----

----

----

----

| R      | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                                                                                                                                                                                                         |   |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   |                                                                                                                                                                                                                                                                                                                                                            |   |
|   | For the Quarterly Period ended June 30, 2011                                                                                                                                                                                                                                                                                                                    |   |
|   |                                                                                                                                                                                                                                                                                                                                                            |   |
|   | or                                                                                                                                                                                                                                                                                                                                                              |   |
|   |                                                                                                                                                                                                                                                                                                                                                            |   |
| £ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                                                                                                                                                                                                        |   |
|   |                                                                                                                                                                                                                                                                                                                                                            |   |
|   | For the transition period from                                 to                      |   |

----

| Delaware                                 | 25-1701361          |
|------------------------------------------|---------------------|
| (State or Other Jurisdiction of          | (I.R.S. Employer    |
| Incorporation or Organization)           | Identification No.) |
|                                     |                |
| 333 West San Carlos Street, Suite 700    |                |
| San Jose, California                     | 95110               |
| (Address of Principal Executive Offices) | (Zip Code)          |

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

----

----

----

|                                                                                                | Page   |
|-----------------------------------------------------------------------------------------------------|--------|
| PART I  FINANCIAL INFORMATION                                                             |   |
| Item 1. Financial Statements (Unaudited)                                                            |   |
| Condensed Consolidated Balance Sheets                                                               | 3      |
| Condensed Consolidated Statements of Operations                                                     | 4      |
| Condensed Consolidated Statements of Cash Flows                                                     | 5      |
| Notes to Condensed Consolidated Financial Statements                                                | 6      |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18     |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk                                  | 28     |
| Item 4. Controls and Procedures                                                                     | 28     |
| PART II  OTHER INFORMATION                                                                |   |
| Item 1. Legal Proceedings                                                                           | 29     |
| Item 1A. Risk Factors                                                                               | 30     |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                 | 30     |
| Item 3. Defaults Upon Senior Securities                                                             | 30     |
| Item 4. (Removed and Reserved)                                                                      | 30     |
| Item 5. Other Information                                                                           | 30     |
| Item 6. Exhibits                                                                                    | 31     |
| SIGNATURES                                                                                          | 32     |
| INDEX TO EXHIBITS                                                                                   | 33     |

----

|                                                                                                                                                     |   | June 30,2011 |     |   | December 31,2010 (*) |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|----------|--------|----------------------|--------|
| ASSETS                                                                                                                                                        |   |         |     |   |                 |   |
| Current assets:                                                                                                                                               |   |         |     |   |                 |   |
| Cash and cash equivalents                                                                                                                                     |   | $            | 41,712   |   |                 | $      | 38,154 |   |
| Accounts receivable, net of allowance of $254 in both 2011 and 2010                                                                                           |   |         | 22,176   |   |                 |   | 23,442 |   |
| Prepaid expenses and other current assets                                                                                                                     |   |         | 3,869    |   |                 |   | 3,246 |   |
| Total current assets                                                                                                                                          |   |         | 67,757   |   |                 |   | 64,842 |   |
| Non-current investments                                                                                                                                       |   |         | 718      |   |                 |   | 718 |   |
| Property and equipment, net                                                                                                                                   |   |         | 820      |   |                 |   | 797 |   |
| Intangible assets, net                                                                                                                                        |   |         | 954      |   |                 |   | 1,369 |   |
| Other non-current assets                                                                                                                                      |   |         | 685      |   |                 |   | 727 |   |
| Total assets                                                                                                                                                  |   | $            | 70,934   |   |                 | $      | 68,453 |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                    |   |         |     |   |                 |   |   |   |
| Current liabilities:                                                                                                                                          |   |         |     |   |                 |   |   |   |
| Accounts payable                                                                                                                                              |   | $            | 1,155    |   |                 | $      | 1,080 |   |
| Accrued compensation and related benefits                                                                                                                     |   |         | 4,749    |   |                 |   | 3,964 |   |
| Accrued and other current liabilities                                                                                                                         |   |         | 3,066    |   |                 |   | 2,636 |   |
| Deferred revenues                                                                                                                                             |   |         | 2,824    |   |                 |   | 3,021 |   |
| Billings in excess of recognized revenues                                                                                                                     |   |         | 2,010    |   |                 |   | 1,802 |   |
| Current portion of debt obligations                                                                                                                           |   |         | 59       |   |                 |   | 108 |   |
| Total current liabilities                                                                                                                                     |   |         | 13,863   |   |                 |   | 12,611 |   |
| Long-term income taxes payable                                                                                                                                |   |         | 3,397    |   |                 |   | 3,668 |   |
| Other non-current liabilities                                                                                                                                 |   |         | 980      |   |                 |   | 1,259 |   |
| Total liabilities                                                                                                                                             |   |         | 18,240   |   |                 |   | 17,538 |   |
| Commitments and contingencies (Note 14)                                                                                                                       |   |         |     |   |                 |   |   |   |
| Stockholders’ equity:                                                                                                                                   |   |         |     |   |                 |   |   |   |
| Preferred stock, $0.00015 par value, 5,000 shares authorized, no shares issued and outstanding                                                                |   |         | —  |   |                 |   | — |   |
| Common stock, $0.00015 par value, 70,000 shares authorized: shares issued 31,904 and 31,276, respectively; shares outstanding 28,008 and 27,603, respectively |   |         | 4        |   |                 |   | 4 |   |
| Additional paid-in-capital                                                                                                                                    |   |         | 204,309  |   |                 |   | 200,866 |   |
| Treasury stock at cost, 3,896 and 3,673 shares, respectively                                                                                                  |   |         | (20,667  | )      |                 |   | (19,298 | ) |
| Accumulated deficit                                                                                                                                           |   |         | (131,242 | )      |                 |   | (130,586 | ) |
| Accumulated other comprehensive income (loss)                                                                                                                 |   |         | 290      |   |                 |   | (71 | ) |
| Total stockholders’ equity                                                                                                                              |   |         | 52,694   |   |                 |   | 50,915 |   |
| Total liabilities and stockholders’ equity                                                                                                              |   | $            | 70,934   |   |                 | $      | 68,453 |   |

