<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549



                                    FORM 10-Q

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

              FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 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 0-13244



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



DELAWARE                                                              41-1404495
(State of incorporation)                    (I.R.S. Employer Identification No.)


47436 FREMONT BOULEVARD, FREMONT, CALIFORNIA                              94538
(Address of principal executive offices)                              (Zip Code)


    Registrant's telephone number, including area code:      (510) 623-4400


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

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

         TITLE OF EACH CLASS                  OUTSTANDING AT OCTOBER 22, 1999
         -------------------                  -------------------------------
Common stock, par value $0.10 per share                 4,643,038


<PAGE>

                              GATEFIELD CORPORATION

                                      INDEX

<TABLE>
<CAPTION>
                                                                                        Page
                                                                                       Number
PART I.    FINANCIAL INFORMATION
<S>       <C>                                                                        <C>
Item 1.    Financial Statements

               Condensed Consolidated Balance Sheets as of September 30, 1999
                   and December 31, 1998                                                    3

               Condensed Consolidated Statements of Operations and
                   Comprehensive Loss for the Three and Nine Months Ended
                   September 30, 1999 and 1998                                              4

               Condensed Consolidated Statements of Cash Flows for the Nine
                   Months Ended September 30, 1999 and 1998                                 5

               Notes to Condensed Consolidated Financial Statements, September 30, 1999     6

Item 2.    Management's Discussion and Analysis of Financial Condition
               and Results of Operations                                                    7

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                        16

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings                                                                 17

Item 2.  Changes in Securities and Use of Proceeds                                         17

Item 3.  Defaults upon Senior Securities                                                   17

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

Item 5.  Other Information                                                                 17

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

SIGNATURES                                                                                 17
</TABLE>


                                       2

<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


                              GATEFIELD CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                             September 30,    December 31,
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)                                            1999               1998
---------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                 <C>
ASSETS
Current assets:
    Cash and cash equivalents                                                 $  7,400           $  3,832
    Accounts receivable, less allowance for doubtful
        accounts of $441 in 1999 and $244 in 1998                                   49                463
    Inventories                                                                    475                117
    Other current assets                                                         1,084                556
                                                                              --------           --------
        Total current assets                                                     9,008              4,968

Property and equipment, net                                                      1,918              1,783
Other assets                                                                        52                102
                                                                              --------           --------
        Total assets                                                          $ 10,978           $  6,853
                                                                              ========           ========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
    Current portion of long-term obligations                                  $    253           $    393
    Accounts payable                                                             1,763              1,372
    Accrued expenses                                                             1,438              1,941
    Deferred revenues                                                            3,972              4,772
                                                                              --------           --------
        Total current liabilities                                                7,426              8,478

Long term obligations                                                            8,141                330
                                                                              --------           --------
        Total liabilities                                                       15,567              8,808
Redeemable Preferred Stock:
    $0.10 par value; 2,000,000 shares authorized; shares issued
    and outstanding:  318,000 in 1999 and 318,000 in 1998                        3,085              3,083
Stockholders' deficit:
      Common stock:
        $0.10 par value; 65,000,000 shares authorized; shares issued
        and outstanding: 4,221,000 in 1999 and 4,193,000 in 1998                   469                419
        Additional paid-in capital                                              86,307             81,900
    Accumulated other comprehensive loss                                          (864)              (737)
    Accumulated deficit                                                        (93,586)           (86,620)
                                                                              --------           --------
        Total stockholders' deficit                                             (7,674)            (5,038)
                                                                              --------           --------
        Total liabilities and stockholders' deficit                           $ 10,978           $  6,853
                                                                              ========           ========
</TABLE>


 See Accompanying Notes to Condensed Consolidated Financial Statements.


                                       3

<PAGE>


                              GATEFIELD CORPORATION
     CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                            Three Months Ended           Nine Months Ended
                                                              September 30,               September 30,
                                                            1999          1998          1999          1998
                                                          --------      --------      --------      --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
-------------------------------------------------------------------------------------------------------------
<S>                                                      <C>           <C>           <C>           <C>
Revenues:
    Product                                               $    377      $    379      $  1,001      $  2,456
    Service                                                     33           629           523         3,869
                                                          --------      --------      --------      --------
      Total revenues                                           410         1,008         1,524         6,325
                                                          --------      --------      --------      --------

Cost of revenues:
    Product                                                    395         1,040           964         1,717
    Service                                                     10           351           149         3,576
                                                          --------      --------      --------      --------
      Total cost of revenues                                   405         1,391         1,113         5,293
                                                          --------      --------      --------      --------

      Gross profit (loss)                                        5          (383)          411         1,032
                                                          --------      --------      --------      --------

Operating expenses:
    Sales and marketing                                        183         1,603           568         3,877
    Research and development                                 1,090         1,321         3,515         4,017
    General and administrative                                 661         1,276         2,094         2,826
                                                          --------      --------      --------      --------
      Total operating expenses                               1,934         4,200         6,177        10,720
                                                          --------      --------      --------      --------

Operating loss                                              (1,929)       (4,583)       (5,766)       (9,688)
                                                          --------      --------      --------      --------

Other income (expense):
    Interest expense, net                                      (66)          (36)       (1,287)         (146)
    Other income, net                                          120         4,331            89         4,263
                                                          --------      --------      --------      --------
      Total other income (expense)                              54         4,295        (1,198)        4,117
                                                          --------      --------      --------      --------

Net loss                                                    (1,875)         (288)       (6,964)       (5,571)

Other comprehensive gain (loss):
    Currency translation adjustments                            93            13           128            14
                                                          --------      --------      --------      --------
Comprehensive loss                                        $ (1,782)     $   (275)     $ (6,836)     $ (5,557)
                                                          ========      ========      ========      ========

Loss attributable to common stockholders                  $ (1,876)     $   (322)     $ (6,967)     $ (5,674)
                                                          ========      ========      ========      ========

Basic and diluted net loss per share                      $  (0.44)     $  (0.08)     $  (1.65)     $  (1.38)
                                                          ========      ========      ========      ========

Basic and diluted weighted average shares outstanding        4,222         4,150         4,211         4,105
                                                          ========      ========      ========      ========
</TABLE>


See Accompanying Notes To Condensed Consolidated Financial Statements.


