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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Form 10-K

(Mark One)

For the fiscal year ended January 31, 2005,

OR

For the transition period from              to             

Commission file number 000-22009

NEOMAGIC CORPORATION

(Exact name of Registrant as specified in its charter)

Registrant’s telephone number, including area code (408) 988-7020

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

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par value

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 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 the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference to Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2) Yes  x    No  ¨

The aggregate market value of voting stock held by non-affiliates of the Registrant was approximately $47,153,835 as of July 30, 2004 based upon the closing price on the Nasdaq National Market reported for such date, the last business day of the Registrant’s most recently completed second fiscal quarter. This calculation does not reflect a determination that certain persons are affiliates of the Registrant for any other purposes.

The number of shares of the Registrant’s Common Stock, $.001 par value, outstanding at April 22, 2005 was 33,238,669.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement related to the 2005 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission after the date hereof, are incorporated by reference into Part III of this Annual Report on Form 10-K.

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NeoMagic Corporation

FORM 10-K

FOR THE FISCAL YEAR ENDED JANUARY 31, 2005

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FORWARD-LOOKING STATEMENTS

When used in this discussion, the words “expects,” “anticipates,” “believes” and similar expressions are intended to identify forward-looking statements. Such statements reflect management’s current intentions and expectations. However, actual events and results could vary significantly based on a variety of factors including, but not limited to: customer acceptance of new NeoMagic products, the market acceptance of handheld devices developed and marketed by customers that use our products, our ability to execute product and technology development plans on schedule, and our ability to access advanced manufacturing technologies in sufficient capacity without significant cash pre-payments or investment. Examples of forward-looking statements include statements about our expected revenues, our competitive advantage in our markets, the potential market for our products, our expected production timelines, our customer base and our need for additional financing beyond the next 12 months. These statements are subject to significant risks and uncertainties, including those set forth below under “Factors that May Affect Results,” that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein, to reflect any changes in our expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

PART I

General

NeoMagic Corporation designs, develops and markets high-performance semiconductor solutions, known as Applications Processors, for sale to manufacturers of mobile phones and handheld devices. Applications Processors are semiconductors, or Systems-on-Chips (SOCs), used to enable multimedia applications and sophisticated operating systems on mobile phones and other handheld devices. Our Applications Processors are sold under the “MiMagic” brand name with a focus on enabling high performance multimedia within a low power consumption environment. Our target customers include manufacturers of mobile phones and handheld devices. The largest projected market opportunity for Applications Processors is in the mobile phone market, where Applications Processors that enable multimedia functionality work side-by-side with baseband processors that are used for communications functionality.

In the past, we provided semiconductor solutions, called multimedia accelerators, to top notebook computer manufacturers. In April 2000, we began to exit the multimedia accelerator market. However, the majority of our historical net sales through the end of fiscal year 2002 continued to come from these multimedia accelerator products. We do not expect to have revenue related to these products in the future. We are now focused solely on the Applications Processor market. We believe that our expertise and experience in providing multimedia accelerators for the laptop computer market, where multimedia processing with low power consumption is a requirement, will give us an advantage in the Applications Processor market which also requires high performance processing with low power consumption.

International Data Corporation (IDC), an industry research firm for the technology market, states that 536 million mobile phones were shipped worldwide in 2003. IDC estimates that this number will grow to 745 million mobile phones by 2007. NeoMagic believes that next-generation mobile phones and other handheld devices will feature dramatically increased multimedia functionality including: camera applications, highly compressed video using MPEG-4 and H.264 video standards, 3D graphics for gaming, and audio. Our strategy is to become a leading provider of Applications Processors by:

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We have established relationships with third-party manufacturing partners to produce semiconductor products for us. Pursuant to these relationships, NeoMagic designs the overall product, including the logic and analog circuitry, and the manufacturing partners manufacture the wafers, assemble and test the products.

NeoMagic Corporation was incorporated in California in May 1993 and subsequently reincorporated in Delaware in February 1997.