----

----

|                                              |   | Three Months Ended June 30, |   |   | Six Months Ended June 30, |    |
|---------------------------------------------------|--------|-----------------------------|--------|--------|---------------------------|---------|
|                                              |   | 2011                        |   |   |                      | 2010(*) |   |   |   | 2011(*) |   |   |   | 2010(*) |   |
|                                              |   |                        |   |   |                      |    |   |   |   |   |   |   |   |   |   |
| Revenues:                                         |   |                        |   |   |                      |    |   |   |   |   |   |   |   |   |   |
| Design-to-silicon-yield solutions                 |   | $                           | 13,003 |   |                      | $       | 10,814 |   |   | $ | 23,570 |   |   | $ | 21,231 |   |
| Gainshare performance incentives                  |   |                        | 4,157  |   |                      |    | 4,538 |   |   |   | 8,607 |   |   |   | 9,373 |   |
| Total revenues                                    |   |                        | 17,160 |   |                      |    | 15,352 |   |   |   | 32,177 |   |   |   | 30,604 |   |
|                                              |   |                        |   |   |                      |    |   |   |   |   |   |   |   |   |   |   |
| Costs of design-to-silicon-yield solutions:       |   |                        |   |   |                      |    |   |   |   |   |   |   |   |   |   |   |
| Direct costs of design-to-silicon-yield solutions |   |                        | 7,263  |   |                      |    | 6,487 |   |   |   | 13,701 |   |   |   | 13,467 |   |
| Amortization of acquired technology               |   |                        | 156    |   |                      |    | 360 |   |   |   | 312 |   |   |   | 719 |   |
| Total costs of design-to-silicon-yield solutions  |   |                        | 7,419  |   |                      |    | 6,847 |   |   |   | 14,013 |   |   |   | 14,186 |   |
| Gross profit                                      |   |                        | 9,741  |   |                      |    | 8,505 |   |   |   | 18,164 |   |   |   | 16,418 |   |
|                                              |   |                        |   |   |                      |    |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                               |   |                        |   |   |                      |    |   |   |   |   |   |   |   |   |   |   |
| Research and development                          |   |                        | 3,717  |   |                      |    | 3,865 |   |   |   | 7,429 |   |   |   | 7,259 |   |
| Selling, general and administrative               |   |                        | 5,242  |   |                      |    | 4,381 |   |   |   | 10,081 |   |   |   | 9,132 |   |
| Amortization of other acquired intangible assets  |   |                        | 51     |   |                      |    | 82 |   |   |   | 102 |   |   |   | 168 |   |
| Restructuring charges (credits)                   |   |                        | (122   | )      |                      |    | (33 | ) |   |   | (133 | ) |   |   | (32 | ) |
| Total operating expenses                          |   |                        | 8,888  |   |                      |    | 8,295 |   |   |   | 17,479 |   |   |   | 16,527 |   |
|                                              |   |                        |   |   |                      |    |   |   |   |   |   |   |   |   |   |   |
| Income (loss) from operations                     |   |                        | 853    |   |                      |    | 210 |   |   |   | 685 |   |   |   | (109 | ) |
| Interest and other income (expense), net          |   |                        | (32    | )      |                      |    | 404 |   |   |   | (411 | ) |   |   | 666 |   |
| Income  before income taxes             |   |                        | 821    |   |                      |    | 614 |   |   |   | 274 |   |   |   | 557 |   |
| Income tax provision                              |   |                        | 878    |   |                      |    | 275 |   |   |   | 930 |   |   |   | 776 |   |
| Net income (loss)                                 |   | $                           | (57    | )      |                      | $       | 339 |   |   | $ | (656 | ) |   | $ | (219 | ) |
|                                              |   |                        |   |   |                      |    |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) per share:                      |   |                        |   |   |                      |    |   |   |   |   |   |   |   |   |   |   |
| Basic                                             |   | $                           | 0.00   |   |                      | $       | 0.01 |   |   | $ | (0.02 | ) |   | $ | (0.01 | ) |
| Diluted                                           |   | $                           | 0.00   |   |                      | $       | 0.01 |   |   | $ | (0.02 | ) |   | $ | (0.01 | ) |
|                                              |   |                        |   |   |                      |    |   |   |   |   |   |   |   |   |   |   |
| Weighted average common shares:                   |   |                        |   |   |                      |    |   |   |   |   |   |   |   |   |   |   |
| Basic                                             |   |                        | 28,110 |   |                      |    | 27,118 |   |   |   | 27,960 |   |   |   | 27,024 |   |
| Diluted                                           |   |                        | 28,110 |   |                      |    | 27,357 |   |   |   | 27,960 |   |   |   | 27,024 |   |

----

----

|                                                                                       |   | Six Months Ended June 30, |    |
|--------------------------------------------------------------------------------------------|--------|---------------------------|---------|
|                                                                                       |   |                      | 2011(*) |                |   |   | 2010(*)  |   |
|                                                                                       |   | (In thousands)            |    |
| Operating activities:                                                                      |   |                      |    |   |   |   |   |   |
| Net loss                                                                                   |   | $                         | (656    | ) |   | $ | (219 | ) |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities:  |   |                      |    |   |   |   |   |   |
| Depreciation and amortization                                                              |   |                      | 244     |   |   |   | 505 |   |
| Stock-based compensation expense                                                           |   |                      | 2,594   |   |   |   | 2,947 |   |
| Amortization of acquired intangible assets                                                 |   |                      | 414     |   |   |   | 887 |   |
| Deferred taxes                                                                             |   |                      | (174    | ) |   |   | — |   |
| Purchases of treasury stock in connection with tax withholdings on restricted stock grants |   |                      | (341    | ) |   |   | (355 | ) |
| Changes in operating assets and liabilities:                                               |   |                      |    |   |   |   |   |   |
| Accounts receivable                                                                        |   |                      | 1,266   |   |   |   | (3,569 | ) |
| Prepaid expenses and other assets                                                          |   |                      | (385    | ) |   |   | 240 |   |
| Accounts payable                                                                           |   |                      | 315     |   |   |   | 312 |   |
| Accrued compensation and related benefits                                                  |   |                      | 704     |   |   |   | (603 | ) |
| Accrued and other liabilities                                                              |   |                      | (106    | ) |   |   | (1,341 | ) |
| Deferred revenues                                                                          |   |                      | (143    | ) |   |   | 88 |   |
| Billings in excess of recognized revenues                                                  |   |                      | 208     |   |   |   | (1,263 | ) |
| Net cash provided by (used in) operating activities                                        |   |                      | 3,940   |   |   |   | (2,371 | ) |
| Investing activities:                                                                      |   |                      |    |   |   |   |   |   |
| Purchases of property and equipment                                                        |   |                      | (238    | ) |   |   | (59 | ) |
| Net cash used in investing  activities                                           |   |                      | (238    | ) |   |   | (59 | ) |
| Financing activities:                                                                      |   |                      |    |   |   |   |   |   |
| Proceeds from exercise of stock options                                                    |   |                      | 421     |   |   |   | 50 |   |
| Proceeds from employee stock purchase plan                                                 |   |                      | 428     |   |   |   | 411 |   |
| Purchases of treasury stock                                                                |   |                      | (1,028  | ) |   |   | — |   |
| Principal payments on debt obligations                                                     |   |                      | (56     | ) |   |   | (60 | ) |
| Net cash provided by (used in) financing activities                                        |   |                      | (235    | ) |   |   | 401 |   |
| Effect of exchange rate changes on cash and cash equivalents                               |   |                      | 91      |   |   |   | (778 | ) |
| Net change in cash and cash equivalents                                                    |   |                      | 3,558   |   |   |   | (2,807 | ) |
| Cash and cash equivalents, beginning of period                                             |   |                      | 38,154  |   |   |   | 34,899 |   |
| Cash and cash equivalents, end of period                                                   |   | $                         | 41,712  |   |   | $ | 32,092 |   |
|  Supplemental disclosure of cash flow information:                                    |   |                      |    |   |   |   |   |   |
| Cash paid during the period for:                                                           |   |                      |    |   |   |   |   |   |
| Income taxes                                                                               |   | $                         | 925     |   |   | $ | 1,086 |   |
| Interest                                                                                   |   | $                         | 2       |   |   | $ | 5 |   |

----

----

|   | • | provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and how the consideration should be allocated;                                                                                                                          |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | require an entity to allocate revenue in an arrangement using best estimate of selling prices (“BESP”) of deliverables if a vendor does not have vendor-specific objective evidence of fair value (“VSOE”) or third-party evidence of selling price (“TPE”); and |

