UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

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(MARK ONE)

[X] ANNUAL
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  FOR THE FISCAL YEAR ENDEDJANUARY 31, 2005

OR

[   ]
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
  ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO _____________

Commission
  File Number 000-15116



Sigma Designs, Inc. (Exact name of Registrant as Specified in its Charter)



|California                                                     | 94-2848099                             
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

1221 California CircleMilpitas, California    95035(Address of Principal Executive Offices including Zip Code)

(408) 262-9003(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g)
  of the Act:

Common Stock(Title of Class)

Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark if disclosure of delinquent filers pursuant
to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant
  is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X]    
  No [   ]

As of July 31, 2004, the last business day
  of the Registrant's most recently completed second fiscal quarter, there were
  20,796,195 shares of the Registrant's common stock outstanding, and the aggregate
  market value of such shares held by non-affiliates of the Registrant (based
  on the closing sale price of such shares on the Nasdaq National Market on July
  31, 2004) was approximately $125,741,719. Shares of the Registrant's outstanding
  common stock held by each executive officer and director and by each executive
  officer and director and by each entity that owns 5% or more of the Registrant's
  outstanding common stock have been excluded in that such persons may be deemed
  to be affiliates. This determination of affiliate status is not necessarily
  a conclusive determination for other purposes.

There were 21,269,560 shares of the Registrant's Common Stock issued and outstanding on April 8, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

Certain sections of Sigma Designs, Inc.'s definitive Proxy Statement for the
  2004 Annual Meeting of Shareholders to be held on June 17, 2005 are incorporated
  by reference in Part III of this Form 10-K to the extent stated herein.The
  Proxy Statement will be filed within 120 days of the Registrant's fiscal year
  ended January 31, 2005.






Sigma Designs, Inc.
  2005 ANNUAL REPORT ON FORM 10-KTABLE OF CONTENTS



|PART I                                                                                                        | Page No.
|------------------------------------------------------------------------------------------------------------- | --------
|                                                                                                              |         
|Item 1. Business                                                                                              | **      
|                                                                                                              |         
|Item 2. Properties                                                                                            | **      
|                                                                                                              |         
|Item 3. Legal Proceedings                                                                                     | **      
|                                                                                                              |         
|Item 4. Submission of Matters to a Vote of Security Holders                                                   | **      
|                                                                                                              |         
|PART II                                                                                                       |         
|                                                                                                              |         
|Item 5. Market for the Registrant's Common Equity and
      Related Stockholder Matters                       | **      
|                                                                                                              |         
|Item 6. Selected Financial Data                                                                               | **      
|                                                                                                              |         
|Item 7. Management's Discussion and Analysis of Financial
      Condition and Results of Operations           | **      
|                                                                                                              |         
|Item 7A. Quantitative and Qualitative Disclosures About
      Market Risk                                     | **      
|                                                                                                              |         
|Item 8. Consolidated Financial Statements and Supplementary
      Data                                        | **      
|                                                                                                              |         
|Item 9. Changes in and Disagreements with Accountants
      on Accounting and Financial Disclosure            | **      
|                                                                                                              |         
|Item 9A. Controls and Procedures                                                                              | **      
|                                                                                                              |         
|Item 9B. Other Matters                                                                                        | **      
|                                                                                                              |         
|PART III                                                                                                      |         
|                                                                                                              |         
|Item 10. Directors and Executive Officers of the Registrant                                                   | **      
|                                                                                                              |         
|Item 11. Executive Compensation                                                                               | **      
|                                                                                                              |         
|Item 12. Security Ownership of Certain Beneficial Owners
      and Management and Related Stockholder Matters | **      
|                                                                                                              |         
|Item 13. Certain Relationships and Related Transactions                                                       | **      
|                                                                                                              |         
|Item 14. Principal Accounting Fees and Services                                                               | **      
|                                                                                                              |         
|PART IV                                                                                                       |         
|                                                                                                              |         
|Item 15. Exhibits, Financial Statement Schedules                                                              | **      
|                                                                                                              |         
|Signatures                                                                                                    | **      

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FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K contains forward-looking statements that
are subject to assumptions, risks and uncertainties, many of which are discussed in this Annual
Report on Form 10-K, including but not limited to the factors discussed under "Certain Factors
Affecting Business, Operating Results, and Financial Condition" and elsewhere in this Annual Report
on Form 10-K. Actual results may vary from those projected in the forward-looking statements.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or achievements. If our assumptions
about the future do not materialize or prove to be incorrect, the results could differ materially
from those expressed or implied by such forward-looking statements. Accordingly, you should not
place undue reliance on these forward-looking statements. A forward-looking statement is any
statement that looks to future events, including any statements of plans, strategies and objectives
of management for the future and any statement of assumptions underlying the foregoing. In some
cases, you can identify a forward looking statement by such terms as "may," "believe," "could,"
"anticipate," "would", "might," "plan," "expect" and similar expressions or the negative of these
terms or other comparable terminology. We assume no obligation to update these forward-looking
statements to reflect events that occur or circumstances that exist after the date on which they
were made.

PART I

ITEM 1. BUSINESS

In this Annual Report on Form 10-K "Sigma," "the
Company," "we," "us," and "our" refer to Sigma Designs, Inc.

We specialize in silicon-based
digital media processing solutions for consumer products. Our highly-integrated solutions, based on
our award-winning REALmagic® Video Technology, provide high-quality decoding of H.264 MPEG-4,
MPEG-2, MPEG-1 and Windows® Media Video 9 (WMV9) content (note, MPEG (Moving Picture Experts
Group) is an international standards body).

Complementing this core technology, we have developed
complete system solutions for tomorrow's convergence products, including DVD playback, digital TV
(DTV) reception, video over IP, personal video recording (PVR) and video-on-demand (VOD). Our business operates in one segment, consumer electronic devices and products. See
Note 14 of Notes to Consolidated Financial Statements for further information on our product groups
and markets. Our products are sold worldwide through a direct sales force
and distributors. Our Common Stock, publicly traded since 1986, is listed on the NASDAQ National
Market under the symbol SIGM. Our Headquarters are located in Milpitas, California, we also have a
research and development center in France as well as sales offices in China, Europe, Hong Kong,
Japan and Taiwan.

We were founded in 1982, and became a pioneer in the MPEG
hardware decoder market in 1993 with the introduction of our REALmagic card, a MPEG playback card
for PCs. In April 1997, we announced our entry into the DVD market. During the past few years, we
have expanded well beyond our PC card beginnings and are working with consumer electronics
manufacturers and network service providers on new products to deploy Internet Protocol Television
(IPTV) solutions, digital media adapters, networked DVD players, and high definition television.
These opportunities have led to technology investments in media processor chips, streaming video
software, digital rights management, and a number of other important technologies.

At the end of 2001, we introduced the industry's first DVD
resolution MPEG-4 decoder chip for set-top appliances, establishing a unique position to contribute
to the deployment of next generation capabilities. Since
then, we have secured numerous design wins and areshipping this product for applications including IP-based set-top boxes for
video over DSL, fiber to the home, and advanced DVD players.

In January 2003 we launched the first high definition
television (HDTV) decoder chips with MPEG-4. The announcement formally marked our official entry
into the digital TV and media gateway markets. In January 2004 we announced the EM8620L, the first
media processor to support WMV9, an advanced video compression technology from Microsoft Corp. In January 2005, we announced the SMP8630, the first media processor to
integrate H.264, WMV9 and MPEG decoding in one chip.

We were incorporated in California in
January 1982. Our principal executive office is located at 1221 California Circle, Milpitas,
California 95035. Our telephone number is (408) 262-9003, and our Internet home page is located at
www.sigmadesigns.com; however, the information in, or that can be accessed through, the home page is
not part of this report. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to such reports are available, free of charge, on our Internet
website under "Investors," as soon as reasonably practicable after we have electronically filed such
material with, or have furnished it to, the United States Securities and Exchange Commission, or
SEC. The public may also read and copy any materials we filed with the SEC at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington D.C. 20549. The public may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and
other information regarding us that we filed electronically with theSEC.

Principal Markets

Our primary focus is to develop and market media processor chipsets for consumer appliances, which can be segmented
into three broad categories. Many of our chipset products are designed to be used in a wide range of
applications.

IP Video Solutions

Video delivered and distributed over Internet
Protocol (IP) is emerging as an important product category for a growing number of consumer
equipment makers. These solutions can be further segmented into two primary sub-segments, IPTV over
DSL and digital media adapters (DMAs).

Broadband Internet connectivity, highly compressed digital
media, and a fundamental demand for entertainment
alternatives are paving the way for IPTV delivered over DSL. New set-top boxes, many based on
advanced codecs such as H.264 or WMV9 and advanced digital rights management (DRM), are being
readied by telecommunications companies around the world to tap into the
potential revenues streams that may be created by these products. Many international regions currently lack the cable
infrastructure that exists in the U.S., thus creating pent up demand for reliable high quality video
delivery. We have become a key supplier into these IPTV solutions by offering an optimized feature
set with scalable performance silicon and unique streaming video software.

DMAs are a new product category which supports local distribution of video/audio content to television sets
throughout the home using wired or wireless connectivity. DMAs typically work
in conjunction with a centralized media center or gateway to offer ubiquitous digital media within
the home. We are a key vendor of chipset solutions for DMAs, taking advantage of the same feature
set, and streaming video software developed for the IPTV market.

Companies such as D-Link, Pinnacle,
Lenovo Group PC (formerly Legend), Vertex Link, IO Data and LG Electronics, are preparing and providing IP video appliances for the
consumer market using our silicon solutions. In addition, the
new "T-Online Vision on TV" service, based around the Fujitsu Siemens Center ACTIVY Media Center, is
powered by our EM8400 MPEG decoder chips.

Connected Media Players

Connected media players represent a range of
devices that include networked DVD players, portable media devices, and multi-function media
centers.

Premium DVD players with advanced video codecs have been a
product of choice for entertainment enthusiasts for over two years. Manufacturers
have recently introduced a new
range of network connected DVD players, supporting either in-home connectivity or external Internet
connections for direct downloading. We pioneered this market with the first DVD decoder chips
supporting playback of MPEG-4 and DivX video, and have followed up with the support
for WMV9, an important new feature for downloading content. We are an important supplier in this
segment and provide comprehensive solutions with the latest codecs (WMV9 and MPEG-4), support for
networking and local hard drives, and high definition video output.

Another sub-segment of demand for our
chipsets is portable media devices. With ongoing technology improvements in media compression,
wireless communications, and small form-factor storage, portable media players have quickly become
the media-on-the-go equivalent of the cell phone. The trend toward hand-held players has already
moved to the mainstream for audio, while new advanced video compression schemes are enabling the
addition of movies, personal video and photos, for use on the road and within the home. We have
begun to penetrate this market by offering media processors that offer the latest codecs in a highly
integrated package along with low power dissipation.

KiSS Technology, a leading European vendor of advanced DVD
products, is developing the first DivX certified DVD players using our chipsets. In addition, several companies
are preparing new WMV9 capable DVD players to enter the
market usingour new chips.

High Definition Television

HDTV sets already represent a substantial and
growing product category, currently selling in the millions of units, led by the U.S. market and
moving overseas. New widescreen HDTV sets are being offered in an increasing array of forms using
three primary technologies - liquid crystal display (LCD), plasma and projection - each providing
unique advantages. We offer a growing line of high
definition media processors, designed for the new flat panel displays, and offering advanced display
processing features to recreate the essence of cinema picture quality.

Our EM8610 digital media processor has been selected for use in high-definition plasma
television sets from KiSS Technology and from Jamo.

In addition to our primary market segments, we still sell
legacy products into commercial VOD streaming and PC add-in markets.

Industry Alliances

To meet customer needs for a complete system solution,
we have developed strong relationships with leading
suppliers of chipsets, system software and video servers/encoders. Companies that provide live
encoders and server systems enable OEMs to deliver
complete solutions for IP video streaming applications. Our set-top appliance reference designs, in
some cases, depend on vendors of processors, graphics controllers, video encoders, wireless
controllers, and DTV tuners, from providers such as Atheros or Toshiba. Furthermore, stand-alone
consumer appliances require a substantial amount of software and middleware, from vendors such as
Digital 5, Syabas, or Microsoft, with which we also have strong working
relationships.

Sigma Business Strategy

Our objective is to provide digital media processing
chipsets that offer advanced features, superior video quality, and rapid time to market for our target applications. To accomplish this goal, we
focus on a continual investment in technology, as well as the promotion of our fundamental
advantages.

We believe that our field-proven, decoder technology, now in our fourth
generation of silicon and equivalent evolution of software, represents one of our key competitive
advantages. We continue to invest and build on six primary technology foundations to provide the
highest quality digital video/audio solutions possible:

- Digital video decoding including MPEG-1, -2 and -4 H.264 and WMV9;
- Digital audio decoding including MPEG-1, -2 and proprietary formats,
including Dolby® Digital and Windows® Media Audio (WMA);
- Advanced scene composition including advanced video scaling, adaptive
deinterlacing, adaptive flicker filtering and prioritized alpha mixing;
- Front-end architectures for effectively processing DRM algorithms,
transport handling and conditional access;
- Software clients for VOD and IP multicast and navigation software for
DVD-video, DVD-audio, SVCD, VCD, CD and HDD playback; and
- Standard-definition (SD) and high-definition (HD) solutions that share a
common hardware and software architecture.

Sigma Products

We offer chip-level products that enable digital media
processing solutions for consumer appliances. Our line of digital media processing chips features
the highest quality video possible. We complement our silicon technology with embedded software,
portable to a wide range of operating environments. Featuring VOD and media navigation clients, our
software is available under Windows, Linux, and WinCE operating systems. In addition, we develop and
sell reference platforms designed around our silicon and software as application examples for
customer development.

The following chipset products are sold primarily into the consumer appliance
market:

- The original EM8300 provided MPEG-2 and -1 video decoding solutions for
PC-based DVD playback and streaming video, which won wide acclaim as the top MPEG hardware for the
PC, and included retail offerings by Creative Labs, Sony, and Panasonic.
- The EM8400 series provides MPEG-4, -2 and -1 video
and audio decoding for broadband interactive set-top boxes,
including companies such as Fujitsu-Siemens, Acer and Samsung. The
EM8400 Series represents one of the first MPEG-4 silicon solutions for the set-top box market.
- The EM8500 series is the first solution for DVD players, portable media players and video
endpoints to support MPEG-4 and DivXTM. It is also the first to feature high-quality scaling to
HDTV resolutions and support for DVI/HDCP. The unique features of the EM8500 series enabled the
availability of networked DVD players and low-cost video endpoints (digital media adaptors and
broadband network devices).
- The EM8610 series represents the first HDTV decoder silicon solutions to also support MPEG-4 and
IP video streaming. Designed for HDTVs and advanced set-top boxes, it also offers advanced
audio/video processing and progressive DVD playback. The software-compatible EM8610L series
addresses the more cost-sensitive SDTV and video endpoint markets.
- The EM8620L series represents the first HD WMV9 decoder silicon solution and also supports DVD
and HD MPEG-4/-2 decoding. Designed for video endpoints (such as digital media adaptors and
broadband IP video set-top boxes), DVD receivers and advanced DVD players, the EM8620L series offers
advanced audio/video processing.
- The SMP8630 series is the first chip to offer integrated support for H.264, WMV9, and MPEG
decoding in a single system-on-chip solution. It is designed for IPTV set-top boxes, high definition
DVD players, HDTV television, and DMAs.

We also offer a series of PC based solutions, under the NetStream and REALmagic Xcard brand
names, that are sold into the commercial streaming market and PC add-in market respectively:

- The NetStream 4000 and 2000TV are PC add-in cards featuring high
performance MPEG-4 and -2 decoding, bringing streaming video to virtually any PC-based system.
- The REALmagic XcardTM is a desktop PC add-in solution that plugs into
a standard PCI slot, providing high quality DVD, MPEG-4 and DivXTM Video playback onto a
standard TV or HDTV.

Marketing and Sales

We currently sell most of our products through our
direct sales force. We augment these sales through a select set of distributors and manufacturer
representatives operating in different regions of the world. Our U.S. distributor is Ingram Micro,
Inc. Our OEMs include Fujitsu-Siemens, KiSS Technology, Kreatel, LG Electronics, Lite-On and
Samsung. Our international distributors are strategically located in many countries around the
world.

We generally maintain products for distribution through
corporate markets based on forecasts rather than firm purchase orders. Additionally, we generally
acquire products for sale to our OEM customers only after receiving purchase orders from such
customers, which purchase orders are typically cancelable without substantial penalty from such OEM
customers. We currently place non-cancelable orders to purchase semiconductor products from our
suppliers on an eight to twelve week lead-time basis. Consequently, if, as a result of inaccurate
forecasts or canceled purchase orders, anticipated sales and shipments in any quarter do not occur
when expected, expenses and inventory levels could be disproportionately high, requiring more
working capital and resulting in more pressure on our operating results.
International customers accounted for 86% of our total net revenues in
fiscal 2005.

