personnel related expenses and
commissions paid to independent sales representatives. The compensation and
personnel related expenses increased by 140.0% to $4.2 million for the 9 months
ended December 31, 2000 compared to $1.8 million for the 9 months ended December
31, 1999. As a percentage of revenues, our selling, general and administration
expenses increased to 35.9% of revenues for the nine months ended December 31,
2000 as compared to 33.2% of revenues for the nine months ended December 31,
1999. This increase in selling, general and administration expenses in
proportion to revenues was largely the result of increased promotional
activities in support of new Jaguar product developments and introductions.

        Amortization of intangibles. As a result of the purchase transaction
noted above, we recorded $121.9 million of intangibles, which will be amortized
over the expected useful lives of between three and five years. In the period
from date of acquisition through December 31, 2000, we amortized approximately
$13.9 of goodwill and other intangible assets.

        Stock compensation. Stock compensation expenses amounted to $210,000 and
$514,000, for the nine months ended December 31, 2000 and 1999, respectively.
Deferred compensation, representing the difference between the deemed fair
market value of our common stock on the date of grant and the exercise price of
stock options on the date of grant, is amortized on an accelerated basis as the
options vest.

        Interest and other income and (expense), net. Net interest and other
income amounted to $2.1 million for the nine months ended December 31, 2000
compared to $349,000 in the nine months ended December 31, 1999. This
significant increase results from the investment of the proceeds of the IPO in
November 1999 into interest bearing accounts.



                                       12
<PAGE>   13

        Provision for income taxes. We incurred operating losses for the nine
months ended December 31, 2000 and 1999 and therefore had no provision for
income tax in either period. As of March 31, 2000, we had $6.1 million in net
operating losses, which are available to offset future taxable income. If not
used, the net operating losses expire between 2010 and 2020.

LIQUIDITY AND CAPITAL RESOURCES

        Since inception, we have satisfied our liquidity requirements
principally through the issuance and sale of private equity securities, totaling
approximately $17.7 million, and an initial public offering in November 1999,
which raised approximately $37.3 million, net of fees and expenses. During the
nine months ended December 31, 2000, we used $5.7 million, for operating
activities, primarily due to operating losses and increased working capital
requirements relating to sales increases and Faroudja activities. Net cash
arising from investing activities was $13.5 million for the nine months ended
December 31, 2000, principally due to the cash balance of $18.7 million acquired
with Faroudja, offset by deposits and asset purchases related to the new office
building, which was occupied on October 1, 2000.

        As a result of the growth of IC sales in the nine months ended December
31, 2000, and full-capacity limitations at the Sage's foundry partners, we
experienced certain difficulties in ensuring a regular flow of IC inventory
purchases when required. This lead to a run-down of inventory, bunching of
shipments, and delays in meeting a number of sales orders. As a result of
greater procurement effort and a easing of fab capacity, we managed to increase
our inventory as of December 31, 2000.

        As of December 31, 2000, we had $46.9 million in cash and cash
equivalents. In addition, we had a $5.0 million credit facility under which no
borrowings had been made. As of December 31, 2000, we continue to pay certain
fees and expenses related to the Faroudja acquisition of approximately $4.0
million. We believe that our existing cash resources and credit facility will be
sufficient to meet our capital requirements through the next twelve months. We
may need to raise additional equity or debt financing in the future, although we
are not currently negotiating for additional financing nor do we have any plans
to obtain additional financing. Our future capital requirements will depend on
many factors, including the rate of revenue growth, profitability, timing and
extent of spending to support research and development programs, expansion of
selling and marketing and administrative activities, timing or introductions of
new products and product enhancements and market acceptance of our products.
Further, we cannot assure you that additional equity or debt financing, if
required, will be available on acceptable terms, or at all. If we are unable to
obtain additional capital, we may be required to reduce the scope of our planned
product development, selling and marketing activities, which could harm our
business, financial condition and results of operations. In the event that we do
raise additional equity financing, existing investors could be further diluted.

        From time to time, we may evaluate acquisitions of businesses, products
or technologies that complement our business. Although we have no current plans
in this regard, any transactions, if consummated, may consume a portion of our
working capital or require the issuance of equity securities that may result in
further dilution to existing stockholders.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

INVESTMENT RISK

        Our cash equivalents and short-term investments are exposed to financial
market risk due to fluctuation in interest rates, which may affect our interest
income and, in the future, the fair market value of our investments. We manage
the exposure to financial market risk by performing ongoing evaluations of our
investment portfolio and presently invest entirely in certificates of deposit
issued by banks, the value of which does not change based on changes in interest
rates. As our cash balances increase, we anticipate investing in short-term
investment-grade government and corporate securities. These securities will be
highly liquid and generally mature within 12 months from our purchase date. Due
to the short maturities of our investments, the carrying value should
approximate the fair value. In addition, we do not use our investments for
trading or other speculative purposes. We have performed an analysis to assess
the potential effect of reasonably possible near-term changes in interest and
foreign currency exchange rates. The effect of any change in foreign currency
exchange rates is not expected to be material to our results of operations, cash
flows or financial condition. Due to the short duration of our investment
portfolio, an immediate 10% change in interest rates would not have a material
effect on the fair market value of our portfolio. Therefore, we would not expect
our operating results or cash flows to be affected to any significant degree by
the effect of a sudden change in market interest rates on our securities
portfolio.

