10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2014

or

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-35520

GIGOPTIX, INC.

(Exact name of registrant as specified in its charter)

Delaware	26-2439072
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

130 Baytech Drive

San Jose, CA  95134

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x     No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting Company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨   No  x

The number of shares of Common Stock outstanding as of August 1, 2014, the most recent practicable date prior to the filing of this Quarterly Report on Form 10-Q, was 31,885,772 shares.

Table of Contents

		PAGE NO
PART I FINANCIAL INFORMATION
ITEM 1	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of June 29, 2014 and December 31, 2013	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 29, 2014 and June 30, 2013	4
	Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 29, 2014 and June 30, 2013	5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 29, 2014 and June 30, 2013	6
	Notes to Condensed Consolidated Financial Statements	7
ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	28
ITEM 4	Controls and Procedures	28
PART II OTHER INFORMATION
ITEM 1	Legal Proceedings	28
ITEM 1A	Risk Factors	29
ITEM 6	Exhibits	30

2

PART I

FINANCIAL INFORMATION

GIGOPTIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	June 29,			December 31,
	2014			2013
ASSETS	(Unaudited)			(1)
Current assets:
Cash and cash equivalents	$	18,541		$	20,377
Accounts receivable, net		7,029			5,021
Inventories		4,287			4,617
Prepaid and other current assets		739			434
Total current assets		30,596			30,449
Property and equipment, net		2,417			2,999
Intangible assets, net		2,840			3,287
Goodwill		9,860			9,860
Investment in unconsolidated affiliate		125			-
Restricted cash		133			284
Other assets		117			183
Total assets	$	46,088		$	47,062
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,652		$	831
Accrued compensation		903			1,170
Other current liabilities		2,281			2,746
Total current liabilities		5,836			4,747
Pension liabilities		140			140
Deferred rent, noncurrent		143			177
Other long term liabilities		441			418
Total liabilities		6,560			5,482
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.001 par value; 50,000,000 shares authorized as of June 29, 2014 and December 31, 2013; 32,467,019 and 32,067,616 shares issued and outstanding as of June 29, 2014 and December 31, 2013, respectively		32			32
Additional paid-in capital		141,611			139,710
Treasury stock, at cost; 701,754 shares as of June 29, 2014 and December 31, 2013, respectively		(2,209	)		(2,209	)
Accumulated other comprehensive income		478			490
Accumulated deficit		(100,384	)		(96,443	)
Total stockholders’ equity		39,528			41,580
Total liabilities and stockholders’ equity	$	46,088		$	47,062

See accompanying Notes to Condensed Consolidated Financial Statements

(1) The condensed consolidated balance sheet as of December 31, 2013 has been derived from the audited consolidated financial statements as of that date.

3

GIGOPTIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Total revenue	$	8,037		$	6,831		$	15,423		$	13,752
Total cost of revenue		3,487			2,578			6,613			5,214
Gross profit		4,550			4,253			8,810			8,538
Research and development expense		3,358			3,177			7,100			6,413
Selling, general and administrative expense		2,567			2,041			4,965			4,394
Restructuring expense, net		307			-			307			950
Special litigation-related expense		-			472			-			887
Total operating expenses		6,232			5,690			12,372			12,644
Loss from operations		(1,682	)		(1,437	)		(3,562	)		(4,106	)
Interest expense, net		(10	)		(25	)		(27	)		(79	)
Other income, net		-			88			10			256
Loss before provision for income taxes		(1,692	)		(1,374	)		(3,579	)		(3,929	)
Provision for income taxes		21			14			31			27
Loss from consolidated companies		(1,713	)		(1,388	)		(3,610	)		(3,956	)
Equity in earnings of unconsolidated affiliate		331			-			331			-
Net loss	$	(2,044	)	$	(1,388	)	$	(3,941	)	$	(3,956	)
Net loss per share—basic and diluted	$	(0.06	)	$	(0.06	)	$	(0.13	)	$	(0.18	)
Weighted average number of shares used in per share calculations - basic and diluted		31,607			21,628			31,521			21,588

See accompanying Notes to Condensed Consolidated Financial Statements

4

GIGOPTIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Net loss	$	(2,044	)	$	(1,388	)	$	(3,941	)	$	(3,956	)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment		(10	)		17			(12	)		25
Other comprehensive income (loss), net of tax		(10	)		17			(12	)		25
Comprehensive loss	$	(2,054	)	$	(1,371	)	$	(3,953	)	$	(3,931	)

See accompanying Notes to Condensed Consolidated Financial Statements

5

GIGOPTIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended
	June 29,			June 30,
	2014			2013
Cash flows from operating activities:
Net loss	$	(3,941	)	$	(3,956	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,813			1,881
Stock-based compensation		2,127			2,508
Change in fair value of warrants		(3	)		(12	)
Loss (gain) on property and equipment		8			(160	)
Non-cash restructuring expense		210			-
Equity in earnings of unconsolidated affiliate		331			-
Changes in operating assets and liabilities:
Accounts receivable, net		(2,008	)		(1,352	)
Inventories		85			158
Prepaid and other current assets		(582	)		(387	)
Other assets		23			18
Accounts payable		1,754			(409	)
Accrued restructuring		(29	)		13
Accrued compensation		(268	)		28
Other current liabilities		(248	)		(145	)
Other long-term liabilities		(10	)		(41	)
Net cash used in operating activities		(738	)		(1,856	)
Cash flows from investing activities:
Purchases of property and equipment		(682	)		(1,099	)
Proceeds from sale of property and equipment		-			160
Net cash used in investing activities		(682	)		(939	)
Cash flows from financing activities:
Proceeds from issuance of stock		40			-
Taxes paid related to net share settlement of equity awards		(266	)		(75	)
Net borrowings on line of credit		-			2,400
Repayment of capital lease		(181	)		(237	)
Net cash provided by (used in) financing activities		(407	)		2,088
Effect of exchange rates on cash and cash equivalents		(9	)		66
Net decrease in cash and cash equivalents		(1,836	)		(641	)
Cash and cash equivalents as of beginning of period		20,377			10,147
Cash and cash equivalents as of end of period	$	18,541		$	9,506
Supplemental disclosure of cash flow information
Interest paid	$	29		$	79
Property and equipment acquired with accounts payable	$	90		$	46
Investment in unconsolidated affiliate acquired with property and equipment and inventories	$	456		$	-

See accompanying Notes to Condensed Consolidated Financial Statements

6

 GIGOPTIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION

Organization

GigOptix Inc.(“GigOptix” or the “Company”) is a leading fabless supplier of high speed semiconductorcomponentsthat enable end-to-end information streaming over optical and wireless networks and address long haul and metro telecommunications applications as well as emerging high-growth opportunities for Cloud and datacenter connectivity, interactive applications for consumer electronics and the industrial, defense and avionics industries.  The business is made up of two product lines: the High-Speed Communications (“HSC”) product line and the Industrial product line.

The HSC product line offers a broad portfolio of high performance optical and wireless components to telecommunications (“telecom”) and data communications (“datacom”) customers, i) mixed signal radio frequency integrated circuits (“RFIC”), including 10 to 400 gigabit per second (“Gbps”) laser and optical drivers and trans-impedance amplifiers (“TIA”) for telecom, datacom, and consumer electronic fiber-optic applications; ii) power amplifiers and transceivers for microwave and millimeter monolithic microwave integrated circuit (“MMIC”) wireless applications including power amplifiers and transceiver chips at frequencies higher than 50 GHz; iii) integrated systems in a package (“SIP”) solutions for both fiber-optic and wireless applications; and iv) radio frequency (“RF’) chips for various consumer applications such as global navigation satellite systems (“GNSS”). The HSC product line also partners with key customers on development projects that generate engineering project revenue for the Company while helping to position the Company for future product revenues with these key customers.

The Industrial product line offers a wide range of digital and mixed-signal application specific integrated circuit (“ASIC”) solutions for industrial, military, avionics, medical and communications markets. The Industrial product line partners with ASIC customers on development projects that generate engineering project revenue for the Company which generally leads to future product revenues with these ASIC customers.

GigOptix, Inc., the successor to GigOptix LLC, was formed as a Delaware corporation in March 2008 in order to facilitate a combination between GigOptix LLC and Lumera Corporation (“Lumera”). Before the combination, GigOptix LLC acquired the assets of iTerra Communications LLC in July 2007 (“iTerra”) and Helix Semiconductors AG (“Helix”) in January 2008. On November 9, 2009, GigOptix acquired ChipX, Incorporated (“ChipX”). On June 17, 2011, GigOptix acquired Endwave Corporation (“Endwave”). As a result of the acquisitions, Helix, Lumera, ChipX and Endwave all became wholly owned subsidiaries of GigOptix.  In March 2013, the Company established a German subsidiary, GigOptix GmbH; however it is in the process of being dissolved.

In February 2014, together with Fundação CPqD – Centro De Pesquisa e Desenvolvimento em Telecomunicações (“CPqD”), the Company incepted a new joint venture of which the Company owns 49% and CPqD owns 51%, BrPhotonics Produtos Optoeletrônicos LTDA. (“BrP”), based in Campinas, Brazil, which will be a provider of advanced high-speed devices for optical communications and integrated transceiver components that enable information streaming over communications networks. This joint venture is engaged in research and development of Silicon-Photonics (“SiPh”) advanced electro-optical products.  As of June 29, 2014, the Company had transferred its inventory related to the Thin Film Polymer on Silicon (“TFPS^TM”) platform and the production line equipment for use by BrP (see also Note 8).

In June 2014, the Company signed a definitive agreement to acquire, for cash only by way of assuming specified liabilities, substantially all of the assets of Tahoe RF Semiconductor, Inc. (“Tahoe RF”), a provider of RF/analog RFICs, intellectual property, and fully integrated systems and subsystems on a chip. This acquisition closed on June 30, 2014, which is the first day of the Company’s third quarter of fiscal 2014 (see also Note 14.)

Basis of Presentation

The Company’s fiscal year ends on December 31. For quarterly reporting, the Company employs a five-week, four-week, four-week, reporting period. The second quarter of 2014 ended on Sunday, June 29, 2014. The second quarter of 2013 ended on Sunday, June 30, 2013. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

The accompanying unaudited condensed consolidated financial statements as of June 29, 2014 and for the three and six months ended June 29, 2014 and June 30, 2013, have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X, and include the accounts of the Company and all of its subsidiaries. Accordingly, they do not include all of the information and footnotes required by such accounting principles for annual financial statements. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position as of June 29, 2014, the results of operations for the three and six months ended June 29, 2014 and June 30, 2013, and cash flows for the six months ended June 29, 2014 and June 30, 2013. The condensed consolidated results of operations for the three and six months ended June 29, 2014 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending December 31, 2014. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s 2013 Form 10-K.

7

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported periods. These judgments can be subjective and complex, and consequently, actual results could differ materially from those estimates and assumptions. Descriptions of these estimates and assumptions are included in the 2013 Form 10-K and the Company encourages you to read its 2013 Form 10-K for more information about such estimates and assumptions.

NOTE 2—BALANCE SHEET COMPONENTS

Accounts receivable, net consisted of the following (in thousands):

	June 29,			December 31,
	2014			2013
Accounts receivable	$	7,093		$	5,241
Allowance for doubtful accounts		(64	)		(220	)
	$	7,029		$	5,021

Property and equipment, net consisted of the following (in thousands, except depreciable life):

	Life		June 29,			December 31,
	(In years)		2014			2013
Network and laboratory equipment		3 – 5	$	11,242		$	11,250
Computer software and equipment		2 – 3		3,985			3,928
Furniture and fixtures		3 – 7		172			176
Office equipment		3 – 5		137			137
Leasehold improvements		1 – 5		276			378
				15,812			15,869
Accumulated depreciation and amortization				(13,395	)		(12,870	)
Property and equipment, net			$	2,417		$	2,999

For the three and six months ended June 29, 2014, depreciation expense related to property and equipment was $548,000 and $1.1 million, respectively. For the three and six months ended June 30, 2013, depreciation expense related to property and equipment was $584,000 and $1.2 million, respectively.

In addition to the property and equipment above, the Company has prepaid licenses. For the three and six months ended June 29, 2014, amortization related to these prepaid licenses was $125,000 and $276,000, respectively. For the three and six months ended June 30, 2013, amortization related to these prepaid licenses was $132,000 and $221,000, respectively.

Inventories consisted of the following (in thousands):

	June 29,		December 31,
	2014		2013
Raw materials	$	2,184	$	2,103
Work in process		333		780
Finished goods		1,770		1,734
	$	4,287	$	4,617

8

Accrued and other current liabilities consisted of the following (in thousands):

	June 29,		December 31,
	2014		2013
Amounts billed to the U.S. government in excess of approved rates	$	191	$	191
Warranty liability		345		330
Customer deposits		264		313
Capital lease obligations, current portion		104		284
Restructuring liabilities, current portion		-		30
Sales return reserve		248		151
Other		1,129		1,447
	$	2,281	$	2,746

The Company generally offers a one year warranty on its products. The Company records a liability based on estimates of the costs that may be incurred under its warranty obligations and charges to the cost of product revenue the amount of such costs at the time revenues are recognized. The warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. The estimates of anticipated rates of warranty claims and costs per claim are primarily based on historical information and future forecasts.

Changes in the Company’s product warranty liability during the six months ended June 29, 2014 and June 30, 2013 are as follows (in thousands):

	Six months ended
	June 29, 2014			June 30, 2013
Beginning balance	$	330		$	612
Warranties accrued		226			256
Warranties settled or reversed		(211	)		(477	)
Ending balance	$	345		$	391

9

NOTE 3—FAIR VALUE

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 29, 2014 and December 31, 2013 (in thousands):

			Fair Value Measurements Using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 29, 2014:
Assets:
Cash equivalents:
Money market funds	$	12,358	$	12,358	$	-	$	-
	$	12,358	$	12,358	$	-	$	-
Current liabilities:
Liability warrants	$	12	$	-	$	-	$	12
December 31, 2013:
Assets:
Cash equivalents:
Money market funds	$	1,356	$	1,356	$	-	$	-
	$	1,356	$	1,356	$	-	$	-
Current liabilities:
Liability warrants	$	15	$	-	$	-	$	15

The Company’s financial assets and liabilities are valued using market prices on active markets (“Level 1”), less active markets (“Level 2”) and unobservable markets (“Level 3”). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from readily-available pricing sources for comparable instruments.  Level 3 instruments are valued using unobservable market values in which there is little or no market data, and which require the Company to apply judgment to determine the fair value.

For the period ended June 29, 2014, the Company did not have any significant transfers between Level 1, Level 2 and Level 3.

The amounts reported as cash and cash equivalents, accounts receivable, accounts payable, accrued compensation and other current liabilities approximate fair value due to their short-term maturities. The carrying value of the Company’s capital lease obligations approximates fair value and is based upon borrowing rates currently available to the Company for capital leases with similar terms.

Liability Warrants

The Company issued warrants to Bridge Bank in connection with a waiver of certain events of default that arose under a November 2009 loan and security agreement with Bridge Bank. Certain provisions in the warrant agreements provided for down-round protection if the Company raised equity capital at a per share price which was less than the per share price of the warrants. Such down-round protection also requires the Company to classify the value of the warrants as a liability on the issuance date and then record changes in the fair value through the consolidated statements of operations for each reporting period until the warrants are either exercised or cancelled. The fair value of the liability is recalculated and adjusted each quarter with the differences being charged to other income (expense), net on the consolidated statements of operations. The fair value of these warrants was determined using a Black-Scholes option-pricing model, which requires the use of significant unobservable market values.  As a result, these warrants are classified as Level 3 financial instruments. On July 7, 2010, the Company raised additional equity through an offering of 2,760,000 shares at $1.75 per share, thus triggering the down-round protection and adjustment of the number of warrants issued to Bridge Bank. On December 24, 2013, the Company raised additional equity through an offering of 9,573,750 shares at $1.42 per share, thus triggering the down-round protection and adjustment of the number of warrants issued to Bridge Bank.

10

The fair value of the warrants was estimated using the following assumptions:

	As of June 29, 2014			As of December 31, 2013
Stock price	$	1.45		$	1.53
Strike price	$	2.51		$	2.51
Expected life	3.05 years			3.55 years
Risk-free interest rate		0.90	%		1.30	%
Volatility		65	%		65	%
Fair value per share	$	0.42		$	0.52

The following table summarizes the warrants subject to liability accounting as of June 29, 2014 and December 31, 2013 (in thousands, except share and per share amounts) (see also Note 6):

													Three Months Ended June 29, 2014					Six Months Ended June 29, 2014
Holder	Original Warrants		Adjusted Warrants		Grant Date	Expiration Date	Price per Share		Fair Value June 29, 2014		Fair Value December 31, 2013		Exercise of Warrants		Change in Fair Value			Exercise of Warrants		Change in Fair Value			Related Agreement
Bridge Bank		20,000		29,115	4/7/2010	7/7/2017	$	2.51	$	12	$	15		-	$	(5	)		-	$	(3	)	Credit Agreement

The change in the fair value of the Level 3 liability warrants during the three and six months ended June 29, 2014 is as follows (in thousands):

Fair value as of December 31, 2013	$	15
Exercise of warrants		-
Change in fair value		2
Fair value as of March 30, 2014		17
Exercise of warrants		-
Change in fair value		(5	)
Fair value as of June 29, 2014	$	12

The warrant liability is included in other current liabilities on the condensed consolidated balance sheets.

NOTE 4—INTANGIBLE ASSETS AND GOODWILL

Intangible assets consist of the following (in thousands):

	June 29, 2014							December 31, 2013
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	3,277	$	(1,908	)	$	1,369	$	3,277	$	(1,697	)	$	1,580
Existing technology		3,783		(2,677	)		1,106		3,783		(2,473	)		1,310
Order backlog		732		(732	)		-		732		(732	)		-
Patents		457		(400	)		57		457		(397	)		60
Trade name		659		(351	)		308		659		(322	)		337
Total	$	8,908	$	(6,068	)	$	2,840	$	8,908	$	(5,621	)	$	3,287

For the three and six months ended June 29, 2014 and June 30, 2013, amortization of intangible assets was as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
Cost of revenue	$	103	$	122	$	206	$	244
Selling, general and administrative expense		121		129		241		260
	$	224	$	251	$	447	$	504

11

Estimated future amortization expense related to intangible assets as of June 29, 2014 is as follows (in thousands):

Years ending December 31,
2014	$	446
2015		893
2016		869
2017		487
2018		145
Total	$	2,840

As of June 29, 2014, the Company had $9.9 million of goodwill in connection with the acquisitions of ChipX and Endwave. In addition to its annual review, the Company also performs a review of the carrying value of its intangible assets if the Company believes that indicators of impairment exist. During the second quarter of 2014, there were no factors which indicated impairment. The Company did not record impairment on any intangibles, including goodwill, for the three and six months ended June 29, 2014.  In addition, the Company did not record an impairment of goodwill for the year ended December 31, 2013.

