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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q/A

(Amendment
No. 1)





(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, 2008

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 is
a large accelerated filer, an accelerated filer, or 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.



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

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

As of May 7, 2008, there were 23,512,256 shares of the Registrants Common Stock outstanding.









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EXPLANATORY NOTE FOR AMENDMENT

This Amendment No. 1 (the Amendment) to our Quarterly Report on Form-10Q for the quarter ended March 31, 2008, as originally filed
on May 12, 2008 (the Report), amends solely Part I, Item 1 of the Report to correct a typographical error to the balance sheet resulting in an understatement of $3.0 million in the additional paid in capital line This error has
been corrected in the Amendment and does not alter or affect any other part or any other information originally set forth in the Report.



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VIRAGE LOGIC CORPORATION

FORM 10-Q/A

INDEX



|              |  |                                                                                                                          |  |     
|------------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | ----
|              |  |                                                                                                                          |  | PAGE
|              |  | Part I. Financial Information                                                                                            |  |     
|Item 1.       |  | Financial Statements                                                                                                     |  | 4   
|              |  |                                                                                                                         
|              |  | Unaudited Condensed Consolidated Balance Sheets  March 31, 2008 and September 30, 2007                                  |  | 4   
|              |  |                                                                                                                         
|              |  | Unaudited Condensed Consolidated Statements of Operations  Three and Six Months Ended March 31, 2008 and March 31, 2007 |  | 5   
|              |  |                                                                                                                         
|              |  | Unaudited Condensed Consolidated Statements of Cash Flows  Six Months Ended March 31, 2008 and March 31, 2007           |  | 6   
|              |  |                                                                                                                         
|              |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                           |  | 7   
|              |  |                                                                                                                         
|Item 6.       |  | Exhibits                                                                                                                 |  | 16  
|              | 
|Signatures    |  | 17                                                                                                                      
|              | 
|Exhibit Index |  | 18                                                                                                                      



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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 31,2008 |         |   | September 30,2007 |  
|ASSETS                                                                                                                                                                              |  |               |         |   |                   |   |         |  
|Current assets:                                                                                                                                                                     |  |               |         |   |                   |   |         |  
|Cash and cash equivalents                                                                                                                                                           |  | $             | 22,566  |   |                   | $ | 14,820  |  
|Short-term investments                                                                                                                                                              |  |               | 33,242  |   |                   |   | 42,840  |  
|Accounts receivable, net                                                                                                                                                            |  |               | 15,271  |   |                   |   | 12,170  |  
|Costs in excess of related billings on uncompleted contracts                                                                                                                        |  |               | 1,112   |   |                   |   | 1,134   |  
|Current deferred tax assets                                                                                                                                                         |  |               | 1,938   |   |                   |   | 1,939   |  
|Prepaid expenses and other                                                                                                                                                          |  |               | 3,634   |   |                   |   | 4,766   |  
|Taxes receivable                                                                                                                                                                    |  |               | 2,565   |   |                   |   | 2,320   |  
|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|Total current assets                                                                                                                                                                |  |               | 80,328  |   |                   |   | 79,989  |  
|Property, equipment and leasehold improvements, net                                                                                                                                 |  |               | 3,785   |   |                   |   | 3,643   |  
|Goodwill                                                                                                                                                                            |  |               | 11,369  |   |                   |   | 11,355  |  
|Other intangible assets, net                                                                                                                                                        |  |               | 2,336   |   |                   |   | 2,705   |  
|Deferred tax assets                                                                                                                                                                 |  |               | 13,873  |   |                   |   | 13,178  |  
|Long-term investments in marketable securities                                                                                                                                      |  |               | 20,628  |   |                   |   | 17,528  |  
|Other long-term assets                                                                                                                                                              |  |               | 301     |   |                   |   | 473     |  
|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|Total assets                                                                                                                                                                        |  | $             | 132,620 |   |                   | $ | 128,871 |  
|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                |  |               |         |   |                   |   |         |  
|Current liabilities:                                                                                                                                                                |  |               |         |   |                   |   |         |  
|Accounts payable                                                                                                                                                                    |  | $             | 626     |   |                   | $ | 1,027   |  
|Accrued expenses                                                                                                                                                                    |  |               | 4,565   |   |                   |   | 4,659   |  
|Deferred revenue                                                                                                                                                                    |  |               | 8,738   |   |                   |   | 8,996   |  
|Income taxes payable                                                                                                                                                                |  |               | 2,834   |   |                   |   | 2,992   |  
|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|Total current liabilities                                                                                                                                                           |  |               | 16,763  |   |                   |   | 17,674  |  
|Deferred tax liabilities                                                                                                                                                            |  |               | 978     |   |                   |   | 978     |  
|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|Total liabilities                                                                                                                                                                   |  |               | 17,741  |   |                   |   | 18,652  |  
|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|Commitments and contingencies (Note 6)                                                                                                                                              |  |               |         |   |                   |   |         |  
|Stockholders equity:                                                                                                                                                               |  |               |         |   |                   |   |         |  
|Common stock, $.001 par value; Authorized shares  150,000,000; issued and outstanding shares  23,512,256 and 23,190,857 as of
March 31, 2008 and September 30, 2007, respectively |  |               | 24      |   |                   |   | 23      |  
|Additional paid-in capital                                                                                                                                                          |  |               | 138,598 |   |                   |   | 135,926 |  
|Accumulated other comprehensive income                                                                                                                                              |  |               | 1,272   |   |                   |   | 1,009   |  
|Accumulated deficit                                                                                                                                                                 |  |               | (25,015 | ) |                   |   | (26,739 | )
|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|Total stockholders equity                                                                                                                                                          |  |               | 114,879 |   |                   |   | 110,219 |  
|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|Total liabilities and stockholders equity                                                                                                                                          |  | $             | 132,620 |   |                   | $ | 128,871 |  
|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  

