10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended March 31, 2015

OR

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

For the transition period from                to               

Commission file number 000-32929

MOSYS, Inc.

(Exact name of registrant as specified in its charter)

Delaware	77-0291941
(State or other jurisdiction	(I.R.S. Employer
of Incorporation or organization)	Identification Number)

3301 Olcott Street

Santa Clara, California, 95054

(Address of principal executive office and zip code)

(408) 418-7500

(Registrant’s telephone number, including area code)

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 filing requirements for the past 90 days.  YES x  NO o

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

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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o	Smaller reporting company o
(Do not check if a 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 o  No x

As of April 30, 2015, 64,650,098 shares of the Registrant’s common stock, $0.01 par value, were outstanding.

MOSYS, INC.

FORM 10-Q

March 31, 2015

TABLE OF CONTENTS

PART I —	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (Unaudited):	3
	Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2015 and 2014	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Qualitative and Quantitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
PART II —	OTHER INFORMATION	21
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 6.	Exhibits	21
	Signatures	22

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

MOSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value)

	March 31,			December 31,
	2015			2014
ASSETS
Current assets
Cash and cash equivalents	$	7,020		$	3,110
Short-term investments	26,066			20,439
Accounts receivable, net	82			177
Inventories	1,177			881
Prepaid expenses and other	1,020			887
Total current assets	35,365			25,494
Long-term investments	7,597			2,245
Property and equipment, net	830			854
Goodwill	23,134			23,134
Other assets	631			899
Total assets	$	67,557		$	52,626
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	311		$	495
Accrued expenses and other	2,287			2,350
Total current liabilities	2,598			2,845
Long-term liabilities	245			241
Commitments and contingencies (Note 4)
Stockholders’ equity
Preferred stock, $0.01 par value; 20,000 shares authorized; none issued and outstanding	—			—
Common stock, $0.01 par value; 120,000 shares authorized; 64,639 shares and 49,793 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively	646			498
Additional paid-in capital	222,526			199,541
Accumulated other comprehensive loss	(4		)	(10		)
Accumulated deficit	(158,454		)	(150,489		)
Total stockholders’ equity	64,714			49,540
Total liabilities and stockholders’ equity	$	67,557		$	52,626

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

MOSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share data)

	Three Months Ended
	March 31,
	2015			2014
Net revenue
Product	$	180		$	581
Royalty and other	596			751
Total net revenue	776			1,332
Cost of net revenue	237			577
Gross profit	539			755
Operating expenses
Research and development	6,893			7,054
Selling, general and administrative	1,614			1,797
Total operating expenses	8,507			8,851
Loss from operations	(7,968		)	(8,096		)
Other income, net	23			30
Loss before income taxes	(7,945		)	(8,066		)
Income tax provision	20			21
Net loss	(7,965		)	(8,087		)
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on available-for-sale securities	6			(9		)
Comprehensive loss	$	(7,959	)	$	(8,096	)
Net loss per share
Basic and diluted	$	(0.15	)	$	(0.16	)
Shares used in computing net loss per share
Basic and diluted	54,282			49,174

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

MOSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Three Months Ended March 31,
	2015			2014
Cash flows from operating activities:
Net loss	$	(7,965	)	$	(8,087	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	145			108
Stock-based compensation	1,227			1,491
Amortization of intangible assets	237			250
Changes in assets and liabilities:
Accounts receivable	95			(205		)
Inventories	(296		)	158
Prepaid expenses and other assets	(102		)	(80		)
Accounts payable	(184		)	99
Accrued expenses and other liabilities	(166		)	(71		)
Net cash used in operating activities	(7,009		)	(6,337		)
Cash flows from investing activities:
Purchases of property and equipment	(121		)	(84		)
Proceeds from sales and maturities of marketable securities	11,579			13,531
Purchases of marketable securities	(22,552		)	(10,985		)
Net cash (used in) provided by investing activities	(11,094		)	2,462
Cash flows from financing activities:
Proceeds from the sale of common stock, net of issuance costs	21,479			—
Proceeds from issuance of common stock	534			1,624
Net cash provided by financing activities	22,013			1,624
Net increase (decrease) in cash and cash equivalents	3,910			(2,251		)
Cash and cash equivalents at beginning of period	3,110			4,364
Cash and cash equivalents at end of period	$	7,020		$	2,113

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

MOSYS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. The Company and Summary of Significant Accounting Policies

The Company

MoSys, Inc. (the Company) was incorporated in California in September 1991, and reincorporated in September 2000 in Delaware. The Company’s strategy and primary business objective is to be an IP-rich fabless semiconductor company focused on the development and sale of integrated circuit (IC) products. Prior to 2011, the Company’s primary business activities were designing, developing, marketing and licensing high-performance semiconductor memory and high-speed parallel and serial interface, or SerDes, intellectual property (IP) used by the semiconductor industry and communications, networking and storage equipment manufacturers. Since 2011, the Company has developed two IC product lines under the “Bandwidth Engine” and “LineSpeed” product names. Bandwidth Engine ICs combine the Company’s proprietary high-density embedded memory with its high-speed 10 gigabits per second and higher interface technology. The LineSpeed IC product line is comprised of non-memory based, high-speed SerDes devices with gearbox or retimer functionality that convert lanes of data received on line cards or by optical modules into different configurations and/or ensure signal integrity. Both product lines are being marketed to networking and communications systems companies. The Company’s future success and ability to achieve and maintain profitability depends on its success in developing a market for its ICs.

The accompanying condensed consolidated financial statements of the Company have been prepared without audit in accordance with the rules and regulations of the Securities and Exchange Commission (SEC).  The condensed consolidated balance sheet at December 31, 2014 has been derived from the audited consolidated financial statements at that date. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted in accordance with these rules and regulations. The information in this report should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in its most recent annual report on Form 10-K filed with the SEC.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to summarize fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015 or for any other future period.

Basis of Presentation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s fiscal year is the calendar year.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses recognized during the reported period. Actual results could differ from those estimates.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation.  Previously reported intangible asset amounts have been included in the other assets line item of the condensed consolidated balance sheets.  The amounts for the prior periods have been reclassified to be consistent with the current year presentation and have no impact on previously reported total assets, total stockholders’ equity or net loss.

6

Cash Equivalents and Investments

The Company has invested its excess cash in money market accounts, certificates of deposit, commercial paper, corporate debt, government-sponsored enterprise bonds and municipal bonds and considers all highly liquid debt instruments purchased with anoriginal maturity of three months or less to be cash equivalents. Investments with original maturities greater than three months and remaining maturities less than one year are classified as short-term investments. Investments with remaining maturities greater than one year are classified as long-term investments. Management generally determines the appropriate classification of securities at the time of purchase. All securities are classified as available-for-sale. The Company’s available-for-sale short-term and long-term investments are carried at fair value, with the unrealized holding gains and losses reported in accumulated other comprehensive income (loss). Realized gains and losses and declines in the value judged to be other than temporary are included in the other income, net line item in the condensed consolidated statements of operations and comprehensive loss. The cost of securities sold is based on the specific identification method.

Fair Value Measurements

The Company measures the fair value of financial instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:

Level 1—Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date.

Level 2—Pricing is provided by third party sources of market information obtained through the Company’s investment advisors, rather than models. The Company does not adjust for, or apply, any additional assumptions or estimates to the pricing information it receives from advisors. The Company’s Level 2 securities include cash equivalents and available-for-sale securities, which consisted primarily of certificates of deposit, corporate debt, and government agency and municipal debt securities from issuers with high-quality credit ratings. The Company’s investment advisors obtain pricing data from independent sources, such as Standard & Poor’s, Bloomberg and Interactive Data Corporation, and rely on comparable pricing of other securities because the Level 2 securities are not actively traded and have fewer observable transactions. The Company considers this the most reliable information available for the valuation of the securities.

Level 3—Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment are used to measure fair value. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. The determination of fair value for Level 3 investments and other financial instruments involves the most management judgment and subjectivity.

Allowance for Doubtful Accounts

The Company establishes an allowance for doubtful accounts to ensure that its trade receivables balances are not overstated due to uncollectibility. The Company performs ongoing customer credit evaluations within the context of the industry in which it operates and generally does not require collateral from its customers. A specific allowance of up to 100% of the invoice value is provided for any problematic customer balances. Delinquent account balances are written off after management has determined that the likelihood of collection is remote. The Company grants credit only to customers deemed creditworthy in the judgment of management. There was no allowance for doubtful accounts receivable at either March 31, 2015 or December 31, 2014.

Revenue Recognition

General

The Company generates revenue from the sales of IC products and licensing of its IP. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery or performance has occurred, the sales price is fixed or determinable, and collectibility is reasonably assured. Evidence of an arrangement generally consists of signed agreements or customer purchase orders.

IC products

The Company sells products both directly to customers, as well as through distributors. Revenue from sales directly to customers is generally recognized at the time of shipment. The Company may record an estimated allowance, at the time of shipment, for future returns and other charges against revenue consistent with the terms of sale. IC product revenue and costs relating to sales made through distributors with rights of return or stock rotation are generally deferred until the distributors sell the product to end customers due to the Company’s inability to estimate future returns and credits to be issued. Distributors are generally able to return up to 10% of their purchases for slow, non-moving or obsolete inventory for credit every six months. At the time of shipment to distributors, an accounts receivable for the selling price is recorded, as there is a legally enforceable right to receive payment, and inventory is relieved, as legal title to the inventory is transferred upon shipment. Revenues are recognized upon receiving notification from the distributors that products have been sold to end customers. Distributors provide information regarding products and quantity, endcustomer shipments and remaining inventory on hand. The deferred margin recorded on sales to distributors where the product has not sold through to end customers is included in the accrued expenses and other line item in the condensed consolidated balance sheets.

7

Royalty

The Company’s licensing contracts typically also provide for royalties based on the licensee’s use of the Company’s memory technology in their currently shipping commercial products. The Company recognizes royalties in the quarter in which it receives the licensee’s report.

Licensing

Licensing revenue consists of fees earned from license agreements, development services and support and maintenance. For stand-alone license agreements or license deliverables in multi-deliverable arrangements that do not require significant development, modification or customization, revenues are recognized when all revenue recognition criteria have been met. Delivery of the licensed technology is typically the final revenue recognition criterion met, at which time revenue is recognized. If any of the criteria are not met, revenue recognition is deferred until such time as all criteria have been met. Support and maintenance revenue is recognized ratably over the period during which the obligation exists, typically 12 months. There was no licensing revenue for the three months ended March, 31, 2015.  Licensing revenue was $41,000 for the three months ended March 31, 2014.

Cost of Net Revenue

Cost of net revenue consists primarily of direct and indirect costs of IC product sales and engineering personnel costs directly related to maintenance and support services specified in licensing agreements. Maintenance and support typically includes engineering support to assist in the commencement of production of a licensee’s products.

Goodwill

The Company reviews goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than the carrying amount as a basis for determining whether it is necessary to perform the two-step impairment test. If the qualitative assessment warrants further analysis, the Company compares the fair value of the reporting unit to its carrying value. The fair value of the reporting unit is determined using the market approach. If the fair value of the reporting unit exceeds the carrying value of net assets of the reporting unit, goodwill is not impaired, and the Company is not required to perform further testing. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then the Company must record an impairment charge equal to the difference. The Company has determined that it has a single reporting unit for purposes of performing its goodwill impairment test. As the Company uses the market approach to assess impairment in the second step of the analysis, the price of its common stock is an important component of the fair value calculation. If the Company’s stock price continues to experience significant price and volume fluctuations, this will impact the fair value of the reporting unit, which can lead to potential impairment in future periods. The Company performed step one of the annual impairment test in September 2014, and concluded no factors indicated impairment of goodwill. As of March 31, 2015, the Company had not identified any factors to indicate there was an impairment of its goodwill and determined that no additional impairment analysis was required.

Per Share Amounts

Basic net loss per share is computed by dividing net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share gives effect to all potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of incremental shares of common stock issuable upon the exercise of stock options, vesting of stock awards and purchases under the employee stock purchase plan. As of March 31, 2015 and 2014, stock awards to purchase approximately 10,016,000 and 10,173,000 shares, respectively, were excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive.

Comprehensive Loss

Comprehensive loss includes unrealized gains and losses on available-for-sale securities.  Realized gains and losses on available-for-sale securities are reclassified from accumulated other comprehensive loss and included in other income, net in the condensed consolidated statements of operations and comprehensive loss.  All amounts recorded in the three months ended March 31, 2015 and 2014 are not considered significant.