FOREIGN CURRENCY EXCHANGE RISK



                                       13
<PAGE>   14

        We are an international company, selling our products globally and, in
particular, in Japan, Taiwan and Korea. Although we transact our business in
U.S. dollars, we cannot assure you that future fluctuations in the value of the
U.S. dollar would not affect the competitiveness of our products, gross profits
realized, and results of operations. Further, we incur expenses in India, Japan,
Taiwan and other countries that are denominated in currencies other than U.S.
dollars. We cannot estimate the effect that an immediate 10% change in foreign
currency exchange rates would have on our future operating results or cash flows
as a direct result of changes in exchange rates. However, we do not believe that
we currently have any significant direct foreign currency exchange rate risk and
have not hedged exposures denominated in foreign currencies or any other
derivative financial instruments.


                                       14
<PAGE>   15

                                 BUSINESS RISKS

        This Quarterly Report on Form 10-Q contains numerous statements of a
forward-looking nature relating to potential future events or to our future
financial performance, including statements under the heading, "Results of
Operations for the Three Months Ended December 31, 2000 and 1999." Our actual
results may differ significantly from those forward-looking statements. Factors
that may cause our actual results to differ may include: competitive forces in
the market place, ability to control expenses, ability to protect our
intellectual property and proprietary rights and shift in customer demand.

        You should carefully consider the risk factors described below, and all
other information contained in this report, before making an investment decision
regarding our common stock. The risks and uncertainties described below are not
the only ones we face. If any of the events or circumstances described below
arises, our business, financial condition or results of operations could be
seriously harmed, the value of our common stock could decline and you could lose
all or part of your investment. Additional risks and uncertainties not presently
known to us, or that may be currently considered by us to be immaterial, may
also impair our business operations.

                         RISKS RELATED TO OUR OPERATIONS

EFFECTIVE JUNE 8, 2000, FAROUDJA LABS MERGED WITH SAGE. IF THE COSTS ASSOCIATED
WITH THE MERGER EXCEED THE BENEFITS REALIZED, THE COMBINED COMPANY MAY
EXPERIENCE INCREASED LOSSES.

        If the benefits of the merger do not exceed the costs associated with
the merger, including any dilution to Sage's stockholders resulting from the
issuance of shares in connection with the merger, Sage's financial results, as
well as those of the combined company on a consolidated basis, could be
adversely affected, including increased losses.

A SIGNIFICANT AMOUNT OF THE COMPANY'S REVENUES WILL COME FROM A FEW CUSTOMERS
AND ANY DECREASE IN REVENUES FROM THESE FEW CUSTOMERS COULD SIGNIFICANTLY IMPACT
TOTAL REVENUES FOR THE COMPANY.

        Sage is dependent on a limited number of large customers. The company
will, in the foreseeable future, also be dependent on a limited number of large
customers for a substantial portion of its revenues. As a result of customer
concentration any one of the following factors could significantly impact the
total revenues for the company:

        -       a significant reduction, delay or cancellation of orders from
                one or more of the combined company's key customers; or

        -       a decision by one or more significant customers to select
                products manufactured by a competitor, or its own internally
                developed solution, for inclusion in future product generations.

        The manufacturing market for digital televisions, high definition
televisions, liquid crystal display monitors and plasma displays is highly
concentrated among relatively few large manufacturers. We expect that the
operating results of the combined company will continue to depend on revenues
from a relatively small number of manufacturers and their suppliers.

THE RELIANCE BY THE COMPANY ON A LIMITED NUMBER OF LARGE CUSTOMERS REDUCES OUR
ABILITY TO NEGOTIATE FAVORABLE PRICING TERMS WITH OUR CUSTOMERS.

        The markets for digital display and video image enhancement products are
highly concentrated among relatively few large manufacturers of certain types of
personal computers, televisions, home theaters and consumer electronics. These
manufacturers have significantly greater financial and other resources than
Sage; therefore the company may be unable to negotiate favorable pricing terms
with them. Any inability to negotiate favorable pricing terms with customers
could impact our ability to generate positive earnings.

ANY DELAY IN INTRODUCING NEW PRODUCTS OR ENHANCEMENTS TO EXISTING PRODUCTS COULD
REDUCE CUSTOMER ACCEPTANCE OF OUR PRODUCTS AND COULD DECREASE OUR MARKET SHARE
OR REVENUES.

        Sage's display manufacturing customers have regular design cycles for
their next display models. Sage's future success will depend to a substantial
degree upon its ability to develop and introduce new products and enhancements
to its existing products, and to do so on a schedule that makes its products and
enhancements available at the time its customers are making purchasing
decisions.

        Likewise, Sage is developing Faroudja products that are designed to
conform with certain current industry broadcast standards. However, there can be
no assurance that manufacturers will continue to follow these standards or that
more desirable standards will not emerge. The acceptance of Faroudja's products
also depends in part upon content providers developing and marketing content for
end-user systems, such as video and audio playback systems, in a format
compatible with Faroudja's products. There can be no assurance that these or
other factors beyond Sage's control will not adversely affect the development of
markets for Faroudja's products.



                                       15
<PAGE>   16

        The products and product enhancements of the combined company must
incorporate technological changes and innovations to meet evolving customer and
industry standards. The future success of the combined company will depend, to a
substantial degree, upon its ability to develop and introduce new products and
enhancements to its existing products that meet evolving customer and industry
standards, and to do so on a schedule that makes the products and enhancements
available at the time its customers are making purchasing decisions.