Sales to distributors are typically subject to contractual rights of inventory
rotation and price protection. Regardless of particular contractual rights, the failure of one or
more distributors or OEMs to achieve sustained sell-through of REALmagic products could result in
product returns or delayed or uncollectable receivables, contributing to significant fluctuations in
our operating results.

Research and Development

As of January 31, 2005, we had a staff of 87 research and development personnel. These research and
development personnel conduct all of our product development with the assistance of a number of
independent contractors and consultants. We are focusing our development efforts primarily on MPEG
decoder and WMV9 products, including new and improved versions of REALmagic MPEG chipsets and cost
reduction processes.

To achieve and maintain technological leadership, we must
continue to make technological advancements in the areas of MPEG video and audio compression and
decompression. These advancements include maintaining compatibility with emerging standards and
multiple platforms, and making improvements to the REALmagic architecture.

During fiscal 2005, 2004, and 2003, our research and
development expenses were $11.6 million, $10.0 million, and $8.4 million, respectively. We plan to
continue to devote substantial resources to research and development of future generations of MPEG
and other multimedia products.

Competition

The market for MPEG decoder products is highly
competitive. Rival companies include ESS Technology, Cirrus Logic, Mediatek, Zoran, ATI
Technologies, Equator Technologies, Texas Instruments, Phillips, Analog Devices, Broadcom,
STMicroelectronics, Conexant Systems and LSI Logic. Many of these companies have a higher profile,
larger financial resources, and greater marketing resources than Sigma and may develop a
competitive product that may inhibit the wide acceptance of our products' technology. We believe
that other manufacturers are developing MPEG products that will compete directly with our products
in the near future.

We believe that the principal competitive factors in the
market for MPEG decoder products include time to market for new product introductions, product
performance, industry standards compatibility, price, and marketing and distribution resources. We
believe that we compete most favorably with respect to time to market, product performance and
industry standards compatibility, and we may not be able to compete favorably
with respect to price, and marketing and distribution resources.

Licenses, Patents and Trademarks

We continually seek patent protection for certain
software and hardware features and intend to do so for future versions of REALmagic. We currently
have six pending patent applications for our REALmagic technology. Twenty-seven patents have been
issued to us. We cannot assure you that more patents will be issued or that such patents, even if
issued, or our existing patents will provide adequate protection for our competitive position. We
also attempt to protect our trade secrets and other proprietary information through agreements with
customers, suppliers and employees and other security measures. Although we intend to protect our
rights vigorously, we cannot assure you that these measures will be successful.

Manufacturing

To reduce overhead expenses, along with capital and
staffing requirements, we currently use third-party contract manufacturers to fulfill all of our
manufacturing needs, including chipset manufacturing and board-level assembly. All of the chips used
by us to develop our decoding products are manufactured by outside suppliers and foundries. Each of
these suppliers is our sole source of supply for the respectivechips produced by
such supplier and we do not have guaranteed price or quantity commitments.

Our reliance on independent suppliers involves several risks, including the
potential absence of adequate capacity and reduced control over delivery schedules, manufacturing
yields and costs. Any delay or interruption in the supply of any of the components required for the
production of REALmagic products could seriously harm our sales of products and, thus, our operating
results.

Backlog

Since our customers typically expect quick deliveries,
we seek to ship products within a few weeks of receipt of a purchase order. However, the customer
may reschedule delivery of products or cancel the purchase order entirely without significant
penalty. Historically, our backlog has not been reflective of future sales.

Employees

As of January 31, 2005, we had 149 full-time
employees, including 87 in research and development, 35 in marketing, sales and support, 8 in
operations, and 19 in finance and administration.

Our future success will depend, in part, on our ability to
continue to attract, retain and motivate highly qualified technical, marketing, engineering and
management personnel, who are in great demand. Our employees are not represented by any collective
bargaining unit, and we have never experienced a work stoppage. We believe that our employee
relations are satisfactory.

ITEM 2. PROPERTIES

We currently lease a 40,000 square foot facility in
Milpitas, California that is used as our headquarters. The lease on our Milpitas, California
facility will expire in September 2007. We also lease facilities for a sales office in Hong Kong and
a representative office in Shenzhen China, and for research and development near Paris, France. We
believe existing facilities are both suitable and adequate for our near-term needs.



ITEM 3.	LEGAL PROCEEDINGS

Not applicable.

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

No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 2005.

EXECUTIVEOFFICERS OF THE REGISTRANT

The following table sets forth certain information
concerning our executive officers as of April 1, 2005:



|Name               | Age | Position                                                     
|------------------ | --- | -------------------------------------------------------------
|Thinh Q. Tran      | 52  | Chairman of the Board, President, and Chief Executive Officer
|Silvio Perich      | 57  | Senior Vice President, Worldwide Sales                       
|Jacques Martinella | 49  | Vice President, Engineering                                  
|Kenneth Lowe       | 49  | Vice President, Strategic Marketing                          
|Kit Tsui           | 56  | Chief Financial Officer, and Secretary                       

_______________

Mr. Tran, a founder of Sigma, has served as President, Chief
Executive Officer, and Chairman of the Board of Directors since February 1982. Prior to joining
Sigma, Mr. Tran was employed by Amdahl Corporation and Trilogy Systems Corporation, both of
which were involved in the IBM-compatible mainframe computer market.

Mr. Perich joined Sigma in September 1985 as Director, Sales. In
September 1992, Mr. Perich became Senior Vice President, Worldwide Sales. Mr. Perich was a
co-founder of Costar Incorporated, a manufacturers' representative organization for high technology
products, where he served as partner from October 1979 to September 1985. From September 1972 until
September 1979, Mr. Perich served in several sales management roles at Siliconix Inc, a
specialty semiconductor manufacturer.

Mr. Martinella joined Sigma in May 1994 as Director, VLSI
Engineering. In December 1995, Mr. Martinella became Vice President, Engineering. From June
1990 to April 1994, Mr. Martinella served in engineering and management positions at Weitek, a
microchip manufacturer. In addition, Mr. Martinella was an engineer at National Semiconductor, a
semiconductor manufacturer, from June 1982 to June 1990.

Mr. Lowe joined Sigma in May 2000 as Vice President, Marketing. In
December 2000, Mr. Lowe became Vice President, Strategic Marketing. Prior to joining Sigma, Mr. Lowe
served as the Director of Multimedia Marketing for Cadence Design Systems. From 1996 to 1998, Mr.
Lowe served as the Vice President of Marketing for Chrontel. Prior to 1996, Mr. Lowe held various
marketing management positions at Sierra Semiconductor, Datquest, Personal CAD Systems, Performix
and Gould-Biomation. In the late 1980's, Mr. Lowe served as Product Marketing Director of Sigma.

Ms. Tsui joined Sigma in November 1982 as its Accounting Manager.
Ms. Tsui was promoted to Director of Finance in February 1990, acting Chief Financial Officer
and Secretary in December 1996, Chief Accounting Officer in January 2000 and Chief Financial Officer
in January 2001.

There is no family relationship among any of our directors and executive
officers.

PART II

ITEM 5.	MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock trades on The Nasdaq National Market under the trading
symbol "SIGM". The following table sets forth the high and low sales prices per share of our common
stock for each quarter in the last two fiscal years.

|                                | Fiscal 2005 | Fiscal 2004
|------------------------------- | ----------- | -----------
|                                | High        | Low        
|First quarter ended April 30    | $8.95       | $5.77      
|Second quarter ended July 31    | 9.57        | 4.75       
|Third quarter ended October 31  | 9.84        | 5.35       
|Fourth quarter ended January 31 | 10.30       | 6.81       

Shareholders

As of April 8, 2005, we had approximately 6,185 shareholders of record.

Dividends

We have never paid cash dividends on our common stock and we do not plan to
pay cash dividends to our common shareholders in the foreseeable future.

ITEM 6.	SELECTED FINANCIAL DATA

The following selected financial data is derived from our consolidated
financial statements. This data should be read in conjunction with our consolidated financial
statements, the notes related thereto, and Management's Discussion and Analysis of Financial
Condition and Results of Operations, which are included elsewhere in this Annual Report on Form 10-K.

|                                                                     | Fiscal Year                          
|-------------------------------------------------------------------- | -------------------------------------
|Year ended January 31,                                               | 2005                                 
|                                                                     | (In thousands, except per share data)
|Net Revenues                                                         | $ 31,437                             
|Net income (loss) available to common shareholders                   | 1,840                                
|Diluted net income (loss) per share available to common shareholders | 0.08                                 
|Working capital                                                      | 23,998                               
|Total assets                                                         | 34,937                               
|Shareholders' equity                                                 | 29,112                               

ITEM 7.	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 RELATED NOTES. THE FOLLOWING DISCUSSION INCLUDES
FORWARD-LOOKING STATEMENTS, WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E
OF THE SECURITIES EXCHANGE ACT OF 1934, ABOUT THE MARKETS IN WHICH WE OPERATE AND OUR BUSINESS AND
PROSPECTS, INCLUDING STATEMENTS ABOUTOUR REVENUESS, GROSS MARGIN, OPERATING
EXPENSES, THE SUFFICIENCY OF OUR CURRENT RESERVE OF CASH AND CASH
EQUIVALENTS, OUR SHORT-TERM INVESTMENTS AND OUR BANK LINES OF CREDIT TO MEET OUR WORKING CAPITAL
REQUIREMENTS, AND THE EFFECT OF INTEREST RATE CHANGES ON THE VALUE OF OUR SHORT-TERM INVESTMENTS,
OUR BANK LINES OF CREDIT AND OUR FOREIGN CURRENCY CASH BALANCES. THESE STATEMENTS ARE SUBJECT TO
MANY RISKS AND UNCERTAINTIES WHICH MAY RESULT IN DIFFERENT OR DISAPPOINTING FUTURE BUSINESS AND
FINANCIAL RESULTS. MANY OF THESE RISKS AND UNCERTAINTIES ARE DISCUSSED IN THIS REPORT, INCLUDING
UNDER "CERTAIN FACTORS AFFECTING BUSINESS, OPERATING RESULTS, AND FINANCIAL CONDITIONS".

Results of Operations

For the fiscal year ended January 31, 2005, our net revenues increased 3% to
$31.4 million from $30.5 million reported for fiscal 2004. This slight increase in revenues was
primarily attributable to the increased non-recurring engineering revenues and sales of our new
EM8620 Windows Media 9 media processors in the IP video application and advanced DVD/media player
markets which was partially offset by the decreased sales of other MPEG chipset products in the same
markets. Revenues from sales of our products in IP video application and advanced DVD/media player
market increased to 91% of our total revenues in fiscal 2005 compared to 88% of total revenues for
fiscal 2004 and 73% for fiscal 2003, while revenues from sales of our products in the PC add-in
market decreased to 8% in fiscal 2005 compared to 12% for fiscal 2004 and 27% for fiscal 2003.

Net income for the fiscal year ended January 31, 2005 was $1.8 million, increased
by $0.3 million as compared to net income of $1.5 million for the prior fiscal year. The increase
was primarily attributable to increased revenues of $0.9 million, gross margin of $3.1 million, an
incentive of $0.4 million received from the French tax authorities, and interest income of $0.1
million from our short term investments, partially offset by increased operating expenses. The
incentive recovered qualifying research and development expenditures incurred by our French
subsidiary in fiscal 2001.

The following table shows certain items as a percentage of net revenues, which
are included in our Consolidated Statements of Operations:

|                                                   | Fiscal 2005 | Fiscal 2004 | Fiscal 2003
|-------------------------------------------------- | ----------- | ----------- | -----------
|Net revenues                                       | 100%        | 100%        | 100%       
|Cost of revenue                                    | 30%         | 38%         | 45%        
|Gross profit                                       | 70%         | 62%         | 55%        
|Operating expenses:                                |             |             |            
|Research and development                           | 37%         | 33%         | 46%        
|Sales and marketing                                | 15%         | 16%         | 25%        
|General and administrative                         | 14%         | 8%          | 16%        
|Other (income) expense                             | (2%)        | 0%          | 1%         
|Net income (loss) available to common shareholders | 6%          | 5%          | (33%)      

Net Revenues

The following table sets forth our net revenues in each of our major product
group, and the percentage of total net revenues represented by each product group, for the last
three years:

|(Dollars in thousands) | Fiscal 2005 | Fiscal 2004 | Fiscal 2003
|---------------------- | ----------- | ----------- | -----------
|Boards                 | $ 3,280     | 10%         | $ 3,231    
|Chipsets               | 26,380      | 84%         | 25,880     
|Other                  | 1,777       | 6%          | 1,409      
|TOTAL NET REVENUES     | $31,437     |             | $30,520    

Our board level product lines target OEM customers to address the DVD upgrade market, system integrators to
address the computer-based training, kiosks, and corporate video-on-demand markets and consumer
markets for upgraded multimedia products. Our chipsets are targeted toward manufacturers and large
volume OEM customers building interactive multimedia products for business and consumer markets. The
"Other" category includes Netstream consoles for the IP video application market, development kits,
set-top box products and accessories, service revenues under agreements for providing hardware and
software support, engineering development for
customization of certain MPEG decoding chipsets and freight fees charged to customers. The costs
related to support service revenues and development revenues were included in sales and marketing
expenses, and research and development expenses, respectively.

We anticipated the continuous decrease in revenues for our MPEG board
products from fiscal 2003 through 2005, which were
mainly attributable to our decision to focus on the chipset products in the IP video application and
advanced DVD/media player market instead of board products in the same markets. The increases in
revenues for our chipset products from fiscal 2003 through fiscal 2005 were attributable to the
continuing growth of demand for our chipset products from the IP video application and advance
DVD/media player markets, leading to increased unit sales and higher introduction selling prices of
our new advanced DVD player and IP video set-top box chipsets.

The table below sets forth our net revenues by market and
the percentage of total net revenues represented by our product sales to each market segment for
each of the last three fiscal years:

|(Dollars in thousands)           | Fiscal 2005 | Fiscal 2004 | Fiscal 2003
|-------------------------------- | ----------- | ----------- | -----------
|IP video application market      | $18,063     | 58%         | $15,068    
|Advanced DVD/media player market | 10,379      | 33%         | 11,690     
|HDTV product market              | 362         | 1%          | 94         
|PC add-in and other markets      | 2,633       | 8%          | 3,668      
|TOTAL NET REVENUES               | $31,437     |             | $30,520    

For fiscal 2005, revenues from sales of our products to
the IP video application market increased 20% or $2,995,000 from fiscal 2004 and increased 53% or
$5,234,000 for fiscal 2004 compared to fiscal 2003. For fiscal 2005, revenues from sales of our
products to the advanced DVD/media player market decreased 11% or $1,311,000 from fiscal 2004 and
increased 235% or $8,200,000 for fiscal 2004 compared to fiscal 2003.

The increase in revenues in the IP video application market for fiscal 2005 as compared to
fiscal 2004 and 2003 is mainly attributable to increased unit sales due to the increase in internet
protocol television (IPTV) and digital media adapter (DMA) deployment.  We expect our revenues from
the IP video application market to fluctuate in future periods due to the uneven pace of IPTV
service deployments.

The decrease in revenues from sales of our products to the advanced DVD/media
player market for fiscal 2005 as compared to fiscal 2004 is attributable to decreased unit sales and
lower average selling price of our MPEG chipsets to advanced DVD player manufacturers, partially
offset by increased revenues from sales of our new Window Media Video (WMV9) chipsets. The increase
in revenues for fiscal 2004 compared to fiscal 2003 was mainly due to increased sales of our MPEG
chipset products. We expect revenues from sales of our products to the advanced DVD/media player
market will continue to fluctuate, primarily due to changes in demand from our customers. If,
however, these declines in unit sales and average selling prices for our products sold into the
advanced DVD/media player market were to continue, it could harm our revenues and profitability.

We began shipment of HDTV applications during the second quarter of fiscal 2004,
and expect revenues in the HDTV product market to increase slowly over the near term.

The category "PC add-in and other markets" in the above table consists of PC
add-in board and chipset products, engineering support services for both hardware and software,
engineering development for customization of chipsets, and freight fees. The continued decrease in
revenues for fiscal 2005 and 2004 is due to the decreased unit sales of our chipsets to the PC
add-in market, partially offset by increased revenues in engineering development projects. We expect our
revenues from sales for these products to the PC add-in markets to continue to decrease due to the
generally declining demand, and we expect our revenues from engineering development projects to
fluctuate in future periods due to the timing and complexity of the projects required by our
customers.