8

Note 2: Fair Value of Financial Instruments

The estimated fair values of financial instruments outstanding were (in thousands):

	March 31, 2015
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash and cash equivalents	$	7,020	$	—	$	—		$	7,020
Short-term investments:
U.S. government-sponsored enterprise bonds	$	8,710	$	—	$	(3	)	$	8,707
Corporate notes	10,835		2		(3		)	10,834
Municipal bonds	3,071		1		—			3,072
Certificates of deposit	2,953		1		—			2,954
Commercial paper	499		—		—			499
Total short-term investments	$	26,068	$	4	$	(6	)	$	26,066
Long-term investments:
U.S. government-sponsored enterprise bonds	$	1,001	$	—	$	(1	)	$	1,000
Corporate notes	6,598		2		(3		)	6,597
Total long-term investments	$	7,599	$	2	$	(4	)	$	7,597
	December 31, 2014
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash and cash equivalents	$	3,110	$	—	$	—		$	3,110
Short-term investments:
U.S. government-sponsored enterprise bonds	$	1,250	$	—	$	—		$	1,250
Municipal bonds	841		—		—			841
Corporate notes	15,921		2		(6		)	15,917
Certificates of deposit	2,430		1		—			2,431
Total short-term investments	$	20,442	$	3	$	(6	)	$	20,439
Long-term investments:
U.S. government-sponsored enterprise bonds	$	1,000	$	—	$	(2	)	$	998
Corporate notes	1,252		—		(5		)	1,247
Total long-term investments	$	2,252	$	—	$	(7	)	$	2,245

9

The estimated fair values of available-for-sale securities with unrealized losses were (in thousands):

	March 31, 2015
	Cost		Unrealized Losses			Fair Value
Short-term investments:
U.S. government-sponsored enterprise bonds	$	6,597	$	(3	)	$	6,594
Corporate notes	4,387		(3		)	4,384
Total short-term investments	$	10,984	$	(6	)	$	10,978
Long-term investments:
U.S. government-sponsored enterprise bonds	$	1,001	$	(1	)	$	1,000
Corporate notes	3,299		(3		)	3,296
Total long-term investments	$	4,300	$	(4	)	$	4,296
	December 31, 2014
	Cost		Unrealized Losses			Fair Value
Short-term investments:
Corporate notes	$	13,006	$	(6	)	$	13,000
Total short-term investments	$	13,006	$	(6	)	$	13,000
Long-term investments:
U.S. government-sponsored enterprise bonds	$	1,000	$	(2	)	$	998
Corporate notes	1,252		(5		)	1,247
Total long-term investments	$	2,252	$	(7	)	$	2,245

As of March 31, 2015 and December 31, 2014, all of the available-for-sale securities with unrealized losses had been in a loss position for less than 12 months.

Cost and fair value of investments based on two maturity groups were (in thousands):

	March 31, 2015
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Due within 1 year	$	26,068	$	4	$	(6	)	$	26,066
Due in 1-2 years	7,599		2		(4		)	7,597
Total	$	33,667	$	6	$	(10	)	$	33,663
	December 31, 2014
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Due within 1 year	$	20,442	$	3	$	(6	)	$	20,439
Due in 1-2 years	2,252		—		(7		)	2,245
Total	$	22,694	$	3	$	(13	)	$	22,684

10

The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) as of March 31, 2015 and December 31, 2014 (in thousands):

	March 31, 2015
	Fair Value		Level 1		Level 2		Level 3
Money market funds	$	5,002	$	5,002	$	—	$	—
U.S. government-sponsored enterprise bonds	9,707		—		9,707		—
Corporate notes	17,431		—		17,431		—
Municipal bonds	4,205		—		4,205		—
Certificates of deposit	2,954		—		2,954		—
Commercial paper	599		—		599		—
Total assets	$	39,898	$	5,002	$	34,896	$	—
	December 31, 2014
	Fair Value		Level 1		Level 2		Level 3
Money market funds	$	1,837	$	1,837	$	—	$	—
U.S. government-sponsored enterprise bonds	2,248		—		2,248		—
Municipal bonds	1,243		—		1,243		—
Corporate notes	17,164		—		17,164		—
Certificates of deposit	2,676		—		2,676		—
Total assets	$	25,168	$	1,837	$	23,331	$	—

There were no transfers in or out of Level 1 and Level 2 securities during the three months ended March 31, 2015 and 2014.

Note 3. Balance Sheet Detail

	March 31, 2015		December 31, 2014
	(in thousands)
Inventories:
Work-in-process	$	979	$	651
Finished goods	198		230
	$	1,177	$	881

Identifiable intangible assets relating to business combinations and a patent license were (dollar amounts in thousands):

	March 31, 2015
	Life (years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Developed technology	3-5	$	9,240	$	9,240	$	—
Patent license	7	780		362		418
Total		$	10,020	$	9,602	$	418
	December 31, 2014
	Life (years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Developed technology	3-5	$	9,240	$	9,031	$	209
Patent license	7	780		334		446
Total		$	10,020	$	9,365	$	655

Intangible assets acquired in business combinations, referred to as purchased intangible assets, are accounted for based on the fair value of assets purchased and are amortized over the period in which economic benefit is estimated to be received. The net carrying value of identifiable assets has been included in the other assets line item in the condensed consolidated balance sheets. Amortization expense has been included in research and development expense in the condensed consolidated statements of operations and comprehensive loss. The estimated aggregate amortization expense to be recognized in future years is approximately $0.1 million for the remainder of 2015 and $0.1 million annually for 2016 through 2018.

11

Note 4. Commitments and Contingencies

Indemnification

In the ordinary course of business, the Company enters into contractual arrangements under which it may agree to indemnify the counterparties from any losses incurred relating to breach of representations and warranties, failure to perform certain covenants, or claims and losses arising from certain events as outlined within the particular contract, which may include, for example, losses arising from litigation or claims relating to past performance. Such indemnification clauses may not be subject to maximum loss clauses. The Company has also entered into indemnification agreements with its officers and directors. No material amounts were reflected in the Company’s condensed consolidated financial statements for the three months ended March 31, 2015 or 2014 related to these indemnifications.

The Company has not estimated the maximum potential amount of indemnification liability under these agreements due to the limited history of prior claims and the unique facts and circumstances applicable to each particular agreement. To date, the Company has not made any material payments related to these indemnification agreements.

Legal Matters

The Company is not a party to any material legal proceeding that the Company believes is likely to have a material adverse effect on its consolidated financial position or results of operations. From time to time the Company may be subject to legal proceedings and claims in the ordinary course of business. These claims, even if not meritorious, could result in the expenditure of significant financial resources and diversion of management efforts.

Note 5. Business Segments, Concentration of Credit Risk and Significant Customers

The Company operates in one business segment and uses one measurement of profitability for its business.  Net revenue attributed to the United States and to all foreign countries is based on the geographical location of the customer.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents, short-term and long-term investments and accounts receivable. Cash, cash equivalents and short-term and long term investments are deposited with high credit-quality institutions.

The Company recognized revenue from licensing of its technologies and shipment of ICs to customers in North America, Asia and Europe as follows (in thousands):

	Three Months Ended
	March 31,
	2015		2014
Taiwan	$	479	$	337
North America	177		350
Japan	112		623
Rest of world	8		11
Europe	—		11
Total net revenue	$	776	$	1,332

Customers who accounted for at least 10% of total net revenue were:

	Three Months Ended March 31,
	2015		2014
Customer A	60	%	24	%
Customer B	10	%	38	%
Customer C	*		20	%

*Represents less than 10%

Two customers accounted for 80% of net accounts receivable at March 31, 2015. Three customers accounted for 97% of net accounts receivable at December 31, 2014.

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Note 6. Income Tax Provision

The Company determines deferred tax assets and liabilities based upon the differences between the financial statement and tax bases of the Company’s assets and liabilities using tax rates in effect for the year in which the Company expects the differences to affect taxable income. A valuation allowance is established for any deferred tax assets for which it is more likely than not that all or a portion of the deferred tax assets will not be realized.

The Company files U.S. federal and state and foreign income tax returns in jurisdictions with varying statutes of limitations.  2004 through 2014 tax years generally remain subject to examination by federal, state and foreign tax authorities.  As of March 31, 2015, the Company has not recorded any liability for unrecognized tax benefits related to uncertain tax positions.

Note 7. Stock-Based Compensation

The expense relating to stock options is recognized on a straight-line basis over the requisite service period, usually the vesting period, based on the grant-date fair value. The unamortized compensation cost, net of expected forfeitures, as of March 31, 2015 was $3.9 million related to stock options and is expected to be recognized as expense over a weighted average period of approximately 2.4 years.  The expense related to restricted stock units (RSUs) is recognized over a three-to-five year vesting period and is based on the fair value of the underlying stock on the dates of grant.  The unamortized compensation cost, net of expected forfeitures, as of March 31, 2015 was $0.9 million related to RSUs and is expected to be recognized as expense over a weighted average period of approximately 2 years.

The Company presents the tax benefits resulting from tax deductions in excess of the compensation cost recognized from the exercise of stock options as financing cash flows in the condensed consolidated statements of cash flows. For the three months ended March 31, 2015 and 2014, there were no such tax benefits associated with the exercise of stock options due to the Company’s loss position.

Valuation Assumptions

The fair value of the Company’s share-based payment awards for the three months ended March 31, 2015 and 2014 was estimated on the grant dates using the Black-Scholes valuation option-pricing model with the following assumptions:

	Three Months Ended March 31,
Employee stock options:	2015	2014
Risk-free interest rate	0.6% - 1.4%	1.5% - 1.7%
Volatility	55.8% - 57.7%	56.9% - 57.5%
Expected life (years)	3.0-5.0	4.0-5.0
Dividend yield	0%	0%

The risk-free interest rate was derived from the Daily Treasury Yield Curve Rates as published by the U.S. Department of the Treasury as of the grant date for terms equal to the expected terms of the options. The expected volatility was based on the historical volatility of the Company’s stock price over the expected term of the options. The expected term of options granted was derived from historical data based on employee exercises and post-vesting employment termination behavior. A dividend yield of zero is applied because the Company has never paid dividends and has no intention to pay dividends in the near future.

The stock-based compensation expense recorded is adjusted based on estimated forfeiture rates. An annualized forfeiture rate has been used as a best estimate of future forfeitures based on the Company’s historical forfeiture experience. The stock-based compensation expense will be adjusted in later periods if the actual forfeiture rate is different from the estimate.

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Common Stock Options and Restricted Stock

A summary of the option and RSU activity under the Company’s Amended and Restated 2000 Stock Option and Equity Incentive Plan (Amended 2000 Plan) and Amended and Restated 2010 Equity Incentive Plan (Amended 2010 Plan), referred to collectively as the “Plans,” is presented below (in thousands, except exercise price):

			Options Outstanding
	Available for Grant		Number of Shares		Weighted Average Exercise Prices
Balance at December 31, 2014	1,760		5,994		$	3.87
Additional shares authorized under the Amended 2010 Plan	500		—		—
Restricted stock units cancelled	6		—		—
Options granted	(1,323	)	1,323		$	2.05
Options cancelled	153		(153	)	$	5.00
Options exercised	—		(22	)	$	1.60
Options expired	(78	)	—		5.79
Balance at March 31, 2015	1,018		7,142		$	3.52

The Company also has awarded options to new employees outside of the Plans and may continue to do so, as material inducements to the acceptance of employment with the Company, as permitted under the Listing Rules of the Nasdaq Stock Market. These grants must be approved by the compensation committee of the board of directors, a majority of the independent directors or, below a specified share level, by an authorized executive officer.

A summary of the inducement grant option activity is presented below (in thousands, except exercise price):

	Options Outstanding
	Number of Shares	Weighted Average Exercise Prices
Balance at December 31, 2014 and March 31, 2015	2,233	$	3.68

A summary of RSU activity under the Plans is presented below (in thousands, except for fair value):

	Number of Shares		Weighted Average Grant-Date Fair Value
Non-vested shares at December 31, 2014	394		$	4.61
Vested	(120	)	$	4.60
Cancelled	(6	)	$	4.60
Non-vested shares at March 31, 2015	268		$	4.61

The total intrinsic value of the restricted stock units outstanding as of March 31, 2015 was $0.6 million.

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The following table summarizes significant ranges of outstanding and exercisable options as of March 31, 2015 (in thousands, except contractual life and exercise price):

	Options Outstanding				Options Exercisable
Range of Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life (in Years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price		Aggregate Intrinsic Value
$1.50 - $2.94	2,542	5.97	$	2.06	1,098	$	2.01
$2.95 - $3.58	2,353	3.85	$	3.23	1,502	$	3.25
$3.59 - $4.46	3,013	4.77	$	4.15	2,131	$	4.12
$4.47 - $6.50	1,467	2.77	$	5.44	1,286	$	5.49
$1.50 - $6.50	9,375	4.55	$	3.56	6,017	$	3.81	$	418
Vested and expected to vest	9,027	4.40	$	3.58				$	405
Exercisable	6,017	2.88	$	3.81				$	331

The aggregate intrinsic value of employee stock options exercised during the three months ended March 31, 2015 and 2014 was approximately $8,000 and $500,000, respectively.

Employee Stock Purchase Plan

In June 2010, the Company’s stockholders approved the 2010 Employee Stock Purchase Plan (ESPP). A total of 2,000,000 shares of common stock have been reserved for issuance under the ESPP. The ESPP, which is intended to qualify under Section 423 of the Internal Revenue Code, is administered by the board of directors or the compensation committee of the board of directors. The ESPP provides that eligible employees may purchase up to $25,000 worth of the Company’s common stock annually over the course of two six-month offering periods. The purchase price to be paid by participants is 85% of the price per share of the Company’s common stock either at the beginning or the end of each six-month offering period, whichever is less. On September 1, 2010, the Company commenced the first offering period under the ESPP. On February 28, 2015, approximately 339,000 shares of common stock were issued at an aggregate purchase price of $518,000 under the ESPP.  As of March 31, 2015, there were approximately 427,000 shares authorized and unissued under the ESPP.

Note 8. Stockholders’ Equity

On March 4, 2015, the Company sold 14,375,000 shares of common stock in an equity offering and raised approximately $21.5 million, net of transaction expenses.  Two of the Company’s executive officers between them purchased a total of 406,250 shares at the public offering price.