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 OPERATIONS

(In thousands, except share and per share amounts)



|                                                             |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------ |  | --------------------------- | ------ | - | ------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                             |  | Three Months EndedMarch 31, |        |   | Six Months EndedMarch 31, |  
|                                                             |  | 2008                        |        |   | 2007                      |   |        | 2008 |  |   | 2007   |  
|Revenues:                                                    |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|License                                                      |  | $                           | 12,113 |   |                           | $ | 7,804  |      |  | $ | 22,874 |   |  | $ | 16,226 |  
|Royalties                                                    |  |                             | 2,576  |   |                           |   | 2,763  |      |  |   | 5,875  |   |  |   | 5,866  |  
|                                                             |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Total revenues                                               |  |                             | 14,689 |   |                           |   | 10,567 |      |  |   | 28,749 |   |  |   | 22,092 |  
|                                                             |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Costs and expenses:                                          |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Cost of revenues                                             |  |                             | 3,121  |   |                           |   | 3,376  |      |  |   | 5,568  |   |  |   | 7,103  |  
|Research and development                                     |  |                             | 6,175  |   |                           |   | 4,823  |      |  |   | 12,033 |   |  |   | 9,900  |  
|Sales and marketing                                          |  |                             | 3,864  |   |                           |   | 3,763  |      |  |   | 7,457  |   |  |   | 7,417  |  
|General and administrative                                   |  |                             | 2,111  |   |                           |   | 2,418  |      |  |   | 3,886  |   |  |   | 5,082  |  
|Restructuring charges                                        |  |                             |       |   |                           |   |       |      |  |   | (3     | ) |  |   |       |  
|                                                             |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Total costs and expenses                                     |  |                             | 15,271 |   |                           |   | 14,380 |      |  |   | 28,941 |   |  |   | 29,502 |  
|                                                             |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Operating loss                                               |  |                             | (582   | ) |                           |   | (3,813 | )    |  |   | (192   | ) |  |   | (7,410 | )
|Interest income and other income (expenses), net             |  |                             | 767    |   |                           |   | 974    |      |  |   | 1,934  |   |  |   | 1,917  |  
|                                                             |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Income (loss) before income taxes                            |  |                             | 185    |   |                           |   | (2,839 | )    |  |   | 1,742  |   |  |   | (5,493 | )
|Income tax (benefit) provision                               |  |                             | (447   | ) |                           |   | (1,062 | )    |  |   | 18     |   |  |   | (2,500 | )
|                                                             |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Net income (loss)                                            |  | $                           | 632    |   |                           | $ | (1,777 | )    |  | $ | 1,724  |   |  | $ | (2,993 | )
|                                                             |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Net income (loss) per share:                                 |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Basic                                                        |  | $                           | 0.03   |   |                           | $ | (0.08  | )    |  | $ | 0.07   |   |  | $ | (0.13  | )
|                                                             |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Diluted                                                      |  | $                           | 0.03   |   |                           | $ | (0.08  | )    |  | $ | 0.07   |   |  | $ | (0.13  | )
|                                                             |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Weighted average shares used in computing per share amounts: |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Basic                                                        |  |                             | 23,494 |   |                           |   | 23,073 |      |  |   | 23,466 |   |  |   | 23,080 |  
|                                                             |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Diluted                                                      |  |                             | 23,723 |   |                           |   | 23,073 |      |  |   | 23,730 |   |  |   | 23,080 |  
|                                                             |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  

