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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





(MARK ONE)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | ----------------------------------------------------------------------------------------

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2009

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | -----------------------------------------------------------------------------------------

FOR THE TRANSITION PERIOD FROM  TO

COMMISSION FILE NUMBER: 000-31089





VIRAGE LOGIC CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 77-0416232                          
|(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) |  | (I.R.S. EMPLOYER IDENTIFICATION NO.)

VIRAGE LOGIC CORPORATION

47100 BAYSIDE PARKWAY

FREMONT, CALIFORNIA 94538

(510) 360-8000

(ADDRESS, INCLUDING
ZIP CODE AND TELEPHONE NUMBER,

INCLUDING AREA CODE, OF PRINCIPAL EXECUTIVE OFFICE)





Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

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

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



|                           |  |                      |  |                                               |  |                             
|-------------------------- |  | -------------------- |  | --------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈ |  | Accelerated filer  x |  | Non-accelerated filer   ̈                      |  | Smaller reporting company   ̈
|                           |  |                      |  | (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
Act).    Yes   ̈    No  x

As of April 30, 2009, there were 22,956,532 shares of the Registrants Common Stock outstanding.









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VIRAGE LOGIC CORPORATION

FORM 10-Q

INDEX



|              |  |                                                                                                                          |  |     
|------------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | ----
|              |  |                                                                                                                          |  | PAGE
|              |  | Part I. Financial Information                                                                                            |  |     
|              |  |                                                                                                                         
|Item 1.       |  | Financial Statements                                                                                                     |  |     
|              |  |                                                                                                                         
|              |  | Unaudited Condensed Consolidated Balance Sheets  March 31, 2009 and September 30, 2008                                  |  | 3   
|              |  |                                                                                                                         
|              |  | Unaudited Condensed Consolidated Statements of Operations  Three and Six Months Ended March 31, 2009 and March 31, 2008 |  | 4   
|              |  |                                                                                                                         
|              |  | Unaudited Condensed Consolidated Statements of Cash Flows  Six Months Ended March 31, 2009 and March 31, 2008           |  | 5   
|              |  |                                                                                                                         
|              |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                           |  | 6   
|              |  |                                                                                                                         
|Item 2.       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                    |  | 17  
|              |  |                                                                                                                         
|Item 3.       |  | Quantitative and Qualitative Disclosures about Market Risks                                                              |  | 25  
|              |  |                                                                                                                         
|Item 4.       |  | Controls and Procedures                                                                                                  |  | 25  
|              |  |                                                                                                                         
|              |  | Part II. Other Information                                                                                               |  |     
|              |  |                                                                                                                         
|Item 1.       |  | Legal Proceedings                                                                                                        |  | 26  
|              |  |                                                                                                                         
|Item 1A.      |  | Risk Factors                                                                                                             |  | 26  
|              |  |                                                                                                                         
|Item 2.       |  | Unregistered sales of equity securities                                                                                  |  | 27  
|              |  |                                                                                                                         
|Item 3.       |  | Defaults upon senior securities                                                                                          |  | 27  
|              |  |                                                                                                                         
|Item 4.       |  | Submission of matters to a vote of security holders                                                                      |  | 27  
|              |  |                                                                                                                         
|Item 5.       |  | Other information                                                                                                        |  | 28  
|              |  |                                                                                                                         
|Item 6.       |  | Exhibits                                                                                                                 |  | 28  
|              | 
|Signatures    |  | 29                                                                                                                      
|              | 
|Exhibit Index |  | 30                                                                                                                      



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PART I. FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

VIRAGE LOGIC CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)



|                                                                                                                                                                                                                                 |  |               |         |   |                   |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                                                                                                                                                                 |  | March 31,2009 |         |   | September 30,2008 |  
|ASSETS                                                                                                                                                                                                                           |  |               |         |   |                   |   |         |  
|Current assets:                                                                                                                                                                                                                  |  |               |         |   |                   |   |         |  
|Cash and cash equivalents                                                                                                                                                                                                        |  | $             | 26,664  |   |                   | $ | 13,214  |  
|Short-term investments                                                                                                                                                                                                           |  |               | 29,166  |   |                   |   | 31,148  |  
|Accounts receivable, net                                                                                                                                                                                                         |  |               | 10,793  |   |                   |   | 16,526  |  
|Costs in excess of related billings on uncompleted contracts                                                                                                                                                                     |  |               | 1,226   |   |                   |   | 972     |  
|Deferred tax assets - current                                                                                                                                                                                                    |  |               | 1,319   |   |                   |   | 1,255   |  
|Prepaid expenses and other                                                                                                                                                                                                       |  |               | 3,610   |   |                   |   | 4,995   |  
|Taxes receivable                                                                                                                                                                                                                 |  |               |        |   |                   |   | 2,733   |  
|                                                                                                                                                                                                                                 |  |               |         |   |                   |   |         |  
|Total current assets                                                                                                                                                                                                             |  |               | 72,778  |   |                   |   | 70,843  |  
|Property, plant and equipment, net                                                                                                                                                                                               |  |               | 4,534   |   |                   |   | 3,966   |  
|Goodwill                                                                                                                                                                                                                         |  |               |        |   |                   |   | 11,751  |  
|Other intangible assets, net                                                                                                                                                                                                     |  |               | 5,609   |   |                   |   | 6,270   |  
|Deferred tax assets - long-term                                                                                                                                                                                                  |  |               | 5,482   |   |                   |   | 14,548  |  
|Taxes receivable  long-term                                                                                                                                                                                                     |  |               | 2,860   |   |                   |   |        |  
|Long-term investments                                                                                                                                                                                                            |  |               | 4,562   |   |                   |   | 21,443  |  
|Other long-term assets                                                                                                                                                                                                           |  |               | 1,325   |   |                   |   | 383     |  
|                                                                                                                                                                                                                                 |  |               |         |   |                   |   |         |  
|Total assets                                                                                                                                                                                                                     |  | $             | 97,150  |   |                   | $ | 129,204 |  
|                                                                                                                                                                                                                                 |  |               |         |   |                   |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                             |  |               |         |   |                   |   |         |  
|Current liabilities:                                                                                                                                                                                                             |  |               |         |   |                   |   |         |  
|Accounts payable                                                                                                                                                                                                                 |  | $             | 1,478   |   |                   | $ | 1,023   |  
|Accrued expenses                                                                                                                                                                                                                 |  |               | 5,054   |   |                   |   | 5,678   |  
|Deferred revenues                                                                                                                                                                                                                |  |               | 7,907   |   |                   |   | 8,866   |  
|Income taxes payable                                                                                                                                                                                                             |  |               | 44      |   |                   |   | 1,702   |  
|                                                                                                                                                                                                                                 |  |               |         |   |                   |   |         |  
|Total current liabilities                                                                                                                                                                                                        |  |               | 14,483  |   |                   |   | 17,269  |  
|Income tax liabilities                                                                                                                                                                                                           |  |               | 1,083   |   |                   |   | 1,083   |  
|Other long-term accruals                                                                                                                                                                                                         |  |               | 151     |   |                   |   | 150     |  
|                                                                                                                                                                                                                                 |  |               |         |   |                   |   |         |  
|Total liabilities                                                                                                                                                                                                                |  |               | 15,717  |   |                   |   | 18,502  |  
|                                                                                                                                                                                                                                 |  |               |         |   |                   |   |         |  
|Commitments and contingencies (Note 7)                                                                                                                                                                                           |  |               |        |   |                   |   |        |  
|Stockholders equity:                                                                                                                                                                                                            |  |               |         |   |                   |   |         |  
|Common stock, $0.001 par value; Authorized shares  150,000,000 as of March 31, 2009 and September 30, 2008; issued and
outstanding shares  23,846,371 and 23,649,295 as of March 31, 2009 and September 30, 2008, respectively |  |               | 24      |   |                   |   | 24      |  
|Additional paid-in capital                                                                                                                                                                                                       |  |               | 142,058 |   |                   |   | 141,220 |  
|Accumulated other comprehensive income (loss)                                                                                                                                                                                    |  |               | (376    | ) |                   |   | 207     |  
|Treasury stock, at cost (890,000 shares as of March 31, 2009 and 700,000 shares as of September 30, 2008)                                                                                                                        |  |               | (5,130  | ) |                   |   | (4,564  | )
|Accumulated deficit                                                                                                                                                                                                              |  |               | (55,143 | ) |                   |   | (26,185 | )
|                                                                                                                                                                                                                                 |  |               |         |   |                   |   |         |  
|Total stockholders equity                                                                                                                                                                                                       |  |               | 81,433  |   |                   |   | 110,702 |  
|                                                                                                                                                                                                                                 |  |               |         |   |                   |   |         |  
|Total liabilities and stockholders equity                                                                                                                                                                                       |  | $             | 97,150  |   |                   | $ | 129,204 |  
|                                                                                                                                                                                                                                 |  |               |         |   |                   |   |         |  

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



3



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VIRAGE LOGIC CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)



|                                                             |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |        |  
|------------------------------------------------------------ |  | --------------------------- | ------- | - | ------------------------- | - | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                                             |  | Three Months EndedMarch 31, |         |   | Six Months EndedMarch 31, |  
|                                                             |  | 2009                        |         |   | 2008                      |   |        | 2009 |  |   | 2008    |  
|Revenues:                                                    |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |        |  
|License                                                      |  | $                           | 7,478   |   |                           | $ | 10,293 |      |  | $ | 14,039  |   |  | $ | 18,735 |  
|Maintenance                                                  |  |                             | 1,648   |   |                           |   | 1,820  |      |  |   | 3,588   |   |  |   | 4,139  |  
|Royalties                                                    |  |                             | 1,899   |   |                           |   | 2,576  |      |  |   | 4,747   |   |  |   | 5,875  |  
|                                                             |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |        |  
|Total revenues                                               |  |                             | 11,025  |   |                           |   | 14,689 |      |  |   | 22,374  |   |  |   | 28,749 |  
|                                                             |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |        |  
|Costs and expenses:                                          |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |        |  
|Cost of revenues                                             |  |                             | 2,401   |   |                           |   | 3,121  |      |  |   | 4,970   |   |  |   | 5,568  |  
|Research and development                                     |  |                             | 6,700   |   |                           |   | 6,175  |      |  |   | 15,719  |   |  |   | 12,033 |  
|Sales and marketing                                          |  |                             | 2,754   |   |                           |   | 3,864  |      |  |   | 5,421   |   |  |   | 7,457  |  
|General and administrative                                   |  |                             | 2,645   |   |                           |   | 2,111  |      |  |   | 4,766   |   |  |   | 3,886  |  
|Goodwill impairment                                          |  |                             | 11,839  |   |                           |   |       |      |  |   | 11,839  |   |  |   |       |  
|Restructuring charges                                        |  |                             | 1,473   |   |                           |   |       |      |  |   | 1,473   |   |  |   | (3     | )
|                                                             |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |        |  
|Total costs and expenses                                     |  |                             | 27,812  |   |                           |   | 15,271 |      |  |   | 44,188  |   |  |   | 28,941 |  
|                                                             |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |        |  
|Operating loss                                               |  |                             | (16,787 | ) |                           |   | (582   | )    |  |   | (21,814 | ) |  |   | (192   | )
|Interest income                                              |  |                             | 259     |   |                           |   | 841    |      |  |   | 647     |   |  |   | 1,806  |  
|Other income (expenses)                                      |  |                             | (145    | ) |                           |   | (74    | )    |  |   | 115     |   |  |   | 128    |  
|                                                             |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |        |  
|Income (loss) before income taxes                            |  |                             | (16,673 | ) |                           |   | 185    |      |  |   | (21,052 | ) |  |   | 1,742  |  
|Income tax provision (benefit)                               |  |                             | 9,674   |   |                           |   | (447   | )    |  |   | 7,906   |   |  |   | 18     |  
|                                                             |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |        |  
|Net income (loss)                                            |  | $                           | (26,347 | ) |                           | $ | 632    |      |  | $ | (28,958 | ) |  | $ | 1,724  |  
|                                                             |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |        |  
|Net income (loss) per share:                                 |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |        |  
|Basic                                                        |  | $                           | (1.15   | ) |                           | $ | 0.03   |      |  | $ | (1.26   | ) |  | $ | 0.07   |  
|                                                             |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |        |  
|Diluted                                                      |  | $                           | (1.15   | ) |                           | $ | 0.03   |      |  | $ | (1.26   | ) |  | $ | 0.07   |  
|                                                             |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |        |  
|Weighted average shares used in computing per share amounts: |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |        |  
|Basic                                                        |  |                             | 22,877  |   |                           |   | 23,494 |      |  |   | 22,915  |   |  |   | 23,466 |  
|                                                             |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |        |  
|Diluted                                                      |  |                             | 22,877  |   |                           |   | 23,723 |      |  |   | 22,915  |   |  |   | 23,730 |  
|                                                             |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |        |  

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



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VIRAGE LOGIC CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                                  |  |                                |         |   |                                |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ------------------------------ | - | ------- | -
|                                                                                  |  | Six Months EndedMarch 31, 2009 |         |   | Six Months EndedMarch 31, 2008 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                                |         |   |                                |   |         |  
|Net income (loss)                                                                 |  | $                              | (28,958 | ) |                                | $ | 1,724   |  
|Adjustments to reconcile net income (loss) to net cash from operating activities: |  |                                |         |   |                                |   |         |  
|Provision for doubtful accounts                                                   |  |                                | 358     |   |                                |   |        |  
|Depreciation and amortization                                                     |  |                                | 651     |   |                                |   | 720     |  
|Amortization of intangible assets                                                 |  |                                | 661     |   |                                |   | 369     |  
|Stock-based compensation                                                          |  |                                | 927     |   |                                |   | 1,445   |  
|Excess tax benefits from stock-based compensation                                 |  |                                | (4      | ) |                                |   |        |  
|Goodwill impairment                                                               |  |                                | 11,839  |   |                                |   |        |  
|Deferred income taxes                                                             |  |                                | 8,996   |   |                                |   | (695    | )
|Changes in operating assets and liabilities:                                      |  |                                |         |   |                                |   |         |  
|Accounts receivable                                                               |  |                                | 5,317   |   |                                |   | (3,102  | )
|Costs in excess of related billings on uncompleted contracts                      |  |                                | (236    | ) |                                |   | (11     | )
|Prepaid expenses and other assets                                                 |  |                                | 1,303   |   |                                |   | 1,124   |  
|Taxes receivable                                                                  |  |                                | (128    | ) |                                |   | (244    | )
|Other long-term assets                                                            |  |                                | (942    | ) |                                |   | 173     |  
|Accounts payable and accrued liabilities                                          |  |                                | (229    | ) |                                |   | (689    | )
|Deferred revenue                                                                  |  |                                | (959    | ) |                                |   | (259    | )
|Income taxes payable                                                              |  |                                | (1,635  | ) |                                |   | (159    | )
|                                                                                  |  |                                |         |   |                                |   |         |  
|Net cash provided by (used in) operating activities                               |  |                                | (3,039  | ) |                                |   | 396     |  
|                                                                                  |  |                                |         |   |                                |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                                |         |   |                                |   |         |  
|Purchase of property, equipment and leasehold improvements                        |  |                                | (1,669  | ) |                                |   | (626    | )
|Purchase of investments                                                           |  |                                | (15,174 | ) |                                |   | (59,002 | )
|Proceeds from maturities of investments                                           |  |                                | 34,209  |   |                                |   | 65,661  |  
|                                                                                  |  |                                |         |   |                                |   |         |  
|Net cash provided by investing activities                                         |  |                                | 17,366  |   |                                |   | 6,033   |  
|                                                                                  |  |                                |         |   |                                |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                                |         |   |                                |   |         |  
|Net proceeds from issuance of common stock                                        |  |                                | 11      |   |                                |   | 1,423   |  
|Purchase of treasury stock                                                        |  |                                | (566    | ) |                                |   |        |  
|Excess tax benefits from stock-based compensation                                 |  |                                | 4       |   |                                |   |        |  
|                                                                                  |  |                                |         |   |                                |   |         |  
|Net cash provided by (used in) financing activities                               |  |                                | (551    | ) |                                |   | 1,423   |  
|                                                                                  |  |                                |         |   |                                |   |         |  
|Effect of exchange rates on cash                                                  |  |                                | (326    | ) |                                |   | (106    | )
|                                                                                  |  |                                |         |   |                                |   |         |  
|Net increase in cash and cash equivalents                                         |  |                                | 13,450  |   |                                |   | 7,746   |  
|Cash and cash equivalents at beginning of period                                  |  |                                | 13,214  |   |                                |   | 14,820  |  
|                                                                                  |  |                                |         |   |                                |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                              | 26,664  |   |                                | $ | 22,566  |  
|                                                                                  |  |                                |         |   |                                |   |         |  