Note 9. Related Party Transactions

In February 2012, the Company entered into a strategic development and marketing agreement with Credo Semiconductor (Hong Kong) Ltd. (Credo), a privately- funded, fabless semiconductor company, to develop, market and sell integrated circuits. Two of the Company’s executive officers between them loaned a total of $250,000 to Credo for a portion of the seed funding needed by Credo to commence its integrated circuit design efforts. These loans may be converted into minority equity interests in Credo. The strategic development and marketing agreement, as amended, calls for the Company to make payments to Credo upon Credo achieving certain development and verification milestones towards the development of IC products and provides the Company with exclusive sales and marketing rights for such IC products. To date, the Company has paid Credo $4.6 million for achievement of additional development milestones, as well as for mask costs and wafer purchases from third-party vendors. All amounts incurred have been recorded as research and development expenses. Currently, under the strategic development and marketing agreement, the Company is entitled to reimbursement of $4.2 million of development costs based on payments made to Credo to date. This amount is subject to increase as additional payments are made to Credo. The reimbursement will be funded by the gross profits earned by the Company from the sale of the products, with the initial gross profits being primarily applied to reimbursing the Company for these development payments and a portion paid to Credo. Once the full amount has been reimbursed, the gross profits will be shared equally by the Company and Credo.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying condensed consolidated financial statements and notes included in this report. This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which include, without limitation, statements about the market for our technology, our strategy, competition, expected financial performance, all information disclosed under Item 3 of this Part I, and other aspects of our business identified in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2015 and in other reports that we file from time to time with the Securities and Exchange Commission. Any statements about our business, financial results, financial condition and operations contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,” or similar expressions are intended to identify forward-looking statements. Our actual results could differ materially from those expressed or implied by these forward-looking statements as a result of various factors, including the risk factors described below in Risk Factors and elsewhere in this report and under Item 1A of our annual report on Form 10-K for the year ended December 31, 2014. We undertake no obligation to update publicly any forward-looking statements for any reason, except as required by law, even as new information becomes available or events occur in the future.

Company Overview

Our strategy and primary business objective is to become a fabless semiconductor company focused on the development and sale of integrated circuits, or ICs, for the high-speed networking, communications, storage and computing markets. Our solutions deliver time-to-market, performance, power, area and economic benefits for system original equipment manufacturers, or OEMs. We have developed two families of ICs under the Bandwidth Engine® and LineSpeed™ product names. Bandwidth Engine ICs combine our proprietary 1T-SRAM® high-density embedded memory, integrated macro functions and high-speed serial interface, or SerDes, I/O, with our intelligent access technology and a highly efficient interface protocol. The LineSpeed IC product line, which was announced in March 2013, is comprised of non-memory, high-speed SerDes I/O devices with gearbox and retimer functionality, which convert lanes of data received on line cards or by optical modules into different configurations and/or ensure signal integrity. Certain SerDes products have been developed under a strategic development and marketing agreement with Credo Semiconductor Ltd., or Credo, to whom we have paid a total of $4.6 million for the development of these new products. The initial gross profits earned by us from the sale of Credo developed products will be primarily applied to reimbursing us for these development payments and a portion will be paid to Credo. Once $4.2 million of this amount has been reimbursed, all gross profits from the sale of the Credo-developed products worldwide will be shared equally by Credo and us.

Historically, our primary business was the design, development, marketing, sale and support of differentiated intellectual property, or IP, including embedded memory and high-speed parallel and SerDes I/O used in advanced systems-on-chips, or SoCs. Currently, we are focused on developing differentiated IP-rich IC products and are dedicating all our research and development, marketing and sales budget to these IC products.

Our future success and ability to achieve and maintain profitability will be dependent on the marketing and sales of our IC products into networking, communications and other markets requiring high-bandwidth memory access. We are currently supporting existing design-win customers and actively pursuing additional design wins for the use of our ICs in networking and communication equipment. To date, none of our design win customers have commenced full production of systems using our ICs. We have established initial pricing of our IC products ordered to date, but longer-term volume prices will be subject to negotiations with our customers and may vary substantially from these initial prices.

Sources of Revenue

Product.  Product revenue is generally recognized at the time of shipment to our customers. An estimated allowance is recorded, at the time of shipment, for future returns and other charges against revenue consistent with the terms of sale.  IC product revenue and costs relating to sales made through distributors with rights of return and stock rotation are deferred until the distributors sell the product to end customers due to our inability to estimate future returns and credits to be issued.  At the time of shipment to distributors, an accounts receivable for the selling price is recorded, as there is a legally enforceable right to receive payment, inventory is relieved, as legal title to the inventory is transferred upon shipment, and the associated deferred margin is recorded as deferred revenues in the condensed consolidated balance sheets.  Revenues are recognized upon receiving notification from the distributors that products have been sold to end customers.

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Royalty.  Royalty revenue represents amounts earned under provisions in our memory licensing contracts that require our licensees to report royalties and make payments at a stated rate based on actual units manufactured or sold by licensees for productsthat include our memory IP. Our license agreements require the licensee to report the manufacture or sale of products that include our technology after the end of the quarter in which the sale or manufacture occurs, and we recognize royalties in the quarter in which we receive the licensee’s report. The timing and level of royalties are difficult to predict. They depend on the licensee’s ability to market, produce and sell products incorporating our technology.

Licensing.  Licensing revenue, which is included in royalty and other revenue, consists of fees earned from license agreements, development services, and support and maintenance.  Our licensing revenue consists primarily of fees for providing circuit design, layout and design verification and granting licenses to customers that embed our technology into their products. The vast majority of our contracts allow for milestone billing based on work performed. We currently have no active license agreements generating licensing revenue.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis we make these estimates based on our historical experience and on assumptions that we consider reasonable under the circumstances. Actual results may differ from these estimates, and reported results could differ under different assumptions or conditions. Our significant accounting policies and estimates are disclosed in Note 1 of the “Notes to Consolidated Financial Statements” in our Annual Report on Form 10-K for the year ended December 31, 2014. As of March 31, 2015, there have been no material changes to our significant accounting policies and estimates.

Results of Operations

Net Revenue.

	Three Months Ended March 31,						Year-Over-Year Change
	2015			2014			2014 to 2015
	(dollar amounts in thousands)
Product	$	180		$	581		$	(401	)	(69	)%
Percentage of total net revenue	23		%	44		%

Product revenue decreased due to a lower volume of shipments of ICs in the first quarter of 2015.  Additionally, product revenue for the first quarter of 2014 included a reversal of $0.3 million of sales return reserves, which had been recorded in prior periods.

	Three Months Ended March 31,						Year-Over-Year Change
	2015			2014			2014 to 2015
	(dollar amounts in thousands)
Royalty and other	$	596		$	751		$	(155	)	(21	)%
Percentage of total net revenue	77		%	56		%

Royalty and other revenue include revenues generated from licensing agreements.  Royalty and other revenue decreased primarily due to a decrease in shipment volumes by licensees whose products incorporate our licensed IP and a decrease in revenue recognized from residual licensing agreements entered into in prior years.

Cost of Net Revenue and Gross Profit.

	Three Months Ended March 31,						Year-Over-Year Change
	2015			2014			2014 to 2015
	(dollar amounts in thousands)
Cost of net revenue	$	237		$	577		$	(340	)	(59	)%
Percentage of total net revenue	31		%	43		%

	Three Months Ended March 31,						Year-Over-Year Change
	2015			2014			2014 to 2015
	(dollar amounts in thousands)
Gross profit	$	539		$	755		$	(216	)	(29	)%
Gross margin	69		%	57		%

Cost of net revenue is primarily comprised of direct and indirect costs related to the sale of IC products.

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Cost of net revenue decreased for the three months ended March 31, 2015, compared with the same period of 2014, primarily due to lower IC shipment volumes.

Gross profit decreased for the three months ended March 31, 2015, compared with the same period of 2014, due to the decrease in our royalty revenue.  Gross margin percentage increased for the three months ended March 31, 2015, compared with the same period of 2014, primarily due to the shift in revenue mix where royalty revenue, which has no associated costs, comprised a greater portion of total net revenue.

Research and Development.

	Three Months Ended March 31,						Year-Over-Year Change
	2015			2014			2014 to 2015
	(dollar amounts in thousands)
Research and development	$	6,893		$	7,054		$	(161	)	(2	)%
Percentage of total net revenue	888		%	530		%

Our research and development expenses include costs related to the development of our IC products and amortization of intangible assets. We expense research and development costs as they are incurred.

The $0.2 million decrease was primarily due to decreases in computer-aided software license fees, development costs of our LineSpeed IC products and stock-based compensation charges, partially offset by an increase in personnel-related expenses.  Research and development expense is expected to fluctuate in absolute dollars in the remaining quarters of 2015 primarily due to timing of masks tooling costs and other fabrication costs related to next generation products. Specifically, we expect to incur mask tooling and related fabrication costs in the second quarter of 2015 related to our next generation of Bandwidth Engine IC products, which will significantly increase research and development expenses.

Research and development expenses included stock-based compensation expense of $1.0 million and $1.1 million for the three months ended March 31, 2015 and 2014, respectively.

Selling, General and Administrative.

	Three Months Ended March 31,						Year-Over-Year Change
	2015			2014			2014 to 2015
	(dollar amounts in thousands)
Selling, general and administrative	$	1,614		$	1,797		$	(183	)	(10	)%
Percentage of total net revenue	208		%	135		%

Selling, general and administrative expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, human resources and general management.

The $0.2 million decrease was primarily due to a decrease in stock-based compensation charges.

Selling, general and administrative expenses included stock-based compensation expense of $0.2 million and $0.4 million for the three month periods ended March 31, 2015 and 2014, respectively.

Other Income, net.

	Three Months Ended March 31,						Year-Over-Year Change
	2015			2014			2014 to 2015
	(dollar amounts in thousands)
Other income, net	$	23		$	30		$	(7	)	(23	)%
Percentage of total net revenue	3		%	2		%

Other income, net primarily consisted of interest income on our investments, partially offset by other non-operating items.

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Income Tax Provision.

	Three Months Ended March 31,						Year-Over-Year Change
	2015			2014			2014 to 2015
	(dollar amounts in thousands)
Income tax provision	$	20		$	21		$	(1	)	(5	)%
Percentage of total net revenue	3		%	2		%

The provision for the three months ended March 31, 2015 and 2014 was primarily attributable to taxes on earnings of our foreign subsidiaries and branches. We believe that, based on the history of our operating losses and other factors, the weight of available evidence indicates that it is more likely than not that we will not be able to realize the benefit of our net operating losses, which are primarily generated in the United States. Accordingly, a full valuation reserve has been recorded against our net deferred tax assets.

Liquidity and Capital Resources; Changes in Financial Condition

Cash Flows

As of March 31, 2015, we had cash, cash equivalents and short and long-term investments of $40.7 million and had total working capital of $32.8 million. Our primary capital requirements are to fund working capital, including development of our IC products, and any acquisitions that we make that require cash consideration or expenditures.

Net cash used in operating activities was $7.0 million for the first three months of 2015, which primarily resulted from a net loss of $8.0 million and $0.7 million in the net reduction in assets and liabilities, partially offset by non-cash charges, including stock-based compensation expense of $1.2 million and depreciation and amortization expenses of $0.4 million.  The changes in assets and liabilities primarily related to the timing of the collection of receivables from customers and payments to vendors.

Net cash used in operating activities was $6.3 million for the first three months of 2014, which primarily resulted from a net loss of $8.1 million and $0.1 million in the net reduction in assets and liabilities, partially offset by non-cash charges, including stock-based compensation expense of $1.5 million and depreciation and amortization expenses of $0.4 million.  The changes in assets and liabilities primarily related to the timing of the collection of receivables from customers and payments to vendors.

Net cash used in investing activities was $11.1 million for the first three months of 2015, and included net amounts transferred from cash and cash equivalents to investments of $11.0 million, which did not impact our liquidity, and $0.1 million for purchases of fixed assets.

Net cash provided by investing activities was $2.5 million for the first three months of 2014, and included net amounts transferred to cash and cash equivalents from investments of $2.6 million, which did not impact our liquidity, partially offset by $0.1 million for purchases of fixed assets.

Our proceeds from financing activities for the first three months of 2015 of $22.0 million consisted primarily of net proceeds received from the sale of common stock through a public offering and proceeds from the exercise of stock options and purchases of common stock under our employee stock purchase plan.

Our financing activities in the first three months of 2014 primarily consisted of proceeds from the exercise of stock options and  purchases of common stock under our employee stock purchase plan.

Our future liquidity and capital requirements are expected to vary from quarter to quarter, depending on numerous factors, including:

·level of revenue;

·cost, timing and success of technology development efforts;

·inventory levels, timing of product shipments and length of billing and collection cycles;

·fabrication costs, including mask costs, of our ICs currently under development;

·variations in manufacturing yields, materials costs and other manufacturing risks;

·costs of acquiring other businesses and integrating the acquired operations; and

·profitability of our business.

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We expect our cash expenditures to continue to exceed receipts in 2015, as our revenues will not be sufficient to offset our operating expenses, which include significant research and development expenditures for the expansion and fabrication of our IC products. We believe our existing cash, cash equivalents and investments, along with our existing capital and cash generated from operations, if any, to be sufficient to meet our capital requirements for the foreseeable future. However, there can be no assurance that our capital is sufficient to fund operations until such time as we begin to achieve positive cash flows. We might decide to raise additional capital, and there can be no assurance that such funding will be available to us on favorable terms, if at all. The failure to raise capital when needed could have a material adverse effect on our business and financial condition.