The table below sets forth our net revenues by geographic region, and the
percentage of total net revenues represented by each geographic region, for each of the last three
fiscal years:

|(Dollars in thousands) | Fiscal 2005 | Fiscal 2004 | Fiscal 2003
|---------------------- | ----------- | ----------- | -----------
|Asia                   | $20,571     | 65%         | $19,816    
|Europe                 | 6,462       | 21%         | 6,502      
|United States          | 4,345       | 14%         | 4,168      
|Canada                 | 56          | 0%          | 22         
|Other regions          | 3           | 0%          | 12         
|TOTAL NET REVENUES     | $31,437     |             | $30,520    

Our Asia revenues for fiscal 2005 were derived predominantly from customers in
China, Taiwan, and Korea. Revenues generated from China, Taiwan, and Korea, in fiscal 2005 accounted
for 21%, 17% and 16% of our total net revenues, respectively as compared to 12%, 22%, and 11% for
fiscal 2004 and 8%, 4% and 4% for fiscal 2003. Our Europe revenues in fiscal 2005 were derived
predominantly from customers in Denmark. Revenues generated from Denmark in fiscal 2005 accounted
for 15% of our total net revenues, as compared to 12% for fiscal 2004 and 21% for fiscal 2003. In
fiscal 2005 no domestic customer accounted for more than 10% of our total net revenues, one customer
in Asia accounted for 15% of our total net revenues and one customer in Europe accounted for 14% of
our total net revenues. In fiscal 2004, no customer accounted more than 10% of our total net
revenues and one customer based in Europe accounted for 19% of our total net
revenues in fiscal 2003. Our 2005 international revenues were at the same percentage as fiscal
2004, approximately 86% of our total net revenues. The
percentage of international sales was 67% in fiscal 2003. We expect that international sales will
continue to account for a significant portion of revenues, due in part to the significant overseas
manufacturing of consumer appliances by our chipset customers.

Gross Margin

Our gross margin as a percentage of net revenues was approximately 70% in
fiscal year 2005, 62% in fiscal 2004, and 55% in fiscal 2003. This improvement was due to our
continuing efforts to reduce the cost of our original MPEG board and chipset products, and the
introduction and sales of our new higher-margin chipset and board products as
well as increased service and development revenues. In addition, the costs related to service
revenues and development revenues were included in sales and marketing expenses, and
research and development expenses respectively (see reference to Critical Accounting Policies - Revenue Recognition),
while our expense for
inventory obsolescence included in cost of revenues decreased to $0.2 million
versus $0.6 million in fiscal 2004 and $0.7 million in fiscal 2003.
We expect our gross margins will vary from period to
period due to changes in the mix of product sales, selling prices, including as
affected by volume discounts, our costs, the extent of development fees,
and provisions for inventory obsolescence. Because average selling prices of our products typically
decline over the life of a product, if we are unable to reduce costs faster than the rate of such
decline or introduce new products with higher average selling prices, our gross margins will
decline.

Operating Expenses

In fiscal 2005, sales and marketing expenses were
comparable to fiscal 2004 and increased $0.3 million or 6% in fiscal 2004 compared to fiscal 2003. We believe that our sales and
marketing expenses will increase in absolute dollar terms infuture periods as we intend to increase headcount in our sales and marketing
organization and to expand our product marketing and sales development.

Research and development expenses increased $1.6 million
or 16% in fiscal 2005 compared to fiscal 2004 and $1.6 million or 20% in fiscal 2004 compared to fiscal 2003. The year-over-year increase in
research and development expenses was primarily attributable to the additions
of engineering staff at our headquarters, our Hong Kong office and development center in France,
independent contractors and consultants, prototype costs of new products, and various licensing
fees. We plan to continue our efforts in the
development of our proprietary MPEG and WMV9 based products, and expect research and development expenses will likely increase by 10% to
20%in absolute dollar terms on a year-over-year basis
at least for the near term.

Our general and administrative expenses increased $1.7 million or 68% in fiscal
2005 compared to fiscal year 2004, due to additional expenses for various professional services -
most of which are Sarbanes-Oxley related, totaling approximately $0.5 million. The increase is also
due to additional bad debt expense of $0.6 million compared to a $0.2 million recovery in 2004 and legal
costs that were $0.2 million greater than prior year. Our general and administrative expenses decreased $0.5
million or 16% in fiscal 2004 compared to fiscal 2003. The decrease was mainly due to a $0.2 million
recovery of bad debt expenses and the reduction of professional service fees. We expect our general
and administrative expenses will increase in absolute dollar terms in future periods due to the
continually increasing cost of insurance, professional services and other expenditures associated
with our business.

Liquidity and Capital Resources

As of January 31, 2005, our principal sources of liquidity consisted of cash and cash equivalents and
short-term investments of $18.8 million, a slight decrease of $0.2 million compared with $19.0 million at January
31, 2004. The decrease resulted from an additional $1.0 million investment in an Original Equipment
Manufacturer (the OEM) headquartered in Europe, a $1.0 million investment in a local early-stage
technology company and capital equipment additions of $1.2 million.  The decrease was partially offset by
cash generated from operations of $2.0 million and $1.3 million from the exercise and purchase of stock by
employees through the stock options plan and the Employee Stock Purchase Program.   Our ownership
interest in the OEM is less than 7% as of January 31, 2004 and less than 10% as of January 31, 2005 and is
accounted for using the cost method. We had revenues from product sales to this OEM of $4.5 million,
$1.4 million, and $0.3 million in fiscal 2005, 2004, and 2003, respectively. We had an accounts receivable
balance of $2.5 million and $0.8 million from this OEM at January 31, 2005 and 2004, respectively.
Subsequent to January 31, 2005, payment terms for the $2.5 million receivable balance from this OEM
were modified to provide for an extended repayment arrangement of eight weekly installment payments
ranging from  $300,000 to $420,000, commencing March 21, 2005 through May 9, 2005.  The modified
payment terms were in response to cash flow difficulties the OEM encountered subsequent to its product
purchases from us, primarily because of operational issues that arose when the OEM transferred the
manufacturing of its products to another contract manufacturer. To extend its payment terms, the OEM
provided to us a security interest on certain of its assets.  As of April 12, 2005 the OEM was ahead of
schedule with respect to the modified payment terms and, as a result, the remaining balance of this
receivable had been reduced to approximately $0.5 million which we believe is fully collectable.

We do not have guaranteed price or quantity commitments for any of our suppliers.
The following table sets forth the amounts (in thousands) of payments due under specified
contractual obligations, which consisted solely of operating lease commitments, as of January 31, 2005.

`Contractual Obligations                                   Operating
Payments Due by Period                                     Leases
-------------------------------                           ---------
1 year or less.......................................... $     788
1-3 years...............................................     1,130
                                                          ---------
Total................................................... $   1,918
                                                           =========`

On October 29, 2004, we entered into an amended and restated revolving line of
credit, expiring in October 2005, which is primarily collateralized by our accounts receivable and
under which we can draw down a maximum of $3.0million.As
of January 31, 2005, we had availability to draw down approximately $1.2 million. In addition, we
have a bank line of credit of $3.0 million that expires in October 2005, which line is secured by
substantially all of our assets. The entire $3.0 million of bank line is available for borrowing. As
of January 31, 2005, we had no borrowings outstanding under either line of credit. Under the agreements for these lines of credit, we are
subject to certain financial covenants. As of January 31, 2005, we were in compliance with these
covenants.

Our primary sources of funds to date have been proceeds from preferred and common
stock issuances, and borrowings under bank lines of credit. In certain periods, cash generated from
operations has also been a source of funds. While we generated cash from operations for the year
ended January 31, 2005 and 2004, it is possible that our operations will consume cash in future
periods. Other than the obligations under certain
contractual agreements shown on the table above, we currently have no long-term debt. Based on our
currently anticipated cash needs, we believe that our current reserve of cash and cash equivalents,
including the proceeds from our private placements of common stock during the first half of fiscal
2004, will be sufficient to meet our primary uses of cash, which include our anticipated working
capital requirements, obligations, capital expenditures, strategic investments, and other cash needs
for the next twelve months. In addition, we believe that we will be able to comply with or make
modifications to the current covenants under our existing asset-based banking agreements, and to renew those lines of credit upon their
expiration, in order to maintain the availability of
funds under these agreements.

CERTAIN FACTORS AFFECTING BUSINESS, OPERATING RESULTS, AND FINANCIAL CONDITION

You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the only ones facing Sigma
Designs. Additional risks and uncertainties not presently known to us or that we currently deem
immaterial may also impair our business operations.

If any of the following risks actually occur, our business, financial condition
and results of operations could be materially adversely affected. In such case, the trading price of
our common stock could decline, and you could lose all or part of your investment.

Our business is highly dependent on the expansion of young and rapidly evolving segments of the consumer
electronics market

Our business is highly dependent on the sale of IP
video set-top boxes, advanced DVD/media players, and high definition televisions. We expect the
majority of our current revenues to come from the sale of chipsets for use in emerging consumer
applications. The digital home entertainment market will continue to account for a significant
portion of our net revenues for the foreseeable future. Our ability to sustain and increase revenues
is in large part dependent on the continued growth of these young and rapidly
evolving market segments, whose future is largely uncertain. Many factors
could impede orinterfere with the expansion of these
consumer market segments, including general economic
conditions, other competing consumer electronic
products, delays in the deployment of telecommunications video services and insufficient interest in
new technology innovations. In addition, even if these consumer market segments expand,
manufacturers of products in these segments may not choose to utilize our products in their
products, but rather the products of our competitors. Moreover, market acceptance of the products of
manufacturers that do utilize our products may not occur as expected. In any such case, our business
would likely be harmed.

We have a history of operating losses and we could
sustain future losses. We cannot assure you that we will be profitable and if we continue to lose
money, our business may not be financially viable.

We incurred significant operating losses in fiscal
1995, 1996, 1998, 2001, 2002 and 2003 and had negative cash flow in fiscal 1995, 1998, 2002 and
2003. Since our introduction of the REALmagic® MPEG product line in November 1993, we
have made significant investments in marketing and technological innovation for our REALmagic
products. As a result of our investments, we experienced significant losses through fiscal 1996.
Fiscal 1995, 1996 and 1998 also included significant losses associated with products other than
those related to our REALmagic technology. Fiscal 2001, 2002 and 2003 included significant losses
associated with a decline in demand for our REALmagic products. Since our inception through
January 31, 2005, our total accumulated deficit is $59.123 million. We cannot assure you that we
will not incur operating losses in any future fiscal quarter or fiscal year.

Our operating results are subject to significant fluctuations due to many
factors and any of these factors could adversely affect our stock price.

Our operating results have fluctuated in the past and may continue to
fluctuate in the future due to a number of factors, including but not limited to:

- New product introductions by us and our competitors;
- Changes in our pricing models and product sales mix;
- Unexpected reductions in unit sales, average selling prices and/or gross margins, particularly if
they occur precipitously;
- Expenses related to compliance with Section 404 of the Sarbanes-Oxley Act of 2002;
Market acceptance of the technology embodied in our products generally and our products in
particular;
- The level of acceptance of our products by our OEM customers, and acceptance of our OEM customers'
products by their end user customers;
- Shifts in demand for the technology embodied in our products generally and our products in
particular and those of our competitors;
- Gains or losses of significant customers;
- The timing of, and potential unexpected delays in our customer orders and product shipments;
Reduction in average selling prices and gross margins, which could occur either gradually or
precipitously;
- Inventory obsolescence;
- Write-downs of accounts receivable;
- An interrupted or inadequate supply of semiconductor chips or other materialsincluded in our products, for example, our source of supply for
silicon wafers was, and may in the future be, affected by earthquakes in Taiwan;
- Our inability to protect our intellectual property;
- Loss of key personnel;
- Technical problems in the development, ramp up, and manufacturing of products which could cause
shipping delays;
- The effect of terrorist attacks and any related conflicts or similar events worldwide;
- Availability of third-party manufacturing capacity for production of certain products;
- The impact of a recurrence of severe acute respiratory syndrome, or SARS, upon our revenues and our
supply sources for our products; and
- The impact of potential economic instability in the Asia-Pacific
region.

Our industry is highly competitive and we cannot assure you that we will be able
to effectively compete. If we fail to compete effectively, our growth could be substantially
affected.

The market for multimedia products is highly competitive and includes
embedded processors provided by multiple companies. Processors have, in recent years, included
increased graphics functionality. Other companies with more experience and financial resources may
develop a competitive product that could inhibit future growth in sales of products utilizing our
REALmagic technology. Increased competition may be generated from several major computer product
manufacturers that have developed products and technologies that could compete directly with
REALmagic products. These competitors include:

- Analog Devices;
- ATI Technologies;
- Broadcom;
- Cirrus Logic;
- Conexant Systems;
- Equator Technologies;
- ESS Technology;
- LSI Logic/C-Cube;
- Mediatek;
- Phillips;
- STMicroelectronics;
- Texas Instruments; and
- Zoran Corporation.

In addition, for some applications, video decoding is done in software operating on today's
more powerful CPUs. Most of our competitors have substantial experience and expertise in audio,
video and multimedia technology and in producing and selling consumer products through retail
distribution and OEM channels. These companies also have substantially greater engineering,
marketing and financial resources than we have.  Our competitors could form cooperative
relationships that could present formidable competition to us. We cannot assure you that our
REALmagic technology will continue to achieve commercial success or that it will compete effectively
against other interactive multimedia products, services and technologies that currently exist, are
under development, or may be announced by competitors. Also, we anticipate that our competitors
will, over time, introduce features that have been unique to Sigma Designs, such as WMV9 decoding.
We cannot assure you that we will not lose market share or suffer price erosion in each of our
market segments, as a result of the introduction of competitive products with similar features.

The requirements of Section 404 of the Sarbanes-Oxley Act will increase our operating
expenses, and our receipt of an adverse opinion on internal controls from our external auditor could
adversely affect the market price of our stock.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are
required to include an internal controls report of management's assessment of the design and
effectiveness of our internal controls as part of our Annual Report on Form 10-K beginning with the
fiscal year ended January 31, 2005. Our independent auditors are required to attest to, and report
on, our management's assessment. In our report, our management documents both the design of our
internal controls and the testing processes supporting management's evaluation and conclusion. We
extensively documented and tested our internal controls over financial reporting in order to meet
our required compliance date of January 31, 2005. We hired additional personnel and engaged outside
advisory services all of which caused our operating expenses to increase. We expect to incur
additional expenses in the future in connection with compliance with Sarbanes-Oxley in future
periods. In addition, deficiencies and weaknesses identified by the Company and our independent
auditors are required to be remediated and this will likely result in additional expenses. These
include material weaknesses which resulted in an adverse opinion on our internal controls, including
the following: (1) inadequate controls to ensure that financial information is adequately analyzed
to detect misstatements, (2) the lack of understanding of generally accepted
accounting principles and SEC reporting matters, and (3) inadequate supervision and review controls
over the recording of stock options. We are evaluating the additional steps and actions needed to
improve our financial infrastructure and eliminate the deficiencies and weaknesses identified and
will take appropriate remedial action. We believe that the internal control deficiencies and
material weaknesses identified to date did not have a material effect on our financial statements
for the period ended January 31, 2005. However the receipt of the adverse opinion from our
independent auditors over internal controls could detrimentally impact our stock price.

Sales risks and volatility of OEM customer sales and resale distribution
may harm our business.

Our ability to increase sales and achieve continued profitability depends
substantially on our ability to achieve a sustained high level of sales to our OEM customers. We
have not executed volume purchase agreements with any of our current customers. Our customers are
not under any obligation to purchase any minimum quantity of our products. Also, even if we achieve
new design wins, we cannot assure you that these manufacturers will purchase our products in
substantial volumes. Sales to any particular OEM customer fluctuate significantly from quarter to
quarter and are subject to severe price pressures by competitors. Any reductions in those sales
could seriously harm our business. Based on our experience in the industry, we expect that our
actual sales to OEM customers will continue to experience significant fluctuations. Also, estimates
of future sales to any particular customer or groups of customers are inherently uncertain.

Because we depend on a limited number of major customers, the reduction,
delay or cancellation of orders from these customers or the loss of these customers may adversely
affect our business.

In fiscal 2005, no domestic customer accounted for more than 10% of our
total net revenues, however, one customer in Asia accounted for 15% and one customer in Europe
accounted for 14% of our total net revenues. In fiscal 2004, no customer accounted more than 10% of
our total net revenues and only one customer based in Europe accounted for 19% of our total net
revenues in fiscal 2003.Our dependence on a few major customers will likely
continue despite other changes in the composition of
our customer base. The reduction, delay or cancellations of orders from major customers or the loss
of major customers could materially and adversely affect our business, financial condition and
results of operations. In addition, any difficulty in collection from key customers could harm our
business.

Our international operations are subject to certain risks.

Our international sales represented 86% of total net revenues for the
years ended January 31, 2005 and 2004, and 67% for the year ended January 31, 2003. We anticipate
that sales to international customers will continue to constitute a substantial percentage of our net revenues. Also, one of the foundries
that manufacture our products and components is located in Asia.

Due to the concentration of international sales and the manufacturing
capacity in Europe and Asia, we are subject to the risks of conducting business internationally.
These risks include unexpected changes in regulatory requirements and fluctuations in the U.S.
dollar that could increase the sales price in local currencies of our products in international
markets, or make it difficult for us to obtain price reductions from our foundries.  Overseas sales and purchases to date have been denominated in
U.S. dollars.  We do not currently engage in any hedging
activities to reduce our exposure to exchange rate risks.  Our results of operations could be
adversely affected by exchange rate fluctuations.

We derive a substantial portion of our revenues from sales to the Asia
Pacific region.  This region of the world is subject to increased levels of economic instability,
and this instability could seriously harm our results of operations. Further, the economic impact of
a recurrence of SARS or a similar eventin this
region could adversely affect our revenues and our business as a whole.

