10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 29, 2015

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  ☒    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  ☒     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	☒

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

The number of shares of Common Stock outstanding as of April 24, 2015, the most recent practicable date prior to the filing of this Quarterly Report on Form 10-Q, was 32,617,947 shares.

Table of Contents

		PAGE NO
PART I FINANCIAL INFORMATION
ITEM 1	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of March 29, 2015 and December 31, 2014	3
	Condensed Consolidated Statements of Operations for the three months ended March 29, 2015 and March 30, 2014	4
	Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 29, 2015 and March 30, 2014	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 29, 2015 and March 30, 2014	6
	Notes to Condensed Consolidated Financial Statements	7
ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	25
ITEM 4	Controls and Procedures	25
PART II OTHER INFORMATION
ITEM 1	Legal Proceedings	25
ITEM 1A	Risk Factors	26
ITEM 6	Exhibits	27

2

PART I

FINANCIAL INFORMATION

GIGOPTIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	March 29,			December 31,
	2015			2014
ASSETS	(Unaudited)			(1)
Current assets:
Cash and cash equivalents	$	17,664		$	18,438
Accounts receivable, net		8,254			7,955
Inventories		5,978			5,139
Prepaid and other current assets		738			433
Total current assets		32,634			31,965
Property and equipment, net		2,134			1,916
Intangible assets, net		2,171			2,394
Goodwill		10,395			10,306
Restricted cash		54			53
Other assets		123			116
Total assets	$	47,511		$	46,750
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,773		$	2,731
Accrued compensation		1,269			730
Other current liabilities		2,784			2,902
Total current liabilities		6,826			6,363
Pension liabilities		335			326
Other long term liabilities		634			556
Total liabilities		7,795			7,245
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.001 par value; 1,000,000 shares authorized; no shares issued and outstanding as of March 29, 2015 and December 31, 2014, respectively		-			-
Common stock, $0.001 par value; 100,000,000 shares authorized; 33,318,633 and 33,112,086 shares issued and outstanding as of March 29, 2015 and December 31, 2014, respectively		33			32
Additional paid-in capital		144,487			143,661
Treasury stock, at cost; 701,754 shares as of March 29, 2015 and December 31, 2014, respectively		(2,209	)		(2,209	)
Accumulated other comprehensive income		305			285
Accumulated deficit		(102,900	)		(102,264	)
Total stockholders’ equity		39,716			39,505
Total liabilities and stockholders’ equity	$	47,511		$	46,750

See accompanying Notes to Condensed Consolidated Financial Statements

(1) The condensed consolidated balance sheet as of December 31, 2014 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
	March 29, 2015			March 30, 2014
Total revenue		9,060			7,386
Total cost of revenue		3,667			3,126
Gross profit		5,393			4,260
Operating expenses
Research and development expense		3,248			3,742
Selling, general and administrative expense		2,770			2,398
Loss from operations		(625	)		(1,880	)
Interest expense, net		(3	)		(17	)
Other income, net		1			10
Loss before provision for income taxes		(627	)		(1,887	)
Provision for income taxes		9			10
Net loss	$	(636	)	$	(1,897	)
Net loss per share—basic and diluted	$	(0.02	)	$	(0.06	)
Weighted average number of shares used in basic and diluted net loss per share calculations		32,525			31,435

See accompanying Notes to Condensed Consolidated Financial Statements

4

GIGOPTIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

	Three Months Ended
	March 29, 2015			March 30, 2014
Net loss	$	(636	)	$	(1,897	)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment		20			(2	)
Other comprehensive income (loss), net of tax		20			(2	)
Comprehensive loss	$	(616	)	$	(1,899	)

See accompanying Notes to Condensed Consolidated Financial Statements

5

GIGOPTIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended
	March 29,			March 30,
	2015			2014
Cash flows from operating activities:
Net loss	$	(636	)	$	(1,897	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		890			917
Stock-based compensation		889			1,010
Change in fair value of warrants		(1	)		2
Changes in operating assets and liabilities:
Accounts receivable		(299	)		(1,044	)
Inventories		(839	)		(136	)
Prepaid and other current assets		(557	)		(25	)
Other assets		(7	)		25
Accounts payable		(168	)		1,595
Accrued restructuring		-			(29	)
Accrued compensation		539			(125	)
Other current liabilities		(217	)		(487	)
Other long-term liabilities		79			(13	)
Net cash used in operating activities		(327	)		(207	)
Cash flows from investing activities:
Purchases of property and equipment		(416	)		(123	)
Net cash used in investing activities		(416	)		(123	)
Cash flows from financing activities:
Proceeds from issuance of stock		28			10
Taxes paid related to net share settlement of equity awards		(90	)		(103	)
Repayment of capital lease		(1	)		(89	)
Net cash used in financing activities		(63	)		(182	)
Effect of exchange rates on cash and cash equivalents		32			-
Net decrease in cash and cash equivalents		(774	)		(512	)
Cash and cash equivalents at beginning of period		18,438			20,377
Cash and cash equivalents at end of period	$	17,664		$	19,865
Supplemental disclosure of cash flow information
Interest paid	$	4		$	17
Property and equipment acquired with accounts payable	$	289		$	406

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. Its products address the needs of emerging high-growth markets, such as long haul and metro telecommunications (“telecom”) applications, as well as Cloud data communications (“datacom”) and datacenter connectivity, point-to-point wireless backhaul, and interactive high speed applications for the consumer electronics, 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.  Its products are highly customized and typically developed in partnership with key ”Lighthouse” customers, generating engineering project revenues through the development stage and larger future product revenue through these customers and general market availability.

The HSC product line offers a broad portfolio of high performance semiconductor devices and multi-chip-Modules (MCMs) aimed predominantly at the telecom, datacom and consumer-electronics optical communications and wireless markets, and includes, among others, (i) mixed signal radio frequency integrated circuits (“RFIC”) at 50 GHz and above; (ii) 10 to 400 gigabit per second (“Gbps”) laser and optical-modulator drivers, and trans-impedance amplifiers (“TIA”); (iii) power amplifiers and transceivers for microwave and millimeter monolithic microwave integrated circuit (“MMIC”) wireless applications at frequencies higher than 50 GHz; (iv) integrated systems in a package (“SIP”) solutions for both fiber-optic and wireless communication systems; and (v) radio frequency (“RF’) chips for various consumer applications such as global navigation satellite systems (“GNSS”).

The Industrial product line offers a wide range of digital and mixed-signal application specific integrated circuit (“ASIC”) solutions for various industrial applications used in the military, avionics, automotive, security and surveillance, medical and communications markets.

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 currently in the process of being dissolved.

In February 2014, together with Fundação CPqD – Centro De Pesquisa e Desenvolvimento em Telecomunicações (“CPqD”), the Company formed 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 fiber-optics communication networks. This joint venture is also engaged in research and development of Silicon-Photonics (“SiPh”) advanced electro-optical products. During the second quarter of 2014, the Company transferred all of its inventory and assets related to the Thin Film Polymer on Silicon (“TFPS^TM”) platform and the production line equipment for use by BrP (see also Note 7).

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 and analog RFICs, intellectual property, and fully integrated systems and subsystems on a chip. That acquisition closed on June 30, 2014, which was the first day of the Company’s third quarter of fiscal 2014.

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 first quarter of 2015 ended on Sunday, March 29, 2015. The first quarter of 2014 ended on Sunday, March 30, 2014. 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 March 29, 2015 and for the three months ended March 29, 2015 and March 30, 2014, 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. The statements include the accounts of the Company and all of its subsidiaries and 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 March 29, 2015, and the results of operations and cash flows for the three months ended March 29, 2015 and March 30, 2014. The condensed consolidated results of operations for the three months ended March 29, 2015 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending December 31, 2015. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the 2014 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 2014 Form 10-K and the Company encourages you to read its 2014 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):

	March 29,			December 31,
	2015			2014
Accounts receivable	$	8,298		$	8,003
Allowance for doubtful accounts		(44	)		(48	)
	$	8,254		$	7,955

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

	Life		March 29,			December 31,
	(In years)		2015			2014
Network and laboratory equipment		3 – 5	$	11,937		$	11,252
Computer software and equipment		2 – 3		3,918			3,877
Furniture and fixtures		3 – 7		165			165
Office equipment		3 – 5		135			131
Leasehold improvements		1 – 5		279			276
				16,434			15,701
Accumulated depreciation and amortization				(14,300	)		(13,785	)
Property and equipment, net			$	2,134		$	1,916

For the three months ended March 29, 2015 and March 30, 2014, depreciation expense related to property and equipment was $415,000 and $543,000, respectively.

In addition to the property and equipment above, the Company has prepaid licenses. For the three months ended March 29, 2015 and March 30, 2014, amortization related to these prepaid licenses was $252,000 and $151,000, respectively.

8

 Inventories consisted of the following (in thousands):

	March 29,		December 31,
	2015		2014
Raw materials	$	2,484	$	1,676
Work in process		1,528		1,421
Finished goods		1,966		2,042
	$	5,978	$	5,139

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

	March 29,		December 31,
	2015		2014
Amounts billed to the U.S. government in excess of approved rates	$	191	$	191
Warranty liability		369		334
Customer deposits		258		599
Capital lease obligations, current portion		3		3
Sales return reserve		552		412
Deferred revenue		337		327
Other		1,074		1,036
	$	2,784	$	2,902

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 three months ended March 29, 2015 and March 30, 2014 are as follows (in thousands):

	Three months ended
	March 29, 2015			March 30, 2014
Beginning balance	$	334		$	330
Warranties accrued		158			112
Warranties settled or reversed		(123	)		(127	)
Ending balance	$	369		$	315

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 March 29, 2015 and December 31, 2014 (in thousands):

			Fair Value Measurements Using
	Carrying Value		Quoted Prices in Active Markets for IdenticalAssets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 29, 2015:
Assets:
Cash equivalents:
Money market funds	$	12,361	$	12,361	$	-	$	-
	$	12,361	$	12,361	$	-	$	-
Current liabilities:
Liability warrants	$	7	$	-	$	-	$	7
December 31, 2014:
Assets:
Cash equivalents:
Money market funds	$	12,360	$	12,360	$	-	$	-
	$	12,360	$	12,360	$	-	$	-
Current liabilities:
Liability warrants	$	8	$	-	$	-	$	8

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 three months ended March 29, 2015, 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 line of credit and capital lease obligations approximates fair value and is based upon borrowing rates currently available to the Company for loans and 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 March 29, 2015			As of December 31, 2014
Stock price	$	1.19		$	1.20
Exercise price	$	2.51		$	2.51
Expected life	2.31 years			2.55 years
Risk-free interest rate		0.60	%		1.10	%
Volatility		69	%		69	%
Fair value per share	$	0.24		$	0.27

The following table summarizes the warrants subject to liability accounting as of March 29, 2015 and December 31, 2014 (in thousands, except share and per share amounts) (see also Note 6):

													Three Months Ended March 29, 2015					Three Months Ended March 30, 2014
Holder	Original Warrants		Adjusted Warrants		Grant Date	Expiration Date	Price per Share		Fair Value March 29, 2015		Fair Value December 31, 2014		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	$	7	$	8		-	$	(1	)		-	$	2	Credit Agreement

The change in the fair value of the Level 3 liability warrants during the three months ended March 29, 2015 is as follows (in thousands):

Fair value as of December 31, 2014	$	8
Exercise of warrants		-
Change in fair value		(1	)
Fair value as of March 29, 2015	$	7

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

NOTE 4—INTANGIBLE ASSETS AND GOODWILL

Intangible assets consist of the following (in thousands):

	March 29, 2015							December 31, 2014
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	3,277	$	(2,224	)	$	1,053	$	3,277	$	(2,119	)	$	1,158
Existing technology		3,783		(2,982	)		801		3,783		(2,881	)		902
Order backlog		732		(732	)		-		732		(732	)		-
Patents		457		(404	)		53		457		(402	)		55
Trade name		659		(395	)		264		659		(380	)		279
Total	$	8,908	$	(6,737	)	$	2,171	$	8,908	$	(6,514	)	$	2,394

For the three months ended March 29, 2015 and March 30, 2014, amortization of intangible assets was as follows (in thousands):

	Three Months Ended
	March 29, 2015		March 30, 2014
Cost of revenue	$	103	$	103
Selling, general and administrative expense		120		120
	$	223	$	223

11

Estimated future amortization expense related to intangible assets as of March 29, 2015 is as follows (in thousands):

Years ending December 31,
2015	$	670
2016		869
2017		487
2018		63
2019		54
Thereafter		28
Total	$	2,171

As of March 29, 2015, the Company had $10.4 million of goodwill in connection with the acquisitions of ChipX, Endwave and Tahoe RF.  During the third quarter of 2014, the Company completed its acquisition of Tahoe RF which resulted in $446,000 of goodwill.  During 2014, the Company assumed approximately $446,000 of liabilities of Tahoe RF and added RF/analog RFIC technology to the Company’s product portfolio and approximately 10 employees, primarily High-Speed and High-Frequency SiGe RF engineers focused on high growth areas such as wireless – E-Band and V-Band and GPS technologies. The Company agreed to pay up to an additional $254,000 in TahoeRF expenses of which $20,000 had been accrued in other current liabilities on the Company’s condensed consolidated balance sheet as of December 31, 2014. During the first quarter of 2015, the Company assumed an additional $89,000 related to tax and legal expenses which resulted in an increase of Tahoe RF’s goodwill to $535,000.  As of March 29, 2015, the Company does not expect any additional changes to the purchase price. Since the final additional assumed grossed up liabilities were less than $254,000, the Company paid $128,000 in bonus payments in the first quarter of 2015 to former employees of Tahoe RF who were eligible as active employees of GigOptix on January 1, 2015, which was recorded as compensation expense.  In addition, beginning in July 2016 and continuing annually through July 2020, any former Tahoe RF employee who remains, at that time, as an active employee of the Company will be entitled to a pre-allocated percentage of an aggregate retention bonus of up to approximately $70,000 based on the remaining 8 employees. These payments will be recorded as compensation expense when incurred and are being accrued as they are earned.  As of March 29, 2015, approximately $95,000 is included in other long term liabilities.

The consolidated financial statements include the operating results of Tahoe RF from the date of acquisition. Pro forma results of operations for the Tahoe RF acquisition have not been presented because the effect of the acquisition was not material to the Company’s financial results.

NOTE 5—CREDIT FACILITIES

On March 25, 2013, the Company and its wholly owned subsidiaries, ChipX, Incorporated and Endwave Corporation (together with the Company, the “Borrowers”) previously 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 $7.0 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.

12

The terms of the Loan Agreement were set to expire on March 9, 2015. On March 9, 2015 SVB and the Borrowers entered into a First Amendment to the Second Restated Loan Agreement (the “First Amendment”) in order to extend the expiration date of the Loan Agreement by sixty (60) days to May 8, 2015. The Borrowers intend to use this period of time to negotiate the terms of a new loan and security agreement with SVB. Other than as set forth herein with regard to the First Amendment, the terms of the Second Restated Loan Agreement remain unchanged and in full force and effect.

The Company had no outstanding balance on its line of credit as of March 29, 2015.

NOTE 6—STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

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 November 2014, the Company’s stockholders approved an amendment to the Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 50,000,000 shares to 100,000,000 shares 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 750,000 shares have been designated Series A Junior Preferred Stock with powers, preferences and rights as set forth in the amended and restated certificate of designation dated December 15, 2014; 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 March 29, 2015 and December 31, 2014, there were no shares of preferred stock issued or outstanding.

On December 16, 2014, the Company entered into an Amended and Restated Rights Agreement to extend the expiration date of its stockholder rights plan that may have the effect of deterring, delaying, or preventing a change in control. The Amended and Restated Rights Agreement amends the Rights Agreement previously adopted by (i) extending the expiration date by three years to December 16, 2017, (ii) decreasing the exercise price per right issued to stockholders pursuant to the stockholder rights plan from $8.50 to $5.25, and (iii) making certain other technical and conforming changes. The Amended and Restated Rights Agreement was not adopted in response to any acquisition proposal.  Under the rights plan, the Company issued a dividend of one preferred share purchase right for each share of common stock held by stockholders of record as of January 6, 2012, and the Company will issue one preferred stock purchase right to each share of common stock issued between January 6, 2012 and the earlier of either the rights’ exercisability or the expiration of the Rights Agreement. Each right entitles stockholders to purchase one one-thousandth of the Company’s Series A Junior Preferred Stock.

In general, the exercisability of the rights to purchase preferred stock will be triggered if any person or group, including persons knowingly acting in concert to affect the control of the Company, is or becomes a beneficial owner of 10% or more of the outstanding shares of the Company’s common stock after the Adoption Date. Stockholders or beneficial ownership groups who owned 10% or more of the outstanding shares of common stock of the Company on or before the Adoption Date will not trigger the preferred share purchase rights unless they acquire an additional 1% or more of the outstanding shares of the Company’s common stock. Each right entitles a holder with the right upon exercise to purchase one one-thousandth of a share of preferred stock at an exercise price that is currently set at $5.25 per right, subject to purchase price adjustments as set forth in the rights agreement. Each share of preferred stock has voting rights equal to one thousand shares of common stock. In the event that exercisability of the rights is triggered, each right held by an acquiring person or group would become void. As a result, upon triggering of exercisability of the rights, there would be significant dilution in the ownership interest of the acquiring person or group, making it difficult or unattractive for the acquiring person or group to pursue an acquisition of the Company. These rights expire in December of 2017, unless earlier redeemed or exchanged by the Company.

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, 2014, the stockholders had approved 16,624,634 shares for future issuance. On January 1, 2015, there was an automatic increase of 1,655,604 shares. As of March 29, 2015, 12,290,653 options to purchase common stock and restricted stock units (“RSUs”) were outstanding and 2,902,824 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 incentive stock option (“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 RSUs which generally vest over a three quarters to four year period.

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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 in 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 March 29, 2015, options to purchase a total of 376,436 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 March 29, 2015, no additional options can be granted under the Lumera Plan, and options to purchase a total of 57,191 shares of common stock were outstanding.

Warrants

As of March 29, 2015, the Company had a total of 658,240 warrants to purchase common stock outstanding under all warrant arrangements. During the three months ended March 29, 2015, no warrants were exercised and expired. 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 months ended March 29, 2015 and March 30, 2014 (in thousands):

	Three Months Ended
	March 29, 2015		March 30, 2014
Cost of revenue	$	82	$	76
Research and development expense		247		275
Selling, general and administrative expense		560		659
	$	889	$	1,010

The Company did not grant any options during the three months ended March 29, 2015 and March 30, 2014.