Contractual Obligations

The impact that our contractual obligations as of March 31, 2015 are expected to have on our liquidity and cash flow in future periods is as follows (in thousands):

	Payment Due by Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Operating leases	$	4,130	$	781	$	1,527	$	1,501	$	321
Software licenses	2,312		2,287		25		—		—
Purchase commitments	502		502		—		—		—
	$	6,944	$	3,570	$	1,552	$	1,501	$	321

As of March 31, 2015, our software licenses related to computer-aided design software.

ITEM 3. Qualitative and Quantitative Disclosures about Market Risk

Our investment portfolio consists of money market accounts, certificates of deposit, commercial paper, corporate debt, government-sponsored enterprise bonds and municipal bonds. The portfolio dollar-weighted average maturity of these investments is within 12 months.  Our primary objective with this investment portfolio is to invest available cash while preserving principal and meeting liquidity needs.  No single security should exceed 5% of the portfolio or $2.0 million at the time of purchase. In accordance with our investment policy, we place investments with high credit quality issuers and limit the amount of credit exposure to any one issuer. These securities, which approximated $40.0 million as of March 31, 2015 and earned an average annual interest rate of approximately 0.3% during the first three months of 2015, are subject to interest rate and credit risks. We do not have any investments denominated in foreign currencies, and, therefore, are not subject to foreign currency risk on such investments.

ITEM 4. Controls and Procedures

Disclosure Controls and Procedures.  Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based on this evaluation, our management concluded that as of March 31, 2015, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting.  During the first quarter of 2015, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

ITEM 1. Legal Proceedings

The discussion of legal matters in Note 4 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report under the heading “Legal Matters” is incorporated by reference in response to this Part II, Item 1.

ITEM 1A. Risk Factors

We face many significant risks in our business, some of which are unknown to us and not presently foreseen.  These risks could have a material adverse impact on our business, financial condition and results of operations in the future.  We have disclosed a number of material risks under Item 1A of our annual report on Form 10-K for the year ended December 31, 2014, which we filed with the Securities and Exchange Commission on March 13, 2015.

ITEM 6. Exhibits

(a)	Exhibits
	31.1	Rule 13a-14 certification
	31.2	Rule 13a-14 certification
	32.1	Section 1350 certification
	101	The following financial information from MoSys, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2015, filed with the SEC on May 11, 2015, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2015 and 2014, (ii) the Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014, (iii) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014, and (iv) Notes to Condensed Consolidated Financial Statements.

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Signatures

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

Dated: May 11, 2015		MOSYS, INC.
	By:	/s/ Leonard Perham
		Leonard Perham
		President and Chief Executive Officer
	By:	/s/ James W. Sullivan
		James W. Sullivan
		Vice President of Finance and Chief Financial Officer
		(Principal Financial Officer)

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EXHIBIT INDEX

31.1	Rule 13a-14 certification
31.2	Rule 13a-14 certification
32.1	Section 1350 certification
101	The following financial information from MoSys, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2015, filed with the SEC on May 11, 2015, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2015 and 2014, (ii) the Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014, (iii) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014, and (iv) Notes to Condensed Consolidated Financial Statements.

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULE 13a-14 THE SECURITIES EXCHANGE ACT OF 1934

I, Leonard Perham, certify that:

1.I have reviewed this quarterly report on Form 10-Q of MoSys, Inc. for the period ended March 31, 2015;

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 (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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, including its consolidated subsidiaries, 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 control 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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 the registrant’s board of directors (or persons performing the equivalent functions):

(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.

Date: May 11, 2015

/s/ Leonard Perham

Leonard Perham

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULE 13a-14 THE SECURITIES EXCHANGE ACT OF 1934

I, James W. Sullivan, certify that:

1.I have reviewed this quarterly report on Form 10-Q of MoSys, Inc. for the period ended March 31, 2015;

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 (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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, including its consolidated subsidiaries, 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 control 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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 the registrant’s board of directors (or persons performing the equivalent functions):

(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.

Date: May 11, 2015

/s/ James W. Sullivan

James W. Sullivan

Vice President of Finance and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CEO AND CFO FURNISHED PURSUANT TO
18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO
§ 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of MoSys, Inc. (the “Company”) for the quarterly period ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of Leonard Perham, Chief Executive Officer of the Company, and James W. Sullivan, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:

(1)The Report 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 the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Leonard Perham

Leonard Perham

President and Chief Executive Officer

May 11, 2015

/s/ James W. Sullivan

James W. Sullivan

Vice President of Finance and Chief Financial Officer

May 11, 2015

This certification accompanies this Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, or otherwise required, be deemed filed by the Company for purposes of § 18 of the Securities Exchange Act of 1934, as amended.

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Related Party Transactions (Details) (USD $)	1 Months Ended	3 Months Ended	38 Months Ended
	Feb. 29, 2012	Mar. 31, 2015 item	Mar. 31, 2015 item	Mar. 04, 2015 item
Related party transactions
Number of executive officers who loaned a portion of seed funding to related parties				2
Credo
Related party transactions
Number of executive officers who loaned a portion of seed funding to related parties		2	2
Amount of loan provided by executive officers to related party	$ 250,000
Payment made to related party			4,600,000
Initial amount of gross profits which will be retained by the entity		$ 4,200,000

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Balance Sheet Details (Details) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Inventory, Finished Goods and Work in Process, Net of Reserves [Abstract]
Work-in-process	979,000	651,000
Finished goods	198,000	230,000
Inventory, Net	1,177,000	881,000
Intangible assets
Gross Carrying Amount	10,020,000	10,020,000
Accumulated Amortization	9,602,000	9,365,000
Net Carrying Value	418,000	655,000
Estimated aggregate amortization expense to be recognized in future
Remainder of 2015	100,000
2016 through 2018	100,000
Developed technology
Intangible assets
Gross Carrying Amount	9,240,000	9,240,000
Accumulated Amortization	9,240,000	9,031,000
Net Carrying Value		209,000
Developed technology | Minimum
Intangible assets
Life	3 years	3 years
Developed technology | Maximum
Intangible assets
Life	5 years	5 years
Patent license
Intangible assets
Life	7 years	7 years
Gross Carrying Amount	780,000	780,000
Accumulated Amortization	362,000	334,000
Net Carrying Value	418,000	446,000

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2015

Commitments and Contingencies

Commitments and Contingencies

Note 4. Commitments and Contingencies

Indemnification

In the ordinary course of business, the Company enters into contractual arrangements under which it may agree to indemnify the counterparties from any losses incurred relating to breach of representations and warranties, failure to perform certain covenants, or claims and losses arising from certain events as outlined within the particular contract, which may include, for example, losses arising from litigation or claims relating to past performance. Such indemnification clauses may not be subject to maximum loss clauses. The Company has also entered into indemnification agreements with its officers and directors. No material amounts were reflected in the Company’s condensed consolidated financial statements for the three months ended March 31, 2015 or 2014 related to these indemnifications.

The Company has not estimated the maximum potential amount of indemnification liability under these agreements due to the limited history of prior claims and the unique facts and circumstances applicable to each particular agreement. To date, the Company has not made any material payments related to these indemnification agreements.

Legal Matters

The Company is not a party to any material legal proceeding that the Company believes is likely to have a material adverse effect on its consolidated financial position or results of operations. From time to time the Company may be subject to legal proceedings and claims in the ordinary course of business. These claims, even if not meritorious, could result in the expenditure of significant financial resources and diversion of management efforts.

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Stock-Based Compensation (Details 2) (USD $)	3 Months Ended		0 Months Ended	1 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Feb. 28, 2015	Jun. 30, 2010 item
Stock-Based Compensation
Outstanding options fully vested and expected to vest (in shares)	9,027,000
Remaining contractual life of options fully vested and expected to vest	4 years 4 months 24 days
Weighted average exercise price of options fully vested and expected to vest (in dollars per share)	$ 3.58
Awards exercisable (in shares)	6,017,000
Weighted average exercise price of awards exercisable (in dollars per share)	$ 3.81
Options
Assumptions used in estimation of fair value of the share-based payment awards on the grant date
Risk-free interest rate, minimum (as a percent)	0.60%	1.50%
Risk-free interest rate, maximum (as a percent)	1.40%	1.70%
Volatility, minimum (as a percent)	55.80%	56.90%
Volatility, maximum (as a percent)	57.70%	57.50%
Dividend yield (as a percent)	0.00%	0.00%
Options | Minimum
Assumptions used in estimation of fair value of the share-based payment awards on the grant date
Expected life	3 years	4 years
Options | Maximum
Assumptions used in estimation of fair value of the share-based payment awards on the grant date
Expected life	5 years	5 years
ESPP
Employee Stock Purchase Plan
Number of shares reserved for issuance				2,000,000
Maximum amount of shares that eligible employee may purchase annually (in dollars)				$ 25,000
Number of offering periods				2
Offering period				6 months
Purchase price to be paid by participants as a percentage of price per share either at the beginning or the end of each six-month offering period, whichever is less				85.00%
Shares of common stock issued under the plan			154,000
Aggregate purchase price (in dollars)			$ 422,000
Shares authorized and unissued	427,000

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Stock-Based Compensation (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Options
Stock-Based Compensation
Unamortized compensation cost, net of expected forfeitures	$ 3,900,000
Weighted average expected period over which the expense is to be recognized	2 years 4 months 24 days
Tax benefits associated with exercise of stock options	0	0
Inducement grant options
Number of Shares
Balance at the end of the year (in shares)	2,233,000
Weighted Average Exercise Prices
Balance at the end of the year (in dollars per share)	$ 3.68
RSU's
Stock-Based Compensation
Weighted average expected period over which the expense is to be recognized	2 years
Unamortized compensation cost for awards other than options, net of expected forfeitures	$ 900,000
RSU's | Minimum
Stock-Based Compensation
Stock-based compensation expense, recognition period	3 years
RSU's | Maximum
Stock-Based Compensation
Stock-based compensation expense, recognition period	5 years
Plans | Options
Available for Grant
Balance at the beginning of the year (in shares)	1,760,000
Additional shares authorized under the Amended 2010 Plan	500,000
Restricted stock units cancelled (in shares)	(6,000)
Options granted (in shares)	(1,323,000)
Options cancelled (in shares)	153,000
Options expired (in shares)	(78,000)
Balance at the end of the year (in shares)	1,018,000
Number of Shares
Balance at the beginning of the year (in shares)	5,994,000
Options granted (in shares)	(1,323,000)
Options cancelled (in shares)	(153,000)
Options exercised (in shares)	(22,000)
Balance at the end of the year (in shares)	7,142,000
Weighted Average Exercise Prices
Balance at the beginning of the year (in dollars per share)	$ 3.87
Options granted (in dollars per share)	$ 2.05
Options cancelled (in dollars per share)	$ 5.00
Options exercised (in dollars per share)	$ 1.60
Options expired (in dollars per share)	$ 5.79
Balance at the end of the year (in dollars per share)	$ 3.52
Plans | RSU's
Available for Grant
Restricted stock units cancelled (in shares)	6,000

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Stock-Based Compensation (Details 3) (RSU's, USD $) In Millions, except Share data in Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015
Weighted Average Grant-Date Fair Value
Total intrinsic value of the restricted stock units outstanding	$ 0.6
Plans
Number of Shares
Non-vested shares at the beginning of the year	394
Vested (in shares)	(120)
Cancelled (in shares)	(6)
Non-vested shares at the end of the year	268
Weighted Average Grant-Date Fair Value
Non-vested shares at the beginning of the year (in dollars per share)	$ 4.61
Vested (in dollars per share)	$ 4.60
Cancelled (in dollars per share)	$ 4.60
Non-vested shares at the end of the year (in dollars per share)	$ 4.61