|   | • | eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                          |   | ThreeMonthsEnded                        |   |   | Year Ended       |   |    | Three Months Ended |   |   | Year Ended         |   |
|---------------------------------------------------------------|--------|-----------------------------------------|--------|--------|------------------|--------|---------|--------------------|--------|--------|--------------------|--------|
|                                                          |   | March 31,2011                           |   |   | December, 312010 |   |    | December 31, 2010  |   |   | September 30, 2010 |   |   | June 30, 2010 |   |   | March 31, 2010 |   |   | December 31, 2009 |   |
|                                                          |   | (In thousands, except per share amount) |   |
| As previously reported:Consolidated Statements of Operations: |   |                                    |   |   |             |   |    |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues:                                                     |   |                                    |   |   |             |   |    |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Design-to-silicon-yield solutions                             |   | $                                       | 10,567 |   |             | $      | 43,080  |               |   | $      | 11,352             |   |   | $ | 10,498 |   |   | $ | 10,814 |   |   | $ | 10,417 |   |   | $ | 32,662 |   |
| Gainshare performance incentives                              |   |                                    | 4,450  |   |             |   | 18,570  |               |   |   | 4,866              |   |   |   | 4,330 |   |   |   | 4,538 |   |   |   | 4,835 |   |   |   | 15,776 |   |
| Total revenues                                                |   |                                    | 15,017 |   |             |   | 61,650  |               |   |   | 16,218             |   |   |   | 14,828 |   |   |   | 15,352 |   |   |   | 15,252 |   |   |   | 48,438 |   |
| Cost of design-to-silicon-yield solutions:                    |   |                                    |   |   |             |   |    |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Direct costs of design-to-silicon-yield solutions             |   | $                                       | 5,793  |   |             | $      | 24,389  |               |   | $      | 6,348              |   |   | $ | 5,790 |   |   | $ | 5,928 |   |   | $ | 6,322 |   |   | $ | 22,779 |   |
| Amortization and impairment of acquired technology            |   |                                    | 156    |   |             |   | 1,285   |               |   |   | 207                |   |   |   | 360 |   |   |   | 360 |   |   |   | 359 |   |   |   | 1,439 |   |
| Total cost of design-to-silicon-yield solutions               |   |                                    | 5,949  |   |             |   | 25,674  |               |   |   | 6,555              |   |   |   | 6,150 |   |   |   | 6,288 |   |   |   | 6,681 |   |   |   | 24,218 |   |
| Gross profit                                                  |   |                                    | 9,068  |   |             |   | 35,976  |               |   |   | 9,663              |   |   |   | 8,678 |   |   |   | 9,064 |   |   |   | 8,571 |   |   |   | 24,220 |   |
| Operating expenses:                                           |   |                                    |   |   |             |   |    |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Research and development                                      |   |                                    | 4,349  |   |             |   | 17,187  |               |   |   | 4,599              |   |   |   | 4,291 |   |   |   | 4,335 |   |   |   | 3,962 |   |   |   | 19,773 |   |
| Selling, general and administrative                           |   |                                    | 4,745  |   |             |   | 15,989  |               |   |   | 3,689              |   |   |   | 3,228 |   |   |   | 4,492 |   |   |   | 4,579 |   |   |   | 16,561 |   |
| Amortization of other acquired intangible assets              |   |                                    | 51     |   |             |   | 295     |               |   |   | 57                 |   |   |   | 70 |   |   |   | 82 |   |   |   | 86 |   |   |   | 349 |   |
| Restructuring charges                                         |   |                                    | (11    | )      |             |   | 885     |               |   |   | 543                |   |   |   | 375 |   |   |   | (33 | ) |   |   | 1 |   |   |   | 4,512 |   |
| Total operating expenses                                      |   |                                    | 9,134  |   |             |   | 34,356  |               |   |   | 8,888              |   |   |   | 7,964 |   |   |   | 8,876 |   |   |   | 8,628 |   |   |   | 41,195 |   |
| Income (loss) from operations                                 |   |                                    | (66    | )      |             |   | 1,620   |               |   |   | 775                |   |   |   | 714 |   |   |   | 188 |   |   |   | (57 | ) |   |   | (16,975 | ) |
| Interest and other income, net                                |   |                                    | (359   | )      |             |   | — |               |   |   | (30                | )      |   |   | (636 | ) |   |   | 404 |   |   |   | 262 |   |   |   | 237 |   |
| Income (loss) before taxes                                    |   |                                    | (425   | )      |             |   | 1,620   |               |   |   | 745                |   |   |   | 78 |   |   |   | 592 |   |   |   | 205 |   |   |   | (16,738 | ) |
| Income tax provision                                          |   |                                    | 152    |   |             |   | 1,393   |               |   |   | 589                |   |   |   | 28 |   |   |   | 275 |   |   |   | 501 |   |   |   | 753 |   |
| Net income (loss)                                             |   | $                                       | (577   | )      |             | $      | 227     |               |   | $      | 156                |   |   | $ | 50 |   |   | $ | 317 |   |   | $ | (296 | ) |   | $ | (17,491 | ) |
| Net income (loss) per share:                                  |   |                                    |   |   |             |   |    |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                         |   | $                                       | (0.02  | )      |             | $      | 0.01    |               |   | $      | 0.01               |   |   | $ | 0.00 |   |   | $ | 0.01 |   |   | $ | (0.01 | ) |   | $ | (0.66 | ) |
| Diluted                                                       |   | $                                       | (0.02  | )      |             | $      | 0.01    |               |   | $      | 0.01               |   |   | $ | 0.00 |   |   | $ | 0.01 |   |   | $ | (0.01 | ) |   | $ | (0.66 | ) |
|                                                          |   |                                    |   |   |             |   |    |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average common shares:                               |   |                                    |   |   |             |   |    |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                         |   |                                    | 27,810 |   |             |   | 27,257  |               |   |   | 27,566             |   |   |   | 27,413 |   |   |   | 27,118 |   |   |   | 26,929 |   |   |   | 26,377 |   |
| Diluted                                                       |   |                                    | 27,810 |   |             |   | 27,471  |               |   |   | 27,767             |   |   |   | 27,581 |   |   |   | 27,357 |   |   |   | 26,929 |   |   |   | 26,377 |   |
|                                                          |   |                                    |   |   |             |   |    |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| Consolidated Balance Sheets:                        |   | March 31, 2011 |     |   | December 31, 2010 |   |     | September 30, 2010 |   |   | June 30, 2010 |   |   | March 31, 2010 |     |   | December 31, 2009 |   |
|-----------------------------------------------------|--------|----------------|----------|--------|-------------------|--------|----------|--------------------|--------|--------|---------------|--------|--------|----------------|----------|--------|-------------------|--------|
|                                                |   | (In thousands) |     |   |
| Prepaid expenses and other assets    |   | $              | 3,967    |   |              | $      | 3,246    |               |   | $      | 3,665         |   |   | $              | 2,826    |   |              | $      | 3,438 |   |   | $ | 3,029 |   |
| Accrued compensation and related benefits           |   |           | 3,927    |   |              |   | 3,964    |               |   |   | 3,722         |   |   |           | 3,704    |   |              |   | 3,565 |   |   |   | 4,438 |   |
| Accrued and other current liabilities               |   |           | 2,849    |   |              |   | 2,400    |               |   |   | 2,306         |   |   |           | 2,575    |   |              |   | 2,946 |   |   |   | 3,502 |   |
| Other non-current liabilities                       |   |           | 1,406    |   |              |   | 1,495    |               |   |   | 1,436         |   |   |           | 1,547    |   |              |   | 1,636 |   |   |   | 1,704 |   |
| Long-term income tax payable                        |   |           | 3,262    |   |              |   | 3,668    |               |   |   | 2,948         |   |   |           | 3,181    |   |              |   | 3,035 |   |   |   | 3,218 |   |
| Additional paid-in-capital                          |   |           | 201,865  |   |              |   | 200,144  |               |   |   | 198,943       |   |   |           | 197,517  |   |              |   | 195,996 |   |   |   | 194,081 |   |
| Accumulated deficit                                 |   |           | (130,461 | )      |              |   | (129,884 | )                  |   |   | (130,040      | )      |   |           | (130,090 | )      |              |   | (130,407 | ) |   |   | (130,111 | ) |
| Accumulated other comprehensive income (loss)       |   |           | 339      |   |              |   | (51      | )                  |   |   | 464           |   |   |           | (148     | )      |              |   | 334 |   |   |   | 628 |   |

----

|                                                      |   |                                    |    |   |                         |   |    | Three Months Ended |   |   |               |   |
|-----------------------------------------------------------|--------|-----------------------------------------|---------|--------|------------------------------|--------|---------|--------------------|--------|--------|--------------------|--------|
|                                                      |   | Three Months Ended March 31, 2011       |    |   | Year Ended December, 31 2010 |   |    | December 31, 2010  |   |   | September 30, 2010 |   |   | June 30, 2010 |   |   | March 31, 2010 |   |   | Year Ended December 31, 2009 |   |
|                                                      |   | (In thousands, except per share amount) |    |
| Revisions:Consolidated Statements of Operations:          |   |                                    |    |   |                         |   |    |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total cost of design-to-silicon-yield solutions (1)(2)(8) |   | $                                       | 645     |   |                         | $      | 2,510   |               |   | $      | 656                |   |   | $ | 637 |   |   | $ | 559 |   |   | $ | 658 |   |   | $ | 2,308 |   |
| Operating expenses:                                       |   |                                    |    |   |                         |   |    |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Research and development(1)(8)                            |   |                                    | (637    | )      |                         |   | (2,232  | )                  |   |   | (602               | )      |   |   | (592 | ) |   |   | (471 | ) |   |   | (567 | ) |   |   | (1,867 | ) |
| Selling, general and administrative(1)(3)(8)              |   |                                    | 94      |   |                         |   | 13      |               |   |   | (209               | )      |   |   | 161 |   |   |   | (110 | ) |   |   | 171 |   |   |   | (10 | ) |
| Restructuring charges(4)                                  |   |                                    | — |   |                         |   | — |               |   |   | 72                 |   |   |   | (72 | ) |   |   | — |   |   |   | — |   |   |   | — |   |
| Total operating expenses                                  |   |                                    | (543    | )      |                         |   | (2,219  | )                  |   |   | (739               | )      |   |   | (503 | ) |   |   | (581 | ) |   |   | (396 | ) |   |   | (1,877 | ) |
| Income (loss) from operations                             |   |                                    | (102    | )      |                         |   | (291    | )                  |   |   | 83                 |   |   |   | (134 | ) |   |   | 22 |   |   |   | (262 | ) |   |   | (431 | ) |
| Interest and other income (expenses),net(5)               |   |                                    | (20     | )      |                         |   | 20      |               |   |   | 20                 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Income (loss) before taxes                                |   |                                    | (122    | )      |                         |   | (271    | )                  |   |   | 103                |   |   |   | (134 | ) |   |   | 22 |   |   |   | (262 | ) |   |   | (431 | ) |
| Income tax provision (benefit)(6)                         |   |                                    | (100    | )      |                         |   | (67     | )                  |   |   | (67                | )      |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 67 |   |
| Net income (loss)(1)(2)(3)(4)(5)(6)                       |   | $                                       | (22     | )      |                         | $      | (204    | )                  |   | $      | 170                |   |   | $ | (134 | ) |   | $ | 22 |   |   | $ | (262 | ) |   | $ | (498 | ) |