Products

Our main product line is the MiMagic Applications Processor family. The MiMagic family of Applications Processors incorporates microprocessor, 3D graphics, audio and video capabilities. We introduced the first member of the MiMagic Applications Processor family in July of 2001. We have since phased out production of the MiMagic 1 and MiMagic 2 Applications Processors. Currently, the MiMagic 3 Applications Processor and MiMagic 5 Applications Processor are in full production. The MiMagic 6 Applications Processor is currently being sampled to customers and is expected to commence production shipments during the fourth quarter of calendar year 2005.

The following products fall within the category of Applications Processors for handheld devices:

The following products fall within the category of companion chips, which add IO (input/output) functions to processors made by other companies. These companion chips are currently being phased out.

Research and Development

We believe the timely development and introduction of new products are essential to maintaining our competitive position and our ability to capitalize on market opportunities. NeoMagic’s research and development efforts are focused on developing Integrated System-on-Chip semiconductor products for mobile phones and other handheld devices. At the end of fiscal 2005, we had approximately 91 employees engaged in research and development activities. Research and development expenses were $18.2 million, $19.7 million, and $24.7 million, in fiscal 2005, 2004 and 2003, respectively. We have historically focused much of our personnel and

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resources on research and development. Our research and development activities are focused on bringing the MiMagic 6 to production as well as on developing next generation products. We are also developing new technologies that will improve the quality of multimedia applications on low-power consumption mobile phones and other handheld devices. We plan to continue innovating and improving the functionality of our MiMagic family of Applications Processors.

In November of 2003, we completed the first version of our MiMagic 6 Applications Processor, which includes a new technology architecture, called Associative Processor Array (APA). The APA multimedia engine uses a massively parallel approach to processing information. Most competitive architectures use a sequential approach to process each bit of data separately. To increase performance, sequential architectures rely on increased clock rates. These faster clock rates result in increased power consumption and reduced battery life. Because APA operates on data in parallel, it is able to process more information per clock cycle than sequential approaches. With its ability to handle large amounts of data simultaneously, the APA platform is able to efficiently process multimedia data such as images, video and graphics, with low power consumption.

Sales and Marketing

We primarily sell our products to manufacturers of mobile phones and other handheld devices using our internal sales and marketing personnel, a global network of distributors and sales representatives and our management team. In some cases, mobile phones and other handheld devices are designed and manufactured by third-party Original Design Manufacturers (ODMs) on behalf of the final brand name Original Equipment Manufacturers (OEMs). We focus on developing long-term customer relationships with ODMs, brand name OEMs as well as mobile phone operators. We believe that this approach increases the likelihood of design wins, improves the overall quality of support, and enables the timely release of customer products to market.

Our sales and marketing strategy is an integral part of our effort to become a leading supplier of Applications Processors to manufacturers of mobile phones and other handheld devices. To meet customer requirements and achieve design wins, our sales and marketing personnel work closely with our customers, business partners and key industry trendsetters to define product features, performance, price, and market timing of new products. We employ a sales and marketing organization with a high level of technical expertise and product and industry knowledge to support a lengthy and complex design win process. Additionally, we employ a highly trained team of application engineers to assist customers in designing, testing and qualifying system designs that incorporate NeoMagic products as part of the pre-sale process. We believe that the depth and quality of this design support is key to improving customers’ time-to-market deliveries and maintaining a high level of customer satisfaction, which in turn encourages customers to utilize subsequent generations of our products.

Third Party Manufacturing

We have relationships with several foundries to produce our semiconductor wafers. These relationships enable us to concentrate our resources on product design, development, engineering, marketing and sales, where we believe we have greater competitive advantages, and to eliminate the high cost of owning and operating a semiconductor wafer fabrication facility. We depend on these suppliers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs, to produce products of acceptable cost and quality at acceptable manufacturing yields, and to deliver those products to us on a timely basis. A manufacturing disruption experienced by any of our manufacturing partners would have an adverse effect on our business, financial condition and results of operations. Furthermore, in the event that the transition to the next generation of manufacturing technologies at one of our suppliers is unsuccessful, our business, financial condition and results of operations would be materially and adversely affected.