                                       4

<PAGE>

                              GATEFIELD CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                             Nine Months Ended September 30,
(IN THOUSANDS)                                                                  1999               1998
--------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                <C>
Operating activities:
    Net loss                                                                  $ (6,964)          $ (5,571)
    Reconciliation to net cash used in operating activities:
      Depreciation and amortization                                                695                375
      Non-cash subordinated convertible debt interest                            1,231
      Gain on sale of Design Service Business                                        -             (4,462)
      Changes in assets and liabilities:
        Accounts receivable                                                        412              1,081
        Inventories                                                               (358)               562
        Other assets                                                              (479)               180
        Accounts payable and accrued expenses                                     (118)            (2,200)
        Deferred revenues                                                         (800)             3,763
                                                                              --------           --------
          Net cash used in operating activities                                 (6,381)            (6,272)
                                                                              --------           --------
Investing activities:
    Property and equipment purchases, net                                         (830)                 -
    Proceeds from sale of Design Service Business                                    -              5,444
                                                                              --------           --------
          Net cash provided by (used in) in investing activities                  (830)             5,444
                                                                              --------           --------
Financing activities:
    Proceeds from issuance of convertible note                                   8,000                  -
    Proceeds from issuance of common stock                                       3,226              5,099
    Proceeds from issuance of preferred stock                                        -              3,000
    Principal payments on long term debt & capital lease obligations              (329)              (158)
                                                                              --------           --------
          Net cash provided by financing activities                             10,897              7,941

Effect of exchange rate changes on cash and cash equivalents                      (118)                40
                                                                              --------           --------

Net change in cash and cash equivalents                                          3,568              7,153

Cash and cash equivalents, beginning of period                                   3,832              4,189
                                                                              --------           --------

Cash and cash equivalents, end of period                                      $  7,400           $ 11,342
                                                                              ========           ========

Supplemental disclosure of cash flow information:
    Noncash activities:
      Equipment acquired under capital leases                                   $    -           $    525
    Cash activities:
      Cash paid during the year for interest                                  $    159           $    300
</TABLE>


See Accompanying Notes To Condensed Consolidated Financial Statements.


                                       5

<PAGE>
                              GATEFIELD CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 30, 1999

1.   BASIS OF PRESENTATION

         The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in the
financial statements, during the quarters ended September 30, 1999 and 1998,
GateField Corporation, (the "company") incurred net losses of approximately
$1,875,000 and $288,000, respectively and had stockholders deficits of
approximately $7,674,000 at September 30, 1999 and $5,038,000 at December 31,
1998. The company must successfully introduce its 0.25-micron products into
the market and successfully manufacture sufficient quantities to support its
sales and marketing introduction to reach cash flow breakeven. If the company
fails to significantly increase revenues and improve gross margins within the
next six to nine months it will have to obtain additional financing in order
to fund planned operating levels or cease or significantly reduce operations.

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

         Interim results of operations are not necessarily indicative of the
results to be expected for the full year. The company's interim fiscal
quarter ended on September 30, 1999 and 1998, respectively. The condensed
consolidated financial statements should be read in conjunction with the
financial statements and the notes thereto for the year ended December 31,
1998, included in the company's annual report on Form 10-K.

2.   INVENTORIES

         Inventory consists principally of raw wafers.

3.   CONVERTIBLE PROMISSORY NOTE

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

         The Note is convertible at the option of the noteholder. On the date
of issuance, the Note was convertible into common stock at a price equal to
approximately a 13% discount (the Conversion Discount) to the closing market
price as reported on the OTCBB. The Conversion Discount of $1.2 million was
recognized during the second quarter of 1999 by the company as a non-cash
interest expense with a corresponding increase in the common stock additional
paid in capital.

4.   REVERSE STOCK SPLIT

         In March 1999, the company's Board of Directors approved a ten for
one reverse stock split of the company's common stock. In June 1999, the
company's shareholders approved the reverse stock split. The reverse split
became


                                       6
<PAGE>
effective on June 30, 1999 (the "Effective Date"). No fractional shares were
issued. In lieu of any such fractional share interest, each holder will
receive cash in an amount equal to the product obtained by multiplying (i)
the closing sales price of the company's Common Stock on the Effective Date
as reported on the OTCBB by (ii) the number of shares of Common Stock held by
such holder that would otherwise have been exchanged for such fractional
share interest.

5.   SALE OF COMMON STOCK

         In September 1999, the company issued approximately 471,000 shares
of common stock to outside investors for an aggregate purchase price of
$3,062,000 pursuant to a Stock Purchase Agreement entered into on September
30, 1999.

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

THE DISCUSSION IN THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE STATEMENTS CONTAINED IN THIS REPORT THAT
ARE NOT PURELY HISTORICAL ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, INCLUDING STATEMENTS
REGARDING THE COMPANY'S EXPECTATIONS, BELIEFS, INTENTIONS OR STRATEGIES
REGARDING THE FUTURE. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
DOCUMENT ARE BASED ON INFORMATION AVAILABLE TO THE COMPANY ON THE DATE
HEREOF, AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH
FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED IN "FACTORS AFFECTING FUTURE RESULTS" AS WELL AS THOSE DISCUSSED IN
THIS SECTION AND ELSEWHERE IN THIS REPORT, AND THE RISKS DISCUSSED IN THE
COMPANY'S SECURITIES AND EXCHANGE COMMISSION FILINGS.

RESULTS OF OPERATIONS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

REVENUES

         Total revenue for the quarter ended September 30, 1999 was $410,000
compared to $1,008,000 for the quarter ended September 30, 1998, a decrease
of 59%. Total product revenue in the quarter ended September 30, 1999 was
flat at $377,000, as compared to $379,000 for the same period last year.
ProASIC product revenue for the quarter ended September 30, 1999, was
$349,000, as compared to $375,000 for the same period in 1998. The current
quarter's ProASIC revenues include the recognition of $312,000 in license
fees from Rohm Co. Ltd. that were collected and deferred in fiscal 1998. The
decline in ProASIC revenues was due to the company's decision to halt active
sales efforts for the 0.72-micron product in the third quarter of 1998 and
ultimately terminate the sale of these products in the second quarter of
1999. The company believes it will have little, if any, revenue from its
0.72-micron products in the fourth quarter of 1999. The company expects
future revenues, if any, will come from the commercialization of its
0.25-micron products. The company began selling, on a limited basis, its
0.25-micron standard ProASIC product in the last month of the third quarter
of fiscal 1999. Total 0.25-micron standard ProASIC product revenue during the
quarter was insignificant and the company can not predict with any degree of
certainty what the revenue will be for the 0.25-micron product for the
balance of 1999 or that significant volumes of the product can be produced in
a timely manner. Indeed, no assurance can be given that design and production
problems will not arise that could interrupt or cease sales in future
quarters. Moreover, there can be no assurances that, even if such products
are introduced into the market in significant volumes on a timely basis, they
will achieve market acceptance. To the extent that the company's development
and commercialization efforts with respect to the 0.25-micron standard
ProASIC products are unsuccessful, or if these products do not achieve market
acceptance, the company's business, financial condition and results of
operations would be materially adversely affected.