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



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VIRAGE LOGIC CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Description of Business

Virage Logic Corporation (Virage Logic or the Company) was incorporated in California in November 1995 and subsequently reincorporated in Delaware
in July 2000. The Company provides semiconductor intellectual property (IP) including the following embedded memories including SRAM and non-volatile memory (NVM): logic libraries, IP and development infrastructure for embedded test and repair of
on-chip memory instances, software development tools used to build memory compilers, and Double Date Rate (DDR) memory controllers, Physical Interfaces (PHYs) and Delay Locked Loops (DLLs). These various forms of IP are utilized by the
Companys customers to design and manufacture System-on-a-Chip (SoC) integrated circuits that power todays consumer, communications and networking, handheld and portable devices, computer and graphics, automotive, and defense
applications.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information,
and in accordance with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete
financial statements, and should be read in conjunction with the Companys audited consolidated financial statements for the fiscal year ended September 30, 2008 contained in the Companys 2008 Annual Report on Form 10-K. In the
opinion of management, the unaudited interim financial statements reflect all adjustments, consisting only of normal, recurring adjustments necessary for a fair statement of the financial position, results of operations and cash flows for the
periods indicated. Operating results for the three and six months ended March 31, 2009 are not necessarily indicative of the results that may be expected for any subsequent interim period or for the fiscal year ending September 30, 2009.

The accompanying unaudited condensed consolidated financial statements include the accounts of Virage Logic Corporation and its wholly-owned subsidiaries
and operations located in the Republic of Armenia (Armenia), Germany, India, Israel, Japan and the United Kingdom. All intercompany balances and transactions have been eliminated upon consolidation.

Reclassification

Certain amounts in the prior year financial
statements have been reclassified to conform to the current year presentation. Specifically, the Company has reclassified certain prior year amounts relating to the classification of revenues to show maintenance revenues separately. The effects of
these reclassifications have no impact on previously reported total revenues, operating loss or net income (loss).

Foreign Currency

The financial position and results of operations of the Companys foreign operations are measured using currencies other than the
U.S. dollar as their functional currencies. Accordingly, for these operations all assets and liabilities are translated into U.S. dollars at the current exchange rates as of the respective balance sheet dates. Revenue and expense items are
translated using the weighted average exchange rates prevailing during the period. Cumulative gains and losses from the translation of these operations financial statements are reported as a separate component of stockholders equity,
while foreign currency transactions gains or losses, resulting from re-measuring local currencies to the U.S. dollar are recorded in the consolidated statements of operations in other income (expenses), net.

Use of Estimates

The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.

Accounting for Internal-Use Computer Software

In March 1998, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use (SOP 98-1). SOP 98-1 provides guidance on accounting for the costs of computer software developed or obtained for internal use and identifies the characteristics of internal-use software. SOP 98-1
permits the capitalization of certain costs, including internal payroll costs, incurred in the connection with the development or acquisition of software for internal use. These costs are capitalized beginning when the Company has entered the
application development stage and ceases when the software is substantially complete and is ready for its intended use. In accordance with SOP 98-1, the Company purchased and capitalized costs of approximately $113,000 and $0 during the six months
ended March 31, 2009, and 2008, respectively. Software is amortized for financial reporting purposes using the straight-line method over the estimated useful life of three years.



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##### Table of Contents

Revenue Recognition

The Companys revenue recognition policy is based on the American Institute of Certified Public Accountants Statement of Position (SOP) 97-2, Software Revenue Recognition as amended by SOP 98-4 and SOP
98-9. Additionally, revenue is recognized on some of the Companys products, according to SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. The Company recognizes intellectual
property revenue in accordance with SOP 97-2 because the software is not incidental to the IP as the IP is embedded in the software and the intellectual property is, in essence, a software product.

Revenues from perpetual licenses for the semiconductor IP products are generally recognized when persuasive evidence of an arrangement exists, delivery of the product
has occurred, the fee is fixed or determinable, and collectibility is reasonably assured. The Company uses a completed performance model for perpetual licenses that do not include services to provide significant production, modification or
customization of software as all of the elements have been delivered. The Company determines delivery has occurred when all the license materials that are specified in the evidence of a signed arrangement including any related documentation and the
license keys are delivered electronically through the FTP server or via Electronic mail (e-mail). If any of these criteria are not met, revenue recognition is deferred until such time as all criteria are met. Revenues from term-based licenses that
do not require specific customization for the semiconductor IP and software products are recognized ratably over the term of the license, which is generally between twelve to thirty-six months in duration, provided the criteria mentioned above are
met. The Company uses a proportional performance model for term-based licenses as these licenses have a right to receive unspecified additional products that are granted over the access term of the license. Consulting services represent an
immaterial amount of the Companys revenue thus are recorded as part of license revenue. These consulting services are not related to the functionality of the products licensed. Revenue from consulting services is recognized on the time and
materials method or as work is performed.

License of custom memory compilers and logic libraries may involve customization to the functionality of the
software; therefore revenues from such licenses are recognized in accordance with SOP 81-1 over the period that services are performed. Revenue derived from library development services are recognized using a percentage-of-completion method, and
revenues from technical consulting services are recognized as the services are performed. For all license and service agreements accounted for using the percentage-of-completion method, the Company determines progress-to-completion based on labor
hours incurred in comparison to the estimated total service hours required to complete the development or service or on the value of contract milestones completed. The Company believes that it is able to reasonably and reliably estimate the costs to
complete projects accounted for using the percentage-of-completion method based on historical experience of similar project requirements. If the Company cannot reasonably and reliably estimate the costs to complete a project, the completed contract
method of accounting is used, such that costs are deferred until the project is completed, at which time revenues and related costs are recognized. A provision for estimated losses on any project is made in the period in which the loss becomes
probable and can be reasonably estimated. Costs incurred in advance of revenue recognition are recorded as costs in excess of related revenue on uncompleted contracts. If customer acceptance is required for completion of specified milestones, the
related revenue is deferred until the acceptance criteria are met. If a portion of the value of a contract is contingent based on meeting a specified criteria, then the contingent value of the contract is deferred until the contingency has been
satisfied or removed.

For agreements that include multiple elements, the Company recognizes revenues attributable to delivered or completed elements when
such elements are completed or delivered. The amount of such revenues is determined by applying the residual method of accounting by deducting the aggregate fair value of the undelivered or uncompleted elements, which the Company determines by each
such elements vendor-specific objective evidence of fair value, from the total revenues recognizable under such agreement. Vendor-specific objective evidence of fair value of each element of an arrangement is based upon the higher of the
normal pricing for such licensed product and service when sold separately or the actual price stated in the contract, and for maintenance, it is determined based on 20% of the net selling price of the license for new agreements starting in fiscal
2007 or the higher of the actual price stated in the contract or the stated renewal rate in each contract for all contracts entered into prior to fiscal 2007. Revenues are recognized once the Company delivers the element identified as having
vendor-specific objective evidence or once the provision of the services is completed. Maintenance revenues are recognized ratably over the remaining contractual term of the maintenance period from the date of delivery of the licensed materials
receiving maintenance, which is generally twelve months.

The Company assesses whether the fee associated with each transaction is fixed or determinable
and collection is reasonably assured and evaluates the payment terms. If a portion of the fee is due beyond normal payment terms, the Company recognizes the revenues on the payment due date, as long as collection is reasonably assured. The Company
assesses collectibility based on a number of factors, including past transaction history and the overall credit-worthiness of the customer. If collection is not reasonably assured, revenue is deferred and recognized at the time collection becomes
reasonably assured, which is generally upon receipt of the payment.



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Amounts invoiced to customers in excess of recognized revenues are recorded as deferred revenues. Amounts recognized as
revenue in advance of invoicing the customer are recorded as unbilled accounts receivable. The timing and amounts invoiced to customers can vary significantly depending on specific contract terms and can therefore have a significant impact on
deferred revenues and unbilled accounts receivable in any given period. All of the criteria under SOP 97-2 or SOP 81-1, as applicable, have been met, prior to the recognition of any revenue that would create an unbilled accounts receivable
balance.

Royalty revenues are generally determined and recognized one quarter in arrears based on SOP 97-2, when a production volume report is
received from the customer or foundry, and are calculated based on actual production volumes of wafers containing chips utilizing the Companys semiconductor IP technologies based on a rate per-chip or rate per-wafer depending on the terms of
the respective license agreement. Depending on the contractual terms, prepaid royalties are recognized as revenue upon either the receipt of a corresponding royalty report or after all related license deliverables have been made.

Fair Value of Financial Instruments

The Company has
determined that the amounts reported for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short maturities and/or variable interest rates. Available-for-sale
investments are reported at their fair market value based on quoted market prices.

In September 2006, the Financial Accounting Standard Board
(FASB) issued FASB Statement No. 157 (SFAS 157), Fair Value Measurements. The standard defines fair value, establishes a framework for measuring fair value and expands fair value measurement disclosures.
Effective October 1, 2008, the Company adopted the measurement and disclosure requirements related to financial assets and financial liabilities and provided disclosure in Note 9. The adoption of SFAS 157 for financial assets and financial
liabilities did not have any impact on the Companys results of operations or the fair values of its financial assets and liabilities.

Cash and
Cash Equivalents, Short-term and Long-term Investments

For purposes of the accompanying consolidated statements of cash flows, the Company
considers all highly liquid instruments with an original maturity on the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents as of March 31, 2009 consisted of commercial papers, corporate bonds, government
sponsored securities and treasury bills. Cash and cash equivalents as of September 30, 2008 consisted of money market funds and commercial paper. The Company determines the appropriate classification of investment securities at the time of
purchase. As of March 31, 2009, all investment securities are designated as available-for-sale and are carried at fair value. The Company considers all investments that are available-for-sale that have a maturity date longer than
three months and less than twelve months to be short-term investments. The Company considers all investments that have a maturity of more than twelve months to be long-term investments. Long-term investments include government sponsored enterprise
bonds of $4.6 million and $21.4 million with maturity dates greater than one year for the fiscal quarter ended March 31, 2009 and fiscal year ended September 30, 2008, respectively.

The available-for-sale securities are carried at fair value based on quoted market prices, with the unrealized gains (losses) reported as a separate component of
stockholders equity. The Company periodically reviews the realizable value of its investments in marketable securities. When assessing marketable securities for other-than-temporary declines in value, the Company considers such factors as the
length of time and extent to which fair value has been less than the cost basis, the market outlook in general and the Companys intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in
market value. If an other-than-temporary impairment of the investments is deemed to exist, the carrying value of the investment would be written down to its estimated fair value.

Software Development Costs

The Company accounts for software development costs in accordance with SFAS
No. 86, Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed.Software development costs are capitalized beginning when a products technological feasibility has been established by
completion of a working model of the product and amortization begins when a product is available for general release to customers. The Company capitalized $0.8 million and $0 of third party SFAS No. 86 costs, or purchased software, during the
second quarters of fiscal 2009 and 2008. The purchased software will start to be amortized when the technology is available for general release to customers. The Company expects the general release date to be around the end of fiscal 2009. There is
no amortization expense for purchased software during fiscal 2009.

Goodwill and Intangible Assets

Goodwill

In accordance with SFAS No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142), goodwill and intangible assets deemed to have indefinite lives are no longer to be amortized, but instead are subject to annual
impairment tests. As required by the provisions of SFAS 142, the Company evaluates goodwill for impairment on an annual basis on September 30 each year or more frequently if impairment indicators arise. During the second quarter of fiscal
2009 the Company assessed the carrying value of its goodwill balance. The Company determined that the restructuring plan it undertook in the quarter represented a triggering event to assess its goodwill. As a result of the significant negative
industry and economic trends



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affecting the current operations and expected future growth as well as the general decline of industry valuations impacting the Companys valuation, the
Company determined that goodwill was impaired. The Company recorded an impairment loss of $11.8 million for the quarter ended March 31, 2009.

Acquired Intangible Assets

Other intangible assets, net are as follows (in thousands):



|                             |  |                |       |                         |   |        |       |  |             |       |                         |   |       |       |   |        |   |  |   |      
|---------------------------- |  | -------------- | ----- | ----------------------- | - | ------ | ----- |  | ----------- | ----- | ----------------------- | - | ----- | ----- | - | ------ | - |  | - | -----
|                             |  | March 31, 2009 |       | September 30, 2008     
|                             |  | GrossAmount    |       | AccumulatedAmortization |   |        | Total |  | GrossAmount |       | AccumulatedAmortization |   |       | Total
|Amortized intangible assets: |  |                |       |                         |   |        |       |  |             |       |                         |   |       |       |   |        |   |  |   |      
|Patents                      |  | $              | 4,800 |                         | $ | (2,668 | )     |  | $           | 2,132 |                         | $ | 4,800 |       | $ | (2,403 | ) |  | $ | 2,397
|Customer lists and contracts |  |                | 700   |                         |   | (169   | )     |  |             | 531   |                         |   | 700   |       |   | (98    | ) |  |   | 602  
|Technology                   |  |                | 3,300 |                         |   | (629   | )     |  |             | 2,671 |                         |   | 3,300 |       |   | (321   | ) |  |   | 2,979
|Trade name                   |  |                | 300   |                         |   | (25    | )     |  |             | 275   |                         |   | 300   |       |   | (8     | ) |  |   | 292  
|                             |  |                |       |                         |   |        |       |  |             |       |                         |   |       |       |   |        |   |  |   |      
|Total                        |  | $              | 9,100 |                         | $ | (3,491 | )     |  | $           | 5,609 |                         | $ | 9,100 |       | $ | (2,830 | ) |  | $ | 6,270
|                             |  |                |       |                         |   |        |       |  |             |       |                         |   |       |       |   |        |   |  |   |      

Aggregate amortization expense related to acquired intangible assets totaled approximately $0.7 million and $0.4
million for the six months ended March 31, 2009 and 2008, respectively.