During the three months ended March 29, 2015, the Company granted 2,815,822 RSUs with a grant-date fair value of $3.5 million or $1.25 per share. During the three months ended March 30, 2014, the Company granted 1,405,085 RSUs with a grant-date fair value of $2.4 million or $1.70 per share.

As of March 29, 2015, the total compensation cost not yet recognized in connection with unvested stock options and RSUs under the Company’s equity compensation plans was approximately $1.0 million and $5.2 million, respectively. Unrecognized compensation will be amortized on a straight-line basis over a weighted-average period of approximately 1.28 years for stock options and approximately 2.83 years for RSUs.

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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			Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term, in Years
Outstanding, December 31, 2014		8,801,160		$	2.35		5.91
Granted		-
Exercised		(28,194	)	$	0.97
Forfeited/Expired		(505,533	)	$	3.15
Ending balance, March 29, 2015		8,267,433		$	2.31		5.63
Vested and exercisable and expected to vest, March 29, 2015		8,140,894		$	2.31		5.60
Vested and exercisable, March 29, 2015		7,456,321		$	2.33		5.44

The aggregate intrinsic value of options vested, exercisable and expected to vest, based on the fair value of the underlying stock options as of March 29, 2015 was approximately $443,000. The aggregate intrinsic value reflects the difference between the exercise price of the underlying stock options and the Company’s closing share price of $1.19 as of March 27, 2015.

The total intrinsic value of options exercised during the three months ended March 29, 2015 was $8,000. The total intrinsic value of options exercised during the three months ended March 30, 2014 was $5,000.

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		AggregateIntrinsic Value
								(In thousands)
Outstanding, December 31, 2014		1,915,858		$	1.55		3.11	$	1,990
Granted		2,815,822			1.25
Released		(257,571	)		1.38
Forfeited/expired		(17,262	)		1.50
Outstanding, March 29, 2015		4,456,847		$	1.37		2.83	$	5,304

The majority of the RSUs that vested in the three months ended March 29, 2015 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 three months ended March 29, 2015, 257,571 shares of RSUs vested with an intrinsic value of approximately $307,000. The Company withheld 79,218 shares to satisfy approximately $90,000 of employees’ minimum tax obligation on the vested RSUs.

NOTE 7—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.

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The Company transferred into BrP its knowledge-base and intellectual property of TFPS^TM technology. The Company 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 year ended December 31, 2014, the Company had a $456,000 loss on equity investment for the Company’s allocated portion of BrP’s results. Since the Company’s share of the loss exceeded the Company’s carrying cost of its investment in BrP, the Company’s investment in an unconsolidated affiliate was written down to zero as of December 31, 2014.

NOTE 8—INCOME TAXES

The Company recorded a provision for income taxes of $9,000 for the three months ended March 29, 2015, and $10,000 for the three months ended March 30, 2014. The Company's effective tax rate was approximately 1% for the three months ended March 29, 2015 and March 30, 2014.

The income tax provision for the three months ended March 29, 2015 and March 30, 2014 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 March 29, 2015 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 in the U.S. federal, U.S. state and foreign tax jurisdictions.  The Company’s major tax jurisdictions are the U.S., California, Switzerland, Germany and Israel. The Company’s fiscal years through March 29, 2015 remain subject to examination by the tax authorities for U.S. federal, U.S. state and foreign tax purpose.

NOTE 9—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:

	March 29,		March 30,
	2015		2014
Stock options and RSUs		12,724,280		12,743,125
Common stock warrants		658,240		1,183,240
Total		13,382,520		13,926,365

NOTE 10—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.

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

	Three Months Ended
	March 29, 2015				March 30, 2014
North America	$	3,031	33	%	$	2,227	30	%
Asia		2,819	31	%		2,158	29	%
Europe		2,953	33	%		2,909	40	%
Other		257	3	%		92	1	%
	$	9,060	100	%	$	7,386	100	%

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

For the three months ended March 29, 2015, three customers accounted for 51% of total revenue. For the three months ended March 30, 2014, one customer accounted for 28% of our total revenue. No other customers accounted for more than 10% of total revenue during the periods presented.

During three months ended March 29, 2015, Italy, the United States, Hong Kong, and Taiwan accounted for 29%, 27%, 14% and 11% of revenue, respectively. During three months ended March 30, 2014, Italy, the United States, and Japan accounted for 36%, 28%, and 15% of revenue, respectively. No other countries accounted for more than 10% of the Company’s consolidated revenue during the periods presented.

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

	Three Months Ended
	March 29, 2015				March 30, 2014
HSC	$	6,201	68	%	$	5,282	72	%
Industrial		2,859	32	%		2,104	28	%
Total revenue	$	9,060	100	%	$	7,386	100	%

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

	March 29, 2015				December 31, 2014
United States	$	1,875	88	%	$	1,687	88	%
Switzerland		259	12	%		229	12	%
	$	2,134	100	%	$	1,916	100	%

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

NOTE 11—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 months ended March 29, 2015 was $111,000, and for the three months ended March 30, 2014 was $141,000.

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.

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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
2015	$	3		$	383
2016		3			496
2017		3			124
Total minimum lease payments		9		$	1,003
Less: Amount representing interest		(1	)
Total capital lease obligations		8
Less: current portion		(3	)
Long-term portion of capital lease obligations	$	5

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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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, 2014. 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, 2014 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 the needs of emerging high-growth markets, such as long haul and metro telecommunications applications as well as Cloud data communications (datacom) and datacenter connectivity, point-to-point wireless backhaul, and interactive high speed applications for the consumer electronics, industrial, defense and avionics industries. 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 application-specific integrated circuits (ASICs), as well as wireless communications ICs, millimeter monolithic microwave integrated circuits (MMICs) and modules. We believe we are an industry leader in the fast growing market for electronic solutions that enable high-speed optical and wireless connections that are found in telecom, datacom and storage systems, and intend to maintain this position in consumer electronics and computing systems.

The business is made up of two product lines: our High-Speed Communications (HSC) product line and our Industrial product line. Our products are highly customized and typically developed in partnership with key ‘Lighthouse” customers, generating engineering project revenues through the development stage and larger future product revenue through these customers and general market availability.

Through our HSC product line, we offer a broad portfolio of high performance optical and wireless components to telecom and datacom customers, including (i) mixed signal radio frequency integrated circuits (RFIC); (ii) 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; (iii) power amplifiers and transceivers for MMIC wireless applications including power amplifiers and transceiver chips at frequencies higher than 50 GHz; (iv) integrated systems in a package (SIP) solutions for both fiber-optic and wireless applications; and (v) radio frequency (RF) chips for various consumer applications such as global navigation satellite systems (GNSS).

Through our Industrial product line, we offer a wide range of digital and mixed-signal application specific integrated circuit (ASIC) solutions for industrial applications used in the military, avionics, medical and communications markets.

Since inception in July 2007, we have expanded our customer base by acquiring and integrating seven businesses with complementary products and customers. In so doing, we have expanded our device product line in multiple areas, growing our communication device offering from a few leading 10 Gbps ultra-long haul optical drivers, to a line of products that includes: drivers, receivers and TIAs for 2 to 400 Gbps optical applications; power amplifiers; transceiver devices for 50 to 100 GHz; and custom ASICs spanning 0.6um to 40nm technology nodes. Our worldwide direct sales force is supported by a significant number of channel representatives and distributors that sell our products throughout North America, South 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) by assuming at that time approximately $446,000 of liabilities of Tahoe RF.  During the first quarter of 2015, the Company assumed an additional $89,000 related to tax and legal expenses which resulted in an increase of Tahoe RF’s goodwill to $535,000. Through the acquisition, we have added 8 employees to our team, who are primarily High-Speed and High-Frequency SiGe RF engineers focused on high growth areas such as E-Band and V-Band wireless technologies.

Historically, we have incurred net losses. For the three months ended March 29, 2015 and the years ended December 31, 2014 and 2013, we incurred net losses of $636,000, $5.8 million and $1.9 million, respectively. For the three months ended March 29, 2015, we had cash outflows from operations of $327,000. For the years ended December 31, 2014 and 2013, we had cash inflows from operations of $2,000 and $3.3 million, respectively. As of March 29, 2015, we had an accumulated deficit of $102.9 million.

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Results of Operations

Revenue

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

	Three Months Ended
	March 29, 2015			March 30, 2014
Product	$	8,561		$	6,679
Development fees and other		499			707
Total revenue	$	9,060		$	7,386
Increase period over period	$	1,674
Percentage increase, period over period		23	%

Total revenue for the three months ended March 29, 2015 was $9.1 million, an increase of $1.7 million or 23%, compared with $7.4 million for the three months ended March 30, 2014. For the three months ended March 29, 2015, 94% of our revenue was contributed by product revenue and 6% of our revenue was contributed by development fees and other revenue.For the three months ended March 30, 2014, 90% of our revenue was contributed by product revenue and 10% of our revenue was contributed by development fees and other revenue.

Product revenue for the three months ended March 29, 2015 was $8.6 million, an increase of $1.9 million or 28%, compared with $6.7 million for the three months ended March 30, 2014. The increase in product revenue during the three months ended March 29, 2015 was primarily due to the increased demand for both of our HSC and Industrial product lines.

Development fees and other revenue for the three months ended March 29, 2015 was $499,000, a decrease of $208,000 or 29%, compared with $707,000 for the three months ended March 30, 2014. We experienced a decrease in development fees and other revenue due to a decrease in the number and size of development projects in our HSC product line.

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
	March 29, 2015			March 30, 2014
Total cost of revenue	$	3,667		$	3,126
Gross profit	$	5,393		$	4,260
Gross margin		60	%		58	%
Increase, period over period		1,133
Percentage increase, period over period		27	%

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; 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 March 29, 2015 was $5.4 million, or a gross margin of 60%, compared to a gross profit of $4.3 million, or a gross margin of 58%, for the three months ended March 30, 2014. The increase in gross margin is primarily due to a change in product mix.

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 typically dependent on our performance and acceptance 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.

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Development project revenue and other non-product revenue for the three months ended March 29, 2015 was $499,000 compared with $707,000 for the three months ended March 30, 2014. Excluding the revenue and gross profit associated with development programs and other non-product revenue, gross margin was 57% and 53% for the three months ended March 29, 2015 and March 30, 2014, respectively.

Research and Development Expense

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

	Three Months Ended
	March 29, 2015			March 30, 2014
Research and development expense	$	3,248		$	3,742
Percentage of revenue		36	%		51	%
Decrease, period over period	$	(494	)
Percentage decrease, period over period		-13	%

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 March 29, 2015 was $3.2 million compared to $3.7 million for the three months ended March 30, 2014, a decrease of $494,000 or 13%.  Research and development costs decreased as compared to the first quarter of 2014 primarily due to a $713,000 decrease in expenses for materials and project-related services which is offset by the increase of $386,000 in personnel related expenses.

We expect research and development expense to moderately increase from the first quarter of 2015 to the second quarter of 2015 due to increased materials and project-related expenses to develop new products.

Selling, General and Administrative Expense

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

	Three Months Ended
	March 29, 2015			March 30, 2014
Selling, general and administrative expense	$	2,770		$	2,398
Percentage of revenue		31	%		32	%
Increase, period over period	$	372
Percentage increase, period over period		16	%

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 March 29, 2015 was $2.8 million compared to $2.4 million for the three months ended March 30, 2014, an increase of $372,000 or 16%. Selling, general and administrative expense increased as compared to the first quarter of 2014 primarily due to $326,000 increase in personnel related expenses.

We expect selling, general and administrative expense to moderately decrease from the first quarter of 2015 to the second quarter of 2015.

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Interest Expense, Net and Other Income, Net

	Three Months Ended
	March 29, 2015			March 30, 2014
Interest expense, net	$	(3	)	$	(17	)
Other income (expense), net		1			10
Total	$	(2	)	$	(7	)

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, 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 March 29, 2015 was $3,000 compared to $17,000 for the three months ended March 30, 2014. Interest expense, net decreased as compared to the first quarter of 2014 primarily due to an $11,000 decrease in interest related to capital lease obligations.

Other income, net for the three months ended March 29, 2015 was income of $1,000. Other income, net for the three months ended March 30, 2014 was income of $10,000.

Provision for Income Taxes

	Three Months Ended
	March 29, 2015			March 30, 2014
Provision for income taxes	$	9		$	10
Decrease, period over period	$	(1	)
Percentage decrease, period over period		-10	%

Income tax expense was $9,000 and $10,000 for three months ended March 29, 2015 and March 30, 2014, respectively, and our effective tax rate was approximately 1% for those periods. The income tax provision for the three months ended March 29, 2015 and March 30, 2014 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.
 

Liquidity and Capital Resources

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

	Three Months Ended
	March 29, 2015			March 30, 2014
Net cash used in operating activities	$	(327	)	$	(207	)
Net cash used in investing activities	$	(416	)	$	(123	)
Net cash used in financing activities	$	(63	)	$	(182	)

Operating Activities

Operating activities used cash of $327,000 in the three months ended March 29, 2015. Our net loss from continuing operations, adjusted for depreciation, stock-based compensation and other non-cash items, was an income of $1,142,000. The remaining use of $1,469,000 of cash was primarily due to an increase in inventories of $839,000, an increase in prepaid and other current assets of $557,000, an increase in accounts receivable, net of $299,000, a decrease in other current liabilities of $217,000, and a decrease in accounts payable of $168,000 which were partially offset by an increase in accrued compensation of $539,000.

Operating activities used cash of $207,000 in the three months ended March 30, 2014. Our net loss from continuing operations, adjusted for depreciation, stock-based compensation and other non-cash items, was an income of $32,000. The remaining use of $239,000 of cash was primarily due to an increase in accounts receivable, net of $1.0 million, a decrease in other current liabilities of $487,000, an increase in inventories of $136,000, and a decrease in accrued compensation of $125,000 which were partially offset by an increase in accounts payable of $1.6 million.

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Investing Activities

Net cash used in investing activities for the three months ended March 29, 2015 was $416,000 from purchases of property and equipment.

Net cash used in investing activities for the three months ended March 30, 2014 was $123,000 from purchases of property and equipment.

Financing Activities

Net cash used in financing activities for the three months ended March 29, 2015 was $63,000 and consisted primarily of $90,000 taxes paid related to net share settlement of equity awards.

Net cash used in financing activities for the three months ended March 30, 2014 was $182,000 and consisted primarily of $103,000 taxes paid related to net share settlement of equity awards and $89,000 for capital lease payments.

Material Commitments

The following table summarizes our future net cash obligations for operating leases and capital leases, in thousands of dollars, as of March 29, 2015:

Contractual Obligations at March 29, 2015:	Total		Less than One Year		One to  Three Years		More than Three Years
Operating lease obligations		1,003		383		620		-
Capital lease obligations (including interest)		9		3		6		-
Total	$	1,012	$	386	$	626	$	-

GigOptix did not have any material commitments for capital expenditures as of March 29, 2015.

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)

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.

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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 QUALITATIVE 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 (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

Our management is responsible for establishing and maintaining our disclosure controls and procedures. Our CEO and CFO have evaluated the effectiveness of our disclosure controls and procedures as of March 29, 2015 and have concluded that these controls and procedures were effective. We believe that a control system, no matter how well designed and operated, can only provide reasonable assurance and cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our CEO and CFO have 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, 2014 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 three months ended March 29, 2015 and the years ended December 31, 2014 and 2013, we incurred net losses of $636,000, $5.8 million and $1.9 million, respectively. For the three months ended March 29, 2015, we had cash outflows from operations of $327,000. For the years ended December 31, 2014 and 2013, we had cash inflows from operations of $2,000 and $3.3 million, respectively. As of March 29, 2015, we had an accumulated deficit of $102.9 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 three months ended March 29, 2015, three customers accounted for 51% of total revenue. For the three months ended March 30, 2014, one customer accounted for 28% of our total revenue. No other customers accounted for more than 10% of total revenue during the periods presented.

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 March 29, 2015 increased by $299,000 or 4% compared to the balance as of December 31, 2014, 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 uncollectable 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 73% and 72% of our revenue for the three months ended March 29, 2015 and March 30, 2014, 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
10.1*	First Amendment to Second Amended and Restated Loan and Security Agreement, dated as of March 9, 2015.
10.2*	Century Park Standard Form Lease Agreement, by and between the Company and Keith C. Traci A. Estes Trust, dated as of April 3, 2015.
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: May 07, 2015		/S/    Avi S. Katz
		Dr. Avi S. Katz
		Chief Executive Officer and Chairman of the Board
Date: May 07, 2015		/S/ Darren Ma
		Darren Ma
		Chief Financial Officer

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EX-10.1

Exhibit 10.1

FIRST AMENDMENT

TO

SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

This First Amendment to Second Amended and Restated Loan and Security Agreement (this “Amendment”) is entered into as of March 9, 2015, by and among Silicon Valley Bank (“Bank”) and GigOptix, Inc., a Delaware corporation (“GigOptix”), ChipX, Incorporated, a Delaware corporation and wholly-owned Subsidiary of GigOptix (“ChipX”), and Endwave Corporation, a Delaware corporation and wholly-owned Subsidiary of GigOptix (“Endwave” and together with GigOptix and ChipX, individually and collectively, jointly and severally, “Borrower”) whose address is 130 Baytech Drive, San Jose, CA 95134.

Recitals

A.Bank and Borrower have entered into that certain Second Amended and Restated Loan and Security Agreement dated on or about March 25, 2013 (as the same may from time to time be amended, modified, supplemented or restated, the “Loan Agreement”).

B.Bank has previously extended credit to Borrower for the purposes permitted in the Loan Agreement, although none is outstanding as of the date of this Agreement.

C.Borrower has requested that Bank amend the Loan Agreement to extend the maturity dates from March 9, 2015 as more fully set forth herein.

D.Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

Agreement

Now, Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1.Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

2.Amendments to Loan Agreement.

2.1       Section 13 (Definitions). The following terms and their respective definitions set forth in Section 13.1 are amended in their entirety and replaced with the following:

“Maturity Date” is May 8, 2015.

“Non-Formula Maturity Date” is May 8, 2015.

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3.Limitation of Amendments.

3.1The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

3.2This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

4.Representations and Warranties. To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:

4.1Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

4.2Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

4.3The organizational documents of Borrower most recently delivered to Bank remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

4.4The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;

4.5The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

4.6The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and

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4.7This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights.

5.Integration. This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Amendment and the Loan Documents merge into this Amendment and the Loan Documents.