BECAUSE DISPLAY AND VIDEO PROCESSORS ARE COMPLEX, THEY MAY HAVE ERRORS OR
DEFECTS THAT ARE FOUND ONLY AFTER THE PROCESSORS HAVE BEEN INCORPORATED INTO ITS
CUSTOMERS' PRODUCTS, WHICH COULD RESULT IN WARRANTY CLAIMS AND A REDUCTION IN
REVENUES.

        Sage's display processors, Faroudja technology based video processing
ASICs and the chips that will be produced by the company are complex products
and are designed to be incorporated into digital and high definition display
devices which are themselves complex. Although the products are, and will be,
thoroughly tested, design and manufacturing defects may not be discovered during
the manufacturing and testing process and may only be discovered when the
finished products are connected to a signal source. Consequently, customers may
discover errors or defects in hardware or software after large quantities of
products have been fully incorporated into customers' digital and video display
devices. To date, however, our customers have not, to the knowledge of the
company, discovered errors or defects in their products. If customers of company
were to discover errors or defects that may be identified after a device is
connected to a signal source, the selling company could experience:

        -       loss of or delay in revenues and loss of market share;

        -       loss of customers;

        -       failure to achieve market acceptance;

        -       diversion of development resources;

        -       increased warranty costs;

        -       customer legal actions; and

        -       increased insurance costs.

In addition, in the event of a significant number of product returns due to a
defect or recall of its products, revenues, gross margin and the name brands of
the company could be significantly harmed.

THERE ARE RISKS ASSOCIATED WITH THE FAILURE TO IDENTIFY NEW MARKETS AND
APPLICATIONS.

        The markets in which Sage competes or seek to compete are subject to
rapid technological change, frequent new product introductions, changing
customer requirements for new products and features, and evolving industry
standards. The introduction of new technologies and the emergence of new
industry standards could render Sage's products less desirable or obsolete. If
the combined company fails to produce technologically competitive products in a
cost-effective manner and on a timely basis or is unable to comply with industry
standards in the future, our business and results of operations could be harmed.

        A substantial portion of the company's revenues have been derived from
sales of products that address the home theater and commercial presentation
markets. Certain of Sage's current Faroudja based products and future product
plans address markets that are not now and may never become substantial
commercial markets. The company's future growth will depend, in large part, on
the company's ability to identify new markets for its products and to apply its
products and technology to evolving markets and applications. There can be no
assurance that these markets will become substantial commercial markets or that
the company's products will achieve market acceptance in those markets. There
can be no assurance that new display technologies will be successful or that the
television and personal computer markets will converge, that these new markets
will present substantial commercial opportunities, or that the company's
products will adequately address these markets in a timely manner.

        Although we expect to continue to make significant investments in
research and development to enhance the company's current products and to
develop products incorporating new and existing technologies, we cannot offer
any assurance that new products or product enhancements will be successfully
developed. If developed, we cannot offer any assurance that any new products or
product enhancements will be developed in time to capture market opportunities
or achieve a significant or sustainable level of acceptance in new and existing
markets.

THE COMPANY WILL BE EXPOSED TO DISTRIBUTION RISKS AND ISSUES SURROUNDING THE
DIVERSIFICATION OF SALES CHANNELS.

        Sage sell its products domestically and internationally through
distributors, third party sales representatives and dealers and the combined
company's success depends on the continued efforts of this network. The loss of,
or reduction in sales to, any of the company's key customers, could have a
material adverse affect on the combined company's operating results. The short
life cycles of the


                                       16
<PAGE>   17

products of the company, and the difficulty in predicting future sales increase
the risk that new product introductions, price reductions by the company or its
competitors or other factors affecting the flat panel display and video imaging
industry could result in significant product returns. In addition, there can be
no assurance that new product introductions by competitors or other market
factors will not require the combined company to reduce prices in a manner or at
a time which has a material adverse impact upon the combined company's business,
financial condition and operating results.

        An integral element of our strategy is to enhance and diversify our
distribution channels. The company's ability to achieve revenue growth in the
future will depend in large part on our success in recruiting and training
sufficient sales personnel, third party sales representatives, distributors and
resellers. Of which, a certain number currently distribute, or may in the future
distribute, the product lines of our competitors. There can be no assurance that
the combined company will be able to attract, train and retain a sufficient
number of distributors, third party sales representatives or direct sales
personnel, or that they will continue to recommend, or devote sufficient
resources to market and provide customer support for the company's products. All
of these factors could have a material adverse effect on the company's business,
financial condition and operating results.

INTENSE COMPETITION MAY REDUCE THE DEMAND OR PRICES FOR OUR PRODUCTS, DECREASING
OUR GROSS MARGIN.

        The markets in which Sage competes are intensely competitive. Rapid
technological change, evolving industry standards and declining average selling
prices in these markets could have a material adverse effect on the business,
financial condition and results of operations of the company. As the overall
price of personal computers, televisions and other products that use our
technology continues to fall, we may be required to offer solutions to
manufacturers at discounted prices due to increased price competition. At the
same time, new, alternative display and video processing technologies and
industry standards may emerge that directly compete with technologies that we
offer. We may be required to increase our investment in research and development
at the same time that product prices are falling. In addition, even after making
this investment, we cannot assure you that our technologies will be superior to
those of our competitors or that our products will achieve market acceptance,
whether for performance or price reasons. Failure to effectively respond to
these trends could reduce the demand for our products.