Estimated amortization expenses for intangible assets for the remainder of
fiscal 2009, the next four fiscal years and all years thereafter are as follows (in thousands):



|                               |  |   |      
|------------------------------ |  | - | -----
|Estimated Amortization Expense |  |  
|2009                           |  | $ | 661  
|2010                           |  |   | 1,322
|2011                           |  |   | 1,300
|2012                           |  |   | 943  
|2013                           |  |   | 733  
|Thereafter                     |  |   | 650  
|                               |  |   |      
|Total                          |  | $ | 5,609
|                               |  |   |      

Stock-Based Compensation

Stock Options and Stock Settled Appreciation Rights (SSARS)

As outlined in SFAS No. 123 (revised
2004), Share-Based Payment(SFAS 123R), the Company uses the fair value method to apply the provisions of SFAS 123R. Total SFAS 123R compensation expense recognized for the three months ended March 31, 2009 and 2008 were
$0.9 million and $1.0 million, respectively. As of March 31, 2009, total unrecognized estimated compensation expense, net of forfeitures related to stock options and SSARs prior to that date, was $4.2 million and will be amortized over a
weighted average period of 3.0 years.

The estimated stock-based compensation expense related to the Companys stock-based awards for the three and
six months period ended March 31, 2009 and 2008 was as follows (in thousands, except per share data):



|                                                        |  |                                |      |   |                                |   |       |                              |  |   |                              |   |  |   |       |  
|------------------------------------------------------- |  | ------------------------------ | ---- | - | ------------------------------ | - | ----- | ---------------------------- |  | - | ---------------------------- | - |  | - | ----- | -
|                                                        |  | Three MonthsEndedMarch 31,2009 |      |   | Three MonthsEndedMarch 31,2008 |   |       | Six MonthsEndedMarch 31,2009 |  |   | Six MonthsEndedMarch 31,2008 |  
|Cost of revenue                                         |  | $                              | 52   |   |                                | $ | 177   |                              |  | $ | 122                          |   |  | $ | 279   |  
|Research and development                                |  |                                | 226  |   |                                |   | 304   |                              |  |   | 356                          |   |  |   | 525   |  
|Sales and marketing                                     |  |                                | 44   |   |                                |   | 30    |                              |  |   | (119                         | ) |  |   | 118   |  
|General and administrative                              |  |                                | 530  |   |                                |   | 518   |                              |  |   | 568                          |   |  |   | 523   |  
|                                                        |  |                                |      |   |                                |   |       |                              |  |   |                              |   |  |   |       |  
|Stock-based compensation expense                        |  |                                | 852  |   |                                |   | 1,029 |                              |  |   | 927                          |   |  |   | 1,445 |  
|Related benefits                                        |  |                                | (344 | ) |                                |   | (376  | )                            |  |   | (374                         | ) |  |   | (528  | )
|                                                        |  |                                |      |   |                                |   |       |                              |  |   |                              |   |  |   |       |  
|Stock-based compensation expense, net of tax benefits   |  | $                              | 508  |   |                                | $ | 653   |                              |  | $ | 553                          |   |  | $ | 917   |  
|Net stock-based compensation expense, per common share: |  |                                |      |   |                                |   |       |                              |  |   |                              |   |  |   |       |  
|Basic                                                   |  | $                              | 0.02 |   |                                | $ | 0.03  |                              |  | $ | 0.02                         |   |  | $ | 0.04  |  
|                                                        |  |                                |      |   |                                |   |       |                              |  |   |                              |   |  |   |       |  
|Diluted                                                 |  | $                              | 0.02 |   |                                | $ | 0.03  |                              |  | $ | 0.02                         |   |  | $ | 0.04  |  
|                                                        |  |                                |      |   |                                |   |       |                              |  |   |                              |   |  |   |       |  



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As of March 31, 2009 and 2008, the Company capitalized approximately $80,000 and $83,000, respectively, of
stock-based compensation expense related to its custom contracts which have not been completed.

The Company uses the Black-Scholes option pricing model to
value the compensation expense associated with its stock-based awards under SFAS 123R. As required by SFAS 123R, employee stock-based compensation expense is calculated based on estimated forfeiture rate. The Company estimates its future
forfeitures based on its historical forfeiture experience and future expectations. SFAS 123R requires forfeitures to be estimated at the time of the grant and revised as necessary in subsequent periods if actual forfeitures differ from those
estimates. If factors change and the Company employs different assumptions in the application of SFAS 123R in future periods, the stock-based compensation expense recognized under SFAS 123R may differ significantly from what have been recorded in
the current period. During the six months ended March 31, 2009 the Company recorded a true-up of stock-based compensation expense recognized in prior periods as a result of an increase in our estimated forfeiture rate in accordance with SFAS
123R.

The following weighted average assumptions were used in the estimated grant date fair value calculations for stock options and SSARs:



|                        |  |                    |   |  |                  |   |  |               |   |  |               |  
|----------------------- |  | ------------------ | - |  | ---------------- | - |  | ------------- | - |  | ------------- | -
|                        |  | Three Months Ended |   |  | Six Months Ended |  
|                        |  | March 31,2009      |   |  | March 31,2008    |   |  | March 31,2009 |   |  | March 31,2008 |  
|Volatility              |  | 50                 | % |  | 44               | % |  | 49            | % |  | 44            | %
|Risk-free interest rate |  | 1.7                | % |  | 2.2              | % |  | 1.6           | % |  | 3.3           | %
|Dividend yield          |  | 0.0                | % |  | 0.0              | % |  | 0.0           | % |  | 0.0           | %
|Expected life (years)   |  | 4.8 years          |   |  | 4.63 years       |   |  | 4.8 years     |   |  | 4.63 years    |  

The expected stock price volatility rates are based on historical volatilities of the Companys common stock.
The risk free interest rates are based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the options and SSARs. The average expected life represents the weighted average period of
time that options and SSARs granted are expected to be outstanding giving consideration to vesting schedules and its historical exercise patterns. The Black-Scholes weighted average fair values of options and SSARs granted during the three months
ended March 31, 2009 and 2008 were $1.15 and $2.66, respectively. The Black-Scholes weighted average fair values of options and SSARs granted during the six months ended March 31, 2009 and 2008 were $1.43 and $3.38, respectively.

Restricted Stock Units

The Company issues restricted
stock unit awards as an additional form of equity compensation to its employees and officers, pursuant to Companys stockholder-approved 2002 Equity Incentive Plan. Restricted stock units generally vest over a two or four year period and
unvested restricted stock units are forfeited and cancelled as of the date that employment terminates. Restricted stock units are settled in shares of the Companys common stock upon vesting. The cost of restricted stock unit awards is
determined using the fair value of the Companys common stock on the date of the grant, and compensation expense is recognized over the vesting period.

The following table summarizes the activity of the Companys unvested restricted stock units as of March 31, 2009 and changes during the six months ended March 31, 2009:



|                                   |  |                        |   |  |                                        |     
|---------------------------------- |  | ---------------------- | - |  | -------------------------------------- | ----
|                                   |  | Restricted Stock Units
|                                   |  | Number ofshares        |   |  | Weighted-average grant-date fair value
|Nonvested as of September 30, 2008 |  | 1,016,262              |   |  | $                                      | 6.84
|RSU granted                        |  | 126,815                |   |  | $                                      | 3.04
|RSU vested                         |  | (182,117               | ) |  | $                                      | 5.88
|RSU cancelled                      |  | (119,459               | ) |  | $                                      | 7.46
|                                   |  |                        |   |  |                                        |     
|Nonvested as of March 31, 2009     |  | 841,501                |   |  | $                                      | 6.46
|                                   |  |                        |   |  |                                        |     



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Stock-based compensation cost for restricted stock units for the six months ended March 31, 2009 was $1.3 million.
As of March 31, 2009, the total unrecognized compensation cost net of forfeitures related to unvested awards not yet recognized is $3.6 million and is expected to be recognized over a period of 2.08 years.

Equity Incentive Plans

The Company has two active incentive plans:
the 2001 Incentive and Non-statutory Stock Option Plan and the 2002 Equity Incentive Plan. The Company continues to have awards outstanding under its expired 1997 Equity Incentive Plan. In November 2006, the Company began issuing SSARs which provide
the holder the right to receive an amount settled in stock at the time of the exercise. Under the Companys equity incentive plans, stock options and SSARs generally have a vesting period of four years, are exercisable for a period not to
exceed ten years from the date of grant and are generally granted at prices not less than the fair value of the Companys common stock at the time of grant. Information with respect to the Equity Incentive Plans is summarized as follows:



|                              |  |                          |   |  |                                   |   |  |                               |     
|----------------------------- |  | ------------------------ | - |  | --------------------------------- | - |  | ----------------------------- | ----
|                              |  | SharesAvailablefor Grant |   |  | Number ofOptions/SSARsOutstanding |   |  | WeightedAverageExercise Price
|Balance at September 30, 2008 |  | 780,185                  |   |  | 3,977,726                         |   |  | $                             | 8.43
|Additional options granted    |  | 1,000,000                |   |  |                                  |   |  |                               |    
|Options and SSARs granted     |  | (377,863                 | ) |  | 377,863                           |   |  | $                             | 3.32
|RSUs granted                  |  | (126,815                 | ) |  |                                  |   |  |                               |    
|Options and SSARs exercised   |  |                         |   |  | (44,500                           | ) |  | $                             | 0.24
|Options and SSARs cancelled   |  | 318,733                  |   |  | (318,733                          | ) |  | $                             | 8.93
|RSUs cancelled                |  | 119,459                  |   |  |                                  |   |  |                               |    
|Awards expired (unissued)     |  | (131,234                 | ) |  |                                  |   |  |                               |    
|                              |  |                          |   |  |                                   |   |  |                               |     
|Balance at March 31, 2009     |  | 1,582,465                |   |  | 3,992,356                         |   |  | $                             | 8.00
|                              |  |                          |   |  |                                   |   |  |                               |     

The following table summarizes information about stock options and SSARs outstanding and exercisable at
March 31, 2009:



|                         |  |                    |   |                    |                                         |  |                              |       |                         |   |                |  |                                         |  |                              |  |                         |       |  |   |    
|------------------------ |  | ------------------ | - | ------------------ | --------------------------------------- |  | ---------------------------- | ----- | ----------------------- | - | -------------- |  | --------------------------------------- |  | ---------------------------- |  | ----------------------- | ----- |  | - | ---
|                         |  | Awards Outstanding |   | Awards Exercisable
|Range of Exercise Prices |  | NumberofShares     |   |                    | WeightedAverageRemainingContractualLife |  | WeightedAverageExercisePrice |       | AggregateIntrinsicValue |   | NumberofShares |  | WeightedAverageRemainingContractualLife |  | WeightedAverageExercisePrice |  | AggregateIntrinsicValue
|                         |  |                    |   |                    | (In years)                              |  |                              |       | (In thousands)          |   |                |  | (In years)                              |  |                              |  | (In thousands)         
|$0.70 - $3.75            |  | 441,240            |   |                    | 8.27                                    |  | $                            | 3.04  |                         | $ | 221            |  | 75,152                                  |  | 1.43                         |  | $                       | 2.01  |  | $ | 103
|$4.00 - $6.19            |  | 546,483            |   |                    | 5.97                                    |  | $                            | 5.38  |                         | $ |               |  | 283,414                                 |  | 3.10                         |  | $                       | 5.17  |  | $ |   
|$6.38 - $7.08            |  | 443,813            |   |                    | 8.75                                    |  | $                            | 6.75  |                         | $ |               |  | 147,781                                 |  | 8.47                         |  | $                       | 6.88  |  | $ |   
|$7.10 - $7.81            |  | 623,942            |   |                    | 4.40                                    |  | $                            | 7.60  |                         | $ |               |  | 606,983                                 |  | 4.40                         |  | $                       | 7.61  |  | $ |   
|$7.84 - $8.63            |  | 458,984            |   |                    | 3.74                                    |  | $                            | 8.27  |                         | $ |               |  | 383,883                                 |  | 3.27                         |  | $                       | 8.24  |  | $ |   
|$8.65 - $8.94            |  | 439,646            |   |                    | 5.86                                    |  | $                            | 8.83  |                         | $ |               |  | 321,016                                 |  | 5.18                         |  | $                       | 8.82  |  | $ |   
|$8.95 - $10.30           |  | 567,918            |   |                    | 5.78                                    |  | $                            | 9.80  |                         | $ |               |  | 517,937                                 |  | 5.82                         |  | $                       | 9.85  |  | $ |   
|$10.31 - $16.55          |  | 444,580            |   |                    | 3.71                                    |  | $                            | 14.01 |                         | $ |               |  | 444,278                                 |  | 3.82                         |  | $                       | 14.01 |  | $ |   
|$16.70 - $22.37          |  | 25,500             |   |                    | 5.71                                    |  | $                            | 16.99 |                         | $ |               |  | 25,500                                  |  | 5.71                         |  | $                       | 16.99 |  | $ |   
|$22.81 - $22.81          |  | 250                |   |                    | 2.78                                    |  | $                            | 22.81 |                         | $ |               |  | 250                                     |  | 2.78                         |  | $                       | 22.81 |  | $ |   
|                         |  |                    |   |                    |                                         |  |                              |       |                         |   |                |  |                                         |  |                              |  |                         |       |  |   |    
|Total                    |  | 3,992,356          | * |                    | 5.74                                    |  | $                            | 8.00  |                         | $ | 221            |  | 2,806,194                               |  | 4.52                         |  | $                       | 8.91  |  | $ | 103
|                         |  |                    |   |                    |                                         |  |                              |       |                         |   |                |  |                                         |  |                              |  |                         |       |  |   |    



|* | Table of awards outstanding does not include 841,501 unvested restricted stock units.
|- | -------------------------------------------------------------------------------------



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|                                                 |  |                    |  |                                         |  |                              |      |                         |   |                |  |                                         |  |                              |  |                         |  | 
|------------------------------------------------ |  | ------------------ |  | --------------------------------------- |  | ---------------------------- | ---- | ----------------------- | - | -------------- |  | --------------------------------------- |  | ---------------------------- |  | ----------------------- |  | 
|                                                 |  | Awards Outstanding |  | Awards Exercisable                     
|Range of Exercise Prices                         |  | NumberofShares     |  | WeightedAverageRemainingContractualLife |  | WeightedAverageExercisePrice |      | AggregateIntrinsicValue |   | NumberofShares |  | WeightedAverageRemainingContractualLife |  | WeightedAverageExercisePrice |  | AggregateIntrinsicValue
|                                                 |  |                    |  | (In years)                              |  |                              |      | (In thousands)          |   |                |  | (In years)                              |  |                              |  | (In thousands)         
|Vested and expected to vest as of March 31, 2009 |  | 3,717,696          |  | 5.49                                    |  | $                            | 8.18 |                         | $ | 193            |  |                                         |  |                              |  |                         |  | 
|                                                 |  |                    |  |                                         |  |                              |      |                         |   |                |  |                                         |  |                              |  |                         |  | 

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on the
Companys closing stock price of $3.36 as of March 31, 2009, which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options exercisable as of
March 31, 2009 and 2008 was 45,000 and 0.5 million, respectively.