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Stock-Based Compensation (Details 4) (USD $) Share data in Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Options Outstanding
Vested and expected to vest Options Outstanding, Number Outstanding	9,027
Vested and expected to vest Options Outstanding, Weighted Average Remaining Contractual Life	4 years 4 months 24 days
Vested and expected to vest Options Outstanding, Weighted Average Exercise Price	$ 3.58
Exercisable, Number Outstanding	6,017
Exercisable, Weighted Average Remaining Contractual Life	2 years 10 months 17 days
Exercisable, Weighted Average Exercise Price	$ 3.81
Options Exercisable
Vested and expected to vest Options Exercisable, Aggregate Intrinsic Value	$ 405,000
Exercisable, Aggregate Intrinsic Value	331,000
$1.50 - $2.94
Exercise price range
Low end of the range (in dollars per share)	$ 1.50
High end of the range (in dollars per share)	$ 2.94
Options Outstanding
Number Outstanding (in shares)	2,542
Weighted Average Remaining Contractual Life	5 years 11 months 19 days
Weighted Average Exercise Price (in dollars per share)	$ 2.06
Options Exercisable
Number Exercisable (in shares)	1,098
Weighted Average Exercise Price (in dollars per share)	$ 2.01
$2.95-$3.58
Exercise price range
Low end of the range (in dollars per share)	$ 2.95
High end of the range (in dollars per share)	$ 3.58
Options Outstanding
Number Outstanding (in shares)	2,353
Weighted Average Remaining Contractual Life	3 years 10 months 6 days
Weighted Average Exercise Price (in dollars per share)	$ 3.23
Options Exercisable
Number Exercisable (in shares)	1,502
Weighted Average Exercise Price (in dollars per share)	$ 3.25
$3.59-$4.46
Exercise price range
Low end of the range (in dollars per share)	$ 3.59
High end of the range (in dollars per share)	$ 4.46
Options Outstanding
Number Outstanding (in shares)	3,013
Weighted Average Remaining Contractual Life	4 years 9 months 7 days
Weighted Average Exercise Price (in dollars per share)	$ 4.15
Options Exercisable
Number Exercisable (in shares)	2,131
Weighted Average Exercise Price (in dollars per share)	$ 4.12
$4.47 - $6.50
Exercise price range
Low end of the range (in dollars per share)	$ 4.47
High end of the range (in dollars per share)	$ 6.50
Options Outstanding
Number Outstanding (in shares)	1,467
Weighted Average Remaining Contractual Life	2 years 9 months 7 days
Weighted Average Exercise Price (in dollars per share)	$ 5.44
Options Exercisable
Number Exercisable (in shares)	1,286
Weighted Average Exercise Price (in dollars per share)	$ 5.49
$1.50 - $6.50
Exercise price range
Low end of the range (in dollars per share)	$ 1.50
High end of the range (in dollars per share)	$ 6.50
Options Outstanding
Number Outstanding (in shares)	9,375
Weighted Average Remaining Contractual Life	4 years 6 months 18 days
Weighted Average Exercise Price (in dollars per share)	$ 3.56
Options Exercisable
Number Exercisable (in shares)	6,017
Weighted Average Exercise Price (in dollars per share)	$ 3.81
Aggregate Intrinsic value (in dollars)	418,000
Options
Options Exercisable
Total intrinsic value of awards exercised (in dollars)	$ 8,000	$ 500,000

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Balance Sheet Detail

3 Months Ended

Mar. 31, 2015

Balance Sheet Detail

Balance Sheet Detail

Note 3. Balance Sheet Detail

	March 31, 2015		December 31, 2014
	(in thousands)
Inventories:
Work-in-process	$	979	$	651
Finished goods	198		230
	$	1,177	$	881

Identifiable intangible assets relating to business combinations and a patent license were (dollar amounts in thousands):

	March 31, 2015
	Life (years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Developed technology	3-5	$	9,240	$	9,240	$	—
Patent license	7	780		362		418
Total		$	10,020	$	9,602	$	418
	December 31, 2014
	Life (years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Developed technology	3-5	$	9,240	$	9,031	$	209
Patent license	7	780		334		446
Total		$	10,020	$	9,365	$	655

Intangible assets acquired in business combinations, referred to as purchased intangible assets, are accounted for based on the fair value of assets purchased and are amortized over the period in which economic benefit is estimated to be received. The net carrying value of identifiable assets has been included in the other assets line item in the condensed consolidated balance sheets. Amortization expense has been included in research and development expense in the condensed consolidated statements of operations and comprehensive loss. The estimated aggregate amortization expense to be recognized in future years is approximately $0.1 million for the remainder of 2015 and $0.1 million annually for 2016 through 2018.

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Stockholders' Equity (Details) (USD $) In Thousands, except Share data, unless otherwise specified	0 Months Ended	3 Months Ended
	Mar. 04, 2015	Mar. 31, 2015	Mar. 04, 2015 item
Stockholders' Equity
Number of shares of common stock issued in equity and public offering	14,375,000
Net proceeds from issue of shares of common stock in equity and public offering	$ 21,500	$ 21,479
Number of executive officers			2
Shares purchased by executive officers	406,250

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Current assets
Cash and cash equivalents	$ 7,020	$ 3,110
Short-term investments	26,066	20,439
Accounts receivable, net	82	177
Inventories	1,177	881
Prepaid expenses and other	1,020	887
Total current assets	35,365	25,494
Long-term investments	7,597	2,245
Property and equipment, net	830	854
Goodwill	23,134	23,134
Other assets	631	899
Total assets	67,557	52,626
Current liabilities
Accounts payable	311	495
Accrued expenses and other	2,287	2,350
Total current liabilities	2,598	2,845
Long-term liabilities	245	241
Commitments and contingencies (Note 4)
Stockholders' equity
Preferred stock, $0.01 par value; 20,000 shares authorized; none issued and outstanding
Common stock, $0.01 par value; 120,000 shares authorized; 64,639 shares and 49,793 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively	646	498
Additional paid-in capital	222,526	199,541
Accumulated other comprehensive loss	(4)	(10)
Accumulated deficit	(158,454)	(150,489)
Total stockholders' equity	64,714	49,540
Total liabilities and stockholders' equity	$ 67,557	$ 52,626

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The Company and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2015

The Company and Summary of Significant Accounting Policies

The Company and Summary of Significant Accounting Policies

Note 1. The Company and Summary of Significant Accounting Policies

The Company

MoSys, Inc. (the Company) was incorporated in California in September 1991, and reincorporated in September 2000 in Delaware. The Company’s strategy and primary business objective is to be an IP-rich fabless semiconductor company focused on the development and sale of integrated circuit (IC) products. Prior to 2011, the Company’s primary business activities were designing, developing, marketing and licensing high-performance semiconductor memory and high-speed parallel and serial interface, or SerDes, intellectual property (IP) used by the semiconductor industry and communications, networking and storage equipment manufacturers. Since 2011, the Company has developed two IC product lines under the “Bandwidth Engine” and “LineSpeed” product names. Bandwidth Engine ICs combine the Company’s proprietary high-density embedded memory with its high-speed 10 gigabits per second and higher interface technology. The LineSpeed IC product line is comprised of non-memory based, high-speed SerDes devices with gearbox or retimer functionality that convert lanes of data received on line cards or by optical modules into different configurations and/or ensure signal integrity. Both product lines are being marketed to networking and communications systems companies. The Company’s future success and ability to achieve and maintain profitability depends on its success in developing a market for its ICs.

The accompanying condensed consolidated financial statements of the Company have been prepared without audit in accordance with the rules and regulations of the Securities and Exchange Commission (SEC).  The condensed consolidated balance sheet at December 31, 2014 has been derived from the audited consolidated financial statements at that date. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted in accordance with these rules and regulations. The information in this report should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in its most recent annual report on Form 10-K filed with the SEC.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to summarize fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015 or for any other future period.

Basis of Presentation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s fiscal year is the calendar year.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses recognized during the reported period. Actual results could differ from those estimates.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation.  Previously reported intangible asset amounts have been included in the other assets line item of the condensed consolidated balance sheets.  The amounts for the prior periods have been reclassified to be consistent with the current year presentation and have no impact on previously reported total assets, total stockholders’ equity or net loss.

Cash Equivalents and Investments

The Company has invested its excess cash in money market accounts, certificates of deposit, commercial paper, corporate debt, government-sponsored enterprise bonds and municipal bonds and considers all highly liquid debt instruments purchased with anoriginal maturity of three months or less to be cash equivalents. Investments with original maturities greater than three months and remaining maturities less than one year are classified as short-term investments. Investments with remaining maturities greater than one year are classified as long-term investments. Management generally determines the appropriate classification of securities at the time of purchase. All securities are classified as available-for-sale. The Company’s available-for-sale short-term and long-term investments are carried at fair value, with the unrealized holding gains and losses reported in accumulated other comprehensive income (loss). Realized gains and losses and declines in the value judged to be other than temporary are included in the other income, net line item in the condensed consolidated statements of operations and comprehensive loss. The cost of securities sold is based on the specific identification method.

Fair Value Measurements

The Company measures the fair value of financial instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:

Level 1—Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date.

Level 2—Pricing is provided by third party sources of market information obtained through the Company’s investment advisors, rather than models. The Company does not adjust for, or apply, any additional assumptions or estimates to the pricing information it receives from advisors. The Company’s Level 2 securities include cash equivalents and available-for-sale securities, which consisted primarily of certificates of deposit, corporate debt, and government agency and municipal debt securities from issuers with high-quality credit ratings. The Company’s investment advisors obtain pricing data from independent sources, such as Standard & Poor’s, Bloomberg and Interactive Data Corporation, and rely on comparable pricing of other securities because the Level 2 securities are not actively traded and have fewer observable transactions. The Company considers this the most reliable information available for the valuation of the securities.

Level 3—Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment are used to measure fair value. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. The determination of fair value for Level 3 investments and other financial instruments involves the most management judgment and subjectivity.

Allowance for Doubtful Accounts

The Company establishes an allowance for doubtful accounts to ensure that its trade receivables balances are not overstated due to uncollectibility. The Company performs ongoing customer credit evaluations within the context of the industry in which it operates and generally does not require collateral from its customers. A specific allowance of up to 100% of the invoice value is provided for any problematic customer balances. Delinquent account balances are written off after management has determined that the likelihood of collection is remote. The Company grants credit only to customers deemed creditworthy in the judgment of management. There was no allowance for doubtful accounts receivable at either March 31, 2015 or December 31, 2014.

Revenue Recognition

General

The Company generates revenue from the sales of IC products and licensing of its IP. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery or performance has occurred, the sales price is fixed or determinable, and collectibility is reasonably assured. Evidence of an arrangement generally consists of signed agreements or customer purchase orders.

IC products

The Company sells products both directly to customers, as well as through distributors. Revenue from sales directly to customers is generally recognized at the time of shipment. The Company may record an estimated allowance, at the time of shipment, for future returns and other charges against revenue consistent with the terms of sale. IC product revenue and costs relating to sales made through distributors with rights of return or stock rotation are generally deferred until the distributors sell the product to end customers due to the Company’s inability to estimate future returns and credits to be issued. Distributors are generally able to return up to 10% of their purchases for slow, non-moving or obsolete inventory for credit every six months. At the time of shipment to distributors, an accounts receivable for the selling price is recorded, as there is a legally enforceable right to receive payment, and inventory is relieved, as legal title to the inventory is transferred upon shipment. Revenues are recognized upon receiving notification from the distributors that products have been sold to end customers. Distributors provide information regarding products and quantity, endcustomer shipments and remaining inventory on hand. The deferred margin recorded on sales to distributors where the product has not sold through to end customers is included in the accrued expenses and other line item in the condensed consolidated balance sheets.

Royalty

The Company’s licensing contracts typically also provide for royalties based on the licensee’s use of the Company’s memory technology in their currently shipping commercial products. The Company recognizes royalties in the quarter in which it receives the licensee’s report.

Licensing

Licensing revenue consists of fees earned from license agreements, development services and support and maintenance. For stand-alone license agreements or license deliverables in multi-deliverable arrangements that do not require significant development, modification or customization, revenues are recognized when all revenue recognition criteria have been met. Delivery of the licensed technology is typically the final revenue recognition criterion met, at which time revenue is recognized. If any of the criteria are not met, revenue recognition is deferred until such time as all criteria have been met. Support and maintenance revenue is recognized ratably over the period during which the obligation exists, typically 12 months. There was no licensing revenue for the three months ended March, 31, 2015.  Licensing revenue was $41,000 for the three months ended March 31, 2014.

Cost of Net Revenue

Cost of net revenue consists primarily of direct and indirect costs of IC product sales and engineering personnel costs directly related to maintenance and support services specified in licensing agreements. Maintenance and support typically includes engineering support to assist in the commencement of production of a licensee’s products.

Goodwill

The Company reviews goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than the carrying amount as a basis for determining whether it is necessary to perform the two-step impairment test. If the qualitative assessment warrants further analysis, the Company compares the fair value of the reporting unit to its carrying value. The fair value of the reporting unit is determined using the market approach. If the fair value of the reporting unit exceeds the carrying value of net assets of the reporting unit, goodwill is not impaired, and the Company is not required to perform further testing. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then the Company must record an impairment charge equal to the difference. The Company has determined that it has a single reporting unit for purposes of performing its goodwill impairment test. As the Company uses the market approach to assess impairment in the second step of the analysis, the price of its common stock is an important component of the fair value calculation. If the Company’s stock price continues to experience significant price and volume fluctuations, this will impact the fair value of the reporting unit, which can lead to potential impairment in future periods. The Company performed step one of the annual impairment test in September 2014, and concluded no factors indicated impairment of goodwill. As of March 31, 2015, the Company had not identified any factors to indicate there was an impairment of its goodwill and determined that no additional impairment analysis was required.

Per Share Amounts

Basic net loss per share is computed by dividing net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share gives effect to all potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of incremental shares of common stock issuable upon the exercise of stock options, vesting of stock awards and purchases under the employee stock purchase plan. As of March 31, 2015 and 2014, stock awards to purchase approximately 10,016,000 and 10,173,000 shares, respectively, were excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive.

Comprehensive Loss

Comprehensive loss includes unrealized gains and losses on available-for-sale securities.  Realized gains and losses on available-for-sale securities are reclassified from accumulated other comprehensive loss and included in other income, net in the condensed consolidated statements of operations and comprehensive loss.  All amounts recorded in the three months ended March 31, 2015 and 2014 are not considered significant.