         Service revenues declined to $33,000 for the quarter ended September
30, 1999 from $629,000 for the same quarter last year. Service revenues are
comprised of two components: (i) maintenance contracts on the company's
verification systems and (ii) design services. Revenues from maintenance
contracts on the company's verification systems were $33,000 in the third
quarter of 1999, as compared to $363,000 in the third quarter of 1998. The
decline in verification maintenance revenues is the result of the sale of the
verification product assets in 1997. Revenues from maintenance contracts on
the company's verification systems earned in the third quarter of 1999 and
1998 represent the company's portion of a revenue sharing agreement with the
purchaser of the verification assets. The company expects revenues from

                                       7
<PAGE>
this source to continue to decline at an increasing rate and to eventually
cease in the fourth quarter of 1999. The company did not generate any service
fees from its design services for the quarter ended September 30, 1999
because the company sold those assets in August 1998. Service fees related to
the company's design services were $266,000 in the quarter ended September
30, 1998.

         Total revenue for the nine months ended September 30, 1999,
decreased to $1,524,000 from $6,325,000 for the same period last year.
Product revenue for the nine months ended September 30, 1999, was $1,001,000,
compared to $2,456,000 for the comparable period last year. Service revenue
was $523,000 for the nine months ended September 30, 1999, compared to
$3,869,000 for the same period last year. The decrease in product revenue and
service revenue represents the transition of the company's business from a
manufacturer of verification products to a designer, developer and marketer
of high-density, high-performance FPGA products. The company expects that
service revenue will decline to zero over the balance of the year.

GROSS PROFIT

         Gross profit for the quarter ended September 30, 1999 was $5,000, as
compared to a gross loss of $383,000, for the same period last year. Gross
loss from product revenues was $18,000 in the quarter ended September 30,
1999, as compared to a gross loss of $661,000 in the same period last year.
Gross loss from ProASIC product revenues for the quarter ended September 30,
1999 was $46,000, as compared to a gross loss of $665,000 for the quarter
ended September 30, 1998. Poor manufacturing yields on the 0.72-micron
product wafers caused actual costs to exceed revenues on those products for
the quarter ended September 30, 1998. Gross profit related to 0.72-micron
products is expected to cease in the third quarter of 1999, as the company
does not expect to sell those products in future quarters. As the design and
manufacturing processes are different for the 0.72-micron and the 0.25-micron
products, the yields and, hence, the gross profits on the two products are
unrelated. Sale of the 0.25-micron standard ProASIC product was insignificant
in the third quarter of 1999. Furthermore, the 0.25-micron product has not
been manufactured in commercial quantities and the production process has not
been qualified. Therefore, the company cannot predict its standard ProASIC
product margins with any degree of certainty.

         Gross profit from service revenues was $23,000 in the quarter ended
September 30, 1999, as compared to $278,000 in the same period last year.
Gross profit related to maintenance contracts on the verification systems was
$23,000 in the quarter ended September 30, 1999, as compared to $355,000 in
the same period last year. The company expects that revenues related to
maintenance contracts on the verification systems will decline to zero in the
fourth quarter of 1999 and, therefore, will not contribute to gross profit.
Gross loss related to design services was $77,000 for the quarter ended
September 30, 1998. Because revenue from design services ceased in August
1998, the company does not expect any gross profit contribution from this
source in 1999.

         Gross profit for the nine-month period ended September 30, 1999, was
$411,000, compared to $1,032,000 for the same period last year. The gross
profit from product revenues was $37,000, or 4% of revenues, for the nine
month period ended September 30, 1999, as compared to a gross profit of
$739,000, or 30% of revenues, for the same period last year. Gross profit
from service revenues was $374,000, or 72% of revenues, for the nine months
ended September 30, 1999, compared to $293,000, or 8% of revenues, for the
same period last year.

SALES AND MARKETING

         Sales and marketing expenses were $183,000 for the three months
ended September 30, 1999, as compared to $1,603,000 for the three months
ended September 30, 1998. Sales and marketing expenses for the nine months
ended September 30, 1999 and September 30, 1998 were $568,000 and $3,877,000,
respectively. The decrease represents the termination of the company's sales
and marketing personnel in connection with the sale of the company's
worldwide distribution rights to its 0.25-micron and below products to Actel
in August 1998. Expenses incurred in the third quarter of 1999 relate to the
company's efforts to prepare for the 0.25-micron product introduction and the
company's efforts to support strategic initiatives and new product designs.
The company expects quarterly sales and marketing expenses to remain
relatively flat for the next few quarters.

RESEARCH AND DEVELOPMENT

         Research and development expenses for the three months ended
September 30, 1999, were $1,090,000 as

                                       8
<PAGE>

compared to $1,321,000 for the three months ended September 30, 1998.
Research and development expenses for the nine months ended September 30,
1999 and September 30, 1998 were $3,515,000 and $4,017,000, respectively. The
decrease in the quarter ended September 30, 1999, represents a decrease in
mask expenses for the 0.25-micron product development and normal fluctuations
in operating expenses. The company expects quarterly research and development
expenses to be between $1.2 million and $1.5 million per quarter for the next
few quarters, however, development expenses could fluctuate significantly due
to unforeseen design, test and process issues.

