NVIDIA 2003 Annual Report Download - page 37

Our ability to compete will be harmed if we are unable to adequately protect our intellectual property.
We rely primarily on a combination of patents, trademarks, trade secrets, employee and third-party
nondisclosure agreements and licensing arrangements to protect our intellectual property. Our pending patent
applications and any future applications may not be approved. In addition, any issued patents may not provide us
with competitive advantages or may be challenged by third parties. The enforcement of patents by others may
harm our ability to conduct our business. Others may independently develop substantially equivalent intellectual
property or otherwise gain access to our trade secrets or intellectual property. Our failure to effectively protect
our intellectual property could harm our business. We have licensed technology from third parties for
incorporation in our graphics processors, and expect to continue to enter into license agreements for future
products. These licenses may result in royalty payments to third parties, the cross-licensing of technology by us
or payment of other consideration. If these arrangements are not concluded on commercially reasonable terms,
our business could suffer.
Future actions by the SEC or other governmental or regulatory agencies and resolution of related
litigation arising out of the restatement of our financial statements or other matters could harm our
business.
The staff of the Enforcement Division of the Securities & Exchange Commission (“SEC”) informed us in
January 2002 that it had concerns relating to certain accounting matters and that the SEC along with the U.S.
Attorney’s Office for the Northern District of California had authorized investigations into such matters. In
accordance with the suggestion and advice of the SEC staff, we launched a review of these matters. On April 29,
2002, we announced that the Audit Committee of our Board of Directors had, with assistance from the law firm
of Cooley Godward LLP and forensic auditors from the accounting firm of KPMG LLP, concluded its review
and determined that it was appropriate to restate our financial statements for fiscal 2000, 2001 and the first three
quarters of fiscal 2002. The Audit Committee has worked and continues to work in cooperation with the SEC.
After receiving a Wells notice indicating the SEC staff intended to recommend to the SEC that an enforcement
action be initiated, we reached an agreement in principle with the SEC staff in April 2003 that would resolve the
SEC’s investigation of us in matters related to the restatement. The agreement is subject to final approval of the
SEC. Under the terms of the agreement in principle, NVIDIA, without admitting or denying liability or
wrongdoing, would agree to an administrative cease and desist order prohibiting any future violations of certain
non-fraud financial reporting, books and records, and internal control provisions of the federal securities laws.
We would not be required to pay any fines or penalties. The documentation of the agreement and the SEC’s
review of the agreement may take several weeks or months to complete. Further, there can be no assurance that
the agreement will be approved by the SEC. Notwithstanding the above, actions by the SEC or other
governmental or regulatory agencies with respect to us or our personnel arising out of the restatement of our
financial statements or other matters may take significant time, may be expensive and may divert management’s
attention from other business concerns and harm our business.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth in our consolidated financial statements and notes thereto
included in this Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
35