|                                                                        |   | March 31, 2011 |    |   | December 31, 2010 |   |    | September 30, 2010 |   |   | June 30, 2010 |   |   | March 31, 2010 |   |   | December 31, 2009 |   |
|-----------------------------------------------------------------------------|--------|----------------|---------|--------|-------------------|--------|---------|--------------------|--------|--------|---------------|--------|--------|----------------|--------|--------|-------------------|--------|
|                                                                        |   | (In thousands) |    |   |
| Consolidated Balance Sheets:Prepaid expenses and other current assets(2)(6) |   | $              | 48      |   |              | $      | — |               |   | $      | (67           | )      |   | $              | (67    | )      |              | $      | (26 | ) |   | $ | 16 |   |
| Accrued compensation and related benefits(3)                                |   |           | — |   |              |   | — |               |   |   | 76            |   |   |           | 60     |   |              |   | 45 |   |   |   | 30 |   |
| Accrued and other current liabilities(2)(3)(4)(9)                           |   |           | 276     |   |              |   | 236     |               |   |   | 157           |   |   |           | 221    |   |              |   | 209 |   |   |   | 42 |   |
| Other non-current liabilities(9)                                            |   |           | (244    | )      |              |   | (236    | )                  |   |   | (229          | )      |   |           | (221   | )      |              |   | (209 | ) |   |   | (197 | ) |
| Long-term income tax payable(7)                                             |   |           | — |   |              |   | — |               |   |   | 475           |   |   |           | 304    |   |              |   | 236 |   |   |   | 256 |   |
| Additional paid-in-capital(1)                                               |   |           | 840     |   |              |   | 722     |               |   |   | 801           |   |   |           | 611    |   |              |   | 689 |   |   |   | 639 |   |
| Accumulated deficit(1)(2)(3)(4)(5)(6)                                       |   |           | (724    | )      |              |   | (702    | )                  |   |   | (872          | )      |   |           | (738   | )      |              |   | (760 | ) |   |   | (498 | ) |
| Accumulated other comprehensive income (loss)(6)(7)                         |   |           | (100    | )      |              |   | (20     | )                  |   |   | (475          | )      |   |           | (304   | )      |              |   | (236 | ) |   |   | (256 | ) |

----

|   | (1) | In the second quarter of 2011, the Company identified an error related to prior period expense for stock-based compensation for the Employee Stock Purchase Plan. The effect of the error is to increase compensation expense by $12,000, $201,000, $40,000, $44,000, $55,000, $50,000 and $639,000 for the first quarter of 2011, full fiscal year of 2010, fourth quarter of 2010, third quarter of 2010, second quarter of 2010, first quarter of 2010 and full fiscal year of 2009, respectively. In addition, in the first quarter of 2011, the Company recorded an out-of-period adjustment to reduce stock-based compensation expense of $106,000 that should have been recorded as $133,000 decrease in expense for the second quarter of 2010, $146,000 increase in expense for the third quarter of 2010 and $119,000 decrease in expense for the fourth quarter in 2010. The effect of correcting these errors is as follows: |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                      |   |                              |   |   |                         |   |   | Three Months Ended |   |   |               |   |
|-------------------------------------------|--------|-----------------------------------|--------|--------|------------------------------|--------|--------|--------------------|--------|--------|--------------------|--------|
|                                      |   | Three Months Ended March 31, 2011 |   |   | Year Ended December, 31 2010 |   |   | December 31, 2010  |   |   | September 30, 2010 |   |   | June 30, 2010 |   |   | March 31, 2010 |   |   | Year Ended December 31, 2009 |   |
|                                      |   | (In thousands)                    |   |
|                                      |   |                              |   |   |                         |   |   |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of design-to-silicon-yield solutions |   | $                                 | 6      |   |                         | $      | 65     |               |   | $      | 12                 |   |   | $ | 17 |   |   | $ | 16 |   |   | $ | 20 |   |   | $ | 187 |   |
| Research and development                  |   |                              | 4      |   |                         |   | 57     |               |   |   | 20                 |   |   |   | 12 |   |   |   | 13 |   |   |   | 12 |   |   |   | 201 |   |
| Selling, general and administrative       |   |                              | 108    |   |                         |   | (39    | )                  |   |   | (111               | )      |   |   | 161 |   |   |   | (107 | ) |   |   | 18 |   |   |   | 251 |   |
| Total                                     |   | $                                 | 118    |   |                         | $      | 83     |               |   | $      | (79                | )      |   | $ | 190 |   |   | $ | (78 | ) |   | $ | 50 |   |   | $ | 639 |   |