The timing of our customer orders and product shipments can adversely
affect our operating results and stock price.

Our quarterly revenues and operating results depend upon the volume and timing of
customer orders received during a given quarter and the percentage of each order that we are able to
ship and recognize as revenues during each quarter, each of which is extremely difficult to
forecast. The majority of our orders in a given quarter historically have been shipped in the last
months of that quarter. This trend is likely to continue, and any failure or delay in the closing of
orders during the last part of a quarter would adversely affect our operating results.  Further, to
the extent we receive orders late in any given quarter, we may be unable to ship products to fill
those orders during the same quarter in which we received the corresponding order, which would have
an adverse impact on our operating results for that quarter.

Our products are subject to increasing price pressures.

Some of our markets, especially the DVD segments, are characterized by intense price
competition.  The willingness of customers to design our chips  into their products depends to a
significant extent, upon our ability to sell our products at competitive prices.  We expect the
average selling price of our existing products to decline significantly over the life of each
product as the markets for our products mature, new technologies emerge, and competition increases.
If we are unable to reduce our costs sufficiently to offset declines in product prices or are unable
to introduce more advanced products with higher marginsin a timely manner, we could see declines in our market share or
gross margins.

If we fail to comply with or obtain waivers for covenants under our loan
obligations, our financial condition could be
harmed.

We have two lines of credit with a bank, which allow for
borrowings of $3.0 million from each line. Under the agreements for these lines of credit, which
expire in October 2005, we are subject to certain financial covenants. In the past, we had, on
occasion, been in violation of some of the covenants and in all cases, obtained waivers releasing us
from our obligation to meet these covenants as of previous dates.  It is possible that we may need
such a waiver for future non-compliance and we cannot assure you that our bank will grant these
waivers. If we do not meet these covenants and cannot obtain waivers, the lender could accelerate
payments of any amounts due under the lines.  To the extent we had borrowed
amounts under these lines and were required to repay them on an accelerated basis, it could substantially weaken our financial condition. If we do not have
sufficient funds available to make full payment of the lines when required, the bank could foreclose on our accounts receivable,
inventories, general intangibles, equipment and tangible assets that collateralize the notes, which
would harm our business. As of January 31, 2005, we had no borrowings outstanding under any line of
credit.

Our future revenues growth depends in large part on the adoption of MPEG
technology and new CODECs.

Our business strategy is, and has been, to focus on our REALmagic
products by investing heavily in video decoding technology. We have made
substantial investments in product development based on the latest MPEG technology, WMV9. Though
WMV9 has gained some market acceptance, there is increasing competition from the ISO H.264 standard,
a next generation video CODEC that forms an extension of MPEG-4. Though we intend to support new
CODEC technologies as they become commercially viable, there is no guarantee that we can
successfully develop these technologies in a timely manner or that competitors will not gain market share at our expense with these new
technologies.

Our failure to keep pace with technological change will seriously harm our
business.

Our success depends, among other things, on our ability to achieve and
maintain technological leadership and to remain competitive in terms of price and product
performance.

Our technological leadership depends on our continued technological advancements,
as well as research and development investments in the area of MPEG video and audio decoding. These
advancements include the following:

- Compatibility with emerging standards and multiple platforms; and
- Improvements to our silicon architecture.

We cannot assure you that we will be able to make these advancements to our technology. Even if
we do make these advances, we cannot assure you that we will be able to achieve and maintain
technological leadership.  Any material failure by us or OEMs and software developers to develop or
incorporate any required improvement could adversely affect the continued acceptance of our
technology and the introduction and sale of future products based on our technology.  We cannot
assure you that products or technologies developed by others will not render our technology and the
products based on our technology obsolete.

To be competitive, we must anticipate the needs of the market and successfully develop and introduce
innovative new products in a timely fashion.  We cannot assure you that we will be able to
successfully complete the design of our new products, have these products manufactured at acceptable
manufacturing yields, or obtain significant purchase orders for these products.  The introduction of
new products may adversely affect sales of existing products and contribute to fluctuations in
operating results from quarter to quarter.  Our introduction of new products also requires that we
carefully manage our inventory to avoid inventory surplus and obsolescence.  Our failure to do so
could adversely impact our results of operations. In addition, new products, as opposed to more
mature products, typically have higher initial component costs.  These higher costs could result in
downward pressures on our gross margins.

We face many risks because of our heavy reliance on certain manufacturers
and suppliers that could harm our business and financial condition.

Our products and components are presently manufacturedentirely by outside suppliers or foundries. We do
not have long-term contracts with these suppliers. We conduct business with our suppliers on a
written purchase order basis. Our reliance on independent suppliers subjects us to several risks.
These risks include:

- The absence of adequate capacity;
- The unavailability of, or interruptions in access to,
certain process technologies; and
- Reduced control over delivery schedules, manufacturing
yields and costs.

We obtain some of our components from a single source.
Other delays or interruptions have not occurred to date, but any delay or interruption in the supply
of any of the components required for the production of our REALmagic silicon or our REALmagic
multimedia cards currently obtained from a single source, including delays resulting from a
recurrence of SARS, earthquakes or other business interruptions could have a material adverse impact on our sales of REALmagic products,
and on our business.

We must provide our suppliers with sufficient lead-time to meet our forecasted manufacturing
objectives.  Any failure to properly forecast such quantities could materially and adversely affect
our ability to produce REALmagic products in sufficient quantities. We cannot assure you that our
forecasts regarding new product demand will be accurate, particularly because we sell our REALmagic
products on a purchase order basis. Manufacturing REALmagic chipsets is a complex process, and we
may experience short-term difficulties in obtaining timely deliveries.  This could affect our
ability to meet customer demand for our products. Any such delay in delivering products in the
future could materially and adversely affect our operating results. Also, should any of our major
suppliers become unable or unwilling to continue to manufacture our key components in required
volumes, we will have to identify and qualify acceptable additional suppliers.  This qualification
process could take up to three months or longer and additional sources of supply may not be in a
position to satisfy our requirements on a timely basis.

In the past, we have experienced production delays and other difficulties, and we could experience
similar problems in the future. In addition, product defects may occur and they may escape
identification at the factory. This could result in unanticipated costs, cancellations, deferrals of
purchase orders, or costly recall of products from customer sites.

Loss of key personnel could cause our business to suffer.

Our future success depends in large part on the continued service of our key technical,
marketing, sales and management personnel. Given the complexity of REALmagic technology, we are
dependent on our ability to retain and motivate highly skilled engineers involved in the ongoing
hardware and software development of REALmagic products. These engineers are required to refine the
existing hardware system and application programming interface and to introduce enhancements in
future applications. Despite incentives we provide, our current employees may not continue to work
for us, and if additional personnel were required for our operations, we may not be able to obtain
the services of additional personnel necessary for our growth.

We face risks related to intellectual property rights.

Our ability to compete may be affected by our ability to protect our
proprietary information. We currently hold twenty-seven patents covering the technology underlying
the REALmagic products. We have filed certain patent applications and are in the process of
preparing others. We cannot assure you that any additional patents for which we have applied will be
issued or that any issued patents will provide meaningful protection of our product innovations.
Like other emerging multimedia companies, we rely primarily on trade secrets and technological
know-how in the conduct of our business. We also rely, in part, on copyright law to protect our
proprietary rights with respect to our REALmagic technology. We use measures such as confidentiality
agreements to protect our intellectual property. These methods of protecting our intellectual
property may not be sufficient.

The electronics industry is characterized by frequent litigation regarding patent and
intellectual property rights. Any such litigation could result in significant expense to us and
divert the efforts of our technical and management personnel. In the event of an adverse result in
any such litigation, we could be required to expend significant resources to develop non-infringing
technology or to obtain licenses to the technology that is the subject of the litigation, and we may
not be successful in such development or in obtaining such licenses on acceptable terms, if at all.
In addition, patent disputes in the electronics industry have often been settled through
cross-licensing arrangements. Because we do not yet have a large portfolio of issued patents, we may not
be able to settle an alleged patent infringement claim through a cross-licensing arrangement.

We will be required to expense options granted under our employee stock plan as
compensation, and our net income and earnings per share could be significantly reduced and we may be
forced to change our business practices to attract and retain employees.

Historically, we have used stock options as a key component of our employee
compensation packages. We believe that stock options provide an incentive to our employees to
maximize long-term stockholder value and, through the use of vesting, encourage valued employees to
remain with us. In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No.
123  (revised 2004) "Share-Based Payment" ("SFAS 123R"), which requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the financial statements
based on their fair values, beginning with the first interim or annual period commencing after June
15, 2005, with early adoption encouraged.  Therefore, we are required to adopt SFAS 123R in our
third fiscal quarter of 2006. When such adoption is implemented, our net income and earnings per
share will be negatively impacted. As a result, we may decide to reduce the number of employees who
receive stock options or grant fewer options to particular employees. This could adversely affect
our ability to retain existing employees and attract qualified candidates, and also could increase
the cash compensation we would have to pay to them.

Our stock price is volatile.

The market for our common stock has been subject to significant volatility, which is
expected to continue.  The following factors, among others, may have a significant impact on the
market price of our common stock:

- our announcement of the introduction of new products;
- our competitors' announcements of the introduction of new products;
and
- market conditions in the technology, entertainment and emerging growth
company sectors.

The stock market has experienced, and is currently experiencing, volatility that
particularly affects the market prices of equity securities of many high technology companies, such
as those in the electronics industry. This volatility is often unrelated or disproportionate to the
operating performance of such companies. These fluctuations, as well as general economic and market
conditions, could decrease the price of our common stock.

Critical Accounting Policies

Management's Discussion and Analysis of Financial Condition and Results of
Operations are based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States. The preparation of
these financial statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expense during the
reporting period. On an on-going basis, management evaluates its estimates and judgments, including
those related to revenue recognition, accounts receivable, and inventories. Management bases its
estimates and judgments on historical experience and on various other factors that are believed to
be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition - We recognize revenues in accordance with Staff
Accounting Bulletin ("SAB") No. 104, "Revenue Recognition". Revenue is recognized when
persuasive evidence of an arrangement exists, delivery has occurred or service has been rendered,
the fee is fixed and determinable, and collectibility is probable. We derive revenues from three
principal sources: product sales, product development contracts and service contracts.

Revenues from product sales to OEMs, distributors and end users are generally
recognized upon shipment, as our shipping terms are FOB shipping point, except that revenues are
deferred when management cannot reasonably estimate the amount of returns or where collectibility is
not assured. In those situations, revenue is recognized when collection subsequently becomes
probable and returns are estimable (generally upon resale by customers or "Sell-through Basis").
Allowances for sales returns, price protection and warranty costs are recorded at the time that
revenues are recognized.

In fiscal 2001, we began recognizing revenues from our primary U.S. distributor
on a Sell-through Basis. This practice resulted from significant sales returns, which we accepted
from the distributor outside of the terms of the distribution agreement. Under terms of a
distribution agreement entered into with the distributor in fiscal 2002, we granted the distributor
the right of return and price protection, which allows the distributor to return any product, which
is in the original packaging, for full credit up to 180 days after the earlier of the agreement
expiration or early termination. The price protection provision allows the distributor to receive a
credit for the difference between the original price and the reduced price of our products within
their inventory. Although the returns are not frequent in nature, returns from this distributor
cannot be reasonably estimated. Consequently, pursuant to the above policy, revenue from this
distributor is recognized upon resale to the distributor's end-customers.

Revenues from product development agreements were recognized in fiscal 2005, 2004 and 2003 when
billed, earned, and collection was assured.  The Company classifies all development costs related to such
agreements as research and development expenses as the associated effort expended in providing
development revenue is resident in the R&D function. Development revenues were $981,000, $792,000
and $458,000, for fiscal 2005, 2004, and 2003, respectively.

Revenues from service contracts consist of fees for providing engineering support services, which are
recognized ratably over the contract term.  Expenses related to support service revenues were included in
sales and marketing expenses as the engineering support associated with service contract revenue is
resident in the sales and marketing function. Support service revenues were $308,000, $269,000 and
$127,000 for fiscal 2005, 2004, and 2003 respectively.

Accounts Receivable -During industry downturns, certain of our
customers have difficulty with their cash flows. Certain customers, typically those with whom we
have long-term relationships, may delay their payments by 40-60 days beyond the original terms. We
review the ability of our customers to pay the indebtedness they incur with us. We defer recognition
of revenue and the related receivable when we cannot reasonably estimate whether collectibility is
assured at the time products and services are delivered to our customer. We provide an allowance for
doubtful accounts for estimated losses resulting from the inability of our customers to make
required payments. These estimated allowances are periodically reviewed, analyzing the customer's
payment history and information regarding credit worthiness. In fiscal 2005, 2004 and 2003, we
recorded a provision (reversal) for bad debt allowance in the total amount of $595,000, $(186,000),
and $60,000 respectively. If the financial condition of our customers were to deteriorate, resulting
in an impairment of their ability to make payments, additional allowances may be required.

Inventories - We continue to monitor our inventory levels in light of
product development changes and expectations of an eventual market upturn. We may be required to
take additional charges for excess and obsolete inventories if the current industry recovery falls
below our expectation or we make changes in our current product development plans. We estimate
inventory reserves for excess and obsolete inventories based on our assessments of future product
sales giving consideration for factors such as the cyclical nature of our industry. These forecasts
require us to estimate our ability to see demand for current and future products and compare those
estimates with our current inventory levels. If these forecasts or estimates change adversely, or
our product roadmaps change, then we would need further write down inventory.

Deferred Tax Assets - We record a valuation allowance to reduce our
deferred tax assets to the amount that is more likely than not to be realized. In the event we were
to determine that we would be able to realize deferred tax assets in the future in excess of the net
recorded amount, an adjustment to the deferred tax asset would increase income in the period such
determination was made.

Recent Accounting Pronouncements

The Company accounts for stock-based compensation awards issued to employees
using the intrinsic value measurement provisions of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("Opinion 25"). Accordingly, no compensation expense
has been recorded for stock options granted with exercise prices greater than or equal to the fair
value of the underlying common stock at the option grant date. On December 16, 2004, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 123
(revised 2004), Share-Based Payment ("SFAS 123R"). SFAS 123R eliminates the alternative of
applying the intrinsic value measurement provisions of Opinion 25 to stock compensation awards
issued to employees. Rather, the new standard requires enterprises to measure the cost of employee
services received in exchange for an award of equity instruments based on the grant-date fair value
of the award. That cost will be recognized over the period during which an employee is required to
provide services in exchange for the award, known as the requisite service period (usually the
vesting period).

The Company has not yet quantified the effects of the adoption of SFAS 123R, but
it is expected that the new standard may result in significant stock-based compensation expense. The
actual effects of adopting SFAS 123R will be dependent on numerous factors including, but not
limited to, the valuation model chosen by the Company to value stock-based awards; the assumed award
forfeiture rate; the accounting policies adopted concerning the method of recognizing the fair value
of awards over the requisite service period; and the transition method (as described below) chosen
for adopting SFAS 123R.

SFAS 123R will be effective for the Company's fiscal quarter beginning August 1,
2005, and requires the use of the Modified Prospective Application Method. Under this method SFAS
123R is applied to new awards and to awards modified, repurchased, or cancelled after the effective
date. Additionally, compensation cost for the portion of awards for which the requisite service has
not been rendered (such as unvested options) that are outstanding as of the date of adoption shall
be recognized as the remaining requisite services are rendered. The compensation cost relating to
unvested awards at the date of adoption shall be based on the grant-date fair value of those awards
as calculated for pro forma disclosures under the original SFAS 123. In addition, companies may use
the Modified Retrospective Application Method. This method may be applied to all prior years for
which the original SFAS 123 was effective or only to prior interim periods in the year of initial
adoption. If the Modified Retrospective Application Method is applied, financial statements for
prior periods shall be adjusted to give effect to the fair-value-based method of accounting for
awards on a consistent basis with the pro forma disclosures required for those periods under the
original SFAS 123.

In November 2004, the FASB issued SFAS 151, Inventory Costs-- an amendment of ARB
No. 43, Chapter 4. This Statement amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing,"
to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs,
and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that "under some
circumstances, items such as idle facility expense, excessive spoilage, double freight, and
rehandling costs may be so abnormal as to require treatment as current period charges. . . ." This
Statement requires that those items be recognized as current-period charges regardless of whether
they meet the criterion of "so abnormal." In addition, this Statement requires that allocation of
fixed production overheads to the costs of conversion be based on the normal capacity of the
production facilities. This Statement is effective for inventory costs incurred during fiscal years
beginning after June 15, 2005. Management does not believe the adoption of this Statement will have
any immediate material impact on the Company.

In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities", which expands upon and strengthens existing
accounting guidance concerning when a Company should include in its financial statements the assets,
liabilities and activities of another entity. Prior to the issuance of FIN 46, a company generally
included another entity in its consolidated financial statements only if it controlled the entity
through voting interests. FIN 46 now requires a variable interest entity, as defined in FIN 46, to
be consolidated by a company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the entity's residual
returns or both. FIN 46 also requires disclosures about variable interest entities that the company
is not required to consolidate but in which it has a significant variable interest. In October 2003
the FASB elected to defer the effective date for applying the provisions of FIN 46 for interests
held by public entities in variable interest entities or potential variable interest entities until
the end of the first interim or annual period ending after December 15, 2003. The adoption of
FIN 46 did not have a significant impact on the Company's financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". This Statement establishes
standards for the classification and measurement of certain financial instruments with
characteristics of both liabilities and equity. This Statement is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise effective at the
beginning of the first interim period beginning after June 15, 2003. The Company currently has
no financial instruments which meet these requirements.