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 Ended |        
|                                                                                         |  | March 31,2008    |         |   | March 31,2007 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |  |                  |         |   |               |   |         |  
|Net income (loss)                                                                        |  | $                | 1,724   |   |               | $ | (2,993  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                  |         |   |               |   |         |  
|Depreciation and amortization                                                            |  |                  | 720     |   |               |   | 936     |  
|Amortization of intangible assets                                                        |  |                  | 369     |   |               |   | 193     |  
|Stock-based compensation                                                                 |  |                  | 1,445   |   |               |   | 2,633   |  
|Changes in operating assets and liabilities:                                             |  |                  |         |   |               |   |         |  
|Accounts receivable                                                                      |  |                  | (3,102  | ) |               |   | 4,086   |  
|Costs in excess of related billings on uncompleted contracts                             |  |                  | (11     | ) |               |   | (41     | )
|Prepaid expenses and other assets                                                        |  |                  | 1,124   |   |               |   | (244    | )
|Taxes receivable                                                                         |  |                  | (244    | ) |               |   | (191    | )
|Deferred tax assets                                                                      |  |                  | (695    | ) |               |   | (2,950  | )
|Other long-term assets                                                                   |  |                  | 173     |   |               |   | (241    | )
|Accounts payable and accrued liabilities                                                 |  |                  | (689    | ) |               |   | (963    | )
|Deferred revenue                                                                         |  |                  | (259    | ) |               |   | (1,093  | )
|Income taxes payable                                                                     |  |                  | (159    | ) |               |   | (2      | )
|                                                                                         |  |                  |         |   |               |   |         |  
|Net cash provided by (used in) operating activities                                      |  |                  | 396     |   |               |   | (870    | )
|                                                                                         |  |                  |         |   |               |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |  |                  |         |   |               |   |         |  
|Purchase of property, equipment and leasehold improvements                               |  |                  | (626    | ) |               |   | (111    | )
|Purchase of investments                                                                  |  |                  | (59,002 | ) |               |   | (59,087 | )
|Proceeds from maturities of investments                                                  |  |                  | 65,661  |   |               |   | 44,783  |  
|                                                                                         |  |                  |         |   |               |   |         |  
|Net cash provided by (used in) investing activities                                      |  |                  | 6,033   |   |               |   | (14,415 | )
|                                                                                         |  |                  |         |   |               |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |  |                  |         |   |               |   |         |  
|Net proceeds from issuance of common stock                                               |  |                  | 1,423   |   |               |   | 611     |  
|                                                                                         |  |                  |         |   |               |   |         |  
|Net cash provided by financing activities                                                |  |                  | 1,423   |   |               |   | 611     |  
|                                                                                         |  |                  |         |   |               |   |         |  
|Effect of exchange rates on cash                                                         |  |                  | (106    | ) |               |   | 105     |  
|                                                                                         |  |                  |         |   |               |   |         |  
|Net increase (decrease) in cash and cash equivalents                                     |  |                  | 7,746   |   |               |   | (14,569 | )
|Cash and cash equivalents at beginning of period                                         |  |                  | 14,820  |   |               |   | 20,815  |  
|                                                                                         |  |                  |         |   |               |   |         |  
|Cash and cash equivalents at end of period                                               |  | $                | 22,566  |   |               | $ | 6,246   |  
|                                                                                         |  |                  |         |   |               |   |         |  

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 (the Company) was incorporated in California in November 1995 and subsequently reincorporated in Delaware in July 2000. The Company provides
semiconductor intellectual property (IP) platforms based on memory, logic, and I/Os (input/output interface components). 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, and automotive 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, 2007 contained in the Companys 2007 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 six months ended March 31, 2008 are not
necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending September 30, 2008.

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, Germany, India, Israel, Japan and the United
Kingdom. All intercompany balances and transactions have been eliminated upon consolidation.

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 remeasuring local currencies to the U.S. dollar are recorded in the consolidated statements of operations. The net transaction gains and losses recorded in the consolidated statements of operations
were not significant in the periods presented.

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 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 during the application development stage. In accordance
with SOP 98-1, the Company purchased and capitalized costs of approximately $0 and $48,000 during the six months ended March 31, 2008, and 2007, respectively. Software is amortized for financial reporting purposes using the straight-line method
over the estimated useful life of three years.

Revenue Recognition

The Companys revenue recognition policy is based on the American Institute of Certified Public Accountants Statement of Position 97-2, Software Revenue Recognitionas amended by Statement of
Position 98-4 and Statement of Position 98-9.



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Additionally, revenue is recognized on some of our products, according to Statement of Position 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 are 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 our 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 Statement of Position 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 projects
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 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.

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



8



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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 our 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s financial instruments, including cash equivalents, accounts receivable and accounts payable are recorded at cost, which approximates their fair value
because of the short-term maturity of these instruments.

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, 2008 and 2007 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, 2008 and 2007, 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 and federal agency bonds of $20.6 million and $17.5 million with maturity dates greater than one year for the fiscal quarter ended March 31, 2008 and fiscal year ended September 30, 2007, respectively.

Goodwill and Intangible Assets

Goodwill

In accordance with Statement of Financial Accounting Standards (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. A significant impairment could have a material adverse effect on the Companys financial position and
results of operations. No impairment charge or amortization of goodwill was recorded during fiscal year 2007 or 2008.