|   | (2) | In the first and second quarter of 2010, the Company recorded an increase in software license amortization expense of $42,000 and $41,000, respectively. The total amount of $83,000 should have been recorded as a decrease in expense in the fourth quarter of 2009. The Company also reduced $48,000 of amortization expense in the first quarter of 2011, resulting in an increase in prepaid expense and other current assets balance. In addition, the Company accrued $32,000 for software license fee in the first quarter of 2011 resulting in an increase in accrued and other current liabilities. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | In the fourth quarter of 2010, the Company recorded additional sabbatical accrual of $76,000 that should have been recorded as $30,000 increase of expense in the fourth quarter of 2009, $15,000 increase of expense in the first quarter of 2010, $15,000 increase of expense in the second quarter of 2010 and $16,000 increase of expense in the third quarter of 2010. In addition, in the first quarter of 2010, the Company reversed an accrual for fringe benefits of $155,000 which should have been reversed in the prior year. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | In the fourth quarter of 2010, the Company reversed a restructuring accrual for $72,000 which should have been reversed in the third quarter of 2010. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | In the first quarter of 2011, the Company reduced foreign currency loss of $20,000 which should have been reduced in the fourth quarter of 2010. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | In the second quarter of 2011, the Company identified an out-of-period error related to an overstatement of the tax provision of $100,000 for the first quarter of 2011. In the fourth quarter of 2010, the Company recorded an increase to income tax provision of $67,000 to correct a prepaid expenses and other current assets balance that was related to the fourth quarter of 2009. There are no adjustments to income tax relating to the pre-tax adjustments described in (1) to (5) above. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (7) | In the fourth quarter of 2010, the Company adjusted its liability amount for uncertain tax position related to its foreign subsidiary, which included recording the cumulative out-of-period amount in such quarter. The effect of the error is an increase to long-term income tax payable and a decrease of accumulated other comprehensive income (loss) by $475,000, $304,000, $236,000 and $256,000 third quarter of 2011, second quarter of 2010, first quarter of 2011 and full fiscal year of 2009, respectively. The adjustment has no impact to the Consolidated Statement of Operations in any of the periods previously reported. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (8) | In the second quarter of 2011, the Company identified a misclassification of certain amounts in the prior periods related to cost of design-to-silicon-yield solutions, research and development and selling, general and administrative. The correction of classification has no impact to the net income (loss) in any of the periods previously reported. The effect of correcting the misclassification is as follows: |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                      |   |                              |   |   |                         |   |   | Three Months Ended  |   |   |               |   |
|-------------------------------------------|--------|-----------------------------------|--------|--------|------------------------------|--------|--------|--------------------------|--------|--------|--------------------|--------|
|                                      |   | Three Months Ended March 31, 2011 |   |   | Year Ended December, 31 2010 |   |   | December 31, 2010        |   |   | September 30, 2010 |   |   | June 30, 2010 |   |   | March 31, 2010 |   |   | Year Ended December 31, 2009 |   |
|                                      |   | (In thousands)                    |   |
|                                      |   |                              |   |   |                         |   |   |                     |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of design-to-silicon-yield solutions |   | $                                 | 655    |   |                         | $      | 2,362  |                     |   | $      | 644                |   |   | $ | 620 |   |   | $ | 502 |   |   | $ | 596 |   |   | $ | 2,204 |   |
| Research and development                  |   |                              | (641   | )      |                         |   | (2,289 | )                        |   |   | (622               | )      |   |   | (604 | ) |   |   | (484 | ) |   |   | (579 | ) |   |   | (2,068 | ) |
| Selling, general and administrative       |   |                              | (14    | )      |                         |   | (73    | )                        |   |   | (22                | )      |   |   | (16 | ) |   |   | (18 | ) |   |   | (17 | ) |   |   | (136 | ) |
|                                      |   |                              |   |   |                         |   |   |                     |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|   | (9) | In the second quarter of 2011, the Company identified a misclassification of certain amounts in the prior periods related to deferred rent. The short-term portion of the deferred rent balance that was previously presented as other non-current liabilities should have been presented as accrued and other current liabilities. The reclassification has no impact to the Consolidated Statement of Operations in any of the periods previously reported. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                               |   |                                    |   |   |                         |   |   | Three Months Ended  |   |   |               |   |
|----------------------------------------------------|--------|-----------------------------------------|--------|--------|------------------------------|--------|--------|--------------------------|--------|--------|--------------------|--------|
|                                               |   | Three Months Ended March 31, 2011       |   |   | Year Ended December, 31 2010 |   |   | December 31, 2010        |   |   | September 30, 2010 |   |   | June 30, 2010 |   |   | March 31, 2010 |   |   | Year Ended December 31, 2009 |   |
|                                               |   | (In thousands, except per share amount) |   |
| As revised:Consolidated Statements of Operations:  |   |                                    |   |   |                         |   |   |                     |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues:                                          |   |                                    |   |   |                         |   |   |                     |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Design-to-silicon-yield solutions                  |   | $                                       | 10,567 |   |                         | $      | 43,080 |                     |   | $      | 11,352             |   |   | $ | 10,498 |   |   | $ | 10,814 |   |   | $ | 10,417 |   |   | $ | 32,662 |   |
| Gainshare performance incentives                   |   |                                    | 4,450  |   |                         |   | 18,570 |                     |   |   | 4,866              |   |   |   | 4,330 |   |   |   | 4,538 |   |   |   | 4,835 |   |   |   | 15,776 |   |
| Total revenues                                     |   |                                    | 15,017 |   |                         |   | 61,650 |                     |   |   | 16,218             |   |   |   | 14,828 |   |   |   | 15,352 |   |   |   | 15,252 |   |   |   | 48,438 |   |
| Cost of design-to-silicon-yield solutions:         |   |                                    |   |   |                         |   |   |                     |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Direct costs of design-to-silicon-yield solutions  |   | $                                       | 6,438  |   |                         |   | 26,900 |                     |   |   | 7,004              |   |   |   | 6,427 |   |   |   | 6,487 |   |   |   | 6,980 |   |   |   | 25,087 |   |
| Amortization and impairment of acquired technology |   |                                    | 156    |   |                         |   | 1,285  |                     |   |   | 207                |   |   |   | 360 |   |   |   | 360 |   |   |   | 359 |   |   |   | 1,439 |   |
| Total cost of design-to-silicon-yield solutions    |   |                                    | 6,594  |   |                         |   | 28,185 |                     |   |   | 7,211              |   |   |   | 6,787 |   |   |   | 6,847 |   |   |   | 7,339 |   |   |   | 26,526 |   |
| Gross profit                                       |   |                                    | 8,423  |   |                         |   | 33,465 |                     |   |   | 9,007              |   |   |   | 8,041 |   |   |   | 8,505 |   |   |   | 7,913 |   |   |   | 21,912 |   |
| Operating expenses:                                |   |                                    |   |   |                         |   |   |                     |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Research and development                           |   |                                    | 3,712  |   |                         |   | 14,954 |                     |   |   | 3,997              |   |   |   | 3,699 |   |   |   | 3,865 |   |   |   | 3,394 |   |   |   | 17,906 |   |
| Selling, general and administrative                |   |                                    | 4,839  |   |                         |   | 16,002 |                     |   |   | 3,480              |   |   |   | 3,389 |   |   |   | 4,381 |   |   |   | 4,751 |   |   |   | 16,551 |   |
| Amortization of other acquired intangible assets   |   |                                    | 51     |   |                         |   | 295    |                     |   |   | 57                 |   |   |   | 70 |   |   |   | 82 |   |   |   | 86 |   |   |   | 349 |   |
| Restructuring charges                              |   |                                    | (11    | )      |                         |   | 885    |                     |   |   | 615                |   |   |   | 303 |   |   |   | (33 | ) |   |   | 1 |   |   |   | 4,512 |   |
| Total operating expenses                           |   |                                    | 8,592  |   |                         |   | 32,136 |                     |   |   | 8,149              |   |   |   | 7,461 |   |   |   | 8,295 |   |   |   | 8,232 |   |   |   | 39,318 |   |
| Income (loss) from operations                      |   |                                    | (168   | )      |                         |   | 1,329  |                     |   |   | 858                |   |   |   | 580 |   |   |   | 210 |   |   |   | (319 | ) |   |   | (17,406 | ) |
| Interest and other income, net                     |   |                                    | (379   | )      |                         |   | 20     |                     |   |   | (10                | )      |   |   | (636 | ) |   |   | 404 |   |   |   | 262 |   |   |   | 237 |   |
| Income (loss) before taxes                         |   |                                    | (547   | )      |                         |   | 1,349  |                     |   |   | 848                |   |   |   | (56 | ) |   |   | 614 |   |   |   | (57 | ) |   |   | (17,169 | ) |
| Income tax provision                               |   |                                    | 52     |   |                         |   | 1,326  |                     |   |   | 522                |   |   |   | 28 |   |   |   | 275 |   |   |   | 501 |   |   |   | 820 |   |
| Net income (loss)                                  |   | $                                       | (599   | )      |                         | $      | 23     |                     |   | $      | 326                |   |   | $ | (84 | ) |   | $ | 339 |   |   | $ | (558 | ) |   | $ | (17,989 | ) |
| Net income (loss) per share:                       |   |                                    |   |   |                         |   |   |                     |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                              |   | $                                       | (0.02  | )      |                         | $      | 0.00   |                     |   | $      | 0.01               |   |   | $ | 0.00 |   |   | $ | 0.01 |   |   | $ | (0.02 | ) |   | $ | (0.67 | ) |
| Diluted                                            |   | $                                       | (0.02  | )      |                         | $      | 0.00   |                     |   | $      | 0.01               |   |   | $ | 0.00 |   |   | $ | 0.01 |   |   | $ | (0.02 | ) |   | $ | (0.67 | ) |
|                                               |   |                                    |   |   |                         |   |   |                     |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average common shares:                    |   |                                    |   |   |                         |   |   |                     |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                              |   |                                    | 27,810 |   |                         |   | 27,257 |                     |   |   | 27,566             |   |   |   | 27,413 |   |   |   | 27,118 |   |   |   | 26,929 |   |   |   | 26,377 |   |
| Diluted                                            |   |                                    | 27,810 |   |                         |   | 27,471 |                     |   |   | 27,767             |   |   |   | 27,413 |   |   |   | 27,357 |   |   |   | 26,929 |   |   |   | 26,377 |   |