NOTE 5—CREDIT FACILITIES

On March 25, 2013, the Company entered into a second amended and restated loan and security agreement (“Loan Agreement”) with Silicon Valley Bank (“SVB”) to replace the amended and restated loan and security agreement entered on December 9, 2011. Pursuant to the Loan Agreement, the total aggregate amount that the Company is entitled to borrow from SVB has increased to $7 million, which is now split into two different credit facilities, comprised of (i) the existing Revolving Loan facility which was amended to provide that the Company is entitled to borrow from SVB up to $3.5 million, based on net eligible accounts receivable after an 80% advance rate and subject to limits based on the Company’s eligible accounts as determined by SVB and (ii) a new facility under which the Company is entitled to borrow from SVB up to $3.5 million without reference to accounts receivable under which the principal balance and accrued interest must be repaid within 3 business days after the date of any advance under the facility. In addition, the Loan Agreement eliminates the financial covenants contained in the previous loan agreement.

The Loan Agreement with SVB is secured by all of the Company’s assets, including all accounts, equipment, inventory, receivables, and general intangibles. The Loan Agreement contains certain restrictive covenants that will impose significant operating and financial restrictions on its operations, including, but not limited to restrictions that limit its ability to:

· Sell, lease, or otherwise transfer, or permit any of its subsidiaries to sell, lease or otherwise transfer, all or any part of its business or property, except in the ordinary course of business or in connection with certain indebtedness or investments permitted under the amended and restated loan agreement;

· Merge or consolidate, or permit any of its subsidiaries to merge or consolidate, with or into any other business organization, or acquire, or permit any of its subsidiaries to acquire, all or substantially all of the capital stock or property of another person;

· Create, incur, assume or be liable for any indebtedness, other than certain indebtedness permitted under the amended and restated loan and security agreement;

· Pay any dividends or make any distribution or payment on, or redeem, retire, or repurchase, any capital stock; and

· Make any investment, other than certain investments permitted under the amended and restated loan and security agreement.

The Company had no outstanding balance on its line of credit as of June 29, 2014.

12

NOTE 6—STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

Public Offering

On December 19, 2013, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Roth Capital Partners, LLC as representative of several underwriters to the Underwriting Agreement relating to a public offering of an aggregate of 8,325,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share at a public offering price of $1.42 per share. The Shares are accompanied by the associated rights to purchase shares of Series A Junior Preferred Stock, par value $0.001 per share, of the Company created by the Rights Agreement, dated December 16, 2011, between the Company and the American Stock Transfer & Trust Company, LLC, as Rights Agent (the “Rights Agreement”).  Under the terms of the Underwriting Agreement, the Company granted the Underwriters a 30 day option to purchase up to an additional 1,248,750 shares of common stock to cover over-allotments.

On December 24, 2013, the Company completed its public offering of 9,573,750 newly issued shares of common stock at a price to the public of $1.42 per share. The number of shares sold in the offering included the underwriter’s full exercise on December 24, 2013 of their over-allotment option of 1,248,750 shares of common stock. The net proceeds to the Company from the offering was approximately $12.3 million which consisted of $12.5 million after underwriting discounts, commissions and expenses less an additional $250,000 for legal, accounting, registration and other transaction costs related to the public offering.

Common and Preferred Stock

In December 2008, the Company’s stockholders approved an amendment to the Certificate of Incorporation to authorize 50,000,000 shares of common stock of par value $0.001. In addition, the Company is authorized to issue 1,000,000 shares of preferred stock of $0.001 par value of which 300,000 shares have been designated Series A Junior Preferred Stock with powers, preferences and rights as set forth in the certificate of designation dated December 16, 2011; the remainder of the shares of preferred stock are undesignated, for which the Board of Directors is authorized to fix the designation, powers, preferences and rights. As of June 29, 2014 and December 31, 2013, there were no shares of preferred stock issued or outstanding.

2008 Equity Incentive Plan

In December 2008, the Company adopted the 2008 Equity Incentive Plan (the “2008 Plan”) for directors, employees, consultants and advisors to the Company or its affiliates. Under the 2008 Plan, 2,500,000 shares of common stock were reserved for issuance upon the completion of a merger with Lumera Corporation (“Lumera”) on December 9, 2008. On January 1 of each year, starting in 2009, the aggregate number of shares reserved for issuance under the 2008 Plan increase automatically by the lesser of (i) 5% of the number of shares of common stock outstanding as of the Company’s immediately preceding fiscal year, or (ii) a number of shares determined by the Board of Directors. The maximum number of shares of common stock to be granted is up to 21,000,000 shares. Forfeited options or awards generally become available for future awards.As of December 31, 2013, the stockholders had approved 15,021,253 shares for future issuance. On January 1, 2014, there was an automatic increase of 1,603,381 shares. As of June 29, 2014, 11,790,457 options to purchase common stock and restricted stock were outstanding and 3,953,715 shares are authorized for future issuance under the 2008 equity incentive plan.

Under the 2008 Plan, the exercise price of a stock option is at least 100% of the stock’s fair market value on the date of grant, and if an ISO is granted to a 10% stockholder at least 110% of the stock’s fair market value on the date of grant. Vesting periods for awards are recommended by the chief executive officer and generally provide for stock options to vest over a four-year period, with a one year vesting cliff of 25%, and have a maximum life of ten years from the date of grant. The Company has also issued restricted stock units (“RSUs”) which generally vest over a one to four-year period.

2007 Equity Incentive Plan

In August 2007, GigOptix LLC adopted the GigOptix LLC Equity Incentive Plan (the "2007 Plan"). The 2007 Plan provided for grants of options to purchase membership units, membership awards and restricted membership units to employees, officers and non-employee directors, and upon the completion of the merger with Lumera were converted into grants of up to 632,500 shares of stock. Vesting periods are determined by the Board of Directors and generally provide for stock options to vest over a four-year period and expire ten years from date of grant. Vesting for certain shares of restricted stock is contingent upon both service and performance criteria. The 2007 Plan was terminated upon the completion of merger with Lumera on December 9, 2008 and the remaining 864 stock options not granted under the 2007 Plan were cancelled. No shares of the Company’s common stock remain available for issuance of new grants under the 2007 Plan other than for satisfying exercises of stock options granted under this plan prior to its termination. As of June 29, 2014, options to purchase a total of 413,497 shares of common stock and 4,125 warrants to purchase common stock were outstanding.

Lumera 2000 and 2004 Stock Option Plan

In December 2008, in connection with the merger with Lumera, the Company assumed the existing Lumera 2000 Equity Incentive Plan and the Lumera 2004 Stock Option Plan (the “Lumera Plan”). All unvested options granted under the Lumera Plan were assumed by the Company as part of the merger. All contractual terms of the assumed options remain the same, except for the converted number of shares and exercise price based on merger conversion ratio of 0.125. As of June 29, 2014, no additional options can be granted under the Lumera Plan, and options to purchase a total of 72,428 shares of common stock were outstanding.

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Warrants

As of December 31, 2013, the Company had a total of 1,468,239 warrants to purchase common stock outstanding under all warrant arrangements. During the six months ended June 29, 2014, no warrants were exercised and 784,999 warrants expired. As a result, as of June 29, 2014, the Company had 683,240 warrants to purchase common stock outstanding under all warrant arrangements. Some of the warrants have anti-dilution provisions which adjust the number of warrants available to the holder such as, but not limited to, stock dividends, stock splits and certain reclassifications, exchanges, combinations or substitutions. These provisions are specific to each warrant agreement.

Stock-based Compensation Expense

The following table summarizes the Company’s stock-based compensation expense for the three and six months ended June 29, 2014 and June 30, 2013 (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
Cost of revenue	$	88	$	59	$	164	$	139
Research and development expense		292		231		567		554
Selling, general and administrative expense		728		448		1,387		1,153
Restructuring expense		9		-		9		662
	$	1,117	$	738	$	2,127	$	2,508

For the six months ended June 29, 2014, included in the $2.1 million of stock-based compensation expense was $9,000 in restructuring expense to modify the exercise period and accelerate the vesting of RSUs (see Note 7).

For the six months ended June 30, 2013, included in the $2.5 million of stock-based compensation expense is $662,000 in restructuring expense to modify the exercise period and accelerate the vesting of stock options and RSUs (see Note 7).

During the three months ended June 29, 2014 and June 30, 2013, the Company granted options to purchase 25,000 and 610,010 of common stock, respectively, with an estimated total grant-date fair value of $28,000 and $359,000, respectively.

During the three months ended June 29, 2014 and June 30, 2013, the Company granted 70,000 and 569,846 RSUs, respectively, with a grant-date fair value of $113,000 and $490,000 or $1.62 and $0.86 per share, respectively.

During the six months ended June 29, 2014 and June 30, 2013, the Company granted options to purchase 25,000 and 610,010 of common stock, respectively, with an estimated total grant-date fair value of $28,000 and $359,000, respectively.

During the six months ended June 29, 2014 and June 30, 2013, the Company granted 1,475,085 and 569,846 RSUs, respectively, with a grant-date fair value of $2.5 million and $490,000 or $1.70 and $0.86 per share, respectively.

 As of June 29, 2014, the total compensation cost not yet recognized in connection with unvested stock options and RSUs under the Company’s equity compensation plans was approximately $2.6 million and $2.8 million, respectively. Unrecognized compensation will be amortized on a straight-line basis over a weighted-average period of approximately 1.67 years for stock options and approximately 2.6 years for RSUs.

Stock Option and RSU Activity

The following is a summary of option activity for the Company’s equity incentive plans, including both the 2008 Plan and other prior plans for which there are outstanding options but no new grants since the 2008 Plan was adopted:

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	Options Outstanding			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term, in Years
Outstanding, December 31, 2013		10,306,671		$	2.34		6.96
Granted		25,000			1.59
Exercised		(38,305	)		1.05
Forfeited/Expired		(237,754	)		2.06
Ending balance, June 29, 2014		10,055,612			2.35		6.44
Vested and exercisable and expected to vest, June 29, 2014		9,918,037		$	2.35		6.43
Vested and exercisable, June 29, 2014		8,036,039		$	2.38		6.12

The aggregate intrinsic value of options vested, exercisable and expected to vest, based on the fair value of the underlying stock options as of June 29, 2014 was approximately $1.1 million. The aggregate intrinsic value reflects the difference between the exercise price of the underlying stock options and the Company’s closing share price of $1.45 as of June 27, 2014.

The total intrinsic value of options exercised during the six months ended June 29, 2014 was approximately $18,000. During the six months ended June 30, 2013, the Company did not have any options exercised.

RSUs are converted into shares of the Company’s common stock upon vesting on a one-for-one basis. Typically, vesting of RSUs is subject to the employee’s continuing service to the Company. RSUs generally vest over a period of one to four years and are expensed ratably on a straight line basis over their respective vesting period net of estimated forfeitures. The fair value of the RSUs granted is the product of the number of shares granted and the grant date fair value of the Company’s common stock.

The following is a summary of RSU activity for the indicated periods:

	Number of Shares			Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Vesting Term, Years		Aggregate Intrinsic Value
								(In thousands)
Outstanding, December 31, 2013		1,313,801		$	1.19		1.85	$	2,010
Granted		1,475,085			1.70
Released		(525,333	)		1.30
Forfeited/expired		(42,783	)		1.25
Outstanding, June 29, 2014		2,220,770		$	1.50		2.60	$	3,220

The majority of the RSUs that vested in the six months ended June 29, 2014 were net-share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld were based on the value of the RSUs on their vesting date as determined by the Company’s closing stock price. These net-share settlements had the effect of share repurchases by the Company as they reduced and retired the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company. For the six months ended June 29, 2014, 525,333 shares of RSUs vested with an intrinsic value of approximately $762,000. The Company withheld 164,000 shares to satisfy approximately $266,000 of employees’ minimum tax obligation on the vested RSUs.

NOTE 7—RESTRUCTURING

During the first of quarter of 2013, the Company undertook restructuring activities to reduce its expenses.  The components of the restructuring charge included $662,000 of non-cash expenses associated with the acceleration of stock options and RSUs, $288,000 of cash expenses for severance, benefits and payroll taxes and other costs associated with employee terminations. The net charge for these restructuring activities was $950,000.

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During the second of quarter of 2014, the Company undertook restructuring activities to reduce its expenses. In conjunction with the creation of the BrP joint venture and the subsequent relocation of the related manufacturing activities to BrP, the Company ended its lease in the Bothell, Washington location and reduced its headcount.The components of the restructuring charge included $43,000 of cash expenses for cleanup services, $210,000 of restricted cash and rent deposit forfeiture to move out of the Bothell facility, $45,000 of cash expenses for severance, benefits and payroll taxes and other costs associated with employee terminations, and $9,000 of non-cash expenses associated with the acceleration of RSUs. The total charge for these restructuring activities was $307,000.

The following is a summary of the restructuring activity (in thousands):

	Three Months Ended						Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Beginning balance	$	-		$	182		$	30		$	168
Charges		307			-			307			950
Uses and adjustments		(307	)		(54	)		(337	)		(990	)
Ending balance	$	-		$	128		$	-		$	128

As of June 29, 2014, the Company had no balance in accrued restructuring.

NOTE 8—INVESTMENT IN UNCONSOLIDATED AFFILIATE

In February 2014, together with CPqD, the Company incepted a new joint venture, named BrP, of which the Company owns 49% and CPqD owns 51% of BrP. It is based in Campinas, Brazil. BrP will be a provider of advanced high-speed devices for optical communications and integrated transceiver components for information networks. It is engaged in research and development of SiPh advanced electro-optical products.

The Company has transferred into BrP its knowledge-base and intellectual property of TFPS^TM technology. The Company has transferred to CPqD, its inventory related to the TFPS^TM platform and the complete production line equipment that previously resided at its Bothell, Washington, facility for CPqD to use for the BrP joint venture. As of the transfer date, the Company’s net book value of the inventory and property and equipment was $245,000 and $211,000, respectively, which resulted in a $456,000 investment in BrP.

For the three and six months ended June 29, 2014, the Company’s allocated portion of BrP’s results was a loss of $331,000, respectively. This resulted in the Company’s investment in an unconsolidated affiliate of $125,000 as of June 29, 2014.

NOTE 9—INCOME TAXES

The Company recorded a provision for income taxes of $21,000 and $31,000 for the three and six months ended June 29, 2014, respectively, and $14,000 and $27,000 for the three and six months ended June 30, 2013, respectively. The Company's effective tax rate was less than 1% for the three and six months ended June 29, 2014 and June 30, 2013.

The income tax provision for the three and six months ended June 29, 2014 and June 30, 2013 was due primarily to state taxes and foreign taxes due. The Company has incurred book losses in all tax jurisdictions and has a full valuation allowance against such losses.

In assessing the potential realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. In making such a determination, management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial performance. In order to support a conclusion that a valuation allowance is not needed, positive evidence of sufficient quantity and quality is necessary to overcome negative evidence. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. A valuation allowance has been recorded for the entire deferred tax asset as a result of uncertainties regarding realization of the asset including lack of profitability through June 29, 2014 and the uncertainty over future operating profitability and taxable income. The Company will continue to evaluate the potential realization of the deferred tax assets on a quarterly basis.

The Company files tax returns as prescribed by the tax laws of the jurisdictions it operates which include U.S. federal, U.S. state and foreign tax returns. The Company’s major tax jurisdictions are the U.S., California, Switzerland, Germany and Israel. The Company’s federal and state tax returns for the years 2000 through 2013 remain subject to examination.

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NOTE 10—NET LOSS PER SHARE

The following table summarizes total securities outstanding which were not included in the calculation of diluted net loss per share because to do so would have been anti-dilutive:

	June 29,		June 30,
	2014		2013
Stock options and RSUs		12,276,382		10,978,671
Common stock warrants		683,240		1,788,095
Total		12,959,622		12,766,766

NOTE 11—SEGMENT AND GEOGRAPHIC INFORMATION

The Company has determined that it operates as a single operating and reportable segment. The following tables reflect the results of the Company’s reportable segment consistent with the management system used by the Company’s Chief Executive Officer, the chief operating decision maker.

The following table summarizes revenue by geographic region (in thousands):

	Three Months Ended										Six Months Ended
	June 29, 2014				June 30, 2013				June 29, 2014					June 30, 2013
North America	$	1,875	23	%	$	2,094	31	%	$	4,102		27	%	$	4,073	30	%
Asia		2,456	31	%		1,895	28	%		4,614		30	%		4,175	30	%
Europe		3,647	45	%		2,533	37	%		6,556		42	%		4,696	34	%
Other		59	1	%		309	4	%		151		1	%		808	6	%
	$	8,037	100	%	$	6,831	100	%	$	15,423		100	%	$	13,752	100	%

The Company determines geographic location of its revenue based upon the destination of shipments of its products.

For the three months ended June 29, 2014, two customers accounted for greater than 10% of total revenue and combined they accounted for 35% of total revenue, of which the largest accounted for 24% of the Company’s total revenue. For the three months ended June 30, 2013, two customers accounted for greater than 10% of total revenue and combined they accounted for 41% of total revenue, of which the largest accounted for 30% of the Company’s total revenue.

For the six months ended June 29, 2014, one customer accounted for 26% of total revenue. For the six months ended June 30, 2013, one customer accounted for 29% of total revenue.

During the three months ended June 29, 2014, Italy and the United States accounted for 36% and 20% of total revenue, respectively. During the three months ended June 30, 2013, Italy, the United States, and Japan accounted for 34%, 26%, and 16% of total revenue, respectively. No other countries accounted for more than 10% of the Company’s total revenue during the three months ended June 29, 2014 and June 30, 2013.

During the six months ended June 29, 2014, Italy, the United States, and Japan accounted for 36%, 24%, and 10% of total revenue, respectively. During the six months ended June 30, 2013, Italy, the United States, and Japan accounted for 30%, 27%, and 14% of total revenue, respectively. No other countries accounted for more than 10% of the Company’s total revenue during the six months ended June 29, 2014 and June 30, 2013.

The following table summarizes revenue by product line (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
HSC	$	5,609	$	4,563	$	10,891	$	9,128
Industrial		2,428		2,268		4,532		4,624
Total revenue	$	8,037	$	6,831	$	15,423	$	13,752

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The following table summarizes long-lived assets by country (in thousands):

	June 29, 2014		December 31, 2013
United States	$	1,851	$	2,004
Switzerland		566		995
	$	2,417	$	2,999

Long-lived assets, comprised of property and equipment, are reported based on the location of the assets as of each balance sheet date.

NOTE 12—COMMITMENTS AND CONTINGENCIES

Commitments

Leases

The Company leases its domestic and foreign sales offices under non-cancelable operating leases. These leases contain various expiration dates and renewal options.  The Company also leases certain software licenses under operating leases. Total facilities rent expense for the three and six months ended June 29, 2014 was $93,000 and $234,000, respectively, and for the three and six months ended June 30, 2013 was $140,000 and $280,000, respectively.

As of April 2014, the Company moved out of its Bothell, Washington facility which comprised 11,666 square feet and entered into a new one-year lease located in Bellevue, Washington which comprises approximately 2,100 square feet.