GENERAL AND ADMINISTRATIVE

         General and administrative expenses for the three months ended
September 30, 1999 and 1998 were $661,000 and $1,276,000, respectively. The
amount for the current quarter includes a non-cash bad debt expense of
$100,000 related to a reserve set up for receivables due from the purchaser
of the verification assets. The decrease represents reduced head count, legal
and accounting expenses. General and administrative expenses for the nine
months ended September 30, 1999 and 1998 were $2,094,000 and $2,826,000
respectively. The company expects these expenses to remain relatively flat
for the next few quarters. However, general and administrative expenses may
increase in future quarters due to legal and accounting expenses incurred in
connection with future financings.

OTHER INCOME AND EXPENSES

         Other income for the quarter ended September 30, 1999, were $54,000
as compared to other income of $4,295,000 for the quarter ended September 30,
1998. Other expenses for the nine months ended September 30, 1999 were
$1,198,000, as compared to other income of $4,117,000 for the nine-month
period ended September 30, 1998. The increase in other expenses in 1999 is
due to a $1.2 million non-cash interest expense that the company recognized
on the date of issuance of a convertible promissory note in the aggregate
principal amount of $8.0 million to Actel (see note 3) in August of 1999
versus a $4.4 million gain on the sale of the design services business in
August of 1998.

LIQUIDITY AND CAPITAL RESOURCES

         At September 30, 1999, the company had cash and cash equivalents of
approximately $7,400,000 and working capital of $1,582,000. During the nine
month period ended September 30, 1999 and 1998, the company incurred net
losses of approximately $6,964,000 and $5,571,000, respectively. The company
expects to continue to generate such losses until 0.25-micron product sales
attain significant volumes and sustain positive gross margin. As a result,
the company estimates it will have used all of its currently available
capital resources on or about June 30, 2000. If the company cannot generate
significant revenues and positive gross margins by that date or obtain
additional funding, the company would be unable to continue as a going
concern. Many factors could increase or decrease the company's utilization of
its capital resources during this period. The company cannot predict the
timing or the magnitude of those factors with any degree of certainty.
Therefore, the company may need additional financing at an earlier date. The
company cannot assure you that additional financings will be available, or if
available, will be on reasonable terms, nor can we assure you that these
financings will not be dilutive to our shareholders.

         The company will need to increase revenue significantly in a
relatively short period of time in order to attain breakeven cash flow from
operations with its existing capital. Several other circumstances could arise
which would also cause the company to exhausts its capital resources before
achievement of breakeven cash flow including: an increase in the company's
product development time and/or costs; an increase in the amount of time
and/or costs required to manufacture sufficient quantities of product; poor
manufacturing yields which erode margins on the 0.25-micron product sales;
and greater than anticipated company expenses. Therefore, there can be no
assurance that the cash and cash equivalents balance as of September 30,
1999, will be sufficient to meet the company's capital requirements through
June 30, 2000.

         The company has historically used private offerings of convertible
debt and convertible preferred stock, public and private offerings of common
stock, sale and leaseback arrangements and bank financing and credit lines to
finance its business. The company has contacted a number of potential
providers of additional capital, including investment banking firms,
financial investors, customers, potential customers, strategic partners and
potential strategic partners and continues to seek additional funds. If the
company is unable to obtain additional financing on a timely basis when and
if needed, the company will be required to reduce or even terminate its
operations.

                                       9
<PAGE>

         Cash used in operations was $6,714,000 in the first nine months of
1999, compared to $6,272,000 for the first nine months of 1998. Net cash used
by investing activities during the nine-month period ended September 30, 1999
was $830,000, as compared to $5,444,000 of net cash provided by investing
activities for the same period of 1998. The company has already incurred
$654,000 in capital expenditures for mask cost for the 0.25-micron products
and could invest up to an additional $100,000 in mask sets for the
0.25-micron product in 1999 but does not presently anticipate any other
significant capital asset acquisitions during the remainder of the year. The
company could invest up to $400,000 for mask cost in the first half of the
fiscal year 2000 but does not presently anticipate any other significant
capital asset acquisitions during the first half of the fiscal year 2000.

         Net cash provided by financing activities was $10,897,000 in the
nine months ended September 30, 1999 and includes a $3.1 million common stock
sale to various investors, a convertible promissory note in the aggregate
principal amount of $8.0 million issued to Actel and $164,000 in employee
purchases of stock under certain option plans. That amount compares to
$7,941,000 for the same nine month period in 1998 which included the sale of
$3.0 million of the company's preferred stock to Actel and the sale of $4.6
million of the company's common stock to Idanta Partners, Ltd.

YEAR 2000 ISSUES

         The following constitutes "Year 2000 Disclosure" under the Year 2000
Information and Readiness Disclosure Act of 1998.

         Background of Year 2000 issues. Many existing information technology
(IT) systems, such as computer systems and software products, as well as
non-IT systems that include embedded technology, were not designed to
correctly process date and time information after December 31, 1999.
Accordingly, computer programs and software may need to be modified prior to
the year 2000 in order to remain functional. Failure to complete necessary
modifications could cause a disruption or failure of such program and system.

         The company has defined Year 2000 compliant as the ability to:

         -  Correctly handle date information needed for the December 31,
            1999, to January 1, 200, date change;

         -  Function according to the product documentation provided for this
            date change, without changes in operation resulting from the
            advent of a new century, assuming correct configuration;

         -  Respond to two-digit date input in a way that resolves the
            ambiguity as to century in a disclosed, defined and predetermined
            manner;

         -  Store and provide output of date information in ways that are
            unambiguous as to century if the date elements in interfaces and
            data storage specify the century; and

         -  Recognize Year 2000 as a leap year

         The company has formed a "Year 2000 Team" to identify, access and
resolve Year 2000 compliance issues. The team has completed an inventory of
all material Year 2000 issues.

         Products and IT systems. The company has tested all of its current
products for Year 2000 compliance. The company derived its testing method
from a review and analysis of the Year 2000 testing practices of software
vendors, relevant industry Year 2000 compliance standards and the specific
functionality and operation environments of its products. These tests were
run on all supported platforms for each current release of our product and
included testing for date calculations and internal storage of date
information with test numbers starting in 1999 and going beyond the year
2000. Based on these tests, the company believes its products are Year 2000
compliant with respect to date calculations and internal storage of date
information. However there can be no assurance that its tests detected every
possible contingency and no assurance the company will not receive claims
from its customers asserting liability, including liability for breach of
warranties related to the failure of its products and services to function
properly.