The total intrinsic value of options exercised during the six month periods
ended March 31, 2009 and 2008 was $0.1 million and $0.8 million, respectively. The total cash received from employees as a result of employee stock option exercises during the six months ended March 31, 2009 and 2008 was approximately
$11,000 and $1.4 million.

NOTE 2  RESTRUCTURING CHARGES

During the second quarter of fiscal 2009, the Company initiated a plan of restructuring in an effort to reduce operating expenses and improve operating margins and cash flows. The restructuring plan was intended to decrease costs through
job eliminations. The Company reduced its workforce by 13% primarily in engineering. The restructuring plan resulted in the reduction of 60 employees and closing of its R&D centers in New Jersey and Minnesota. Costs resulting from the
restructuring plan included severance payments, severance-related benefits, lease termination charges, and other professional services. Total restructuring expense was $1.5 million of which $0.6 million was paid as of March 31, 2009. No further
charges are expected under the plan.

Total restructuring costs accrued as of March 31, 2009 and September 30, 2008 were $0.9 million and $4,000,
respectively, which were recorded in accrued expenses on the consolidated balance sheets. Approximately $0.6 million of the accrued restructuring balance of $0.9 million as of March 31, 2009 will be paid in the third quarter of fiscal 2009. The
remaining amount, consisting mainly of lease payments for the Companys exited facilities, will continue until the first quarter of 2011.

The
following table summarizes restructuring activity for the six months ended March 31, 2009 as follows (in thousands):



|                                |  |           |       |   |          |   |       |  |   |       |   |  |   |       |  
|------------------------------- |  | --------- | ----- | - | -------- | - | ----- |  | - | ----- | - |  | - | ----- | -
|                                |  | Severance |       |   | Facility |   | Other |  |   | Total |  
|Balance at September 30, 2008   |  | $         | 4     |   |          | $ |      |  | $ |      |   |  | $ | 4     |  
|January 2009 Restructuring Plan |  |           | 1,123 |   |          |   | 314   |  |   | 36    |   |  |   | 1,473 |  
|Other adjustments               |  |           |      |   |          |   | 25    |  |   |      |   |  |   | 25    |  
|Cash payments                   |  |           | (541  | ) |          |   |      |  |   | (17   | ) |  |   | (558  | )
|                                |  |           |       |   |          |   |       |  |   |       |   |  |   |       |  
|Balance at March 31, 2009       |  | $         | 586   |   |          | $ | 339   |  | $ | 19    |   |  | $ | 944   |  
|                                |  |           |       |   |          |   |       |  |   |       |   |  |   |       |  

NOTE 3  NET INCOME (LOSS) PER SHARE

Basic and diluted net income (loss) per share is presented in conformity with SFAS No. 128, Earnings Per Share (SFAS 128). Accordingly, basic and diluted net income (loss) per share have been
computed using the weighted average number of shares of common stock outstanding during the period, plus weighted average share equivalents, unless anti-dilutive.

The following table presents the computation of basic and diluted net income (loss) per share applicable to common stockholders (in thousands, except for per share data):



|                                                             |  |                             |         |                           |      |   |        |  |   |         |   |  |   |       
|------------------------------------------------------------ |  | --------------------------- | ------- | ------------------------- | ---- | - | ------ |  | - | ------- | - |  | - | ------
|                                                             |  | Three Months EndedMarch 31, |         | Six months EndedMarch 31,
|                                                             |  | 2009                        |         |                           | 2008 |   | 2009   |  |   | 2008   
|Net income (loss)                                            |  | $                           | (26,347 | )                         |      | $ | 632    |  | $ | (28,958 | ) |  | $ | 1,724 
|                                                             |  |                             |         |                           |      |   |        |  |   |         |   |  |   |       
|Shares used in computation:                                  |  |                             |         |                           |      |   |        |  |   |         |   |  |   |       
|Shares used in computing basic net income (loss) per share   |  |                             | 22,877  |                           |      |   | 23,494 |  |   | 22,915  |   |  |   | 23,466
|Add:Effect of potentially diluted securities                 |  |                             |        |                           |      |   | 229    |  |   |        |   |  |   | 264   
|                                                             |  |                             |         |                           |      |   |        |  |   |         |   |  |   |       
|Shares used in computing diluted net income (loss) per share |  |                             | 22,877  |                           |      |   | 23,723 |  |   | 22,915  |   |  |   | 23,730
|                                                             |  |                             |         |                           |      |   |        |  |   |         |   |  |   |       
|Basic net income (loss) per share                            |  | $                           | (1.15   | )                         |      | $ | 0.03   |  | $ | (1.26   | ) |  | $ | 0.07  
|                                                             |  |                             |         |                           |      |   |        |  |   |         |   |  |   |       
|Diluted net income (loss) per share                          |  | $                           | (1.15   | )                         |      | $ | 0.03   |  | $ | (1.26   | ) |  | $ | 0.07  
|                                                             |  |                             |         |                           |      |   |        |  |   |         |   |  |   |       



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For the computation of diluted net income (loss) per share for the three months ended March 31, 2009 and
March 31, 2008, the Company excluded awards totaling approximately 4.8 million shares and 5.3 million shares, respectively, from the calculation of the net income (loss) per share as they are anti-dilutive. Additionally, for the six
months ended March 31, 2009 and March 31, 2008, the Company excluded awards totaling approximately 4.8 million shares and 5.2 million shares, respectively, from the calculation of the net income (loss) per share as they are
anti-dilutive.

NOTE 4  COMPREHENSIVE INCOME (LOSS)

SFAS No. 130, Reporting Comprehensive Income (SFAS 130) established standards for the reporting and display of comprehensive income (loss). Comprehensive income (loss) includes unrealized gains (losses) on
investments, net of related tax effects and foreign currency translation adjustments. These items have been excluded from net income (loss) and are reflected instead in Stockholders Equity.

Total comprehensive income (loss) for the three and six month periods ended March 31, 2009 and 2008, respectively, is as follows:



|                                                             |  |                             |         |   |                           |   |     |      |  |   |         |   |  |   |      
|------------------------------------------------------------ |  | --------------------------- | ------- | - | ------------------------- | - | --- | ---- |  | - | ------- | - |  | - | -----
|                                                             |  | Three Months EndedMarch 31, |         |   | Six Months EndedMarch 31,
|                                                             |  | 2009                        |         |   | 2008                      |   |     | 2009 |  |   | 2008   
|Net income (loss)                                            |  | $                           | (26,347 | ) |                           | $ | 632 |      |  | $ | (28,958 | ) |  | $ | 1,724
|Foreign currency translation adjustments, net of tax         |  |                             | (289    | ) |                           |   | (4  | )    |  |   | (546    | ) |  |   | 57   
|Changes in unrealized gain (loss) on investments, net of tax |  |                             | (65     | ) |                           |   | 47  |      |  |   | 187     |   |  |   | 105  
|                                                             |  |                             |         |   |                           |   |     |      |  |   |         |   |  |   |      
|Comprehensive income (loss), net of tax                      |  | $                           | (26,701 | ) |                           | $ | 675 |      |  | $ | (29,317 | ) |  | $ | 1,886
|                                                             |  |                             |         |   |                           |   |     |      |  |   |         |   |  |   |      

NOTE 5  SEGMENT INFORMATION

The Company operates in one industry segment, the sale of semiconductor IP including embedded SRAM and NVM, logic libraries, IP and development infrastructure for embedded test and repair of on-chip memory instances,
software development tools used to build memory compilers, and DDR memory controllers, PHYs and DLLs.

The Chief Executive Officer has been identified as
the Chief Operating Decision Maker (CODM) because he has final authority over resource allocation decisions and performance assessment.

Revenues by
geographic region are based on the region in which the customers are located.

Total revenues by geography are as follows:



|                                                        |  |                             |        |                           |   |        |  |      |        |  |   |       
|------------------------------------------------------- |  | --------------------------- | ------ | ------------------------- | - | ------ |  | ---- | ------ |  | - | ------
|                                                        |  | Three Months EndedMarch 31, |        | Six Months EndedMarch 31,
|                                                        |  | 2009                        |        | 2008                      |   | 2009   |  | 2008
|Total Revenue by Geography                              |  |                             |        |                           |   |        |  |      |        |  |   |       
|United States                                           |  | $                           | 4,983  |                           | $ | 5,460  |  | $    | 9,896  |  | $ | 11,669
|Taiwan                                                  |  |                             | 1,689  |                           |   | 2,349  |  |      | 4,039  |  |   | 4,579 
|Other Asia (China, Malaysia, South Korea and Singapore) |  |                             | 1,475  |                           |   | 3,327  |  |      | 2,734  |  |   | 5,184 
|Europe, Middle East and Africa (EMEA)                   |  |                             | 1,410  |                           |   | 2,465  |  |      | 3,051  |  |   | 5,065 
|Canada                                                  |  |                             | 1,036  |                           |   | 145    |  |      | 1,303  |  |   | 1,111 
|Japan                                                   |  |                             | 432    |                           |   | 943    |  |      | 1,351  |  |   | 1,141 
|                                                        |  |                             |        |                           |   |        |  |      |        |  |   |       
|Total                                                   |  | $                           | 11,025 |                           | $ | 14,689 |  | $    | 22,374 |  | $ | 28,749
|                                                        |  |                             |        |                           |   |        |  |      |        |  |   |       



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Total license revenues by process node are as follows:



|                                      |  |                             |   |  |                           |   |  |      |   |  |      |  
|------------------------------------- |  | --------------------------- | - |  | ------------------------- | - |  | ---- | - |  | ---- | -
|                                      |  | Three Months EndedMarch 31, |   |  | Six Months EndedMarch 31, |  
|                                      |  | 2009                        |   |  | 2008                      |   |  | 2009 |   |  | 2008 |  
|Total License Revenue by Process Node |  |                             |   |  |                           |   |  |      |   |  |      |  
|32 Nanometer technology               |  | 4                           | % |  |                          | % |  | 4    | % |  |     | %
|45 Nanometer technology               |  | 38                          |   |  | 14                        |   |  | 36   |   |  | 13   |  
|65 Nanometer technology               |  | 26                          |   |  | 39                        |   |  | 28   |   |  | 38   |  
|90 Nanometer technology               |  | 8                           |   |  | 19                        |   |  | 11   |   |  | 18   |  
|0.13 Micron technology                |  | 10                          |   |  | 13                        |   |  | 10   |   |  | 14   |  
|0.18 Micron technology                |  | 12                          |   |  | 4                         |   |  | 7    |   |  | 5    |  
|Other                                 |  | 2                           |   |  | 11                        |   |  | 4    |   |  | 12   |  
|                                      |  |                             |   |  |                           |   |  |      |   |  |      |  
|Total                                 |  | 100                         | % |  | 100                       | % |  | 100  | % |  | 100  | %
|                                      |  |                             |   |  |                           |   |  |      |   |  |      |  

Total maintenance revenues by process node are as follows:



|                                          |  |                             |   |  |                           |   |  |      |   |  |      |  
|----------------------------------------- |  | --------------------------- | - |  | ------------------------- | - |  | ---- | - |  | ---- | -
|                                          |  | Three Months EndedMarch 31, |   |  | Six Months EndedMarch 31, |  
|                                          |  | 2009                        |   |  | 2008                      |   |  | 2009 |   |  | 2008 |  
|Total Maintenance Revenue by Process Node |  |                             |   |  |                           |   |  |      |   |  |      |  
|32 Nanometer technology                   |  | 1                           | % |  |                          | % |  | 1    | % |  |     | %
|45 Nanometer technology                   |  | 21                          |   |  |                          |   |  | 18   |   |  |     |  
|65 Nanometer technology                   |  | 25                          |   |  | 23                        |   |  | 23   |   |  | 33   |  
|90 Nanometer technology                   |  | 29                          |   |  | 44                        |   |  | 36   |   |  | 36   |  
|0.13 Micron technology                    |  | 16                          |   |  | 27                        |   |  | 15   |   |  | 25   |  
|0.18 Micron technology                    |  | 7                           |   |  | 6                         |   |  | 6    |   |  | 6    |  
|Other                                     |  | 1                           |   |  |                          |   |  | 1    |   |  |     |  
|                                          |  |                             |   |  |                           |   |  |      |   |  |      |  
|Total                                     |  | 100                         | % |  | 100                       | % |  | 100  | % |  | 100  | %
|                                          |  |                             |   |  |                           |   |  |      |   |  |      |  

The Company has only one product line, and as such disclosure by product groupings is not applicable.

Long-lived assets are located primarily in the United States, with the exception of a building in Armenia, which is owned by the Company. The building in Armenia and
its leasehold improvements are valued at cost less accumulated depreciation and amortization and amounted to approximately $1.9 million and $2.4 million as of March 31, 2009 and 2008, respectively.

NOTE 6  RECENT ACCOUNTING PRONOUNCEMENTS

In April 2009, the
Financial Accounting Standard Board (FASB) issued three FASB Staff Positions (FSPs) that are intended to provide additional application guidance and enhance disclosures about fair value measurements and impairments of
securities. FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS 157-4) clarifies
the objective and method of fair value measurement even when there has been a significant decrease in market activity for the asset being measured. FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary
Impairments (FSP FAS 115-2 and FAS 124-2) establishes a new model for measuring other-than-temporary impairments for debt securities, including establishing criteria for when to recognize a write-down through earnings
versus other comprehensive income (loss). FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1 and APB 28-1) expands the fair value disclosures required for
all financial instruments within the scope of SFAS No. 107, Disclosures about Fair Value of Financial Instruments (SFAS No. 107). All of these FSPs are effective for interim and annual periods ending after June 15,
2009. The Company is currently evaluating the potential impact of these FSPs on its consolidated financial statements.

In April 2008, the FASB issued FSP
FAS 142-3, Determination of the Useful Life of Intangible Assets (FSP FAS 142-3). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets (SFAS 142). FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008 and early adoption is prohibited.
The Company is currently evaluating what impact this standard will have on its financial position or results of operations.