|                                                                  |   | March 31, 2011 |     |   | December 31, 2010 |   |     | September 30, 2010 |   |   | June 30, 2010 |   |   | March 31, 2010 |     |   | December 31, 2009 |   |
|-----------------------------------------------------------------------|--------|----------------|----------|--------|-------------------|--------|----------|--------------------|--------|--------|---------------|--------|--------|----------------|----------|--------|-------------------|--------|
|                                                                  |   | (In thousands) |     |   |
| Consolidated Balance Sheets:Prepaid expenses and other current assets |   | $              | 4,015    |   |              | $      | 3,246    |               |   | $      | 3,598         |   |   | $              | 2,759    |   |              | $      | 3,412 |   |   | $ | 3,045 |   |
| Accrued compensation and related benefits                             |   |           | 3,927    |   |              |   | 3,964    |               |   |   | 3,798         |   |   |           | 3,764    |   |              |   | 3,610 |   |   |   | 4,468 |   |
| Accrued and other current liabilities                                 |   |           | 3,125    |   |              |   | 2,636    |               |   |   | 2,463         |   |   |           | 2,796    |   |              |   | 3,155 |   |   |   | 3,544 |   |
| Other non-current liabilities                                         |   |           | 1,162    |   |              |   | 1,259    |               |   |   | 1,207         |   |   |           | 1,326    |   |              |   | 1 ,427 |   |   |   | 1,507 |   |
| Long-term income tax payable                                          |   |           | 3,262    |   |              |   | 3,668    |               |   |   | 3,423         |   |   |           | 3,485    |   |              |   | 3,271 |   |   |   | 3,474 |   |
| Additional paid-in-capital                                            |   |           | 202,705  |   |              |   | 200,866  |               |   |   | 199,744       |   |   |           | 198,128  |   |              |   | 196,685 |   |   |   | 194,720 |   |
| Accumulated deficit                                                   |   |           | (131,185 | )      |              |   | (130,586 | )                  |   |   | (130,912      | )      |   |           | (130,828 | )      |              |   | (131,167 | ) |   |   | (130,609 | ) |
| Accumulated other comprehensive income (loss)                         |   |           | 239      |   |              |   | (71      | )                  |   |   | (11           | )      |   |           | (452     | )      |              |   | 98 |   |   |   | 372 |   |

----

|                    |   | AmortizedCost |   |   | UnrealizedHoldingGains |   |    | UnrealizedHoldingLosses |   |   | FairValue |   |
|-------------------------|--------|---------------|--------|--------|------------------------|--------|---------|-------------------------|--------|--------|-----------|--------|
| Auction-rate securities |   | $             | 1,000  |   |                   | $      | — |                    |   | $      | (282      | )      |   | $ | 718 |   |

----

| Acquired Identifiable Intangible                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | AmortizationPeriod(Years) |   |   | June 30, 2011Gross CarryingAmount |   |   | Accumulated Amortization |   |   | June 30, 2011Net CarryingAmount |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|--------|--------|-----------------------------------|--------|--------|--------------------------|--------|--------|---------------------------------|--------|
| Acquired technology                                                                                            |   |                      | 4-5    |   |                              | $      | 11,800 |                     |   | $      | (11,226                         | )      |   | $ | 574 |   |
| Brand name                                                                                                     |   |                      | 4      |   |                              |   | 510    |                     |   |   | (510                            | )      |   |   | — |   |
| Customer relationships and backlog                                                                             |   |                      | 1-6    |   |                              |   | 3,420  |                     |   |   | (3,255                          | )      |   |   | 165 |   |
| Patents and applications                                                                                       |   |                      | 7      |   |                              |   | 1,400  |                     |   |   | (1,185                          | )      |   |   | 215 |   |
| Other acquired intangibles                                                                                     |   |                      | 4      |   |                              |   | 255    |                     |   |   | (255                            | )      |   |   | — |   |
| Total                                                                                                                         |   |                      |   |   |                              | $      | 17,385 |                     |   | $      | (16,431                         | )      |   | $ | 954 |   |

| Acquired Identifiable Intangible                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | AmortizationPeriod(Years) |   |   | December 31, 2010Gross CarryingAmount |   |   | Accumulated Amortization |   |   | December 31, 2010Net CarryingAmount |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|--------|--------|--------------------------------------------|--------|--------|--------------------------|--------|--------|------------------------------------------|--------|
| Acquired technology                                                                                            |   |                      | 4-5    |   |                                       | $      | 11,800 |                     |   | $      | (10,915                                  | )      |   | $ | 885 |   |
| Brand name                                                                                                     |   |                      | 4      |   |                                       |   | 510    |                     |   |   | (510                                     | )      |   |   | — |   |
| Customer relationships and backlog                                                                             |   |                      | 1-6    |   |                                       |   | 3,420  |                     |   |   | (3,188                                   | )      |   |   | 232 |   |
| Patents and applications                                                                                       |   |                      | 7      |   |                                       |   | 1,400  |                     |   |   | (1,148                                   | )      |   |   | 252 |   |
| Other acquired intangibles                                                                                     |   |                      | 4      |   |                                       |   | 255    |                     |   |   | (255                                     | )      |   |   | — |   |
| Total                                                                                                                         |   |                      |   |   |                                       | $      | 17,385 |                     |   | $      | (16,016                                  | )      |   | $ | 1,369 |   |

| Year Ending December 31,          |   | Amount |   |
|-----------------------------------|--------|--------|--------|
| 2011 (remaining six-month period) |   | $      | 415    |   |
| 2012                              |   |   | 435    |   |
| 2013                              |   |   | 74     |   |
| 2014                              |   |   | 30     |   |
| Total                             |   | $      | 954    |   |

|                                 |   | Three MonthsEnded June 30, |   |   | Six MonthsEnded June 30, |   |
|-------------------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
|                                      |   | 2011                       |   |   | 2010                     |   |   | 2011 |   |   | 2010 |   |
| Cost of design-to-silicon yield-solutions |   | $                          | 522    |   |                     | $      | 455 |   |   | $ | 990 |   |   | $ | 1,077 |   |
| Research and development                  |   |                       | 337    |   |                     |   | 362 |   |   |   | 680 |   |   |   | 721 |   |
| Selling, general and administrative       |   |                       | 614    |   |                     |   | 575 |   |   |   | 924 |   |   |   | 1,149 |   |
| Stock-based compensation expenses         |   | $                          | 1,473  |   |                     | $      | 1,392 |   |   | $ | 2,594 |   |   | $ | 2,947 |   |

|                                                                       |   | Three Months Ended June 30, |    |   | Six Months Ended June 30, |   |
|----------------------------------------------------------------------------|--------|-----------------------------|---------|--------|---------------------------|--------|
|                                                                       |   | 2011                        |    |   | 2010                      |   |   | 2011 |   |   | 2010 |   |
| Expected life (in years)                                                   |   |                        | 4.97    |   |                      |   | 5.24 |   |   |   | 4.94 |   |   |   | 5.24 |   |
| Volatility                                                                 |   |                        | 60.8    | %      |                      |   | 61.9 | % |   |   | 61.0 | % |   |   | 62.4 | % |
| Risk-free interest rate                                                    |   |                        | 1.64    | %      |                      |   | 1.95 | % |   |   | 1.66 | % |   |   | 2.10 | % |
| Expected dividend                                                          |   |                        | — |   |                      |   | — |   |   |   | — |   |   |   | — |   |
| Weighted average fair value per share of options granted during the period |   | $                           | 3.21    |   |                      | $      | 2.52 |   |   | $ | 3.17 |   |   | $ | 2.35 |   |