                                       10
<PAGE>

         To date, the company has not identified any significant areas of
noncompliance with respect to its internal IT systems. It expects that the
assessment and all remedial action for all of its IT systems will be
completed by the end of calendar year 1999. The company intends to take the
necessary steps to make its systems Year 2000 compliant. These steps may
require the company to modify, upgrade or replace some of its internal
financial and operational systems. The cost of bringing all internal systems,
equipment and operations into Year 2000 compliance has not yet been
determined. While these efforts may involve additional costs, the company
believes, based upon currently available information, that these costs will
not have a material adverse effect on the business, financial condition or
results of operations of the company--although no assurances can be given.

         Customers, suppliers, and service providers. The company has
surveyed its significant customers, suppliers, service providers and the sole
manufacturer of its silicon wafers to determine their plans to address Year
2000 issues. The company has received assurances from most of its customers
and third party vendors and anticipates further cooperation in these efforts,
however there can be no assurance such third parties will indeed be Year 2000
compliant. If any customers have a business interruption due to Year 2000
compliance issues the company's revenue could be significantly impacted and
the resulting loss in sales for the quarter could have a material adverse
effect on the company's business, financial condition and results of
operation. If any suppliers, service providers or the sole manufacturer of
its silicon wafers fails to appropriately address their Year 2000 issues,
such failure could have a material adverse effect on the company's business,
financial condition and results of operation. The company may not find
alternative suppliers, service providers, or an alternative to its sole
manufacturer. In the event that any of our significant suppliers, service
providers or our sole manufacturer does not achieve Year 2000 compliance
successfully and in a timely manner, and we are unable to replace them with
alternate sources, our business would be harmed. The Year 2000 Team has
developed contingency plans in the event a third party fails to appropriately
address their Year 2000 issues for every supplier except the sole
manufacturer of our silicon wafers for which an alternative supplier is not
available. Even if the company's assessments, resolutions and contingency
plans are completed and put in place on time, there can be no assurance that
such actions will be sufficient to address any third-party failures. Nor can
the company be assured that unresolved or undetected internal and external
Year 2000 issues with third parties will not have a material adverse effect
on the company's business, financial condition and results of operations.

         The most reasonably likely "worst case" scenario for the company
with respect to the Year 2000 problem is the failure of the company's major
distributor or the company's sole manufacturer of silicon wafers to be Year
2000 compliant such that the sale or distribution of GateField products or
the supply of components for such products is interrupted. This could result
in the company not being able to produce or distribute products for a period
of time, which in turn could result in lost sales and profits. If the
company's strategic partners were to incur a sustained interruption in their
ability to manufacture GateField wafers or sell GateField products, the
impact on the company's business, financial condition and results of
operations would be material.

         Recent legislation. Legislation was recently passed by Congress that
purports to limit liability for failure to be Year 2000 compliant. We cannot
assure you that this legislation will limit our liability.

         Although the company believes its Year 2000 Team will identify all
of the company's material Year 2000 issues, given the pervasiveness of Year
2000 issues and the complex interrelationships among Year 2000 issues both
internal and external to the company, there can be no assurance that the
company will be able to identify and accurately evaluate all such issues. As
the process of identifying, accessing and resolving Year 2000 compliance
issues proceeds, the company may identify situations that present material
Year 2000 risks and/or that will require substantial time and material
expense to address. Even if the company's assessments and resolutions are
completed on time and put in place, there can be no assurance that such plans
will be sufficient to address any failures or that unresolved or undetected
internal and external Year 2000 issues will not have a material adverse
effect on the company's business, financial condition and results of
operations. The discussion above regarding estimated completion dates, costs,
risks and other forward-looking statements regarding Year 2000 is based on
the company's best estimates given information that is currently available
and is subject to change as the company continues to progress with its Year
2000 initiatives, it may discover that actual results will differ materially
from these estimates.

                                       11
<PAGE>

FACTORS AFFECTING FUTURE RESULTS

IMMEDIATE NEED FOR ADDITIONAL FUNDING

         At September 30, 1999, the company had cash and cash equivalents of
approximately $7,067,000 and working capital of $1,582,000. During the nine
months ended September 30, 1999 and 1998, the company incurred net losses of
approximately $6,964,000 and $5,571,000, respectively. The company expects to
continue to generate losses for at least the next nine months. As a result,
the company expects that it will have utilized all of its currently available
cash on or about June 30, 2000. Many factors could increase or decrease the
company's utilization of its capital resources during this period and the
company may need additional financing at an earlier date. There can be no
assurance that such financing will be available on terms acceptable to the
company and its stockholders, if at all. If the company is unable to obtain
additional financing the company may be required to reduce or even terminate
its operations.

DEPENDENCE ON THE SUCCESSFUL DEVELOPMENT OF 0.25-MICRON PRODUCTS

         The company's success is highly dependent upon the timely completion
and introduction of new products at competitive price and performance levels,
especially the timely roll-out of sufficient volumes of its next generation
of 0.25-micron products. GateField is currently completing initial testing of
its 0.25-micron product family and related software. The joint Actel /
GateField marketing team began limited shipments of its 0.25-micron products
to initial customers in the third quarter of 1999. However, no assurance can
be given that the company's design and introduction schedules for such
products will continue to be met. Indeed, several factors could interrupt or
severely limit production of its products; such interruptions or limited
production could drastically impact the company's financial performance for
one or more quarters. Moreover, there can be no assurances that, even if such
products are introduced into the market on a timely basis and in sufficient
volumes, they will achieve market acceptance or continue to be successfully
developed. To the extent that the company's development and commercialization
efforts with respect to the 0.25-micron products is unsuccessful or if these
products do not achieve market acceptance, the company's business, financial
condition and results of operations would be materially adversely affected.

         The company's 0.25-micron products are highly complex and may
contain undetected or unresolved defects when first introduced or as new
versions are released. There can be no assurance that, despite testing by the
company, defects will not be found in new products, including the company's
0.25-micron products, or new versions of such products following commercial
release. This could result in loss of market share, delay in or loss of
market acceptance or product recall. Any such occurrence could have a
material adverse effect upon the company's business, financial condition and
results of operations.