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about our market risk disclosures involves
forward-looking statements. Actual results could differ materially from those projected in the
forward-looking statements. We face exposure to market risk from adverse movements in interest rates and
foreign currency exchange rates, which could affect our operations and financial condition. We do
not use derivative financial instruments for speculative purposes.

Interest Rate Sensitivity. At January 31, 2005, we had no borrowings
outstanding under our $3.0 million and $3.0 million variable interest rate bank lines of credit,
respectively. If short-term interest rates were to increase 10 percent, the increased interest
expense associated with these arrangements would not have a material impact on our net income (loss)
and cash flows.

Foreign Currency Exchange Rate Sensitivity. The Hong Kong dollar and Euro
are the financial currencies of our subsidiaries in Hong Kong and France, respectively. We do not
currently enter into foreign exchange forward contracts to hedge certain balance sheet exposures and
intercompany balances against future movements in foreign exchange rates. However, we do maintain
cash balances denominated in the Hong Kong dollar and Euro. If foreign exchange rates were to weaken
against the U.S. dollar immediately and uniformly by 10 percent from the exchange rate at January
31, 2005, the fair value of these foreign currency amounts would decline by an immaterial
amount.

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required by this item, the notes related thereto,
and the independent auditors' report appear on pages F-1 through F-26 and S-1 of this Annual Report
on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.

Management's Annual Report on Internal Controls Over Financial
Reporting

We prepared and are responsible for the financial statements that appear in
our Annual Report. These financial statements are in conformity with accounting principles generally
accepted in the United States of America, and therefore, include amounts based on informed judgments
and estimates. We also accept responsibility for the preparation of other financial information that
is included in this document. The management of the Company is responsible for establishing and
maintaining adequate control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934. The Company's internal control over financial reporting
is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. The Company's internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii)
provide reasonable assurance that the transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and the receipt
and expenditures of the Company are being made only in accordance with authorizations of management
and directors of the Company; and (iii) provide reasonable assurance regarding prevention of timely
detection of unauthorized acquisition, use of disposition of the Company's assets that could have a
material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies may deteriorate.

A material weakness is a significant deficiency (within the meaning of PCAOB
Auditing Standard No 2), or combination of significant deficiencies, that results in there being a
more than remote likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected on a timely basis by employees in the normal course of
their assigned functions.

Management of the Company assessed the effectiveness of the Company's internal control over financial
reporting as of January 31, 2005, and identified the following material weaknesses in the operating
effectiveness of internal control: (1) inadequate controls to ensure that financial information is adequately
analyzed to detect misstatements, (2) the lack of understanding of generally accepted accounting principles
and SEC reporting and (3) inadequate supervision and review controls over the recording of stock options.
The above represent deficiencies or weaknesses in the effectiveness of our internal controls that resulted in
an adverse opinion on our internal controls from our independent auditor.  Details of these weaknesses are
provided in the following paragraphs.

- The Company's personnel who are responsible for performing and overseeing the period-end
financial closing and reporting process lack the understanding of generally accepted
accounting principles (GAAP) and SEC reporting matters for their assigned duties, and
consequently the Company's process to determine and monitor compliance with GAAP and
SEC reporting matters is not operating effectively. In addition, the Company has not designed
and implemented appropriate controls to ensure that financial information (both routine and
non-routine) is adequately analyzed and reviewed to detect misstatements.  For example, the
Company did not appropriately consider the recoverability of a material trade receivable from
a related party, totaling approximately $2.5 million and certain impairment indicators which
were present when assessing a material investment in this related party, totaling $2.0 million.
In addition, numerous audit adjustments to the financial statements, including the reversal of a
$1.1 million gain on sale of investment that had not been consummated as of January 31,
2005, and modifications to the financial statement footnote disclosures were necessary to
present fairly, in all material respects, the annual financial statements for the year ended
January 31, 2005 in accordance with generally accepted accounting principles.
- The Company failed to design and implement appropriate supervisory and review controls
over the recording of stock options.  The Company's Chief Financial Officer records all
inputs and changes to the stock option file and there is no independent review of such inputs.
An error in recording option grants or cancellations may potentially misstate stock
compensation expense and/or pro-forma footnote disclosures under SFAS No. 123 by an
amount considered to be material to the interim or annual financial statements.

The Company recognizes these weaknesses and has instituted or plans to institute remediating actions as
follows: (1) training of accounting personnel, (2) engaging outside consultants in areas where GAAP and
SEC training was deficient, (3) adding qualified additional resources in various finance functions, and (4)
implementing adequate review and control over the stock option administration process.

In making its assessment of internal control over financial reporting, management used the criteria issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework.  Because of the material weaknesses described above, management believes that, as
of January 31, 2005, the Company did not maintain effective internal control over financial reporting based
on those criteria. The Company's independent auditor has issued an attestation report on management's
assessment of the Company's internal control over financial reporting.  That report appears below.

Changes in internal control over financial reporting.

There was no change in our internal control over financial reporting that occurred during our fourth fiscal
quarter that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.

---

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Sigma Designs, Inc.

We have audited management's assessment, included in the accompanying
Management's Annual Report on Internal Control over Financial Reporting, that Sigma Designs, Inc. and
subsidiaries (the "Company") did not maintain effective internal control over financial reporting as
of January 31, 2005, because of the effect of the material weaknesses identified in management's
assessment based on criteria established in Internal Control - Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's
management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on management's assessment and an opinion on the
effectiveness of the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating management's assessment, testing and
evaluating the design and operating effectiveness of internal control, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed
by, or under the supervision of, the company's principal executive and principal financial officers,
or persons performing similar functions, and effected by the company's board of directors,
management, and other personnel to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial
reporting, including the possibility of collusion or improper management override of controls,
material misstatements due to error or fraud may not be prevented or detected on a timely basis.
Also, projections of any evaluation of the effectiveness of the internal control over financial
reporting to future periods are subject to the risk that the controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

A material weakness is a significant deficiency, or combination of
significant deficiencies, that results in more than a remote likelihood that a material misstatement
of the annual or interim financial statements will not be prevented or detected. The following
material weaknesses have been identified and included in management's assessment:

- The Company's personnel who are responsible for performing and overseeing the
period-end financial closing and reporting process lack the understanding of
generally accepted accounting principles (GAAP) and SEC reporting matters for their assigned duties,
and consequently the Company's process to determine and monitor compliance with GAAP and SEC
reporting matters is not operating effectively. In addition, the Company has not designed and
implemented appropriate controls to ensure that financial information (both routine and non-routine)
is adequately analyzed and reviewed to detect misstatements. For example, the Company did not
appropriately consider the recoverability of a material trade receivable from a related party,
totaling approximately $2.5 million and certain impairment indicators which were present when
assessing a material investment in this related party, totaling $2.0 million. In addition, numerous
audit adjustments to the financial statements, including the reversal of a $1.1 million gain on sale
of investment that had not been consummated as of January 31, 2005, and modifications to the
financial statement footnote disclosures were necessary to present fairly, in all material respects,
the annual financial statements for the year ended January 31, 2005 in accordance with generally
accepted accounting principles.
- The Company failed to design and implement appropriate supervisory and review
controls over the recording of stock options. The Company's Chief Financial Officer records all
inputs and changes to the stock option file and there is no independent review of such inputs. An
error in recording option grants or cancellations may potentially misstate stock compensation
expense and/or pro-forma footnote disclosures under SFAS No. 123 by an amount considered to be
material to the interim or annual financial statements.

These material weaknesses were considered in determining the nature, timing, and
extent of audit tests applied in our audit of the consolidated financial statements and financial
statement schedule as of and for the year ended January 31, 2005 of the Company and this report does
not affect our report on such financial statements and financial statement schedule.

In our opinion, management's assessment that the Company did not maintain
effective internal control over financial reporting as of January 31, 2005, is fairly stated, in all
material respects, based on the criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion,
because of the effect of the material weaknesses described above on the achievement of the
objectives of the control criteria, the Company has not maintained effective internal control over
financial reporting as of January 31, 2005, based on the criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.

We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated financial statements and financial
statement schedule as of and for the year ended January 31, 2005 of the Company and our report dated
April 12, 2005 expressed an unqualified opinion on those financial statements and financial
statement schedule.

/s/ DELOITTE & TOUCHE LLP

San Jose, California
                   April 12, 2005

ITEM 9B. OTHER INFORMATION

In February 2005, the Company sold its investment in Series B Preferred stock
of a local MPEG-4 system provider for approximately $1.08 million in cash. The Company had no
carrying amount in this investment at the date of sale, as it had been fully written off in fiscal
2002 and 2003. Consequently, the entire sales proceeds will be reported as a gain on sales of
investment in the first quarter of fiscal 2006. The Company's remaining investment in this local
MPEG-4 service provider company, consisting of 263,000 shares of Series D Preferred stock had a
carrying amount of $263,000 at January 31, 2005.

PART III

ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item concerning our directors is
incorporated by reference from the information set forth in the section entitled "Proposal
One-Election of Directors" contained in our Proxy Statement relating to the 2005 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission within 120 days after the end
of our fiscal year pursuant to General Instruction G(3) of Form 10-K (the "Proxy Statement"). The
information required by this item concerning our executive officers is incorporated by reference to
the information set forth at the end of Part I of this Annual Report on Form 10-K.

The information regarding compliance with Section 16(a)
of the Exchange Act is set forth in the section entitled "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Proxy Statement and is incorporated herein by
reference.

The information regarding our code of ethics that applies to our principal executive officer, principal financial officer and principal accounting officer is incorporated by reference from the information
set forth in the section entitled "Management-Code of Ethics" contained in the Proxy
Statement.

ITEM 11.	EXECUTIVE COMPENSATION

The information required by this item regarding executive compensation is
incorporated by reference from the information set forth in the sections entitled "Election of
Directors-Compensation of Directors" and "Other Information-Executive Compensation" contained in the
Proxy Statement.

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS

The information required by this item regarding security ownership of certain
beneficial owners and management is incorporated by reference from the information set forth in the
section entitled "Other Information-Security Ownership of Certain Beneficial Owners and Management"
contained in the Proxy Statement.

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item regarding certain relationships and
related transactions is set forth in the section entitled "Transactions with Management" contained
in the Proxy Statement and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item regarding principal accounting fees
and services is incorporated by reference from the information set forth in the section entitled
"Ratification of Independent Auditors - Principal Accounting Fees and Services" contained in the
Proxy Statement.

PART IV

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this Annual Report on Form
10-K:

1.	Consolidated Financial Statements



|                                                                                                                                     | Page
|------------------------------------------------------------------------------------------------------------------------------------ | ----
|Report of Independent Registered Public Accounting Firm                                                                              | F-1 
|Consolidated Balance Sheets as of January 31, 2005 and 2004                                                                          | F-2 
|Consolidated Statements of Operations for the years ended January 31, 2005, 2004,
and 2003                                           | F-3 
|Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss)
for the years ended January 31, 2005, 2004, and 2003 | F-4 
|Consolidated Statements of Cash Flows for the years ended January 31, 2005, 2004
and 2003                                            | F-5 
|Notes to Consolidated Financial Statements                                                                                           | F-7 

2.	Consolidated Financial Statements Schedules



|Schedule II-Valuation and Qualifying Accounts and Reserves | S-1
|---------------------------------------------------------- | ---

All other schedules have been omitted as they are not required, not applicable,
or the required information is otherwise included.

(b)	Reports on Form 8-K

On November 23, 2004, we filed a Current Report on Form 8-K dated November 23,
2004 with the Securities and Exchange Commission to furnish our press release reporting our results
for the three months and nine months ended October 31, 2004.

(c)	Exhibits

The exhibits listed on the accompanying index to exhibits immediately following
the financial statement schedules are incorporated by reference into this Annual Report on
Form 10-K.

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Milpitas, State of California, on the 14th
day of April 2005.

SIGMA DESIGNS, INC.
                                                   By: /s/ Thinh Q. Tran
                                                   Chairman of the Board,
                                                   President, and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thinh Q. Tran and Kit Tsui, and each of them, jointly and
severally, his true and lawful attorneys-in-fact, each with full power of substitution and
resubstitution, for him in any and all capacities, to sign any or all amendments to this Annual
Report on Form 10-K, with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and purposes as he or she
might or could do if personally present, hereby ratifying and confirming all that each said
attorney-in-fact and agent, or his or her substitute or substitutes or any of them, may lawfully do
or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1934, THIS ANNUAL REPORT ON
FORM 10-K HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE OF THE REGISTRANT AND IN
THE CAPACITIES AND ON THE DATES INDICATED:

|Signature                            | Title                                                                                       | Date          
|------------------------------------ | ------------------------------------------------------------------------------------------- | --------------
|                                     |                                                                                             |               
|/s/ Thinh Q. TranThinh Q. Tran       | Chairman of the Board, President, and Chief Executive Officer (Principal Executive
Officer) | April 14, 2005
|/s/ Kit TsuiKit Tsui                 | Chief Financial Officer and Secretary (Principal Financial andAccounting Officer)           | April 14, 2005
|/s/ William J. AlmonWilliam J. Almon | Director                                                                                    | April 14, 2005
|/s/ Julien NguyenJulien Nguyen       | Director                                                                                    | April 14, 2005
|/s/ Lung C. TsaiLung C. Tsai         | Director                                                                                    | April 14, 2005

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Sigma Designs, Inc.:

We have audited the accompanying consolidated balance sheets of Sigma Designs,
Inc. and subsidiaries as of January 31, 2005 and 2004, and the related consolidated statements of
operations, shareholders' equity and comprehensive income (loss) and cash flows for each of the
three years in the period ended January 31, 2005. Our audits also included the financial statement
schedule listed in Item 15(a)2. These financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Sigma Designs, Inc. and subsidiaries at January 31,
2005 and 2004, and the results of their operations and their cash flows for each of the three years
in the period ended January 31, 2005, in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of the Company's internal control over
financial reporting as of January 31, 2005, based on the criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated April 12, 2005 expressed an unqualified opinion on management's
assessment of the effectiveness of the Company's internal control over financial reporting and an
adverse opinion on the effectiveness of the Company's internal control over financial reporting.



/s/ Deloitte & Touche LLP

San Jose, California
                   April 12, 2005

---





SIGMA DESIGNS, INC. 
                           CONSOLIDATED BALANCE SHEETS
       JANUARY 31, 2005 and 2004 (In thousands, except share data)

`January 31,
                                                   ----------------------
                                                      2005        2004
                                                   ----------  ----------
ASSETS                                                                   
CURRENT ASSETS:
  Cash and cash equivalents...................... $   10,250  $   18,962
  Short-term investments.........................      8,529          --
  Accounts receivable (net of allowances of
    $1,460 in 2005 and $935 in 2004).............      6,417       5,283
  Inventories....................................      3,675       2,614
  Prepaid expenses and other current assets......        764         518
                                                   ----------  ----------
           Total current assets..................     29,635      27,377

EQUIPMENT & LEASEHOLD IMPROVEMENTS - net.........      1,756       1,028
LONG-TERM INVESTMENTS............................      3,313       1,313
OTHER  ASSETS....................................        233          74
                                                   ----------  ----------
TOTAL............................................ $   34,937  $   29,792
                                                   ==========  ==========
                                                                         
LIABILITIES AND SHAREHOLDERS' EQUITY                                     
CURRENT LIABILITIES:
  Accounts payable............................... $    3,540  $    1,666
  Accrued liabilities............................      2,097       1,838
  Current portion of capital lease obligations...         --           5
                                                   ----------  ----------
           Total current liabilities.............      5,637       3,509
                                                   ----------  ----------
OTHER LONG - TERM LIABILITIES....................        188         261
                                                   ----------  ----------
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY:
  Common stock - no par value:  35,000,000
   shares authorized; shares outstanding:
   2005, 21,038,962; 2004, 20,637,995............     88,207      86,948
  Accumulated other comprehensive income.........         28          37
  Accumulated deficit............................    (59,123)    (60,963)
                                                   ----------  ----------
           Total shareholders' equity                 29,112      26,022
                                                   ----------  ----------
TOTAL............................................ $   34,937  $   29,792
                                                   ==========  ==========`

See notes to consolidated financial statements.