----

|                                                                             |   | Three Months Ended June 30, |    |   | Six Months Ended June 30, |   |
|----------------------------------------------------------------------------------|--------|-----------------------------|---------|--------|---------------------------|--------|
|                                                                             |   | 2011                        |    |   | 2010                      |   |   | 2011 |   |   | 2010 |   |
| Expected life (in years)                                                         |   |                        | 1.25    |   |                      |   | 1.25 |   |   |   | 1.25 |   |   |   | 1.25 |   |
| Volatility                                                                       |   |                        | 54.3    | %      |                      |   | 65.6 | % |   |   | 64.1 | % |   |   | 69.8 | % |
| Risk-free interest rate                                                          |   |                        | 0.44    | %      |                      |   | 0.49 | % |   |   | 0.51 | % |   |   | 0.54 | % |
| Expected dividend                                                                |   |                        | — |   |                      |   | — |   |   |   | — |   |   |   | — |   |
| Weighted average fair value per share of employee stock issued during the period |   | $                           | 1.83    |   |                      | $      | 1.71 |   |   | $ | 1.41 |   |   | $ | 1.52 |   |

|                                       |   | Number ofOptions(in thousands) |   |   | Weighted AverageExercise Priceper Share |   |   | Weighted AverageRemainingContractualTerm (years) |   |   | AggregateIntrinsic Value(in thousands) |   |
|--------------------------------------------|--------|--------------------------------|--------|--------|-----------------------------------------|--------|--------|--------------------------------------------------|--------|--------|----------------------------------------|--------|
| Outstanding, January 1, 2011               |   |                           | 3,453  |   |                                    | $      | 5.60   |                                             |   |   |                                   |   |   |   |
| Granted                                    |   |                           | 974    |   |                                    |   | 6.09   |                                             |   |   |                                   |   |   |   |
| Exercised                                  |   |                           | (116   | )      |                                    |   | 3.60   |                                             |   |   |                                   |   |   |   |
| Canceled                                   |   |                           | (161   | )      |                                    |   | 4.33   |                                             |   |   |                                   |   |   |   |
| Expired                                    |   |                           | (32    | )      |                                    |   | 9.20   |                                             |   |   |                                   |   |   |   |
| Outstanding, June 30, 2011                 |   |                           | 4,118  |   |                                    |   | 5.79   |                                             |   |   | 7.48                                   |   |   | $ | 4,278 |   |
| Vested and expected to vest, June 30, 2011 |   |                           | 3,832  |   |                                    |   | 5.82   |                                             |   |   | 6.72                                   |   |   | $ | 4,056 |   |
| Exercisable, June 30, 2011                 |   |                           | 2,085  |   |                                    |   | 6.57   |                                             |   |   | 4.84                                   |   |   | $ | 2,062 |   |

|                       |   | Shares(in thousands) |   |   | Weighted AverageGrant DateFair Value Per Share |   |
|----------------------------|--------|----------------------|--------|--------|------------------------------------------------|--------|
| Nonvested, January 1, 2011 |   |                 | 453    |   |                                           | $      | 7.29 |   |
| Granted                    |   |                 | 288    |   |                                           |   | 6.18 |   |
| Vested                     |   |                 | (201   | )      |                                           |   | 6.23 |   |
| Forfeited                  |   |                 | (11    | )      |                                           |   | 6.46 |   |
| Nonvested, June 30, 2011   |   |                 | 529    |   |                                           |   | 7.09 |   |

----

|                       |   | Three MonthsEnded June 30, |   |   | Six MonthsEnded June 30, |   |
|---------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
|                            |   | 2011                       |   |   | 2010                     |   |   | 2011 |   |   | 2010 |   |
| Beginning balance               |   | $                          | 1,219  |   |                     | $      | 1,407 |   |   | $ | 1,379 |   |   | $ | 1,619 |   |
| Restructuring charges (credits) |   |                       | (122   | )      |                     |   | (33 | ) |   |   | (133 | ) |   |   | (32 | ) |
| Adjustments                     |   |                       | 7      |   |                     |   | — |   |   |   | 17 |   |   |   | — |   |
| Cash payments                   |   |                       | (161   | )      |                     |   | (228 | ) |   |   | (320 | ) |   |   | (441 | ) |
| Ending balance                  |   | $                          | 943    |   |                     | $      | 1,146 |   |   | $ | 943 |   |   | $ | 1,146 |   |

----

|                                                       |   | Three MonthsEnded June 30, |    |   | Six MonthsEnded June 30, |    |
|------------------------------------------------------------|--------|----------------------------|---------|--------|--------------------------|---------|
|                                                       |   | 2011                       |    |   | 2010                     |    |   | 2011 |   |   | 2010 |   |
| Net income (loss)                                          |   | $                          | (57     | )      |                     |  $ | 339 |   |   |  $ | (656 | ) |   | $ | (219 | ) |
| Weighted average common shares outstanding — basic   |   |                       | 28,110  |   |                     |    | 27,118 |   |   |   | 27,960 |   |   |   | 27,024 |   |
| Dilutive effect of equity incentive plans                  |   |                       | — |   |                     |    | 239 |   |   |   | — |   |   |   | — |   |
| Weighted average common shares outstanding — diluted |   |                       | 28,110  |   |                     |    | 27,357 |   |   |   | 27,960 |   |   |   | 27,024 |   |
| Net income (loss) per share:                               |   |                       |    |   |                     |    |   |   |   |   |   |   |   |   |   |   |
| Basic                                                      |   | $                          | 0.00    |   |                     | $       | 0.01 |   |   | $ | (0.02 | ) |   | $ | (0.01 | ) |
| Diluted                                                    |   | $                          | 0.00    |   |                     | $       | 0.01 |   |   | $ | (0.02 | ) |   | $ | (0.01 | ) |

|                        |   | Three MonthsEnded June 30, |   |   | Six MonthsEnded June 30, |   |
|----------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
|                             |   | 2011                       |   |   | 2010                     |   |   | 2011 |   |   | 2010 |   |
| Outstanding options              |   |                       | 1,948  |   |                     |   | 3,742 |   |   |   | 1,520 |   |   |   | 3,695 |   |
| Nonvested restricted stock units |   |                       | 315    |   |                     |   | 346 |   |   |   | 202 |   |   |   | 364 |   |
| Employee Stock Purchase Plan     |   |                       | 64     |   |                     |   | — |   |   |   | 32 |   |   |   | — |   |
| Total                            |   |                       | 2,327  |   |                     |   | 4,088 |   |   |   | 1,754 |   |   |   | 4,059 |   |

----

|                                                                |   | Three MonthsEnded June 30, |     |   | Six MonthsEnded June 30, |   |
|---------------------------------------------------------------------|--------|----------------------------|----------|--------|--------------------------|--------|
|                                                                |   | 2011                       |     |   | 2010                     |   |   | 2011 |   |   | 2010 |   |
| Net income (loss)                                                   |   | $                          | (57      | )      |                     | $      | 339 |   |   | $ | (656 | ) |   | $ | (219 | ) |
| Foreign currency translation adjustments, net of income tax effects |   |                       | 51       |   |                     |   | (482 | ) |   |   | 362 |   |   |   | (777 | ) |
| Comprehensive loss                                                  |   | $                          |  (6 | )      |                     | $      | (143 | ) |   | $ |  (294 | ) |   | $ |  (996 | ) |

|           |   | Three MonthsEnded June 30, |   |   | Six MonthsEnded June 30, |   |
|----------------|--------|----------------------------|--------|--------|--------------------------|--------|
| Customer  |   | 2011                       |   |   | 2010                     |   |   | 2011 |   |   | 2010 |   |
| A              |   |                       | 23     | %      |                     |   | 31 | % |   |   | 22 | % |   |   | 23 | % |
| B              |   |                       | 18     | %      |                     |   | 13 | % |   |   | 18 | % |   |   | 12 | % |
| C              |   |                       | 15     | %      |                     |   | 10 | % |   |   | 16 | % |   |   | 10 | % |
| D              |   |                       | *      | %      |                     |   | 15 | % |   |   | 10 | % |   |   | 17 | % |

----

| Customer |   | June 30, 2011 |   |   | December 31, 2010 |   |
|----------|--------|---------------|--------|--------|-------------------|--------|
| A        |   |          | 21     | %      |              |   | 16 | % |
| B        |   |          | 24     | %      |              |   | 13 | % |
| C        |   |          | 14     | %      |              |   | 10 | % |
| D        |   |          | 11     | %      |              |   | 14 | % |
| E        |   |          | *      | %      |              |   | 11 | % |
| F        |   |          | *      | %      |              |   | 11 | % |