Aggregate non-cancelable future minimum rental payments under capital and operating leases are as follows (in thousands):

	Capital Leases			Operating Leases
Years ending December 31,	Minimum lease payments			Minimum lease  payments
2014	$	108		$	593
2015		4			432
2016		3			339
2017		3			57
Total minimum lease payments		118		$	1,421
Less: Amount representing interest		(6	)
Total capital lease obligations		112
Less: current portion		(104	)
Long-term portion of capital lease obligations	$	8

Legal Contingencies

From time to time, the Company may become involved in legal proceedings, claims and litigation arising in the ordinary course of business. When the Company believes a loss is probable and can be reasonably estimated, the Company accrues the estimated loss in the consolidated financial statements. Where the outcome of these matters is not determinable, the Company does not make a provision in the financial statements until the loss, if any, is probable and can be reasonably estimated or the outcome becomes known. There are no known losses at this time.

NOTE 13—RECENT ACCOUNTING PRONOUNCEMENTS

In June 2014, the Financial Accounting Standard Board (“FASB”) issued an accounting standard update clarifying the accounting guidance on how to account for share-based payment awards that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. This standard is effective for periods beginning after December 15, 2015 and early adoption is permitted. The Company does not expect the adoption will have a material impact on the Company’s condensed consolidated financial statements.

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In May 2014, the FASB issued an accounting standard clarifying the principles for recognizing revenue by amending the FASB Accounting Standards Codification and creating a new Topic 606, Revenue from Contracts with Customers.The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This standard is effective for annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. The Company is currently evaluating the impact of the adoption on the Company’s condensed consolidated financial statements.

NOTE 14—SUBSEQUENT EVENTS

During the third quarter of 2014, the Company completed its acquisition of Tahoe RF. The Company acquired substantially all of the assets of Tahoe RF including one patent, equipment and inventory by assuming approximately $500,000 of liabilities of Tahoe RF. Through the acquisition the Company added 10 employees to its team, which are primarily RF engineers focused on the high growth areas of E-Band and V-Band technologies. In January 2015, up to an additional approximately $200,000 in bonus payments are payable by the Company to these employees provided certain milestones are met and they remain employed by the Company. In addition, beginning in July 2016 and continuing annually through July 2020, these employees will be entitled to a retention bonus of approximately, $100,000 in the aggregate, if they remain employed with the Company.

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

You should read the following discussion and analysis in conjunction with our consolidated financial statements and the related notes included elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2013. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2013 and this Quarterly Report on Form 10-Q. We assume no obligation to update the forward-looking statements or such risk factors.

This Quarterly Report on Form 10-Q and the documents incorporated herein by reference include forward-looking statements within the meaning and protections of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements are also made in reliance upon the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

Overview

We are a leading fabless supplier of high speed semiconductorcomponentsthat enable end-to-end information streaming over optical and wireless networks.  Our products address long haul and metro telecommunications applications as well as emerging high-growth opportunities for Cloud and datacenter connectivity, interactive applications for consumer electronics, and the industrial, defense and avionics industries. The business is made up of two product lines: our High-Speed Communications (HSC) product line and our Industrial product line.

Through our HSC product line we offer a broad portfolio of high performance optical and wireless components to telecommunications (telecom) and data communications (datacom) customers, including i) mixed signal radio frequency integrated circuits (RFIC), including 10 to 400 gigabit per second (Gbps) laser and optical drivers and trans-impedance amplifiers (TIA) for telecom, datacom, and consumer electronic fiber-optic applications; ii) power amplifiers and transceivers for microwave and millimeter monolithic microwave integrated circuit (MMIC) wireless applications including power amplifiers and transceiver chips at frequencies higher than 50 GHz; iii) integrated systems in a package (SIP) solutions for both fiber-optic and wireless applications; and iv) radio frequency (RF) chips for various consumer applications such as global navigation satellite systems (GNSS). The HSC product line also partners with key customers on development projects that generate engineering project revenue and helps to position us for future product revenues with these key customers.

Through our Industrial product line, we offer a wide range of digital and mixed-signal application specific integrated circuit (ASIC) solutions for industrial, military, avionics, medical and communications markets. The Industrial product line partners with ASIC customers on development projects that generate engineering project revenue and which generally lead to future product revenues with these ASIC customers.

We focus on the specification, design, development and sale of analog semiconductor integrated circuits (ICs), multi-chip module (MCM) solutions, and digital and mixed signal ASICs, as well as wireless communications MMICs and modules. We believe we are an industry leader in the fast growing market for electronic solutions that enable high-bandwidth optical connections found in telecom, datacom and storage systems, and, increasingly, in consumer electronics and computing systems.

Since inception, we have expanded our customer base with the acquisition and integration of six businesses with complementary products and customers. In so doing, we have expanded our device product line in a few active areas, such growing our communication device offering from a few leading 10Gbps ultra-long haul optical drivers at our inception in July 2007 to a line of products today that include: drivers, receivers and TIAs for 10 to 400Gbps optical applications; power amplifiers; and custom ASICs spanning 0.6um to 65nm technology nodes. Our direct sales force is based in three countries and is supported by a significant number of channel representatives and distributors that sell our products throughout North America, Europe, Japan and Asia.

During the third quarter of 2014, we acquired substantially all of the assets of Tahoe RF Semiconductor, Inc. (Tahoe RF) including one patent, equipment and inventory by assuming approximately $500,000 of liabilities of Tahoe RF.  Through the acquisition, we have added RF/analog RFIC technology to our product portfolio and 10 employees to our team, primarily RF engineers focused on the high growth areas of E-Band and V-Band technologies.

Historically, we have incurred net losses. For the six months ended June 29, 2014 and the year ended December 31, 2013, we incurred net losses of $3.9 million and $1.9 million, respectively.  For the six months ended June 29, 2014, we had cash outflows from operations of $738,000. For the year ended December 31, 2013, we had cash inflows from operations of $3.3 million.  As of June 29, 2014 and December 31, 2013, we had an accumulated deficit of $100.4 million and $96.4 million, respectively.

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Recent Accounting Pronouncements

In June 2014, the Financial Accounting Standard Board (FASB) issued an accounting standard update clarifying the accounting guidance on how to account for share-based payment awards that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. This standard is effective for periods beginning after December 15, 2015 and early adoption is permitted. We do not expect the adoption will have a material impact on our condensed consolidated financial statements.

In May 2014, the FASB issued an accounting standard clarifying the principles for recognizing revenue by amending the FASB Accounting Standards Codification and creating a new Topic 606, Revenue from Contracts with Customers.The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This standard is effective for annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. We are currently evaluating the impact of the adoption on our condensed consolidated financial statements.

Results of Operations

Revenue

Revenue for the periods reported was as follows (in thousands, except percentages):

	Three Months Ended					Six Months Ended
	June 29, 2014			June 30, 2013		June 29, 2014			June 30, 2013
Product	$	7,201		$	5,646	$	13,880		$	11,330
Development fees and other		836			1,185		1,543			2,422
Total revenue	$	8,037		$	6,831	$	15,423		$	13,752
Increase, period over period	$	1,206				$	1,671
Percentage increase, period over period		18	%				12	%

Total revenue for the three months ended June 29, 2014 was $8.0 million, an increase of $1.2 million or 18%, compared with $6.8 million for the three months ended June 30, 2013. For the three months ended June 29, 2014, 90% of our revenue was contributed by product revenue and 10% of our revenue was contributed by development fees and other revenue. For the three months ended June 30, 2013, 83% of our revenue was contributed by product revenue and 17% of our revenue was contributed by development fees and other revenue.

Product revenue for the three months ended June 29, 2014 was $7.2 million, an increase of $1.6 million or 28%, compared with $5.6 million for the three months ended June 30, 2013. The increase in product revenue during the three months ended June 29, 2014 was due to the increased demand for both our HSC and Industrial product lines.

Development fees and other revenue for the three months ended June 29, 2014 was $836,000, a decrease of $349,000 or 29%, compared with $1.2 million for the three months ended June 30, 2013.  We experienced a decrease in development fees and other revenue primarily due to a decrease in the number and size of development projects in our HSC product line.

Total revenue for the six months ended June 29, 2014 was $15.4 million, an increase of $1.7 million or 12%, compared with $13.8 million for the six months ended June 30, 2013. For the six months ended June 29, 2014, 90% of our revenue was contributed by product revenue and 10% of our revenue was contributed by development fees and other revenue. For the six months ended June 30, 2013, 82% of our revenue was contributed by product revenue and 18% of our revenue was contributed by development fees and other revenue.

Product revenue for the six months ended June 29, 2014 was $13.9 million, an increase of $2.6 million or 23%, compared with $11.3 million for the six months ended June 30, 2013. The increase in product revenue during the six months ended June 29, 2014 was due to increased revenue from our HSC product line, primarily our data communications and E-band products.

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Development fees and other revenue for the six months ended June 29, 2014 was $1.5 million, a decrease of $879,000 or 36%, compared with $2.4 million for the six months ended June 30, 2013. We experienced a decrease in development fees and other revenue primarily due to a decrease in the number and size of development projects in our HSC and Industrial product lines.

Cost of Revenue and Gross Profit

Cost of revenue and gross profit for the periods presented was as follows (in thousands, except percentages):

	Three Months Ended						Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Total cost of revenue	$	3,487		$	2,578		$	6,613		$	5,214
Gross profit	$	4,550		$	4,253		$	8,810		$	8,538
Gross margin		57	%		62	%		57	%		62	%
Increase, period over period		297						272
Percentage increase, period over period		7	%					3	%

Gross profit consists of revenue less cost of revenue. Cost of revenue consists primarily of the costs to manufacture saleable chips, including outsourced wafer fabrication and testing; costs of direct materials; equipment depreciation; costs associated with procurement, production control and quality assurance; fees paid to our offshore manufacturing vendors; reserves for potential excess or obsolete material; allocated facilities costs; costs related to stock-based compensation; accrued costs associated with potential warranty returns; and amortization of certain identified intangible assets. Amortization expense of identified intangible assets, namely existing technology, is presented within cost of revenue, as the intangible assets were determined to be directly attributable to revenue generating activities.

Gross profit for the three months ended June 29, 2014 was $4.6 million, or a gross margin of 57%, compared to a gross profit of $4.3 million or a gross margin of 62%, for the three months ended June 30, 2013. The decrease in gross margin is primarily due to increased overhead related costs and lower revenue from development projects.

Gross profit for the six months ended June 29, 2014 was $8.8 million, or a gross margin of 57%, compared to a gross profit of $8.5 million, or a gross margin of 62%, for the six months ended June 30, 2013. The decrease in gross margin is primarily due to increased overhead related costs and lower revenue from development projects.

We record revenue from non-recurring engineering projects associated with product development that we enter into with certain customers. In general, these projects are associated with complex technology development, and as such we do not have certainty about our ability to achieve the program milestones. Achievement of the milestone is dependent on our performance and is typically accepted by the customer. The payment associated with achieving the milestone is generally commensurate with our effort or the value of the deliverable and is nonrefundable. Therefore, we record the expenses related to these projects in the periods incurred and recognize revenue only when we have earned the revenue and achieved the development milestones. Revenue from these projects is typically recorded at 100% gross margin because the costs associated with these projects are expensed as incurred and generally included in research and development expense. These efforts generally benefit our overall product development programs beyond the specific project requested by our customer.

Development project revenue and other non-product revenue for the three months ended June 29, 2014 was $836,000 compared with $1.2 million for the three months ended June 30, 2013.  Excluding the revenue and gross profit associated with development programs and other non-product revenue, gross margin was 52% and 54% for the three months ended June 29, 2014 and June 30, 2013, respectively.

Development project revenue and other non-product revenue for the six months ended June 29, 2014 was $1.5 million compared with $2.4 million for the six months ended June 30, 2013.  Excluding the revenue and gross profit associated with development programs and other non-product revenue, gross margin was 52% and 54% for the six months ended June 29, 2014 and June 30, 2013, respectively.

Research and Development Expense

Research and development expense for the periods presented was as follows (in thousands, except percentages):

	Three Months Ended						Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Research and development expense	$	3,358		$	3,177		$	7,100		$	6,413
Percentage of revenue		42	%		47	%		46	%		47	%
Increase, period over period	$	181					$	687
Percentage increase, period over period		6	%					11	%

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Research and development expenses are expensed as incurred. Research and development expense consists primarily of salaries and related expenses for research and development personnel, consulting and engineering design, non-capitalized tools and equipment, engineering related semiconductor masks, depreciation for equipment, engineering expenses paid to outside technology development suppliers, allocated facilities costs and expenses related to stock based compensation.

Research and development expense for the three months ended June 29, 2014 was $3.4 million compared to $3.2 million for the three months ended June 30, 2013, an increase of $181,000 or 6%. Research and development costs increased as compared to the second quarter of 2013 primarily due to a $305,000 increase in personnel related expenses which were partially offset by an $185,000 decrease in project related expenses.

Research and development expense for the six months ended June 29, 2014 was $7.1 million compared to $6.4 million for the six months ended June 30, 2013, an increase of $687,000 or 11%.  Research and development costs increased as compared to 2013 primarily due to a $347,000 increase in personnel related expenses and a $345,000 increase in materials and project-related services for developing new products.

We expect research and development expense to increase from the second quarter of 2014 to the third quarter of 2014 due to increased headcount as a result of the Tahoe RF acquisition.

Selling, General and Administrative Expense

 Selling, general and administrative expense for the periods presented was as follows (in thousands, except percentages):

	Three Months Ended						Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Selling, general and administrative expense	$	2,567		$	2,041		$	4,965		$	4,394
Percentage of revenue		32	%		30	%		32	%		32	%
Increase, period over period	$	526					$	571
Percentage increase, period over period		26	%					13	%

Selling, general and administrative expenses consist primarily of salaries and related expenses for executive, accounting, finance, sales, marketing and administration personnel, professional fees, allocated facilities costs, promotional activities and expenses related to stock-based compensation.

Selling, general and administrative expense for the three months ended June 29, 2014 was $2.6 million compared to $2.0 million for the three months ended June 30, 2013 an increase of $526,000 or 26%. Selling, general and administrative expense increased as compared to the second quarter of 2013 primarily due to a $375,000 increase in personnel related expenses and a $280,000 increase in stock-based compensation.

Selling, general and administrative expense for the six months ended June 29, 2014 was $5.0 million compared to $4.4 million for the six months ended June 30, 2013, an increase of $571,000 or 13%. Selling, general and administrative expense increased as compared to 2013 primarily due to a $428,000 increase in personnel related expenses and a $234,000 increase in stock-based compensation.

We expect selling, general and administrative expense to be comparable in absolute dollars from the second quarter of 2014 to the third quarter of 2014.

Restructuring Expense, Net

	Three Months Ended						Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Restructuring expense	$	307		$	-		$	307		$	950
Percentage of revenue		4	%		0	%		2	%		7	%
Increase (decrease), period over period	$	307					$	(643	)
Percentage increase (decrease), period over period		100	%					(68	%)

During the three months and six months ended June 29, 2014, we recorded $307,000 in restructuring expenses in order to end our lease in the Bothell, Washington location and reduce our headcount.The components of the restructuring charge included $43,000 of cash expenses for cleanup services, $210,000 of restricted cash and rent deposit forfeiture to move out of the Bothell facility, $45,000 of cash expenses for severance, benefits and payroll taxes and other costs associated with employee terminations, and $9,000 of non-cash expenses associated with the acceleration restricted stock units (“RSUs”).

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During the six months ended June 30, 2013, we recorded $950,000 in restructuring expenses. The components of the restructuring charge included $662,000 of non-cash expenses associated with the acceleration of stock options and RSUs and $288,000 of cash expenses for severance, benefits and payroll taxes and other costs associated with employee terminations. No restructuring expenses were incurred in the three months ended June 30, 2013.

Special Litigation-Related Expense

During the six months ended June 29, 2014, we incurred no special litigation-related expenses.

During the three months ended June 30, 2013, we incurred special litigation-related expenses of $472,000, which was primarily due to legal fees associated with the misappropriation of trade secrets and breach of contract case against M/A-COM Technology Solutions, Inc. (“MACOM”), MACOM’s wholly-owned subsidiary Optomai, Inc. (“Optomai”), and three former employees of GigOptix who founded Optomai.

During the six months ended June 30, 2013, we incurred special litigation-related expenses of $887,000, which was primarily due to $770,000 of legal fees associated with the lawsuit against MACOM, Optomai and the three former GigOptix employees and $108,000 of legal fees associated with the case against Advantech, the parent company of Allgon Microwave Corporation AB, or Allgon, for breach of contract.

Interest Expense, Net and Other Income, Net

	Three Months Ended						Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Interest expense, net	$	(10	)	$	(25	)	$	(27	)	$	(79	)
Other income, net		-			88			10			256
Total	$	(10	)	$	63		$	(17	)	$	177

Interest expense, net and other income, net consist primarily of gains and losses related to foreign currency transactions, gains and losses related to property and equipment disposals, interest on line of credit borrowings, interest on capital leases and amortization of loan fees in connection with our Silicon Valley Bank line of credit and loan.

Interest expense, net for the three months ended June 29, 2014 was $10,000 compared to $25,000 for the three months ended June 30, 2013. Interest expense, net decreased as compared to the second quarter of 2013 primarily due to a $12,000 decrease in interest on capital leases.

Interest expense, net for the six months ended June 29, 2014 was $27,000 compared to $79,000 for the six months ended June 30, 2013. Interest expense, net decreased as compared to the second quarter of 2013, primarily due to a $23,000 decrease in interest on capital leases and $19,000 decrease in loan fees.

Other income, net for the three months ended June 30, 2013 was income of $88,000, which primarily consisted of $65,000 gain on sale of materials and $29,000 gain on sale of property and equipment.

Other income, net for the six months ended June 30, 2013 was income of $256,000, which primarily consisted of $160,000 gain on sale of property and equipment, $88,000 gain on sale of materials and $12,000 from the change in the fair value of liability warrants.

Provision for Income Taxes

	Three Months Ended						Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Provision for income taxes	$	21		$	14		$	31		$	27
Percentage of revenue		0	%		0	%		0	%		0	%
Increase, period over period	$	7					$	4
Percentage increase, period over period		50	%					15	%

Income tax expense was $21,000 and $14,000 for three months ended June 29, 2014 and June 30, 2013, respectively, and our effective tax rate was less than 1% for those periods. The income tax provision for the three months ended June 29, 2014 and June 30, 2013 were due primarily to state taxes and foreign taxes due. We have incurred book losses in all tax jurisdictions and have a full valuation allowance against such losses.

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Income tax expense was $31,000 and $27,000 for six months ended June 29, 2014 and June 30, 2013, respectively, and our effective tax rate was less than 1% for those periods. The income tax provision for the six months ended June 29, 2014 and June 30, 2013 were due primarily to state taxes and foreign taxes due. We have incurred book losses in all tax jurisdictions and have a full valuation allowance against such losses.

Equity in Earnings of Unconsolidated Affiliate

In February 2014, together with Fundação CPqD – Centro De Pesquisa e Desenvolvimento em Telecomunicações (“CPqD”), we incepted a new joint venture, of which we own 49% and CPqD owns 51%, BrPhotonics Produtos Optoeletrônicos LTDA. (“BrP”). It is based in Campinas, Brazil.  BrP will be a provider of advanced high-speed devices for optical communications and integrated transceiver components for information networks and is engaged in research and development of Silicon-Photonics (“SiPh”) advanced electro-optical products.