6.Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

7.Effectiveness. This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto, (b) Borrower's payment of an extension fee in an amount equal to Two Thousand Five Hundred Dollars ($2,500), and (c) payment of Bank's legal fees and expenses in connection with the negotiation and preparation of this Amendment.

[Signature page follows.]

3

In Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.

BANK	BORROWER
Silicon Valley Bank	GigOptix, Inc.
By: /s/ James Caron	By: /s/ Dr. Avi Katz
Name: James Caron	Name: Dr. Avi Katz
Title: VP	Title: CEO & President
	ChipX, Incorporated
	By: /s/ Dr. Avi Katz
	Name: Dr. Avi Katz
	Title: CEO & President
	Endwave Corporation
	By: /s/ Dr. Avi Katz
	Name: Dr. Avi Katz
	Title: CEO & President

[Signature Page to First Amendment to Second Amended and Restated Loan and Security Agreement]

EX-10.2

Exhibit 10.2

CENTURY PARK

STANDARD FORM LEASE

ARTICLE 1 PARTIES

This Lease, dated as of this 3rd day of April, 2015, is madeby and between KEITH C. & TRACI A. ESTES TRUST (hereincalled "Landlord") and GIGOPTIX, INC., a Delaware Corporation­­­­ (herein called "Tenant").

ARTICLE 2 PREMISES

Landlord does hereby lease to Tenant and Tenant herebyleases from Landlord thatcertain space (hereincalled "Premises") containing approximately 6,100 square feet of interior floorarea as indicated in Exhibit A.  The Premises are situated within a building (the "Building") withinthe complex known as Century Park Bldg 3.  Said Premises and the Center are located at 12820 Earhart Ave Auburn, County of Placer, and State of California.

This Lease is subject to the terms, covenants and conditions hereinset forth and Landlord and Tenant covenantas a material part of the considerationfor thisLease to keep andperform eachand all of said terms, covenantsand conditionsby them to be kept andperformed.

ARTICLE 3 USE

Tenant shall use thePremises for engineering offices and one small lab area for testing of electronic components and shall not useor permit the Premisesto be used for any other purpose without prior written consent of Landlord.  Landlord shall not unreasonably withhold, delay, or condition such consent.

ARTICLE 4  RENT

4.1Rent.  Tenant agrees to pay to Landlord as rent ("Rent"), without notice or demand, themonthly sum according to Article 4.2  in advance, on or before thefirst day of each andevery successive calendar month during the term hereof. Rent for any period which is for less than one (1) month shall be a prorated portionof the monthly installment herein based upon a thirty (30) day month.  Said rental shall be paid to Landlord, without deduction or offset, in lawful money of theUnited States of America and at suchplace as Landlord may from time to time designate in writing.

4.2Rent Schedule

Period	Rent
01 thru 06:*	$0.00 per month.
7-66	$6,100.00 per month

* Consideration for tenant moving expenses.

(Tenant shall be responsible for suite janitorial and utilities as set forth in Article 14.)

ARTICLE 5 LATE CHARGES

 If any installment of rent shall not be received by Landlord or Landlord's designee within five calendar (5) days after due date specified by this Lease, then Tenant shall pay to Landlord a late charge equal to ten percent (10%) of  outstanding charges.   Acceptance of such late charges by the Landlord shall in no event constitute a waiver of Tenant’s default with respect to such overdue amount, nor prevent Landlord from exercising any of the other rights and remedies granted hereunder.  Tenant hereby agrees that if Tenant is subject to a late charge for two (2) consecutive months, Rent for the following twelve (12) months shall automatically be adjusted to be quarterly rental, payable in advance, commencing upon the first day of the month following such consecutive late month and continuing for the next twelve (12) months on a quarterly basis in advance.

Initials: ________

              ________

1

Insufficient Funds Checks -- Checks returned by Tenant's bank for insufficient funds or closed accounts will be subject to a $25.00 check charge, in addition to applicable late charges, which will be paid immediately to Landlord.

ARTICLE 6 TERM

6.1Commencement.  The Lease term shall be Sixty-Six (66) months, plus any partial month in which the rental commences.  The parties hereto acknowledge that certain obligations under various articles hereof may commence prior to the Lease term, i.e., construction, hold harmless, liability insurance, etc.; and the parties agree to be bound by these articles prior to commencement of the Lease term.  The Lease term shall commence ("Commencement Date") on the 1st day of May 2015, subject to such incidental work as is to be performed by Landlord prior to said date (this work, if any, to be set forth in Section 41).

6.2Early Occupancy. Tenant shall have the option to occupy the space at any time prior to the Commencement Date.

6.3Performance of Landlord's Work.  Except to the extent to which Tenant shall have given Landlord notice, not later than the end of the second full calendar month next beginning after the Commencement Date, of those matters which Landlord has not performed its obligations under  Article 41­­­, Tenant shall have no claim that Landlord has failed to perform any of Landlord's obligations under  Article 41.  Tenant shall conduct a walk-through inspection of the Premises with Landlord and provide to Landlord a written punch-list specifying those items which require completion.  Landlord shall thereafter diligently complete said items but not later than thirty (30) days from Landlord’s receipt of the punch-list.

6.4Force Majeure.  Any prevention, delay or stoppage of work to be performed by Landlord or Tenant which is due to strikes, labor disputes, inability to obtain labor, materials, equipment or reasonable substitutes therefor, acts of God, governmental restrictions or regulations or controls, judicial orders, enemy or hostile government actions, civil commotion, fire or other casualty, or other causes beyond the reasonable control of the party obligated to perform hereunder, shall excuse performance of the work by that party for a period equal to the duration of that prevention, delay or stoppage.  Nothing in this Section shall excuse or delay Tenant’s obligation to pay Rent or other charges under this Lease if Tenant is occupying the Premises.

ARTICLE 7 SECURITY DEPOSIT

Concurrently with Tenant’s execution of this Lease, Tenant has deposited with Landlord thesum of SIX THOUSAND ONE HUNDRED FOURTY EIGHT AND AND NO/100 Dollars ($6,148.00).  Said sum shall be held by Landlord as security for the faithful performance by Tenant of all the terms, covenants, and conditions of this Lease to be kept and performed by Tenant during the term hereof.  If Tenant defaults withrespect to any provision of this Lease, including, but not limited to the provisions relating tothe payment of Rent, Landlord may (but shall not be required to) use, apply or retain all or any part of this security deposit for the payment of any rent or any other sum in default, or for the payment of any amount whichLandlord must spend or become obligated to spendby reason of Tenant's default, or to compensate Landlord for any other lossor damage which Landlord may suffer by reason ofTenant's default.  If any portion of said deposit is so used orapplied, Tenant shall, within five (5) days after written demand therefor, deposit cash withLandlord in an amount sufficient to restorethe security deposit to its original amount and Tenant's failure todo so shallbe a default under this Lease.  Landlord shall not be required to keep thissecurity deposit separate from its general funds, and Tenant shall not be entitled to interest on such deposit.  If Tenant is not in default, the security deposit or any balance thereof shall be returned to Tenant (or, at Landlord option, to the last assignee of Tenant's interest hereunder) within twenty (20) days following the expiration of the Lease term.  In the event of termination of Landlord's interest in this Lease, said deposit, or any part thereof not previously applied, may be turned overby Landlord to Landlord's granteeand, if so turned over, Tenant agrees to look solely to such grantee for proper applicationof (thedeposit in accordance with the terms of this Article 7, and thereturn thereof in accordance herewith.   The holderof a mortgage onproperty which includes thePremises shallnever be responsible to Tenant for the return or applicationof any such deposit, whether or not such holder succeeds to the position of Landlord hereunder, unless suchdeposit shall havebeen received inhandby suchholder.

Initials: ________

              ________

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ARTICLE 8 INSURANCE AND INDEMNITY

8.1Insuring Party.  As used in this Article, the term "insuring party" shall mean the party who has the obligation to obtain the insurance required hereunder.  This insuring party shall be designated in each Section of this Article8.

8.2Liability Insurance.  Tenant shall, at Tenant's expense obtain and keep in force during the term of this Lease, as the insuring party under this Section 8.2, a policy of Combined Single Limit, Bodily Injury and Property Damage Insurance insuring Landlord and Tenant against any liability arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto.  Such insurance shall be a combined single limit policy in an amount not less than Two Million Dollars ($2,000,000).  The policy shall contain cross liability endorsements and shall insure performance by Tenant of the indemnity provisions of this Article 8. The limits of said insurance shall not, however, limit the liability of Tenant hereunder.  Said insurance shall have a Landlord's Protective Liability endorsement attached thereto.  If Tenant shall fail to procure and maintain said insurance, Landlord may, but shall not be required to procure and maintain the same, but at the expense of Tenant. .

8.3 Property Insurance

(a)Landlord, as insuring party under this Section 8.3, shall obtain and keep in force during the term of this Lease a policy or policies of insurance covering loss or damage to the Premises, in the amount of ninety percent (90%) of the replacement value thereof, as the same may exist from time to time against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, special extended perils (all risk) and sprinkler leakage.  Said insurance shall provide for payment of loss thereunder to Landlord or to the holders of mortgages or deeds of trust on the Premises. Landlord shall, in addition, obtain and keep in force during the term of this Lease a policy of rental income insurance covering a period of one (1) year, with loss payable to Landlord, which insurance shall also cover all real estate taxes and insurance costs for said period.

(b)Tenant shall pay for any increase in the property insurance of other building or buildings in the Center if said increase is caused by Tenant's acts, omissions, use or occupancy of the Premises.  It is provided, however, that Tenant shall not be required to pay for any such increases in insurance costs of adjacent properties unless such increased insurance costs was the result of unusual features of Tenant's occupancy of the Premises or of Tenant’s unusual acts or omissions, the intent of the parties being to require Tenant to be financially responsible to the extent of such cost increases for creating situations of unusual hazard on the Premises not reasonably contemplated by the use to which the Premises shall be put pursuant to Article 3 above.

Initials: ________

              ________

3

(c)Landlord will not insure Tenant’s fixtures, equipment or Tenant improvements unless the Tenant improvements have become a part of the Premises under Article 12 hereof. Tenant shall have such responsibility in accordance with Section 8.7 herein below.

(d)Not more frequently than once each year, if, in the opinion of Landlord, the amount of property insurance required hereunder is not adequate, Landlord shall increase said insurance coverage as determined by Landlord. However, such increase may be more frequent than each year if required by the insurance carrier in order to maintain insurance for the full replacement value of the Premises.

8.4Insurance Policies.  Insurance required hereunder shall be in companies holding a "General Policyholders Rating" of “A” or better as set forth in the most current issue of "Best’s Insurance Guide" and admitted to do business in the state of California.  The insuring party shall deliver to the other party copies of policies of such insurance or certificates evidencing the existence and amounts of such insurance with loss payable clauses satisfactory to Landlord.  No such policy shall be cancelable or subject to reduction of coverage or other modifications except after ten (10) days prior written notice to Landlord.  If Tenant is the insuring party, Tenant shall, within ten (10) days prior to the expiration of such policies, furnish Landlord with renewals or "binders" thereof, or Landlord may order such insurance and charge the cost thereof to Tenant, which amount shall be payable by Tenant upon demand.  Tenant shall not do or permit to be done anything which shall invalidate the insurance policies referred to in Section 8.3. If Tenant does or permits to be done anything which shall increase the cost of the insurance policies referred to in Section 8.3, then Tenant shall forthwith upon Landlord’s demand reimburse Landlord for any additional premiums attributable to any act or omission or operation of Tenant causing such increase in the cost of insurance.  If Landlord is the insuring party and if the insurance policies maintained hereunder cover other improvements in addition to the Premises, Landlord shall deliver to Tenant a written statement setting forth the amount of any such insurance cost increase and showing in reasonable detail the manner in which it has been computed.

8.5Waiver of Subrogation.  Tenant and Landlord each hereby waive any and all rights of recovery against the other, or against the officers, employees, agents and representatives of the other, for loss of or damage to such waiving party or its property or the property of others under its control to the extent that such loss or damage is insured against under any insurance policy in force at the time of such loss or damages.  The insuring party shall, upon obtaining the policies of insurance required hereunder, give notice to the insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Lease.  Notwithstanding, the waiver of subrogation would not be effective if its inclusion would cancel an insurance policy of any party.

8.6Indemnity.  Tenant shall indemnify and hold harmless Landlord from and against any and all claims arising from Tenant’s use of the Premises, or from the conduct of Tenant’s business or from any activity, work or things done, permitted or suffered by Tenant in or about the Premises or elsewhere. Tenant shall further indemnify and hold harmless Landlord from and against any and all claims arising from any breach or default in the performance of any obligation on Tenant’s part to be performed under the terms of this Lease, or arising from any negligence of the Tenant, or any of such claim or any action or proceeding brought thereon; and in case any action or proceeding be brought against Landlord by reason of any such claim, Tenant upon notice from Landlord shall defend the same at Tenant’s expense. Tenant, as a material part of the consideration to Landlord, hereby assumes all risk of damage to property or injury to persons, in, upon or about the Premises arising from any cause and Tenant hereby waives all claims in respect thereof against Landlord, except in the event of Landlord’s (including Landlord’s officers, employees, agents and representatives) negligence, breach of the Lease, or intentional misconduct.

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8.7Exemption of Landlord from Liability. Except in the event of Landlord’s, his agent's, officers, representatives or employee's gross negligence, breach of this lease or intentional misconduct,  Tenant hereby agrees that Landlord shall not be liable for injury to Tenant's business or any loss of income therefrom or for damage to the improvements, trade fixtures, contents, goods, wares, merchandise or other property of Tenant (“Tenant's Contents”), Tenant's employees, invitees, customers, or any other person in or about the Premises, nor shall Landlord be liable for injury to the person of Tenant, Tenant's employees, agents or contractors, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, whether the said damage or injury results from conditions arising upon the Premises or upon other portions of the building of which the Premises are a part, or from other sources or places, and regardless of whether the cause of such damage or injury or the means of repairing the same is inaccessible to Tenant.  Landlord shall not be liable for any damages arising from any act or neglect of any other tenant, if any, of the building in which the Premises are located.  Tenant shall maintain the following insurance coverage with respect to the insurable losses contemplated by this Section 8.7 during the term of this Lease insuring Landlord, Tenant and any lender of record encumbering the Premises, with full waiver or subrogation:

(a)against fire, extended coverage, glass breakage and vandalism and malicious mischief perils, including coverage for Tenant’s Contents, in an amount of not less than ninety percent (90%) of the full replacement cost thereof;

(b)Broad form boiler and machinery insurance on a blanket repair and replacement basis with limits per accident not less than the replacement cost of all leasehold improvements and of all boilers, pressure vessels, air conditioning equipment, miscellaneous electrical apparatus and all other insurable objects owned or operated by Tenant or by others (other than Landlord) on behalf of Tenant in the Premises or relating or serving the Premises;

(c)Business interruption insurance in such amount as will reimburse Tenant for direct or indirect loss of earnings attributable to all such perils insured against in Section 8.7(a) and 8.7(b) above and an amount payable to the Landlord not less than twelve (12) months rental as set forth in this Lease.  Such sums to be paid no less frequently than monthly in equal amounts during such period as the Tenant’s business is interrupted; and

(d)Workmen's compensation insurance covering all Tenant’s employees working in the Premises to the extent required by law;

(e)Such additional liability insurance as may be reasonably required by Landlord to protect the Landlord against any environmental hazards arising from Tenant’s prospective or actual use of the Premises.

8.8Additional Insurance.  Notwithstanding any provisions to the contrary contained in this Lease, the insuring party shall also provide insurance against damage by such other perils as any mortgage lending institution holding a mortgage on the Premises may from time to time require against damage by such other perils as mortgage lending institutions generally may from time to time require in case of similar properties and in such amounts.

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8.9Blanket Policy.  If at any time during the term of this Lease the insuring party shall have in full force and effect a blanket policy of general liability insurance and/or property insurance with the same coverage for the Premises or for Tenant’s property as applicable all as described above, as well as coverage of other Premises and properties of the insuring party or in which the insuring party has some interest, such blanket insurance shall satisfy the requirements hereof.

8.10 Additionally Insured.  Tenant's insurance as stated in Article 8 of the Lease, shall include Landlord as additionally insured.  Tenant shall furnish to Landlord within twenty (20) days prior to Tenant's taking possessions of the Premises, evidence of Tenant's insurance.

ARTICLE 9 USES PROHIBITED

Tenant shall not do nor permit anything to be done in or about the Premises, nor bring or keep anything therein which is not within the permitted use of the Premises, which will in any way increase the existing rate of or affect any fire or other insurance upon the Building or any of its contents, nor cause a cancellation of any insurance policy covering said Building or the Center or any part thereof or any of its contents.  Tenant shall not do nor permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building or the Center or injure or annoy them nor use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose; nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises.  Tenant shall not commit nor allow to be committed any waste in or upon the Premises.

(a)Tenant agrees that it will not use or permit any person to use the Premises for a second-hand store, auction, distress or fire sale, or bankruptcy or going-out-of-business sale (whether or not pursuant to any insolvency proceedings), or for any use or purpose in violation of any governmental law or authority, and the Tenant shall at its sole cost and expense promptly comply with all laws, statutes, ordinances and governmental rules, regulations and requirements now in force of which may hereinafter be in force and with the requirements of any board of fire underwriters or other similar body now or hereafter constituted relating to or affecting the condition, use or occupancy of the Premises.  The judgment of any court of competent jurisdiction or the admission of Tenant in any action against Tenant, whether Landlord be a party thereto or not, that Tenant has violated any law, statute, ordinance or governmental rules, regulation or requirement, shall be conclusive of that fact as between Landlord and Tenant.

(b)Tenant shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of other Tenants or occupants of the building of which the Premises may be a part or any other building in the Center, or injure or annoy them, or use or allow the Premises to be used for any unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises.  Tenant shall not commit or allow to be committed any waste in or upon the Premises.  Tenant shall keep the Premises in a clean and wholesome condition, free of any objectionable noises, odors or nuisance.

(c)       

 Notwithstanding anything in this Lease, Landlord shall be responsible for all structural alterations to the building shell required under new or existing law.