DEPENDENCE ON INDEPENDENT WAFER MANUFACTURERS

         The company currently uses a single independent manufacturer,
Infineon Corporation ("Infineon"), to provide wafers used in the production
of its products, including its 0.25-micron products. The company has invested
significant amounts of time and resources in working with Infineon to develop
and improve the manufacturing processes relating to GateField's 0.25-micron
product family. Although Infineon has also invested significant resources
into its relationship with GateField, if Infineon were unable or unwilling to
manufacture such products as anticipated by GateField, GateField would be
unable to introduce such products to market on a timely basis and/or produce
sufficient volumes, which would have a material adverse effect on the
company's business, financial condition and results on operations. If this
relationship were terminated, the company would be required to redesign its
wafers to make them compatible with the manufacturing process of a new
manufacturer. This process could take up to twelve (12) months. In addition,
the company could lose significant revenue opportunities while working to
achieve volume production with a new vendor. No assurance can be given that
any additional qualified wafer foundries would become available or be able to
satisfy GateField's requirements on a timely basis.

         GateField's dependence on Infineon for the manufacture of its
products subjects the company to a number of risks associated with an
interruption of supply from a single source. In particular, with respect to
the manufacture of GateField's 0.25-micron products, Infineon will require
significant lead-time to reach volume production on new processes.
Accordingly, no assurance can be given that volume production or acceptable
yields with respect to GateField's new 0.25-micron product family will be
achieved on a timely basis or at all. GateField has in the past experienced
delays in obtaining wafers and unacceptable yields from its foundries, and
there can be no assurance that the company will not experience similar or
more severe delays or poor yields in the future. Although GateField has
supply agreements with Infineon, a

                                       12
<PAGE>

shortage of raw materials or production capacity could lead Infineon to
allocate available capacity to customers other than GateField. In addition,
internal uses within Infineon could delay manufacture of GateField products
and interrupt GateField's capability to meet its product delivery
obligations. Any inability or unwillingness of Infineon to provide adequate
quantities of finished wafers to satisfy GateField's needs in a timely manner
would delay production and product shipments and could have a material
adverse effect on GateField's business, financial condition and results of
operations. Furthermore, Infineon is in the process of being spun off from
its parent, Siemens Aktiengesellschaft. There can be no assurance that the
wafer-manufacturing portion of such operations will be willing and capable of
continuing to support the manufacture of GateField's products.

RELIANCE ON ACTEL RELATIONSHIP

         In August 1998, GateField entered into a strategic relationship with
Actel Corporation. In a product marketing agreement, Actel acquired the
exclusive right to distribute GateField's standard ProASIC products based on
0.25 micron and smaller geometries. As a result, GateField terminated its
entire sales force and does not anticipate creating a new sales force in the
foreseeable future. Consequently, GateField is highly dependent on Actel's
sales efforts and the success of its sales force in marketing GateField's
0.25-micron products.

         Actel will continue to market its own products, including products
that are competitive with GateField's products. Accordingly, there is a risk
that Actel may give higher priority to its own Actel products, thus reducing
its efforts to sell GateField's products. In addition, GateField's agreement
with Actel is terminable by Actel under a variety of circumstances, including
GateField's material breach of the product marketing agreement. As GateField
would require significant amounts of time and resources to rebuild its sales
force, reduction in sales efforts by Actel or a termination of its agreement
with GateField would have a material adverse effect on GateField's business,
financial condition and results of operations.

COMPETITION

         The semiconductor industry is intensely competitive and is
characterized by rapid technological change, product obsolescence, and price
erosion. The company expects competition to increase in the future. Increased
competition would likely reduce our prices. GateField's existing competitors
include suppliers of conventional gate arrays, complex programmable logic
devices (CPLDs) and FPGAs. The company's two principal competitors are
Xilinx, a supplier of FPGAs based on SRAM technology, and Altera, a supplier
principally of CPLDs. GateField also faces competition in the future from
major domestic and international semiconductor suppliers and suppliers of
logic products based on new or emerging technologies.

         The company's competitors may respond more quickly to emerging
technologies. In addition, many of the company's competitors have longer
operating histories, more resources, broader customer relationships and
broader product lines. Important competitive factors in GateField's market
are: price, performance, number of usable gates, ease of use and
functionality of development system software, installed base of development
systems, adaptability of products to specific applications, length of
development cycle (including reductions to finer micron design rules), number
of I/Os, reliability, adequate wafer fabrication capacity and sources of raw
materials, protection of products by effective utilization of intellectual
property laws and technical service and support. Failure of GateField to
compete successfully in any of these or other areas could have a material
adverse effect on its business, financial condition and results of operations.

DEPENDENCE ON KEY PERSONNEL

         GateField's success is dependent in large part on the continued
service of its key management, engineering, marketing and support employees.
Competition for qualified personnel, particularly skilled engineers, is
intense in the semiconductor industry. The loss of GateField's current key
employees, or the inability of the company to attract other qualified
personnel, could have a material adverse effect on GateField. The company
does not have employment agreements with any of its key employees.

PRICE EROSION

         The semiconductor industry is characterized by intense competition.
Historically, average selling prices in the semiconductor industry in
general, and for GateField's products in particular, have declined
significantly over the life of

                                       13
<PAGE>

each product. Moreover, GateField is highly dependent on Actel for the
marketing of the company's next generation of ProASIC products. While
GateField expects that the average selling prices of its products will be
reduced over time as the company achieves manufacturing cost reductions,
GateField may from time to time be required by competitive pressures to
reduce the prices of its products more quickly than such cost reductions can
be achieved. In addition, GateField occasionally approves price reductions on
specific sales to meet competition. If these reductions are not offset by
reductions in manufacturing costs or by a shift in the mix of products sold
toward higher-margin products, declines in the average selling prices of
GateField's products will reduce gross margins and could have a material
adverse effect on the company's business, financial condition and results of
operations.

MANUFACTURING YIELDS

          The manufacture of high-performance ProASIC products is a complex
process that requires a high degree of technical skill, state-of-the-art
equipment and effective cooperation between the wafer supplier and the
circuit designer to produce acceptable yields. Minute impurities, errors in
any step of the fabrication process, defects in the masks used to print
circuits on a wafer and other factors can cause a substantial percentage of
wafers to be rejected or numerous die on each wafer to be nonfunctional.
GateField has from time to time experienced in the past, and expects that it
will experience in the future, production yield problems and delivery delays.
Any prolonged inability to obtain adequate yields or deliveries of the
0.25-micron products would adversely effect GateField's business, financial
condition and results of operations.