We use other third-party subcontractors to perform assembly, packaging and testing of our products. We work with these third-party subcontractors for advanced packaging capabilities. We do not have long-term agreements with any of these subcontractors. As a result of our reliance on third-party subcontractors to

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assemble, test and provide advanced packaging for our products, we cannot directly control product delivery schedules, which could lead to product shortages or quality assurance problems that could increase the costs of manufacturing or assembly of our products. Due to the amount of time normally required to qualify these assembly and test subcontractors, shipments could be delayed significantly if we are required to find alternative subcontractors.

Competition

The market for Applications Processors is intensely competitive and is characterized by rapid technological change, evolving industry standards and declining average selling prices. We believe that the principal factors of competition in this market are video and 3D graphics performance, price, features, power consumption, size and customer support. The market for Applications Processors is also heavily affected by the system level architectural decisions made by prospective customers, that affect the allocation of functionality between the baseband processor and other chips in a mobile phone. Our ability to compete successfully in the Applications Processor market depends on a number of factors including, success in designing and subcontracting the manufacture of new products that implement new technologies, product quality and reliability, price, ramp of production of our products, customer demand and acceptance of more sophisticated multimedia functionality on mobile phones and other handheld devices, end-user acceptance of our customers’ products, market acceptance of competitors’ products and general economic conditions. Our ability to compete will also depend on our ability to identify and ensure compliance with evolving industry standards and market trends.

We compete with both domestic and international companies, some of which have substantially greater financial and other resources than us with which to pursue engineering, manufacturing, marketing and distribution of their products. Our principal competitors include Texas Instruments, Renesas, ST Microelectronics and Broadcom as well as a number of vertically integrated electronics firms that are developing their own solutions. We may also face increased competition from new entrants into the market including companies currently at developmental stages. We believe we have significant intellectual properties and historically demonstrated expertise in SOC technology. However, our inability to introduce timely new products for our market, to support these products in customer programs, or to manufacture these products could have a material adverse effect on our business, financial condition and operating results.

Intellectual Property

We rely in part on patents to protect our intellectual property. As of January 31, 2005, we had been issued 79 patents. However, on April 7, 2005, we announced the sale of 58 patents to Faust Communications, LLC for net proceeds of $3.5 million. The patents sold related to our legacy products and not to products that we currently sell or plan to sell. We retain a worldwide, non-exclusive license under the patents sold. The sale did not include several of our important patents covering embedded DRAM technology or any of the unique array processing technology used in our MiMagic family of Applications Processors. The remaining 21 issued patents are scheduled to expire no later than January 2022. Additionally, we have several patent applications pending. There can be no assurance that our pending patent applications, or any future applications will be approved. Further, there can be no assurance that any issued patents will provide us with significant intellectual property protection, competitive advantages, or will not be challenged by third parties, or that the patents of others will not have an adverse effect on our ability to do business. In addition, there can be no assurance that others will not independently develop similar products, duplicate our products or design around any patents that may be issued to us.

We also rely on a combination of mask work protection, trademarks, copyrights, trade secret laws, employee and third-party nondisclosure agreements and licensing arrangements to protect our intellectual property. Despite these efforts, there can be no assurance that others will not independently develop substantially equivalent intellectual property or otherwise gain access to our trade secrets or intellectual property, disclose such intellectual property or trade secrets, or that we can meaningfully protect our intellectual property. A failure by us to meaningfully protect our intellectual property could have a material adverse effect on our business, financial condition and results of operations.