Acquired Intangible Assets

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



|                               |  |                |       |                         |   |        |       |  |             |       |                         |   |       |       |   |        |   |  |   |      
|------------------------------ |  | -------------- | ----- | ----------------------- | - | ------ | ----- |  | ----------- | ----- | ----------------------- | - | ----- | ----- | - | ------ | - |  | - | -----
|                               |  | March 31, 2008 |       | September 30, 2007     
|                               |  | GrossAmount    |       | AccumulatedAmortization |   |        | Total |  | GrossAmount |       | AccumulatedAmortization |   |       | Total
|Amortized intangible assets:   |  |                |       |                         |   |        |       |  |             |       |                         |   |       |       |   |        |   |  |   |      
|Patents                        |  | $              | 3,500 |                         | $ | (2,192 | )     |  | $           | 1,308 |                         | $ | 3,500 |       | $ | (2,035 | ) |  | $ | 1,465
|Customer lists                 |  |                | 300   |                         |   | (44    | )     |  |             | 256   |                         |   | 300   |       |   | (5     | ) |  |   | 295  
|Technology                     |  |                | 800   |                         |   | (116   | )     |  |             | 684   |                         |   | 800   |       |   | (17    | ) |  |   | 783  
|                               |  |                |       |                         |   |        |       |  |             |       |                         |   |       |       |   |        |   |  |   |      
|                               |  |                | 4,600 |                         |   | (2,352 | )     |  |             | 2,248 |                         |   | 4,600 |       |   | (2,057 | ) |  |   | 2,543
|Unamortized intangible assets: |  |                |       |                         |   |        |       |  |             |       |                         |   |       |       |   |        |   |  |   |      
|Workforce                      |  |                | 269   |                         |   | (269   | )     |  |             |      |                         |   | 269   |       |   | (202   | ) |  |   | 67   
|Customer lists                 |  |                | 27    |                         |   | (27    | )     |  |             |      |                         |   | 27    |       |   | (20    | ) |  |   | 7    
|Other                          |  |                | 353   |                         |   | (265   | )     |  |             | 88    |                         |   | 353   |       |   | (265   | ) |  |   | 88   
|                               |  |                |       |                         |   |        |       |  |             |       |                         |   |       |       |   |        |   |  |   |      
|Total (*)                      |  | $              | 5,249 |                         | $ | (2,913 | )     |  | $           | 2,336 |                         | $ | 5,249 |       | $ | (2,544 | ) |  | $ | 2,705
|                               |  |                |       |                         |   |        |       |  |             |       |                         |   |       |       |   |        |   |  |   |      



|* | Intangible assets include approximately $88,000 related to customer lists which are no longer amortized in accordance with SFAS 142.
|- | ------------------------------------------------------------------------------------------------------------------------------------

The aggregate amortization expense related to acquired intangible assets totaled approximately $369,000 and $193,000 for the six months ended March 31, 2008 and
2007, respectively.



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



|                               |  |   |      
|------------------------------ |  | - | -----
|Estimated Amortization Expense |  |   |      
|2008                           |  | $ | 294  
|2009                           |  |   | 589  
|2010                           |  |   | 589  
|2011                           |  |   | 566  
|2012                           |  |   | 210  
|Thereafter                     |  |   |     
|                               |  |   |      
|Total                          |  | $ | 2,248
|                               |  |   |      

Stock-Based Compensation

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

As of October 1, 2005, we
adopted SFAS 123R, Share-Based Payment. We use the fair value method to apply the provisions of SFAS 123R with a modified prospective application which provides for certain changes to the method for valuing stock-based compensation. The
valuation provisions of SFAS 123R apply to new awards and to unvested awards that are outstanding on the effective date. Under the modified prospective application, prior periods are not revised for comparative purposes. Total SFAS 123R compensation
expense recognized for the three months ended March 31, 2008 and 2007 were $1.0 million and $1.2 million, respectively. As of March 31, 2008, total unrecognized estimated compensation expense related to non-vested stock options and stock
settled appreciation rights granted prior to that date was $7.3 million and will be amortized over a weighted average period of 2.6 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, 2008 and 2007 was as follows (in thousands, except per share data):



|                                                        |  |                                |       |   |                                |   |       |                              |  |   |                              |   |  |   |       |  
|------------------------------------------------------- |  | ------------------------------ | ----- | - | ------------------------------ | - | ----- | ---------------------------- |  | - | ---------------------------- | - |  | - | ----- | -
|                                                        |  | Three MonthsEndedMarch 31,2008 |       |   | Three MonthsEndedMarch 31,2007 |   |       | Six MonthsEndedMarch 31,2008 |  |   | Six MonthsEndedMarch 31,2007 |  
|Cost of revenue                                         |  | $                              | 177   |   |                                | $ | 240   |                              |  | $ | 279                          |   |  | $ | 478   |  
|Research and development                                |  |                                | 304   |   |                                |   | 285   |                              |  |   | 525                          |   |  |   | 617   |  
|Sales and marketing                                     |  |                                | 30    |   |                                |   | 255   |                              |  |   | 118                          |   |  |   | 635   |  
|General and administrative                              |  |                                | 518   |   |                                |   | 387   |                              |  |   | 523                          |   |  |   | 903   |  
|                                                        |  |                                |       |   |                                |   |       |                              |  |   |                              |   |  |   |       |  
|Stock-based compensation expense                        |  |                                | 1,029 |   |                                |   | 1,167 |                              |  |   | 1,445                        |   |  |   | 2,633 |  
|Related income tax benefits                             |  |                                | (376  | ) |                                |   | (286  | )                            |  |   | (528                         | ) |  |   | (626  | )
|                                                        |  |                                |       |   |                                |   |       |                              |  |   |                              |   |  |   |       |  
|Stock-based compensation expense, net of tax benefits   |  | $                              | 653   |   |                                | $ | 881   |                              |  | $ | 917                          |   |  | $ | 2,007 |  
|                                                        |  |                                |       |   |                                |   |       |                              |  |   |                              |   |  |   |       |  
|Net stock-based compensation expense, per common share: |  |                                |       |   |                                |   |       |                              |  |   |                              |   |  |   |       |  
|Basic                                                   |  | $                              | 0.03  |   |                                | $ | 0.04  |                              |  | $ | 0.04                         |   |  | $ | 0.09  |  
|                                                        |  |                                |       |   |                                |   |       |                              |  |   |                              |   |  |   |       |  
|Diluted                                                 |  | $                              | 0.03  |   |                                | $ | 0.04  |                              |  | $ | 0.04                         |   |  | $ | 0.09  |  
|                                                        |  |                                |       |   |                                |   |       |                              |  |   |                              |   |  |   |       |  

As of March 31, 2008 and 2007, the Company capitalized approximately $83,000 and $21,000, respectively, of
stock-based compensation expense related to our custom contracts which have not been completed.