        Sage has competed with a range of diversified companies that offer
display and video processors, some of which have substantially greater resources
than we do. In particular, the company will compete against Communications
Specialties Inc., Leitch Incorporated, Panasonic Broadcast and Television
Systems Company, DVDO, Inc., TeraNex, Miranda Technology, Inc., NEC, RGB
Spectrum, Cinema Pro Corporation dba Runco International, Arithmos, Inc.,
Genesis Microchip, Inc., Pixelworks, Inc., Silicon Image, Inc., DWIN
Electronics, Inc., Extron Electronics, NEC Technologies, Inc. USA, Snell &
Wilcox, Inc., Sony Corporation and Yamashita Engineering Manufacturing, Inc. We
also compete in some instances against in-house processing solutions designed by
large original equipment manufacturers. In the future, our current or potential
customers may also develop their own proprietary display and video processors
and become our competitors. In addition, start-up companies that are seeking to
capitalize on business opportunities as a result of the shift from analog to
digital technology may seek to compete in our markets. Our competitors may
develop advanced technologies enabling them to offer more cost-effective and
higher quality solutions to our customers than those offered by us. Increased
competition could harm our business, financial condition and results of
operations by, for example, increasing pressure on our profit margin or causing
us to lose sales opportunities.

CONCERNS ABOUT AN ECONOMIC SLOWDOWN MAY INFLUENCE OUR CUSTOMERS TO REDUCE
PRODUCTION AND INVENTORY OF DISPLAY PRODUCTS IN ANTICIPATION OF A SLOWDOWN.

        Unforeseen reduction in demand by our customers could reduce orders and
shipments, which could result in increased inventory. Since order cycles are
brief and the backlog small, we are required to carry a certain level of
inventory to service our customers. If our inventory buildup as a result of
order postponement, or cutbacks of sales forecasts by our customers, we could
end up with excess inventory that is either unusable, or that has to be sold a
clearance prices which will harm our sales margins.

FLUCTUATIONS IN THE OPERATING RESULTS MAKE IT DIFFICULT TO PREDICT THE COMPANY'S
FUTURE PERFORMANCE AND MAY RESULT IN VOLATILITY IN THE MARKET PRICE OF THE
COMPANY'S COMMON STOCK.

        The quarterly operating results for Sage have fluctuated significantly
in the past and we expect our results to fluctuate significantly in the future
based on a number of factors. Some of these factors arise from decisions we have
made with respect to the timing and magnitude of expenditures and our ability to
control our revenues. Our operating expenses, which include research and
development expenses and selling, general and administration expenses, are
relatively fixed over the short-term. If our revenues are lower than we expect
because we sell fewer display processors or video image enhancement products,
because we delay the release or the announcement of new products or because of
other reasons, we may not be able to quickly reduce our spending in response. In
addition, our revenues could fall short of our expectations if we experience
delays or cancellations of even a small number of orders.



                                       17
<PAGE>   18

        Certain other factors have, in the past, caused, and may in the future
cause, fluctuations in our quarterly operating results. These factors are
industry risks over which we have no control, including:

        -       changes in the available supply of flat panel displays at
                reasonable prices;

        -       changes related to selected video processing products;

        -       changes in our customers' demand for our products;

        -       the deferral of customer orders in anticipation of new products
                or enhancements by us or our competitors;

        -       changes in the available production capacity at the
                semiconductor fabrication foundries that manufacture our
                products and changes in the costs of manufacturing; and

        -       our ability to develop, introduce and market new products in
                time to meet the product design cycles of our customers.

        There are additional factors that could, but which have not, affected
our operating results including:

        -       the growth rate of the overall digital display and video
                processing markets;

        -       incorrect forecasting of future revenues;

        -       changes in product mix, product costs or pricing;

        -       general economic conditions and economic conditions specific to
                the personal computer, television, home theater, display and
                semiconductor markets;

        -       growth rate of HDTV market; and

        -       growth rate of projector market.

        Any one or more of these factors are difficult to forecast and could
result in fluctuations in our future operating results. Any shortfall in our
revenues would have a direct impact on the combined business. In addition,
fluctuations in our quarterly results could adversely affect the market price of
our common stock in a manner unrelated to our long-term operating performance.
Because our operating results are volatile and difficult to predict, you should
not rely on the results of one quarter as an indication of our future
performance. It is likely that in some future quarter our operating results will
fall below the expectations of securities analysts and investors. In this event,
the trading price of our common stock may decline significantly.

SAGE RELIES ON INDEPENDENT FOUNDRIES AND MANUFACTURING.

        Sage currently relies on independent foundries to manufacture, assemble
and test all of their semiconductor components and products. These independent
foundries fabricate products for other companies and may also manufacture
products of their own design. The combined company will purchase products from
all of its foundries pursuant to individually negotiated purchase orders. The
company does not have long-term supply contracts with any of these foundries,
and, therefore, none of them will be obligated to supply products to the
combined company for any specific period, in any specific quantity or at any
specified price, except as may be provided in a particular purchase order. The
reliance by the combined company on independent foundries involves a number of
risks, including the inability to obtain adequate capacity, unavailability of or
interruption of access to certain process technologies, reduced control over
delivery schedules, quality assurance, manufacturing yields and cost, and
potential misappropriation of our intellectual property. The ability of the
company to obtain the foundry capacity necessary to meet the demand for their
products is based in part on their ability to accurately forecast demand. If the
combined company fails to accurately forecast its future demand, we may be
unable to obtain adequate supplies of integrated circuits on a timely basis.
There can be no assurance that the company will be able to accurately forecast
the demand for its products or obtain sufficient foundry capacity in the future.