ARTICLE 10 ALTERATIONS AND ADDITIONS

Tenant shall not make or allow to be made any alterations, additions or improvements to or of the Premises or any part thereof excepting non-structural interior alterations not exceeding One Thousand Dollars ($1,000.00) in cost without first obtaining the written consent of Landlord, and such governmental approvals and building permits as required by building code, and any alterations, additions or improvements to or of said Premises, including, but not limited to, wall covering, paneling and built-in cabinet work, but excepting movable furniture and trade fixtures, shall at once become a part of the realty and belong to the Landlord and shall be surrendered with the Premises at the election of the Landlord, the Landlord may, in Landlord’s sole discretion, require that the Premises be returned to its standard original condition with such interior walls, plumbing, cabinetry, lighting, wall coverings, flooring, removed to the Landlord’s reasonable satisfaction.  The Premises shall be repainted prior to Tenant vacating the Premises.  Should the Tenant fail to complete the removal of improvements as required by Landlord, the Landlord may remove the improvements in which case the reasonable cost of removal plus a service charge equal to twenty-five (25%) of the cost of removal and reconditioning shall be payable by the Tenant to the Landlord within ten (10) days of Tenant’s receipt of Landlord’s billing for such work.  In the event Landlord consents to the making of any alterations, additions or improvements to the Premises by Tenant, the same shall be made by Tenant at Tenant’s sole cost and expense.  Notwithstanding anything to the contrary herein, no installation, alterations, additions or improvements to or of any electrical system or outlet to or of the Premises, or any part thereof, shall be made, or allowed to be made by Tenant without first obtaining the written consent of Landlord.  Upon the expiration or sooner termination of the term hereof, Tenant shall, upon written demand by Landlord,  at least thirty (30) days prior to the end of the term, at Tenant's sole cost and expense, forthwith and with all due diligence, remove any alterations, additions, or improvements made by Tenant designated by Landlord to be removed, including trade fixtures, movable furniture and inventory, and Tenant shall, forthwith and with all due diligence, at its sole cost and expense, repair any damage to the Premises caused by such removal.  Landlord shall not unreasonably withhold, delay, or condition consent under this Article.

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ARTICLE 11 REPAIRS

By occupancy or entry to the Premises hereunder, Tenant shall be deemed to have accepted the Premises as being in good, sanitary order, condition and repair except as to items identified by Tenant pursuant to Article 6.3.  Tenant shall, at Tenant’s sole cost and expense, keep the Premises and every part thereof in good condition and repair (except as hereinafter provided with respect to Landlord's obligations.  Tenant shall, upon the expiration or sooner termination of the term of this Lease, surrender the Premises to the Landlord in the same condition as when first occupied in good condition, broom clean, ordinary wear and tear and damage from causes beyond the reasonable control of Tenant excepted subject to Article 11 of this Lease.  Any damage to adjacent Premises caused by Tenant's use of the Premises shall be repaired at the sole cost and expense of Tenant.   In the event Tenant fails to maintain the Premises in good order, condition and repair, Landlord shall give Tenant notice to do such acts as are reasonably required so to maintain Premises.  In the event Tenant fails to commence such work within 30 days of receiving such notice or diligently prosecute the same to completion, Landlord may, but is not obligated to, perform such acts and expend such funds at the expense of Tenant as are reasonably required to perform such work.  Landlord shall be paid by Tenant promptly after demand with interest at ten percent (10%) per annum from the date of such work.  Landlord shall have no liability to Tenant for any damage, inconvenience or interference with the use of the Premises by Tenant as a result of performing any such work or by reason of undertaking the repairs required by this Article 11.  .

ARTICLE 12 LIENS

Tenant shall keep the Premises and the property in which the Premises are situated free from any liens arising out of any work performed, materials furnished or obligations incurred by or on behalf of Tenant.  Landlord may require, at Landlord’s sole option, that Tenant shall provide to Landlord, at Tenant's sole cost and expense, a lien and completion bond in an amount equal to one and one-half (1 1/2) times the estimated cost of any improvements, additions, alterations in the Premises which the Tenant desires to make, to insure Landlord against any liability for mechanics' and material men’s liens and to insure completion of the work.

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ARTICLE 13 ASSIGNMENT AND SUBLETTING

Except for the excluded transactions set forth in this Article, Tenant shall not voluntarily, or by operation of law, assign, transfer, mortgage, sublet or otherwise transfer or encumber all or any part of Tenant's interest in this Lease or in the Premises without Landlord's prior written consent which shall not be unreasonably withheld.  Any attempt to assignment, transfer, mortgage, encumbrance or subletting without such consent shall be void and shall constitute a breach of this Lease.  Regardless of Landlord's consent, no subletting or assignment shall release Tenant from Tenant’s obligation or alter the primary liability of Tenant to pay the rent and to perform all other obligations to be performed by Tenant hereunder.  The acceptance of rent by Landlord from any person shall not be deemed to be a waiver by Landlord of any provision hereof.  Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting.  In the event that Landlord shall consent to a sublease or assignment under the provisions of this Article 15, Tenant shall pay Landlord’s reasonable attorney’s fees not to exceed $2,000 incurred in connection with giving such consent.  Prior to such approval by Landlord of subletting or assignment, Tenant shall provide Landlord with information concerning the proposed assignees or subtenants financial responsibility.  Further, if for any proposed assignment or sublease Tenant receives rent or other consideration either initially or over the term of the assignment of sublease, in excess of the rent called for hereunder, or in case of the sublease of a portion of the Premises in excess of such rent fairly allocable to such portion, after appropriate adjustments to assure that all other payments called for hereunder taken into account, Tenant shall pay to Landlord as additional rent hereunder all of the excess of each such payment of rent or other consideration received by Tenant promptly after its receipt.  Landlord shall not unreasonably withhold, delay, or condition approval under this article.  For purposes of this Article, the following are considered “Excluded Transactions”:  (a) any transfer of Tenant’s interest in this Lease to any entity that is a corporate affiliate of Tenant; and (b) any change in the ownership or control of Tenant, including, but not limited to, any sale or transfer of stock or other ownership interests, merger, consolidation, or similar transactions.  Landlord’s consent is not required prior to any Excluded Transaction.

ARTICLE 14 UTILITIES AND JANITORIAL

Tenant shall pay for all janitorial, water, gas, heat, light, power and sewer charges, telephone service, fire alarm service, HVAC maintenance and all other services and metered utilities supplied to the Premises, together with any taxes thereon.  If any such services are not separately metered or otherwise assessed or charged to Tenant, Tenant shall pay a pro rata share of all charges jointly metered or shared with other Premises, to be calculated by multiplying such charges by the floor area (in square feet) of the Premises occupied by Tenant, divided by the gross leasable floor area (in square feet) Center.  Landlord’s billings for such utilities and services shall be accompanied by documentation of the total charges incurred and the method for determining Tenant’s proportionate share.  Tenant shall not be responsible for any costs or expenses not actually incurred by Landlord, costs or expenses that are separately reimbursed or reimbursable by third parties, including tenants, or costs and expenses that exclusively or disproportionately benefit other tenant(s) in the Center.

14.1   Government Energy or Utility Controls.  In the event of imposition of federal, state or local government controls, rules, regulations, or restrictions on the use or consumption of energy or other utilities during the Term, both Landlord and Tenant shall be bound thereby.  In the event of a difference in interpretation by Landlord and Tenant of any such controls, the reasonable interpretation of Landlord shall prevail, and Landlord shall have the right to enforce compliance therewith, including the right of entry into the Premises to effect compliance.

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ARTICLE 15 PERSONAL PROPERTY TAXES

Tenant shall pay, or cause to be paid, before delinquency, any and all taxes levied or assessed and which become payable during the term hereof upon all Tenant's leasehold improvements, equipment, furniture, fixtures, and any other personal property located in the Premises.  In the event any or all of the Tenant's leasehold improvements, equipment, furniture, fixtures, and other personal property shall be assessed and taxed with the real property, Tenant shall pay to Landlord its share of such taxes within ten (10) days after delivery to Tenant by Landlord of a statement in writing setting forth the amount of such taxes applicable to Tenant’s property and copy of the tax bill received by Landlord.

ARTICLE 16 RULES AND REGULATIONS

Tenant shall faithfully observe and comply with the reasonable rules and regulations affecting the Center that Landlord shall from time to time promulgate and/or modify to the extent such rules and regulations do not unreasonably interfere with Tenant’s use and enjoyment of the Premises.  The rules and regulations shall be binding upon the Tenant upon delivery of a copy of them to Tenant.  Landlord shall not be responsible to Tenant for the nonperformance of any said rules and regulations by any other tenants or occupants of the Center.

ARTICLE 17 HOLDING OVER

If Tenant shall remain in possession of the Premises after the expiration of the term of this Lease, Tenant will be deemed to be occupying the Premises as a tenant-at-sufferance subject to all the covenants and obligations of this Lease and at a daily rental of twice the per diem Rent provided hereunder, computed on the basis of a thirty (30) day month, and Tenant will vacate the Premises and deliver the same to Landlord upon Tenant’s receipt of notice from Landlord to vacate the Premises.  If any Property not belonging to Landlord remains at the Premises after the expiration of the term of this Lease, Tenant hereby authorizes Landlord to make such disposition of such property as Landlord may desire without liability for compensation or damages to Tenant upon ten (10) days written notice.  In the event that such property belongs to someone other than Tenant, Tenant agrees to indemnify and hold Landlord harmless from all suits, actions, liabilities, losses, damages and expenses in connection with or incident to any removal, exercise of dominion over and/or disposition of such property by Landlord.

ARTICLE 18 ENTRY BY LANDLORD

Landlord reserves, and shall at any and all times (upon reasonable notice to Tenant, except in the event of an emergency) has, the right to enter the Premises to inspect the same, to submit said Premises to prospective purchasers or tenants, to post notices of non-responsibility, to repair the Premises and any portion of the Building of which the Premises are a part that Landlord may deem necessary or desirable, without abatement of Rent, unless such actions unreasonably impair Tenant’s use and enjoyment of the premises.   and may for that purpose erect scaffolding and other necessary structures where reasonably required by the character of the work to be performed, always providing that the entrance to the Premises shall not be unreasonably blocked thereby, and further providing that the business of the Tenant shall not be interfered with unreasonably.  Tenant hereby waives any claim for damages or for any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby except to the extent Landlord’s actions unreasonably impair tenant’s use and enjoyment of the Premises, or to the extent Landlord or its agents, officers, employees or representatives act or omit to act negligently, or commit intentional misconduct.  Landlord shall have the right to use any and all means which Landlord may deem proper to open said doors in an emergency, in order to obtain entry to the Premises without liability to Tenant except for any failure to exercise due care for Tenant's property and any entry to the Premises obtained by Landlord by any means, or otherwise, shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant from the Premises or any portion thereof.  Up to 6 months prior to the expiration of the lease, Landlord’s brokers shall, with reasonable notice, have the right to tour the space in order to continue marketing the space.

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ARTICLE 19 TENANT'S DEFAULT

19.1Events of Default.  The occurrence of any one or more of the following events shall constitute a default and breach of this Lease by Tenant:

(a)Failure to pay rent, or any other monetary obligation which Tenant is required to pay under this Lease when due, which failure continues for five (5) days.

(b)Abandonment or vacation of the Premises or any substantial portion thereof (failure to occupy and operate the Premises for twenty-one (21) consecutive days shall be deemed an abandonment and vacation), except (a) to the extent reasonably necessary to perform maintenance, repairs, renovations, or alteration to the Premises; (b) due to damage to the premises; or (c) as otherwise permitted under this Lease

(c)Failure to perform any other provision of this Lease if the failure to perform is not cured within thirty (30) days after notice has been given to Tenant.  If the default cannot reasonably be cured within thirty (30) days, Tenant shall not be in default of this Lease if Tenant commences to cure the default within the thirty (30) day period and diligently and in good faith continues to cure the default.

(d)The making by Tenant of any general assignment or general arrangement for the benefit of creditors; or the filing by or against Tenant of a petition to have Tenant adjudged a bankrupt or a petition or reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant, the same is dismissed within thirty (30) days or the appointment of a trustee or a receiver to take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where possession is not restored to Tenant within thirty (30) days; or the Exhibit, execution or other judicial seizure of substantially all of Tenant's interest in this Lease, where such seizure is not discharged in thirty (30) days.

19.2Notices of Default.  Notices given under this Article shall specify the alleged default and the applicable Lease provisions, and shall demand that Tenant perform the provisions of this Lease within the applicable period of time, or quit the Premises.  No such notice shall be deemed a forfeiture or a termination of this Lease unless Landlord so elects in the notice.

ARTICLE 20 LANDLORD'S REMEDIES

Landlord shall have the following remedies if Tenant commits a default.  These remedies are not exclusive; they are cumulative in addition to any remedies now or later allowed by law.

20.1Tenant's Right to Possession Not Terminated.  Landlord can continue this Lease in full force and effect, and the Lease will continue in effect as long as Landlord does not terminate Tenant's right to possession, and Landlord shall have the right to collect rent when due.  During the period Tenant is in default, Landlord can enter the Premises and relet them, or any part of them, to third parties for Tenant's account.  Tenant shall be liable immediately to Landlord for all costs Landlord incurs in reletting the Premises, including, without limitation, brokers' commissions, expenses of remodeling the Premises required by the reletting, and like costs.  Reletting can be for a period shorter or longer than the remaining term of this Lease.  Tenant shall pay to Landlord the rent due under this Lease on the dates the Rent is due, less the Rent Landlord receives from any reletting.  No act by Landlord allowed by this Section 22.1 shall terminate this Lease unless Landlord notifies Tenant that Landlord elects to terminate this Lease.  After Tenant's default and for as long as Landlord does not terminate Tenant's right to possession of the Premises, if Tenant obtains Landlord's consent Tenant shall have the right to assign or sublet its interest in this Lease, but Tenant shall not be released from liability.

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20.2Termination of Tenant's Right to Possession.  Landlord can terminate Tenant's right to possession of the Premises at any time while Tenant is in default.  Acts of maintenance, efforts to relet the Premises, or the appointment of a receiver on Landlord’s initiative to protect Landlord’s interest under this Lease shall not constitute a termination of Tenant's right to possession.  On termination, Landlord has the right to recover from Tenant:

(a)The worth, at the time of the award, of the unpaid Rent that had been earned at the time of termination of this Lease;

(b)The worth, at the time of the award, of the amount by which the unpaid Rent that would have been earned after the date of termination of this Lease until the time of award exceeds the amount of the loss of Rent that could have been reasonably avoided;

(c)The worth, at the time of the award, of the amount by which the unpaid Rent for the balance of the term after the time of award exceeds the amount of the loss of Rent that could have been reasonably avoided; and

(d)Any other amount, and court costs, necessary to compensate Landlord for all detriment approximately caused by Tenant's default.

The worth, at the time of the award is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award.

20.3Appointment of Receiver. If Tenant is in default of this Lease, Landlord shall have the right to have a receiver appointed to collect rent and conduct Tenant’s business.  Neither the filing of a petition for the appointment of a receiver nor the appointment itself shall constitute an election by Landlord to terminate this Lease.  Tenant agrees that in the event all or substantially all of its assets be placed in the hands of a receiver or trustee, and in the event receivership of trusteeship continue for a period of ten (10) days, or should Tenant make assignment for the benefit of creditors, or be adjudicated a bankrupt, or should Tenant institute any state or federal bankruptcy act wherein Tenant seeks to be adjudicated a bankrupt, or seeks to be discharged of its debts, or should any voluntary proceeding be filed against such Tenant under such bankruptcy laws and Tenant consents thereto or acquiesces therein by pleading or default, then this Lease or any interest in and to the demised Premises shall not become an asset in any of such proceedings and in any of such events and in addition to any and all rights or remedies of Landlord hereunder of as provided by law, it shall be lawful for Landlord at his option to declare the term hereof ended and to re-enter the demised Premises and take possession hereof and remove all persons therefrom and Tenant shall have no further claim, therein or hereunder.

20.4Landlord's Right to Cure Tenant's Default.  Landlord, at any time after Tenant commits a default, can cure the default at Tenant’s cost. If Landlord at any time, by reason of Tenant’s default, pays any start or does any act that requires the payment of any sum, the sum paid by Landlord shall be due immediately from Tenant to Landlord at the time the sum is paid, and if paid at a later date shall bear interest at the rate of ten percent (10%) per annum from the date the sum is paid by Landlord until Landlord is reimbursed by Tenant.  The sum, together with interest on it, shall be additional rent.

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ARTICLE 21 DEFAULT BY LANDLORD

Landlord shall not be in default unless Landlord fails to perform obligations required of Landlord within a reasonable time, but in no event later than thirty (30) days after notice by Tenant to Landlord in writing specifying wherein Landlord has failed to perform such obligation; provided, however, that if the nature of Landlord's obligation is such that more than thirty (30) days are required for performance then Landlord shall not be in default if Landlord commences performance within such thirty (30) day period and thereafter diligently prosecutes the same to completion.

ARTICLE 22 RECONSTRUCTION

In the event the Premises are damaged by fire or other perils covered by extended coverage insurance, Landlord agrees to forthwith repair same, and this Lease shall remain in full force and effect, except that Tenant shall be entitled to a proportionate reduction of the Rent and other amounts otherwise payable under this Lease from the date of damage and while such repairs are being made, such proportionate reduction to be based upon the extent to which the damage and making of such repairs shall reasonably interfere with the business carried on by the Tenant in the Premises.  If the damage is due to the fault or neglect of Tenant or its employees, there shall be no abatement of rent.  In the event the Premises are damaged as a result of any cause other than the perils covered by fire and extended coverage insurance, then Landlord shall have the option:  (1) to repair or restore such damage, this Lease continuing in full force and effect, but the Rent to be proportionately reduced as provided hereinabove in this Article; or (2) give notice to Tenant any time within sixty (60) days after such damage, terminating this Lease as of the date specified in such notice, which date shall be no more than thirty (30) days after the giving of such notice.  In the event of giving such notice, this Lease shall expire and all interest of the Tenant in the Premises shall terminate on the date so specified in such notice and the Rent, reduced by a proportionate reduction, based upon the extent, if any, to which such damage interfered with the business carried on by the Tenant in the Premises, shall be paid up to the date of such termination.  Notwithstanding anything to the contrary contained in this Article, Landlord shall not have any obligation whatsoever to repair, reconstruct or restore the Premises when the damage resulting from any casualty covered in this Article occurs during the last twenty four (24) months of the term of this Lease or any extension thereof. Landlord shall not be required to repair any injury or damage by fire or other cause, or to make any repairs or replacements of any leasehold improvements, fixtures, or other personal property of Tenant.