The Company is using the Black-Scholes option pricing
model to value the compensation expense associated with our stock-based awards under SFAS 123R. In addition, the Company estimates forfeitures when recognizing compensation expense, and the Company will adjust our estimate of forfeitures over
the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through an adjustment in the period of change and will also
impact the amount of compensation expense to be recognized in future periods.



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



|                        |  |                    |   |  |                  |   |  |               |   |  |               |  
|----------------------- |  | ------------------ | - |  | ---------------- | - |  | ------------- | - |  | ------------- | -
|                        |  | Three Months Ended |   |  | Six Months Ended |  
|                        |  | March 31,2008      |   |  | March 31,2007    |   |  | March 31,2008 |   |  | March 31,2007 |  
|Volatility              |  | 44                 | % |  | 54               | % |  | 44            | % |  | 56            | %
|Risk-free interest rate |  | 2.2                | % |  | 4.5              | % |  | 3.3           | % |  | 4.6           | %
|Dividend yield          |  | 0.0                | % |  | 0.0              | % |  | 0.0           | % |  | 0.0           | %
|Expected life (years)   |  | 4.63 years         |   |  | 4.25 years       |   |  | 4.63 years    |   |  | 4.25 years    |  

The expected stock price volatility rates are based on historical volatilities of our 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 SSARS and option grants. 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 our historical exercise patterns. The Black-Scholes weighted average fair values of awards granted during the three and six months ended
March 31, 2008 were $2.66 and $3.38, respectively. The Black-Scholes weighted average fair values of awards granted during the three and six months ended March 31, 2007 were $4.04 and $4.24, respectively.

Restricted Stock Units

During the first quarter of fiscal
year 2007, the Company began issuing 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 and 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, 2008 and changes during the six months ended
March 31, 2008, is presented below:



|                                   |  |                        |   |  |                                        |     
|---------------------------------- |  | ---------------------- | - |  | -------------------------------------- | ----
|                                   |  | Restricted Stock Units
|                                   |  | Number ofshares        |   |  | Weighted-average grant-date fair value
|Nonvested as of September 30, 2007 |  | 155,120                |   |  | $                                      | 8.29
|RSU granted                        |  | 159,977                |   |  | $                                      | 7.24
|RSU vested                         |  | (58,870                | ) |  | $                                      | 8.55
|RSU canceled                       |  | (3,800                 | ) |  | $                                      | 8.76
|                                   |  |                        |   |  |                                        |     
|Nonvested as of March 31, 2008     |  | 252,427                |   |  | $                                      | 7.55
|                                   |  |                        |   |  |                                        |     

Stock-based compensation cost for restricted stock units for the six months ended March 31, 2008 was $0.3
million. As of March 31, 2008, the total unrecognized compensation cost net of forfeitures related to unvested awards not yet recognized is $1.5 million and is expected to be recognized over a period of 2.0 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. We continue to have awards outstanding under our 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 our 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 our common stock at the time of grant.



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Information with respect to the Equity Incentive Plans is summarized as follows:



|                                |  |                          |   |  |                                   |   |  |                               |     
|------------------------------- |  | ------------------------ | - |  | --------------------------------- | - |  | ----------------------------- | ----
|                                |  | SharesAvailablefor
Grant |   |  | Number ofOptions/SSARsOutstanding |   |  | WeightedAverageExercise Price
|Balance at September, 2007      |  | 971,061                  |   |  | 5,769,432                         |   |  | $                             | 9.46
|SSARs granted                   |  | (545,042                 | ) |  | 545,042                           |   |  | $                             | 8.36
|Restricted stock units granted  |  | (159,977                 | ) |  |                                  |   |  |                               |    
|Options and SSARs exercised     |  |                         |   |  | (282,893                          | ) |  | $                             | 5.03
|Options and SSARs canceled      |  | 241,502                  |   |  | (241,502                          | ) |  | $                             | 9.86
|Restricted stock units canceled |  | 3,800                    |   |  |                                  |   |  |                               |    
|Options expired (unissued)      |  | (71,326                  | ) |  |                                  |   |  |                               |    
|                                |  |                          |   |  |                                   |   |  |                               |     
|Balance at March 31, 2008       |  | 440,018                  |   |  | 5,790,079                         |   |  | $                             | 9.55
|                                |  |                          |   |  |                                   |   |  |                               |     