SEMICONDUCTOR INDUSTRY RISKS

         The semiconductor industry has historically been cyclical and
periodically subject to significant economic downturns, which are
characterized by rapid technological change, product obsolescence, diminished
product demand, accelerated price erosion and overcapacity. Downturns often
occur in connection with, or in anticipation of, maturing product cycles (of
both the semiconductor companies and their "end customers") and declines in
general economic conditions. Some of these downturns have lasted for more
than a year. Also, during such periods, customers of semiconductor
manufacturers benefiting from shorter lead times may delay some purchases of
semiconductors into future periods.

DEPENDENCE ON DESIGN WINS

         For GateField to sell its ProASIC products to a customer, the
customer must incorporate the company's ProASIC technology into the
customer's product in the design phase. GateField is highly dependent on
Actel's sales marketing and FAE team, in conjunction with the support of
GateField resources, to persuade potential customers to incorporate the
company's standard ProASIC product into new or updated products. These
efforts may precede by many months (and sometimes a year or more) the
generation of volume sales, if any, by the customer. The value of any design
win, moreover, will depend in large part upon the ultimate success of the
customer's product. No assurance can be given that GateField will win
sufficient designs or that any design win will result in significant revenues.

DEPENDENCE ON INDEPENDENT ASSEMBLY SUBCONTRACTORS

         GateField relies primarily on foreign subcontractors for the
assembly and packaging of its products and, to a lesser extent, for the
testing of its finished products. The company generally relies on a few key
subcontractors to provide particular services and has from time to time
experienced difficulties with the timeliness and quality of product
deliveries. GateField has no long-term contracts with its subcontractors, and
certain of those subcontractors are currently operating at or near full
capacity. There can be no assurance that these subcontractors will continue
to be able and willing to meet GateField's requirements for components or
services. Any significant disruption in supplies from, or degradation in the
quality of components or services supplied by, these subcontractors could
delay shipments and result in the loss of customers or revenues or otherwise
have a material adverse effect on GateField's business, financial condition
and results of operations.

                                       14
<PAGE>


PATENT INFRINGEMENT

         Although GateField has obtained patents covering aspects of its
ProASIC and related technologies, no assurance can be given that GateField's
patents will be determined to be valid or that any assertions of infringement
or invalidity by other parties (or claims for indemnity from customers
resulting from any infringement claims) will not be successful. Although the
company is not currently a party to any material litigation, the
semiconductor industry is characterized by frequent claims regarding patent
and other intellectual property rights. As is typical in the semiconductor
industry, the company from time to time receives communications from third
parties asserting patents on certain of the company's technologies. In the
event any third party were to make a valid claim against the company, the
company could be required to discontinue the use of certain processes or
cease the use, import and sale of infringing products, to pay substantial
damages and to develop non-infringing technologies or to acquire licenses to
the alleged infringed technology. The company's business, financial condition
and results of operations could be materially and adversely affected by such
developments. Litigation, which could result in substantial cost to and
diversion of resources of the company, may also be necessary to enforce
patents or other intellectual property rights of the company or to defend the
company against claimed infringement of the rights of others. The failure to
obtain necessary licenses or the occurrence of litigation relating to patent
infringement or other intellectual property matters could have a material
adverse effect on the company's business, financial condition and results of
operations.

PROTECTION OF INTELLECTUAL PROPERTY

         GateField has historically devoted significant resources to research
and development. It believes that the intellectual property derived from
research and development is a valuable asset that has been and will continue
to be important to the success of the company's business. GateField relies
primarily on a combination of nondisclosure agreements, other contractual
provisions, and patent and copyright laws to protect its proprietary rights.
No assurance can be given that the steps taken by GateField will be adequate
to protect its proprietary rights. In addition, the laws of certain
territories in which GateField's products are or may be developed,
manufactured or sold, including Asia and Europe, may not protect the
company's products and intellectual property rights to the same extent as the
laws of the United States. Failure of GateField to enforce its patents or
copyrights or to protect its trade secrets could have a material adverse
effect on the company's business, financial condition and results of
operations.

RELIANCE ON INTERNATIONAL SALES

         In the past, GateField has operated sales offices in England,
Germany and Japan. Sales from these offices were in the local currency and,
therefore, exposed the company to currency exchange fluctuations. Sales to
customers located outside the United States accounted for approximately 30%
in 1998, 48% in 1997 and 31% in 1996. Of these sales, sales to customers
located in the Asia Pacific region and Japan accounted for approximately 25%,
28% and 18% of net revenues for 1998, 1997 and 1996, respectively. Revenue
from customers located in the Asia Pacific region and Japan in the third
quarter of 1999 and 1998 was $30,400 and $223,700 respectively. Revenue from
customers located in the Asia Pacific region and Japan for the nine-month
period ended September 30, 1999 and 1998 was $391,800 and $808,100
respectively.

         GateField is in the process of closing down the operations of all of
its foreign offices and expects such closures to occur by the end of the
fourth quarter of 1999. GateField expects international revenues to continue
to decline each quarter from their current level.

         Although GateField is closing its foreign sales offices, it expects
that revenues derived from international sales will continue to represent a
significant portion of the company's total revenues because of its marketing
relationship with Actel. Further, such direct foreign sales are denominated
in U.S. dollars. Therefore, GateField's products become less price
competitive in countries with currencies that are declining in value against
the dollar. International sales are subject to a variety of risks, including
longer payment cycles, greater difficulty in accounts receivable collection,
currency restrictions, tariffs, trade barriers, taxes, export license
requirements and the impact of recessionary environments in economies outside
the United States.

DEPENDENCE ON NEW PRODUCT DEVELOPMENT; RAPID TECHNOLOGICAL CHANGE

         The market for GateField's products is characterized by rapidly
changing technology, frequent new product introductions, and declining
average selling prices over product life cycles. Thus GateField's future
success is highly dependent upon the timely completion and introduction of
new products at competitive price and performance levels,

                                       15
<PAGE>

including the timely introduction of its next generation of 0.25-micron
ProASIC products.