ARTICLE 23 EMINENT DOMAIN

If more than twenty five percent (25%) of the Premises shall be taken or appropriated by any public or quasi-public authority under the power of eminent domain and such taking materially effects the Tenant’s ability to conduct the Tenant’s business in the Premise or the Landlord’s operation of the Center then, either party hereto shall have the right, at its option, within sixty (60) days after said taking, to terminate this Lease upon thirty (30) days written notice.  If less than twenty five percent (25%) of the Premises are taken, or if more than twenty five percent (25%) is taken and neither party elects to terminate as herein provided, the Rent thereafter to be paid shall be equitably reduced.  If any part of the Center other than the Premises may be so taken or appropriated, Landlord shall within sixty (60) days of said taking have the right at its option to terminate this Lease upon written notice to Tenant.  In the event of any taking or appropriation whatsoever, Landlord shall be entitled to any and all awards and/or settlements which may be given and Tenant shall have no claim against Landlord for the value of any unexpired term of this Lease.

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ARTICLE 24 PARKING AND COMMON AREA

All areas within the exterior boundaries of the Center which are not now or hereafter held for lease or occupation by Landlord or used by other persons entitled to occupy floor space in the Center shall be deemed Common Areas.  Landlord may make changes at any time and from time to time in the size, shape, location, and extent of the Common Area, and no such change shall entitle Tenant to any abatement of Rent.  Landlord covenants that except as otherwise provided herein below, an area approximately equal to the Common Area which includes automobile parking, shall be at all times available for the non-exclusive use of Tenant during the full term of this Lease or any extension of the term hereof, provided that the condemnation or other taking by any public authority, or sale in lieu of condemnation, of any or all of such Common Area shall not constitute a violation of this covenant; provided further, however, that Landlord reserves the right to change the entrances, exits, traffic lanes and the boundaries and locations of such Common Area including automobile parking and to construct buildings and other improvements thereon if in the sole good faith judgment of Landlord such construction shall be for the overall benefit of the Center and will not substantially interfere with ingress and egress from the Premises or the flow of vehicular traffic in the Center.  The Common Area of the Center shall include, but is not necessarily be limited to driveways, parking areas, landscape areas, loading and unloading area, walkways, handicapped ramps and parking area, patios, , and exterior lighting.

24.1Maintenance.  Landlord shall keep said Common Area, including all parts thereof, in a neat, clean and orderly condition and shall repair any damage to the facilities thereof, but all expenses reasonably incurred in connection with keeping  said Common Area including automobile parking in a neat, clean and orderly condition and making repairs in said Common Area shall be charged and prorated, Tenant’s share to be calculated by multiplying such charges by the floor area (in square feet) of the Premises occupied by Tenant, divided by the gross leasable floor area (in square feet) Center.  Tenant shall not be responsible for any costs or expenses not actually incurred by Landlord, costs or expenses that are separately reimbursed or reimbursable by third parties, including tenants, or costs and expenses that exclusively or disproportionately benefit other tenant(s) in the Center.

24.2Common Rights.  Tenant, for the use and benefit of Tenant, its agents, employees, customers, licensees and subtenants, shall have the non-exclusive right in common with Landlord, and other present and future owners, tenants and their agents, employees, customers, licensees and sub-tenants, to use said Common Area during the entire term of this Lease, or any extension thereof, for ingress and egress, and automobile parking.

24.3Rules and Regulations.  Tenant, in the use of said Common Area, agrees to comply with such reasonable rules, regulations and charges for parking as Landlord may adopt from time to time for orderly and proper operation of said Common Area.  Such rules may include but shall not be limited to the following: (1) the Restricting of employee parking to a limited, designated area or areas; and (2) The regulation of the removal, storage and disposal of Tenant's refuse and other rubbish at the sole cost and expense of Tenant.

ARTICLE 25 SIGNS

Tenant may affix and maintain upon the glass panes and sign area above the windows upon the exterior walls of the Premises only such signs, advertising, placards, names, insignia, trademarks and descriptive material as shall have first received the written approval of Landlord as to type, size, color, location, copy nature and display qualities.  Landlord shall not withhold such written approval of such signage material so long as it conforms with the Signage Criteria and incorporated herein by this reference and any and all sign criteria established by the County of Placer applicable to the Center or the Premises.  Tenant shall not affix any sign to the roof.  The Landlord shall, at Landlord’s sole discretion, approve or disapprove the installation of any tenant signs on or as a part of Project Identification signs erected by the Landlord adjacent to the public streets.  No free standing “A” frame signs will be allowed.

Initials: ________

              ________

13

ARTICLE 26 DISPLAYS

Tenant may not display or sell merchandise or allow grocery carts or other similar devices within the control of Tenant to be stored or to remain outside the defined exterior walls and permanent doorways of the Premises.  Tenant further agrees not to install any exterior lighting, amplifiers or similar devices or use in or about the Premises any advertising medium which may be heard or seen outside the Premises, such as flags, banners, flashing lights, searchlights, loudspeakers, phonographs or radio broadcasts.

ARTICLE 27 AUCTIONS

Tenant shall not conduct or permit to be conducted any sale by auction in, upon or from the Premises whether said auction by voluntary, involuntary, pursuant to any assignment for the payment of creditors or pursuant to any bankruptcy or other insolvency proceeding.

ARTICLE 28 LANDLORD'S LIABILITY

Tenant specifically agrees to look solely to Landlord's then equity interest in that part of the Center at the time owned, or in which Landlord holds an interest as ground lessee, for recovery of any judgment from Landlord, it being specifically agreed that neither Landlord, nor any successor holder of Landlord's interest hereunder, nor any beneficiary of any trusts of which any person from time to time holding Landlord's interest is trustee, shall ever be personally liable for any such judgment, or for the payment of any monetary obligation to Tenant.  The provision contained in the foregoing sentence is not intended to, and shall not, limit any right that Tenant might otherwise have to obtain injunctive relief against Landlord or Landlord's successors in interest, or any other action not involving the personal liability of Landlord, or any successor holder of Landlord's interest hereunder, or any beneficiary of any trust of which any person from time to time holding Landlord's interest is trustee, to respond in monetary damages from Landlord's assets other than Landlord's equity interest aforesaid in the Center.

ARTICLE 29 ASSIGNMENT OF RENTS

29.1Assumption:  With reference to any assignment by Landlord of Landlord’s interest in this Lease, or the rents payable hereunder, conditional in nature or otherwise, which assignment is made to the holder of a mortgage or ground lease on property which includes the Premises, Tenant agrees as follows:

(a)That the execution thereof by Landlord, and the acceptance thereof by the holder of such mortgage, or the ground lessor, shall never be treated as an assumption by such holder or ground lessor of any of the obligation of Landlord hereunder, unless such holder, or ground lessor, shall by notice sent to Tenant, specifically otherwise elect, and

(b)That, except as aforesaid, such holder or ground lessor shall be treated as having assumed Landlord’s obligations hereunder only upon foreclosure of such holder’s mortgage and the taking of possession of the Premises, or, in the case of a ground lessor, the assumption of Landlord's position hereunder by such ground lessor.

Initials: ________

              ________

14

29.2Leaseback.  Where a party acquires Landlord's interest in property (whether land only, or land and buildings) which includes the Premises, and simultaneously leases the same back, such acquisition shall not be treated as an assumption of Landlord's position hereunder, and this Lease shall thereafter be subject and subordinate at all times to such lease.

ARTICLE 30 FINANCIAL STATEMENTS

At any time during the term of this Lease, Tenant shall, upon ten (10) days prior written notice from Landlord, provide any institutional lender which is negotiating with Landlord for interim, construction or permanent financing during the term of this Lease, with a current financial statement and financial statements for each of the two (2) years prior to the then current fiscal statement year, as filed with the U.S. Securities and Exchange Commission.  Tenant’s obligations to provide such statements shall be limited to statements that are publicly available as of the date of Landlord’s request.  Such statements shall be sent directly to such institutional lender and not through Landlord.  Such current statement shall be prepared in accordance with generally accepted accounting principles and, if such is the normal practice of Tenant shall be audited by an independent certified public accountant.

This Lease is subject to Landlord’s approval of Tenant’s financial condition..

ARTICLE 31 WAIVER

The waiver by Landlord or Tenant of any term, covenant or condition herein contained shall not be deemed to be a waiver of such terms, covenant or condition or any subsequent breach of the same or any other term, covenant or condition herein contained.  The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding default by Tenant of any term, covenant or condition of this Lease, other than the failure of the Tenant to pay the particular rental so accepted, regardless of Landlord's knowledge of such preceding defaults at the time of such rent.

ARTICLE 32 INABILITY TO PERFORM

This Lease and the obligations of the Tenant hereunder shall not be affected or impaired because the Landlord is unable to fulfill any of its obligations hereunder or is delayed in doing so, if such inability or delay is caused by reason of strike oracts of God.

ARTICLE 33 JOINT OBLIGATION / SUCCESSORS AND ASSIGNS

If there be more than one Tenant the obligations hereunder imposed shall be joint and several.  The covenants and conditions herein contained, subject to the provision as to assignment, apply to and bind the heirs, successors, executors, administrator and assigns of the parties hereto.

If Tenant is a corporation, each individual executing this Lease on behalf of said corporation represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation, in accordance with the bylaws of said corporation, and that this Lease is binding upon said corporation.

ARTICLE 34 NOTICES

All notices and demands which may or are to be required or permitted to be given by either party on the other shall be in writing.  All notices and demands by the Landlord to the Tenant shall be sent by certified mail, return receipt requested, postage prepaid, or delivered in person addressed to the Tenant at the Premises, at the address herein below, or to such other place as Tenant may from time to time designate in a notice to the Landlord.  All notices and demands by the Tenant to the Landlord shall be sent by certified mail, return receipt requested, pottage prepaid, or delivered in person addressed to the Landlord at the address set forth herein, and to such other person or place as the Landlord may from time to time designate in a notice to the Tenant.

Initials: ________

              ________

15

To Landlord at: 12820 Earhart Ave., Auburn, CA.  95602

To Tenant at: 130 Baytech Drive, San Jose, CA 95134

ARTICLE 35 MISCELLANEOUS

Marginal Headings.  The marginal headings and titles to the Sections and Articles of this Lease are not a part of the Lease and shall have no effect upon the construction or interpretation of any part hereof.

Time. Time is of the essence of this Lease and of the performance of each and all of its provisions in which performance is a factor.

Recordation.  Neither Landlord nor Tenant shall record this Lease, but a short form memorandum hereof may be recorded at the request of Landlord.

Quiet Possession.  Upon Tenant paying the rent reserved hereunder and observing and performing all of the covenants, conditions, and provisions on Tenant's part to be observed and performed hereunder, Tenant shall have quiet possession of the Premises for the entire term hereof, subject to all the provisions of this Lease.

Partial Invalidity.  Any provision of this Lease which shall prove to be invalid, void, or illegal shall be in no way affect, impair or invalidate any other provision hereof and other provision shall remain in full force and effort.

Cumulative Remedies.  No remedy or election hereunder shall be deemed exclusive but shall, whenever possible, be cumulative with all other remedies at law or in equity.

Jurisdiction.  Placer County, State of California will be jurisdiction and venue of the action concerning this lease agreement.

Attorneys' Fees. In the event of any action or proceeding brought by either party against the other under this Lease the prevailing party shall be entitled to recover for the fees of its attorneys in such action or proceeding, including costs of appeal, if any, in such amount as the court may adjudge reasonable as attorneys’ fees.  In addition, should it be necessary for either party to employ legal counsel to enforce any of the provisions herein contained,  the other party agrees to pay all attorneys’ fees and court costs reasonably incurred.

Certain Rights Reserved By Landlord.  Landlord reserves the following rights, exercisable without liability to Tenant for (a) damage or injury to property, person or business, (b) causing an actual or constructive eviction from the Premises, or (c) disturbing Tenant’s use or possession of the Premises:

a. To name the Building and Project and to change the name or street address of the Building or project; and

b. To install and maintain all signs on the exterior of the Building and Project.

Initials: ________

              ________

16

ARTICLE 36 SALE OF PREMISES BY LANDLORD

In the event of any sale of the Premises by Landlord, Landlord shall be and is hereby entirely freed and relieved of all liability under any and all of its covenants and obligation contained in or derived from this Lease arising out of any act, occurrence or omission occurring after the consummation of such sale; and the purchaser, at such sale or any subsequent sale of the Premises shall be deemed, without any further agreement between the parties or their successors in interest or between the parties and any such purchaser, to have assumed and agreed to carry out any and all of the covenants and obligations of the Landlord under this Lease.

ARTICLE 37 TENANT ESTOPPEL

Tenant shall at any time and from time to time, upon not less than five (5) days prior written notice from Landlord, execute, acknowledge and deliver to Landlord an Estoppel  Statement in writing containing at a minimum the following:

(a)Certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease as so modified is in full force and effect), and the date to which the rental and other charges are paid in advance, if any, and

(b)Acknowledging that there are not, to Tenant's knowledge, any incurred defaults on the part of the Landlord hereunder, or specifying such defaults if any are claimed, and

(c)Setting forth the date of commencement of rents and expiration of the term hereof. Any such statement may be relied upon by the prospective purchaser or encumbrance of all or any portion of the real property of which the Premises are a part.

ARTICLE 38 SUBORDINATION, ATTORNMENT AND NONDISTURBANCE

Tenant covenants and agrees that this Lease is subject and subordinate to any mortgage or deed of trust which may now or hereafter encumber the Premises,  the Building or the Project, and to all renewals, modifications, consolidations, replacements and extensions thereof.  This clause shall be self-operative and no further instrument of subordination need be requested by any mortgagee.  However, Tenant will execute, if requested, a mutually-agreeable Subordination, Non-Disturbance and Attornment Agreement.  In the event of the enforcement by the trustee, mortgagee or the beneficiary under any such mortgage or deed of trust of the remedies provided for by law or by such mortgage or deed of trust, Tenant will become the Tenant of, and attorn to, such successor in interest without change in the terms or other provisions of this Lease.  Notwithstanding any other provision contained herein, this paragraph shall not result in an interference with Tenant’s Permitted Use and occupancy of the Premises or Tenant’s rights hereunder.

ARTICLE 39 PRIOR AGREEMENTS

This Lease contains all of the agreements of the parties hereto with respect to any matter covered or mentioned in this Lease, and no prior agreements or understanding pertaining to any such matters shall be effective for any purposes.  No provision of this Lease may be amended or added to except by an agreement in writing signed by the parties hereto or their respective successors in interest.  This Lease shall not be effective or binding on any party until fully executed by both parties hereto.  The submission of this Lease to Tenant shall be for examination purposes only and does not and shall not constitute a reservation of or option for Tenant to lease, or otherwise create any interest by Tenant in, the Premises or any other Premises situated in the shopping center.  Execution of this Lease by Tenant and return to Landlord shall not be binding upon Landlord, notwithstanding any time interval, until Landlord has in fact executed and delivered this Lease to the Tenant.

Initials: ________

              ________

17

ARTICLE 40 AMERICANS WITH DISABILITIES ACT (ADA)

(a) The Premises have not undergone an inspection by a Certified Access Specialist (CAS).

(b) Since compliance with the Americans with Disabilities Act (ADA) is dependent upon Lessee's specific use of the Premises, Lessor makes no warranty or representation as to whether or not the Premises comply with ADA or any similar legislation. In the event that Lessee's use of the Premises requires modifications or additions to the Premises in order to be in ADA compliance, Lessee agrees to make any such necessary modifications and/or additions at Lessee's expense.

(c) Under the terms of this Lease, Landlord is not obligated to bring building to current ADA compliance.

ARTICLE 41 LANDLORD TENANT IMPROVEMENTS

Landlord, at Landlord’s sole cost and expense, shall deliver the premises in turn-key condition and as per the following:

-Replace carpet squares with holes using existing carpet squares from conference room or other offices as needed.  Room where carpet squares have been removed shall have new carpet installed.

ARTICLE 42 TERMINATION OF EXISTING LEASE

The existing lease dated April 17, 2007 between The Estes Family Trust and Tahoe RF Semiconductor, and the amendment thereto, date November 14, 2012 which were assigned to Tenant  on or about June 30, 2014 will be terminated as of April 30, 2015.

ARTICLE 43 RESERVED SPACE

The area indicated in Exhibit A and so designated as “Area Not included in lease” (hereafter “Area”) is approximately 2,300 sf and shall not be occupied.  GigOptix shall have the option up and until February 1, 2016 to notify Landlord of its intent to lease and rent said Area with the commencement of the additional lease term to begin on May 1, 2016. Notice will be given in accordance with the terms of the Lease.   However, should GigOptix occupy any portion of the Area prior to February 1, 2016 then the entirety of the Area,  2,300 sf,  shall be added to the existing lease and the monthly rent amount shall increase to $8,400.00 with the new monthly payment to begin upon use of the Area, prorated as needed.  Should Tenant not utilize any  or all of Area and  notice to Landlord is not be given by February 1^st 2016, Tenant will have waived its right to lease Area and  Landlord shall have the right to section off the Area by installing demising walls for the purposes of leasing the Area to another entity.

Exhibits.  The following Exhibits are attached to this Lease after the signatures and are incorporated herein by reference:

· Exhibit A - Floor Plan

Initials: ________

              ________

18

This Agreement has been prepared for submission to your attorney for his approval.  No representations or recommendation is made by the real estate Broker(s) or their agents or employees as to the legal sufficiency, legal effect, or tax consequences of this Agreement or the transaction involved herein.