The following table summarizes information about stock options and SSARs outstanding and exercisable at
March 31, 2008:



|                                                 |  |                |  |                                         |  |                              |       |                         |   |                |  |                                         |  |                              |  |                         |       |  |   |    
|------------------------------------------------ |  | -------------- |  | --------------------------------------- |  | ---------------------------- | ----- | ----------------------- | - | -------------- |  | --------------------------------------- |  | ---------------------------- |  | ----------------------- | ----- |  | - | ---
|                                                 |  |                |  | Awards Outstanding                      |  | Awards Exercisable          
|Range of Exercise Prices                         |  | NumberofShares |  | WeightedAverageRemainingContractualLife |  | WeightedAverageExercisePrice |       | AggregateIntrinsicValue |   | NumberofShares |  | WeightedAverageRemainingContractualLife |  | WeightedAverageExercisePrice |  | AggregateIntrinsicValue
|                                                 |  |                |  | (In years)                              |  |                              |       | (In thousands)          |   |                |  | (In years)                              |  |                              |  | (In thousands)         
|$0.13 - $6.63                                    |  | 586,704        |  | 4.33                                    |  | $                            | 4.32  |                         | $ | 890            |  | 586,704                                 |  | 4.33                         |  | $                       | 4.31  |  | $ | 890
|$6.70 - $7.11                                    |  | 625,600        |  | 9.50                                    |  | $                            | 7.04  |                         | $ |               |  | 2,333                                   |  | 6.10                         |  | $                       | 6.71  |  | $ |   
|$7.25 - $7.81                                    |  | 807,073        |  | 8.59                                    |  | $                            | 7.65  |                         | $ |               |  | 377,133                                 |  | 8.54                         |  | $                       | 7.63  |  | $ |   
|$7.84 - $8.45                                    |  | 709,928        |  | 9.28                                    |  | $                            | 8.21  |                         | $ |               |  | 141,268                                 |  | 8.42                         |  | $                       | 7.90  |  | $ |   
|$8.63 - $8.87                                    |  | 654,016        |  | 7.51                                    |  | $                            | 8.75  |                         | $ |               |  | 427,310                                 |  | 6.83                         |  | $                       | 8.71  |  | $ |   
|$8.91 - $10.11                                   |  | 609,822        |  | 6.59                                    |  | $                            | 9.44  |                         | $ |               |  | 497,697                                 |  | 6.09                         |  | $                       | 9.49  |  | $ |   
|$10.13 - $11.62                                  |  | 579,336        |  | 6.61                                    |  | $                            | 10.71 |                         | $ |               |  | 552,248                                 |  | 6.56                         |  | $                       | 10.70 |  | $ |   
|$11.64 - $16.11                                  |  | 976,550        |  | 4.31                                    |  | $                            | 14.91 |                         | $ |               |  | 968,076                                 |  | 4.29                         |  | $                       | 14.91 |  | $ |   
|$16.55 - $22.37                                  |  | 240,800        |  | 4.18                                    |  | $                            | 17.05 |                         | $ |               |  | 233,967                                 |  | 4.10                         |  | $                       | 17.05 |  | $ |   
|$22.81 - $22.81                                  |  | 250            |  | 4.03                                    |  | $                            | 22.81 |                         | $ |               |  | 250                                     |  | 4.03                         |  | $                       | 22.81 |  | $ |   
|                                                 |  |                |  |                                         |  |                              |       |                         |   |                |  |                                         |  |                              |  |                         |       |  |   |    
|Total                                            |  | 5,790,079      |  | 6.90                                    |  | $                            | 9.55  |                         | $ | 890            |  | 3,786,986                               |  | 5.71                         |  | $                       | 10.54 |  | $ | 890
|                                                 |  |                |  |                                         |  |                              |       |                         |   |                |  |                                         |  |                              |  |                         |       |  |   |    
|Vested and expected to vest as of March 31, 2008 |  | 5,485,560      |  | 5.98                                    |  | $                            | 9.64  |                         | $ | 890            |  |                                         |  |                              |  |                         |       |  |   |    
|                                                 |  |                |  |                                         |  |                              |       |                         |   |                |  |                                         |  |                              |  |                         |       |  |   |    

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on the
Companys closing stock price of $5.76 as of March 31, 2008 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, 2008 and 2007 was 0.5 million and 0.7 million, respectively.

The total fair value of shares vested during the six months ended
March 31, 2008 and 2007 were $2.1 million. The total intrinsic value of options exercised during the six month periods ended March 31, 2008 and 2007 was $0.8 million and $0.3 million, respectively. The total cash received from employees as
a result of employee stock option exercises during the six months ended March 31, 2008 and 2007 was approximately $1.4 million and $0.5 million.