For the three and six months ended June 29, 2014, our allocated portion of BrP’s operating results was a loss of $331,000, respectively.

Liquidity and Capital Resources

 Cash and cash equivalents and cash flow data for the periods presented were as follows (in thousands):

	June 29, 2014		December 31, 2013
Cash and cash equivalents	$	18,541	$	20,377

	Six Months Ended
	June 29, 2014			June 30, 2013
Net cash used in operating activities	$	(738	)	$	(1,856	)
Net cash used in investing activities	$	(682	)	$	(939	)
Net cash provided by (used in) financing activities	$	(407	)	$	2,088

Public Offering

On December 19, 2013, we entered into an underwriting agreement (the “Underwriting Agreement”) with Roth Capital Partners, LLC as representative of several underwriters to the Underwriting Agreement relating to a public offering of an aggregate of 8,325,000 shares (the “Shares”) of our common stock, par value $0.001 per share at a public offering price of $1.42 per share. The Shares are accompanied by the associated rights to purchase shares of Series A Junior Preferred Stock, par value $0.001 per share, created by the Rights Agreement, dated December 16, 2011, between us and the American Stock Transfer & Trust Company, LLC, as Rights Agent (the “Rights Agreement”).  Under the terms of the Underwriting Agreement, we granted the underwriters a 30 day option to purchase up to an additional 1,248,750 shares of common stock to cover over-allotments.

On December 24, 2013, we completed our public offering of 9,573,750 newly issued shares of common stock at a price to the public of $1.42 per share. The number of shares sold in the offering included the underwriter’s full exercise on December 24, 2013 of their over-allotment option of 1,248,750 shares of common stock. The net proceeds from the offering was approximately $12.3 million which consisted of $12.5 million after underwriting discounts, commissions and expenses less an additional $250,000 for legal, accounting, registration and other transaction costs related to the public offering.

Operating Activities

Operating activities used cash of $738,000 in the six months ended June 29, 2014. Our net loss from continuing operations, adjusted for depreciation, stock-based compensation, equity in earnings of unconsolidated affiliate, non-cash restructuring expense and other non-cash items, was an income of $545,000. The remaining use of $1.3 million of cash was primarily due to an increase in accounts receivable, net of $2.0 million, an increase in prepaid and other current assets of $582,000, a decrease in accrued compensation of $268,000 and a decrease in other current liabilities of $248,000, which were partially offset by an increase in accounts payable of $1.8 million.

Operating activities used cash of $1.9 million in the six months ended June 30, 2013. This resulted from a net loss of $4.0 million and we experienced cash usage for working capital for an increase in accounts receivable, net of $1.4 million, an increase in prepaid and other current assets of $387,000, a decrease in accounts payables of $409,000, and a decrease in other current and long-term liabilities of $186,000. These decreases were partially offset by a decrease in inventories of $158,000 and non-cash expenses of stock-based compensation of $2.5 million and depreciation and amortization of $1.9 million.

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Investing Activities

Net cash used in investing activities for the six months ended June 29, 2014 was $682,000 and consisted of purchases of property and equipment.

Net cash used in investing activities for the six months ended June 30, 2013 was $939,000 and consisted of $1.1 million of purchases of property and equipment partially offset by $160,000 proceeds from sale of property and equipment.

Financing Activities

Net cash used in financing activities for the six months ended June 29, 2014 was $407,000 and consisted primarily of $266,000 of taxes paid related to net share settlement of equity awards and $181,000 for capital lease payments.

Net cash provided by financing activities for the six months ended June 30, 2013 was $2.1 million and consisted primarily of $2.4 million of net borrowings on our line of credit facilities with Silicon Valley Bank partially offset by $237,000 for capital lease payments.

Material Commitments

The following table summarizes our future net cash obligations for current debt, operating leases, and capital leases, in thousands of dollars, as of June 29, 2014:

Contractual Obligations at June 29, 2014:	Total		Less than One Year		One to Three Years		More than Three Years
Operating lease obligations	$	1,421	$	593	$	771	$	57
Capital lease obligations (including interest)		118		108		7		3
Total	$	1,539	$	701	$	778	$	60

Except for the future cash obligations above, GigOptix did not have any material commitments for capital expenditures as of June 29, 2014.

Impact of Inflation and Changing Prices on Net Sales, Revenue and Income

Inflation and changing prices have not had a material impact on the materials used in our production process during the periods and at balance sheet dates presented in this report.

Off-Balance Sheet Arrangements

GigOptix does not use off-balance-sheet arrangements with unconsolidated entities, nor does it use other forms of off-balance-sheet arrangements such as special purpose entities and research and development arrangements. Accordingly, GigOptix is not exposed to any financing or other risks that could arise if it had such relationships.

WHERE YOU CAN FIND MORE INFORMATION

Our filings with the Securities and Exchange Commission (the “SEC”), including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended are available on our website at http://www.gigoptix.com, free of charge, as soon as reasonably practicable after the electronic filing of these reports with the SEC. The information contained on our website is not a part of this Quarterly Report on Form 10-Q.

Investors and others should note that we announce material financial information to our investors using our investor relations website, press releases, SEC filings and public conference calls and webcasts. We intend to also use the following social media channels as a means of disclosing information about the company, our services and other matters and for complying with our disclosure obligations under Regulation FD:

• GigOptix Twitter Account (https://twitter.com/GigOptix)

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The information we post through these social media channels may be deemed material. Accordingly, investors should monitor these accounts, in addition to following our press releases, SEC filings and public conference calls and webcasts. This list may be updated from time to time. The information we post through these channels is not a part of this Quarterly Report on Form 10-Q.  Further, the references to the URLs for these websites are intended to be inactive textual references only.

You can also read and copy any document that we file, including this Annual Report on Form 10-K, at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Call the SEC at 1-800-SEC-0330 for information on the operation of the Public Reference Room. In addition, the SEC maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. You can electronically access our SEC filings there.  Additionally, the Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, by our predecessor registrant Lumera are also available at http://www.sec.gov.

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ITEM 3. QUANTITATIVE AND QUALTATIVE DISCLOSURES ABOUT MARKET RISK

This item has been omitted based on GigOptix’ status as a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management is responsible for establishing and maintaining our disclosure controls and procedures. Our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have evaluated the effectiveness of our disclosure controls and procedures as of June 29, 2014. Our CEO and CFO have concluded that our disclosure controls and procedures were effective as of that date and have also concluded that our consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with generally accepted accounting principles in the United States.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II     OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become involved in legal proceedings, claims and litigation arising in the ordinary course of business. When we believe a loss is probable and can be reasonably estimated, we accrue the estimated loss in our consolidated financial statements. Where the outcome of these matters is not determinable, we do not make a provision in our financial statements until the loss, if any, is probable and can be reasonably estimated or the outcome becomes known.

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ITEM 1A. RISK FACTORS

We have revised the risk factors that relate to our business, as set forth below. These risks include any material changes to and supersede any similar the risks previously disclosed in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2013 and otherwise supplement those risks. We encourage investors to review the risk factors and uncertainties relating to our business disclosed in that Form 10-K, as well as those contained in Part 1, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, above.

We have incurred substantial operating losses in the past and we may not be able to achieve profitability in the future.

Historically, we have incurred net losses. For the six months ended June 29, 2014 and the years ended December 31, 2013 and 2012, we incurred net losses of $3.9 million, $1.9 million and $7.0 million, respectively. For the six months ended June 29, 2014, we had cash outflows from operations of $738,000. For the year ended December 31, 2013, we had cash inflows from operations of $3.3 million. For the year ended December 31, 2012, we had cash outflows from operations of $2.0 million. As of June 29, 2014, we had an accumulated deficit of $100.4 million. We expect development, sales and other operating expenses to increase in the future as we expand our business. If our revenue does not grow to offset these current expenses, we may not be profitable. In fact, in future quarters we may not have any revenue growth and our revenues could decline. Furthermore, if our operating expenses exceed expectations, financial performance will be adversely affected and we may continue to incur significant losses in the future.

We derive a significant portion of our revenue from a small number of customers and the loss of one or more of these key customers, the diminished demand for our products from a key customer, or the failure to obtain certifications from a key customer or its distribution channel could significantly reduce our revenue and profits.

A relatively small number of customers account for a significant portion of our revenue in any particular period. One or more of our key customers may discontinue operations as a result of consolidation, liquidation or otherwise, or reduce significantly its business with us due to the current economic conditions or their current situation. Reductions, delays and cancellation of orders from our key customers or the loss of one or more key customers could significantly reduce our revenue and profits. There is no assurance that our current customers will continue to place orders with us, that orders by existing customers will continue at current or historical levels or that we will be able to obtain orders from new customers.

For the six months ended June 29, 2014, one customer accounted for 26% of total revenue. For the six months ended June 30, 2013, one customer accounted for 29% of our total revenue. No other customers accounted for more than 10% of total revenue during the six months ended June 29, 2014 and June 30, 2013.

We could suffer unrecoverable losses on our customers’ accounts receivable, which would adversely affect our financial results.

Our operating cash flows are dependent on the continued collection of receivables. Although our accounts receivable as of June 29, 2014 increased by $2.0 million, or 40%, compared to the balance as of December 31, 2013 we have not had significant uncollectable accounts. However, if a customer is unable or refuses to pay, we could suffer additional accounting losses as well as a reduction in liquidity. A significant increase in uncollectible accounts would have an adverse impact on our business, liquidity and financial results.

Our business is subject to foreign currency risk.

Sales to customers located outside the United States comprised 76% and 73% of our revenue for the six months ended June 29, 2014 and June 30, 2013, respectively. In addition, we have two subsidiaries overseas (Switzerland and Germany) that record their operating expenses in a foreign currency.  Since sales of our products have been denominated to date primarily in U.S. dollars, increases in the value of the U.S. dollar could increase the price of our products so that they become relatively more expensive to customers in the local currency of a particular country, leading to a reduction in sales. Future international activity may result in increased foreign currency denominated sales. Gains and losses on the conversion to U.S. dollars of accounts receivable, accounts payable and other monetary assets and liabilities arising from international operations may contribute to fluctuations in GigOptix’ results of operations. We currently do not have hedging or other programs in place to protect against adverse changes in the value of the U.S. dollar as compared to other currencies to minimize potential adverse effects.

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ITEM 6. EXHIBITS

(a) Exhibits

Exhibit Number	Description
31.1*	Chief Executive Officer certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Chief Financial Officer certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Chief Executive Officer certification pursuant to Rule 13a-14(b) or Rule 13d-14(b) and Section 1350, Chapter 63 of Title 18 United States Code (18 U.S.C. 1350) as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002
32.2*	Chief Financial Officer certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) and Section 1350, Chapter 63 of Title 18 United States Code (18 U.S.C. 1350) as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

101.INS*	Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

*           Filed herewith

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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.

GIGOPTIX, INC.

Date: August 12, 2014	/S/    Avi S. Katz
	Dr. Avi S. Katz Chief Executive Officer and Chairman of the Board
Date: August 12, 2014	/S/ Curt P. Sacks
	Curt P. Sacks Chief Financial Officer

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULE 13a-14(a) and 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS AMENDED

I, Dr. Avi S. Katz, certify that:

1. I have reviewed this quarterly report on Form 10-Q of GigOptix, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/	Dr. Avi S. Katz
Dr. Avi S. Katz
Chief Executive Officer and Principal Executive Officer

Date: August 12, 2014

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULE 13a-14(a) and 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS AMENDED

I, Curt Sacks, certify that:

1. I have reviewed this quarterly report on Form 10-Q of GigOptix, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/	Curt P. Sacks
Curt P. Sacks
Chief Financial Officer and Principal Financial and Principal Accounting Officer

 Date: August 12, 2014

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Chief Executive Officer of GigOptix, Inc. (the "Company"), does hereby certify that to the undersigned's knowledge:

1) the Company's Quarterly Report on Form 10-Q for the period ended June 29, 2014 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2) the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/	Dr. Avi S. Katz
Dr. Avi S. Katz
Chief Executive Officer and Principal Executive Officer

Dated: August 12, 2014

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Acting Chief Financial Officer and Principal Accounting Officer of GigOptix, Inc. (the "Company"), does hereby certify that to the undersigned's knowledge:

1) the Company's Quarterly Report on Form 10-Q for the period ended June 29, 2014 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2) the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/	CURT P. SACKS
Curt P. Sacks
Chief Financial Officer and Principal Financial and Principal Accounting Officer

Dated: August 12, 2014

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STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION, Allocation of Recognized Period Costs (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock based compensation expense	$ 1,117	$ 738	$ 2,127	$ 2,508
Cost of Revenue [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock based compensation expense	88	59	164	139
Research And Development Expense [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock based compensation expense	292	231	567	554
Selling, General and Administrative Expenses [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock based compensation expense	728	448	1,387	1,153
Restructuring expense [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock based compensation expense	$ 9	$ 0	$ 9	$ 662

XML

SUBSEQUENT EVENTS (Details) (Subsequent Event [Member], Tahoe RF [Member], USD $)	3 Months Ended
	Sep. 29, 2014 Employee Patent
Subsequent Event [Member] | Tahoe RF [Member]
Subsequent Event [Line Items]
Number of patents acquired	1
Liabilities incurred	$ 500,000
Number of employees added as part of acquisition	10
Bonus payable to employees	200,000
Retention bonus payable, during the period July 2016 through July 2020	$ 100,000

XML

INTANGIBLE ASSETS AND GOODWILL (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013	Dec. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Gross intangible asset	$ 8,908		$ 8,908		$ 8,908
Accumulated amortization	(6,068)		(6,068)		(5,621)
Net intangible asset	2,840		2,840		3,287	[1]
Amortization of intangible assets	224	251	447	504
Cost of Revenue [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization of intangible assets	103	122	206	244
Selling, General and Administrative Expenses [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization of intangible assets	121	129	241	260
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Gross intangible asset	3,277		3,277		3,277
Accumulated amortization	(1,908)		(1,908)		(1,697)
Net intangible asset	1,369		1,369		1,580
Existing Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Gross intangible asset	3,783		3,783		3,783
Accumulated amortization	(2,677)		(2,677)		(2,473)
Net intangible asset	1,106		1,106		1,310
Order Backlog [Member]
Finite-Lived Intangible Assets [Line Items]
Gross intangible asset	732		732		732
Accumulated amortization	(732)		(732)		(732)
Net intangible asset	0		0		0
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Gross intangible asset	457		457		457
Accumulated amortization	(400)		(400)		(397)
Net intangible asset	57		57		60
Trade Name [Member]
Finite-Lived Intangible Assets [Line Items]
Gross intangible asset	659		659		659
Accumulated amortization	(351)		(351)		(322)
Net intangible asset	$ 308		$ 308		$ 337

[1] The condensed consolidated balance sheet as of December 31, 2013 has been derived from the audited consolidated financial statements as of that date.

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STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION (Tables)

6 Months Ended

Jun. 29, 2014

STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION [Abstract]

Schedule of stock-based compensation expense

The following table summarizes the Company’s stock-based compensation expense for the three and six months ended June 29, 2014 and June 30, 2013 (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
Cost of revenue	$	88	$	59	$	164	$	139
Research and development expense		292		231		567		554
Selling, general and administrative expense		728		448		1,387		1,153
Restructuring expense		9		-		9		662
	$	1,117	$	738	$	2,127	$	2,508

Summary of option activity

The following is a summary of option activity for the Company’s equity incentive plans, including both the 2008 Plan and other prior plans for which there are outstanding options but no new grants since the 2008 Plan was adopted:

	Options Outstanding		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term, in Years
Outstanding, December 31, 2013		10,306,671	$	2.34		6.96
Granted		25,000		1.59
Exercised		(38,305)		1.05
Forfeited/Expired		(237,754)		2.06
Ending balance, June 29, 2014		10,055,612		2.35		6.44
Vested and exercisable and expected to vest, June 29, 2014		9,918,037	$	2.35		6.43
Vested and exercisable, June 29, 2014		8,036,039	$	2.38		6.12

Summary of restricted stock unit activity

The following is a summary of RSU activity for the indicated periods:

	Number of Shares			Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Vesting Term, Years		Aggregate Intrinsic Value
								(In thousands)
Outstanding, December 31, 2013		1,313,801		$	1.19		1.85	$	2,010
Granted		1,475,085			1.70
Released		(525,333	)		1.30
Forfeited/expired		(42,783	)		1.25
Outstanding, June 29, 2014		2,220,770		$	1.50		2.60	$	3,220

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INCOME TAXES (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013
INCOME TAXES [Abstract]
Provision for income taxes	$ 21	$ 14	$ 31	$ 27
Effective tax rate (in hundredths)	1.00%	1.00%	1.00%	1.00%

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STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION, Warrants (Details)	6 Months Ended
	Jun. 29, 2014	Dec. 31, 2013
Class of Warrant or Right [Line Items]
Warrants outstanding (in shares)	683,240	1,468,239
Number of warrants expired (in shares)	784,999

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FAIR VALUE

6 Months Ended

Jun. 29, 2014

FAIR VALUE [Abstract]

FAIR VALUE

NOTE 3—FAIR VALUE

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 29, 2014 and December 31, 2013 (in thousands):

			Fair Value Measurements Using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 29, 2014:
Assets:
Cash equivalents:
Money market funds	$	12,358	$	12,358	$	-	$	-
	$	12,358	$	12,358	$	-	$	-
Current liabilities:
Liability warrants	$	12	$	-	$	-	$	12
December 31, 2013:
Assets:
Cash equivalents:
Money market funds	$	1,356	$	1,356	$	-	$	-
	$	1,356	$	1,356	$	-	$	-
Current liabilities:
Liability warrants	$	15	$	-	$	-	$	15

The Company’s financial assets and liabilities are valued using market prices on active markets (“Level 1”), less active markets (“Level 2”) and unobservable markets (“Level 3”). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from readily-available pricing sources for comparable instruments.  Level 3 instruments are valued using unobservable market values in which there is little or no market data, and which require the Company to apply judgment to determine the fair value.

For the period ended June 29, 2014, the Company did not have any significant transfers between Level 1, Level 2 and Level 3.

The amounts reported as cash and cash equivalents, accounts receivable, accounts payable, accrued compensation and other current liabilities approximate fair value due to their short-term maturities. The carrying value of the Company’s capital lease obligations approximates fair value and is based upon borrowing rates currently available to the Company for capital leases with similar terms.