         In evaluating new product decisions, GateField must anticipate both
the future demand and the technology that will be available to supply such
demand. Failure to anticipate customer demand, delays in developing new
products and failure to coordinate the design and development of silicon and
associated software products each could have a material adverse effect on
GateField's business, financial condition and results of operation. No
assurance can be given that any other new products will gain market
acceptance or that GateField will respond effectively to new technological
changes or new product announcements by others. Any failure of GateField or
its strategic partners to successfully define, develop, market, manufacture,
assemble or test competitive new products could have a material adverse
effect on its business, financial condition and results of operations.

FORWARD-LOOKING STATEMENTS

         All forward-looking statements contained in this Quarterly Report on
Form 10-Q, including all forward-looking statements contained in any document
incorporated herein by reference, are made pursuant to the safe harbor
provisions of the Public Securities Litigation Reform Act of 1995. Words such
as "anticipates," "believes," "estimates," "expects," intends," "plans,"
"seeks" and variations of such words and similar expressions are intended to
identify the forward-looking statements. The forward-looking statements
include projections relating to trends in markets, revenues, average selling
prices, gross margin, wafer yields, research and development expenditures,
selling, general and administrative expenditures and the Year 2000 compliance
issue.

         All forward-looking statements are based on current expectations and
projections about the semiconductor industry and programmable logic market,
and assumptions made by GateField's management that reflect its best judgment
based on other factors currently known by management, but they are not
guarantees of future performance. Accordingly, actual events and results may
differ materially from those expressed or forecast in the forward-looking
statements due to the risk factors identified herein or for other reasons.
GateField undertakes no obligation to update any forward-looking statement
contained in this Quarterly Report on Form 10-Q or incorporated by reference
in the company's Annual Report on Form 10-K.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          Item 3.  Quantitative and Qualitative Disclosures About Market Risk
The GateField Corporation is exposed to market risk related to fluctuations
in interest rates and in foreign currency exchange rates:

INTEREST RATE EXPOSURE.

           GateField maintains its funds in money market and Certificate of
Deposit accounts at banks. The company's exposure to market risk due to
fluctuations in interest rates relates primarily to its interest earnings on
its cash deposits. These securities are subject to interest rate risk
inasmuch as their fair value will fall if market interest rates increase. If
market interest rates were to increase immediately and uniformly by 10% from
the levels prevailing at December 31, 1998, the fair value of the portfolio
would not decline by a material amount. GateField does not use derivative
financial instruments to mitigate risks. However, it does have an investment
policy that would allow it to invest in short-term investments such as money
market instruments and corporate debt securities. The company's policy does
attempt to reduce such risks by typically limiting the maturity date of such
securities to no more than eighteen months with a maximum average maturity to
its whole portfolio of such investments at six months, placing its
investments with high credit quality issuers and limiting the amount of
credit exposure with any one issuer.

FOREIGN CURRENCY EXCHANGE RATE EXPOSURE.

           GateField's exposure to market risk due to fluctuations in foreign
currency exchange rates relates primarily to the intercompany balances with
its U.K., German and Japanese subsidiaries. Although the company transacts
business in various foreign countries, settlement amounts are usually based
on U.S. currency. Transaction gains or losses have not been significant in
the past, and there is no hedging activity on sterling, mark, yen or other
currencies. GateField is in the process of closing these subsidiaries and
expects to receive approximately $500,000 in cash transfers during 1999 from
these closings. The company would not experience a material foreign exchange
loss based on a hypothetical 10% adverse change in the price of the sterling,
mark or yen against the U.S. dollar. Consequently, GateField does not expect
that a reduction in the value of such accounts denominated in foreign
currencies resulting from even a sudden or significant fluctuation in foreign
exchange rates would have a direct material impact on the company's financial
position, results of operations or cash flows.

           Notwithstanding the foregoing analysis of the direct effects of
interest rate and foreign currency exchange rate fluctuations on the value of
certain of GateField's investments and accounts, the indirect effects of such
fluctuations could have a material adverse effect on the company's business,
financial condition and results of operations. For example, international
demand for GateField's products is affected by foreign currency exchange
rates. In addition, interest rate fluctuations may affect the buying patterns
of the company's customers. Furthermore, interest rate and currency exchange
rate fluctuations have broad influence on the general condition of the U.S.
foreign and global economics, which could materially adversely affect the
company.

PART II.    OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

None

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         In September 1999, the company issued approximately 471,000 shares
of common stock to outside investors for an aggregate purchase price of
$3,062,000 pursuant to a Stock Purchase Agreement entered into on September
30, 1999 which were exempt from registration pursuant to Regulation D
promulgated under the Securities Act of 1933, as amended or Rule 4(2)
thereunder.

         On June 30, 1999 (the "Effective Time") the company effected a
reverse stock split of its outstanding common stock whereby each ten (10)
shares of the company's Common Stock, par value $0.10 per share, issued and
outstanding or held in treasury at the Effective Time were automatically and
without any action on the part of the respective holders thereof

                                       16
<PAGE>

combined, converted and changed into one (1) share of Common Stock, par value
$0.10 per share, of the company (the "Reverse Stock-Split"). No fractional
shares were issued and, in lieu thereof, any holder of less than one share of
Common Stock received cash for such holder's fractional share based on the
closing price per share of the Common Stock on the Nasdaq Unaffiliated Over
the Counter Bulletin Board as of the Effective Time of the Reverse
Stock-Split.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None

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

None

ITEM 5.  OTHER INFORMATION

None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

4.1    Common Stock Purchase Agreement, dated September 30, 1999, between the
       company and Mitsui Create USA, Inc.

4.2    Common Stock Purchase Agreement, dated September 30, 1999, between the
       company and MHT American Holding, Inc.

4.3    Common Stock Purchase Agreement, dated September 30, 1999, between the
       company and Actel Corporation.

4.4    Common Stock Purchase Agreement, dated September 30, 1999, between the
       company and Idanta Partners Limited.

4.5    Common Stock Purchase Agreement, dated September 30, 1999, between the
       company and the Dunn Family Trust.

27.1   Financial Data Schedule.

(b)    Reports on Form 8-K

 None

                                       17
<PAGE>

                                    SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date: November 8, 1999   GATEFIELD CORPORATION

                                        /s/  Timothy Saxe
                                        -------------------------------------
                                        Timothy Saxe
                                        President and Chief Executive Officer


                                        /s/  James B. Boyd
                                        -------------------------------------
                                        James B. Boyd
                                        Chief Accounting Officer &
                                        Corporate Controller


                                       18