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In December 2007, the FASB issued SFAS No. 141 (revised 2007) (SFAS 141R), Business
Combinations and SFAS No. 160 (SFAS 160), Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51. SFAS 141R will change how business
acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS 160 will change the accounting and reporting for minority interests, which will be re-characterized as
noncontrolling interests and classified as a component of equity. SFAS 141R and SFAS 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years.
Early adoption is not permitted. The Company is currently evaluating the impact SFAS 141R and SFAS 160 will have on its financial position or results of operations.

NOTE 7  COMMITMENTS AND CONTINGENCIES

Indemnification. The Company enters into standard license
agreements in its ordinary course of business. Pursuant to these agreements, the Company agrees to indemnify its customers for losses suffered or incurred by them as a result of any patent, copyright, or other intellectual property infringement
claims by any third party with respect to the Companys products. These agreements generally have perpetual terms. The maximum amount of indemnification the Company could be required to make under these agreements is generally limited to the
license fees received by the Company. The Company has minimal history of claims, and accordingly, no liabilities have been recorded for indemnification under these agreements as of March 31, 2009.

Warranties. The Company offers its customers a warranty that its software products will substantially conform to their functional specifications. To date,
there have been no payments or material costs incurred related to fulfilling these warranty obligations. Accordingly, the Company has no liabilities recorded for these warranties as of March 31, 2009. The Company assesses the need for a
warranty reserve on a quarterly basis and there can be no guarantee that a warranty reserve will not become necessary in the future.

NOTE 8 
INCOME TAXES

The Company calculates its income taxes based on an annual effective tax rate in compliance with SFAS No. 109, Accounting for
Income Taxes (SFAS 109). Under SFAS 109, income tax expense (benefit) is recognized for the amount of taxes payable or refundable for the current year, and for deferred tax assets and liabilities for the tax consequences of
events that have been recognized in an entitys financial statements or tax returns.

The Company recorded a tax provision of $7.9 million and $18,000
for the six months ended March 31, 2009 and 2008. The Company evaluates its deferred tax assets each reporting period and assesses the likelihood that it will be able to recover its deferred tax assets. If recovery is not more likely than not, the
Company increases its income tax provision by recording a valuation allowance against the deferred tax assets that it estimates will not ultimately be recoverable over a reasonable period. Due to the current market conditions and resulting impact on
near term financial projections, the Company adjusted its expectations and risks associated with estimates of taxable income in future periods. The Company has determined that the realization of the R&D credits and foreign tax credits to be
included in the deferred tax assets is not more likely than not. Based on these facts, the Company has recorded a valuation allowance of $11.0 million against its prior years deferred tax assets and also placed a valuation allowance on current year
R&D credits and foreign tax credits in computing its estimated annual tax rate for the fiscal year 2009. As of March 31, 2009, the Company has current and long-term deferred tax assets, net of valuation allowance, totaling $6.8 million which
primarily related to temporary timing differences and net operating loss carry-forwards. The Company believes it is more-likely-than not that these deferred tax assets will be realized in the future.

The Indian Tax Authorities completed its assessment of the Companys tax returns for the tax years 2001 through 2006 and issued assessment orders in which the
Indian Tax Authorities proposes to assess an aggregate tax deficiency for the six year period of approximately $1.2 million, net of deposits of $260,000 as required by the Indian Tax Authorities. Interest will continue to accrue until the
matter is resolved. The Indian Tax Authorities may also make similar claims for years subsequent to 2006 in future assessment. The assessment orders are not final notices of deficiency, and the Company has immediately filed appeals. The Company
believes that the assessments are inconsistent with applicable tax laws and that it has meritorious defense to the assessments.

The ultimate outcome of
the tax assessment cannot be predicted with certainty, including the amount payable or the timing of any such payments upon resolution of the matter. Should the Indian Tax Authorities assess additional taxes as a result of a current or a future
assessment, the Company may be required to record charges to operations that could have an adverse effect on its condensed unaudited consolidated statements of operations.

NOTE 9  FAIR VALUE DISCLOSURE

The Company accounts for investments in accordance with SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities. Management determines the appropriate classification of securities at the time of purchase. All securities are classified as available-for-sale. The Companys short-term
and long-term investments are carried at fair value, with the unrealized holding gains and losses reported in accumulated other comprehensive income. The Company evaluates declines in market value for potential impairment if the decline results in a
value below cost and is determined to be other than temporary. Realized gains and losses and declines in the value judged to be other than temporary are included in other income and expenses. The cost of securities sold is based on the specific
identification method.



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##### Table of Contents

The Company has invested its excess cash in money market accounts, corporate debt, commercial paper, government agency
securities and government sponsored enterprise bonds and considers all highly liquid debt instruments purchased with an original 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.

On October 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements,or (SFAS 157). The adoption of SFAS 157 did not have a material impact on its consolidated financial
statements. SFAS 157 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value
measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and consider assumptions that market participants would use when pricing the
asset or liability. SFAS 157 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instruments categorization
within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. SFAS 157 establishes three levels of inputs that may be used to measure fair value:

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  Inputs used to measure fair value, other than quoted prices included in Level 1, are either
directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also
includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by
readily observable data from actively quoted markets for substantially the full term of the financial instrument.

Level 3  Inputs
used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions
utilize managements estimates of market participant assumptions.

Investments primarily include money market funds, U.S. government sponsored
enterprise bonds, commercial paper, corporate debt securities, and common stock securities. The Company uses quoted prices in active markets for identical assets or liabilities to determine fair value. This pricing methodology applies to Level
1 investments such as money market funds and corporate common stock securities. If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then the Company uses quoted prices for similar
assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly. These investments are included in Level 2 and consist primarily of government sponsored enterprise bonds, U.S. treasury bills,
commercial paper debt securities, corporate debt securities.

In accordance with SFAS 157, the following table represents the Companys fair value
hierarchy for its financial assets (cash equivalents and short and long-term available-for-sale investments) as of March 31, 2009 (in thousands):



|                                             |  |                |        |         |   |         |  |   |       
|-------------------------------------------- |  | -------------- | ------ | ------- | - | ------- |  | - | ------
|                                             |  | March 31, 2009
|                                             |  | Fair Value     |        | Level 1 |   | Level 2
|Assets:                                      |  |                |        |         |   |         |  |   |       
|U.S. government sponsored enterprise bonds   |  | $              | 23,914 |         | $ |        |  | $ | 23,914
|Commercial paper and certificates of deposit |  |                | 16,661 |         |   |        |  |   | 16,661
|U.S. treasury bills                          |  |                | 14,513 |         |   |        |  |   | 14,513
|Corporate debt securities                    |  |                | 2,995  |         |   |        |  |   | 2,995 
|Corporate common stock securities            |  |                | 152    |         |   | 152     |  |   |      
|                                             |  |                |        |         |   |         |  |   |       
|Total financial assets                       |  | $              | 58,235 |         | $ | 152     |  | $ | 58,083
|                                             |  |                |        |         |   |         |  |   |       

NOTE 10  STOCK REPURCHASE PROGRAM

On May 6, 2008, the Company adopted a stock repurchase program to purchase up to $20 million in shares of the common stock in the open market or negotiated transactions through May 2009. On August 4, 2008,
700,000 shares were repurchased in the open



16



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##### Table of Contents

market at a price per share of $6.49. On December 8, 2008, 190,000 shares were repurchased in the open market at a
price per share of $2.95. The Company did not repurchase any shares under its stock repurchase program during the second quarter of fiscal 2009. As of March 31, 2009, the remaining balance available for future stock repurchase was $14.9 million
under the Companys stock repurchase program.



|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Statements made in this quarterly report on Form 10-Q, other than statements of historical fact, are forward-looking statements that involve risks and uncertainties. These statements and the assumptions underlying
them are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Some of these statements relate to products, customers, business prospects, technologies, trends and effects of acquisitions. In some
cases, forward-looking statements can be identified by terminology such as may, will, should, expect, anticipate, intend, plan, believe,
estimate, potential, or continue, the negative of these terms or other comparable terminology. Forward-looking statements are subject to a number of known and unknown risks and uncertainties which might cause
actual results to differ materially from those expressed or implied by such statements. These risks include our ability to forecast our business, including our revenue, income and order flow outlook, our ability to execute on our strategy of being a
provider of highly differentiated semiconductor IP, our ability to continue to develop new products and maintain and develop new relationships with third-party foundries, integrated device manufacturers, and fabless semiconductor companies, our
ability to overcome the challenges associated with establishing licensing relationships with semiconductor companies, our ability to obtain royalty revenues from customers in addition to license fees, our ability to receive accurate information
necessary for calculation of royalty revenues and to collect royalty revenues from customers, business and economic conditions generally and in the semiconductor industry in particular, pace of adoption of new technologies by our customers and
increases or fluctuations in the demand for their products, competition in the market for semiconductor IP, and other risks and uncertainties including those set forth below under Risk Factors. These forward-looking statements speak only
as of the date hereof, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein. The following information should be read in conjunction with the
Managements Discussion and Analysis of Financial Condition and Results of Operations section of the Companys Form 10-K for the fiscal year ended September 30, 2008 filed with the Securities and Exchange Commission.

Overview

Business Environment

Virage Logic provides semiconductor intellectual property (IP) to the global semiconductor industry. These various forms of IP are utilized by our
customers to design and manufacture System-on-Chip (SoC) integrated circuits that are the foundation of todays consumer, communications and networking, hand-held and portable devices, computer and graphics, automotive, and defense
applications. Our semiconductor IP offering consists of (1) compilers that allow chip designers to configure our memories, or SRAMs, into different sizes and shapes on a single silicon chip, (2) IP and development solutions for embedded
test and repair of on-chip memory instances, (3) software development tools used to design memory compilers, (4) NVM instances, (5) logic cell libraries, and (6) DDR memory controller interface IP components. We also provide
design services related to our IP to the semiconductor industry.

Our customers include fabless semiconductor companies, integrated device manufacturers
and foundries. As semiconductor companies face increasing pressures to bring products to market faster and semiconductors have shorter product cycles, we focus on providing our customers a broad product offering as a means to satisfy a larger
portion of our customers semiconductor IP needs, while positioning ourselves to offer advanced products as the semiconductor industry migrates to smaller geometries.

The timing of customer purchases of our products is typically related to new design starts by fabless companies and migration to new manufacturing processes by integrated device manufacturers and foundries. Because of
the high costs involved in new design starts and migration to new manufacturing processes, our customers decisions regarding these matters are heavily dependent on their long-term business outlook. As a result, our business, and specifically
our license revenues, are likely to grow at times of positive outlook for the semiconductor industry and may suffer at times of negative outlook for the semiconductor industry.

In the second quarter of fiscal year 2009, we derived 76% of our license and maintenance revenue from the more advanced processes, 90-nanometer, 65-nanometer, 45-nanometer and 32-nanometer technologies and 24% of
license and maintenance revenue from the older process nodes, predominantly 0.13, 0.18, 0.25 and 0.35 micron technologies. The Company expects the 90-nanometer, 65-nanometer and 45-nanometer technologies to drive revenue growth in the foreseeable
future while license revenues from the older process nodes decline. Our royalty revenue to date has been from production on the older process nodes. However, we expect future growth in royalty revenues to be driven by the advanced processes,
45-nanometer, 65-nanometer and 90-nanometer technologies, in addition to continued production on the 0.13 and 0.18 micron technologies.

We sell our
products early in the design process, and there are time delays of 24 to 36 months between the sale of our products and the time we expect to receive royalty revenues. These time delays are due to the length of time required for our customers
to implement our semiconductor IP into their designs, and then to manufacture, market and sell a product incorporating our products. As a result, we



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expect our royalty revenues to increase in periods in which manufacturing volumes of semiconductors are growing. Future
growth of our royalty revenue is dependent on our ability to increase the number of designs incorporating our products and on such designs achieving substantial manufacturing volumes.

Stock Repurchase Program

On May 6, 2008, we announced that our Board of Directors authorized a stock
repurchase program to purchase up to $20 million in shares of our common stock in the open market or negotiated transactions through May 2009. We intend to use available cash to effect any stock repurchases. At March 31, 2009, the
Companys balance sheet reflected cash and investments totaling $60.4 million. On August 4, 2008, 700,000 shares were repurchased in the open market at a price per share of $6.49. On December 8, 2008, 190,000 shares were repurchased
in the open market at a price per share of $2.95. We did not repurchase any shares under our stock repurchase program during the second quarter of fiscal 2009. As of March 31, 2009, the remaining balance available for future stock repurchase
was $14.9 million under our stock repurchase program.

Our common stock trades on the Nasdaq Global Market. We may plan to make purchases from time to time
in the open market or through privately negotiated transactions. The number, price and timing of the repurchases, which may include, without limitation round lot or block transactions, will be at our sole discretion and may be re-evaluated depending
on market conditions, liquidity needs or other factors. Our board of directors may suspend, terminate, modify or cancel the program at any time without notice.

Sources of Revenues

Our revenues are derived principally from licenses of our semiconductor IP products, which
include:



| |  |  | embedded memories including SRAM and NVM, logic libraries;
| | - |  | ----------------------------------------------------------



| |  |  | IP and development infrastructure for embedded test and repair of on-chip memory instances;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | software development tools used to build memory compilers; and
| | - |  | --------------------------------------------------------------



| |  |  | DDR memory controllers, PHYs, and DLLs.
| | - |  | ---------------------------------------

We also
derive revenues from royalties, custom design services, maintenance services and library development and consulting services related to the license of logic components. Our revenues are reported in two separate categories: license revenues and
royalty revenues. License revenues are derived from license fees, maintenance fees, fees for custom design services, library design services and consulting services. Royalty revenues are derived from fees paid by a customer or a third-party foundry
based on production volumes of wafers containing chips utilizing our semiconductor IP technologies.

The license of our semiconductor IP typically covers a
range of embedded memory, logic, DDR memory controller, PHY and DLL products. Licenses of our semiconductor IP products can be either perpetual or term-based. In addition, maintenance can be purchased for both types of licenses.

We derive our royalty revenues from pure-play foundries that manufacture chips incorporating our Area, Speed and
Power (ASAPTM) Memory, ASAPTMLogic, SiWareTMMemory, SiWareTMLogic and STAR Memory
products for our fabless customers, and from integrated device manufacturers and fabless customers that utilize our STARTMMemory
System,NOVeA®and AEON® technologies. Royalty payments are in addition to the license fees we collect from our customers, and are calculated based on production volumes of wafers containing chips utilizing our semiconductor IP technologies based on a rate
per-chip or rate per-wafer depending on the terms of the respective license agreement. Royalty revenues are generally determined and recognized one quarter in arrears, when a production volume report is received from the customer or foundry.

Currently, license fees represent the majority of our revenues. License revenues for the three months ended March 31, 2009 and 2008 were $7.5 million
and $10.3 million, respectively. Maintenance revenues for the three months ended March 31, 2009 and 2008 were $1.6 million and $1.8 million, respectively. Royalty revenues for the three months ended March 31, 2009 and 2008 were $1.9
million and $2.6 million, respectively. License revenues for the six months ended March 31, 2009 and 2008 were $14.0 million and $18.7 million, respectively. Maintenance revenues for the six months ended March 31, 2009 and 2008 were $3.6
million and $4.1 million, respectively. Royalty revenues for the six months ended March 31, 2009 and 2008 were $4.7 million and $5.9 million, respectively.