Liability Warrants

The Company issued warrants to Bridge Bank in connection with a waiver of certain events of default that arose under a November 2009 loan and security agreement with Bridge Bank. Certain provisions in the warrant agreements provided for down-round protection if the Company raised equity capital at a per share price which was less than the per share price of the warrants. Such down-round protection also requires the Company to classify the value of the warrants as a liability on the issuance date and then record changes in the fair value through the consolidated statements of operations for each reporting period until the warrants are either exercised or cancelled. The fair value of the liability is recalculated and adjusted each quarter with the differences being charged to other income (expense), net on the consolidated statements of operations. The fair value of these warrants was determined using a Black-Scholes option-pricing model, which requires the use of significant unobservable market values.  As a result, these warrants are classified as Level 3 financial instruments. On July 7, 2010, the Company raised additional equity through an offering of 2,760,000 shares at $1.75 per share, thus triggering the down-round protection and adjustment of the number of warrants issued to Bridge Bank. On December 24, 2013, the Company raised additional equity through an offering of 9,573,750 shares at $1.42 per share, thus triggering the down-round protection and adjustment of the number of warrants issued to Bridge Bank.

The fair value of the warrants was estimated using the following assumptions:

	As of June 29, 2014			As of December 31, 2013
Stock price	$	1.45		$	1.53
Strike price	$	2.51		$	2.51
Expected life	3.05 years			3.55 years
Risk-free interest rate		0.90	%		1.30	%
Volatility		65	%		65	%
Fair value per share	$	0.42		$	0.52

The following table summarizes the warrants subject to liability accounting as of June 29, 2014 and December 31, 2013 (in thousands, except share and per share amounts) (see also Note 6):

													Three Months Ended June 29, 2014					Six Months Ended June 29, 2014
Holder	Original Warrants		Adjusted Warrants		Grant Date	Expiration Date	Price per Share		Fair Value June 29, 2014		Fair Value December 31, 2013		Exercise of Warrants		Change in Fair Value			Exercise of Warrants		Change in Fair Value			Related Agreement
Bridge Bank		20,000		29,115	4/7/2010	7/7/2017	$	2.51	$	12	$	15		-	$	(5	)		-	$	(3	)	Credit Agreement

The change in the fair value of the Level 3 liability warrants during the three and six months ended June 29, 2014 is as follows (in thousands):

Fair value as of December 31, 2013	$	15
Exercise of warrants		-
Change in fair value		2
Fair value as of March 30, 2014		17
Exercise of warrants		-
Change in fair value		(5	)
Fair value as of June 29, 2014	$	12

The warrant liability is included in other current liabilities on the condensed consolidated balance sheets.

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NET LOSS PER SHARE (Details)	6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Outstanding anti-dilutive securities (in shares)	12,959,622	12,766,766
Stock options and RSUs [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Outstanding anti-dilutive securities (in shares)	12,276,382	10,978,671
Common Stock Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Outstanding anti-dilutive securities (in shares)	683,240	1,788,095

XML

COMMITMENTS AND CONTINGENCIES (Tables)

6 Months Ended

Jun. 29, 2014

COMMITMENTS AND CONTINGENCIES [Abstract]

Aggregate non-cancelable future minimum rental payments

Aggregate non-cancelable future minimum rental payments under capital and operating leases are as follows (in thousands):

	Capital Leases			Operating Leases
Years ending December 31,	Minimum lease payments			Minimum lease  payments
2014	$	108		$	593
2015		4			432
2016		3			339
2017		3			57
Total minimum lease payments		118		$	1,421
Less: Amount representing interest		(6	)
Total capital lease obligations		112
Less: current portion		(104	)
Long-term portion of capital lease obligations	$	8

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SEGMENT AND GEOGRAPHIC INFORMATION (Tables)

6 Months Ended

Jun. 29, 2014

SEGMENT AND GEOGRAPHIC INFORMATION [Abstract]

Revenue by geographic region and long lived assets by country

The following table summarizes revenue by geographic region (in thousands):

	Three Months Ended										Six Months Ended
	June 29, 2014				June 30, 2013				June 29, 2014					June 30, 2013
North America	$	1,875	23	%	$	2,094	31	%	$	4,102		27	%	$	4,073	30	%
Asia		2,456	31	%		1,895	28	%		4,614		30	%		4,175	30	%
Europe		3,647	45	%		2,533	37	%		6,556		42	%		4,696	34	%
Other		59	1	%		309	4	%		151		1	%		808	6	%
	$	8,037	100	%	$	6,831	100	%	$	15,423		100	%	$	13,752	100	%

Revenue by product line

The following table summarizes revenue by product line (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
HSC	$	5,609	$	4,563	$	10,891	$	9,128
Industrial		2,428		2,268		4,532		4,624
Total revenue	$	8,037	$	6,831	$	15,423	$	13,752

Long lived assets by country

The following table summarizes long-lived assets by country (in thousands):

	June 29, 2014		December 31, 2013
United States	$	1,851	$	2,004
Switzerland		566		995
	$	2,417	$	2,999

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SEGMENT AND GEOGRAPHIC INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 29, 2014 Customer	Jun. 30, 2013 Customer	Jun. 29, 2014 Customer	Jun. 30, 2013 Customer	Dec. 31, 2013
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	$ 8,037	$ 6,831	$ 15,423	$ 13,752
Revenue by geographic region (in hundredths)	100.00%	100.00%	100.00%	100.00%
Number of customers	2	2	1	1
Long-lived assets	2,417		2,417		2,999
HSC [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	5,609	4,563	10,891	9,128
Industrial [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	2,428	2,268	4,532	4,624
Customer One [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Major customer percentage (in hundredths)			26.00%	29.00%
Customer One And Two [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Major customer percentage (in hundredths)	35.00%	41.00%
Major Customer [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Major customer percentage (in hundredths)	24.00%	30.00%
North America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	1,875	2,094	4,102	4,073
Revenue by geographic region (in hundredths)	23.00%	31.00%	27.00%	30.00%
Asia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	2,456	1,895	4,614	4,175
Revenue by geographic region (in hundredths)	31.00%	28.00%	30.00%	30.00%
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	3,647	2,533	6,556	4,696
Revenue by geographic region (in hundredths)	45.00%	37.00%	42.00%	34.00%
Other [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	59	309	151	808
Revenue by geographic region (in hundredths)	1.00%	4.00%	1.00%	6.00%
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue by geographic region (in hundredths)	20.00%	26.00%	24.00%	27.00%
Long-lived assets	1,851		1,851		2,004
Switzerland [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets	$ 566		$ 566		$ 995
Italy [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue by geographic region (in hundredths)	36.00%	34.00%	36.00%	30.00%
Japan [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue by geographic region (in hundredths)		16.00%	10.00%	14.00%

XML

ORGANIZATION AND BASIS OF PRESENTATION (Details)	6 Months Ended
	Jun. 29, 2014 ProductLine	Feb. 28, 2014 CPqD [Member]	Feb. 28, 2014 GigOptix, Inc. [Member]
Organization [Abstract]
Number of product lines	2
Schedule of Investments [Line Items]
Joint venture ownership percentage (in hundredths)		51.00%	49.00%

XML

BALANCE SHEET COMPONENTS (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013	Dec. 31, 2013
BALANCE SHEET COMPONENTS [Abstract]
Accounts receivable	$ 7,093,000		$ 7,093,000		$ 5,241,000
Allowance for doubtful accounts	(64,000)		(64,000)		(220,000)
Accounts receivable, net	7,029,000		7,029,000		5,021,000	[1]
Property and equipment [Line Items]
Property and equipment, gross	15,812,000		15,812,000		15,869,000
Accumulated depreciation and amortization	(13,395,000)		(13,395,000)		(12,870,000)
Property and equipment, net	2,417,000		2,417,000		2,999,000	[1]
Depreciation expense related to property and equipment	548,000	584,000	1,100,000	1,200,000
Amortization	125,000	132,000	276,000	221,000
Inventory, net [Abstract]
Raw materials	2,184,000		2,184,000		2,103,000
Work in process	333,000		333,000		780,000
Finished goods	1,770,000		1,770,000		1,734,000
Inventories	4,287,000		4,287,000		4,617,000	[1]
Accrued and other current liabilities [Abstract]
Amounts billed to the U.S. government in excess of approved rates	191,000		191,000		191,000
Warranty liability	345,000		345,000		330,000
Customer deposits	264,000		264,000		313,000
Capital lease obligations, current portion	104,000		104,000		284,000
Restructuring liabilities, current portion	0		0		30,000
Sales return reserve	248,000		248,000		151,000
Other	1,129,000		1,129,000		1,447,000
Accrued and other current liabilities	2,281,000		2,281,000		2,746,000	[1]
Period of product warranty			1 year
Movement in product warranty liability [Roll Forward]
Beginning balance			330,000	612,000
Warranties accrued			226,000	256,000
Warranties settled or reversed			(211,000)	(477,000)
Ending balance	345,000	391,000	345,000	391,000
Network and Laboratory Equipment [Member]
Property and equipment [Line Items]
Property and equipment, gross	11,242,000		11,242,000		11,250,000
Network and Laboratory Equipment [Member] | Minimum [Member]
Property and equipment [Line Items]
Life			3 years
Network and Laboratory Equipment [Member] | Maximum [Member]
Property and equipment [Line Items]
Life			5 years
Computer Software and Equipment [Member]
Property and equipment [Line Items]
Property and equipment, gross	3,985,000		3,985,000		3,928,000
Computer Software and Equipment [Member] | Minimum [Member]
Property and equipment [Line Items]
Life			2 years
Computer Software and Equipment [Member] | Maximum [Member]
Property and equipment [Line Items]
Life			3 years
Furniture And Fixtures [Member]
Property and equipment [Line Items]
Property and equipment, gross	172,000		172,000		176,000
Furniture And Fixtures [Member] | Minimum [Member]
Property and equipment [Line Items]
Life			3 years
Furniture And Fixtures [Member] | Maximum [Member]
Property and equipment [Line Items]
Life			7 years
Office Equipment [Member]
Property and equipment [Line Items]
Property and equipment, gross	137,000		137,000		137,000
Office Equipment [Member] | Minimum [Member]
Property and equipment [Line Items]
Life			3 years
Office Equipment [Member] | Maximum [Member]
Property and equipment [Line Items]
Life			5 years
Leasehold Improvements [Member]
Property and equipment [Line Items]
Property and equipment, gross	$ 276,000		$ 276,000		$ 378,000
Leasehold Improvements [Member] | Minimum [Member]
Property and equipment [Line Items]
Life			1 year
Leasehold Improvements [Member] | Maximum [Member]
Property and equipment [Line Items]
Life			5 years

[1] The condensed consolidated balance sheet as of December 31, 2013 has been derived from the audited consolidated financial statements as of that date.

XML

BALANCE SHEET COMPONENTS

6 Months Ended

Jun. 29, 2014

BALANCE SHEET COMPONENTS [Abstract]

BALANCE SHEET COMPONENTS

NOTE 2—BALANCE SHEET COMPONENTS

Accounts receivable, net consisted of the following (in thousands):

	June 29,			December 31,
	2014			2013
Accounts receivable	$	7,093		$	5,241
Allowance for doubtful accounts		(64	)		(220	)
	$	7,029		$	5,021

Property and equipment, net consisted of the following (in thousands, except depreciable life):

	Life		June 29,			December 31,
	(In years)		2014			2013
Network and laboratory equipment		3 – 5	$	11,242		$	11,250
Computer software and equipment		2 – 3		3,985			3,928
Furniture and fixtures		3 – 7		172			176
Office equipment		3 – 5		137			137
Leasehold improvements		1 – 5		276			378
				15,812			15,869
Accumulated depreciation and amortization				(13,395	)		(12,870	)
Property and equipment, net			$	2,417		$	2,999

For the three and six months ended June 29, 2014, depreciation expense related to property and equipment was $548,000 and $1.1 million, respectively. For the three and six months ended June 30, 2013, depreciation expense related to property and equipment was $584,000 and $1.2 million, respectively.

In addition to the property and equipment above, the Company has prepaid licenses. For the three and six months ended June 29, 2014, amortization related to these prepaid licenses was $125,000 and $276,000, respectively. For the three and six months ended June 30, 2013, amortization related to these prepaid licenses was $132,000 and $221,000, respectively.

Inventories consisted of the following (in thousands):

	June 29,		December 31,
	2014		2013
Raw materials	$	2,184	$	2,103
Work in process		333		780
Finished goods		1,770		1,734
	$	4,287	$	4,617

Accrued and other current liabilities consisted of the following (in thousands):

	June 29,		December 31,
	2014		2013
Amounts billed to the U.S. government in excess of approved rates	$	191	$	191
Warranty liability		345		330
Customer deposits		264		313
Capital lease obligations, current portion		104		284
Restructuring liabilities, current portion		-		30
Sales return reserve		248		151
Other		1,129		1,447
	$	2,281	$	2,746

The Company generally offers a one year warranty on its products. The Company records a liability based on estimates of the costs that may be incurred under its warranty obligations and charges to the cost of product revenue the amount of such costs at the time revenues are recognized. The warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. The estimates of anticipated rates of warranty claims and costs per claim are primarily based on historical information and future forecasts.

Changes in the Company’s product warranty liability during the six months ended June 29, 2014 and June 30, 2013 are as follows (in thousands):

	Six months ended
	June 29, 2014			June 30, 2013
Beginning balance	$	330		$	612
Warranties accrued		226			256
Warranties settled or reversed		(211	)		(477	)
Ending balance	$	345		$	391

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FAIR VALUE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	0 Months Ended		6 Months Ended	12 Months Ended	3 Months Ended		6 Months Ended
	Dec. 24, 2013	Jul. 07, 2010	Jun. 29, 2014	Dec. 31, 2013	Jun. 29, 2014 Liability Warrants [Member]	Mar. 30, 2014 Liability Warrants [Member]	Jun. 29, 2014 Liability Warrants [Member]	Jun. 29, 2014 Recurring [Member] Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]	Dec. 31, 2013 Recurring [Member] Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]	Jun. 29, 2014 Recurring [Member] Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] Money Market Funds [Member]	Dec. 31, 2013 Recurring [Member] Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] Money Market Funds [Member]	Jun. 29, 2014 Recurring [Member] Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] Liability Warrants [Member]	Dec. 31, 2013 Recurring [Member] Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] Liability Warrants [Member]	Jun. 29, 2014 Recurring [Member] Significant Other Observable Inputs (Level 2) [Member]	Dec. 31, 2013 Recurring [Member] Significant Other Observable Inputs (Level 2) [Member]	Jun. 29, 2014 Recurring [Member] Significant Other Observable Inputs (Level 2) [Member] Money Market Funds [Member]	Dec. 31, 2013 Recurring [Member] Significant Other Observable Inputs (Level 2) [Member] Money Market Funds [Member]	Jun. 29, 2014 Recurring [Member] Significant Other Observable Inputs (Level 2) [Member] Liability Warrants [Member]	Dec. 31, 2013 Recurring [Member] Significant Other Observable Inputs (Level 2) [Member] Liability Warrants [Member]	Jun. 29, 2014 Recurring [Member] Significant Unobservable Inputs (Level 3) [Member]	Dec. 31, 2013 Recurring [Member] Significant Unobservable Inputs (Level 3) [Member]	Jun. 29, 2014 Recurring [Member] Significant Unobservable Inputs (Level 3) [Member] Money Market Funds [Member]	Dec. 31, 2013 Recurring [Member] Significant Unobservable Inputs (Level 3) [Member] Money Market Funds [Member]	Jun. 29, 2014 Recurring [Member] Significant Unobservable Inputs (Level 3) [Member] Liability Warrants [Member]	Dec. 31, 2013 Recurring [Member] Significant Unobservable Inputs (Level 3) [Member] Liability Warrants [Member]	Jun. 29, 2014 Carrying Value [Member] Recurring [Member]	Dec. 31, 2013 Carrying Value [Member] Recurring [Member]	Jun. 29, 2014 Carrying Value [Member] Recurring [Member] Money Market Funds [Member]	Dec. 31, 2013 Carrying Value [Member] Recurring [Member] Money Market Funds [Member]	Jun. 29, 2014 Carrying Value [Member] Recurring [Member] Liability Warrants [Member]	Dec. 31, 2013 Carrying Value [Member] Recurring [Member] Liability Warrants [Member]
Cash equivalents [Abstract]
Cash equivalents										$ 12,358	$ 1,356					$ 0	$ 0					$ 0	$ 0					$ 12,358	$ 1,356
Total assets, fair value								12,358	1,356					0	0					0	0					12,358	1,356
Current liabilities [Abstract]
Liability warrants												0	0					0	0					12	15					12	15
Class of Warrant or Right [Line Items]
Additional equity shares issued (in shares)	9,573,750	2,760,000
Share price of additional equity offering (in dollars per share)	$ 1.42	$ 1.75	$ 1.45	$ 1.53
Fair value assumptions
Stock price (in dollars per share)	$ 1.42	$ 1.75	$ 1.45	$ 1.53
Strike price (in dollars per share)			$ 2.51	$ 2.51
Expected life			3 years 0 months 18 days	3 years 6 months 18 days
Risk-free interest rate (in hundredths)			0.90%	1.30%
Volatility (in hundredths)			65.00%	65.00%
Fair value per share (in dollars per share)			$ 0.42	$ 0.52
Warrants subject to liability accounting [Abstract]
Holder			Bridge Bank
Original warrants (in shares)					20,000		20,000
Adjusted warrants (in shares)			683,240	1,468,239	29,115		29,115
Grant date							Apr. 07, 2010
Expiration date							Jul. 07, 2017
Price per share (in dollars per share)					$ 2.51		$ 2.51
Fair value					12	17	12
Exercise of warrants					0	0	0
Change in fair value					(5)	2	(3)
Related agreement							Credit Agreement
Change in fair value of Level 3 liability warrants [Roll Forward]
Fair value, beginning of period					17	15	15
Exercise of warrants					0	0	0
Change in fair value					(5)	2	(3)
Fair value, end of period					$ 12	$ 17	$ 12

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RESTRUCTURING (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013
RESTRUCTURING [Abstract]
Restructuring reserve settled without cash				$ 662,000
Restructuring reserve settled with cash				288,000
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	307,000	0	307,000	950,000
Summary of restructuring activity [Roll forward]
Beginning balance	0	182,000	30,000	168,000
Charges	307,000	0	307,000	950,000
Uses and adjustments	(307,000)	(54,000)	(337,000)	(990,000)
Ending balance	0	128,000	0	128,000
Other Restructuring [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges			43,000
Facility Closing [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges			210,000
Employee Severance [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges			45,000
RSUs [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges			$ 9,000

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 29, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 18,541	$ 20,377
Accounts receivable, net	7,029	5,021	[1]
Inventories	4,287	4,617	[1]
Prepaid and other current assets	739	434	[1]
Total current assets	30,596	30,449	[1]
Property and equipment, net	2,417	2,999	[1]
Intangible assets, net	2,840	3,287	[1]
Goodwill	9,860	9,860	[1]
Investment in unconsolidated affiliate	125	0	[1]
Restricted cash	133	284	[1]
Other assets	117	183	[1]
Total assets	46,088	47,062	[1]
Current liabilities:
Accounts payable	2,652	831	[1]
Accrued compensation	903	1,170	[1]
Other current liabilities	2,281	2,746	[1]
Total current liabilities	5,836	4,747	[1]
Pension liabilities	140	140	[1]
Deferred rent, noncurrent	143	177	[1]
Other long term liabilities	441	418	[1]
Total liabilities	6,560	5,482	[1]
Commitments and contingencies (Note 12)			[1]
Stockholders' equity:
Common stock, $0.001 par value; 50,000,000 shares authorized as of June 29, 2014 and December 31, 2013; 32,467,019 and 32,067,616 shares issued and outstanding as of June 29, 2014 and December 31, 2013, respectively	32	32	[1]
Additional paid-in capital	141,611	139,710	[1]
Treasury stock, at cost; 701,754 shares as of June 29, 2014 and December 31, 2013, respectively	(2,209)	(2,209)	[1]
Accumulated other comprehensive income	478	490	[1]
Accumulated deficit	(100,384)	(96,443)	[1]
Total stockholders' equity	39,528	41,580	[1]
Total liabilities and stockholders' equity	$ 46,088	$ 47,062	[1]

[1] The condensed consolidated balance sheet as of December 31, 2013 has been derived from the audited consolidated financial statements as of that date.