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Fair Value of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2014	Dec. 31, 2013
Fair Value of Financial Instruments
Cash and cash equivalents, cost	$ 7,020	$ 3,110	$ 2,113	$ 4,364
Cash and cash equivalents, fair value	7,020	3,110
Estimated fair values of financial instruments
Unrealized Gains	6	3
Unrealized Losses	(10)	(13)
Short-term investments.
Estimated fair values of financial instruments
Cost	26,068	20,442
Unrealized Gains	4	3
Unrealized Losses	(6)	(6)
Fair Value	26,066	20,439
Short-term investments. | U.S. government-sponsored enterprise bonds
Estimated fair values of financial instruments
Cost	8,710	1,250
Unrealized Losses	(3)
Fair Value	8,707	1,250
Short-term investments. | Municipal Bonds
Estimated fair values of financial instruments
Cost	3,071	841
Unrealized Gains	1
Fair Value	3,072	841
Short-term investments. | Corporate notes
Estimated fair values of financial instruments
Cost	10,835	15,921
Unrealized Gains	2	2
Unrealized Losses	(3)	(6)
Fair Value	10,834	15,917
Short-term investments. | Certificates of deposit
Estimated fair values of financial instruments
Cost	2,953	2,430
Unrealized Gains	1	1
Fair Value	2,954	2,431
Short-term investments. | Commercial Paper
Estimated fair values of financial instruments
Cost	499
Fair Value	499
Long-term investments
Estimated fair values of financial instruments
Cost	7,599	2,252
Unrealized Gains	2
Unrealized Losses	(4)	(7)
Fair Value	7,597	2,245
Long-term investments | U.S. government-sponsored enterprise bonds
Estimated fair values of financial instruments
Cost	1,001	1,000
Unrealized Losses	(1)	(2)
Fair Value	1,000	998
Long-term investments | Corporate notes
Estimated fair values of financial instruments
Cost	6,598	1,252
Unrealized Gains	2
Unrealized Losses	(3)	(5)
Fair Value	$ 6,597	$ 1,247

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Fair Value of Financial Instruments (Details 3) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Fair value hierarchy for its financial assets
Transfer of assets between Level 1 to Level 2	$ 0	$ 0
Transfer of liabilities between Level 1 to Level 2	0	0
Transfer of assets between Level 2 to Level 1	0	0
Transfer of liabilities between Level 2 to Level 1	0	0
Fair Value
Fair value hierarchy for its financial assets
Money market funds	5,002		1,837
Total assets	39,898		25,168
Fair Value | U.S. government-sponsored enterprise bonds
Fair value hierarchy for its financial assets
Available-for-sale securities	9,707		2,248
Fair Value | Municipal Bonds
Fair value hierarchy for its financial assets
Available-for-sale securities	4,205		1,243
Fair Value | Corporate notes
Fair value hierarchy for its financial assets
Available-for-sale securities	17,431		17,164
Fair Value | Certificates of deposit
Fair value hierarchy for its financial assets
Available-for-sale securities	2,954		2,676
Fair Value | Commercial Paper
Fair value hierarchy for its financial assets
Available-for-sale securities	599
Level 1
Fair value hierarchy for its financial assets
Money market funds	5,002		1,837
Total assets	5,002		1,837
Level 2
Fair value hierarchy for its financial assets
Total assets	34,896		23,331
Level 2 | U.S. government-sponsored enterprise bonds
Fair value hierarchy for its financial assets
Available-for-sale securities	9,707		2,248
Level 2 | Municipal Bonds
Fair value hierarchy for its financial assets
Available-for-sale securities	4,205		1,243
Level 2 | Corporate notes
Fair value hierarchy for its financial assets
Available-for-sale securities	17,431		17,164
Level 2 | Certificates of deposit
Fair value hierarchy for its financial assets
Available-for-sale securities	2,954		2,676
Level 2 | Commercial Paper
Fair value hierarchy for its financial assets
Available-for-sale securities	$ 599

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2015

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Note 2: Fair Value of Financial Instruments

The estimated fair values of financial instruments outstanding were (in thousands):

	March 31, 2015
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash and cash equivalents	$	7,020	$	—	$	—		$	7,020
Short-term investments:
U.S. government-sponsored enterprise bonds	$	8,710	$	—	$	(3	)	$	8,707
Corporate notes	10,835		2		(3		)	10,834
Municipal bonds	3,071		1		—			3,072
Certificates of deposit	2,953		1		—			2,954
Commercial paper	499		—		—			499
Total short-term investments	$	26,068	$	4	$	(6	)	$	26,066
Long-term investments:
U.S. government-sponsored enterprise bonds	$	1,001	$	—	$	(1	)	$	1,000
Corporate notes	6,598		2		(3		)	6,597
Total long-term investments	$	7,599	$	2	$	(4	)	$	7,597
	December 31, 2014
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash and cash equivalents	$	3,110	$	—	$	—		$	3,110
Short-term investments:
U.S. government-sponsored enterprise bonds	$	1,250	$	—	$	—		$	1,250
Municipal bonds	841		—		—			841
Corporate notes	15,921		2		(6		)	15,917
Certificates of deposit	2,430		1		—			2,431
Total short-term investments	$	20,442	$	3	$	(6	)	$	20,439
Long-term investments:
U.S. government-sponsored enterprise bonds	$	1,000	$	—	$	(2	)	$	998
Corporate notes	1,252		—		(5		)	1,247
Total long-term investments	$	2,252	$	—	$	(7	)	$	2,245

The estimated fair values of available-for-sale securities with unrealized losses were (in thousands):

	March 31, 2015
	Cost		Unrealized Losses			Fair Value
Short-term investments:
U.S. government-sponsored enterprise bonds	$	6,597	$	(3	)	$	6,594
Corporate notes	4,387		(3		)	4,384
Total short-term investments	$	10,984	$	(6	)	$	10,978
Long-term investments:
U.S. government-sponsored enterprise bonds	$	1,001	$	(1	)	$	1,000
Corporate notes	3,299		(3		)	3,296
Total long-term investments	$	4,300	$	(4	)	$	4,296
	December 31, 2014
	Cost		Unrealized Losses			Fair Value
Short-term investments:
Corporate notes	$	13,006	$	(6	)	$	13,000
Total short-term investments	$	13,006	$	(6	)	$	13,000
Long-term investments:
U.S. government-sponsored enterprise bonds	$	1,000	$	(2	)	$	998
Corporate notes	1,252		(5		)	1,247
Total long-term investments	$	2,252	$	(7	)	$	2,245

As of March 31, 2015 and December 31, 2014, all of the available-for-sale securities with unrealized losses had been in a loss position for less than 12 months.

Cost and fair value of investments based on two maturity groups were (in thousands):

	March 31, 2015
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Due within 1 year	$	26,068	$	4	$	(6	)	$	26,066
Due in 1-2 years	7,599		2		(4		)	7,597
Total	$	33,667	$	6	$	(10	)	$	33,663
	December 31, 2014
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Due within 1 year	$	20,442	$	3	$	(6	)	$	20,439
Due in 1-2 years	2,252		—		(7		)	2,245
Total	$	22,694	$	3	$	(13	)	$	22,684

The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) as of March 31, 2015 and December 31, 2014 (in thousands):

	March 31, 2015
	Fair Value		Level 1		Level 2		Level 3
Money market funds	$	5,002	$	5,002	$	—	$	—
U.S. government-sponsored enterprise bonds	9,707		—		9,707		—
Corporate notes	17,431		—		17,431		—
Municipal bonds	4,205		—		4,205		—
Certificates of deposit	2,954		—		2,954		—
Commercial paper	599		—		599		—
Total assets	$	39,898	$	5,002	$	34,896	$	—
	December 31, 2014
	Fair Value		Level 1		Level 2		Level 3
Money market funds	$	1,837	$	1,837	$	—	$	—
U.S. government-sponsored enterprise bonds	2,248		—		2,248		—
Municipal bonds	1,243		—		1,243		—
Corporate notes	17,164		—		17,164		—
Certificates of deposit	2,676		—		2,676		—
Total assets	$	25,168	$	1,837	$	23,331	$	—

There were no transfers in or out of Level 1 and Level 2 securities during the three months ended March 31, 2015 and 2014.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	20,000	20,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	120,000	120,000
Common stock, shares issued	64,639	49,793
Common stock, shares outstanding	64,639	49,793

XML

Balance Sheet Detail (Tables)

3 Months Ended

Mar. 31, 2015

Balance Sheet Detail

Schedule of inventory

	March 31, 2015		December 31, 2014
	(in thousands)
Inventories:
Work-in-process	$	979	$	651
Finished goods	198		230
	$	1,177	$	881

Schedule of identifiable intangible assets

Identifiable intangible assets relating to business combinations and a patent license were (dollar amounts in thousands):

	March 31, 2015
	Life (years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Developed technology	3-5	$	9,240	$	9,240	$	—
Patent license	7	780		362		418
Total		$	10,020	$	9,602	$	418
	December 31, 2014
	Life (years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Developed technology	3-5	$	9,240	$	9,031	$	209
Patent license	7	780		334		446
Total		$	10,020	$	9,365	$	655

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2015	Apr. 30, 2015
Document and Entity Information
Entity Registrant Name	MoSys, Inc.
Entity Central Index Key	0000890394
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		64,650,098
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1

XML

Business Segments, Concentration of Credit Risk and Significant Customers (Tables)

3 Months Ended

Mar. 31, 2015

Business Segments, Concentration of Credit Risk and Significant Customers

Schedule of revenue from customers in North America, Asia and Europe

The Company recognized revenue from licensing of its technologies and shipment of ICs to customers in North America, Asia and Europe as follows (in thousands):

	Three Months Ended
	March 31,
	2015		2014
Taiwan	$	479	$	337
North America	177		350
Japan	112		623
Rest of world	8		11
Europe	—		11
Total net revenue	$	776	$	1,332

Schedule of customers who accounted for at least 10% of total net revenue

	Three Months Ended March 31,
	2015		2014
Customer A	60	%	24	%
Customer B	10	%	38	%
Customer C	*		20	%

*Represents less than 10%

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Net revenue
Product	$ 180	$ 581
Royalty and other	596	751
Total net revenue	776	1,332
Cost of net revenue	237	577
Gross profit	539	755
Operating expenses
Research and development	6,893	7,054
Selling, general and administrative	1,614	1,797
Total operating expenses	8,507	8,851
Loss from operations	(7,968)	(8,096)
Other income, net	23	30
Loss before income taxes	(7,945)	(8,066)
Income tax provision	20	21
Net loss	(7,965)	(8,087)
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on available-for-sale securities	6	(9)
Comprehensive loss	$ (7,959)	$ (8,096)
Net loss per share
Basic and diluted (in dollars per share)	$ (0.15)	$ (0.16)
Shares used in computing net loss per share
Basic and diluted (in shares)	54,282	49,174

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2015

Stock-Based Compensation

Stock-Based Compensation

Note 7. Stock-Based Compensation

The expense relating to stock options is recognized on a straight-line basis over the requisite service period, usually the vesting period, based on the grant-date fair value. The unamortized compensation cost, net of expected forfeitures, as of March 31, 2015 was $3.9 million related to stock options and is expected to be recognized as expense over a weighted average period of approximately 2.4 years.  The expense related to restricted stock units (RSUs) is recognized over a three-to-five year vesting period and is based on the fair value of the underlying stock on the dates of grant.  The unamortized compensation cost, net of expected forfeitures, as of March 31, 2015 was $0.9 million related to RSUs and is expected to be recognized as expense over a weighted average period of approximately 2 years.

The Company presents the tax benefits resulting from tax deductions in excess of the compensation cost recognized from the exercise of stock options as financing cash flows in the condensed consolidated statements of cash flows. For the three months ended March 31, 2015 and 2014, there were no such tax benefits associated with the exercise of stock options due to the Company’s loss position.

Valuation Assumptions

The fair value of the Company’s share-based payment awards for the three months ended March 31, 2015 and 2014 was estimated on the grant dates using the Black-Scholes valuation option-pricing model with the following assumptions:

	Three Months Ended March 31,
Employee stock options:	2015	2014
Risk-free interest rate	0.6% - 1.4%	1.5% - 1.7%
Volatility	55.8% - 57.7%	56.9% - 57.5%
Expected life (years)	3.0-5.0	4.0-5.0
Dividend yield	0%	0%

The risk-free interest rate was derived from the Daily Treasury Yield Curve Rates as published by the U.S. Department of the Treasury as of the grant date for terms equal to the expected terms of the options. The expected volatility was based on the historical volatility of the Company’s stock price over the expected term of the options. The expected term of options granted was derived from historical data based on employee exercises and post-vesting employment termination behavior. A dividend yield of zero is applied because the Company has never paid dividends and has no intention to pay dividends in the near future.

The stock-based compensation expense recorded is adjusted based on estimated forfeiture rates. An annualized forfeiture rate has been used as a best estimate of future forfeitures based on the Company’s historical forfeiture experience. The stock-based compensation expense will be adjusted in later periods if the actual forfeiture rate is different from the estimate.