We have been dependent on a limited number of customers for a substantial portion of our revenues, although our dependence on certain customers over the long term continues to decrease. Our customers comprising the top 10 customer group
have changed from time to time. We have one customer that generated 10% or more of our revenue for the three months ended March 31, 2009 and two customers that generated 10% or more of our revenue for the six months ended March 31, 2009.
We have two customers that generated 10% or more of our revenue for the three and six months ended March 31, 2008.

Sales to customers located outside
of North America accounted for approximately 45% and 62% of total sales for the three months ended March 31, 2009 and 2008, respectively. Sales to customers located outside of North America accounted for approximately 50% and 56% for the six
months ended March 31, 2009 and 2008, respectively. Our global sales force, comprised of direct sales representatives and field application engineers as well as third-party sales representatives, are located in North America, Europe, Israel,
Japan and the rest of Asia. All revenues to date have been denominated in U.S. dollars.



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Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with generally accepted accounting principles in the United States requires that we make estimates and judgments, which affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We continually evaluate our estimates, including those related to percentage-of-completion, allowance for doubtful accounts, investments, intangible
assets, income taxes, and contingencies such as litigation. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different
assumptions or conditions.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about
matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements. We
believe that there have been no significant changes during the three months ended March 31, 2009 to the items that we disclosed as our critical accounting policies and estimates in Managements Discussion and Analysis of Financial
Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended September 30, 2008.

RESULTS OF OPERATIONS FOR
THE THREE AND SIX MONTHS ENDED MARCH 31, 2009 AND 2008

Revenues

The table below sets forth the changes in revenues from the three and six months ended March 31, 2009 to the three months and six months ended March 31, 2008 (in thousands, except percentage data):



|               |  |                                  |        |                    |                                  |   |        |                       |                    |  |       |   |  |   |        |   |  |       |   
|-------------- |  | -------------------------------- | ------ | ------------------ | -------------------------------- | - | ------ | --------------------- | ------------------ |  | ----- | - |  | - | ------ | - |  | ----- | --
|               |  | Three Months EndedMarch 31, 2009 |        |                    | Three Months EndedMarch 31, 2008 |   |        | Year-Over-Year Change |                   
|               |  | Amount                           |        | % of totalrevenues |                                  |   | Amount |                       | % of totalrevenues |  |      
|Revenues:      |  |                                  |        |                    |                                  |   |        |                       |                    |  |       |   |  |   |        |   |  |       |   
|License        |  | $                                | 7,478  |                    | 67.8                             | % |        | $                     | 10,293             |  | 70.1  | % |  | $ | (2,815 | ) |  | (27.3 | )%
|Maintenance    |  |                                  | 1,648  |                    | 15.0                             | % |        |                       | 1,820              |  | 12.4  | % |  |   | (172   | ) |  | (9.5  | )%
|Royalties      |  |                                  | 1,899  |                    | 17.2                             | % |        |                       | 2,576              |  | 17.5  | % |  |   | (677   | ) |  | (26.3 | )%
|               |  |                                  |        |                    |                                  |   |        |                       |                    |  |       |   |  |   |        |   |  |       |   
|Total revenues |  | $                                | 11,025 |                    | 100.0                            | % |        | $                     | 14,689             |  | 100.0 | % |  | $ | (3,664 | ) |  | (24.9 | )%
|               |  |                                  |        |                    |                                  |   |        |                       |                    |  |       |   |  |   |        |   |  |       |   
|               |  |                                  |       
|               |  | Six Months EndedMarch 31, 2009   |        |                    | Six Months EndedMarch 31, 2008   |   |        | Year-Over-Year Change |                   
|               |  | Amount                           |        | % of totalrevenues |                                  |   | Amount |                       | % of totalrevenues |  |      
|Revenues:      |  |                                  |        |                    |                                  |   |        |                       |                    |  |       |   |  |   |        |   |  |       |   
|License        |  | $                                | 14,039 |                    | 62.8                             | % |        | $                     | 18,735             |  | 65.2  | % |  | $ | (4,696 | ) |  | (25.1 | )%
|Maintenance    |  |                                  | 3,588  |                    | 16.0                             | % |        |                       | 4,139              |  | 14.4  | % |  |   | (551   | ) |  | (13.3 | )%
|Royalties      |  |                                  | 4,747  |                    | 21.2                             | % |        |                       | 5,875              |  | 20.4  | % |  |   | (1,128 | ) |  | (19.2 | )%
|               |  |                                  |        |                    |                                  |   |        |                       |                    |  |       |   |  |   |        |   |  |       |   
|Total revenues |  | $                                | 22,374 |                    | 100.0                            | % |        | $                     | 28,749             |  | 100.0 | % |  | $ | (6,375 | ) |  | (22.2 | )%
|               |  |                                  |        |                    |                                  |   |        |                       |                    |  |       |   |  |   |        |   |  |       |   

Revenues for the three months ended March 31, 2009 totaled $11.0 million, decreasing 24.9% from $14.7 million
for the three months ended March 31, 2008. The decrease resulted from a $2.8 million decrease in license revenues, $0.2 million decrease in maintenance revenues, and a decrease of $0.7 million in royalty revenues.

Revenues for the six months ended March 31, 2009 totaled $22.4 million, decreasing 22.2% from $28.7 million for the six months ended March 31, 2008. The
decrease resulted from a $4.7 million decrease in license revenues, $0.5 million decrease in maintenance revenues, and a decrease of $1.1 million in royalty revenues.

Overall economic conditions during the first half of fiscal 2009, which may continue throughout 2009, have negatively impacted sales. These downturns have been characterized by diminished product demand, production
overcapacity, high inventory levels and accelerated erosion of average selling prices.



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##### Table of Contents

For the three and six months ended March 31, 2009 and 2008, total license revenues by process node are as follows:



|                                      |  |                             |   |  |                           |   |  |      |   |  |      |  
|------------------------------------- |  | --------------------------- | - |  | ------------------------- | - |  | ---- | - |  | ---- | -
|                                      |  | Three Months EndedMarch 31, |   |  | Six Months EndedMarch 31, |  
|                                      |  | 2009                        |   |  | 2008                      |   |  | 2009 |   |  | 2008 |  
|Total License Revenue by Process Node |  |                             |   |  |                           |   |  |      |   |  |      |  
|32 Nanometer technology               |  | 4                           | % |  |                          | % |  | 4    | % |  |     | %
|45 Nanometer technology               |  | 38                          |   |  | 14                        |   |  | 36   |   |  | 13   |  
|65 Nanometer technology               |  | 26                          |   |  | 39                        |   |  | 28   |   |  | 38   |  
|90 Nanometer technology               |  | 8                           |   |  | 19                        |   |  | 11   |   |  | 18   |  
|0.13 Micron technology                |  | 10                          |   |  | 13                        |   |  | 10   |   |  | 14   |  
|0.18 Micron technology                |  | 12                          |   |  | 4                         |   |  | 7    |   |  | 5    |  
|Other                                 |  | 2                           |   |  | 11                        |   |  | 4    |   |  | 12   |  
|                                      |  |                             |   |  |                           |   |  |      |   |  |      |  
|Total                                 |  | 100                         | % |  | 100                       | % |  | 100  | % |  | 100  | %
|                                      |  |                             |   |  |                           |   |  |      |   |  |      |  

License revenues for the three months ended March 31, 2009 were $7.5 million, representing a decrease of $2.8
million, or 27.3%, as compared to $10.3 million for the three months ended March 31, 2008. The license revenue decrease for the three months ended March 31, 2009 is mainly attributed to decreases of $2.0 million on the 65-nanometer
process, $1.3 million on the 90-nanometer process, $1.5 million on 0.13 micron process and other technologies, partially offset by increases of $1.3 million on the 45-nanometer process, $0.4 million on 0.18 micron process, and $0.3 on the
32-nanometer process. License revenue from 0.18 micron process for the three month ended March 31, 2009 increased by 8% from the three months ended March 31, 2008 as a result of the Impinj acquisition.

License revenues for the six months ended March 31, 2009 were $14.0 million, representing a decrease of $4.7 million, or 25.1%, as compared to $18.7 million for the
six months ended March 31, 2008. The license revenue decrease for the six months ended March 31, 2009 is mainly attributed to decreases of $3.3 million on the 65-nanometer process, $1.9 million on the 90-nanometer process, $2.8 million on
0.13 micron process and other technologies, partially offset by increases of $2.5 million on the 45-nanometer process, $0.6 million on the 32-nanometer process, and $0.1 million on 0.18 micron process.

For the three and six months ended March 31, 2009 and 2008, total maintenance revenues by process node are as follows:



|                                          |  |                             |   |  |                           |   |  |      |   |  |      |  
|----------------------------------------- |  | --------------------------- | - |  | ------------------------- | - |  | ---- | - |  | ---- | -
|                                          |  | Three Months EndedMarch 31, |   |  | Six Months EndedMarch 31, |  
|                                          |  | 2009                        |   |  | 2008                      |   |  | 2009 |   |  | 2008 |  
|Total Maintenance Revenue by Process Node |  |                             |   |  |                           |   |  |      |   |  |      |  
|32 Nanometer technology                   |  | 1                           | % |  |                          | % |  | 1    | % |  |     | %
|45 Nanometer technology                   |  | 21                          |   |  |                          |   |  | 18   |   |  |     |  
|65 Nanometer technology                   |  | 25                          |   |  | 23                        |   |  | 23   |   |  | 33   |  
|90 Nanometer technology                   |  | 29                          |   |  | 44                        |   |  | 36   |   |  | 36   |  
|0.13 Micron technology                    |  | 16                          |   |  | 27                        |   |  | 15   |   |  | 25   |  
|0.18 Micron technology                    |  | 7                           |   |  | 6                         |   |  | 6    |   |  | 6    |  
|Other                                     |  | 1                           |   |  |                          |   |  | 1    |   |  |     |  
|                                          |  |                             |   |  |                           |   |  |      |   |  |      |  
|Total                                     |  | 100                         | % |  | 100                       | % |  | 100  | % |  | 100  | %
|                                          |  |                             |   |  |                           |   |  |      |   |  |      |  

Maintenance revenues for the three months ended March 31, 2009 were $1.6 million, representing a decrease of
$0.2 million, or 9.5%, as compared to $1.8 million for the three months ended March 31, 2008. Maintenance revenues decreased for the three months ended March 31, 2009 mainly attributed to decreases of $0.3 million on the 90-nanometer
process, $0.2 million on the 0.2 micron process, partially offset by an increase of $0.3 million on the 45-nanometer process.

Maintenance revenues for the
six months ended March 31, 2009 were $3.6 million, representing a decrease of $0.5 million, or 13.3%, as compared to $4.1 million for the six months ended March 31, 2008. Maintenance revenues decreased for the six months ended
March 31, 2009 mainly attributed to decreases of $0.5 million on the 65-nanometer process, $0.5 million on 0.13 micron process, and $0.2 million on the 90-nanometer process, partially offset by increases of $0.6 million on the 45-nanometer
process and $0.1 million on 0.18 micron process and other technologies.



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Royalties decreased by $0.7 million, or 26.3%, from $2.6 million in the three months ended March 31, 2008 to $1.9
million for the three months ended March 31, 2009. Royalties decreased by $1.1 million, or 19.2%, from $5.9 million in the six months ended March 31, 2008 to $4.7 million for the six months ended March 31, 2009.

For the three and six months ended March 31, 2009 and 2008, total revenues by geography were as follows:



|                                                        |  |                             |        |                           |   |        |  |      |        |  |   |       
|------------------------------------------------------- |  | --------------------------- | ------ | ------------------------- | - | ------ |  | ---- | ------ |  | - | ------
|                                                        |  | Three Months EndedMarch 31, |        | Six Months EndedMarch 31,
|                                                        |  | 2009                        |        | 2008                      |   | 2009   |  | 2008
|Total Revenue by Geography                              |  |                             |        |                           |   |        |  |      |        |  |   |       
|United States                                           |  | $                           | 4,983  |                           | $ | 5,460  |  | $    | 9,896  |  | $ | 11,669
|Taiwan                                                  |  |                             | 1,689  |                           |   | 2,349  |  |      | 4,039  |  |   | 4,579 
|Other Asia (China, Malaysia, South Korea and Singapore) |  |                             | 1,475  |                           |   | 3,327  |  |      | 2,734  |  |   | 5,184 
|Europe, Middle East and Africa (EMEA)                   |  |                             | 1,410  |                           |   | 2,465  |  |      | 3,051  |  |   | 5,065 
|Canada                                                  |  |                             | 1,036  |                           |   | 145    |  |      | 1,303  |  |   | 1,111 
|Japan                                                   |  |                             | 432    |                           |   | 943    |  |      | 1,351  |  |   | 1,141 
|                                                        |  |                             |        |                           |   |        |  |      |        |  |   |       
|Total                                                   |  | $                           | 11,025 |                           | $ | 14,689 |  | $    | 22,374 |  | $ | 28,749
|                                                        |  |                             |        |                           |   |        |  |      |        |  |   |       