        While Sage has not experienced any material disruptions in supply to
date, there can be no assurance that manufacturing problems will not occur in
the future. In the event that any of the combined company's foundries are unable
or unwilling to produce sufficient supplies of our products in required volumes
at acceptable costs, the combined company will be required to reallocate
production among our other existing foundries or identify and qualify acceptable
alternatives. This qualification process could take six months or longer, and no
assurance can be given that any additional source would become available to the
company or would be in a position to satisfy the company's production
requirements on a timely basis. The loss of any of the company's foundries, the
inability of the company to obtain additional production in a period of
increased demand, or the company's inability to obtain timely and adequate
deliveries from its suppliers could reduce or delay shipments of our products.
Any of these developments could damage relationships with the company's current
and prospective customers and could have a material adverse effect on our
business, financial condition and operating results.

        The reliance by the company on third-party manufacturers limits our
control over delivery schedules, quality assurance and product cost. Disruptions
in the provision of services by the company's assemblers or other circumstances
that would require the company to seek alternative sources of assembly could
lead to supply constraints or delays in the delivery of our products. In
addition, the need for high


                                       18
<PAGE>   19

quality assurance by the company may increase costs paid by the company to third
parties for manufacturing and assembly of our products. These constraints or
delays could damage relationships with current and prospective customers and
could have a material adverse effect on our business, financial condition and
operating results. In addition, third party contractors assemble Sage's board
level display processor products and Faroudja based home theater and broadcast
products.

SAGE CURRENTLY DEPENDS ON A LIMITED NUMBER OF CONTRACT MANUFACTURERS FOR ITS
SEMICONDUCTOR AND SYSTEM LEVEL PRODUCTS, AND IT MUST ORDER PRODUCTS FROM THEM
BASED ON FORECASTS FROM CUSTOMERS FROM WHICH SAGE DOES NOT HAVE FIRM PURCHASE
ORDERS.

        Sage does not own or operate a semiconductor fabrication facility and it
does not have the resources to manufacture our products internally. Currently,
Sage's digital interface chips, the Cheetah4 and Jaguar D, are being
manufactured, assembled and tested by Kawasaki LSI U.S.A., Inc., and Cheetah3
chips are being manufactured, assembled and tested by Fujitsu Microelectronics
Inc. Sage's new Jaguar series of dual analog chips are being be manufactured by
Taiwan Semiconductor Manufacturing Company and Sage will be responsible for the
assembly and testing. Sage produces its FLI2200 de-interlacing chip at ST Micro,
continuing a former long-term Faroudja relationship. Sage's system level
products are manufactured and tested by Topline Electronics or Eagle
Manufacturing while the Faroudja based box products are manufactured by
Bestronics. Sage does not have a long-term supply contract with any of its
contract manufacturers, and they are not obligated to supply Sage with products
for any specific period, in any specific quantity or at any specific price,
except as may be provided in a particular purchase order. Sage tries not to
maintain substantial inventories of products, but it must often place orders for
products two to six months before they are needed and before it has firm
purchase orders for those products. None of Sage's products is currently
manufactured by more than one supplier. There are many risks associated with our
dependence on third-party manufacturing, assembling and product testing
relationships, including:

        - delays in delivering products in response to purchase orders due to
          increased demand, disruptions in operations or other factors;

        - lack of control over pricing;

        - reduced quality assurance;

        - reduced manufacturing yields and costs;

        - unavailability or interruption of access to process technologies
          necessary to manufacture our products; and

        - potential misappropriation of Sage's intellectual property.

        If Sage is unable to obtain its products from manufacturers on schedule,
revenues from the sale of those products may be delayed. If orders for Sage's
products are cancelled, revenues will be lost.

FAILURE TO MANAGE OUR EXPANSION EFFECTIVELY COULD ADVERSELY AFFECT OUR ABILITY
TO INCREASE OUR REVENUES AND IMPROVE OUR EARNINGS.

        The ability of the company to successfully offer our products in a
rapidly evolving market requires effective planning and management processes. We
continue to increase the scope of our operations domestically and
internationally and have increased our headcount substantially. The past growth
of Sage, and the expected future growth of the company, places a significant
strain on our management systems and resources including our financial and
managerial controls, reporting systems and procedures. In addition, we will need
to continue to expand, train and manage our workforce worldwide.

WE DEPEND ON KEY PERSONNEL TO MANAGE OUR BUSINESSES EFFECTIVELY, AND IF WE ARE
UNABLE TO RETAIN OR HIRE ADDITIONAL PERSONNEL, OUR REVENUES AND PRODUCT
DEVELOPMENT EFFORTS COULD BE HARMED.

        The future success of the company depends upon the continued services of
our executive officers and other key engineering, sales, marketing and support
personnel, many of whom would be difficult to replace. Current and prospective
employees of Sage may experience uncertainty about their future roles. This
uncertainty may adversely affect the company's ability to retain key management,
sales, marketing and technical personnel, or to attract qualified personnel in
the future.

   We intend to hire a significant number of engineering, sales, marketing and
support personnel in the future, and we believe our success depends, in large
part, upon our ability to attract and retain our key employees. Competition for
these persons is intense, especially in the San Francisco Bay Area, and we may
not be able to retain our key personnel or identify, attract or retain other
highly qualified personnel in the future. We have experienced, and may continue
to experience, difficulty in hiring and retaining candidates with appropriate
qualifications. If we do not succeed in hiring and retaining candidates with
appropriate qualifications, our revenues and product development efforts could
be harmed.