Common Stock Options and Restricted Stock

A summary of the option and RSU activity under the Company’s Amended and Restated 2000 Stock Option and Equity Incentive Plan (Amended 2000 Plan) and Amended and Restated 2010 Equity Incentive Plan (Amended 2010 Plan), referred to collectively as the “Plans,” is presented below (in thousands, except exercise price):

			Options Outstanding
	Available for Grant		Number of Shares		Weighted Average Exercise Prices
Balance at December 31, 2014	1,760		5,994		$	3.87
Additional shares authorized under the Amended 2010 Plan	500		—		—
Restricted stock units cancelled	6		—		—
Options granted	(1,323	)	1,323		$	2.05
Options cancelled	153		(153	)	$	5.00
Options exercised	—		(22	)	$	1.60
Options expired	(78	)	—		5.79
Balance at March 31, 2015	1,018		7,142		$	3.52

The Company also has awarded options to new employees outside of the Plans and may continue to do so, as material inducements to the acceptance of employment with the Company, as permitted under the Listing Rules of the Nasdaq Stock Market. These grants must be approved by the compensation committee of the board of directors, a majority of the independent directors or, below a specified share level, by an authorized executive officer.

A summary of the inducement grant option activity is presented below (in thousands, except exercise price):

	Options Outstanding
	Number of Shares	Weighted Average Exercise Prices
Balance at December 31, 2014 and March 31, 2015	2,233	$	3.68

A summary of RSU activity under the Plans is presented below (in thousands, except for fair value):

	Number of Shares		Weighted Average Grant-Date Fair Value
Non-vested shares at December 31, 2014	394		$	4.61
Vested	(120	)	$	4.60
Cancelled	(6	)	$	4.60
Non-vested shares at March 31, 2015	268		$	4.61

The total intrinsic value of the restricted stock units outstanding as of March 31, 2015 was $0.6 million.

The following table summarizes significant ranges of outstanding and exercisable options as of March 31, 2015 (in thousands, except contractual life and exercise price):

	Options Outstanding				Options Exercisable
Range of Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life (in Years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price		Aggregate Intrinsic Value
$1.50 - $2.94	2,542	5.97	$	2.06	1,098	$	2.01
$2.95 - $3.58	2,353	3.85	$	3.23	1,502	$	3.25
$3.59 - $4.46	3,013	4.77	$	4.15	2,131	$	4.12
$4.47 - $6.50	1,467	2.77	$	5.44	1,286	$	5.49
$1.50 - $6.50	9,375	4.55	$	3.56	6,017	$	3.81	$	418
Vested and expected to vest	9,027	4.40	$	3.58				$	405
Exercisable	6,017	2.88	$	3.81				$	331

The aggregate intrinsic value of employee stock options exercised during the three months ended March 31, 2015 and 2014 was approximately $8,000 and $500,000, respectively.

Employee Stock Purchase Plan

In June 2010, the Company’s stockholders approved the 2010 Employee Stock Purchase Plan (ESPP). A total of 2,000,000 shares of common stock have been reserved for issuance under the ESPP. The ESPP, which is intended to qualify under Section 423 of the Internal Revenue Code, is administered by the board of directors or the compensation committee of the board of directors. The ESPP provides that eligible employees may purchase up to $25,000 worth of the Company’s common stock annually over the course of two six-month offering periods. The purchase price to be paid by participants is 85% of the price per share of the Company’s common stock either at the beginning or the end of each six-month offering period, whichever is less. On September 1, 2010, the Company commenced the first offering period under the ESPP. On February 28, 2015, approximately 339,000 shares of common stock were issued at an aggregate purchase price of $518,000 under the ESPP.  As of March 31, 2015, there were approximately 427,000 shares authorized and unissued under the ESPP.

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Income Tax Provision

3 Months Ended

Mar. 31, 2015

Income Tax Provision

Income Tax Provision

Note 6. Income Tax Provision

The Company determines deferred tax assets and liabilities based upon the differences between the financial statement and tax bases of the Company’s assets and liabilities using tax rates in effect for the year in which the Company expects the differences to affect taxable income. A valuation allowance is established for any deferred tax assets for which it is more likely than not that all or a portion of the deferred tax assets will not be realized.

The Company files U.S. federal and state and foreign income tax returns in jurisdictions with varying statutes of limitations.  2004 through 2014 tax years generally remain subject to examination by federal, state and foreign tax authorities.  As of March 31, 2015, the Company has not recorded any liability for unrecognized tax benefits related to uncertain tax positions.

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Fair Value of Financial Instruments (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015 item	Dec. 31, 2014
Estimated fair values of available-for-sale securities with unrealized losses
Number of maturity groups	2
Investments by rolling maturity, Cost
Due within 1 year	$ 26,068	$ 20,442
Due in 1-2 years	7,599	2,252
Total	33,667	22,694
Investments by rolling maturity, Unrealized Gains
Due within 1 year	4	3
Due in 1-2 years	2
Total	6	3
Investments by rolling maturity, Unrealized Losses
Due within 1 year	(6)	(6)
Due in 1-2 years	(4)	(7)
Total	(10)	(13)
Investments by rolling maturity, Fair Value
Due within 1 year	26,066	20,439
Due in 1-2 years	7,597	2,245
Total	33,663	22,684
Short-term investments.
Estimated fair values of available-for-sale securities with unrealized losses
Cost	10,984	13,006
Unrealized Losses	(6)	(6)
Fair Value	10,978	13,000
Investments by rolling maturity, Unrealized Gains
Total	4	3
Investments by rolling maturity, Unrealized Losses
Total	(6)	(6)
Short-term investments. | U.S. government-sponsored enterprise bonds
Estimated fair values of available-for-sale securities with unrealized losses
Cost	6,597
Unrealized Losses	(3)
Fair Value	6,594
Investments by rolling maturity, Unrealized Losses
Total	(3)
Short-term investments. | Municipal Bonds
Investments by rolling maturity, Unrealized Gains
Total	1
Short-term investments. | Corporate notes
Estimated fair values of available-for-sale securities with unrealized losses
Cost	4,387	13,006
Unrealized Losses	(3)	(6)
Fair Value	4,384	13,000
Investments by rolling maturity, Unrealized Gains
Total	2	2
Investments by rolling maturity, Unrealized Losses
Total	(3)	(6)
Short-term investments. | Certificates of deposit
Investments by rolling maturity, Unrealized Gains
Total	1	1
Long-term investments
Estimated fair values of available-for-sale securities with unrealized losses
Cost	4,300	2,252
Unrealized Losses	(4)	(7)
Fair Value	4,296	2,245
Investments by rolling maturity, Unrealized Gains
Total	2
Investments by rolling maturity, Unrealized Losses
Total	(4)	(7)
Long-term investments | U.S. government-sponsored enterprise bonds
Estimated fair values of available-for-sale securities with unrealized losses
Cost	1,001	1,000
Unrealized Losses	(1)	(2)
Fair Value	1,000	998
Investments by rolling maturity, Unrealized Losses
Total	(1)	(2)
Long-term investments | Corporate notes
Estimated fair values of available-for-sale securities with unrealized losses
Cost	3,299	1,252
Unrealized Losses	(3)	(5)
Fair Value	3,296	1,247
Investments by rolling maturity, Unrealized Gains
Total	2
Investments by rolling maturity, Unrealized Losses
Total	$ (3)	$ (5)

XML

Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2015

Stock-Based Compensation

Schedule of assumptions used in estimation of fair value of the share-based payment awards on the grant date

	Three Months Ended March 31,
Employee stock options:	2015	2014
Risk-free interest rate	0.6% - 1.4%	1.5% - 1.7%
Volatility	55.8% - 57.7%	56.9% - 57.5%
Expected life (years)	3.0-5.0	4.0-5.0
Dividend yield	0%	0%

Summary of activity under the Plans

A summary of the option and RSU activity under the Company’s Amended and Restated 2000 Stock Option and Equity Incentive Plan (Amended 2000 Plan) and Amended and Restated 2010 Equity Incentive Plan (Amended 2010 Plan), referred to collectively as the “Plans,” is presented below (in thousands, except exercise price):

			Options Outstanding
	Available for Grant		Number of Shares		Weighted Average Exercise Prices
Balance at December 31, 2014	1,760		5,994		$	3.87
Additional shares authorized under the Amended 2010 Plan	500		—		—
Restricted stock units cancelled	6		—		—
Options granted	(1,323	)	1,323		$	2.05
Options cancelled	153		(153	)	$	5.00
Options exercised	—		(22	)	$	1.60
Options expired	(78	)	—		5.79
Balance at March 31, 2015	1,018		7,142		$	3.52

Summary of the inducement grant option activity

A summary of the inducement grant option activity is presented below (in thousands, except exercise price):

	Options Outstanding
	Number of Shares	Weighted Average Exercise Prices
Balance at December 31, 2014 and March 31, 2015	2,233	$	3.68

Summary of restricted stock unit activity

A summary of RSU activity under the Plans is presented below (in thousands, except for fair value):

	Number of Shares		Weighted Average Grant-Date Fair Value
Non-vested shares at December 31, 2014	394		$	4.61
Vested	(120	)	$	4.60
Cancelled	(6	)	$	4.60
Non-vested shares at March 31, 2015	268		$	4.61

Summary of significant ranges of outstanding and exercisable options

The following table summarizes significant ranges of outstanding and exercisable options as of March 31, 2015 (in thousands, except contractual life and exercise price):

	Options Outstanding				Options Exercisable
Range of Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life (in Years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price		Aggregate Intrinsic Value
$1.50 - $2.94	2,542	5.97	$	2.06	1,098	$	2.01
$2.95 - $3.58	2,353	3.85	$	3.23	1,502	$	3.25
$3.59 - $4.46	3,013	4.77	$	4.15	2,131	$	4.12
$4.47 - $6.50	1,467	2.77	$	5.44	1,286	$	5.49
$1.50 - $6.50	9,375	4.55	$	3.56	6,017	$	3.81	$	418
Vested and expected to vest	9,027	4.40	$	3.58				$	405
Exercisable	6,017	2.88	$	3.81				$	331

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The Company and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2015

The Company and Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s fiscal year is the calendar year.

Use of Estimates

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses recognized during the reported period. Actual results could differ from those estimates.

Reclassification

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation.  Previously reported intangible asset amounts have been included in the other assets line item of the condensed consolidated balance sheets.  The amounts for the prior periods have been reclassified to be consistent with the current year presentation and have no impact on previously reported total assets, total stockholders’ equity or net loss.

Cash Equivalents and Investments

Cash Equivalents and Investments

The Company has invested its excess cash in money market accounts, certificates of deposit, commercial paper, corporate debt, government-sponsored enterprise bonds and municipal bonds and considers all highly liquid debt instruments purchased with anoriginal maturity of three months or less to be cash equivalents. Investments with original maturities greater than three months and remaining maturities less than one year are classified as short-term investments. Investments with remaining maturities greater than one year are classified as long-term investments. Management generally determines the appropriate classification of securities at the time of purchase. All securities are classified as available-for-sale. The Company’s available-for-sale short-term and long-term investments are carried at fair value, with the unrealized holding gains and losses reported in accumulated other comprehensive income (loss). Realized gains and losses and declines in the value judged to be other than temporary are included in the other income, net line item in the condensed consolidated statements of operations and comprehensive loss. The cost of securities sold is based on the specific identification method.

Fair Value Measurements

Fair Value Measurements

The Company measures the fair value of financial instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:

Level 1—Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date.

Level 2—Pricing is provided by third party sources of market information obtained through the Company’s investment advisors, rather than models. The Company does not adjust for, or apply, any additional assumptions or estimates to the pricing information it receives from advisors. The Company’s Level 2 securities include cash equivalents and available-for-sale securities, which consisted primarily of certificates of deposit, corporate debt, and government agency and municipal debt securities from issuers with high-quality credit ratings. The Company’s investment advisors obtain pricing data from independent sources, such as Standard & Poor’s, Bloomberg and Interactive Data Corporation, and rely on comparable pricing of other securities because the Level 2 securities are not actively traded and have fewer observable transactions. The Company considers this the most reliable information available for the valuation of the securities.

Level 3—Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment are used to measure fair value. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. The determination of fair value for Level 3 investments and other financial instruments involves the most management judgment and subjectivity.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

The Company establishes an allowance for doubtful accounts to ensure that its trade receivables balances are not overstated due to uncollectibility. The Company performs ongoing customer credit evaluations within the context of the industry in which it operates and generally does not require collateral from its customers. A specific allowance of up to 100% of the invoice value is provided for any problematic customer balances. Delinquent account balances are written off after management has determined that the likelihood of collection is remote. The Company grants credit only to customers deemed creditworthy in the judgment of management. There was no allowance for doubtful accounts receivable at either March 31, 2015 or December 31, 2014.

Revenue Recognition

Revenue Recognition

General

The Company generates revenue from the sales of IC products and licensing of its IP. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery or performance has occurred, the sales price is fixed or determinable, and collectibility is reasonably assured. Evidence of an arrangement generally consists of signed agreements or customer purchase orders.

IC products

The Company sells products both directly to customers, as well as through distributors. Revenue from sales directly to customers is generally recognized at the time of shipment. The Company may record an estimated allowance, at the time of shipment, for future returns and other charges against revenue consistent with the terms of sale. IC product revenue and costs relating to sales made through distributors with rights of return or stock rotation are generally deferred until the distributors sell the product to end customers due to the Company’s inability to estimate future returns and credits to be issued. Distributors are generally able to return up to 10% of their purchases for slow, non-moving or obsolete inventory for credit every six months. At the time of shipment to distributors, an accounts receivable for the selling price is recorded, as there is a legally enforceable right to receive payment, and inventory is relieved, as legal title to the inventory is transferred upon shipment. Revenues are recognized upon receiving notification from the distributors that products have been sold to end customers. Distributors provide information regarding products and quantity, endcustomer shipments and remaining inventory on hand. The deferred margin recorded on sales to distributors where the product has not sold through to end customers is included in the accrued expenses and other line item in the condensed consolidated balance sheets.