Cost and Expenses

The table below sets forth the changes in cost and expenses for the three and six months ended March 31, 2009 and for the three and six months ended March 31, 2008 (in thousands, except percentage data):



|                           |  |                                  |        |                    |                                  |   |        |                       |        |                    |  |       |   |  |   |        |   |  |       |   
|-------------------------- |  | -------------------------------- | ------ | ------------------ | -------------------------------- | - | ------ | --------------------- | ------ | ------------------ |  | ----- | - |  | - | ------ | - |  | ----- | --
|                           |  | Three Months EndedMarch 31, 2009 |        |                    | Three Months EndedMarch 31, 2008 |   |        | Year-Over-Year Change |       
|                           |  | Amount                           |        | % of totalrevenues |                                  |   | Amount |                       |        | % of totalrevenues |  |      
|Cost and expenses:         |  |                                  |        |                    |                                  |   |        |                       |        |                    |  |       |   |  |   |        |   |  |       |   
|Cost of revenues           |  | $                                | 2,401  |                    | 21.8                             | % |        | $                     | 3,121  |                    |  | 21.2  | % |  | $ | (720   | ) |  | (23.1 | )%
|Research and development   |  |                                  | 6,700  |                    | 60.8                             | % |        |                       | 6,175  |                    |  | 42.0  | % |  |   | 525    |   |  | 8.5   | % 
|Sales and marketing        |  |                                  | 2,754  |                    | 25.0                             | % |        |                       | 3,864  |                    |  | 26.3  | % |  |   | (1,110 | ) |  | (28.7 | )%
|General and administrative |  |                                  | 2,645  |                    | 24.0                             | % |        |                       | 2,111  |                    |  | 14.4  | % |  |   | 534    |   |  | 25.3  | % 
|Goodwill impairment        |  |                                  | 11,839 |                    | 107.4                            | % |        |                       |       |                    |  |      |   |  |   | 11,839 |   |  | NM    |   
|Restructuring              |  |                                  | 1,473  |                    | 13.3                             | % |        |                       |       |                    |  |      |   |  |   | 1,473  |   |  | NM    |   
|                           |  |                                  |        |                    |                                  |   |        |                       |        |                    |  |       |   |  |   |        |   |  |       |   
|Total cost and expenses    |  | $                                | 27,812 |                    | 252.3                            | % |        | $                     | 15,271 |                    |  | 103.9 | % |  | $ | 12,541 |   |  | 82.1  | % 
|                           |  |                                  |        |                    |                                  |   |        |                       |        |                    |  |       |   |  |   |        |   |  |       |   
|                           |  |                                  |       
|                           |  | Six Months EndedMarch 31, 2009   |        |                    | Six Months EndedMarch 31, 2008   |   |        | Year-Over-Year Change |       
|                           |  | Amount                           |        | % of totalrevenues |                                  |   | Amount |                       |        | % of totalrevenues |  |      
|Cost and expenses:         |  |                                  |        |                    |                                  |   |        |                       |        |                    |  |       |   |  |   |        |   |  |       |   
|Cost of revenues           |  | $                                | 4,970  |                    | 22.2                             | % |        | $                     | 5,568  |                    |  | 19.4  | % |  | $ | (598   | ) |  | (10.7 | )%
|Research and development   |  |                                  | 15,719 |                    | 70.3                             | % |        |                       | 12,033 |                    |  | 41.9  | % |  |   | 3,686  |   |  | 30.6  | % 
|Sales and marketing        |  |                                  | 5,421  |                    | 24.2                             | % |        |                       | 7,457  |                    |  | 25.9  | % |  |   | (2,036 | ) |  | (27.3 | )%
|General and administrative |  |                                  | 4,766  |                    | 21.3                             | % |        |                       | 3,886  |                    |  | 13.5  | % |  |   | 880    |   |  | 22.6  | % 
|Goodwill impairment        |  |                                  | 11,839 |                    | 52.9                             | % |        |                       |       |                    |  |      |   |  |   | 11,839 |   |  | NM    |   
|Restructuring              |  |                                  | 1,473  |                    | 6.6                              | % |        |                       | (3     | )                  |  | 0.0   | % |  |   | 1,476  |   |  | NM    |   
|                           |  |                                  |        |                    |                                  |   |        |                       |        |                    |  |       |   |  |   |        |   |  |       |   
|Total cost and expenses    |  | $                                | 44,188 |                    | 197.5                            | % |        | $                     | 28,941 |                    |  | 100.7 | % |  | $ | 15,247 |   |  | 52.7  | % 
|                           |  |                                  |        |                    |                                  |   |        |                       |        |                    |  |       |   |  |   |        |   |  |       |   



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Cost of Revenues

Cost of revenues is determined principally based on allocation of costs associated with custom contracts and maintenance contracts, which consist primarily of personnel expenses, allocation of facilities costs, and depreciation expenses of
acquired software and capital equipment. Cost of revenues for the three months ended March 31, 2009 totaled $2.4 million, representing a decrease of $0.7 million, or 23.1%, from $3.1 million for the three months ended March 31, 2008. The
decrease for the three months was primarily attributable to a decrease of $0.6 million in expenses due to the reduction in contract related expenses as a result of lower revenue. Cost of revenues for the six months ended March 31, 2009 totaled
$5.0 million, representing a decrease of $0.6 million, or 10.7%, from $5.6 million for the six months ended March 31, 2008. The decrease for the six months was primarily attributable to a decrease in expenses due to the reduction in contract
related expenses as a result of lower revenue.

Research and Development Expenses

Research and development expenses primarily include personnel expense, software license and maintenance fees and capital equipment depreciation expenses. Research and development expenses for the three months ended
March 31, 2009 totaled $6.7 million, an increase of $0.5 million, or 8.5%, from $6.2 million for the three months ended March 31, 2008. Research and development expenses as a percentage of total revenue for the three months ended
March 31, 2009 increased to 60.8% from 42.0% for the same period in fiscal 2008. The increase was primarily due to increases of $1.0 million of additional recurring expenses incurred due to the acquisition of NVM IP business segment of Impinj,
offset by $0.5 million of lower payroll related expenses. For the six months ended March 31, 2009, research and development expenses increased $3.7 million, or 30.6%, from $12.0 million in fiscal 2008 to $15.7 million in fiscal 2009. The
increase was primarily attributable to $2.3 million of additional recurring expenses incurred due to the acquisition of NVM IP business segment of Impinj and $1.8 million of retention bonus earned by the former Ingot employees offset by $0.3 million
of lower personnel expenses due to the reduction of workforce.

Sales and Marketing Expenses

Sales and marketing expenses consist mainly of personnel expenses, commissions, advertising and promotion-related costs. Sales and marketing expenses for the three months
ended March 31, 2009 totaled $2.8 million, representing a decrease of $1.1 million, or 28.7%, over the same period in fiscal 2008. Sales and marketing expenses as a percentage of revenue were 25.0% for the three months ended March 31,
2009, compared to 26.3% for the three months ended March 31, 2008. The decrease in sales and marketing expenses for the three months ended March 31, 2009 was primarily attributable to decreases of $0.4 million of sales commissions and $0.6
million of payroll related expenses. For the six months ended March 31, 2009, total sales and marketing expense decreased by $2.0 million, or 27.3%, from $7.5 million in fiscal 2008 to $5.4 million in fiscal 2009. The decrease was primarily
attributed to decreases of $1.1 million of payroll related expenses, $0.9 million of sales commissions, and $0.2 million of stock-based compensation expense.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel, corporate governance and other
costs associated with the management of our business. General and administrative expenses for the three months ended March 31, 2009 totaled $2.6 million, representing an increase of $0.5 million, or 25.3%, over the three months ended
March 31, 2008. General and administrative expenses, as a percentage of total revenue were 24.0% for the three months ended March 31, 2009, compared to 14.4% for the same period in fiscal 2008. The increase in general and administrative
expenses for the three months ended March 31, 2009 was mainly attributable to increases of $0.4 million of bad debt expenses and $0.2 million of payroll related expenses offset by $0.1 million of lower depreciation expenses. For the six months
ended March 31, 2009, total general and administrative expense increased by $0.9 million from $3.9 million in fiscal 2008 to $4.8 million in fiscal 2009. The increase was primarily attributed to increases of $0.3 million of payroll related
expenses, $0.4 million of bad debt expenses, $0.1 million of consulting expenses and $0.1 million of recruiting expenses.

Goodwill Impairment

Goodwill impairment for the three and six months ended March 31, 2009 was $11.8 million, representing a write-off of all goodwill as a result of a
triggering event The Company determined that the restructuring plan it undertook in the quarter represented a triggering event to assess its goodwill. As a result of the significant negative industry and economic trends affecting the current
operations and expected future growth as well as the general decline of industry valuations impacting the Companys valuation, the Company determined that goodwill was impaired. There is no impairment loss for the same periods ended
March 31, 2008.

Restructuring

Restructuring
expense for the three and six months ended March 31, 2009 was $1.5 million and primarily consisted of severance charges of $1.1 million and lease termination expenses of $0.3 million. There was no material restructuring expense for the same
periods ended March 31, 2008.



22



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##### Table of Contents

Interest Income and Other Income (Expenses), net

The table below sets forth the changes in interest income and other income (expenses), net from the three and six months ended March 31, 2009 to the three and six
months ended March 31, 2008 (in thousands, except percentage data):



|                                                       |  |                                  |      |   |                                  |      |    |        |   |       |                    |  |      |                       |  |   |        |   |  |       |   
|------------------------------------------------------ |  | -------------------------------- | ---- | - | -------------------------------- | ---- | -- | ------ | - | ----- | ------------------ |  | ---- | --------------------- |  | - | ------ | - |  | ----- | --
|                                                       |  | Three Months EndedMarch 31, 2009 |      |   | Three Months EndedMarch 31, 2008 |      |    |        |  
|                                                       |  | Amount                           |      |   | % of totalrevenues               |      |    | Amount |   |       | % of totalrevenues |  |      | Year-Over-Year Change | 
|Interest income and other income (expenses), net:      |  |                                  |      |   |                                  |      |    |        |   |       |                    |  |      |                       |  |   |        |   |  |       |   
|Interest income                                        |  | $                                | 259  |   |                                  | 2.3  | %  |        | $ | 841   |                    |  | 5.7  | %                     |  | $ | (582   | ) |  | (69.2 | )%
|Other income (expenses), net                           |  |                                  | (145 | ) |                                  | (1.3 | )% |        |   | (74   | )                  |  | (0.5 | )%                    |  |   | (71    | ) |  | (95.9 | )%
|                                                       |  |                                  |      |   |                                  |      |    |        |   |       |                    |  |      |                       |  |   |        |   |  |       |   
|Total interest income and other income (expenses), net |  | $                                | 114  |   |                                  | 1.0  | %  |        | $ | 767   |                    |  | 5.2  | %                     |  | $ | (653   | ) |  | (85.1 | )%
|                                                       |  |                                  |      |   |                                  |      |    |        |   |       |                    |  |      |                       |  |   |        |   |  |       |   
|                                                       |  |                                  |     
|                                                       |  | Six Months EndedMarch 31, 2009   |      |   | Six Months EndedMarch 31, 2008   |      |    |        |  
|                                                       |  | Amount                           |      |   | % of totalrevenues               |      |    | Amount |   |       | % of totalrevenues |  |      | Year-Over-Year Change | 
|Interest income and other income (expenses), net:      |  |                                  |      |   |                                  |      |    |        |   |       |                    |  |      |                       |  |   |        |   |  |       |   
|Interest income                                        |  | $                                | 647  |   |                                  | 2.9  | %  |        | $ | 1,806 |                    |  | 6.3  | %                     |  | $ | (1,159 | ) |  | (64.2 | )%
|Other income (expenses), net                           |  |                                  | 115  |   |                                  | 0.5  | %  |        |   | 128   |                    |  | 0.4  | %                     |  |   | (13    | ) |  | (10.2 | )%
|                                                       |  |                                  |      |   |                                  |      |    |        |   |       |                    |  |      |                       |  |   |        |   |  |       |   
|Total interest income and other income (expenses), net |  | $                                | 762  |   |                                  | 3.4  | %  |        | $ | 1,934 |                    |  | 6.7  | %                     |  | $ | (1,172 | ) |  | (60.6 | )%
|                                                       |  |                                  |      |   |                                  |      |    |        |   |       |                    |  |      |                       |  |   |        |   |  |       |   

Interest income and other income (expenses), net, for the three months ended March 31, 2009 totaled $0.1
million of income compared to $0.8 million of income for the same period in fiscal 2008. The decrease of $0.7 million is largely due to lower investment balances and lower interest rates earned in our investment portfolio of marketable securities.
Interest income and other income (expenses), net, for the six months ended March 31, 2009 totaled $0.8 million of income compared to $1.9 million of income for the same period in fiscal 2008. The decrease of $1.2 million is largely due to lower
investment balances and lower interest rates earned in our investment portfolio of marketable securities.

Income Tax Provision (Benefit)

The table below sets forth the changes in income tax provision (benefit) from the three months ended March 31, 2009 to the three
months ended March 31, 2008 (in thousands, except percentage data):



|                               |  |                                  |       |                    |                                  |   |        |   |      |                    |  |      |   
|------------------------------ |  | -------------------------------- | ----- | ------------------ | -------------------------------- | - | ------ | - | ---- | ------------------ |  | ---- | --
|                               |  | Three Months EndedMarch 31, 2009 |       |                    | Three Months EndedMarch 31, 2008 |  
|                               |  | Amount                           |       | % of totalrevenues |                                  |   | Amount |   |      | % of totalrevenues | 
|Income tax provision (benefit) |  | $                                | 9,674 |                    | 87.7                             | % |        | $ | (447 | )                  |  | (3.0 | )%
|                               |  |                                  |       |                    |                                  |   |        |   |      |                    |  |      |   
|                               |  |                                 
|                               |  | Six Months EndedMarch 31, 2009   |       |                    | Six Months EndedMarch 31, 2008   |  
|                               |  | Amount                           |       | % of totalrevenues |                                  |   | Amount |   |      | % of totalrevenues | 
|Income tax provision           |  | $                                | 7,906 |                    | 35.3                             | % |        | $ | 18   |                    |  | 0.1  | % 
|                               |  |                                  |       |                    |                                  |   |        |   |      |                    |  |      |   



23



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##### Table of Contents

For the three and six months ended March 31, 2009, we recorded an income tax provision of $9.7 million and $7.9
million, respectively. For the three months ended March 31, 2008, we recorded an income tax benefit of $0.4 million. The provision for income taxes for the six months ended March 31, 2009 is based on our annual effective tax rate in
compliance with SFAS 109. For the six months ended March 31, 2008, we recorded an income tax provision of $18,000. The income tax provision for the three and six month ended March 31, 2009 included a provision of $11.0 million related to
the valuation allowance placed against deferred tax assets. The fiscal 2009 effective tax rate increased as a result of the provision for the valuation allowance. The fiscal 2009 effective tax rate excluding the valuation allowance is 41.0%.

LIQUIDITY AND CAPITAL RESOURCES



|                                                            |  |               |        |                   |   |        |  |   |         |  
|----------------------------------------------------------- |  | ------------- | ------ | ----------------- | - | ------ |  | - | ------- | -
|                                                            |  | March 31,2009 |        | September 30,2008 |   | Change | 
|Cash and cash equivalents                                   |  | $             | 26,664 |                   | $ | 13,214 |  | $ | 13,450  |  
|Short-term and long-term investments                        |  |               | 33,728 |                   |   | 52,591 |  |   | (18,863 | )
|                                                            |  |               |        |                   |   |        |  |   |         |  
|Total cash, cash equivalents and marketable debt securities |  | $             | 60,392 |                   | $ | 65,805 |  | $ | (5,413  | )
|                                                            |  |               |        |                   |   |        |  |   |         |  

As of March 31, 2009, our cash and cash equivalents totaled $26.7 million, as compared to $13.2 million as of
September 30, 2008. As of March 31, 2009 and September 30, 2008, our short-term and long-term investments totaled $33.7 million and $52.6 million, respectively. In aggregate, cash, cash equivalents and short- and long-investments in
marketable securities as of March 31, 2009 totaled $60.4 million, compared to $65.8 million at September 30, 2008. The primary source of our cash in the six months ended March 31, 2009 was proceeds from maturity of investments and
collections of accounts receivable.



|                                                |  |                  |        |   |               |   |       |   |  |   |        |  
|----------------------------------------------- |  | ---------------- | ------ | - | ------------- | - | ----- | - |  | - | ------ | -
|                                                |  | Six months Ended |        |   | Change        |  
|                                                |  | March 31,2009    |        |   | March 31,2008 |   |      
|Cash provided by (used in) operating activities |  | $                | (3,039 | ) |               | $ | 396   |   |  | $ | (3,435 | )
|Cash provided by investing activities           |  |                  | 17,366 |   |               |   | 6,033 |   |  |   | 11,333 |  
|Cash provided by (used in) financing activities |  |                  | (551   | ) |               |   | 1,423 |   |  |   | (1,974 | )
|Effect of exchange rates on cash                |  |                  | (326   | ) |               |   | (106  | ) |  |   | (220   | )
|                                                |  |                  |        |   |               |   |       |   |  |   |        |  
|Net increase in cash and cash equivalents       |  | $                | 13,450 |   |               | $ | 7,746 |   |  | $ | 5,704  |  
|                                                |  |                  |        |   |               |   |       |   |  |   |        |  

Net cash used in operating activities was $3.0 million for the six months ended March 31, 2009, representing
a decrease of $3.4 million over net cash provided by operating activities of $0.4 million for the three months ended March 31, 2008. The change in cash flows from operating activities was primarily attributable to a reduction in net income of
$30.7 million. The reduction in net income of $30.7 million was offset by increases of $5.7 million in changes in operating assets and liabilities and increases of $21.7 million in non-cash charges primarily due to goodwill impairment of $11.8
million and deferred taxes of $9.7 million.