OUR LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
COULD HARM OUR COMPETITIVE POSITION BY ALLOWING OUR COMPETITORS TO ACCESS OUR
PROPRIETARY TECHNOLOGY AND TO INTRODUCE SIMILAR PRODUCTS.



                                       19
<PAGE>   20

        The ability of the company to compete effectively with other companies
will depend, in part, on our ability to maintain the proprietary nature of our
technology. However, we cannot assure you that the degree of protection offered
by the patents held by the company will be sufficient or that any of our pending
patents will be issued. In addition, competitors in both the U.S. and foreign
countries, many of which have substantially greater resources, may apply for and
obtain patents that will prevent, limit or interfere with our ability to make
and sell our products.

        Our competitors may also be able to design around the licensed patents.
The laws of certain foreign countries in which our products are or may be
developed, manufactured or sold, including various countries in Asia, may not
protect our products or intellectual property rights to the same extent as the
laws of the United States. There can be no assurance that the steps taken by
Sage to protect our intellectual property rights will be adequate to prevent
misappropriation of our technology or that our competitors will not
independently develop technologies that are substantially equivalent or superior
to our technology.

        Substantially all of the intellectual property used on Faroudja based
products is licensed to Sage by Yves Faroudja. There are risk associated with
this intellectual property because Sage is a licensee and not the owner of such
intellectual property rights. Under his agreement with Sage, Mr. Faroudja
retains the non-exclusive right to license his patents and technologies to third
parties for use outside Sage's field of use. Notwithstanding the particular
terms of the license agreement with Mr. Faroudja, the company faces the risk
that he may attempt to terminate the granted licenses and that such an attempt
may be successful or that the response to such attempt may consume substantial
financial and personnel resources. In the event Sage's resources are so
consumed, such consumption could have a material adverse affect on the company's
business, financial condition and operating results.

        We may from time to time receive notifications or claims alleging that
we may be infringing patents or intellectual property rights owned by third
parties. While there is currently no intellectual property rights litigation
pending against us, litigation could result in significant expenses to us and
could reduce sales of our products. Any litigation could also divert the efforts
of our technical and management personnel, whether or not the litigation is
determined in our favor. In addition, we may not be able to develop, license or
acquire non-infringing technology under reasonable terms. These developments
could result in an inability to compete for customers or could adversely affect
our ability to increase our earnings.

SAGE HAS INCURRED NET LOSSES SINCE INCEPTION, AND SAGE MAY NOT ACHIEVE OR
SUSTAIN ANNUAL PROFITABILITY.

        Sage incurred net losses of $2.8 million; $4.8 million and $4.6 million
for each of the respective years ended March 31, 1998, 1999 and 2000, and had an
accumulated deficit of $34.9 million as of December 31, 2000. In addition Sage
has capitalized approximately $114 million of goodwill and intangibles in
connection with the acquisition of Faroudja and intends to amortize this over
five years, resulting in annual charges to operating expenses of over $20
million per year. Accordingly, Sage expects to continue to report additional
operating losses, and even before non-cash charges, Sage may continue to report
operating losses for at least the next 12 months. Although Sage has experienced
revenue growth in recent periods, this growth is not necessarily indicative of
future operating results, and we cannot assure you that we will be able to
sustain the growth in our revenues. If Sage and the combined company do achieve
profitability, we cannot be certain that we can sustain or increase
profitability on a quarterly or annual basis in the future or at all. This may
in turn cause Sage's stock price to decline. In addition, if Sage does not
achieve or sustain profitability in the future, we may be unable to continue our
operations.


SAGE HAS A LIMITED OPERATING HISTORY, MAKING IT DIFFICULT FOR YOU TO EVALUATE
OUR BUSINESS.

        Sage commenced operations in January 1995, but it did not generate
material revenues from the sale of its semiconductor products until July 1998.
Thus, Sage has a limited operating history upon which to evaluate its current
business and prospects. Due to the limited history, it is difficult or
impossible for Sage to predict its future results of operations with any degree
of accuracy. For example, Sage cannot accurately forecast expenses based on its
projections of future revenues. Most of Sage's expenses are relatively fixed in
the short term, and Sage may not be able to quickly reduce spending if its
revenues are lower than projections. In addition, because substantially all of
Sage's present customers order on a purchase order basis rather than long-term
purchase commitments, Sage has only a limited ability to project future
revenues. Therefore, net losses in a given quarter may be greater than expected.
Moreover, due to the limited operating history of Sage, any evaluation of its
business and prospects must be made in light of the risks and uncertainties
often encountered by early stage companies in technology markets. Many of these
risks are discussed elsewhere in this section. Please see "Sage Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
more detailed information on our historical results of operations.



                                       20
<PAGE>   21

SAGE'S FOREIGN CUSTOMERS ACCOUNT FOR A SIGNIFICANT PORTION OF ITS REVENUES, AND
IF SAGE DOES NOT SUCCESSFULLY ADDRESS CERTAIN RISKS ASSOCIATED WITH ITS
INTERNATIONAL OPERATIONS, ITS REVENUES COULD DECREASE AND ITS BUSINESS PROSPECTS
COULD DETERIORATE BECAUSE THE MAJORITY OF ITS CUSTOMERS COULD BE LOST AT A
SUBSTANTIAL COST TO ITS BUSINESS PROSPECTS AND ITS REVENUES COULD DECLINE.