Royalty

The Company’s licensing contracts typically also provide for royalties based on the licensee’s use of the Company’s memory technology in their currently shipping commercial products. The Company recognizes royalties in the quarter in which it receives the licensee’s report.

Licensing

Licensing revenue consists of fees earned from license agreements, development services and support and maintenance. For stand-alone license agreements or license deliverables in multi-deliverable arrangements that do not require significant development, modification or customization, revenues are recognized when all revenue recognition criteria have been met. Delivery of the licensed technology is typically the final revenue recognition criterion met, at which time revenue is recognized. If any of the criteria are not met, revenue recognition is deferred until such time as all criteria have been met. Support and maintenance revenue is recognized ratably over the period during which the obligation exists, typically 12 months. There was no licensing revenue for the three months ended March, 31, 2015.  Licensing revenue was $41,000 for the three months ended March 31, 2014.

Cost of Net Revenue

Cost of Net Revenue

Cost of net revenue consists primarily of direct and indirect costs of IC product sales and engineering personnel costs directly related to maintenance and support services specified in licensing agreements. Maintenance and support typically includes engineering support to assist in the commencement of production of a licensee’s products.

Goodwill

Goodwill

The Company reviews goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than the carrying amount as a basis for determining whether it is necessary to perform the two-step impairment test. If the qualitative assessment warrants further analysis, the Company compares the fair value of the reporting unit to its carrying value. The fair value of the reporting unit is determined using the market approach. If the fair value of the reporting unit exceeds the carrying value of net assets of the reporting unit, goodwill is not impaired, and the Company is not required to perform further testing. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then the Company must record an impairment charge equal to the difference. The Company has determined that it has a single reporting unit for purposes of performing its goodwill impairment test. As the Company uses the market approach to assess impairment in the second step of the analysis, the price of its common stock is an important component of the fair value calculation. If the Company’s stock price continues to experience significant price and volume fluctuations, this will impact the fair value of the reporting unit, which can lead to potential impairment in future periods. The Company performed step one of the annual impairment test in September 2014, and concluded no factors indicated impairment of goodwill. As of March 31, 2015, the Company had not identified any factors to indicate there was an impairment of its goodwill and determined that no additional impairment analysis was required.

Per Share Amounts

Per Share Amounts

Basic net loss per share is computed by dividing net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share gives effect to all potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of incremental shares of common stock issuable upon the exercise of stock options, vesting of stock awards and purchases under the employee stock purchase plan. As of March 31, 2015 and 2014, stock awards to purchase approximately 10,016,000 and 10,173,000 shares, respectively, were excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive.

Comprehensive Loss

Comprehensive Loss

Comprehensive loss includes unrealized gains and losses on available-for-sale securities.  Realized gains and losses on available-for-sale securities are reclassified from accumulated other comprehensive loss and included in other income, net in the condensed consolidated statements of operations and comprehensive loss.  All amounts recorded in the three months ended March 31, 2015 and 2014 are not considered significant.

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Stockholders' Equity

3 Months Ended

Mar. 31, 2015

Stockholders' Equity

Stockholders' Equity

Note 8. Stockholders’ Equity

On March 4, 2015, the Company sold 14,375,000 shares of common stock in an equity offering and raised approximately $21.5 million, net of transaction expenses.  Two of the Company’s executive officers between them purchased a total of 406,250 shares at the public offering price.

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Related Party Transactions

3 Months Ended

Mar. 31, 2015

Related Party Transactions

Related Party Transactions

Note 9. Related Party Transactions

In February 2012, the Company entered into a strategic development and marketing agreement with Credo Semiconductor (Hong Kong) Ltd. (Credo), a privately- funded, fabless semiconductor company, to develop, market and sell integrated circuits. Two of the Company’s executive officers between them loaned a total of $250,000 to Credo for a portion of the seed funding needed by Credo to commence its integrated circuit design efforts. These loans may be converted into minority equity interests in Credo. The strategic development and marketing agreement, as amended, calls for the Company to make payments to Credo upon Credo achieving certain development and verification milestones towards the development of IC products and provides the Company with exclusive sales and marketing rights for such IC products. To date, the Company has paid Credo $4.6 million for achievement of additional development milestones, as well as for mask costs and wafer purchases from third-party vendors. All amounts incurred have been recorded as research and development expenses. Currently, under the strategic development and marketing agreement, the Company is entitled to reimbursement of $4.2 million of development costs based on payments made to Credo to date. This amount is subject to increase as additional payments are made to Credo. The reimbursement will be funded by the gross profits earned by the Company from the sale of the products, with the initial gross profits being primarily applied to reimbursing the Company for these development payments and a portion paid to Credo. Once the full amount has been reimbursed, the gross profits will be shared equally by the Company and Credo.

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2015

Fair Value of Financial Instruments

Schedule of estimated fair values of financial instruments outstanding

The estimated fair values of financial instruments outstanding were (in thousands):

	March 31, 2015
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash and cash equivalents	$	7,020	$	—	$	—		$	7,020
Short-term investments:
U.S. government-sponsored enterprise bonds	$	8,710	$	—	$	(3	)	$	8,707
Corporate notes	10,835		2		(3		)	10,834
Municipal bonds	3,071		1		—			3,072
Certificates of deposit	2,953		1		—			2,954
Commercial paper	499		—		—			499
Total short-term investments	$	26,068	$	4	$	(6	)	$	26,066
Long-term investments:
U.S. government-sponsored enterprise bonds	$	1,001	$	—	$	(1	)	$	1,000
Corporate notes	6,598		2		(3		)	6,597
Total long-term investments	$	7,599	$	2	$	(4	)	$	7,597
	December 31, 2014
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash and cash equivalents	$	3,110	$	—	$	—		$	3,110
Short-term investments:
U.S. government-sponsored enterprise bonds	$	1,250	$	—	$	—		$	1,250
Municipal bonds	841		—		—			841
Corporate notes	15,921		2		(6		)	15,917
Certificates of deposit	2,430		1		—			2,431
Total short-term investments	$	20,442	$	3	$	(6	)	$	20,439
Long-term investments:
U.S. government-sponsored enterprise bonds	$	1,000	$	—	$	(2	)	$	998
Corporate notes	1,252		—		(5		)	1,247
Total long-term investments	$	2,252	$	—	$	(7	)	$	2,245

Schedule of estimated fair values of available-for-sale securities with unrealized losses

The estimated fair values of available-for-sale securities with unrealized losses were (in thousands):

	March 31, 2015
	Cost		Unrealized Losses			Fair Value
Short-term investments:
U.S. government-sponsored enterprise bonds	$	6,597	$	(3	)	$	6,594
Corporate notes	4,387		(3		)	4,384
Total short-term investments	$	10,984	$	(6	)	$	10,978
Long-term investments:
U.S. government-sponsored enterprise bonds	$	1,001	$	(1	)	$	1,000
Corporate notes	3,299		(3		)	3,296
Total long-term investments	$	4,300	$	(4	)	$	4,296
	December 31, 2014
	Cost		Unrealized Losses			Fair Value
Short-term investments:
Corporate notes	$	13,006	$	(6	)	$	13,000
Total short-term investments	$	13,006	$	(6	)	$	13,000
Long-term investments:
U.S. government-sponsored enterprise bonds	$	1,000	$	(2	)	$	998
Corporate notes	1,252		(5		)	1,247
Total long-term investments	$	2,252	$	(7	)	$	2,245

Schedule of cost and fair value of investments based on maturity groups

Cost and fair value of investments based on two maturity groups were (in thousands):

	March 31, 2015
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Due within 1 year	$	26,068	$	4	$	(6	)	$	26,066
Due in 1-2 years	7,599		2		(4		)	7,597
Total	$	33,667	$	6	$	(10	)	$	33,663
	December 31, 2014
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Due within 1 year	$	20,442	$	3	$	(6	)	$	20,439
Due in 1-2 years	2,252		—		(7		)	2,245
Total	$	22,694	$	3	$	(13	)	$	22,684

Schedule of fair value hierarchy for financial assets (cash equivalents and investments)

The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) as of March 31, 2015 and December 31, 2014 (in thousands):

	March 31, 2015
	Fair Value		Level 1		Level 2		Level 3
Money market funds	$	5,002	$	5,002	$	—	$	—
U.S. government-sponsored enterprise bonds	9,707		—		9,707		—
Corporate notes	17,431		—		17,431		—
Municipal bonds	4,205		—		4,205		—
Certificates of deposit	2,954		—		2,954		—
Commercial paper	599		—		599		—
Total assets	$	39,898	$	5,002	$	34,896	$	—
	December 31, 2014
	Fair Value		Level 1		Level 2		Level 3
Money market funds	$	1,837	$	1,837	$	—	$	—
U.S. government-sponsored enterprise bonds	2,248		—		2,248		—
Municipal bonds	1,243		—		1,243		—
Corporate notes	17,164		—		17,164		—
Certificates of deposit	2,676		—		2,676		—
Total assets	$	25,168	$	1,837	$	23,331	$	—

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The Company and Summary of Significant Accounting Policies (Details 2) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Revenue Recognition
Threshold purchase return percentage by distributors for slow, non-moving or obsolete inventory	10.00%
Specified period for return of threshold percentage of purchases by distributors for slow, non-moving or obsolete inventory	6 months
Support and maintenance revenue recognition period	12 months
Licensing revenue	$ 0	$ 41,000
Net loss per share
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	10,016,000	10,173,000

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Business Segments and Significant Customers (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015 item	Mar. 31, 2014
Business Segments, Concentration of Credit Risk and Significant Customers
Number of business segments	1
Number of measurements of profitability	1
Business Segments
Total net revenue	$ 776	$ 1,332
Taiwan
Business Segments
Total net revenue	479	337
North America
Business Segments
Total net revenue	177	350
Japan
Business Segments
Total net revenue	112	623
Rest of world
Business Segments
Total net revenue	8	11
Europe
Business Segments
Total net revenue		$ 11

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash flows from operating activities:
Net loss	$ (7,965)	$ (8,087)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	145	108
Stock-based compensation	1,227	1,491
Amortization of intangible assets	237	250
Changes in assets and liabilities:
Accounts receivable	95	(205)
Inventories	(296)	158
Prepaid expenses and other assets	(102)	(80)
Accounts payable	(184)	99
Accrued expenses and other liabilities	(166)	(71)
Net cash used in operating activities	(7,009)	(6,337)
Cash flows from investing activities:
Purchases of property and equipment	(121)	(84)
Proceeds from sales and maturities of marketable securities	11,579	13,531
Purchases of marketable securities	(22,552)	(10,985)
Net cash (used in) provided by investing activities	(11,094)	2,462
Cash flows from financing activities:
Proceeds from the sale of common stock, net of issuance costs	21,479
Proceeds from issuance of common stock	534	1,624
Net cash provided by financing activities	22,013	1,624
Net increase (decrease) in cash and cash equivalents	3,910	(2,251)
Cash and cash equivalents at beginning of period	3,110	4,364
Cash and cash equivalents at end of period	$ 7,020	$ 2,113

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Business Segments, Concentration of Credit Risk and Significant Customers

3 Months Ended

Mar. 31, 2015

Business Segments, Concentration of Credit Risk and Significant Customers

Business Segments, Concentration of Credit Risk and Significant Customers

Note 5. Business Segments, Concentration of Credit Risk and Significant Customers

The Company operates in one business segment and uses one measurement of profitability for its business.  Net revenue attributed to the United States and to all foreign countries is based on the geographical location of the customer.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents, short-term and long-term investments and accounts receivable. Cash, cash equivalents and short-term and long term investments are deposited with high credit-quality institutions.

The Company recognized revenue from licensing of its technologies and shipment of ICs to customers in North America, Asia and Europe as follows (in thousands):

	Three Months Ended
	March 31,
	2015		2014
Taiwan	$	479	$	337
North America	177		350
Japan	112		623
Rest of world	8		11
Europe	—		11
Total net revenue	$	776	$	1,332

Customers who accounted for at least 10% of total net revenue were:

	Three Months Ended March 31,
	2015		2014
Customer A	60	%	24	%
Customer B	10	%	38	%
Customer C	*		20	%

*Represents less than 10%

Two customers accounted for 80% of net accounts receivable at March 31, 2015. Three customers accounted for 97% of net accounts receivable at December 31, 2014.

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Business Segments and Significant Customers (Details 2)	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014 customer
Total revenues | Customer concentration risk | Customer A
Significant Customers
Percentage of concentration risk	60.00%	24.00%
Total revenues | Customer concentration risk | Customer B
Significant Customers
Percentage of concentration risk	10.00%	38.00%
Total revenues | Customer concentration risk | Customer C
Significant Customers
Percentage of concentration risk		20.00%
Net accounts receivable | Credit concentration | Two customers
Significant Customers
Percentage of concentration risk	80.00%		97.00%
Number of customers	2		3

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The Company and Summary of Significant Accounting Policies (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015 item	Dec. 31, 2014
The Company and Summary of Significant Accounting Policies
Number of IC products developed	2
Speed per second of high-speed interface technology of Bandwidth Engine ICs (in gigabits)	10
Allowance for Doubtful Accounts
Maximum specific allowance as percentage of invoice value for problematic customer balances	100.00%
Allowance for doubtful accounts receivable	$ 0	$ 0