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As a general matter, the semiconductor industry has experienced substantial litigation regarding patent and other intellectual property rights. In December 1998, we filed a lawsuit in the United States District Court for the District of Delaware seeking damages and an injunction against Trident Microsystems, Inc. The suit alleged that Trident’s embedded DRAM graphics accelerators infringe certain patents held by the Company. In January 1999, Trident filed a counter claim against us alleging an attempted monopolization in violation of antitrust laws, arising from NeoMagic’s filing of the patent infringement action against Trident. Since January 1999, no further action has occurred on this counter claim. The Court ruled that there was no infringement by Trident. As a result, we filed an appeal in the United States Court of Appeals, for the Federal Circuit. On April 17, 2002, the United States Court of Appeals for the Federal Circuit affirmed the lower court’s judgment of non-infringement on one patent and vacated the court’s judgment of non-infringement on another patent, thereby remanding it to the lower court for further proceedings. In November 2002, the lower court heard oral arguments on cross-motions for summary judgment on the matter. In May 2003, the lower court ruled in favor of Trident. In December 2003, we filed an appeal in the United States Court of Appeals, for the Federal Circuit. In August 2004 the Federal Circuit rejected the appeal and affirmed the lower court’s decision of no infringement by the Trident products. While we believe we have valid defenses against Trident’s counter claim filed in 1999, there can be no assurance as to whether Trident will or will not proceed with the counter-suit.

Backlog

Sales of our products are primarily made pursuant to standard purchase orders that are cancelable without significant penalties. These purchase orders are subject to price renegotiations and to changes in quantities of products and delivery schedules in order to reflect changes in customers’ requirements and manufacturing availability. Also, many of our customers are moving to “just in time” relationships with their vendors, whereby orders for product deliveries are not provided to the supplier until just prior to the requested delivery. A large portion of our sales are made pursuant to short lead-time orders. In addition, our actual shipments depend on the manufacturing capacity of our suppliers and the availability of products from such suppliers. As a result of the foregoing factors, we do not believe that backlog is a meaningful indicator of future sales.

Employees

As of January 31, 2005, we employed a total of 117 full-time employees, including 91 in research and development, 4 in applications engineering, 8 in sales and marketing, 2 in manufacturing and 12 in finance, information technology and administration. We also employ, from time to time, a number of temporary and part-time employees as well as consultants on a contract basis. Our employees are not represented by a collective bargaining organization, and we believe that we have good relations with our employees.

Management

Executive Officers

The executive officers of the Company as of January 31, 2005 are as follows:

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Prakash C. Agarwal, is our co-founder, and he was President, Chief Executive Officer, and a Director of NeoMagic from its inception in 1993 until April 19, 2005.

Doug Young joined NeoMagic in February of 2004. Mr. Young was promoted to VP Worldwide Sales in January 2005 and on April 19, 2005, Mr. Young was appointed President, Chief Executive Officer and Director of NeoMagic. Before joining NeoMagic, Mr. Young was Senior Vice President of Worldwide Sales at Planetweb, Inc., a provider of embedded multimedia application and browser software for consumer electronics devices. At Planetweb, Mr. Young worked with customers such as Samsung, Sharp, Philips and other large OEMs. Mr. Young has managed sales in many different environments ranging between large systems enterprise sales to the ‘Fortune 500’ and ODM and OEM sales in the consumer electronics market. He has over 25 years experience working for companies such as IBM, Storage Technology Corporation, Unilease Computer Corporation, Data General and Hitachi Data Systems. He has worked in hardware and software sales, and he was President and CEO of a computer and satellite leasing company. Mr. Young has a Bachelors of Arts Degree from Princeton University and a Masters Degree in Business Administration from The Stern School of Business at New York University.

Scott Sullinger joined NeoMagic in March of 2004. Prior to joining NeoMagic, Mr. Sullinger was director of finance at ON Semiconductor, a provider of power and data management semiconductors and standard semiconductor components. Before joining ON Semiconductor, Mr. Sullinger spent seven years in investment banking, most recently as vice president of technology investment banking at Morgan Stanley, in Menlo Park, California. In his role as an investment banker, Mr. Sullinger advised a variety of semiconductor companies, including Atmel, LSI Logic and STMicroelectronics, on acquisition and financing strategies. Mr. Sullinger previously worked as an auditor and as a senior consultant at the accounting firm of Price Waterhouse. He has a bachelor’s degree in economics from the University of California, Los Angeles, where he graduated cum laude, and a Masters Degree in Business Administration from Columbia University. He is a Certified Public Accountant.