LANDLORD:		TENANT:
KEITH C. & TRACI A. ESTES, TRUST		GIGOPTIX, INC.
BY:		BY:
	Keith Estes
TITLE:	Owner – Trustee	TITLE:
DATE:		DATE:

EXHIBIT A Floor Plan

Initials: ________

              ________

19

Initials: ________

              ________

20

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: May 07, 2015

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, Darren Ma, 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/	Darren Ma
Darren Ma
Chief Financial Officer and Principal Financial and Principal Accounting Officer
Date: May 07, 2015

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 March 29, 2015 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: May 07, 2015

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 March 29, 2015 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/	Darren Ma
Darren Ma
Chief Financial Officer and Principal Financial and Principal Accounting Officer

Dated: May 07, 2015

XML

SEGMENT AND GEOGRAPHIC INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 29, 2015 Customer	Mar. 30, 2014 Customer	Dec. 31, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	$ 9,060	$ 7,386
Revenue by geographic region (in hundredths)	100.00%	100.00%	100.00%
Number of customers	3	1
Long-lived assets	2,134		1,916
HSC [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	6,201	5,282
Revenue by geographic region (in hundredths)	68.00%	72.00%
Industrial [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	2,859	2,104
Revenue by geographic region (in hundredths)	32.00%	28.00%
Customer One [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Major customer percentage (in hundredths)		28.00%
Customer Three [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Major customer percentage (in hundredths)	51.00%
North America [Member] | Reportable Geographical Components [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	3,031	2,227
Revenue by geographic region (in hundredths)	33.00%	30.00%
Asia [Member] | Reportable Geographical Components [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	2,819	2,158
Revenue by geographic region (in hundredths)	31.00%	29.00%
Europe [Member] | Reportable Geographical Components [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	2,953	2,909
Revenue by geographic region (in hundredths)	33.00%	40.00%
Other [Member] | Reportable Geographical Components [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	257	92
Revenue by geographic region (in hundredths)	3.00%	1.00%
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue by geographic region (in hundredths)	27.00%	28.00%
United States [Member] | Reportable Geographical Components [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue by geographic region (in hundredths)	88.00%		88.00%
Long-lived assets	1,875		1,687
Switzerland [Member] | Reportable Geographical Components [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue by geographic region (in hundredths)	12.00%		28.00%
Long-lived assets	$ 259		$ 229
Italy [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue by geographic region (in hundredths)	29.00%	36.00%
Japan [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue by geographic region (in hundredths)		15.00%
Hong Kong [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue by geographic region (in hundredths)	14.00%
Taiwan [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue by geographic region (in hundredths)	11.00%

XML

STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION, Warrants (Details)	3 Months Ended
	Mar. 29, 2015
STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION [Abstract]
Warrants outstanding (in shares)	658,240
Number of warrants expired (in shares)	0

XML

COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Mar. 29, 2015

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
2015	$	3		$	383
2016		3			496
2017		3			124
Total minimum lease payments		9		$	1,003
Less: Amount representing interest		(1	)
Total capital lease obligations		8
Less: current portion		(3	)
Long-term portion of capital lease obligations	$	5

XML

INCOME TAXES (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2015	Mar. 30, 2014
INCOME TAXES [Abstract]
Provision for income taxes	$ 9	$ 10
Effective tax rate (in hundredths)	1.00%	1.00%

XML

FAIR VALUE

3 Months Ended

Mar. 29, 2015

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 March 29, 2015 and December 31, 2014 (in thousands):

			Fair Value Measurements Using
	Carrying Value		Quoted Prices in Active Markets for IdenticalAssets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 29, 2015:
Assets:
Cash equivalents:
Money market funds	$	12,361	$	12,361	$	-	$	-
	$	12,361	$	12,361	$	-	$	-
Current liabilities:
Liability warrants	$	7	$	-	$	-	$	7
December 31, 2014:
Assets:
Cash equivalents:
Money market funds	$	12,360	$	12,360	$	-	$	-
	$	12,360	$	12,360	$	-	$	-
Current liabilities:
Liability warrants	$	8	$	-	$	-	$	8

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 three months ended March 29, 2015, 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 line of credit and capital lease obligations approximates fair value and is based upon borrowing rates currently available to the Company for loans and 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 March 29, 2015			As of December 31, 2014
Stock price	$	1.19		$	1.20
Exercise price	$	2.51		$	2.51
Expected life	2.31 years			2.55 years
Risk-free interest rate		0.60	%		1.10	%
Volatility		69	%		69	%
Fair value per share	$	0.24		$	0.27

The following table summarizes the warrants subject to liability accounting as of March 29, 2015 and December 31, 2014 (in thousands, except share and per share amounts) (see also Note 6):

													Three Months Ended March 29, 2015					Three Months Ended March 30, 2014
Holder	Original Warrants		Adjusted Warrants		Grant Date	Expiration Date	Price per Share		Fair Value March 29, 2015		Fair Value December 31, 2014		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	$	7	$	8		-	$	(1	)		-	$	2	Credit Agreement

The change in the fair value of the Level 3 liability warrants during the three months ended March 29, 2015 is as follows (in thousands):

Fair value as of December 31, 2014	$	8
Exercise of warrants		-
Change in fair value		(1	)
Fair value as of March 29, 2015	$	7

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

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INTANGIBLE ASSETS AND GOODWILL (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2015	Mar. 30, 2014	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Gross intangible asset	$ 8,908		$ 8,908
Accumulated amortization	(6,737)		(6,514)
Net intangible asset	2,171		2,394	[1]
Amortization of intangible assets	223	223
Cost of Revenue [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization of intangible assets	103	103
Selling, General and Administrative Expenses [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization of intangible assets	120	120
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Gross intangible asset	3,277		3,277
Accumulated amortization	(2,224)		(2,119)
Net intangible asset	1,053		1,158
Existing Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Gross intangible asset	3,783		3,783
Accumulated amortization	(2,982)		(2,881)
Net intangible asset	801		902
Order Backlog [Member]
Finite-Lived Intangible Assets [Line Items]
Gross intangible asset	732		732
Accumulated amortization	(732)		(732)
Net intangible asset	0		0
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Gross intangible asset	457		457
Accumulated amortization	(404)		(402)
Net intangible asset	53		55
Trade Name [Member]
Finite-Lived Intangible Assets [Line Items]
Gross intangible asset	659		659
Accumulated amortization	(395)		(380)
Net intangible asset	$ 264		$ 279

[1] The condensed consolidated balance sheet as of December 31, 2014 has been derived from the audited consolidated financial statements as of that date.

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FAIR VALUE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	0 Months Ended		3 Months Ended	12 Months Ended	3 Months Ended
	Dec. 24, 2013	Jul. 07, 2010	Mar. 29, 2015	Dec. 31, 2014	Mar. 30, 2014	Dec. 16, 2014
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	$ 1.19	$ 1.20
Fair value assumptions [Abstract]
Stock price (in dollars per share)	$ 1.42	$ 1.75	$ 1.19	$ 1.20
Strike price (in dollars per share)			$ 2.51	$ 2.51
Expected life			2 years 3 months 22 days	2 years 6 months 18 days
Risk-free interest rate (in hundredths)			0.60%	1.10%
Volatility (in hundredths)			69.00%	69.00%
Fair value per share (in dollars per share)			$ 0.24	$ 0.27
Warrants subject to liability accounting [Abstract]
Adjusted warrants (in shares)			658,240
Price per share (in dollars per share)			$ 5.25			$ 8.50
Liability Warrants [Member]
Warrants subject to liability accounting [Abstract]
Holder			Bridge Bank
Original warrants (in shares)			20,000
Adjusted warrants (in shares)			29,115
Grant date			Apr. 07, 2010
Expiration date			Jul. 07, 2017
Price per share (in dollars per share)			$ 2.51
Fair value			$ 7
Exercise of warrants			0		0
Change in fair value			(1)		2
Related agreement			Credit Agreement
Change in fair value of Level 3 liability warrants [Roll Forward]
Fair value, beginning of period			8
Exercise of warrants			0		0
Change in fair value			(1)		2
Fair value, end of period			7
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Cash equivalents [Abstract]
Total assets, fair value			12,361	12,360
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Money Market Funds [Member]
Cash equivalents [Abstract]
Cash equivalents			12,361	12,360
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Liability Warrants [Member]
Current liabilities [Abstract]
Liability warrants			0	0
Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Cash equivalents [Abstract]
Total assets, fair value			0	0
Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Money Market Funds [Member]
Cash equivalents [Abstract]
Cash equivalents			0	0
Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Liability Warrants [Member]
Current liabilities [Abstract]
Liability warrants			0	0
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Cash equivalents [Abstract]
Total assets, fair value			0	0
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Money Market Funds [Member]
Cash equivalents [Abstract]
Cash equivalents			0	0
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Liability Warrants [Member]
Current liabilities [Abstract]
Liability warrants			7	8
Carrying Value [Member] | Recurring [Member]
Cash equivalents [Abstract]
Total assets, fair value			12,361	12,360
Carrying Value [Member] | Recurring [Member] | Money Market Funds [Member]
Cash equivalents [Abstract]
Cash equivalents			12,361	12,360
Carrying Value [Member] | Recurring [Member] | Liability Warrants [Member]
Current liabilities [Abstract]
Liability warrants			$ 7	$ 8

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INTANGIBLE ASSETS AND GOODWILL, Schedule of Acquired Finite-Lived Intangible Asset by Major Class (Details) (USD $)	3 Months Ended
	Mar. 29, 2015 Employee	Dec. 31, 2014
Acquired Finite-Lived Intangible Assets [Line Items]
Goodwill related to acquisition	$ 10,395,000	$ 10,306,000	[1]
Future amortization expense [Abstract]
2015	670,000
2016	869,000
2017	487,000
2018	63,000
2019	54,000
Thereafter	28,000
Total	2,171,000
Tahoe RF [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Goodwill related to acquisition	535,000
Goodwill acquired due to acquisition	446,000
Liabilities incurred	446,000
Liabilities assumed - current	20,000
Number of employees added as part of acquisition	10
Tax and legal expenses	89,000
Liabilities incurred maximum	254,000
Bonus payable to employees	128,000
Retention bonus payable, during the period July 2016 through July 2020	70,000
Number of employees remaining and payable retention bonus	8
Accrued bonuses noncurrent	$ 95,000

[1] The condensed consolidated balance sheet as of December 31, 2014 has been derived from the audited consolidated financial statements as of that date.

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CREDIT FACILITIES (Details) (USD $) In Millions, unless otherwise specified	2 Months Ended	3 Months Ended
	Mar. 08, 2015	Mar. 29, 2015
Line of Credit Facility [Line Items]
Loan agreement expiration date	Mar. 09, 2015	May 08, 2015
Loan agreement number of days to extend expiration period		60 days
Line of Credit - Silicon Valley Bank [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity		7.0
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
Number of business days to repay interest on borrowings unrelated to accounts receivable balances		3 days
Amount outstanding		0

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BALANCE SHEET COMPONENTS

3 Months Ended

Mar. 29, 2015

BALANCE SHEET COMPONENTS [Abstract]

BALANCE SHEET COMPONENTS

NOTE 2—BALANCE SHEET COMPONENTS

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

	March 29,			December 31,
	2015			2014
Accounts receivable	$	8,298		$	8,003
Allowance for doubtful accounts		(44	)		(48	)
	$	8,254		$	7,955

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

	Life		March 29,			December 31,
	(In years)		2015			2014
Network and laboratory equipment		3 – 5	$	11,937		$	11,252
Computer software and equipment		2 – 3		3,918			3,877
Furniture and fixtures		3 – 7		165			165
Office equipment		3 – 5		135			131
Leasehold improvements		1 – 5		279			276
				16,434			15,701
Accumulated depreciation and amortization				(14,300	)		(13,785	)
Property and equipment, net			$	2,134		$	1,916

For the three months ended March 29, 2015 and March 30, 2014, depreciation expense related to property and equipment was $415,000 and $543,000, respectively.

In addition to the property and equipment above, the Company has prepaid licenses. For the three months ended March 29, 2015 and March 30, 2014, amortization related to these prepaid licenses was $252,000 and $151,000, respectively.

 Inventories consisted of the following (in thousands):

	March 29,		December 31,
	2015		2014
Raw materials	$	2,484	$	1,676
Work in process		1,528		1,421
Finished goods		1,966		2,042
	$	5,978	$	5,139

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

	March 29,		December 31,
	2015		2014
Amounts billed to the U.S. government in excess of approved rates	$	191	$	191
Warranty liability		369		334
Customer deposits		258		599
Capital lease obligations, current portion		3		3
Sales return reserve		552		412
Deferred revenue		337		327
Other		1,074		1,036
	$	2,784	$	2,902

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 three months ended March 29, 2015 and March 30, 2014 are as follows (in thousands):

	Three months ended
	March 29, 2015			March 30, 2014
Beginning balance	$	334		$	330
Warranties accrued		158			112
Warranties settled or reversed		(123	)		(127	)
Ending balance	$	369		$	315

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STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION (Details) (USD $)	0 Months Ended	3 Months Ended
	Dec. 16, 2014	Mar. 29, 2015	Dec. 31, 2014	Dec. 16, 2014	Nov. 30, 2014	Jan. 06, 2012	Dec. 31, 2008
Subsidiary, Sale of Stock [Line Items]
Par value on common stock in public offering (in dollars per share)		$ 0.001	$ 0.001		$ 0.001		$ 0.001
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]
Preferred stock, authorized (in shares)		1,000,000	1,000,000				1,000,000
Fractional share of preferred stock each preferred share purchase right is entitled to (in shares)		1
Common and preferred stock [Abstract]
Common stock, authorized (in shares)		100,000,000	100,000,000		100,000,000		50,000,000
Common stock, par value (in dollars per share)		$ 0.001	$ 0.001		$ 0.001		$ 0.001
Preferred stock, par value (in dollars per share)		$ 0.001	$ 0.001				$ 0.001
Preferred stock, issued (in shares)		0	0
Preferred stock, outstanding (in shares)		0	0
Stockholders rights plan number of years to extend expiration date	3 years
Stockholders rights plan expiration date	Dec. 16, 2017
Exercise price per share (in dollars per share)	$ 8.50	$ 5.25		$ 8.50
Common stock dividends, number of preferred stock purchase rights per share (in shares)	1			1		1
Minimum ownership percentage of beneficial owner for exercisability of rights to purchase preferred stock to be triggered		10.00%
Minimum percentage of additional purchase of outstanding shares by existing owner of 10 percent or more for exercisability of rights to purchase preferred stock to be triggered (in hundredths)		1.00%
Preferred stock, voting rights		Each share of preferred stock has voting rights equal to one thousand shares of common stock
Series A Junior Preferred Stock [Member]
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]
Preferred stock, authorized (in shares)							750,000
Fractional share of preferred stock each preferred share purchase right is entitled to (in shares)	1			1

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COMMITMENTS AND CONTINGENCIES (Details) (USD $)	3 Months Ended
	Mar. 29, 2015 sqft	Mar. 30, 2014	Dec. 31, 2014
COMMITMENTS AND CONTINGENCIES [Abstract]
Facilities rent expense	$ 111,000	$ 141,000
Bothell facility, sq ft.	11,666
Lease term	1 year
Bellevue Facility, sq ft	2,100
Aggregate non-cancelable future minimum rental payments under capital leases [Abstract]
Capital leases, 2015	3,000
Capital leases, 2016	3,000
Capital leases, 2017	3,000
Capital leases, total minimum lease payments	9,000
Less: Amount representing interest	(1,000)
Total capital lease obligations	8,000
Less: current portion	(3,000)		(3,000)
Long-term portion of capital lease obligations	5,000
Aggregate non-cancelable future minimum rental payments under operating leases [Abstract]
Operating leases, 2014	383,000
Operating leases, 2015	496,000
Operating leases, 2016	124,000
Operating leases, total minimum lease payments	$ 1,003,000

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands, unless otherwise specified	Mar. 29, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 17,664	$ 18,438	[1]
Accounts receivable, net	8,254	7,955	[1]
Inventories	5,978	5,139	[1]
Prepaid and other current assets	738	433	[1]
Total current assets	32,634	31,965	[1]
Property and equipment, net	2,134	1,916	[1]
Intangible assets, net	2,171	2,394	[1]
Goodwill	10,395	10,306	[1]
Restricted cash	54	53	[1]
Other assets	123	116	[1]
Total assets	47,511	46,750	[1]
Current liabilities:
Accounts payable	2,773	2,731	[1]
Accrued compensation	1,269	730	[1]
Other current liabilities	2,784	2,902	[1]
Total current liabilities	6,826	6,363	[1]
Pension liabilities	335	326	[1]
Other long term liabilities	634	556	[1]
Total liabilities	7,795	7,245	[1]
Commitments and contingencies (Note 11)			[1]
Stockholders' equity:
Preferred stock, $0.001 par value; 1,000,000 shares authorized; no shares issued and outstanding as of March 29, 2015 and December 31, 2014, respectively	0	0	[1]
Common stock, $0.001 par value; 100,000,000 shares authorized; 33,318,633 and 33,112,086 shares issued and outstanding as of March 29, 2015 and December 31, 2014, respectively	33	32	[1]
Additional paid-in capital	144,487	143,661	[1]
Treasury stock, at cost; 701,754 shares as of March 29, 2015 and December 31, 2014, respectively	(2,209)	(2,209)	[1]
Accumulated other comprehensive income	305	285	[1]
Accumulated deficit	(102,900)	(102,264)	[1]
Total stockholders' equity	39,716	39,505	[1]
Total liabilities and stockholders' equity	$ 47,511	$ 46,750	[1]

[1] The condensed consolidated balance sheet as of December 31, 2014 has been derived from the audited consolidated financial statements as of that date.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2015		Mar. 30, 2014
Cash flows from operating activities:
Net loss	$ (636)		$ (1,897)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	890		917
Stock-based compensation	889		1,010
Change in fair value of warrants	(1)		2
Changes in operating assets and liabilities
Accounts receivable	(299)		(1,044)
Inventories	(839)		(136)
Prepaid and other current assets	(557)		(25)
Other assets	(7)		25
Accounts payable	(168)		1,595
Accrued restructuring	0		(29)
Accrued compensation	539		(125)
Other current liabilities	(217)		(487)
Other long-term liabilities	79		(13)
Net cash used in operating activities	(327)		(207)
Cash flows from investing activities:
Purchases of property and equipment	(416)		(123)
Net cash used in investing activities	(416)		(123)
Cash flows from financing activities:
Proceeds from issuance of stock	28		10
Taxes paid related to net share settlement of equity awards	(90)		(103)
Repayment of capital lease	(1)		(89)
Net cash used in financing activities	(63)		(182)
Effect of exchange rates on cash and cash equivalents	32		0
Net decrease in cash and cash equivalents	(774)		(512)
Cash and cash equivalents as of beginning of period	18,438	[1]	20,377
Cash and cash equivalents as of end of period	17,664		19,865
Supplemental disclosure of cash flow information
Interest paid	4		17
Property and equipment acquired with accounts payable	$ 289		$ 406

[1] The condensed consolidated balance sheet as of December 31, 2014 has been derived from the audited consolidated financial statements as of that date.