---





SIGMA DESIGNS, INC. 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JANUARY 31, 2005, 2004 AND 2003 (In thousands, except per share data)

`2005       2004       2003
                                             ---------  ---------  ---------
NET REVENUES............................... $  31,437  $  30,520  $  18,139
COSTS AND EXPENSES:
  Cost of revenues.........................     9,527     11,705      8,126
  Research and development.................    11,648     10,000      8,366
  Sales and marketing......................     4,804      4,802      4,528
  General and administrative...............     4,209      2,499      2,966
                                             ---------  ---------  ---------
           Total costs and expenses........    30,188     29,006     23,986
                                             ---------  ---------  ---------
INCOME (LOSS) FROM OPERATIONS..............     1,249      1,514     (5,847)
Interest income............................       229        144        185
Interest expense...........................        (4)      (131)      (270)
Other income (expense), net................       370         25       (159)
                                             ---------  ---------  ---------
INCOME (LOSS) BEFORE INCOME TAXES..........     1,844      1,552     (6,091)
PROVISION FOR (BENEFIT FROM)INCOME TAXES ..         4          9        (34)
                                             ---------  ---------  ---------
NET INCOME (LOSS).......................... $   1,840  $   1,543  $  (6,057)
                                             =========  =========  =========
NET INCOME (LOSS) PER SHARE:
  Basic.................................... $    0.09  $    0.08  $   (0.37)
                                             =========  =========  =========

  Diluted ................................. $    0.08  $    0.07  $   (0.37)
                                             =========  =========  =========
SHARES USED IN COMPUTATION:
  Basic....................................    20,809     19,437     16,482
                                             =========  =========  =========

  Diluted .................................    23,529     22,390     16,482
                                             =========  =========  =========`

See notes to consolidated financial statements.

---





SIGMA DESIGNS, INC. 
  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
  YEARS ENDED JANUARY 31, 2005, 2004 AND 2003 (In thousands, except share data)

`Accumu-
                                                          lated
                                                          Other                              Total
                                                         Compre-                            Compre-
                                     Common Stock        hensive     Accumu-                hensive
                                 ---------------------    Income      lated                 Income
                                   Shares      Amount     (Loss)     Deficit      Total     (Loss)
                                 -----------  --------  ----------  ----------  ---------  ---------
Balances, January 31, 2002...... 16,378,042  $ 67,884  $       31  $  (56,449) $  11,466
Net loss........................         --        --          --      (6,057)    (6,057) $  (6,057)
Unrealized loss on investments..         --        --         (13)         --        (13)       (13)
Accumulated translation
  adjustment....................         --        --          (5)         --         (5)        (5)
                                                                                           ---------
Comprehensive loss..............                                                          $  (6,075)
                                                                                           =========
Common stock issued under
  stock plans...................    264,529       411          --          --        411
                                 -----------  --------  ----------  ----------  ---------
Balances, January 31, 2003...... 16,642,571    68,295          13     (62,506)     5,802
Net income......................         --        --          --       1,543      1,543  $   1,543
Accumulated translation
  adjustment....................         --        --          24          --         24         24
                                                                                           ---------
Comprehensive loss..............                                                          $   1,567
                                                                                           =========
Issuance of common stock,
  net of issuance cost of $666..  3,056,644    16,301          --          --     16,301
Common stock issued under
  stock plans...................    938,780     2,352          --          --      2,352
                                 -----------  --------  ----------  ----------  ---------
Balances, January 31, 2004...... 20,637,995    86,948          37     (60,963)    26,022
Net income......................         --        --          --       1,840      1,840  $   1,840
Unrealized loss on investments..         --        --         (24)                   (24)       (24)
Accumulated translation
  adjustment....................         --        --          15          --         15         15
                                                                                           ---------
Comprehensive loss..............                                                          $   1,831
                                                                                           =========
Common stock issued under
  stock plans...................    400,967     1,259          --          --      1,259
                                 -----------  --------  ----------  ----------  ---------
Balances, January 31, 2005...... 21,038,962  $ 88,207  $       28  $  (59,123) $  29,112
                                 ===========  ========  ==========  ==========  =========`

See notes to consolidated financial statements.

---



SIGMA DESIGNS, INC. 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 YEARS ENDED JANUARY 31, 2005, 2004 AND 2003 (In thousands)

`2005       2004       2003
                                                           ---------  ---------  ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)...................................... $   1,840  $   1,543  $  (6,057)
  Adjustments to reconcile net income (loss) to net
     cash provided by (used for) operating activities:
    Depreciation and amortization........................       492        572        596
    Provision for inventory valuation....................       230        647        745
    Provision (reversal) for bad debts and sales returns.       595       (186)        60
    Loss on disposal of assets...........................         7          8         --
    Investment impairment charge.........................        --         --        172
    Accretion of contributed leasehold improvements......       (85)       (83)       (27)
    Changes in operating assets and liabilities:
      Accounts receivable................................    (1,729)      (731)    (2,258)
      Inventories........................................    (1,291)      (789)     1,265
      Prepaid expenses and other.........................      (246)      (342)       345
      Accounts payable...................................     1,874        164        387
      Accrued liabilities and other......................       270        184        278
                                                           ---------  ---------  ---------
       Net cash provided by (used for)
         operating activities............................     1,957        987     (4,494)
                                                           ---------  ---------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Equipment additions....................................    (1,226)      (265)      (697)
  Purchases of short-term investments....................   (20,153)        --     (4,368)
  Maturity of short-term investments.....................    11,600         --      5,298
  Long-term investments..................................    (2,000)    (1,313)        --
  Other assets...........................................       (29)       243       (216)
                                                           ---------  ---------  ---------
      Net cash provided by (used for)
        investing activities.............................   (11,808)    (1,335)        17
                                                           ---------  ---------  ---------
CASH FLOWS USED FOR FINANCING ACTIVITIES:
  Net proceeds from sale of common stock.................     1,259     18,653        411
  Costs related to pending registration of private
      offering of common stock...........................      (130)        --         --
  Repayment of capital lease obligations.................        (5)      (122)      (230)
                                                           ---------  ---------  ---------
      Net cash provided by (used for)
        financing activities.............................     1,124     18,531        181
                                                           ---------  ---------  ---------
Effect of exchange rates changes on cash.................        15         24         (5)
                                                           ---------  ---------  ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.........    (8,712)    18,207     (4,301)
CASH AND CASH EQUIVALENTS:
  Beginning of year......................................    18,962        755      5,056
                                                           ---------  ---------  ---------
  End of year............................................ $  10,250  $  18,962  $     755
                                                           =========  =========  =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

CASH PAID FOR INTEREST................................... $       4  $     131  $     270
                                                           =========  =========  =========

CASH PAID (REFUND) FOR INCOME TAXES...................... $      15  $       3  $     (34)
                                                           =========  =========  =========
NONCASH INVESTING AND FINANCING ACTIVITIES:
  Restricted cash balance offset against
    line of credit borrowings............................ $      --  $  12,000  $      --
                                                           =========  =========  =========

  Contributed leasehold improvements..................... $      --  $      12  $     400
                                                           =========  =========  =========`

See notes to consolidated financial statements.

---



SIGMA DESIGNS, INC.
   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2005, 2004 AND 2003

1.	NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations - Sigma Designs, Inc. (the Company) develops,
manufactures and markets Moving Picture Experts Group(MPEG) decoders primarily
for consumer appliances and commercial systems. The Company sells its products to consumer equipment
manufacturers, distributors, value-added resellers and corporate customers.

Principle of Consolidation - The consolidated financial statements
include Sigma Designs, Inc. and subsidiaries. Intercompany balances and transactions are eliminated.

Accounting Period - The Company's fiscal year ends on the Saturday
closest to January 31. For convenience, the fiscal years are shown as ending on
January 31, although the fiscal years actually ended on January 29, 2005, January 31, 2004, and
February 1, 2003, respectively. Fiscal 2005, 2004 and 2003 each included 52 weeks.

Pervasiveness of Estimates - The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of
America 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 could differ from those estimates. Significant estimates used in preparing these
financial statements are related primarily to accounts receivable allowances, inventory valuation
allowances, impairment of investments and long-lived assets, and deferred tax asset valuation
allowances. It is at least reasonably possible that the estimates will change within the next
year.

Concentration of Credit Risk - Financial instruments which
potentially subject the Company to concentrations of credit risk consist primarily of cash and cash
equivalents, short-term investments and accounts receivable. The majority of the Company's cash and
cash equivalents and short-term investments are on deposit with one financial institution. The
Company performs ongoing credit evaluations of its customers and generally does not require
collateral for sales on credit. The Company maintains reserves for potential credit losses.

Cash and Cash Equivalents - The Company considers all highly liquid
debt instruments purchased with a remaining maturity of three months or less to be cash
equivalents.

Short Term Investments - Short-term investments represent highly
liquid debt instruments with a remaining maturity date at purchase of greater than 90 days and are
stated at fair value. The differences between amortized cost (cost adjusted for amortization of
premiums and accretion of discounts which are recognized as adjustments to interest income) and fair
value representing unrealized holding gains or losses, are recorded separately as accumulated other
comprehensive income (loss) within shareholders' equity. While the Company's intent is to hold debt
securities to maturity, they are classified as available-for-sale because the sale of such
securities may be required prior to maturity. Any gains and losses on the sale of debt securities
are determined on a specific identification basis.

Inventories are stated at the lower of standard cost (which
approximates first-in, first-out basis) or market. The Company periodically reviews its inventories
for excess and obsolete inventory items and adjusts carrying costs to estimated net realizable
values when they are determined to be less than cost. As a result of this inventory review, the
Company charged approximately $230,000 $647,000, and $745,000 to cost of revenues for the years
ended January 31, 2005, 2004 and 2003, respectively.

Investments in private equity securities of less than 20% owned
companies are accounted for using the cost method unless the Company can exercise significant
influence or the investee is economically dependent upon the Company, in which case the equity
method is used.

Equipment is stated at cost and was re-categorized into Computer
and test equipment, Software, Furniture and fixtures and Other for fiscal years 2005 and 2004.
Depreciation and amortization are computed using the straight-line method based on the useful lives
of the assets (three to five years) or the lease term if shorter. The contributed leasehold
improvement provided by the landlord for the Company's current facility is amortized using the
straight-line method over the leasehold period.

Long Lived Assets - The Company evaluates long-lived assets for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment loss would be recognized when the sum of the undiscounted
future net cash flows expected to result from the use of the asset and its eventual disposal is less
than its carrying amount.

Revenue Recognition - The Company recognizes revenues in accordance
with Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition". Revenue is recognized
when persuasive evidence of an arrangement exists, delivery has occurred or service has been
rendered, the fee is fixed and determinable, and collectibility is probable. The Company derives its
revenues from three principal sources: product sales, product development contracts and service
contracts.

Revenues from product sales to OEMs, distributors and end users are generally
recognized upon shipment, as the Company's shipping terms are FOB shipping point, except that
revenues are deferred when management cannot reasonably estimate the amount of returns or where
collectibility is not assured. In those situations, revenue is recognized when collection
subsequently becomes probable and returns are estimable (generally upon resale by customers or
"Sell-through Basis"). Allowances for sales returns, price protection and warranty costs are
recorded at the time that revenues are recognized.

In fiscal 2001, the Company began recognizing revenues from its primary U.S.
distributor on a Sell-through Basis. This practice resulted from significant sales returns, which
the Company accepted from the distributor outside of the terms of the distribution agreement. Under
terms of a distribution agreement entered into with the distributor in fiscal 2002, the Company
granted the distributor the right of return and price protection, which allows the distributor to
return any product, which is in the original packaging, for full credit up to 180 days after the
earlier of the agreement expiration or early termination. The price protection provision allows the
distributor to receive a credit for the difference between the original price and the reduced price
of the Company's products within their inventory. Although the returns are not frequent in nature,
returns from this distributor could not be reasonably estimated. Consequently, pursuant to the above
policy, revenue from this distributor is recognized upon resale to the distributor's end-customers.

Revenues from product development agreements were recognized in fiscal 2005, 2004
and 2003 when billed, earned, and collection was assured. The Company classifies all development
costs related to such agreements as research and development expenses. Development revenues were
$981,000 $792,000, and $458,000 for fiscal 2005, 2004, and 2003 respectively.

Revenues from service contracts consist of fees for providing engineering support
services, which are recognized ratably over the contract term. Expenses related to support service
revenues were included in sales and marketing expenses. Support service revenues were $308,000,
$269,000, and $127,000 for fiscal 2005, 2004 and 2003 respectively.

Research and Development expenses include costs and expenses
associated with the design and development of new products. To the extent that such costs include
the development of computer software, they are generally incurred prior to the establishment of the
technological feasibility of the related product that is under development and are therefore
expensed as incurred. Software cost incurred after the establishment of technological feasibility,
where the technology is well developed and can be immediately incorporated into the Company's
research endeavors is capitalized. All other research and development expense is expensed as
incurred.

Income Taxes - Deferred income taxes are provided for temporary
differences between financial statement and income tax reporting. Income taxes are accounted for
under an asset and liability approach in accordance with Statement of Financial Accounting Standards
("SFAS") No. 109. Deferred tax liabilities are recognized for future taxable amounts and deferred
tax assets are recognized for future deductions net of a valuation allowance to reduce deferred tax
assets to amounts that are more likely than not to be realized.

Stock-Based Compensation - The Company accounts for stock-based
awards to employees using the intrinsic value method in accordance with Accounting Principles Board
Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees", and related interpretations.
Accordingly, no compensation expense has been recognized in the financial statements for employee
stock arrangements granted at fair market value.

The Company accounts for equity instruments issued to non-employees in accordance
with the provisions of SFAS No. 123 "Accounting for Stock-Based Compensation," which requires that
the fair value of such instruments be recognized as an expense over the period in which the related
services are received. SFAS No. 123 also requires the disclosure of pro forma net income
(loss) and earnings (loss) per share had the Company adopted the fair value method. Under
SFAS No. 123, the fair value of stock-based awards to employees is calculated through the use
of option pricing models, even though such models were developed to estimate the fair value of
freely tradable, fully transferable options without vesting restrictions, which significantly differ
from the Company's stock option awards. These models also require subjective assumptions, including
future stock price volatility and expected time to exercise, which greatly affect the calculated
values. The Company's pro forma calculations were made using the Black-Scholes option pricing model
with the following weighted average assumptions:

`Years Ended January 31,
                                                     -------------------------------
                                                       2005       2004       2003
                                                     ---------  ---------  ---------
Stock Option Plans:
------------------
Risk free interest rate............................      2.61 %     3.00 %     3.03 %
Expected volatility................................        76 %      103 %      104 %
Expected life after vesting (in years).............       1.4        1.7        1.5
Expected dividends.................................        --         --         --

Employee Stock Purchase Plans:
-----------------------------
Risk free interest rate............................      1.37 %     0.95 %     1.19 %
Expected volatility................................        68 %      103 %      104 %
Expected life (in years)...........................       0.5        0.5        0.5
Expected dividends.................................        --         --         --`

The Company's calculations are based on a multiple option valuation approach and
forfeitures are recognized as they occur. If the computed fair values of awards had been amortized
to expense over the vesting period of the awards, pro forma net income (loss) attributable to
common shareholders would have been as follows (in thousands, except per share amounts):

`Years Ended January 31,
                                                     -------------------------------
                                                       2005       2004       2003
                                                     ---------  ---------  ---------
Net income (loss) as reported...................... $   1,840  $   1,543  $  (6,057)
Add: stock-based employee compensation expense
  included in reported net income (loss)...........       --         --         --
Deduct: stock-based employee compensation expense
  determined under fair value based method.........    (1,869)    (1,469)    (1,158)
                                                     ---------  ---------  ---------
Pro forma net income (loss)........................ $     (29) $      74  $  (7,215)
                                                     =========  =========  =========
Basic net income (loss) per share:
  As reported...................................... $    0.09  $    0.08  $   (0.37)
                                                     =========  =========  =========
  Pro forma........................................ $      --  $      --  $   (0.44)
                                                     =========  =========  =========
Diluted net income (loss) per share:
  As reported...................................... $    0.08  $    0.07  $   (0.37)
                                                     =========  =========  =========
  Pro forma........................................ $      --  $      --  $   (0.44)
                                                     =========  =========  =========`

Foreign Currency -The functional currency of the Company's
foreign subsidiaries is the local currency of each country. Accordingly, gains and losses from the
translation of the financial statements of the foreign subsidiaries are included in shareholders'
equity. Transaction gains and losses, which are included in the other expenses, net, in the
accompanying consolidated statements of operations, have not been significant for all years
presented.

Net Income (Loss) per Share - Basic earnings per share (EPS)
excludes dilution and is computed by dividing net income (loss) by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the potential dilution that would
occur if securities or other contracts to issue common stock were exercised or converted into common
stock (see Note 10).

Fair Value of Financial Instruments - The Company believes that
carrying amounts reported in the consolidated balance sheets as of January 31, 2005 and 2004 for
cash, cash equivalents, restricted cash, and short-term investments approximate fair market
value.

Geographic Operating Information - SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information," provides annual and interim reporting
standards for an enterprise's business segments and related disclosures about its products,
services, geographical areas and major customers. The Company operates in one reportable segment
(Note 14).

Derivatives - As a matter of policy, the Company does not currently
enter into transactions involving derivative financial instruments. In the event the Company enters
into such transactions in the future, the Company will account for those transactions in accordance
with SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", in which case the
Company will formally document all relationships between the hedging instruments and hedged items,
as well as its risk management objective and strategy for undertaking such hedge transactions.