        Sales outside of the U.S. accounted for 72.4% of total sales for the
year ended March 31, 2000. A substantial portion of Sage's customers are located
in Japan, Taiwan and Korea. We anticipate that sales outside of the U.S. could
increase in future periods and may account for an increasing portion of Sage's
revenues. In addition, manufacturers who incorporate Sage's processors into
their displays sell them outside of the U.S., thereby exposing Sage indirectly
to foreign risks. Specifically, Sage will be subject to the following risks:

        -       difficulties in maintaining sales representatives outside of the
                U.S. that are knowledgeable of the display processor industry,
                the video processing industry and the products of Sage;

        -       ongoing restructuring activities of Sage's customers and other
                Asian companies may reduce purchases of our products by its
                customers;

        -       potential difficulties in collecting accounts receivable from
                its customers located in Japan, Korea and Taiwan; and

        -       difficulties related to design piracy of display and video
                processing technologies that may exist outside the U.S.

        To date, sales of Sage's products have been denominated exclusively in
U.S. dollars. An increase in the value of the U.S. dollar will increase the
price of Sage's products so that they become relatively more expensive to
customers in the local currency of a particular country, potentially leading to
a reduction in Sage's revenues and profitability.

PORTIONS OF SAGE'S RESEARCH AND DEVELOPMENT EFFORTS ARE PERFORMED IN INDIA, AND
RISKS RELATED TO THOSE OPERATIONS COULD HARM ITS RESEARCH AND DEVELOPMENT
CAPABILITIES AND NEGATIVELY IMPACT ITS PRODUCT SALES.

        Any risks related to the political or economic conditions in India and
the surrounding region, including risks relating to India's national security
situation or labor market conditions, may adversely impact Sage's ability to
take advantage of operations in India. In addition, circumstances beyond Sage's
control at its facilities, related to operating in a developing country, such as
unreliable power supplies, may have a material adverse effect on its research
and development capabilities. We cannot assure you that restrictive laws or
policies on either the part of India or the United States will not constrain
Sage's ability to effectively operate in both countries. If Sage is required to
relocate its India facilities, we cannot assure you that a relocation will not
disrupt Sage's business.

IF MONITORS INCORPORATING SAGE'S SOLUTIONS ARE NOT COMPATIBLE WITH PERSONAL
COMPUTERS, TELEVISIONS, AND OTHER DEVICES FOR WHICH THEY ARE MARKETED, THE
MARKET FOR SAGE'S PRODUCTS WILL BE REDUCED AND OUR BUSINESS PROSPECTS COULD BE
SIGNIFICANTLY LIMITED.

        Sage's products are incorporated into its customers' display monitors
which have different parts and specifications and utilize multiple protocols
that allow them to be compatible with specific PCs, televisions, home theaters
and other devices. If Sage's customers' products are not compatible with the PCs
and other devices for which they have been marketed and sold, consumers will
return those monitors, or consumers will not purchase those monitors, and the
market for Sage's customers' products could be significantly reduced. As a
result, a portion of Sage's market would be eliminated, and its business would
be harmed.

                RISKS RELATED TO THE DISPLAY PROCESSING INDUSTRY

FAILURE OF CONSUMER DEMAND FOR FLAT PANEL DISPLAYS TO INCREASE AS WE EXPECT
COULD IMPEDE SAGE'S GROWTH PROSPECTS.

        Sage's product development strategies anticipate that consumer demand
for flat panel displays and other emerging display products will increase in the
future. The success of Sage's products is dependent on increased demand for
these products, which are at early stages of development. The potential size of
these markets and the timing of their development are uncertain and will depend
upon a number of factors, all of which are beyond our control.

BECAUSE OF SAGE'S LONG PRODUCT DEVELOPMENT PROCESS AND SALES CYCLE, SAGE MAY
INCUR SUBSTANTIAL EXPENSES BEFORE IT EARNS ASSOCIATED REVENUES AND MAY NOT
ULTIMATELY SELL AS MANY UNITS OF ITS PRODUCTS AS FORECASTED.

        Sage develops products based on forecasts of demand and incurs
substantial product development expenditures prior to generating associated
revenues. Sage's customers typically perform numerous tests and extensively
evaluate Sage's products before incorporating them into their systems. The time
required for testing, evaluation and design of Sage's products into a customer's
equipment can take up to six months or more. Because of this lengthy development
cycle, Sage may experience a delay between the time it accrues expenses for
research and development and sales and marketing efforts and the time when it
generates revenues, if any, from such expenditures.

        Furthermore, achieving a design win with a customer does not necessarily
mean that this customer will order large volumes of Sage's products. A design
win is not a binding commitment by a customer to purchase Sage's products.
Rather, it is a decision by a customer to


                                       21
<PAGE>   22


use Sage's products in the design process of that customer's products. In
addition, Sage's customers can choose at any time to discontinue using its
products in that customer's designs or product development efforts. If Sage's
products are chosen to be incorporated into a customer's products, Sage may
still not realize significant revenues from that customer if that customer's
products are not commercially successful.

IF SAGE DOES NOT ACHIEVE DESIGN WINS WITH LEADING DISPLAY MANUFACTURERS, SAGE
MAY BE UNABLE TO SECURE ADDITIONAL DESIGN WINS IN THE FUTURE AND ITS ABILITY TO
GROW WOULD BE SERIOUSLY LIMITED.