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##### Table of Contents

A summary of the status of the Companys nonvested shares as of March 31, 2008 and changes during the six
months ended March 31, 2008, is presented below:



|                                   |  |                 |   |  |                                        |     
|---------------------------------- |  | --------------- | - |  | -------------------------------------- | ----
|                                   |  | Awards         
|                                   |  | Number ofshares |   |  | Weighted-average grant-date fair value
|Nonvested as of September 30, 2007 |  | 2,307,261       |   |  | $                                      | 3.70
|Awards granted                     |  | 545,042         |   |  | $                                      | 3.38
|Awards vested                      |  | (432,918        | ) |  | $                                      | 4.56
|Awards canceled                    |  | (241,502        | ) |  | $                                      | 3.87
|                                   |  |                 |   |  |                                        |     
|Nonvested as of March 31, 2008     |  | 2,177,883       |   |  | $                                      | 3.30
|                                   |  |                 |   |  |                                        |     

NOTE 2  NET INCOME (LOSS) PER SHARE

Basic and diluted net income (loss) per share is presented in conformity with Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS No. 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, |       
|                                                             |  | 2008                        |        | 2007 |                           |        | 2008 |  | 2007 |       
|Net income (loss)                                            |  | $                           | 632    |      | $                         | (1,777 | )    |  | $    | 1,724  |  | $ | (2,993 | )
|                                                             |  |                             |        |      |                           |        |      |  |      |        |  |   |        |  
|Shares used in computation:                                  |  |                             |        |      |                           |        |      |  |      |        |  |   |        |  
|Shares used in computing basic net income (loss) per share   |  |                             | 23,494 |      |                           | 23,073 |      |  |      | 23,466 |  |   | 23,080 |  
|Add:Effect of potentially diluted securities                 |  |                             | 229    |      |                           |       |      |  |      | 264    |  |   |       |  
|                                                             |  |                             |        |      |                           |        |      |  |      |        |  |   |        |  
|Shares used in computing diluted net income (loss) per share |  |                             | 23,723 |      |                           | 23,073 |      |  |      | 23,730 |  |   | 23,080 |  
|                                                             |  |                             |        |      |                           |        |      |  |      |        |  |   |        |  
|Basic net income (loss) per share                            |  | $                           | 0.03   |      | $                         | (0.08  | )    |  | $    | 0.07   |  | $ | (0.13  | )
|                                                             |  |                             |        |      |                           |        |      |  |      |        |  |   |        |  
|Diluted net income (loss) per share                          |  | $                           | 0.03   |      | $                         | (0.08  | )    |  | $    | 0.07   |  | $ | (0.13  | )
|                                                             |  |                             |        |      |                           |        |      |  |      |        |  |   |        |  

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

NOTE 3  COMPREHENSIVE INCOME
(LOSS)

Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS No. 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.



13



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##### Table of Contents

Total comprehensive income (loss) for the three and six month periods ended March 31, 2008 and 2007, respectively,
is as follows:



|                                                             |  |                             |     |   |                           |   |        |      |  |      |       |  |   |        |  
|------------------------------------------------------------ |  | --------------------------- | --- | - | ------------------------- | - | ------ | ---- |  | ---- | ----- |  | - | ------ | -
|                                                             |  | Three Months EndedMarch 31, |     |   | Six Months EndedMarch 31, |  
|                                                             |  | 2008                        |     |   | 2007                      |   |        | 2008 |  | 2007 |      
|Net income (loss)                                            |  | $                           | 632 |   |                           | $ | (1,777 | )    |  | $    | 1,724 |  | $ | (2,993 | )
|Foreign currency translation adjustments, net of tax         |  |                             | (6  | ) |                           |   | (38    | )    |  |      | 92    |  |   | (174   | )
|Changes in unrealized gain (loss) on investments, net of tax |  |                             | 76  |   |                           |   | (5     | )    |  |      | 171   |  |   | (4     | )
|                                                             |  |                             |     |   |                           |   |        |      |  |      |       |  |   |        |  
|Comprehensive income (loss), net of tax                      |  | $                           | 702 |   |                           | $ | (1,820 | )    |  | $    | 1,987 |  | $ | (3,171 | )
|                                                             |  |                             |     |   |                           |   |        |      |  |      |       |  |   |        |  

NOTE 4  SEGMENT INFORMATION

The Company operates in one industry segment, the sale of semiconductor IP platforms based on memory, logic, and I/Os, and the sale of the individual platform components and has one reportable segment.

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,
|                                                        |  | 2008                        |        | 2007                      |   | 2008   |  | 2007
|Total Revenue by Geography                              |  |                             |        |                           |   |        |  |      |        |  |   |       
|United States                                           |  | $                           | 5,460  |                           | $ | 3,276  |  | $    | 11,669 |  | $ | 7,658 
|Canada                                                  |  |                             | 145    |                           |   | 418    |  |      | 1,111  |  |   | 922   
|Japan                                                   |  |                             | 943    |                           |   | 254    |  |      | 1,141  |  |   | 738   
|Taiwan                                                  |  |                             | 2,349  |                           |   | 3,101  |  |      | 4,579  |  |   | 5,741 
|Europe, Middle East and Africa (EMEA)                   |  |                             | 2,465  |                           |   | 2,505  |  |      | 5,065  |  |   | 5,238 
|Other Asia (China, Malaysia, South Korea and Singapore) |  |                             | 3,327  |                           |   | 1,013  |  |      | 5,184  |  |   | 1,795 
|                                                        |  |                             |        |                           |   |        |  |      |        |  |   |       
|Total                                                   |  | $                           | 14,689 |                           | $ | 10,567 |  | $    | 28,749 |  | $ | 22,092
|                                                        |  |                             |        |                           |   |        |  |      |        |  |   |       