Recent Accounting Pronouncements - The Company accounts for
stock-based compensation awards issued to employees using the intrinsic value measurement provisions of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (Opinion
25). Accordingly, no compensation expense has been recorded for stock options granted with exercise
prices greater than or equal to the fair value of the underlying common stock at the option grant
date. On December 16, 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123
(revised 2004), Share-Based Payment ("SFAS 123R"). SFAS 123R eliminates the alternative of
applying the intrinsic value measurement provisions of Opinion 25 to stock compensation awards
issued to employees. Rather, the new standard requires enterprises to measure the cost of employee
services received in exchange for an award of equity instruments based on the grant-date fair value
of the award. That cost will be recognized over the period during which an employee is required to
provide services in exchange for the award, known as the requisite service period (usually the
vesting period).

The Company has not yet quantified the effects of the adoption of SFAS 123R, but
it is expected that the new standard may result in significant stock-based compensation expense. The
pro forma effects on net income and earnings per share if the Company had applied the fair value
recognition provisions of original SFAS 123 on stock compensation awards (rather than applying the
intrinsic value measurement provisions of Opinion 25) are disclosed above on page F-10. Although
such pro forma effects of applying original SFAS 123 may be indicative of the effects of adopting
SFAS 123R, the provisions of these two statements differ in some important respects. The actual
effects of adopting SFAS 123R will be dependent on numerous factors including, but not limited to,
the valuation model chosen by the Company to value stock-based awards; the assumed award forfeiture
rate; the accounting policies adopted concerning the method of recognizing the fair value of awards
over the requisite service period; and the transition method (as described below) chosen for
adopting SFAS 123R.

SFAS 123R will be effective for the Company's fiscal quarter beginning August 1,
2005, and requires the use of the Modified Prospective Application Method. Under this method SFAS
123R is applied to new awards and to awards modified, repurchased, or cancelled after the effective
date. Additionally, compensation cost for the portion of awards for which the requisite service has
not been rendered (such as unvested options) that are outstanding as of the date of adoption shall
be recognized as the remaining requisite services are rendered. The compensation cost relating to
unvested awards at the date of adoption shall be based on the grant-date fair value of those awards
as calculated for pro forma disclosures under the original SFAS123. In addition, companies may use
the Modified Retrospective Application Method. This method may be applied to all prior years for
which the original SFAS 123 was effective or only to prior interim periods in the year of initial
adoption. If the Modified Retrospective Application Method is applied, financial statements for
prior periods shall be adjusted to give effect to the fair-value-based method of accounting for
awards on a consistent basis with the pro forma disclosures required for those periods under the
original SFAS 123.

In November 2004, the FASB issued SFAS 151, "Inventory Costs-- an amendment of ARB No. 43,
Chapter 4". This Statement amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to
clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and
wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that ". . . under
some circumstances, items such as idle facility expense, excessive spoilage, double freight, and
rehandling costs may be so abnormal as to require treatment as current period charges. . . ." This
Statement requires that those items be recognized as current-period chargesregardless of whether they meet the criterion of "so abnormal." In addition, this
Statement requires that allocation of fixedproduction
overheads to the costs of conversion be based on the normal capacity of the production facilities.
This Statement is effective for inventory costs incurred during fiscal years beginning after June
15, 2005. Management does not believe the adoption of this Statement will have a significant impact
on the Company's operating results.

In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities", which expands upon and strengthens existing
accounting guidance concerning when a company should include in its financial statements the assets,
liabilities and activities of another entity. Prior to the issuance of FIN 46, a company generally
included another entity in its consolidated financial statements only if it controlled the entity
through voting interests. FIN 46 now requires a variable interest entity, as defined in FIN 46, to
be consolidated by a company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the entity's residual
returns or both. FIN 46 also requires disclosures about variable interest entities that the company
is not required to consolidate but in which it has a significant variable interest. In October 2003
the FASB elected to defer the effective date for applying the provisions of FIN 46 for interests
held by public entities in variable interest entities or potential variable interest entities until
the end of the first interim or annual period ending after December 15, 2003. The adoption of
FIN 46 had no impact on the Company's financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". This Statement establishes
standards for the classification and measurement of certain financial instruments with
characteristics of both liabilities and equity. This Statement is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise effective at the
beginning of the first interim period beginning after June 15, 2003. The Company currently has
no financial instruments which meet these requirements.

Reclassifications - Certain reclassifications have been made to the
fiscal 2004 and 2003 financial statement footnote disclosures to conform to the current year
presentation.

2.	CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash, cash equivalents and short-term investments consisted of the following
at January 31, 2005 (in thousands):

`Gross     Estimated
                                        Adjusted    unrealized   fair market
                                          cost         loss        value
                                       -----------  -----------  ----------
Money market funds                    $       177  $        --  $      177
Corporate commercial paper                  4,883           (2)      4,881
Corporate bonds                             1,305           (9)      1,296
US agency discount notes                    4,481           (3)      4,478
US agency non callable                      1,228          (10)      1,218
                                       -----------  -----------  ----------
Total cash equivalents
and short-term investments            $    12,074  $       (24)     12,050
                                       ===========  ===========
Cash on hand                                                         6,729
                                                                 ----------
                                                                $   18,779
                                                                 ==========

Reported as:
    Cash and cash equivalents                                       10,250
    Short-term investments                                           8,529
                                                                 ----------
                                                                $   18,779
                                                                 ==========`

The amortized cost and estimated market value of investments,
by contractual maturity, are shown
below. Actual maturities may differ from contractual maturities.

`January 31, 2005
                                                    -----------------------
                                                                 Estimated
                                                     Amortized    market
                                                       cost        value
                                                    -----------  ----------
Due in 1 year or less                              $     9,851  $    9,844
Due in greater than 1 year                               2,223       2,206
                                                    -----------  ----------
Total                                              $    12,074  $   12,050
                                                    ===========  ==========`

Cash and cash equivalents as of January 31, 2004 consisted entirely of cash on
hand and money market funds.

3.	INVENTORIES

Inventories at January 31 consist of (in thousands):

`2005       2004
                                                     ---------  ---------           
Raw materials...................................... $   1,264  $     389
Work in process....................................       251        380
Finished goods.....................................     2,160      1,845
                                                     ---------  ---------
Inventories........................................ $   3,675  $   2,614
                                                     =========  =========`

4.	EQUIPMENT

Equipment at January 31 consists of (in thousands):

`2005       2004
                                                     ---------  ---------           
Computers and test equipment....................... $   2,799  $   2,251
Software...........................................     1,788      1,657
Furniture and fixtures.............................       947        885
Other..............................................       108        108
                                                     ---------  ---------
Total..............................................     5,642      4,901
Accumulated depreciation and amortization..........    (3,886)    (3,873)
                                                     ---------  ---------
Equipment - net.................................... $   1,756  $   1,028
                                                     =========  =========`

As of January 31, 2005 there are no capital leases. At January 31, 2004,
equipment with a net book value of $5,000 (net of accumulated amortization of $19,000) had been
leased under capital leases.

5.	LONG-TERM INVESTMENTS

In fiscal 2005, the Company invested an additional $1,000,000 in an OEM
manufacturer headquartered in Europe and $1,000,000 in an early-stage technology company located in
the US.

Investments at January 31 consist of (in thousands):

`2005       2004
                                                          ---------  ---------           
OEM headquartered in Europe (Note 13)................... $   2,000  $   1,000
Local early-stage technology company....................     1,000         --
Local MPEG-4 service provider...........................       263        263
Early-stage technology company, headquartered in China..        50         50
                                                          ---------  ---------
Total................................................... $   3,313  $   1,313
                                                          =========  =========`

6. 	ACCRUED LIABILITIES

Accrued liabilities at January 31 consist of (in thousands):

`2005       2004
                                                          ---------  ---------           
Accrued salary and benefits............................. $     851  $     650
Accrued royaties........................................       153        344
Accrued professional services...........................       412        261
Customer deposit........................................        47         11
Other accrued liabilities...............................       634        572
                                                          ---------  ---------
Total................................................... $   2,097  $   1,838
                                                          =========  =========`

7. 	PRODUCT WARRANTY

In general, the Company sells products with a one-year limited warranty that
the Company's products will be free from defects in materials and workmanship. Warranty cost is
estimated at the time revenue is recognized, based on historical activity. Accrued warranty cost
includes both hardware and software support costs.

Details of the change in accrued warranty for fiscal years 2005, 2004 and 2003
are as follows (in thousands):

`Balance              Change in
                           Beginning               pre-                 Balance
                              of                 exisiting              End of
                            Period    Additions  warranty   Deductions  Period
Accrued Warranty:          ---------  ---------  ---------  ---------  ---------
  Year ended January 31,
  2005................... $     134  $     112  $     (20) $     (35) $     191
  2004...................        66        117        (26)       (23)       134
  2003...................        39         51          7        (31)        66`

8. 	COMMITMENTS AND CONTINGENCIES

The Company's standard terms and conditions of sale include a patent
infringement indemnification provision for claims from third parties related to the Company's
intellectual property. The terms and conditions of sale generally limit the scope of the available
remedies to a variety of industry-standard methods including, but not limited to, a right to control
the defense or settlement of any claim, procure the right for continued usage, and a right to
replace or modify the infringing products to make them non-infringing. Such indemnification
provisions are accounted for in accordance with SFAS No. 5. To date, the Company has not
incurred or accrued any costs related to any claims under such indemnification provisions.

Leases - The Company's primary facilities are leased under non-cancelable lease
which expires in September 2007. Future minimum annual payments under operating leases are as
follows (in thousands):

`Fiscal Year Ending                                     Operating
  January 31,                                            Leases
-------------------------------                        ----------            
     2006............................................ $      788
     2007............................................        697
     2008............................................        433
                                                       ----------
Total minimum lease payments......................... $    1,918
                                                       ==========`

Rent expense was $698,000, $720,000 and $560,000, for fiscal 2005, 2004 and 2003,
respectively, net of sublease income of approximately $41,000, $37,000 and $12,000 for fiscal 2005,
2004 and 2003, respectively.

Royalties - The Company pays royalties for the right to sell certain
products under various license agreements. During fiscal 2005, 2004 and 2003, the Company recorded
royalty expense of $270,000 $578,000 and $406,000, respectively.

Benefit Plan - The Company sponsors a 401(k) savings plan in which most
employees are eligible to participate. The plan commenced in fiscal 1994. The Company is not
obligated to make contributions to the plan and no contributions have been made by the
Company.

9.	BANK LINES OF CREDIT

The Company has a $3.0 million bank line of credit under which the Company
had availability to draw down approximately $1.2 million as of January 31, 2005. The line of credit
will expire in October 2005 and is primarily collateralized by the Company's accounts receivable. In
addition, the Company has a second bank line of credit of $3.0 million that expires in October 2005,
which is secured by substantially all the Company's assets. As of January 31, 2005, the entire $3.0
million is available for borrowing. Both lines of credit bear interest at a rate equal to the "Prime
rate" plus 1.5% (7.25% as of January 31, 2005.)

As of January 31, 2005, the Company had no borrowings outstanding under all lines
of credit. Under the agreements for these lines of credit, the Company is subject to certain
financial covenants.

10.	SHAREHOLDERS' EQUITY

Common Stock

Net income (loss) per share - basic and diluted for the periods presented
is computed by dividing net income (loss) by the weighted average number of common shares
outstanding (excluding shares subject to repurchase). Net income (loss) per share - diluted reflects
the potential dilution that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. Common stock equivalents are excluded from the computation
in loss periods, as their effect would be antidilutive.

The following is a reconciliation of the numerators and denominators of the basic
and diluted EPS computations for the periods presented (in thousands, except per-share data):

`Years Ended January 31,
                                           ----------------------------------
                                              2005        2004        2003
                                           ----------  ----------  ----------
Numerator:
  Net income (loss) available to
    common shareholders, basic
    and diluted.......................... $    1,840  $    1,543  $   (6,057)
                                           ==========  ==========  ==========
Denominator:
  Weighted average common shares
     outstanding.........................     20,809      19,437      16,482
                                           ----------  ----------  ----------
Shares used in computation, basic........     20,809      19,437      16,482

Effect of dilutive securities:
  Stock options..........................      2,720       2,953          --
                                           ----------  ----------  ----------
Shares used in computation, diluted......     23,529      22,390      16,482
                                           ==========  ==========  ==========
Net income (loss) per share:
  Basic.................................. $     0.09  $     0.08  $    (0.37)
                                           ==========  ==========  ==========
  Diluted................................ $     0.08  $     0.07  $    (0.37)
                                           ==========  ==========  ==========`

A summary of the excluded potential dilutive securities as of the end of each
fiscal year follows (in thousands):

`Years Ended January 31,
                                           ----------------------------------
                                              2005        2004        2003
                                           ----------  ----------  ----------
Stock options............................         20          65       4,606`

Stock Option Plan

During fiscal 2004, the Company adopted the 2003 Director Stock Option
Plan (the "2003 Director Plan") to replace the predecessor 1994 Director Stock Option Plan which
expired in fiscal 2005. A total of 200,000 shares of common stock are currently reserved for
issuance under the 2003 Director Plan.

During fiscal 2002, the Company adopted the 2001 Employee Stock Option Plan (the
"2001 Option Plan") and reserved 500,000 shares of the Company's common stock for issuance under the
plan, with automatic annual increases on the first day of the Company's fiscal year equal to the
lesser of (i) 1,000,000 shares, (ii) 4% of the Company's outstanding common stock on such date or
(iii) a lesser number of shares as determined by the Board of Directors, commencing February 1,
2002. Generally, the plan provides for the granting of options to purchase shares of common stock at
the fair market value on the date of grant. Options granted under the plan become exercisable over a
five-year period and expire no more than ten years from the date of grant (all options outstanding
at January 31, 2005 expire ten years from date of grant). The 2001 plan replaced the predecessor
1994 Option Plan which expired in fiscal 2005.

Stock option activity and balances are summarized as follows:

`Weighted
                                                                    Average
                                                                    Exercise
                                                         Number      Price
                                                           of         Per
                                                         Shares      Share
                                                       ----------  ----------
Balances, January 31, 2002 (2,342,038
  exercisable at a weighted-average price
  of $2.60)..........................................  4,107,969  $     2.51
Granted (weighted-average fair value of $1.35).......    748,000        1.84
Canceled.............................................   (115,023)       2.43
Exercised............................................   (135,265)       1.33
                                                       ----------
Balances, January 31, 2003 (2,824,354
  exercisable at a weighted-average price
  of $2.62)..........................................  4,605,681        2.43
Granted (weighted-average fair value of $3.51).......    588,500        4.77
Canceled.............................................    (62,792)       2.72
Exercised............................................   (869,453)       2.35
                                                       ----------
Balances, January 31, 2004 (2,551,665
  exercisable at a weighted-average price
  of $2.65)..........................................  4,261,936        2.77
Granted (weighted-average fair value of $2.98).......    933,500        5.55
Canceled.............................................    (28,428)       2.58
Exercised............................................   (334,169)       2.46
                                                       ----------
Balances, January 31, 2005...........................  4,832,839  $     3.33
                                                       ==========`

At January 31, 2005, options to purchase 276,912 shares were available for future
grant. Effective February 1, 2005, an additional 841,506 shares resulting from the automatic annual
increase of 4% of the Company's outstanding common stock were added to the shares available for
issuance under the 2001 Employee Stock Option Plan.

`Options Outstanding              Options Exercisable
                   ----------------------------------- ------------------------
                      Number                              Number
                   Outstanding   Weighted    Weighted  Exercisable    Weighted
                        at       Average     Average        at        Average
Range of Exercise  January 31,  Remaining    Exercise  January 31,    Exercise
      Prices           2005        Life       Price        2005        Price
------------------ ------------ ----------  ---------- ------------  ----------
   $1.00 - $1.25       680,089       6.10  $     1.19      431,847  $     1.17
   $1.63 - $2.44     1,628,732       4.42  $     2.12    1,245,976  $     2.21
   $2.53 - $3.50       968,384       5.38  $     3.25      742,051  $     3.20
   $4.25 - $6.38     1,422,634       8.26  $     5.39      405,862  $     5.15
   $6.60 - $9.57       133,000       8.98  $     7.75       28,065  $     8.35
                   ------------                        ------------
   $1.00 - $9.57     4,832,839       6.10  $     3.33    2,853,801  $     2.79
                   ============                        ============`

Employee Stock Purchase Plan

During fiscal 2002, the Company adopted the 2001 Employee Stock Purchase
Plan (the "2001" Purchase Plan") and reserved 100,000 shares of the Company's common stock for
issuance under the plan, with an automatic annual increase on the first day of the Company's fiscal
year equal to the lesser of (i) 500,000 shares, (ii) 2% of the Company's outstanding common stock on
such date or (iii) a lesser number of shares as determined by the Board of Directors. Under this
plan, eligible employees may authorize payroll deductions of up to 10% of their regular base
salaries to purchase common stock at 85% of the fair market value at the beginning or end of each
six-month offering period. During fiscal 2005, 2004, and 2003, 66,798, 69,327 and 129,264 shares of
the Company's common stock were purchased at an average price of $6.58, $4.51 and $1.78 per share,
respectively. At January 31, 2005, 294,138 shares under the 2001 Purchase Plan remain available for
future purchase. Effective February 1, 2005, Board of Directors resolved that an additional 25,000
shares be added to the shares available for issuance under the 2001 Purchase Plan.