Mark Singer joined NeoMagic in March 1997 as a Senior Staff member managing Strategic Business Planning and Corporate Communications. In 1999, he was promoted to Vice President, Corporate Marketing a position he held until April 20, 2005.

Available Information

We file our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 with the SEC electronically. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 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 maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.

You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports on the day of filing with the SEC on our website on the World Wide Web at http://www.neomagic.com, by calling the Investor Relations Department at our corporate offices at (408) 988-7020 or by sending an e-mail message to ir@neomagic.com.

Our corporate headquarters, which is also our principal administrative, selling and marketing, customer service, applications engineering and product development facility, is located in Santa Clara, California and consists of approximately 45,000 square feet under a lease which will expire on April 30, 2010. Prior to April 30, 2003, we had leases on two buildings with 45,000 square feet each. However, we exited one of these buildings

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and chose not to renew the lease on this building. We also lease 7,500 square feet of office space in Israel and 13,000 square feet of office space in India under operating leases that expire in September 2005 and December 2006, respectively. On February 1, 2005, we entered into a sublease agreement to sub-lease 10,000 square feet in our Santa Clara facility for a two year period starting on March 15, 2005. We believe our existing facilities are adequate for our current needs.

As a general matter, the semiconductor industry has experienced substantial litigation regarding patent and other intellectual property rights. In December 1998, we filed a lawsuit in the United States District Court for the District of Delaware seeking damages and an injunction against Trident Microsystems, Inc. The suit alleged that Trident’s embedded DRAM graphics accelerators infringe certain patents held by the Company. In January 1999, Trident filed a counter claim against us alleging an attempted monopolization in violation of antitrust laws, arising from NeoMagic’s filing of the patent infringement action against Trident. Since January 1999, no further action has occurred on this counter claim. The Court ruled that there was no infringement by Trident. As a result, we filed an appeal in the United States Court of Appeals, for the Federal Circuit. On April 17, 2002, the United States Court of Appeals for the Federal Circuit affirmed the lower court’s judgment of non-infringement on one patent and vacated the court’s judgment of non-infringement on another patent, thereby remanding it to the lower court for further proceedings. In November 2002, the lower court heard oral arguments on cross-motions for summary judgment on the matter. In May 2003, the lower court ruled in favor of Trident. In December 2003, we filed an appeal in the United States Court of Appeals, for the Federal Circuit. In August 2004 the Federal Circuit rejected the appeal and affirmed the lower court’s decision of no infringement by the Trident products. While we believe we have valid defenses against Trident’s counter claim filed in 1999, there can be no assurance as to whether Trident will or will not proceed with the counter-suit.

A special meeting of stockholders of NeoMagic Corporation, a Delaware corporation, was held on November 11, 2004 at 10:00 a.m., local time, at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304-1050.

At the special meeting, stockholders were asked to approve an amendment of NeoMagic’s existing certificate of incorporation to increase the authorized number of shares of common stock from 60,000,000 to 100,000,000. The number of votes cast for the matter was 28,262,856. The number of votes cast against the matter was 1,790,680. There were no votes withheld for the matter. The number of shares abstaining on the matter was 50,364. There were no broker non-votes on the matter.

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PART II

The Company’s common stock trades on the Nasdaq National Market under the symbol “NMGC”. The high and low closing sales prices set forth below are as reported on the Nasdaq National Market.

We had 229 stockholders of record as of April 22, 2005. We have not paid any dividends on our common stock. In addition, there are restrictions on dividend payments as long as the Series B Convertible Preferred Stock remains outstanding. We currently intend to retain any future earnings for use in our business and do not anticipate paying cash dividends to stockholders.

Information as of January 31, 2005 regarding equity compensation plans approved and not approved by stockholders is summarized in the following:

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The following selected financial data is qualified in its entirety by and should be read in conjunction with the more detailed consolidated financial statements and related notes included elsewhere herein.

Five Year Summary