Net cash provided by investing activities was $17.4 million for the six months ended March 31, 2009,
representing an increase of $11.3 million over net cash provided by investing activities of $6.0 million for the six months ended March 31, 2008. The increase of $11.3 million from the investing activities resulted from a decrease in purchases
of investments of $43.8 million offset by a decrease in proceeds from maturity of investments of $31.5 million and an increase in property and equipment purchases of $1.0 million.

Net cash used in financing activities totaled $0.6 million for the six months ended March 31, 2009, representing a decrease of $2.0 million over net cash provided by financing activities of $1.4 million for the
six months ended March 31, 2008. The decrease of $2.0 million was attributed to $0.6 million in the purchase of treasury stock and a decrease of $1.4 million in proceeds from issuance of common stock during the first half of fiscal 2009.

Our future capital requirements will depend on many factors, including the rate of our sales growth, market acceptance of our existing and new
technologies, the amount and timing of R&D expenditures, the timing of the introduction of new technologies, expansion of sales and marketing efforts, acquisitions we may pursue, and levels of working capital, primarily accounts receivable. We
believe that our current capital resources will be sufficient to meet our needs for at least the next twelve months, although we may seek to raise additional capital during that period and there can be no assurance that we will not require
additional financing beyond this time frame. There can be no assurance that additional equity or debt financing, if required, will be available on satisfactory terms.



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##### Table of Contents

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The following table summarizes our contractual obligations and commercial commitments at March 31, 2009 (dollars in thousands):



|                                               |  |       |        |                 |   |          |  |          |       |              |   |       |  |   |  
|---------------------------------------------- |  | ----- | ------ | --------------- | - | -------- |  | -------- | ----- | ------------ | - | ----- |  | - | -
|Contractual Obligations                        |  | Total |        | Less Than1 Year |   | 1-3Years |  | 4-5Years |       | After5 Years
|Operating lease obligations                    |  | $     | 3,070  |                 | $ | 1,210    |  | $        | 1,477 |              | $ | 383   |  | $ | 
|Purchase obligations (1)                       |  |       | 17,041 |                 |   | 9,026    |  |          | 4,927 |              |   | 3,088 |  |   | 
|                                               |  |       |        |                 |   |          |  |          |       |              |   |       |  |   |  
|Total operating lease and purchase obligations |  | $     | 20,111 |                 | $ | 10,236   |  | $        | 6,404 |              | $ | 3,471 |  | $ | 
|                                               |  |       |        |                 |   |          |  |          |       |              |   |       |  |   |  



|(1) | Reflects amounts payable under contracts primarily for product development software licenses, maintenance and payments due under other technology licensing agreements.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

Our
core business, the sale of semiconductor IP for the design and manufacture of system-on-a-chip integrated circuits, has exposure to financial market risks, including changes in foreign currency exchange rates and interest rates. A significant
portion of our customers are located in Asia, Canada and Europe. However, to date, our exposure to foreign currency exchange fluctuations has been minimal because all of our license agreements provide for payment in U.S. dollars.

Our international business is subject to risks typical of an international business, including, but not limited to differing economic conditions, changes in political
climate, differing tax environments, other regulations and restrictions and foreign exchange rate volatility. Our foreign subsidiaries incur most of their expenses in the local currency. To date these expenses have not been significant, therefore,
we do not anticipate our future results will be materially adversely impacted by changes in factors affecting international operations.

We are exposed to
the impact of interest rate changes and changes in the market values of our investments. We maintain an investment portfolio of various issuers, types and maturities. These securities are classified as available-for-sale and, consequently, are
recorded on the balance sheet at fair value with unrealized gains or losses reported as a separate component of stockholders equity. Our investments primarily consist of short-term commercial paper, U.S. government sponsored enterprise bonds
and U.S. treasury bills. Our short term investments balance of $29.2 million at March 31, 2009 consists of instruments with original maturities of less than one year. We also hold approximately $4.6 million in U.S. government sponsored
enterprise bonds with maturities greater than one year. The estimated fair value of our investment portfolio as of March 31, 2009, assuming a 100 basis point increase in market interest rates, would decrease by approximately $0.1 million, which
would not materially affect our operations. We have the ability to hold our fixed income investments until maturity and therefore we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a
sudden change in market interest rates on our securities portfolio. If necessary, we may sell short-term investments prior to maturity to meet our liquidity needs.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Evaluation of Disclosure Controls and
Procedures

We evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the
Exchange Act of 1934, as of the end of the period covered by this quarterly report. Our Chief Executive Officer and Chief Financial Officer supervised and participated in the evaluation. Based on the evaluation, our Chief Executive Officer and Chief
Financial Officer each concluded that, as of the date of the evaluation, our disclosure controls and procedures were effective in providing reasonable assurance that material information relating to us and our consolidated subsidiaries is recorded,
processed and made known to management on a timely basis, including during the period when we prepare our periodic SEC reports. The design and operation of any system of controls is based in part upon certain assumptions about the likelihood of
future events and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures, and there can be no assurance that any design will succeed in achieving its stated goals under all
potential future conditions.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934 that occurred during the quarter ended March 31, 2009 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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##### Table of Contents

PART II  OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

We are a party to legal proceedings and claims
of various types in the ordinary course of business. We believe based on information currently available to management that the resolution of such claims will not have a material adverse impact on our condensed consolidated financial position or
results of operations.



|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 September 30, 2008, which we filed with the Securities and Exchange Commission on December 11, 2008. Additional risks and uncertainties not currently known to us
or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. We have updated these risk factors to reflect changes during the first half of fiscal 2009. The following discussion
is of material changes to the risk factors disclosed in that report.

General economic conditions and future terrorist attacks may reduce our
revenues and harm our business.

The U.S. and International economy and financial market have experienced significant slowdown and volatility due to
the instability of the financial markets, falling consumer confidence and rising unemployment rates. As a result of the deteriorating economic environment, our current or potential future customers may experience serious cash flow problems and may
modify, delay or cancel plans to purchase our products. If businesses or consumers defer or cancel purchases of new products that contain complex semiconductors, purchases by fabless semiconductor companies, integrated device manufacturers and
production levels by semiconductor manufacturers could decline. This could adversely affect our revenues which in turn would have an adverse effect on our results of operations and financial condition. In addition, continued unrest in Israel and the
Middle East may negatively impact the investments that our worldwide customers make in these geographic regions.

We may experience additional losses
in the future and may have difficulty returning to profitability.

We recorded a net loss of $29.0 million for the first six months of fiscal 2009
and a net income of $1.7 million for the same period of fiscal 2008. The loss for the six months of fiscal 2009 mainly due to goodwill impairment of $11.8 and tax provision of $11.0 million related to valuation allowance placed against deferred tax
assets. Though we plan on continuing the growth of our business while implementing cost control measures, we may not be able to successfully generate enough revenues to return to profitability. Any failure to increase our revenues and control costs
as we pursue our planned growth would harm our profitability and would likely negatively affect the market price of our stock. In addition, if we incurred losses for a sustained period we may be prevented from being able to fully utilize our
deferred tax assets which would result in the need for an additional valuation allowance to be recorded.

Our quarterly operating results may
fluctuate significantly and the failure to meet financial expectations for any fiscal quarter may cause our stock price to decline.

Our quarterly
operating results are likely to fluctuate in the future from quarter to quarter and on an annual basis due to a variety of factors, many of which are outside of our control. Factors that could cause our revenues and operating results to vary
materially from quarter to quarter include the following:



| |  |  | large orders unevenly spaced over time, or the cancellation or delay of orders;
| | - |  | -------------------------------------------------------------------------------



| |  |  | pace of adoption of new technologies by customers;
| | - |  | --------------------------------------------------



| |  |  | timing of introduction of new products and technologies and technology enhancements by us and our competitors;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | our lengthy sales cycle and fluctuations in the demand for our products and products that incorporate our IP;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | constrained or deferred spending decisions by customers;
| | - |  | --------------------------------------------------------



| |  |  | delays in new process qualification or verification;
| | - |  | ----------------------------------------------------



| |  |  | capacity constraints at the facilities of our foundries;
| | - |  | --------------------------------------------------------



| |  |  | inability to collect or delay in collection of receivables;
| | - |  | -----------------------------------------------------------



26



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##### Table of Contents

| |  |  | the timing and completion of milestones under customer agreements;
| | - |  | ------------------------------------------------------------------



| |  |  | the impact of competition on license revenues or royalty rates;
| | - |  | ---------------------------------------------------------------



| |  |  | the cyclical nature of the semiconductor industry and the general economic environment;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | consolidation, merger and acquisition activity of our customer base may cause delays or loss of sales;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | the amount and timing of royalty payments;
| | - |  | ------------------------------------------



| |  |  | non-cash charges such as tax provisions, write-downs of goodwill and other intangible assets;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | changes in development schedules; and
| | - |  | -------------------------------------



| |  |  | R&D expenditures.
| | - |  | -----------------

As a result, we believe that
quarter-to-quarter comparisons of our results of operations are not necessarily meaningful and may not be reliable as indicators of future performance. These factors make it difficult for us to accurately predict our revenues and operating results
and may cause them to be below market analysts expectations in some quarters, which could cause the market price of our stock to decline.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES
|------- | ---------------------------------------

The following table
provides the specified information about the repurchase of shares by the Company under the Companys stock repurchase program.



|                 |  |                                |  |                     |      |                                                                           |         |                                                                                           |   |           
|---------------- |  | ------------------------------ |  | ------------------- | ---- | ------------------------------------------------------------------------- | ------- | ----------------------------------------------------------------------------------------- | - | ----------
|Period           |  | Total numberof sharespurchased |  | Price paid pershare |      | Total numberof sharespurchased aspart ofpubliclyannouncedplans orprograms |         | Maximumapproximatedollar value ofshares that mayyet bepurchasedunder the plansor
programs
|August 4, 2008   |  | 700,000                        |  | $                   | 6.49 |                                                                           | 700,000 |                                                                                           | $ | 15,457,000
|December 8, 2008 |  | 190,000                        |  | $                   | 2.95 |                                                                           | 890,000 |                                                                                           | $ | 14,896,500
|                 |  |                                |  |                     |      |                                                                           |         |                                                                                           |   |           
|Total            |  | 890,000                        |  |                     |      |                                                                           |         |                                                                                           |   |           
|                 |  |                                |  |                     |      |                                                                           |         |                                                                                           |   |           

On May 6, 2008, the Company adopted a stock repurchase program to purchase up to $20 million in shares of the
common stock in the open market or negotiated transactions through May 2009. See Note 10. Stock Repurchase Program.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

The Company
held its annual meeting of stockholders on March 13, 2009. The stockholders approved the following proposals:



|1. | Election of two Class III directors to hold office until the 2012 annual meeting of stockholders, until their successors are duly elected and qualified.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------



|                     |  |            |  |          
|-------------------- |  | ---------- |  | ---------
|Nominee              |  | For        |  | Withheld 
|Alexander Shubat     |  | 17,515,251 |  | 3,767,328
|Michael L. Hackworth |  | 15,808,706 |  | 5,473,873



|2. | Approval of an amendment to the Virage Logic Corporation 2002 Equity Incentive Plan, or the Plan, to increase the number of shares of common stock issuable under the Plan by
1,000,000 shares.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|           |  |           |  |          |  |         |  |                 
|---------- |  | --------- |  | -------- |  | ------- |  | ----------------
|For        |  | Against   |  | Withheld |  | Abstain |  | Broker Non-Votes
|13,999,477 |  | 4,746,139 |  |         |  | 203,844 |  |                



27



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##### Table of Contents

|3. | Ratification of the appointment of Burr, Pilger & Mayer LLP, as independent auditor of the Company for the fiscal year ending September 30, 2009.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------



|           |  |         |  |          |  |         |  |                 
|---------- |  | ------- |  | -------- |  | ------- |  | ----------------
|For        |  | Against |  | Withheld |  | Abstain |  | Broker Non-Votes
|21,267,725 |  | 7,500   |  |         |  | 7,354   |  |                



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

None.



|ITEM 6. | EXHIBITS
|------- | --------



|           |  |                                                                                                                                                      
|---------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No |  | Exhibits                                                                                                                                             
|           | 
|31.1       |  | Certification Pursuant to Rule 13(a)-14(a) of the Securities and Exchange Act as amended, as Pursuant toSection 302 of the Sarbanes-Oxley Act of 2002
|           | 
|31.2       |  | Certification Pursuant to Rule 13(a)-14(a) of the Securities and Exchange Act as amended, as Pursuant toSection 302 of the Sarbanes-Oxley Act of 2002
|           | 
|32.1       |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                               
|           | 
|32.2       |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                               



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##### Table of Contents

SIGNATURES

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



|                   |  |  |  |                                             
|------------------ |  |  |  | --------------------------------------------
|Date: May 11, 2009 |  |  |  | VIRAGE LOGIC CORPORATION                    
|                   |  | 
|                   |  |  |  | /s/ Alexander Shubat                        
|                   |  |  |  | Dr. Alexander Shubat                        
|                   |  |  |  | President and Chief Executive Officer       
|                   |  | 
|                   |  |  |  | /s/ Brian Sereda                            
|                   |  |  |  | Brian Sereda                                
|                   |  |  |  | Chief Financial Officer                     
|                   |  |  |  | (Principal Financial and Accounting Officer)



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##### Table of Contents

EXHIBIT INDEX



|     |  |                                                                                                                                                       
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|31.1 |  | Certification Pursuant to Rule 13(a)-14(a) of the Securities and Exchange Act as amended, as Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|     | 
|31.2 |  | Certification Pursuant to Rule 13(a)-14(a) of the Securities and Exchange Act as amended, as Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|     | 
|32.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                
|     | 
|32.2 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                



30