11.	INCOME TAXES

Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes, and (b) operating losses and tax credit
carryforwards.

The tax effects of significant items comprising the Company's deferred taxes as
of January 31 are as follows (in thousands):

`January 31,
                                                         --------------------
                                                           2005       2004
                                                         ---------  ---------
Deferred tax assets:
  Net operating losses and tax credit carryforwards.... $  30,284  $  28,989
  Reserves not currently deductible....................     3,483      3,692
  Capitalized research and development expenditures....       672      1,282
  Other................................................        79        127
                                                         ---------  ---------
                                                           34,518     34,090
Valuation allowance....................................   (34,518)   (34,090)
                                                         ---------  ---------
Net deferred taxes..................................... $      --  $      --
                                                         =========  =========`

At January 31, 2005, undistributed earnings of the Company's French operations
totaling $635,000 were considered to be permanently reinvested. No deferred tax liability has been
recognized for the remittance of such earnings to the U.S. since it is management's intention to
utilize those earnings in the foreign operations.

SFAS No. 109 requires that the tax benefit of net operating losses,
temporary differences and credit carryforwards be recorded as an asset to the extent that management
assesses that realization is "more likely than not." Realization of the future tax benefits is
dependent on the Company's ability to generate sufficient taxable income within the carryforward
period. Because of the Company's recent history of operating losses, risks associated with its new
product introduction including the dependence on rapid acceptance of new technology, the dependence
on development of complimentary software by third parties and other risks, such as technological
change in the industry, short product life cycles and reliance on a limited number of suppliers and
manufacturing contractors, management believes that recognition of the deferred tax assets arising
from the above-mentioned future tax benefits is currently not likely to be realized and,
accordingly, has provided a full valuation allowance.

Net operating losses and tax credit carryforwards as of January 31, 2005 are as
follows (in thousands):

`Expiration
                                       Amount          Years
                                      --------- --------------------
Net operating losses, federal....... $  63,202      2009 - 2025
Net operating losses, state.........     1,929      2013 - 2015
Tax credits, federal................     4,543      2006 - 2025
Tax credits, state..................     3,625   2007 - Indefinite
Net operating losses, foreign.......     4,007       Indefinite
Tax credits, foreign................       501      2006 - 2008`

Current federal and California tax laws include substantial restrictions on the
utilization of net operating losses and tax credits in the event of an "ownership change" of a
corporation. Accordingly, the Company's ability to utilize net operating loss and tax credit
carryforwards may be limited as a result of such ownership changes. Such a limitation could result
in the expiration of carryforwards before they are utilized.

The effective tax rate of the Company's provision (benefit) for income taxes
differs from the federal statutory rate as follows (in thousands):

`Years Ended January 31,
                                        -------------------------------
                                          2005       2004       2003
                                        ---------  ---------  ---------
Computed at 35%....................... $     645  $     543  $  (2,060)
State taxes...........................         8          2          2
Valuation allowance...................       429      2,642      2,195
Foreign tax benefits..................      (980)      (325)        --
Domestic tax credits..................      (776)    (1,086)      (522)
Tax deductible stock compensation.....      (512)    (1,625)        --
Reduction in deferred tax assets
   due to decrease in effective
   state tax rate.....................     1,157         --         --
Other.................................        33       (142)       351
                                        ---------  ---------  ---------
Total................................. $       4  $       9  $     (34)
                                        =========  =========  =========`

12.	MAJOR CUSTOMERS

No domestic customer accounted for more than 10% of total net revenues in
fiscal 2005, 2004 and 2003. Two international customers accounted for 15% and 14%
(a related party - Note 13), respectively, of total net revenue in fiscal 2005. No international customer accounted
for more than 10% of total net revenues in fiscal year 2004. One international customer, a related
party (Note 13), accounted for 19% of total net revenues in fiscal 2003.

No domestic customers accounted for more than 10% of total accounts receivable at
January 31, 2005 and 2004. Three international customers accounted for 39% (Note 13), 13% and 11% of
total accounts receivables at January 31, 2005. One international customer accounted for 15% of
accounts receivable at January 31, 2004, while another international customer accounted for 58% of
accounts receivable at January 31, 2003.

13.	RELATED PARTY TRANSACTIONS

During the third quarter of fiscal 2004 and the second quarter of fiscal
2005, the Company invested approximately $1.0 million and $1.0 million, respectively, in an original
equipment manufacturer (the "OEM") headquartered in Europe. The Company's ownership interest in the
OEM is less than 7% as of January 31, 2004 and less than 10% as of January 31, 2005 and is accounted
for using the cost method. The Company had revenues from product sales to this OEM of $4.5 million,
$1.4 million, and $0.3 million in fiscal 2005, 2004, and 2003, respectively. The Company had an
accounts receivable balance of $2.5 million and $0.8 million from this OEM at January 31, 2005 and
2004, respectively. Subsequent to January 31, 2005, payment terms for the $2.5 million receivable
balance from this OEM were modified to provide for an extended repayment arrangement of eight weekly
installment payments ranging from $300,000 to $420,000, commencing March 21, 2005 through May 9,
2005. The modified payment terms were in response to cash flow difficulties the OEM encountered
subsequent to its product purchases from the Company, primarily because of operational issues that
arose when the OEM transferred the manufacturing of its products to another contract manufacturer.
To extend its payment terms, the OEM provided the Company a security interest on certain of its assets.
As of April 12, 2005
the OEM was ahead of schedule with respect to the modified payment terms and, as a result,
the remaining balance of this receivable had been reduced to approximately $0.5 million which
management believes is fully collectable.
One of the Company's customers is a contract manufacturer that
manufactures video equipment for this OEM. Revenues from product sales to this manufacturer totaled
$0.3 million, $2.3 million, and $3.4 million for fiscal 2005, 2004, and 2003, respectively. The
Company had an accounts receivable balance of $0.4 million from this manufacturer at January 31,
2004, and none at January 31, 2005. A portion of the Company's products sold to the contract
manufacturer was installed as components in the video equipment manufactured by the contract
manufacturer on behalf of the OEM.

During the third quarter of fiscal 2003, the Company executed an agreement to
sublease approximately 2,600 square feet of its headquarters' facility to a start-up company founded
by a member of the Company's board of directors. The term of the sublease was one year at the same
market rate as the Company's operating lease arrangement for the facility. The agreement was amended
during the fourth quarter of fiscal 2004 for an additional year, and again in the fourth quarter of
fiscal 2005 on a month-to-month basis on the same terms.

14.	SEGMENT AND GEOGRAPHICAL INFORMATION

As discussed in Note 1, the Company follows the requirements of SFAS
No. 131, "Disclosures About Segments of an Enterprise and Related Information." The Company's
operating segments consist of its geographically based entities in the United States, Hong Kong and
France. All such operating entities segments have similar economic characteristics, as defined in
SFAS No. 131, and accordingly, the Company operates in one reportable segment: the development,
manufacturing and marketing of multimedia computer devices and products. The Company's chief
operating decision-maker is its Chief Executive Officer.

For fiscal 2005, 2004 and 2003, the Company recorded sales to customers
throughout the United States and Canada, Denmark, Japan, China, Taiwan, Hong Kong and Korea;
Germany, Belgium, Finland, The Netherlands, Norway, Sweden, the United Kingdom, France, Italy,
Spain, Hungary, Portugal, Scotland, and Norway (collectively referred to as "Rest of Europe");
Singapore, Thailand, New Zealand, Turkey, Israel, Australia, South American and South Africa
(collectively "Rest of Asia/New Zealand/Other Region").

The following table summaries total net revenues attributed to each product group
for the fiscal years ended January 31 (in thousands):

`Years Ended January 31,
                                        -------------------------------
                                          2005       2004       2003
                                        ---------  ---------  ---------
  Boards.............................. $   3,280  $   3,231  $   6,215
  Chipsets............................    26,380     25,880     10,742
  Other...............................     1,777      1,409      1,182
                                        ---------  ---------  ---------
Total net revenues.................... $  31,437  $  30,520  $  18,139
                                        =========  =========  =========`

The following table summaries total net revenues attributed to each market
segment for the fiscal years ended January 31 (in thousands):

`Years Ended January 31,
                                        -------------------------------
                                          2005       2004       2003
                                        ---------  ---------  ---------
  IP video application market......... $  18,063  $  15,068  $   9,834
  Advanced DVD/media player market....    10,379     11,690      3,490
  HDTV product market.................       362         94         --
  PC add-in and other markets.........     2,633      3,668      4,815
                                        ---------  ---------  ---------
Total net revenues.................... $  31,437  $  30,520  $  18,139
                                        =========  =========  =========`

The following table summaries total net revenues and long-lived assets attributed
to significant countries as of and for the fiscal years ended January 31 (in thousands):

`Years Ended January 31,
                                           -------------------------------
                                             2005       2004       2003
                                           ---------  ---------  ---------
Net revenues:
  Taiwan................................. $   5,376  $   6,741  $     759
  Hong Kong..............................     1,056      4,404        975
  United States..........................     4,345      4,168      5,913
  Denmark................................     4,777      3,785      3,780
  China..................................     6,695      3,566      1,388
  Korea..................................     5,024      3,375        791
  Rest of Europe.........................     1,685      2,717      2,157
  Japan..................................     1,954        889      1,988
  Rest of Asia/New Zealand/Other Region..       469        853        360
  Canada.................................        56         22         28
                                           ---------  ---------  ---------
Total net revenues*...................... $  31,437  $  30,520  $  18,139
                                           =========  =========  =========
Long-lived assets:
  United States.......................... $   1,656  $     907  $   1,307
  Hong Kong..............................        13          8         12
  France.................................        87        113         12
                                           ---------  ---------  ---------
Total long-lived assets.................. $   1,756  $   1,028  $   1,331
                                           =========  =========  =========`

*Net revenues are attributed to countries based on invoicing location of
customer.

15. QUARTERLY FINANCIAL INFORMATION

The following table presents unaudited quarterly financial information for
each of the Company's last eight quarters (unaudited, in thousands, except per share data):

`First     Second      Third     Fourth
                                      Quarter    Quarter    Quarter    Quarter
                                     ---------  ---------  ---------  ---------
Year ended January 31, 2005:
Net revenues....................... $   7,784  $   8,088  $   7,677  $   7,888
Income (loss) from operations......       127        783        458       (119)
Net income available to common
  shareholders.....................       163      1,169        525        (17)
Net income per share available
  to common shareholders:
  Basic............................ $    0.01  $    0.06  $    0.03  $    0.00
  Diluted.......................... $    0.01  $    0.05  $    0.02  $    0.00

Year ended January 31, 2004:
Net revenues....................... $   7,835  $   7,874  $   7,470  $   7,341
Income from operations.............       473        668        134        239
Net income available to common
  shareholders.....................       426        671        149        297
Net income per share available
  to common shareholders:
  Basic............................ $    0.02  $    0.04  $    0.01  $    0.01
  Diluted.......................... $    0.02  $    0.03  $    0.01  $    0.01`

During the fourth quarter of fiscal 2005, the Company reversed a $221,000 bonus
expense which was accrued in the second and third quarter of fiscal 2005 due to profit projections
not being met at the end of the year. The Company also recorded an additional bad debt allowance of
$360,000 due to the extensive length of an outstanding past-due receivable.

16. SUBSEQUENT EVENTS

In February 2005, the Company sold its investment in Series B Preferred stock
of a local MPEG-4 system provider for approximately $1.08 million in cash. The Company had no
carrying amount in this investment at the date of sale, as it had been fully written off in fiscal
2002 and 2003. Consequently, the entire sales proceeds will be reported as a gain on sale of
investment in the first quarter of fiscal 2006. The Company's remaining investment in this local
MPEG-4 system provider, consisting of 263,000 shares of Series D Preferred stock, had a carrying
amount of $263,000 at January 31, 2005.

During February 2005, the Company entered into a loan agreement with a bank for a line of credit of
$600,000 for financing equipment for research and development that the Company acquired in
December 2004. Such line of credit requires thirty-six equal monthly payments with an interest rate
based on the bank's prime rate plus 0.5%.

---



SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

`Additions:     Deductions
                                   Balance at   Provision for  Write-offs,   Balance at
                                  Beginning of  (Reversal of)  (Recoveries)    End of
         Classification               Year        Bad Debts    of Accounts      Year
--------------------------------  ------------  -------------  ------------  ----------
                                                      (in thousands)
Allowance for returns and
 doubtful accounts, price
 protection, and sales
 returns:
  Year ended January 31,
   2005......................... $        935  $         595  $         70  $    1,460
   2004.........................          922           (186)         (199)        935
   2003.........................        1,664             60           802         922`

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INDEX TO EXHIBITS

|EXHIBIT
                   NUMBER | DESCRIPTION                                                                                                                                                                 
|--------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1(1)                            | Second Restated Articles of Incorporation.                                                                                                                                  
|3.2(7)                            | Certificate of Amendment to the Second Restated Articles of Incorporation dated June
22, 2001.                                                                              
|3.6(9)                            | Bylaws of Registrant, as amended.                                                                                                                                           
|10.1(2)                           | Distribution Agreement dated September 10, 1985.                                                                                                                            
|10.2(3)*                          | Registrant's 1986 Employee Stock Purchase Plan, as amended, and form of Subscription
Agreement.                                                                             
|10.4(4)*                          | Registrant's Amended and Restated 1994 Stock Plan and form of Stock Option
Agreement.                                                                                       
|10.5(5)*                          | Registrant's 1994 Director Stock Option Plan and form of Director Option
Agreement.                                                                                         
|10.6(7)*                          | Registrant's 2001 Employee Stock Option Plan.                                                                                                                               
|10.7(7)*                          | Registrant's 2001 Employee Stock Purchase Plan and Form of Subscription
Agreement.                                                                                          
|10.8(8)                           | Registrant's 2001 Loan and Security Agreement with Silicon Valley Bank, as
amended.                                                                                         
|10.9(9)                           | Lease between the Registrant and EOP-Industrial Portfolio, L.L.C.                                                                                                           
|10.10(10)                         | Amendment to Registrant's 2001 Loan and Security Agreement with Silicon Valley Bank.                                                                                        
|10.11(10)                         | Amended and Restated Schedule to Loan and Security Agreement with Silicon Valley
Bank                                                                                       
|10.12                             | Purchase of Series B Preferred Stock in Envivio from Sigma Designs, Inc.
      PDF                                                                                          
|21.1(10)                          | Subsidiaries of the Registrant.                                                                                                                                             
|23.1                              | Consent of Independent Registered Public Accounting Firm                                                                                                                    
|24.1                              | Power of Attorney (contained in the signature page to this Annual Report on
Form 10-K).                                                                                     
|31.1                              | Certification of the President and Chief Executive Officer pursuant to Securities
Exchange Act Rules 13a-14(c) and 15d-14(a).                                               
|31.2                              | Certification of the Chief Financial Officer and Secretary pursuant to Securities
Exchange Act Rules 13a-14(c) and 15d-14(a).                                               
|32.1                              | Certificate of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|                                  |                                                                                                                                                                             

*	Indicates management contract or compensatory plan or
arrangement.

(1)	Incorporated by reference to exhibit filed with the Registrant's
Registration Statement on Form S-1 (No. 33-17789) filed October 8, 1987, Amendment No. 1 thereto
filed June 9, 1988 and Amendment No. 2 thereto filed June 14, 1988, which Registration Statement
became effective June 14, 1988.

(2)	Incorporated by reference to exhibit filed with the Registrant's
Registration Statement on Form S-1 (No. 33-4131) filed on March 19, 1986, Amendment No. 1 thereto
filed April 28, 1986 and Amendment No. 2 thereto filed May 15, 1986, Which Registration Statement
became effective May 15, 1986.

(3)	Incorporated by reference to exhibit filed with the Registrant's
Registration Statement on Form S-8 (No. 333-61549) file August 14, 1998.

(4)	Incorporated by reference to exhibit filed with the Registrant's
Registration Statement on Form S-8 (No. 333-86875) filed September 10, 1999.

(5)	Incorporated by reference to exhibit filed with the
Registrant's Registration Statement on Form S-3 (No. 33-74308) filed on January 28, 1994, Amendment
No. 1 thereto filed February 24, 1994, Amendment No. 2 thereto filed March 3, 1994, Amendment No. 3
thereto filed March 4, 1994 and Amendment No. 4 thereto filed March 8, 1994.

(6)	Incorporated by reference to exhibit filed with the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 31, 1998.

(7)	Incorporated by reference to exhibit filed with the Registrant's
Registrant's Registration Statement on Form S-8 (No. 333-64234) filed on June 29, 2001.

(8)	Incorporated by reference to exhibit filed with the Registrant's
Annual Report on Form 10-K for the fiscal year ended February 2, 2002.

(9)	Incorporated by reference to exhibit filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended February 1, 2003.

(10)  Incorporated by reference to exhibit filed with the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2004.

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