Total license revenues by process node are as follows:



|                                      |  |                             |   |  |                           |   |  |      |   |  |      |  
|------------------------------------- |  | --------------------------- | - |  | ------------------------- | - |  | ---- | - |  | ---- | -
|                                      |  | Three Months EndedMarch 31, |   |  | Six Months EndedMarch 31, |  
|                                      |  | 2008                        |   |  | 2007                      |   |  | 2008 |   |  | 2007 |  
|Total License Revenue by Process Node |  |                             |   |  |                           |   |  |      |   |  |      |  
|45 Nanometer technology               |  | 12                          | % |  |                          | % |  | 11   | % |  |     | %
|65 Nanometer technology               |  | 37                          |   |  | 13                        |   |  | 37   |   |  | 7    |  
|90 Nanometer technology               |  | 22                          |   |  | 27                        |   |  | 22   |   |  | 32   |  
|0.13 Micron technology                |  | 15                          |   |  | 38                        |   |  | 16   |   |  | 39   |  
|0.18 Micron technology                |  | 5                           |   |  | 11                        |   |  | 4    |   |  | 14   |  
|Other                                 |  | 9                           |   |  | 11                        |   |  | 10   |   |  | 8    |  
|                                      |  |                             |   |  |                           |   |  |      |   |  |      |  
|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 Armenian building and
leasehold improvements are valued at cost less accumulated depreciation and amortization and amounted to approximately $2.4 million and $2.2 million as of March 31, 2008 and 2007, respectively.

NOTE 5  RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006,
the FASB issued FASB Statement No. 157, Fair Value Measurements, or SFAS 157. The standard provides guidance for using fair value to measure assets and liabilities. The standard also responds to investors requests for expanded
information about the extent to which the company measures assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. The standard applies whenever other standards require
or permit assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances. SFAS 157 must be adopted prospectively as of the beginning of the year it is initially applied.
SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are still evaluating the impact this standard will have on our financial position
or results of operations.



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In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities, (SFAS 159). SFAS 159 permits companies to choose to measure certain financial instruments and certain other items at fair value. The standard requires that unrealized gains and losses on items for which the
fair value option has been elected be reported in earnings. SFAS 159 is effective for financial statements issued beginning in the first quarter of fiscal year 2009, although earlier adoption is permitted. We are currently evaluating what impact
this standard will have on our financial position or results of operations.

In December 2007, the FASB issued FASB Statement No. 141 (revised
2007) (SFAS 141R), Business Combinations and FASB Statement 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 recharacterized 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. We are currently evaluating the impact SFAS 141R and SFAS 160 will have on our financial position or results of operations.

NOTE 6  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 no history of claims and accordingly, no liabilities have been recorded for indemnification under these agreements as of March 31, 2008.

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, 2008. 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 7 
INCOME TAXES

Effective October 1, 2007, the Company adopted FASB Interpretation, or FIN, No. 48, Accounting for Uncertainty of Income
Taxes, as amended. FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. This interpretation
prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN No. 48 also provides guidance on derecognition of tax
benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure and transition. FIN No. 48 utilizes a two-step approach for evaluating uncertain tax position accounted for in accordance with SFAS
No. 109, Accounting for Income Taxes (SFAS No. 109). Step one, Recognition, requires a company to determine if the weight of available evidence indicates that a tax position is more likely than not to be sustained upon
audit, including resolution of related appeals or litigation processes, if any. Step two, Measurement, is based on the largest amount of benefit, which is more likely than not to be realized on ultimate settlement. The cumulative effect of
adopting FIN No. 48 on October 1, 2007 is recognized as a change in accounting principle, recorded as an adjustment to the opening balance of retained earnings on the adoption date.

As a result of the implementation of FIN No. 48, the Company recognized no change in the liability for unrecognized tax benefits related to tax positions taken in
prior periods. All positions taken in the Companys United States tax return with respect to any book-tax adjustments were highly certain; and accordingly, no reserves have been booked. Upon adoption of FIN No. 48, the Companys
policy to include interest and penalties related to unrecognized tax benefits within the Companys provision for (benefit from) income taxes did not change. As of March 31, 2008, the Company had not accrued any reserve for payment of
interest and penalties related to unrecognized tax benefits as any adjustments would be offset by additional credits and NOLs.

The Companys total
unrecognized tax benefits as of October 1, 2007 (adoption date) amounted to $2.3 million. All of this amount would affect the Companys future tax rate if recognized. The Company remains subject to tax examination in the United States from
1999 to 2007 and in our foreign jurisdictions ranging from 2001 to 2007.



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|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 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                                



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SIGNATURES

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



|                    |  |  |  |                                             
|------------------- |  |  |  | --------------------------------------------
|Date: June 12, 2008 |  |  |  | VIRAGE LOGIC CORPORATION                    
|                    |  | 
|                    |  |  |  | /s/ J. Daniel McCranie                      
|                    |  |  |  | J. Daniel McCranie                          
|                    |  |  |  | President and Chief Executive Officer       
|                    |  | 
|                    |  |  |  | /s/ Christine Russell                       
|                    |  |  |  | CHRISTINE RUSSELL                           
|                    |  |  |  | Chief Financial Officer                     
|                    |  |  |  | (Principal Financial and Accounting Officer)



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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                                



18