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STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION (Tables)

3 Months Ended

Mar. 29, 2015

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 months ended March 29, 2015 and March 30, 2014 (in thousands):

	Three Months Ended
	March 29, 2015		March 30, 2014
Cost of revenue	$	82	$	76
Research and development expense		247		275
Selling, general and administrative expense		560		659
	$	889	$	1,010

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			Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term, in Years
Outstanding, December 31, 2014		8,801,160		$	2.35		5.91
Granted		-
Exercised		(28,194	)	$	0.97
Forfeited/Expired		(505,533	)	$	3.15
Ending balance, March 29, 2015		8,267,433		$	2.31		5.63
Vested and exercisable and expected to vest, March 29, 2015		8,140,894		$	2.31		5.60
Vested and exercisable, March 29, 2015		7,456,321		$	2.33		5.44

Summary of RSU 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		AggregateIntrinsic Value
								(In thousands)
Outstanding, December 31, 2014		1,915,858		$	1.55		3.11	$	1,990
Granted		2,815,822			1.25
Released		(257,571	)		1.38
Forfeited/expired		(17,262	)		1.50
Outstanding, March 29, 2015		4,456,847		$	1.37		2.83	$	5,304

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INVESTMENT IN UNCONSOLIDATED AFFILIATE (Details) (USD $)	12 Months Ended
	Dec. 31, 2014		Mar. 29, 2015	Feb. 28, 2014
Schedule of Investments [Line Items]
Inventory	$ 5,139,000	[1]	$ 5,978,000
Property and equipment	1,916,000	[1]	2,134,000
CPqD [Member]
Schedule of Investments [Line Items]
Joint venture ownership percentage (in hundredths)				51.00%
BrP [Member]
Schedule of Investments [Line Items]
Inventory			245,000
Property and equipment			211,000
Investment in affiliate	0		456,000
Loss attributable to affiliate	$ 456,000
GigOptix, Inc. [Member]
Schedule of Investments [Line Items]
Joint venture ownership percentage (in hundredths)				49.00%

[1] The condensed consolidated balance sheet as of December 31, 2014 has been derived from the audited consolidated financial statements as of that date.

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SEGMENT AND GEOGRAPHIC INFORMATION (Tables)

3 Months Ended

Mar. 29, 2015

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
	March 29, 2015				March 30, 2014
North America	$	3,031	33	%	$	2,227	30	%
Asia		2,819	31	%		2,158	29	%
Europe		2,953	33	%		2,909	40	%
Other		257	3	%		92	1	%
	$	9,060	100	%	$	7,386	100	%

Revenue by product line

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

	Three Months Ended
	March 29, 2015				March 30, 2014
HSC	$	6,201	68	%	$	5,282	72	%
Industrial		2,859	32	%		2,104	28	%
Total revenue	$	9,060	100	%	$	7,386	100	%

Long lived assets by country

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

	March 29, 2015				December 31, 2014
United States	$	1,875	88	%	$	1,687	88	%
Switzerland		259	12	%		229	12	%
	$	2,134	100	%	$	1,916	100	%

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ORGANIZATION AND BASIS OF PRESENTATION

3 Months Ended

Mar. 29, 2015

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. Its products address the needs of emerging high-growth markets, such as long haul and metro telecommunications (“telecom”) applications, as well as Cloud data communications (“datacom”) and datacenter connectivity, point-to-point wireless backhaul, and interactive high speed applications for the consumer electronics, 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.  Its products are highly customized and typically developed in partnership with key ”Lighthouse” customers, generating engineering project revenues through the development stage and larger future product revenue through these customers and general market availability.

The HSC product line offers a broad portfolio of high performance semiconductor devices and multi-chip-Modules (MCMs) aimed predominantly at the telecom, datacom and consumer-electronics optical communications and wireless markets, and includes, among others, (i) mixed signal radio frequency integrated circuits (“RFIC”) at 50 GHz and above; (ii) 10 to 400 gigabit per second (“Gbps”) laser and optical-modulator drivers, and trans-impedance amplifiers (“TIA”); (iii) power amplifiers and transceivers for microwave and millimeter monolithic microwave integrated circuit (“MMIC”) wireless applications at frequencies higher than 50 GHz; (iv) integrated systems in a package (“SIP”) solutions for both fiber-optic and wireless communication systems; and (v) radio frequency (“RF’) chips for various consumer applications such as global navigation satellite systems (“GNSS”).

The Industrial product line offers a wide range of digital and mixed-signal application specific integrated circuit (“ASIC”) solutions for various industrial applications used in the military, avionics, automotive, security and surveillance, medical and communications markets.

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 currently in the process of being dissolved.

In February 2014, together with Fundação CPqD – Centro De Pesquisa e Desenvolvimento em Telecomunicações (“CPqD”), the Company formed 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 fiber-optics communication networks. This joint venture is also engaged in research and development of Silicon-Photonics (“SiPh”) advanced electro-optical products. During the second quarter of 2014, the Company transferred all of its inventory and assets related to the Thin Film Polymer on Silicon (“TFPS^TM”) platform and the production line equipment for use by BrP (see also Note 7).

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 and analog RFICs, intellectual property, and fully integrated systems and subsystems on a chip. That acquisition closed on June 30, 2014, which was the first day of the Company’s third quarter of fiscal 2014.

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 first quarter of 2015 ended on Sunday, March 29, 2015. The first quarter of 2014 ended on Sunday, March 30, 2014. 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 March 29, 2015 and for the three months ended March 29, 2015 and March 30, 2014, 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. The statements include the accounts of the Company and all of its subsidiaries and 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 March 29, 2015, and the results of operations and cash flows for the three months ended March 29, 2015 and March 30, 2014. The condensed consolidated results of operations for the three months ended March 29, 2015 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending December 31, 2015. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the 2014 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 2014 Form 10-K and the Company encourages you to read its 2014 Form 10-K for more information about such estimates and assumptions.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)	Mar. 29, 2015	Dec. 31, 2014
Stockholders' equity:
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized (in shares)	1,000,000	1,000,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized (in shares)	100,000,000	100,000,000
Common stock, issued (in shares)	33,318,633	33,112,086
Common stock, outstanding (in shares)	33,318,633	33,112,086
Treasury stock, at cost (in shares)	701,754	701,754

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 29, 2015

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 11—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 months ended March 29, 2015 was $111,000, and for the three months ended March 30, 2014 was $141,000.

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
2015	$	3		$	383
2016		3			496
2017		3			124
Total minimum lease payments		9		$	1,003
Less: Amount representing interest		(1	)
Total capital lease obligations		8
Less: current portion		(3	)
Long-term portion of capital lease obligations	$	5

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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Document and Entity Information	3 Months Ended
	Mar. 29, 2015	Apr. 24, 2015
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		32,617,947
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2015

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ORGANIZATION AND BASIS OF PRESENTATION (Policies)

3 Months Ended

Mar. 29, 2015

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. Its products address the needs of emerging high-growth markets, such as long haul and metro telecommunications (“telecom”) applications, as well as Cloud data communications (“datacom”) and datacenter connectivity, point-to-point wireless backhaul, and interactive high speed applications for the consumer electronics, 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.  Its products are highly customized and typically developed in partnership with key ”Lighthouse” customers, generating engineering project revenues through the development stage and larger future product revenue through these customers and general market availability.

The HSC product line offers a broad portfolio of high performance semiconductor devices and multi-chip-Modules (MCMs) aimed predominantly at the telecom, datacom and consumer-electronics optical communications and wireless markets, and includes, among others, (i) mixed signal radio frequency integrated circuits (“RFIC”) at 50 GHz and above; (ii) 10 to 400 gigabit per second (“Gbps”) laser and optical-modulator drivers, and trans-impedance amplifiers (“TIA”); (iii) power amplifiers and transceivers for microwave and millimeter monolithic microwave integrated circuit (“MMIC”) wireless applications at frequencies higher than 50 GHz; (iv) integrated systems in a package (“SIP”) solutions for both fiber-optic and wireless communication systems; and (v) radio frequency (“RF’) chips for various consumer applications such as global navigation satellite systems (“GNSS”).

The Industrial product line offers a wide range of digital and mixed-signal application specific integrated circuit (“ASIC”) solutions for various industrial applications used in the military, avionics, automotive, security and surveillance, medical and communications markets.

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 currently in the process of being dissolved.

In February 2014, together with Fundação CPqD – Centro De Pesquisa e Desenvolvimento em Telecomunicações (“CPqD”), the Company formed 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 fiber-optics communication networks. This joint venture is also engaged in research and development of Silicon-Photonics (“SiPh”) advanced electro-optical products. During the second quarter of 2014, the Company transferred all of its inventory and assets related to the Thin Film Polymer on Silicon (“TFPS^TM”) platform and the production line equipment for use by BrP (see also Note 7).

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 and analog RFICs, intellectual property, and fully integrated systems and subsystems on a chip. That acquisition closed on June 30, 2014, which was the first day of the Company’s third quarter of fiscal 2014.

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 first quarter of 2015 ended on Sunday, March 29, 2015. The first quarter of 2014 ended on Sunday, March 30, 2014. 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 March 29, 2015 and for the three months ended March 29, 2015 and March 30, 2014, 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. The statements include the accounts of the Company and all of its subsidiaries and 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 March 29, 2015, and the results of operations and cash flows for the three months ended March 29, 2015 and March 30, 2014. The condensed consolidated results of operations for the three months ended March 29, 2015 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending December 31, 2015. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the 2014 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 2014 Form 10-K and the Company encourages you to read its 2014 Form 10-K for more information about such estimates and assumptions.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 29, 2015	Mar. 30, 2014
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) [Abstract]
Total revenue	$ 9,060	$ 7,386
Total cost of revenue	3,667	3,126
Gross profit	5,393	4,260
Operating expenses
Research and development expense	3,248	3,742
Selling, general and administrative expense	2,770	2,398
Loss from operations	(625)	(1,880)
Interest expense, net	(3)	(17)
Other income, net	1	10
Loss before provision for income taxes	(627)	(1,887)
Provision for income taxes	9	10
Net loss	$ (636)	$ (1,897)
Net loss per share-basic and diluted (in dollars per share)	$ (0.02)	$ (0.06)
Weighted average number of shares used in basic and diluted net loss per share calculations (in shares)	32,525	31,435

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STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION

3 Months Ended

Mar. 29, 2015

STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION [Abstract]

STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION

NOTE 6—STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

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 November 2014, the Company’s stockholders approved an amendment to the Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 50,000,000 shares to 100,000,000 shares 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 750,000 shares have been designated Series A Junior Preferred Stock with powers, preferences and rights as set forth in the amended and restated certificate of designation dated December 15, 2014; 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 March 29, 2015 and December 31, 2014, there were no shares of preferred stock issued or outstanding.

On December 16, 2014, the Company entered into an Amended and Restated Rights Agreement to extend the expiration date of its stockholder rights plan that may have the effect of deterring, delaying, or preventing a change in control. The Amended and Restated Rights Agreement amends the Rights Agreement previously adopted by (i) extending the expiration date by three years to December 16, 2017, (ii) decreasing the exercise price per right issued to stockholders pursuant to the stockholder rights plan from $8.50 to $5.25, and (iii) making certain other technical and conforming changes. The Amended and Restated Rights Agreement was not adopted in response to any acquisition proposal.  Under the rights plan, the Company issued a dividend of one preferred share purchase right for each share of common stock held by stockholders of record as of January 6, 2012, and the Company will issue one preferred stock purchase right to each share of common stock issued between January 6, 2012 and the earlier of either the rights’ exercisability or the expiration of the Rights Agreement. Each right entitles stockholders to purchase one one-thousandth of the Company’s Series A Junior Preferred Stock.

In general, the exercisability of the rights to purchase preferred stock will be triggered if any person or group, including persons knowingly acting in concert to affect the control of the Company, is or becomes a beneficial owner of 10% or more of the outstanding shares of the Company’s common stock after the Adoption Date. Stockholders or beneficial ownership groups who owned 10% or more of the outstanding shares of common stock of the Company on or before the Adoption Date will not trigger the preferred share purchase rights unless they acquire an additional 1% or more of the outstanding shares of the Company’s common stock. Each right entitles a holder with the right upon exercise to purchase one one-thousandth of a share of preferred stock at an exercise price that is currently set at $5.25 per right, subject to purchase price adjustments as set forth in the rights agreement. Each share of preferred stock has voting rights equal to one thousand shares of common stock. In the event that exercisability of the rights is triggered, each right held by an acquiring person or group would become void. As a result, upon triggering of exercisability of the rights, there would be significant dilution in the ownership interest of the acquiring person or group, making it difficult or unattractive for the acquiring person or group to pursue an acquisition of the Company. These rights expire in December of 2017, unless earlier redeemed or exchanged by the Company.

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, 2014, the stockholders had approved 16,624,634 shares for future issuance. On January 1, 2015, there was an automatic increase of 1,655,604 shares. As of March 29, 2015, 12,290,653 options to purchase common stock and restricted stock units (“RSUs”) were outstanding and 2,902,824 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 incentive stock option (“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 RSUs which generally vest over a three quarters 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 in 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 March 29, 2015, options to purchase a total of 376,436 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 March 29, 2015, no additional options can be granted under the Lumera Plan, and options to purchase a total of 57,191 shares of common stock were outstanding.

Warrants

As of March 29, 2015, the Company had a total of 658,240 warrants to purchase common stock outstanding under all warrant arrangements. During the three months ended March 29, 2015, no warrants were exercised and expired. 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 months ended March 29, 2015 and March 30, 2014 (in thousands):

	Three Months Ended
	March 29, 2015		March 30, 2014
Cost of revenue	$	82	$	76
Research and development expense		247		275
Selling, general and administrative expense		560		659
	$	889	$	1,010

The Company did not grant any options during the three months ended March 29, 2015 and March 30, 2014.

During the three months ended March 29, 2015, the Company granted 2,815,822 RSUs with a grant-date fair value of $3.5 million or $1.25 per share. During the three months ended March 30, 2014, the Company granted 1,405,085 RSUs with a grant-date fair value of $2.4 million or $1.70 per share.

As of March 29, 2015, the total compensation cost not yet recognized in connection with unvested stock options and RSUs under the Company’s equity compensation plans was approximately $1.0 million and $5.2 million, respectively. Unrecognized compensation will be amortized on a straight-line basis over a weighted-average period of approximately 1.28 years for stock options and approximately 2.83 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			Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term, in Years
Outstanding, December 31, 2014		8,801,160		$	2.35		5.91
Granted		-
Exercised		(28,194	)	$	0.97
Forfeited/Expired		(505,533	)	$	3.15
Ending balance, March 29, 2015		8,267,433		$	2.31		5.63
Vested and exercisable and expected to vest, March 29, 2015		8,140,894		$	2.31		5.60
Vested and exercisable, March 29, 2015		7,456,321		$	2.33		5.44

The aggregate intrinsic value of options vested, exercisable and expected to vest, based on the fair value of the underlying stock options as of March 29, 2015 was approximately $443,000. The aggregate intrinsic value reflects the difference between the exercise price of the underlying stock options and the Company’s closing share price of $1.19 as of March 27, 2015.

The total intrinsic value of options exercised during the three months ended March 29, 2015 was $8,000. The total intrinsic value of options exercised during the three months ended March 30, 2014 was $5,000.

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		AggregateIntrinsic Value
								(In thousands)
Outstanding, December 31, 2014		1,915,858		$	1.55		3.11	$	1,990
Granted		2,815,822			1.25
Released		(257,571	)		1.38
Forfeited/expired		(17,262	)		1.50
Outstanding, March 29, 2015		4,456,847		$	1.37		2.83	$	5,304

The majority of the RSUs that vested in the three months ended March 29, 2015 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 three months ended March 29, 2015, 257,571 shares of RSUs vested with an intrinsic value of approximately $307,000. The Company withheld 79,218 shares to satisfy approximately $90,000 of employees’ minimum tax obligation on the vested RSUs.

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CREDIT FACILITIES

3 Months Ended

Mar. 29, 2015

CREDIT FACILITIES [Abstract]

CREDIT FACILITIES

NOTE 5—CREDIT FACILITIES

On March 25, 2013, the Company and its wholly owned subsidiaries, ChipX, Incorporated and Endwave Corporation (together with the Company, the “Borrowers”) previously 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 $7.0 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 terms of the Loan Agreement were set to expire on March 9, 2015. On March 9, 2015 SVB and the Borrowers entered into a First Amendment to the Second Restated Loan Agreement (the “First Amendment”) in order to extend the expiration date of the Loan Agreement by sixty (60) days to May 8, 2015. The Borrowers intend to use this period of time to negotiate the terms of a new loan and security agreement with SVB. Other than as set forth herein with regard to the First Amendment, the terms of the Second Restated Loan Agreement remain unchanged and in full force and effect.

The Company had no outstanding balance on its line of credit as of March 29, 2015.

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NET LOSS PER SHARE (Tables)

3 Months Ended

Mar. 29, 2015

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:

	March 29,		March 30,
	2015		2014
Stock options and RSUs		12,724,280		12,743,125
Common stock warrants		658,240		1,183,240
Total		13,382,520		13,926,365

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BALANCE SHEET COMPONENTS (Tables)

3 Months Ended

Mar. 29, 2015

BALANCE SHEET COMPONENTS [Abstract]

Accounts receivable, net

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

	March 29,			December 31,
	2015			2014
Accounts receivable	$	8,298		$	8,003
Allowance for doubtful accounts		(44	)		(48	)
	$	8,254		$	7,955

Property and equipment, net

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

	Life		March 29,			December 31,
	(In years)		2015			2014
Network and laboratory equipment		3 – 5	$	11,937		$	11,252
Computer software and equipment		2 – 3		3,918			3,877
Furniture and fixtures		3 – 7		165			165
Office equipment		3 – 5		135			131
Leasehold improvements		1 – 5		279			276
				16,434			15,701
Accumulated depreciation and amortization				(14,300	)		(13,785	)
Property and equipment, net			$	2,134		$	1,916

Inventories

Inventories consisted of the following (in thousands):

	March 29,		December 31,
	2015		2014
Raw materials	$	2,484	$	1,676
Work in process		1,528		1,421
Finished goods		1,966		2,042
	$	5,978	$	5,139

Accrued and other current liabilities

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

	March 29,		December 31,
	2015		2014
Amounts billed to the U.S. government in excess of approved rates	$	191	$	191
Warranty liability		369		334
Customer deposits		258		599
Capital lease obligations, current portion		3		3
Sales return reserve		552		412
Deferred revenue		337		327
Other		1,074		1,036
	$	2,784	$	2,902

Summary of changes in warranty accrual

Changes in the Company’s product warranty liability during the three months ended March 29, 2015 and March 30, 2014 are as follows (in thousands):

	Three months ended
	March 29, 2015			March 30, 2014
Beginning balance	$	334		$	330
Warranties accrued		158			112
Warranties settled or reversed		(123	)		(127	)
Ending balance	$	369		$	315

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NET LOSS PER SHARE

3 Months Ended

Mar. 29, 2015

NET LOSS PER SHARE [Abstract]

NET LOSS PER SHARE

NOTE 9—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:

	March 29,		March 30,
	2015		2014
Stock options and RSUs		12,724,280		12,743,125
Common stock warrants		658,240		1,183,240
Total		13,382,520		13,926,365

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INVESTMENT IN UNCONSOLIDATED AFFILIATE

3 Months Ended

Mar. 29, 2015

INVESTMENT IN UNCONSOLIDATED AFFILIATE [Abstract]

INVESTMENT IN UNCONSOLIDATED AFFILIATE

NOTE 7—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 transferred into BrP its knowledge-base and intellectual property of TFPS^TM technology. The Company 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 year ended December 31, 2014, the Company had a $456,000 loss on equity investment for the Company’s allocated portion of BrP’s results. Since the Company’s share of the loss exceeded the Company’s carrying cost of its investment in BrP, the Company’s investment in an unconsolidated affiliate was written down to zero as of December 31, 2014.