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COMMITMENTS AND CONTINGENCIES (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 29, 2014 sqft	Jun. 30, 2013	Jun. 29, 2014 sqft	Jun. 30, 2013	Dec. 31, 2013
COMMITMENTS AND CONTINGENCIES [Abstract]
Facilities rent expense	$ 93,000	$ 140,000	$ 234,000	$ 280,000
Bothell facility, sq ft.	11,666		11,666
Lease term			1 year
Bellevue Facility sq ft	2,100		2,100
Aggregate non-cancelable future minimum rental payments under capital leases [Abstract]
Capital leases, 2014	108,000		108,000
Capital leases, 2015	4,000		4,000
Capital leases, 2016	3,000		3,000
Capital leases, 2017	3,000		3,000
Capital leases, total minimum lease payments	118,000		118,000
Less: Amount representing interest	(6,000)		(6,000)
Total capital lease obligations	112,000		112,000
Less: current portion	(104,000)		(104,000)		(284,000)
Long-term portion of capital lease obligations	8,000		8,000
Aggregate non-cancelable future minimum rental payments under operating leases [Abstract]
Operating leases, 2014	593,000		593,000
Operating leases, 2015	432,000		432,000
Operating leases, 2016	339,000		339,000
Operating leases, 2017	57,000		57,000
Operating leases, total minimum lease payments	$ 1,421,000		$ 1,421,000

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013
Cash flows from operating activities:
Net loss	$ (3,941)	$ (3,956)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,813	1,881
Stock-based compensation	2,127	2,508
Change in fair value of warrants	(3)	(12)
Loss (gain) on property and equipment	8	(160)
Non-cash restructuring expense	210	0
Equity in earnings of unconsolidated affiliate	331	0
Changes in operating assets and liabilities:
Accounts receivable, net	(2,008)	(1,352)
Inventories	85	158
Prepaid and other current assets	(582)	(387)
Other assets	23	18
Accounts payable	1,754	(409)
Accrued restructuring	(29)	13
Accrued compensation	(268)	28
Other current liabilities	(248)	(145)
Other long-term liabilities	(10)	(41)
Net cash used in operating activities	(738)	(1,856)
Cash flows from investing activities:
Purchases of property and equipment	(682)	(1,099)
Proceeds from sale of property and equipment	0	160
Net cash used in investing activities	(682)	(939)
Cash flows from financing activities:
Proceeds from issuance of stock	40	0
Taxes paid related to net share settlement of equity awards	(266)	(75)
Net borrowings on line of credit	0	2,400
Repayment of capital lease	(181)	(237)
Net cash provided by (used in) financing activities	(407)	2,088
Effect of exchange rates on cash and cash equivalents	(9)	66
Net decrease in cash and cash equivalents	(1,836)	(641)
Cash and cash equivalents as of beginning of period	20,377	10,147
Cash and cash equivalents as of end of period	18,541	9,506
Supplemental disclosure of cash flow information
Interest paid	29	79
Property and equipment acquired with accounts payable	90	46
Investment in unconsolidated affiliate acquired with property and equipment and inventories	$ 456	$ 0

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CREDIT FACILITIES (Details) (Line of Credit - Silicon Valley Bank [Member], USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 29, 2014
Line of Credit - Silicon Valley Bank [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 7
Borrowing capacity with reference to accounts receivable	3.5
Borrowing base percentage used for maximum borrowing capacity (in hundredths)	80.00%
Borrowing capacity without reference to accounts receivable	3.5
Amount outstanding	$ 0
Number of business days to repay interest on borrowings unrelated to accounts receivable balances	3 days

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BALANCE SHEET COMPONENTS (Tables)

6 Months Ended

Jun. 29, 2014

BALANCE SHEET COMPONENTS [Abstract]

Accounts receivable, net

Accounts receivable, net consisted of the following (in thousands):

	June 29,			December 31,
	2014			2013
Accounts receivable	$	7,093		$	5,241
Allowance for doubtful accounts		(64	)		(220	)
	$	7,029		$	5,021

Property and equipment, net

Property and equipment, net consisted of the following (in thousands, except depreciable life):

	Life		June 29,			December 31,
	(In years)		2014			2013
Network and laboratory equipment		3 – 5	$	11,242		$	11,250
Computer software and equipment		2 – 3		3,985			3,928
Furniture and fixtures		3 – 7		172			176
Office equipment		3 – 5		137			137
Leasehold improvements		1 – 5		276			378
				15,812			15,869
Accumulated depreciation and amortization				(13,395	)		(12,870	)
Property and equipment, net			$	2,417		$	2,999

Inventories

Inventories consisted of the following (in thousands):

	June 29,		December 31,
	2014		2013
Raw materials	$	2,184	$	2,103
Work in process		333		780
Finished goods		1,770		1,734
	$	4,287	$	4,617

Accrued and other current liabilities

Accrued and other current liabilities consisted of the following (in thousands):

	June 29,		December 31,
	2014		2013
Amounts billed to the U.S. government in excess of approved rates	$	191	$	191
Warranty liability		345		330
Customer deposits		264		313
Capital lease obligations, current portion		104		284
Restructuring liabilities, current portion		-		30
Sales return reserve		248		151
Other		1,129		1,447
	$	2,281	$	2,746

Summary of changes in warranty accrual

Changes in the Company’s product warranty liability during the six months ended June 29, 2014 and June 30, 2013 are as follows (in thousands):

	Six months ended
	June 29, 2014			June 30, 2013
Beginning balance	$	330		$	612
Warranties accrued		226			256
Warranties settled or reversed		(211	)		(477	)
Ending balance	$	345		$	391

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STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2010	Jun. 29, 2014	Dec. 31, 2008
Subsidiary, Sale of Stock [Line Items]
Date of transaction	Dec. 24, 2013
Number of shares issued in transaction (in shares)	9,573,750
Par value on common stock in public offering (in dollars per share)	$ 0.001		$ 0.001	$ 0.001
Public offering price per share (in dollars per share)	$ 1.42
Proceeds from the sale of stock	$ 12,500,000	$ 4,800,000
Costs related to public offering	250,000
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]
Preferred stock, authorized (in shares)				1,000,000
Common and preferred stock [Abstract]
Common stock, authorized (in shares)	50,000,000		50,000,000	50,000,000
Common stock, par value (in dollars per share)	$ 0.001		$ 0.001	$ 0.001
Preferred stock, par value (in dollars per share)				$ 0.001
Preferred stock, issued (in shares)	0		0
Preferred stock, outstanding (in shares)	0		0
Series A Junior Preferred Stock [Member]
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]
Preferred stock, authorized (in shares)				300,000
Public offering [Member]
Subsidiary, Sale of Stock [Line Items]
Date of transaction	Dec. 19, 2013
Number of shares issued in transaction (in shares)	8,325,000
Par value on common stock in public offering (in dollars per share)	$ 0.001
Public offering price per share (in dollars per share)	$ 1.42
Proceeds from the sale of stock	$ 12,300,000
Common and preferred stock [Abstract]
Common stock, par value (in dollars per share)	$ 0.001
Over allotment [Member]
Subsidiary, Sale of Stock [Line Items]
Number of shares issued in transaction (in shares)	1,248,750

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INTANGIBLE ASSETS AND GOODWILL (Tables)

6 Months Ended

Jun. 29, 2014

INTANGIBLE ASSETS AND GOODWILL [Abstract]

Intangible assets

Intangible assets consist of the following (in thousands):

	June 29, 2014							December 31, 2013
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	3,277	$	(1,908	)	$	1,369	$	3,277	$	(1,697	)	$	1,580
Existing technology		3,783		(2,677	)		1,106		3,783		(2,473	)		1,310
Order backlog		732		(732	)		-		732		(732	)		-
Patents		457		(400	)		57		457		(397	)		60
Trade name		659		(351	)		308		659		(322	)		337
Total	$	8,908	$	(6,068	)	$	2,840	$	8,908	$	(5,621	)	$	3,287

Amortization of intangible assets

For the three and six months ended June 29, 2014 and June 30, 2013, amortization of intangible assets was as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
Cost of revenue	$	103	$	122	$	206	$	244
Selling, general and administrative expense		121		129		241		260
	$	224	$	251	$	447	$	504

Estimated future amortization expense

Estimated future amortization expense related to intangible assets as of June 29, 2014 is as follows (in thousands):

Years ending December 31,
2014	$	446
2015		893
2016		869
2017		487
2018		145
Total	$	2,840

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ORGANIZATION AND BASIS OF PRESENTATION

6 Months Ended

Jun. 29, 2014

ORGANIZATION AND BASIS OF PRESENTATION [Abstract]

ORGANIZATION AND BASIS OF PRESENTATION

NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION

Organization

GigOptix Inc.(“GigOptix” or the “Company”) is a leading fabless supplier of high speed semiconductorcomponentsthat enable end-to-end information streaming over optical and wireless networks and address long haul and metro telecommunications applications as well as emerging high-growth opportunities for Cloud and datacenter connectivity, interactive applications for consumer electronics and the industrial, defense and avionics industries.  The business is made up of two product lines: the High-Speed Communications (“HSC”) product line and the Industrial product line.

The HSC product line offers a broad portfolio of high performance optical and wireless components to telecommunications (“telecom”) and data communications (“datacom”) customers, i) mixed signal radio frequency integrated circuits (“RFIC”), including 10 to 400 gigabit per second (“Gbps”) laser and optical drivers and trans-impedance amplifiers (“TIA”) for telecom, datacom, and consumer electronic fiber-optic applications; ii) power amplifiers and transceivers for microwave and millimeter monolithic microwave integrated circuit (“MMIC”) wireless applications including power amplifiers and transceiver chips at frequencies higher than 50 GHz; iii) integrated systems in a package (“SIP”) solutions for both fiber-optic and wireless applications; and iv) radio frequency (“RF’) chips for various consumer applications such as global navigation satellite systems (“GNSS”). The HSC product line also partners with key customers on development projects that generate engineering project revenue for the Company while helping to position the Company for future product revenues with these key customers.

The Industrial product line offers a wide range of digital and mixed-signal application specific integrated circuit (“ASIC”) solutions for industrial, military, avionics, medical and communications markets. The Industrial product line partners with ASIC customers on development projects that generate engineering project revenue for the Company which generally leads to future product revenues with these ASIC customers.

GigOptix, Inc., the successor to GigOptix LLC, was formed as a Delaware corporation in March 2008 in order to facilitate a combination between GigOptix LLC and Lumera Corporation (“Lumera”). Before the combination, GigOptix LLC acquired the assets of iTerra Communications LLC in July 2007 (“iTerra”) and Helix Semiconductors AG (“Helix”) in January 2008. On November 9, 2009, GigOptix acquired ChipX, Incorporated (“ChipX”). On June 17, 2011, GigOptix acquired Endwave Corporation (“Endwave”). As a result of the acquisitions, Helix, Lumera, ChipX and Endwave all became wholly owned subsidiaries of GigOptix.  In March 2013, the Company established a German subsidiary, GigOptix GmbH; however it is in the process of being dissolved.

In February 2014, together with Fundação CPqD – Centro De Pesquisa e Desenvolvimento em Telecomunicações (“CPqD”), the Company incepted a new joint venture of which the Company owns 49% and CPqD owns 51%, BrPhotonics Produtos Optoeletrônicos LTDA. (“BrP”), based in Campinas, Brazil, which will be a provider of advanced high-speed devices for optical communications and integrated transceiver components that enable information streaming over communications networks. This joint venture is engaged in research and development of Silicon-Photonics (“SiPh”) advanced electro-optical products.  As of June 29, 2014, the Company had transferred its inventory related to the Thin Film Polymer on Silicon (“TFPS^TM”) platform and the production line equipment for use by BrP (see also Note 8).

In June 2014, the Company signed a definitive agreement to acquire, for cash only by way of assuming specified liabilities, substantially all of the assets of Tahoe RF Semiconductor, Inc. (“Tahoe RF”), a provider of RF/analog RFICs, intellectual property, and fully integrated systems and subsystems on a chip. This acquisition closed on June 30, 2014, which is the first day of the Company’s third quarter of fiscal 2014 (see also Note 14.)

Basis of Presentation

The Company’s fiscal year ends on December 31. For quarterly reporting, the Company employs a five-week, four-week, four-week, reporting period. The second quarter of 2014 ended on Sunday, June 29, 2014. The second quarter of 2013 ended on Sunday, June 30, 2013. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

The accompanying unaudited condensed consolidated financial statements as of June 29, 2014 and for the three and six months ended June 29, 2014 and June 30, 2013, have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X, and include the accounts of the Company and all of its subsidiaries. Accordingly, they do not include all of the information and footnotes required by such accounting principles for annual financial statements. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position as of June 29, 2014, the results of operations for the three and six months ended June 29, 2014 and June 30, 2013, and cash flows for the six months ended June 29, 2014 and June 30, 2013. The condensed consolidated results of operations for the three and six months ended June 29, 2014 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending December 31, 2014. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s 2013 Form 10-K.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported periods. These judgments can be subjective and complex, and consequently, actual results could differ materially from those estimates and assumptions. Descriptions of these estimates and assumptions are included in the 2013 Form 10-K and the Company encourages you to read its 2013 Form 10-K for more information about such estimates and assumptions.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)	Jun. 29, 2014	Dec. 31, 2013
Stockholders' equity:
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized (in shares)	50,000,000	50,000,000
Common stock, issued (in shares)	32,467,019	32,067,616
Common stock, outstanding (in shares)	32,467,019	32,067,616
Treasury stock, at cost (in shares)	701,754	701,754

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SEGMENT AND GEOGRAPHIC INFORMATION

6 Months Ended

Jun. 29, 2014

SEGMENT AND GEOGRAPHIC INFORMATION [Abstract]

SEGMENT AND GEOGRAPHIC INFORMATION

NOTE 11—SEGMENT AND GEOGRAPHIC INFORMATION

The Company has determined that it operates as a single operating and reportable segment. The following tables reflect the results of the Company’s reportable segment consistent with the management system used by the Company’s Chief Executive Officer, the chief operating decision maker.

The following table summarizes revenue by geographic region (in thousands):

	Three Months Ended										Six Months Ended
	June 29, 2014				June 30, 2013				June 29, 2014					June 30, 2013
North America	$	1,875	23	%	$	2,094	31	%	$	4,102		27	%	$	4,073	30	%
Asia		2,456	31	%		1,895	28	%		4,614		30	%		4,175	30	%
Europe		3,647	45	%		2,533	37	%		6,556		42	%		4,696	34	%
Other		59	1	%		309	4	%		151		1	%		808	6	%
	$	8,037	100	%	$	6,831	100	%	$	15,423		100	%	$	13,752	100	%

The Company determines geographic location of its revenue based upon the destination of shipments of its products.

For the three months ended June 29, 2014, two customers accounted for greater than 10% of total revenue and combined they accounted for 35% of total revenue, of which the largest accounted for 24% of the Company’s total revenue. For the three months ended June 30, 2013, two customers accounted for greater than 10% of total revenue and combined they accounted for 41% of total revenue, of which the largest accounted for 30% of the Company’s total revenue.

For the six months ended June 29, 2014, one customer accounted for 26% of total revenue. For the six months ended June 30, 2013, one customer accounted for 29% of total revenue.

During the three months ended June 29, 2014, Italy and the United States accounted for 36% and 20% of total revenue, respectively. During the three months ended June 30, 2013, Italy, the United States, and Japan accounted for 34%, 26%, and 16% of total revenue, respectively. No other countries accounted for more than 10% of the Company’s total revenue during the three months ended June 29, 2014 and June 30, 2013.

During the six months ended June 29, 2014, Italy, the United States, and Japan accounted for 36%, 24%, and 10% of total revenue, respectively. During the six months ended June 30, 2013, Italy, the United States, and Japan accounted for 30%, 27%, and 14% of total revenue, respectively. No other countries accounted for more than 10% of the Company’s total revenue during the six months ended June 29, 2014 and June 30, 2013.

The following table summarizes revenue by product line (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
HSC	$	5,609	$	4,563	$	10,891	$	9,128
Industrial		2,428		2,268		4,532		4,624
Total revenue	$	8,037	$	6,831	$	15,423	$	13,752

The following table summarizes long-lived assets by country (in thousands):

	June 29, 2014		December 31, 2013
United States	$	1,851	$	2,004
Switzerland		566		995
	$	2,417	$	2,999

Long-lived assets, comprised of property and equipment, are reported based on the location of the assets as of each balance sheet date.

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Document and Entity Information	6 Months Ended
	Jun. 29, 2014	Aug. 01, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	GigOptix, Inc.
Entity Central Index Key	0001432150
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		31,885,772
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 29, 2014

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 29, 2014

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 12—COMMITMENTS AND CONTINGENCIES

Commitments

Leases

The Company leases its domestic and foreign sales offices under non-cancelable operating leases. These leases contain various expiration dates and renewal options.  The Company also leases certain software licenses under operating leases. Total facilities rent expense for the three and six months ended June 29, 2014 was $93,000 and $234,000, respectively, and for the three and six months ended June 30, 2013 was $140,000 and $280,000, respectively.

As of April 2014, the Company moved out of its Bothell, Washington facility which comprised 11,666 square feet and entered into a new one-year lease located in Bellevue, Washington which comprises approximately 2,100 square feet.