        The development of new, technologically advanced products and product
enhancements is a complex and uncertain process requiring accurate anticipation
of technological and market trends, as well as skill in obtaining design wins.
Any failure on Sage's part to obtain additional design wins with leading
original equipment manufacturers and to successfully design, develop and
introduce new products and product enhancements could harm its business,
financial condition and results of operations. In addition, development and
manufacturing schedules for Sage's products are difficult to predict, and we
cannot assure you that Sage will achieve timely customer shipments of new
products. The timely introduction of these products and their acceptance by
customers are important to Sage's future success. Any delays in product
development, whether due to manufacturing, product design and development, lack
of market acceptance or otherwise, could reduce future customer acceptance of
Sage's products and harm our business, financial condition and results of
operations.

IF WE HAVE TO QUALIFY A NEW CONTRACT MANUFACTURER FOR ANY OF SAGE'S PRODUCTS,
SAGE MAY LOSE REVENUES AND DAMAGE ITS CUSTOMER RELATIONSHIPS.

        Sage's display processors require manufacturing with state-of-the-art
fabrication equipment and techniques. Because the lead time needed to establish
a strategic relationship with a new contract manufacturer is at least six
months, and the estimated time for Sage to adapt a product's design to a
particular contract manufacturer's processes is an additional three to four
months, there is no readily available alternative source of supply for any
specific product. A manufacturing disruption at any of Sage's contract
manufacturers would impact the production of Sage's display processors for a
substantial period of time, thereby reducing the company's revenues, and would
harm Sage's customer relationships.

SHORTAGES OF MATERIALS INCLUDED IN OUR SEMICONDUCTOR AND CIRCUIT BOARD PRODUCTS
MAY INCREASE SAGE'S COSTS OR LIMIT ITS REVENUES AND DELAY ITS ABILITY TO SHIP
OUR PRODUCTS ON TIME.

        From time to time, shortages of certain materials that are used in
Sage's semiconductor and circuit board products may occur. In particular, Sage
may experience shortages of semiconductor wafers. If materials shortages occur,
Sage may incur additional costs to procure the scarce components or be unable to
ship its products to its customers in a timely fashion, all of which could
negatively impact Sage's earnings.

BY SUBCONTRACTING SEPARATELY FOR THE PRODUCTION OF WAFERS FOR ITS NEXT
GENERATION PROCESSORS, SAGE IS ASSUMING RISKS THAT IT DOES NOT CURRENTLY FACE.

        Currently, Sage purchases packaged, assembled and tested semiconductor
products from contract manufacturers. We expect that Sage will assume greater
responsibility for this process for our next generation of products by
subcontracting separately for the production of wafers and for their assembly
and testing. If Sage does so, we will become more responsible for losses arising
from wafer manufacturing yields and for coordination of the manufacturing,
assembly and testing process. Poor yields, or our failure to implement this
approach to manufacturing properly, would reduce Sage's revenues and harm our
gross margin and results of operations.


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

        In June 1998, the Financial Accounting Standards Board issued Statement
on Financial Accounting Standards, or SFAS, No. 133, Accounting For Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes a new model for
accounting for derivatives and hedging activities and supersedes and amends a
number of existing accounting standards. SFAS No. 133 requires that all
derivatives be recognized in the balance sheet at their fair market value, and
the corresponding derivative gains or losses be either reported in the statement
of operations or as a deferred item depending on the type of hedge relationship
that exists with respect to such derivative. SFAS No. 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. We do not
expect the adoption of SFAS No. 133 to have a material impact on our financial
position or results of operations.

        In December 1999, the Security Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101) "Revenue Recognition Financial
Statements". In October 2000, the SEC released interpretive guidance on SAB 101
in the form of Frequently Asked Questions. We are currently evaluating the
impact of SAB 101 on its financial statements and related disclosures, but do
not


                                       22
<PAGE>   23

expect that such an impact, if any, would be material. The accounting and
disclosures prescribed by SAB 101 will be effective for Sage's fiscal year ended
March 31, 2001.

        In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation," an interpretation of APB Opinion No. 25. The Interpretation is
intended to clarify problems that have arisen in practice since the issuance of
APB No. 25. Sage does not expect that the adoption of FASB Interpretation No. 44
will have a significant effect on Sage's results of operations or its financial
position.


                                       23
<PAGE>   24

                                     PART II

ITEM 1. LEGAL PROCEEDINGS

        As of February 14, 2001, there were no pending legal proceedings to
which we are a party.

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:

        2.1     Agreement and Plan of Merger and Reorganization dated February
                18, 2000 by and among Sage, Inc., Inland Merger Sub, Inc. and
                Faroudja, Inc. which is incorporated by reference to Appendix A
                to the Company's Form S-4/A, dated May 5, 2000.

        3.1     Certificate of Amendment of Restated Certificate of
                Incorporation, which is incorporated herein by reference to
                Form 10-Q as filed with the Commission on February 11, 2000.

        3.2.    Bylaws, which is incorporated herein by reference to Form S-1
                as filed with the Commission, with an effective date of
                November 10, 1999.

   (b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the quarter
ended December 31, 2000.


                                   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.

                                          SAGE, INC.
                                          Registrant

Date: February 14, 2001                        By:   /s/ Simon P. Westbrook
                                                  ------------------------------
                                                     Simon P. Westbrook
                                                     Chief Financial Officer

                                       24