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INCOME TAXES

3 Months Ended

Mar. 29, 2015

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 8—INCOME TAXES

The Company recorded a provision for income taxes of $9,000 for the three months ended March 29, 2015, and $10,000 for the three months ended March 30, 2014. The Company's effective tax rate was approximately 1% for the three months ended March 29, 2015 and March 30, 2014.

The income tax provision for the three months ended March 29, 2015 and March 30, 2014 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 March 29, 2015 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 in the U.S. federal, U.S. state and foreign tax jurisdictions.  The Company’s major tax jurisdictions are the U.S., California, Switzerland, Germany and Israel. The Company’s fiscal years through March 29, 2015 remain subject to examination by the tax authorities for U.S. federal, U.S. state and foreign tax purpose.

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SEGMENT AND GEOGRAPHIC INFORMATION

3 Months Ended

Mar. 29, 2015

SEGMENT AND GEOGRAPHIC INFORMATION [Abstract]

SEGMENT AND GEOGRAPHIC INFORMATION

NOTE 10—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
	March 29, 2015				March 30, 2014
North America	$	3,031	33	%	$	2,227	30	%
Asia		2,819	31	%		2,158	29	%
Europe		2,953	33	%		2,909	40	%
Other		257	3	%		92	1	%
	$	9,060	100	%	$	7,386	100	%

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

For the three months ended March 29, 2015, three customers accounted for 51% of total revenue. For the three months ended March 30, 2014, one customer accounted for 28% of our total revenue. No other customers accounted for more than 10% of total revenue during the periods presented.

During three months ended March 29, 2015, Italy, the United States, Hong Kong, and Taiwan accounted for 29%, 27%, 14% and 11% of revenue, respectively. During three months ended March 30, 2014, Italy, the United States, and Japan accounted for 36%, 28%, and 15% of revenue, respectively. No other countries accounted for more than 10% of the Company’s consolidated revenue during the periods presented.

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

	Three Months Ended
	March 29, 2015				March 30, 2014
HSC	$	6,201	68	%	$	5,282	72	%
Industrial		2,859	32	%		2,104	28	%
Total revenue	$	9,060	100	%	$	7,386	100	%

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

	March 29, 2015				December 31, 2014
United States	$	1,875	88	%	$	1,687	88	%
Switzerland		259	12	%		229	12	%
	$	2,134	100	%	$	1,916	100	%

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

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STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION, Share-based Compensation Arrangements by Share-based Payment Award (Details) (USD $)	3 Months Ended		12 Months Ended
	Mar. 29, 2015	Mar. 30, 2014	Dec. 31, 2014	Dec. 31, 2008	Dec. 24, 2013	Jul. 07, 2010	Mar. 27, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options outstanding (in shares)	12,290,653
Warrants outstanding (in shares)	658,240
Stock price (in dollars per share)	$ 1.19		$ 1.20		$ 1.42	$ 1.75
Stock options activity, number of shares [Roll Forward]
Outstanding, ending balance (in shares)	12,290,653
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options outstanding (in shares)	8,267,433		8,801,160
Unrecognized compensation expense	$ 1,000,000
Weighted average period of recognition for unrecognized compensation cost	1 year 3 months 11 days
Stock price (in dollars per share)							$ 1.19
Stock options activity, number of shares [Roll Forward]
Outstanding, beginning of year (in shares)	8,801,160
Granted (in shares)	0
Exercised (in shares)	(28,194)
Forfeited/Expired (in shares)	(505,533)
Outstanding, ending balance (in shares)	8,267,433		8,801,160
Vested and exercisable and expected to vest (in shares)	8,140,894
Vested and exercisable (in shares)	7,456,321
Stock option activity, weighted-average exercise price [Roll Forward]
Weighted average exercise price, beginning balance (in dollars per shares)	$ 2.35
Weighted average exercise price, exercised (in dollars per shares)	$ 0.97
Weighted average exercise price, forfeited/expired (in dollars per shares)	$ 3.15
Outstanding, ending balance (in dollars per shares)	$ 2.31		$ 2.35
Weighted average exercise price, vested and expected to vest (in dollars per share)	$ 2.31
Weighted average exercise price, exercisable (in dollars per share)	$ 2.33
Weighted average remaining contractual term [Abstract]
Weighted average remaining contractual term, beginning balance	5 years 7 months 17 days		5 years 10 months 28 days
Weighted average remaining contractual term, expected to vest	5 years 7 months 6 days
Weighted average remaining contractual term, exercisable	5 years 5 months 8 days
Weighted average remaining contractual term, ending balance	5 years 7 months 17 days		5 years 10 months 28 days
Aggregate Intrinsic Value [Abstract]
Aggregate intrinsic value, exercised	8,000	5,000
Aggregate intrinsic value, vested and expected to vest	443,000
Restricted stock activity, number of shares [Roll Forward]
Granted (in shares)	0
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	5,200,000
Weighted average period of recognition for unrecognized compensation cost	2 years 9 months 29 days
Stock option activity, weighted-average exercise price [Roll Forward]
Weighted average exercise price, granted (in dollars per shares)	$ 1.25	$ 1.70
Restricted stock activity, number of shares [Roll Forward]
Outstanding, beginning of period (in shares)	1,915,858
Granted (in shares)	2,815,822	1,405,085
Released (in shares)	(257,571)
Forfeited/expired (in shares)	(17,262)
Outstanding, end of period (in shares)	4,456,847		1,915,858
Total grant date fair value	3,500,000	2,400,000
Restricted stock activity, Weighted Average Grant Date Fair Value [Roll Forward]
Outstanding, beginning of period (in dollars per share)	$ 1.55
Granted (in dollars per share)	$ 1.25
Released (in dollars per share)	$ 1.38
Forfeited/expired (in dollars per share)	$ 1.50
Outstanding, end of period (in dollars per share)	$ 1.37		$ 1.55
Restricted stock activity, Weighted-average Remaining Contractual Term, Years [Abstract]
Weighted-average remaining contractual term	2 years 9 months 29 days		3 years 1 month 10 days
Weighted-average remaining contractual term	2 years 9 months 29 days		3 years 1 month 10 days
Restricted stock activity, Aggregate Intrinsic Value [Roll Forward]
Aggregate intrinsic value outstanding beginning balance	1,990,000
Aggregate intrinsic value outstanding ending balance	5,304,000		1,990,000
Aggregate intrinsic value of vested and expected to vest awards	307,000
Shares withheld to satisfy minimum tax obligation (in shares)	79,218
Amount withheld to satisfy minimum tax obligation	$ 90,000
Restricted Stock Units (RSUs) [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	three quarters
Restricted Stock Units (RSUs) [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	4 years
2007 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares)	632,500
2007 Equity Incentive Plan [Member] | Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options outstanding (in shares)	376,436
Vesting period	4 years
Life from date of grant	10 years
Stock options cancelled (in shares)	864
Stock options activity, number of shares [Roll Forward]
Outstanding, ending balance (in shares)	376,436
2007 Equity Incentive Plan [Member] | Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding (in shares)	4,125
2008 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares)		21,000,000	16,624,634	2,500,000
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
Percentage of outstanding common stock (in hundredths)				5.00%
Automatic increase in number of shares reserved for future issuance (in shares)			1,655,604
2008 Equity Incentive Plan [Member] | Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	4 years
Cliff vesting per year (in hundredths)	25.00%
Life from date of grant	10 years
2008 Equity Incentive Plan [Member] | Stock Options [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price of stock options as percentage of fair market value on date of grant (in hundredths)	100.00%
2008 Equity Incentive Plan [Member] | Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares)	2,902,824
2008 Equity Incentive Plan [Member] | Restricted Stock Units (RSUs) [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	9 years
2008 Equity Incentive Plan [Member] | Restricted Stock Units (RSUs) [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	4 years
2008 Equity Incentive Plan [Member] | 10% Stockholder [Member] | Stock Options [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price of stock options as percentage of fair market value on date of grant (in hundredths)	110.00%
Lumera 2000 and 2004 Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Merger conversion ratio (in hundredths)	12.50%
Lumera 2000 and 2004 Stock Option Plan [Member] | Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options outstanding (in shares)	57,191
Stock options activity, number of shares [Roll Forward]
Outstanding, ending balance (in shares)	57,191

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INTANGIBLE ASSETS AND GOODWILL (Tables)

3 Months Ended

Mar. 29, 2015

INTANGIBLE ASSETS AND GOODWILL [Abstract]

Intangible assets

Intangible assets consist of the following (in thousands):

	March 29, 2015							December 31, 2014
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	3,277	$	(2,224	)	$	1,053	$	3,277	$	(2,119	)	$	1,158
Existing technology		3,783		(2,982	)		801		3,783		(2,881	)		902
Order backlog		732		(732	)		-		732		(732	)		-
Patents		457		(404	)		53		457		(402	)		55
Trade name		659		(395	)		264		659		(380	)		279
Total	$	8,908	$	(6,737	)	$	2,171	$	8,908	$	(6,514	)	$	2,394

Amortization of intangible assets

For the three months ended March 29, 2015 and March 30, 2014, amortization of intangible assets was as follows (in thousands):

	Three Months Ended
	March 29, 2015		March 30, 2014
Cost of revenue	$	103	$	103
Selling, general and administrative expense		120		120
	$	223	$	223

Estimated future amortization expense

Estimated future amortization expense related to intangible assets as of March 29, 2015 is as follows (in thousands):

Years ending December 31,
2015	$	670
2016		869
2017		487
2018		63
2019		54
Thereafter		28
Total	$	2,171

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ORGANIZATION AND BASIS OF PRESENTATION (Details)	3 Months Ended
	Mar. 29, 2015 ProductLine	Feb. 28, 2014
Organization [Abstract]
Number of product lines	2
CPqD [Member]
Schedule of Investments [Line Items]
Joint venture ownership percentage (in hundredths)		51.00%
GigOptix, Inc. [Member]
Schedule of Investments [Line Items]
Joint venture ownership percentage (in hundredths)		49.00%

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2015	Mar. 30, 2014
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) [Abstract]
Net loss	$ (636)	$ (1,897)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment	20	(2)
Other comprehensive income (loss), net of tax	20	(2)
Comprehensive loss	$ (616)	$ (1,899)

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INTANGIBLE ASSETS AND GOODWILL

3 Months Ended

Mar. 29, 2015

INTANGIBLE ASSETS AND GOODWILL [Abstract]

INTANGIBLE ASSETS AND GOODWILL

NOTE 4—INTANGIBLE ASSETS AND GOODWILL

Intangible assets consist of the following (in thousands):

	March 29, 2015							December 31, 2014
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	3,277	$	(2,224	)	$	1,053	$	3,277	$	(2,119	)	$	1,158
Existing technology		3,783		(2,982	)		801		3,783		(2,881	)		902
Order backlog		732		(732	)		-		732		(732	)		-
Patents		457		(404	)		53		457		(402	)		55
Trade name		659		(395	)		264		659		(380	)		279
Total	$	8,908	$	(6,737	)	$	2,171	$	8,908	$	(6,514	)	$	2,394

For the three months ended March 29, 2015 and March 30, 2014, amortization of intangible assets was as follows (in thousands):

	Three Months Ended
	March 29, 2015		March 30, 2014
Cost of revenue	$	103	$	103
Selling, general and administrative expense		120		120
	$	223	$	223

Estimated future amortization expense related to intangible assets as of March 29, 2015 is as follows (in thousands):

Years ending December 31,
2015	$	670
2016		869
2017		487
2018		63
2019		54
Thereafter		28
Total	$	2,171

As of March 29, 2015, the Company had $10.4 million of goodwill in connection with the acquisitions of ChipX, Endwave and Tahoe RF.  During the third quarter of 2014, the Company completed its acquisition of Tahoe RF which resulted in $446,000 of goodwill.  During 2014, the Company assumed approximately $446,000 of liabilities of Tahoe RF and added RF/analog RFIC technology to the Company’s product portfolio and approximately 10 employees, primarily High-Speed and High-Frequency SiGe RF engineers focused on high growth areas such as wireless – E-Band and V-Band and GPS technologies. The Company agreed to pay up to an additional $254,000 in TahoeRF expenses of which $20,000 had been accrued in other current liabilities on the Company’s condensed consolidated balance sheet as of December 31, 2014. During the first quarter of 2015, the Company assumed an additional $89,000 related to tax and legal expenses which resulted in an increase of Tahoe RF’s goodwill to $535,000.  As of March 29, 2015, the Company does not expect any additional changes to the purchase price. Since the final additional assumed grossed up liabilities were less than $254,000, the Company paid $128,000 in bonus payments in the first quarter of 2015 to former employees of Tahoe RF who were eligible as active employees of GigOptix on January 1, 2015, which was recorded as compensation expense.  In addition, beginning in July 2016 and continuing annually through July 2020, any former Tahoe RF employee who remains, at that time, as an active employee of the Company will be entitled to a pre-allocated percentage of an aggregate retention bonus of up to approximately $70,000 based on the remaining 8 employees. These payments will be recorded as compensation expense when incurred and are being accrued as they are earned.  As of March 29, 2015, approximately $95,000 is included in other long term liabilities.

The consolidated financial statements include the operating results of Tahoe RF from the date of acquisition. Pro forma results of operations for the Tahoe RF acquisition have not been presented because the effect of the acquisition was not material to the Company’s financial results.

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BALANCE SHEET COMPONENTS (Details) (USD $)	3 Months Ended
	Mar. 29, 2015	Mar. 30, 2014	Dec. 31, 2014
BALANCE SHEET COMPONENTS [Abstract]
Accounts receivable	$ 8,298,000		$ 8,003,000
Allowance for doubtful accounts	(44,000)		(48,000)
Accounts receivable, net	8,254,000		7,955,000	[1]
Property and equipment [Line Items]
Property and equipment, gross	16,434,000		15,701,000
Accumulated depreciation and amortization	(14,300,000)		(13,785,000)
Property and equipment, net	2,134,000		1,916,000	[1]
Depreciation expense related to property and equipment	415,000	543,000
Amortization	252,000	151,000
Inventory, net [Abstract]
Raw materials	2,484,000		1,676,000
Work in process	1,528,000		1,421,000
Finished goods	1,966,000		2,042,000
Inventories	5,978,000		5,139,000	[1]
Other current liabilities [Abstract]
Amounts billed to the U.S. government in excess of approved rates	191,000		191,000
Warranty liability	369,000		334,000
Customer deposits	258,000		599,000
Capital lease obligations, current portion	3,000		3,000
Sales return reserve	552,000		412,000
Deferred Revenue	337,000		327,000
Other	1,074,000		1,036,000
Accrued and other current liabilities	2,784,000		2,902,000	[1]
Period of product warranty	1 year
Movement in product warranty liability [Roll Forward]
Beginning balance	334,000	330,000
Warranties accrued	158,000	112,000
Warranties settled or reversed	(123,000)	(127,000)
Ending balance	369,000	315,000
Network and Laboratory Equipment [Member]
Property and equipment [Line Items]
Property and equipment, gross	11,937,000		11,252,000
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	3,918,000		3,877,000
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	165,000		165,000
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	135,000		131,000
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	$ 279,000		$ 276,000
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, 2014 has been derived from the audited consolidated financial statements as of that date.

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NET LOSS PER SHARE (Details)	3 Months Ended
	Mar. 29, 2015	Mar. 30, 2014
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Outstanding anti-dilutive securities (in shares)	13,382,520	13,926,365
Stock options and RSUs [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Outstanding anti-dilutive securities (in shares)	12,724,280	12,743,125
Common Stock Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Outstanding anti-dilutive securities (in shares)	658,240	1,183,240

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FAIR VALUE (Tables)

3 Months Ended

Mar. 29, 2015

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 March 29, 2015 and December 31, 2014 (in thousands):

			Fair Value Measurements Using
	Carrying Value		Quoted Prices in Active Markets for IdenticalAssets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 29, 2015:
Assets:
Cash equivalents:
Money market funds	$	12,361	$	12,361	$	-	$	-
	$	12,361	$	12,361	$	-	$	-
Current liabilities:
Liability warrants	$	7	$	-	$	-	$	7
December 31, 2014:
Assets:
Cash equivalents:
Money market funds	$	12,360	$	12,360	$	-	$	-
	$	12,360	$	12,360	$	-	$	-
Current liabilities:
Liability warrants	$	8	$	-	$	-	$	8

Estimate of fair value for warrants assumptions

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

	As of March 29, 2015			As of December 31, 2014
Stock price	$	1.19		$	1.20
Exercise price	$	2.51		$	2.51
Expected life	2.31 years			2.55 years
Risk-free interest rate		0.60	%		1.10	%
Volatility		69	%		69	%
Fair value per share	$	0.24		$	0.27

Warrants subject to liability accounting

The following table summarizes the warrants subject to liability accounting as of March 29, 2015 and December 31, 2014 (in thousands, except share and per share amounts) (see also Note 6):

													Three Months Ended March 29, 2015					Three Months Ended March 30, 2014
Holder	Original Warrants		Adjusted Warrants		Grant Date	Expiration Date	Price per Share		Fair Value March 29, 2015		Fair Value December 31, 2014		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	$	7	$	8		-	$	(1	)		-	$	2	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 months ended March 29, 2015 is as follows (in thousands):

Fair value as of December 31, 2014	$	8
Exercise of warrants		-
Change in fair value		(1	)
Fair value as of March 29, 2015	$	7