Aggregate non-cancelable future minimum rental payments under capital and operating leases are as follows (in thousands):

	Capital Leases			Operating Leases
Years ending December 31,	Minimum lease payments			Minimum lease  payments
2014	$	108		$	593
2015		4			432
2016		3			339
2017		3			57
Total minimum lease payments		118		$	1,421
Less: Amount representing interest		(6	)
Total capital lease obligations		112
Less: current portion		(104	)
Long-term portion of capital lease obligations	$	8

Legal Contingencies

From time to time, the Company may become involved in legal proceedings, claims and litigation arising in the ordinary course of business. When the Company believes a loss is probable and can be reasonably estimated, the Company accrues the estimated loss in the consolidated financial statements. Where the outcome of these matters is not determinable, the Company does not make a provision in the financial statements until the loss, if any, is probable and can be reasonably estimated or the outcome becomes known. There are no known losses at this time.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) [Abstract]
Total revenue	$ 8,037	$ 6,831	$ 15,423	$ 13,752
Total cost of revenue	3,487	2,578	6,613	5,214
Gross profit	4,550	4,253	8,810	8,538
Research and development expense	3,358	3,177	7,100	6,413
Selling, general and administrative expense	2,567	2,041	4,965	4,394
Restructuring expense, net	307	0	307	950
Special litigation-related expense	0	472	0	887
Total operating expenses	6,232	5,690	12,372	12,644
Loss from operations	(1,682)	(1,437)	(3,562)	(4,106)
Interest expense, net	(10)	(25)	(27)	(79)
Other income, net	0	88	10	256
Loss before provision for income taxes	(1,692)	(1,374)	(3,579)	(3,929)
Provision for income taxes	21	14	31	27
Loss from consolidated companies	(1,713)	(1,388)	(3,610)	(3,956)
Equity in earnings of unconsolidated affiliate	331	0	331	0
Net loss	$ (2,044)	$ (1,388)	$ (3,941)	$ (3,956)
Net loss per share-basic and diluted (in dollars per share)	$ (0.06)	$ (0.06)	$ (0.13)	$ (0.18)
Weighted average number of shares used in per share calculations - basic and diluted (in shares)	31,607	21,628	31,521	21,588

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STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION

6 Months Ended

Jun. 29, 2014

STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION [Abstract]

STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION

NOTE 6—STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

Public Offering

On December 19, 2013, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Roth Capital Partners, LLC as representative of several underwriters to the Underwriting Agreement relating to a public offering of an aggregate of 8,325,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share at a public offering price of $1.42 per share. The Shares are accompanied by the associated rights to purchase shares of Series A Junior Preferred Stock, par value $0.001 per share, of the Company created by the Rights Agreement, dated December 16, 2011, between the Company and the American Stock Transfer & Trust Company, LLC, as Rights Agent (the “Rights Agreement”).  Under the terms of the Underwriting Agreement, the Company granted the Underwriters a 30 day option to purchase up to an additional 1,248,750 shares of common stock to cover over-allotments.

On December 24, 2013, the Company completed its public offering of 9,573,750 newly issued shares of common stock at a price to the public of $1.42 per share. The number of shares sold in the offering included the underwriter’s full exercise on December 24, 2013 of their over-allotment option of 1,248,750 shares of common stock. The net proceeds to the Company from the offering was approximately $12.3 million which consisted of $12.5 million after underwriting discounts, commissions and expenses less an additional $250,000 for legal, accounting, registration and other transaction costs related to the public offering.

Common and Preferred Stock

In December 2008, the Company’s stockholders approved an amendment to the Certificate of Incorporation to authorize 50,000,000 shares of common stock of par value $0.001. In addition, the Company is authorized to issue 1,000,000 shares of preferred stock of $0.001 par value of which 300,000 shares have been designated Series A Junior Preferred Stock with powers, preferences and rights as set forth in the certificate of designation dated December 16, 2011; the remainder of the shares of preferred stock are undesignated, for which the Board of Directors is authorized to fix the designation, powers, preferences and rights. As of June 29, 2014 and December 31, 2013, there were no shares of preferred stock issued or outstanding.

2008 Equity Incentive Plan

In December 2008, the Company adopted the 2008 Equity Incentive Plan (the “2008 Plan”) for directors, employees, consultants and advisors to the Company or its affiliates. Under the 2008 Plan, 2,500,000 shares of common stock were reserved for issuance upon the completion of a merger with Lumera Corporation (“Lumera”) on December 9, 2008. On January 1 of each year, starting in 2009, the aggregate number of shares reserved for issuance under the 2008 Plan increase automatically by the lesser of (i) 5% of the number of shares of common stock outstanding as of the Company’s immediately preceding fiscal year, or (ii) a number of shares determined by the Board of Directors. The maximum number of shares of common stock to be granted is up to 21,000,000 shares. Forfeited options or awards generally become available for future awards.As of December 31, 2013, the stockholders had approved 15,021,253 shares for future issuance. On January 1, 2014, there was an automatic increase of 1,603,381 shares. As of June 29, 2014, 11,790,457 options to purchase common stock and restricted stock were outstanding and 3,953,715 shares are authorized for future issuance under the 2008 equity incentive plan.

Under the 2008 Plan, the exercise price of a stock option is at least 100% of the stock’s fair market value on the date of grant, and if an ISO is granted to a 10% stockholder at least 110% of the stock’s fair market value on the date of grant. Vesting periods for awards are recommended by the chief executive officer and generally provide for stock options to vest over a four-year period, with a one year vesting cliff of 25%, and have a maximum life of ten years from the date of grant. The Company has also issued restricted stock units (“RSUs”) which generally vest over a one to four-year period.

2007 Equity Incentive Plan

In August 2007, GigOptix LLC adopted the GigOptix LLC Equity Incentive Plan (the "2007 Plan"). The 2007 Plan provided for grants of options to purchase membership units, membership awards and restricted membership units to employees, officers and non-employee directors, and upon the completion of the merger with Lumera were converted into grants of up to 632,500 shares of stock. Vesting periods are determined by the Board of Directors and generally provide for stock options to vest over a four-year period and expire ten years from date of grant. Vesting for certain shares of restricted stock is contingent upon both service and performance criteria. The 2007 Plan was terminated upon the completion of merger with Lumera on December 9, 2008 and the remaining 864 stock options not granted under the 2007 Plan were cancelled. No shares of the Company’s common stock remain available for issuance of new grants under the 2007 Plan other than for satisfying exercises of stock options granted under this plan prior to its termination. As of June 29, 2014, options to purchase a total of 413,497 shares of common stock and 4,125 warrants to purchase common stock were outstanding.

Lumera 2000 and 2004 Stock Option Plan

In December 2008, in connection with the merger with Lumera, the Company assumed the existing Lumera 2000 Equity Incentive Plan and the Lumera 2004 Stock Option Plan (the “Lumera Plan”). All unvested options granted under the Lumera Plan were assumed by the Company as part of the merger. All contractual terms of the assumed options remain the same, except for the converted number of shares and exercise price based on merger conversion ratio of 0.125. As of June 29, 2014, no additional options can be granted under the Lumera Plan, and options to purchase a total of 72,428 shares of common stock were outstanding.

Warrants

As of December 31, 2013, the Company had a total of 1,468,239 warrants to purchase common stock outstanding under all warrant arrangements. During the six months ended June 29, 2014, no warrants were exercised and 784,999 warrants expired. As a result, as of June 29, 2014, the Company had 683,240 warrants to purchase common stock outstanding under all warrant arrangements. Some of the warrants have anti-dilution provisions which adjust the number of warrants available to the holder such as, but not limited to, stock dividends, stock splits and certain reclassifications, exchanges, combinations or substitutions. These provisions are specific to each warrant agreement.

Stock-based Compensation Expense

The following table summarizes the Company’s stock-based compensation expense for the three and six months ended June 29, 2014 and June 30, 2013 (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
Cost of revenue	$	88	$	59	$	164	$	139
Research and development expense		292		231		567		554
Selling, general and administrative expense		728		448		1,387		1,153
Restructuring expense		9		-		9		662
	$	1,117	$	738	$	2,127	$	2,508

For the six months ended June 29, 2014, included in the $2.1 million of stock-based compensation expense was $9,000 in restructuring expense to modify the exercise period and accelerate the vesting of RSUs (see Note 7).

For the six months ended June 30, 2013, included in the $2.5 million of stock-based compensation expense is $662,000 in restructuring expense to modify the exercise period and accelerate the vesting of stock options and RSUs (see Note 7).

During the three months ended June 29, 2014 and June 30, 2013, the Company granted options to purchase 25,000 and 610,010 of common stock, respectively, with an estimated total grant-date fair value of $28,000 and $359,000, respectively.

During the three months ended June 29, 2014 and June 30, 2013, the Company granted 70,000 and 569,846 RSUs, respectively, with a grant-date fair value of $113,000 and $490,000 or $1.62 and $0.86 per share, respectively.

During the six months ended June 29, 2014 and June 30, 2013, the Company granted options to purchase 25,000 and 610,010 of common stock, respectively, with an estimated total grant-date fair value of $28,000 and $359,000, respectively.

During the six months ended June 29, 2014 and June 30, 2013, the Company granted 1,475,085 and 569,846 RSUs, respectively, with a grant-date fair value of $2.5 million and $490,000 or $1.70 and $0.86 per share, respectively.

 As of June 29, 2014, the total compensation cost not yet recognized in connection with unvested stock options and RSUs under the Company’s equity compensation plans was approximately $2.6 million and $2.8 million, respectively. Unrecognized compensation will be amortized on a straight-line basis over a weighted-average period of approximately 1.67 years for stock options and approximately 2.6 years for RSUs.

Stock Option and RSU Activity

The following is a summary of option activity for the Company’s equity incentive plans, including both the 2008 Plan and other prior plans for which there are outstanding options but no new grants since the 2008 Plan was adopted:

	Options Outstanding		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term, in Years
Outstanding, December 31, 2013		10,306,671	$	2.34		6.96
Granted		25,000		1.59
Exercised		(38,305)		1.05
Forfeited/Expired		(237,754)		2.06
Ending balance, June 29, 2014		10,055,612		2.35		6.44
Vested and exercisable and expected to vest, June 29, 2014		9,918,037	$	2.35		6.43
Vested and exercisable, June 29, 2014		8,036,039	$	2.38		6.12

The aggregate intrinsic value of options vested, exercisable and expected to vest, based on the fair value of the underlying stock options as of June 29, 2014 was approximately $1.1 million. The aggregate intrinsic value reflects the difference between the exercise price of the underlying stock options and the Company’s closing share price of $1.45 as of June 27, 2014.

The total intrinsic value of options exercised during the six months ended June 29, 2014 was approximately $18,000. During the six months ended June 30, 2013, the Company did not have any options exercised.

RSUs are converted into shares of the Company’s common stock upon vesting on a one-for-one basis. Typically, vesting of RSUs is subject to the employee’s continuing service to the Company. RSUs generally vest over a period of one to four years and are expensed ratably on a straight line basis over their respective vesting period net of estimated forfeitures. The fair value of the RSUs granted is the product of the number of shares granted and the grant date fair value of the Company’s common stock.

The following is a summary of RSU activity for the indicated periods:

	Number of Shares			Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Vesting Term, Years		Aggregate Intrinsic Value
								(In thousands)
Outstanding, December 31, 2013		1,313,801		$	1.19		1.85	$	2,010
Granted		1,475,085			1.70
Released		(525,333	)		1.30
Forfeited/expired		(42,783	)		1.25
Outstanding, June 29, 2014		2,220,770		$	1.50		2.60	$	3,220

The majority of the RSUs that vested in the six months ended June 29, 2014 were net-share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld were based on the value of the RSUs on their vesting date as determined by the Company’s closing stock price. These net-share settlements had the effect of share repurchases by the Company as they reduced and retired the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company. For the six months ended June 29, 2014, 525,333 shares of RSUs vested with an intrinsic value of approximately $762,000. The Company withheld 164,000 shares to satisfy approximately $266,000 of employees’ minimum tax obligation on the vested RSUs.

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CREDIT FACILITIES

6 Months Ended

Jun. 29, 2014

CREDIT FACILITIES [Abstract]

CREDIT FACILITIES

NOTE 5—CREDIT FACILITIES

On March 25, 2013, the Company entered into a second amended and restated loan and security agreement (“Loan Agreement”) with Silicon Valley Bank (“SVB”) to replace the amended and restated loan and security agreement entered on December 9, 2011. Pursuant to the Loan Agreement, the total aggregate amount that the Company is entitled to borrow from SVB has increased to $7 million, which is now split into two different credit facilities, comprised of (i) the existing Revolving Loan facility which was amended to provide that the Company is entitled to borrow from SVB up to $3.5 million, based on net eligible accounts receivable after an 80% advance rate and subject to limits based on the Company’s eligible accounts as determined by SVB and (ii) a new facility under which the Company is entitled to borrow from SVB up to $3.5 million without reference to accounts receivable under which the principal balance and accrued interest must be repaid within 3 business days after the date of any advance under the facility. In addition, the Loan Agreement eliminates the financial covenants contained in the previous loan agreement.

The Loan Agreement with SVB is secured by all of the Company’s assets, including all accounts, equipment, inventory, receivables, and general intangibles. The Loan Agreement contains certain restrictive covenants that will impose significant operating and financial restrictions on its operations, including, but not limited to restrictions that limit its ability to:

· Sell, lease, or otherwise transfer, or permit any of its subsidiaries to sell, lease or otherwise transfer, all or any part of its business or property, except in the ordinary course of business or in connection with certain indebtedness or investments permitted under the amended and restated loan agreement;

· Merge or consolidate, or permit any of its subsidiaries to merge or consolidate, with or into any other business organization, or acquire, or permit any of its subsidiaries to acquire, all or substantially all of the capital stock or property of another person;

· Create, incur, assume or be liable for any indebtedness, other than certain indebtedness permitted under the amended and restated loan and security agreement;

· Pay any dividends or make any distribution or payment on, or redeem, retire, or repurchase, any capital stock; and

· Make any investment, other than certain investments permitted under the amended and restated loan and security agreement.

The Company had no outstanding balance on its line of credit as of June 29, 2014.

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FAIR VALUE (Tables)

6 Months Ended

Jun. 29, 2014

FAIR VALUE [Abstract]

Financial assets and liabilities measured at fair value, recurring basis

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 29, 2014 and December 31, 2013 (in thousands):

			Fair Value Measurements Using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 29, 2014:
Assets:
Cash equivalents:
Money market funds	$	12,358	$	12,358	$	-	$	-
	$	12,358	$	12,358	$	-	$	-
Current liabilities:
Liability warrants	$	12	$	-	$	-	$	12
December 31, 2013:
Assets:
Cash equivalents:
Money market funds	$	1,356	$	1,356	$	-	$	-
	$	1,356	$	1,356	$	-	$	-
Current liabilities:
Liability warrants	$	15	$	-	$	-	$	15

Estimate of fair value for warrants assumptions

The fair value of the warrants was estimated using the following assumptions:

	As of June 29, 2014			As of December 31, 2013
Stock price	$	1.45		$	1.53
Strike price	$	2.51		$	2.51
Expected life	3.05 years			3.55 years
Risk-free interest rate		0.90	%		1.30	%
Volatility		65	%		65	%
Fair value per share	$	0.42		$	0.52

Warrants subject to liability accounting

The following table summarizes the warrants subject to liability accounting as of June 29, 2014 and December 31, 2013 (in thousands, except share and per share amounts) (see also Note 6):

													Three Months Ended June 29, 2014					Six Months Ended June 29, 2014
Holder	Original Warrants		Adjusted Warrants		Grant Date	Expiration Date	Price per Share		Fair Value June 29, 2014		Fair Value December 31, 2013		Exercise of Warrants		Change in Fair Value			Exercise of Warrants		Change in Fair Value			Related Agreement
Bridge Bank		20,000		29,115	4/7/2010	7/7/2017	$	2.51	$	12	$	15		-	$	(5	)		-	$	(3	)	Credit Agreement

Change in the fair value of level 3 liabilities

The change in the fair value of the Level 3 liability warrants during the three and six months ended June 29, 2014 is as follows (in thousands):

Fair value as of December 31, 2013	$	15
Exercise of warrants		-
Change in fair value		2
Fair value as of March 30, 2014		17
Exercise of warrants		-
Change in fair value		(5	)
Fair value as of June 29, 2014	$	12

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RECENT ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Jun. 29, 2014

RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

NOTE 13—RECENT ACCOUNTING PRONOUNCEMENTS

In June 2014, the Financial Accounting Standard Board (“FASB”) issued an accounting standard update clarifying the accounting guidance on how to account for share-based payment awards that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. This standard is effective for periods beginning after December 15, 2015 and early adoption is permitted. The Company does not expect the adoption will have a material impact on the Company’s condensed consolidated financial statements.

In May 2014, the FASB issued an accounting standard clarifying the principles for recognizing revenue by amending the FASB Accounting Standards Codification and creating a new Topic 606, Revenue from Contracts with Customers.The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This standard is effective for annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. The Company is currently evaluating the impact of the adoption on the Company’s condensed consolidated financial statements.

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INCOME TAXES

6 Months Ended

Jun. 29, 2014

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 9—INCOME TAXES

The Company recorded a provision for income taxes of $21,000 and $31,000 for the three and six months ended June 29, 2014, respectively, and $14,000 and $27,000 for the three and six months ended June 30, 2013, respectively. The Company's effective tax rate was less than 1% for the three and six months ended June 29, 2014 and June 30, 2013.

The income tax provision for the three and six months ended June 29, 2014 and June 30, 2013 was due primarily to state taxes and foreign taxes due. The Company has incurred book losses in all tax jurisdictions and has a full valuation allowance against such losses.

In assessing the potential realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. In making such a determination, management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial performance. In order to support a conclusion that a valuation allowance is not needed, positive evidence of sufficient quantity and quality is necessary to overcome negative evidence. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. A valuation allowance has been recorded for the entire deferred tax asset as a result of uncertainties regarding realization of the asset including lack of profitability through June 29, 2014 and the uncertainty over future operating profitability and taxable income. The Company will continue to evaluate the potential realization of the deferred tax assets on a quarterly basis.

The Company files tax returns as prescribed by the tax laws of the jurisdictions it operates which include U.S. federal, U.S. state and foreign tax returns. The Company’s major tax jurisdictions are the U.S., California, Switzerland, Germany and Israel. The Company’s federal and state tax returns for the years 2000 through 2013 remain subject to examination.

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RESTRUCTURING

6 Months Ended

Jun. 29, 2014

RESTRUCTURING [Abstract]

RESTRUCTURING

NOTE 7—RESTRUCTURING

During the first of quarter of 2013, the Company undertook restructuring activities to reduce its expenses.  The components of the restructuring charge included $662,000 of non-cash expenses associated with the acceleration of stock options and RSUs, $288,000 of cash expenses for severance, benefits and payroll taxes and other costs associated with employee terminations. The net charge for these restructuring activities was $950,000.

During the second of quarter of 2014, the Company undertook restructuring activities to reduce its expenses. In conjunction with the creation of the BrP joint venture and the subsequent relocation of the related manufacturing activities to BrP, the Company ended its lease in the Bothell, Washington location and reduced its headcount.The components of the restructuring charge included $43,000 of cash expenses for cleanup services, $210,000 of restricted cash and rent deposit forfeiture to move out of the Bothell facility, $45,000 of cash expenses for severance, benefits and payroll taxes and other costs associated with employee terminations, and $9,000 of non-cash expenses associated with the acceleration of RSUs. The total charge for these restructuring activities was $307,000.

The following is a summary of the restructuring activity (in thousands):

	Three Months Ended						Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Beginning balance	$	-		$	182		$	30		$	168
Charges		307			-			307			950
Uses and adjustments		(307	)		(54	)		(337	)		(990	)
Ending balance	$	-		$	128		$	-		$	128

As of June 29, 2014, the Company had no balance in accrued restructuring.

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INVESTMENT IN UNCONSOLIDATED AFFILIATE

6 Months Ended

Jun. 29, 2014

INVESTMENT IN UNCONSOLIDATED AFFILIATE [Abstract]

INVESTMENT IN UNCONSOLIDATED AFFILIATE

NOTE 8—INVESTMENT IN UNCONSOLIDATED AFFILIATE

In February 2014, together with CPqD, the Company incepted a new joint venture, named BrP, of which the Company owns 49% and CPqD owns 51% of BrP.  It is based in Campinas, Brazil. BrP will be a provider of advanced high-speed devices for optical communications and integrated transceiver components for information networks.  It is engaged in research and development of SiPh advanced electro-optical products.

The Company has transferred into BrP its knowledge-base and intellectual property of TFPS^TM technology. The Company has transferred to CPqD, its inventory related to the TFPS^TM platform and the complete production line equipment that previously resided at its Bothell, Washington, facility for CPqD to use for the BrP joint venture. As of the transfer date, the Company’s net book value of the inventory and property and equipment was $245,000 and $211,000, respectively, which resulted in a $456,000 investment in BrP.

For the three and six months ended June 29, 2014, the Company’s allocated portion of BrP’s results was a loss of $331,000, respectively. This resulted in the Company’s investment in an unconsolidated affiliate of $125,000 as of June 29, 2014.

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NET LOSS PER SHARE

6 Months Ended

Jun. 29, 2014

NET LOSS PER SHARE [Abstract]

NET LOSS PER SHARE

NOTE 10—NET LOSS PER SHARE

The following table summarizes total securities outstanding which were not included in the calculation of diluted net loss per share because to do so would have been anti-dilutive:

	June 29,		June 30,
	2014		2013
Stock options and RSUs		12,276,382		10,978,671
Common stock warrants		683,240		1,788,095
Total		12,959,622		12,766,766

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INTANGIBLE ASSETS AND GOODWILL, Schedule of Acquired Finite-Lived Intangible Asset by Major Class (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Jun. 29, 2014	Dec. 31, 2013
Future amortization expense [Abstract]
2014	$ 446
2015	893
2016	869
2017	487
2018	145
Total	2,840
Goodwill related to acquisition	9,860	9,860	[1]
Impairment of goodwill	$ 0	$ 0

[1] The condensed consolidated balance sheet as of December 31, 2013 has been derived from the audited consolidated financial statements as of that date.

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ORGANIZATION AND BASIS OF PRESENTATION (Policies)

6 Months Ended

Jun. 29, 2014

ORGANIZATION AND BASIS OF PRESENTATION [Abstract]

Organization

Organization

GigOptix Inc.(“GigOptix” or the “Company”) is a leading fabless supplier of high speed semiconductorcomponentsthat enable end-to-end information streaming over optical and wireless networks and address long haul and metro telecommunications applications as well as emerging high-growth opportunities for Cloud and datacenter connectivity, interactive applications for consumer electronics and the industrial, defense and avionics industries.  The business is made up of two product lines: the High-Speed Communications (“HSC”) product line and the Industrial product line.

The HSC product line offers a broad portfolio of high performance optical and wireless components to telecommunications (“telecom”) and data communications (“datacom”) customers, i) mixed signal radio frequency integrated circuits (“RFIC”), including 10 to 400 gigabit per second (“Gbps”) laser and optical drivers and trans-impedance amplifiers (“TIA”) for telecom, datacom, and consumer electronic fiber-optic applications; ii) power amplifiers and transceivers for microwave and millimeter monolithic microwave integrated circuit (“MMIC”) wireless applications including power amplifiers and transceiver chips at frequencies higher than 50 GHz; iii) integrated systems in a package (“SIP”) solutions for both fiber-optic and wireless applications; and iv) radio frequency (“RF’) chips for various consumer applications such as global navigation satellite systems (“GNSS”). The HSC product line also partners with key customers on development projects that generate engineering project revenue for the Company while helping to position the Company for future product revenues with these key customers.

The Industrial product line offers a wide range of digital and mixed-signal application specific integrated circuit (“ASIC”) solutions for industrial, military, avionics, medical and communications markets. The Industrial product line partners with ASIC customers on development projects that generate engineering project revenue for the Company which generally leads to future product revenues with these ASIC customers.

GigOptix, Inc., the successor to GigOptix LLC, was formed as a Delaware corporation in March 2008 in order to facilitate a combination between GigOptix LLC and Lumera Corporation (“Lumera”). Before the combination, GigOptix LLC acquired the assets of iTerra Communications LLC in July 2007 (“iTerra”) and Helix Semiconductors AG (“Helix”) in January 2008. On November 9, 2009, GigOptix acquired ChipX, Incorporated (“ChipX”). On June 17, 2011, GigOptix acquired Endwave Corporation (“Endwave”). As a result of the acquisitions, Helix, Lumera, ChipX and Endwave all became wholly owned subsidiaries of GigOptix.  In March 2013, the Company established a German subsidiary, GigOptix GmbH; however it is in the process of being dissolved.

In February 2014, together with Fundação CPqD – Centro De Pesquisa e Desenvolvimento em Telecomunicações (“CPqD”), the Company incepted a new joint venture of which the Company owns 49% and CPqD owns 51%, BrPhotonics Produtos Optoeletrônicos LTDA. (“BrP”), based in Campinas, Brazil, which will be a provider of advanced high-speed devices for optical communications and integrated transceiver components that enable information streaming over communications networks. This joint venture is engaged in research and development of Silicon-Photonics (“SiPh”) advanced electro-optical products.  As of June 29, 2014, the Company had transferred its inventory related to the Thin Film Polymer on Silicon (“TFPS^TM”) platform and the production line equipment for use by BrP (see also Note 8).

In June 2014, the Company signed a definitive agreement to acquire, for cash only by way of assuming specified liabilities, substantially all of the assets of Tahoe RF Semiconductor, Inc. (“Tahoe RF”), a provider of RF/analog RFICs, intellectual property, and fully integrated systems and subsystems on a chip. This acquisition closed on June 30, 2014, which is the first day of the Company’s third quarter of fiscal 2014 (see also Note 14.)

Basis of Presentation

Basis of Presentation

The Company’s fiscal year ends on December 31. For quarterly reporting, the Company employs a five-week, four-week, four-week, reporting period. The second quarter of 2014 ended on Sunday, June 29, 2014. The second quarter of 2013 ended on Sunday, June 30, 2013. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

The accompanying unaudited condensed consolidated financial statements as of June 29, 2014 and for the three and six months ended June 29, 2014 and June 30, 2013, have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X, and include the accounts of the Company and all of its subsidiaries. Accordingly, they do not include all of the information and footnotes required by such accounting principles for annual financial statements. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position as of June 29, 2014, the results of operations for the three and six months ended June 29, 2014 and June 30, 2013, and cash flows for the six months ended June 29, 2014 and June 30, 2013. The condensed consolidated results of operations for the three and six months ended June 29, 2014 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending December 31, 2014. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s 2013 Form 10-K.

Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported periods. These judgments can be subjective and complex, and consequently, actual results could differ materially from those estimates and assumptions. Descriptions of these estimates and assumptions are included in the 2013 Form 10-K and the Company encourages you to read its 2013 Form 10-K for more information about such estimates and assumptions.

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RESTRUCTURING (Tables)

6 Months Ended

Jun. 29, 2014

RESTRUCTURING [Abstract]

Summary of restructuring activity

The following is a summary of the restructuring activity (in thousands):

	Three Months Ended						Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Beginning balance	$	-		$	182		$	30		$	168
Charges		307			-			307			950
Uses and adjustments		(307	)		(54	)		(337	)		(990	)
Ending balance	$	-		$	128		$	-		$	128

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INVESTMENT IN UNCONSOLIDATED AFFILIATE (Details) (USD $)	3 Months Ended		6 Months Ended					3 Months Ended	6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013	Dec. 31, 2013		Feb. 28, 2014 CPqD [Member]	Jun. 29, 2014 BrP [Member]	Jun. 29, 2014 BrP [Member]	Feb. 28, 2014 GigOptix, Inc. [Member]
Schedule of Investments [Line Items]
Joint venture ownership percentage (in hundredths)							51.00%			49.00%
Inventory	$ 4,287,000		$ 4,287,000		$ 4,617,000	[1]		$ 245,000	$ 245,000
Property and equipment	2,417,000		2,417,000		2,999,000	[1]		211,000	211,000
Investment in affiliate	125,000		125,000		0	[1]		456,000	456,000
Loss attributable to affiliate	$ 331,000	$ 0	$ 331,000	$ 0				$ 331,000	$ 331,000

[1] The condensed consolidated balance sheet as of December 31, 2013 has been derived from the audited consolidated financial statements as of that date.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) [Abstract]
Net loss	$ (2,044)	$ (1,388)	$ (3,941)	$ (3,956)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment	(10)	17	(12)	25
Other comprehensive income (loss), net of tax	(10)	17	(12)	25
Comprehensive loss	$ (2,054)	$ (1,371)	$ (3,953)	$ (3,931)

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INTANGIBLE ASSETS AND GOODWILL

6 Months Ended

Jun. 29, 2014

INTANGIBLE ASSETS AND GOODWILL [Abstract]

INTANGIBLE ASSETS AND GOODWILL

NOTE 4—INTANGIBLE ASSETS AND GOODWILL

Intangible assets consist of the following (in thousands):

	June 29, 2014							December 31, 2013
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	3,277	$	(1,908	)	$	1,369	$	3,277	$	(1,697	)	$	1,580
Existing technology		3,783		(2,677	)		1,106		3,783		(2,473	)		1,310
Order backlog		732		(732	)		-		732		(732	)		-
Patents		457		(400	)		57		457		(397	)		60
Trade name		659		(351	)		308		659		(322	)		337
Total	$	8,908	$	(6,068	)	$	2,840	$	8,908	$	(5,621	)	$	3,287

For the three and six months ended June 29, 2014 and June 30, 2013, amortization of intangible assets was as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
Cost of revenue	$	103	$	122	$	206	$	244
Selling, general and administrative expense		121		129		241		260
	$	224	$	251	$	447	$	504

Estimated future amortization expense related to intangible assets as of June 29, 2014 is as follows (in thousands):

Years ending December 31,
2014	$	446
2015		893
2016		869
2017		487
2018		145
Total	$	2,840

As of June 29, 2014, the Company had $9.9 million of goodwill in connection with the acquisitions of ChipX and Endwave. In addition to its annual review, the Company also performs a review of the carrying value of its intangible assets if the Company believes that indicators of impairment exist. During the second quarter of 2014, there were no factors which indicated impairment. The Company did not record impairment on any intangibles, including goodwill, for the three and six months ended June 29, 2014.  In addition, the Company did not record an impairment of goodwill for the year ended December 31, 2013.

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NET LOSS PER SHARE (Tables)

6 Months Ended

Jun. 29, 2014

NET LOSS PER SHARE [Abstract]

Antidilutive Securities Excluded from Computation of Earnings Per Share

The following table summarizes total securities outstanding which were not included in the calculation of diluted net loss per share because to do so would have been anti-dilutive:

	June 29,		June 30,
	2014		2013
Stock options and RSUs		12,276,382		10,978,671
Common stock warrants		683,240		1,788,095
Total		12,959,622		12,766,766

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STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION, Share-based Compensation Arrangements by Share-based Payment Award (Details) (USD $)					3 Months Ended	6 Months Ended	12 Months Ended	3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		12 Months Ended	6 Months Ended			6 Months Ended		12 Months Ended			6 Months Ended		6 Months Ended		6 Months Ended
	Jun. 29, 2014	Dec. 31, 2013	Dec. 24, 2013	Jul. 07, 2010	Jun. 29, 2014 Stock Options [Member]	Jun. 29, 2014 Stock Options [Member]	Dec. 31, 2013 Stock Options [Member]	Jun. 29, 2014 Common Stock [Member]	Jun. 30, 2013 Common Stock [Member]	Jun. 29, 2014 Common Stock [Member]	Jun. 30, 2013 Common Stock [Member]	Jun. 29, 2014 Restricted Stock Units (RSUs) [Member]	Jun. 30, 2013 Restricted Stock Units (RSUs) [Member]	Jun. 29, 2014 Restricted Stock Units (RSUs) [Member]	Jun. 30, 2013 Restricted Stock Units (RSUs) [Member]	Dec. 31, 2013 Restricted Stock Units (RSUs) [Member]	Jun. 29, 2014 Restricted Stock Units (RSUs) [Member] Minimum [Member]	Jun. 29, 2014 Restricted Stock Units (RSUs) [Member] Maximum [Member]	Jun. 29, 2014 2007 Equity Incentive Plan [Member]	Jun. 29, 2014 2007 Equity Incentive Plan [Member] Stock Options [Member]	Jun. 29, 2014 2007 Equity Incentive Plan [Member] Warrant [Member]	Dec. 31, 2013 2008 Equity Incentive Plan [Member]	Dec. 31, 2008 2008 Equity Incentive Plan [Member]	Dec. 31, 2013 2008 Equity Incentive Plan [Member] Maximum [Member]	Jun. 29, 2014 2008 Equity Incentive Plan [Member] Stock Options [Member]	Jun. 29, 2014 2008 Equity Incentive Plan [Member] Stock Options [Member] Minimum [Member]	Jun. 29, 2014 2008 Equity Incentive Plan [Member] Restricted Stock Units (RSUs) [Member]	Jun. 29, 2014 2008 Equity Incentive Plan [Member] 10% Stockholder [Member] Stock Options [Member] Minimum [Member]	Jun. 29, 2014 Lumera 2000 and 2004 Stock Option Plan [Member]	Jun. 29, 2014 Lumera 2000 and 2004 Stock Option Plan [Member] Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares)																			632,500			15,021,253	2,500,000	21,000,000			3,953,715
Automatic annual increase in shares authorized																							lesser of (i) 5% of the number of shares of common stock outstanding as of the Company's immediately preceding fiscal year, or (ii) a number of shares determined by the Board of Directors
Automatic increase in number of shares reserved for future issuance (in shares)																						1,603,381
Exercise price of stock options as percentage of fair market value on date of grant (in hundredths)																										100.00%		110.00%
Vesting period																	1 year	4 years		4 years					4 years		1 year
Life from date of grant																				10 years					10 years
Stock options cancelled (in shares)																				864
Number of options outstanding (in shares)					10,055,612	10,055,612	10,306,671													413,497					11,790,457					72,428
Warrants outstanding (in shares)	683,240	1,468,239																			4,125
Merger conversion ratio (in hundredths)																													12.50%
Unrecognized compensation expense					$ 2,600,000	$ 2,600,000						$ 2,800,000		$ 2,800,000
Weighted average period of recognition for unrecognized compensation cost					1 year 8 months 1 day							2 years 7 months 6 days
Stock price (in dollars per share)	$ 1.45	$ 1.53	$ 1.42	$ 1.75	$ 1.45	$ 1.45
Stock options activity, number of shares [Roll Forward]
Outstanding, beginning of year (in shares)						10,306,671																								72,428
Granted (in shares)						25,000
Exercised (in shares)						(38,305)
Forfeited/Expired (in shares)						(237,754)
Outstanding, ending balance (in shares)					10,055,612	10,055,612	10,306,671													413,497					11,790,457					72,428
Vested and exercisable and expected to vest (in shares)					9,918,037	9,918,037
Vested and exercisable (in shares)					8,036,039	8,036,039
Stock option activity, weighted-average exercise price [Roll Forward]
Weighted average exercise price, beginning balance (in dollars per shares)						$ 2.34
Weighted average exercise price, granted (in dollars per shares)						$ 1.59						$ 1.62	$ 0.86	$ 1.70	$ 0.86
Weighted average exercise price, exercised (in dollars per shares)						$ 1.05
Weighted average exercise price, forfeited/expired (in dollars per shares)						$ 2.06
Outstanding, ending balance (in dollars per shares)					$ 2.35	$ 2.35	$ 2.34
Weighted average exercise price, vested and expected to vest (in dollars per share)					$ 2.35	$ 2.35
Weighted average exercise price, exercisable (in dollars per share)					$ 2.38	$ 2.38
Weighted average remaining contractual term [Abstract]
Weighted average remaining contractual term, beginning balance					6 years 5 months 8 days		6 years 11 months 16 days
Weighted average remaining contractual term, expected to vest					6 years 5 months 5 days
Weighted average remaining contractual term, exercisable					6 years 1 month 13 days
Weighted average remaining contractual term, ending balance					6 years 5 months 8 days		6 years 11 months 16 days
Aggregate Intrinsic Value [Abstract]
Aggregate intrinsic value, exercised						18,000
Aggregate intrinsic value, vested and expected to vest					1,100,000	1,100,000
Restricted stock activity, number of shares [Roll Forward]
Outstanding, beginning of period (in shares)														1,313,801
Granted (in shares)								25,000	610,010	25,000	610,010	70,000	569,846	1,475,085	569,846
Released (in shares)														(525,333)
Forfeited/expired (in shares)														(42,783)
Outstanding, end of period (in shaers)												2,220,770		2,220,770		1,313,801
Total grant date fair value								28,000	359,000	28,000	359,000	113,000	490,000	2,500,000	490,000
Restricted stock activity, Weighted Average Grant Date Fair Value [Roll Forward]
Outstanding, beginning of period (in dollars per share)														$ 1.19
Granted (in dollars per share)														$ 1.70
Released (in dollars per share)														$ 1.30
Forfeited/expired (in dollars per share)														$ 1.25
Outstanding, end of period (in dollars per share)												$ 1.50		$ 1.50		$ 1.19
Restricted stock activity, Weighted-average Remaining Contractual Term, Years [Abstract]
Weighted-average remaining contractual term														2 years 7 months 6 days		1 year 10 months 6 days
Weighted-average remaining contractual term														2 years 7 months 6 days		1 year 10 months 6 days
Restricted stock activity, Aggregate Intrinsic Value [Roll Forward]
Aggregate intrinsic value outstanding beginning balance														2,010,000
Aggregate intrinsic value outstanding ending balance												3,220,000		3,220,000		2,010,000
Aggregate intrinsic value of vested and expected to vest awards												762,000		762,000
Shares withheld to satisfy minimum tax obligation (in shares)														164,000
Amount withheld to satisfy minimum tax obligation														$ 266,000

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 29, 2014

SUBSEQUENT EVENTS [Abstract]

SUBSEQUENT EVENTS

NOTE 14—SUBSEQUENT EVENTS

During the third quarter of 2014, the Company completed its acquisition of Tahoe RF. The Company acquired substantially all of the assets of Tahoe RF including one patent, equipment and inventory by assuming approximately $500,000 of liabilities of Tahoe RF. Through the acquisition the Company added 10 employees to its team, which are primarily RF engineers focused on the high growth areas of E-Band and V-Band technologies. In January 2015, up to an additional approximately $200,000 in bonus payments are payable by the Company to these employees provided certain milestones are met and they remain employed by the Company. In addition, beginning in July 2016 and continuing annually through July 2020, these employees will be entitled to a retention bonus of approximately, $100,000 in the aggregate, if they remain employed with the Company.