----

|          |   | Three MonthsEnded June 30, |   |   | Six MonthsEnded June 30, |   |
|---------------|--------|----------------------------|--------|--------|--------------------------|--------|
|          |   | 2011                       |   |   | 2010                     |   |   | 2011 |   |   | 2010 |   |
| Asia          |   | $                          | 8,260  |   |                     | $      | 11,273 |   |   | $ | 15,818 |   |   | $ | 21,570 |   |
| United States |   |                       | 4,051  |   |                     |   | 2,602 |   |   |   | 7,088 |   |   |   | 5,983 |   |
| Europe        |   |                       | 4,849  |   |                     |   | 1,477 |   |   |   | 9,271 |   |   |   | 3,051 |   |
| Total         |   | $                          | 17,160 |   |                     | $      | 15,352 |   |   | $ | 32,177 |   |   | $ | 30,604 |   |

----

|          |   | June 30, 2011 |   |   | December 31, 2010 |   |
|---------------|--------|---------------|--------|--------|-------------------|--------|
| United States |   | $             | 615    |   |              | $      | 566 |   |
| Europe        |   |          | 100    |   |              |   | 121 |   |
| Asia          |   |          | 105    |   |              |   | 110 |   |
| Total         |   | $             | 820    |   |              | $      | 797 |   |

| Level 1 — | Inputs are quoted prices in active markets for identical assets or liabilities.                                                                                                                                                                                                                                                               |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |                                                                                                                                                                                                                                                                                                                                          |
| Level 2 — | Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data. |
|            |                                                                                                                                                                                                                                                                                                                                          |
| Level 3 — | Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.                                                                                                                                                                                                                       |

| Assets                    |   | Total  |   |   | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   |    | Significant OtherObservable Inputs(Level 2) |   |   | SignificantUnobservable Inputs(Level 3) |   |
|---------------------------|--------|--------|--------|--------|-------------------------------------------------------------|--------|---------|---------------------------------------------|--------|--------|-----------------------------------------|--------|
| Money market mutual funds |   | $      | 25,326 |   |                                                        | $      | 25,326  |                                        |   | $      | —                                 |   |   | $ | — |   |
| Auction-rate securities   |   |   | 718    |   |                                                        |   | — |                                        |   |   | —                                 |   |   |   | 718 |   |
| Total                     |   | $      | 26,044 |   |                                                        | $      | 25,326  |                                        |   | $      | —                                 |   |   | $ | 718 |   |

| Assets                    |   | Total  |   |   | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   |    | Significant OtherObservable Inputs(Level 2) |   |   | SignificantUnobservable Inputs(Level 3) |   |
|---------------------------|--------|--------|--------|--------|-------------------------------------------------------------|--------|---------|---------------------------------------------|--------|--------|-----------------------------------------|--------|
| Money market mutual funds |   | $      | 25,304 |   |                                                        | $      | 25,304  |                                        |   | $      | —                                 |   |   | $ | — |   |
| Auction-rate securities   |   |   | 718    |   |                                                        |   | — |                                        |   |   | —                                 |   |   |   | 718 |   |
| Total                     |   | $      | 26,022 |   |                                                        | $      | 25,304  |                                        |   | $      | —                                 |   |   | $ | 718 |   |

----

----

|   | • | Total revenues for the three months ended June 30, 2011 were $17.2 million, an increase of $1.8 million, or 12%, compared to $15.4 million for the three months ended June 30, 2010. Design-to-Silicon-Yield solutions revenues for the three months ended June 30, 2011 were $13.0 million, an increase of $2.2 million, or 20%, compared to $10.8 million for the three months ended June 30, 2010. The increase in Design-to-Silicon-Yield solutions revenues was primarily the result of increased growth in revenue generating activities. Gainshare performance incentives revenues for the three months ended June 30, 2011 were $4.2 million, a decrease of $0.3 million, or 8%, compared to $4.5 million for the three months ended June 30, 2010. The decrease in revenues from Gainshare performance incentives was primarily the result of slower yield improvement and lower wafer volumes at customer manufacturing facilities. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Net loss for the three months ended June 30, 2011 was $(57,000), compared to net income of $339,000 for the three months ended June 30, 2010. The difference in earnings was primarily attributable to foreign currency exchange gains related to Euro to U.S. Dollar currency rate fluctuations in the year-ago period and the amount of withholding taxes related to certain Asian customers more than offsetting the increase in gross profits from revenue growth year-over-year. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Net loss per basic and diluted share was $(0.00) for the three months ended June 30, 2011 compared to net income per basic and diluted share of $0.01 for the three months ended June 30, 2010, a decrease of  $0.01 per basic and diluted share. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Cash, cash equivalents and non-current investments increased $3.5 million from $38.9 million at December 31, 2010 to $42.4 million at June 30, 2011,  primarily due to increase in cash from operating activities during the period. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Total revenues for the six months ended June 30, 2011 was $32.2 million, an increase of $1.6 million, or 5%, compared to total revenues of $30.6 million for the six months ended June 30, 2010. Design-to-Silicon-Yield solutions revenues for the six months ended June 30, 2011 was $23.6 million, an increase of $2.4 million, or 11%, compared to $21.2 million for the six months ended June 30, 2010. The increase in Design-to-Silicon-Yield solutions revenues was primarily the result of increased bookings. Gainshare performance incentives revenues for the six months ended June 30, 2011 was $8.6 million, a decrease of $0.8 million, or 8%, compared to gainshare performance incentive revenues of $9.4 million for the six months ended June 30, 2010.  The decrease in gainshare performance incentives was primarily the result of slower yield improvement and lower wafer volumes at customer manufacturing facilities. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Net loss for the six months ended June 30, 2011 was $(656,000), compared to $(219,000) for the six months ended June 30, 2010. The increase in net loss was primarily attributable to foreign currency exchange gains related to Euro to U.S. Dollar currency rate fluctuations in the year-ago period and the amount of withholding taxes related to certain Asian customers more than offsetting the increase in gross profits from revenue growth year-over-year. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | • | Net loss per basic and diluted share was $(0.02) for the six months ended June 30, 2011 compared to net loss per basic and diluted share of $(0.01) for the six months ended June 30, 2010, a decrease of $0.01 per basic and diluted share. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and how the consideration should be allocated; |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | require an entity to allocate revenue in an arrangement using best estimate of selling prices (“BESP”) of deliverables if a vendor does not have vendor-specific objective evidence of fair value (“VSOE”) or third-party evidence ofselling price (“TPE”); and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------|

----

----

|                                              |   | Three Months EndedJune 30, |    |   | Six Months EndedJune 30, |   |
|---------------------------------------------------|--------|----------------------------|---------|--------|--------------------------|--------|
|                                              |   | 2011                       |    |   | 2010                     |   |   | 2011 |   |   | 2010 |   |
| Revenues:                                         |   |                       |    |   |                     |   |   |   |   |   |   |   |
| Design-to-silicon-yield solutions                 |   |                       | 76      | %      |                     |   | 70 | % |   |   | 73 | % |   |   | 69 | % |
| Gainshare performance incentives                  |   |                       | 24      |   |                     |   | 30 |   |   |   | 27 |   |   |   | 31 |   |
| Total revenues                                    |   |                       | 100     | %      |                     |   | 100 | % |   |   | 100 | % |   |   | 100 | % |
| Costs of design-to-silicon-yield solutions:       |   |                       |    |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Direct costs of design-to-silicon-yield solutions |   |                       | 42      |   |                     |   | 43 |   |   |   | 43 |   |   |   | 44 |   |
| Amortization of acquired technology               |   |                       | 1       |   |                     |   | 2 |   |   |   | 1 |   |   |   | 2 |   |
| Total costs of design-to-silicon-yield solutions  |   |                       | 43      |   |                     |   | 45 |   |   |   | 44 |   |   |   | 46 |   |
| Gross Profit                                      |   |                       | 57      |   |                     |   | 55 |   |   |   | 56 |   |   |   | 54 |   |
| Operating expenses:                               |   |                       |    |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Research and development                          |   |                       | 22      |   |                     |   | 25 |   |   |   | 23 |   |   |   | 23 |   |
| Selling, general and administrative               |   |                       | 31      |   |                     |   | 28 |   |   |   | 31 |   |   |   | 30 |   |
| Amortization of other acquired intangible assets  |   |                       | — |   |                     |   | 1 |   |   |   | — |   |   |   | 1 |   |
| Restructuring charges (credits)                   |   |                       | (1      | )      |                     |   | — |   |   |   | — |   |   |   | — |   |
| Total operating expenses                          |   |                       | 52      |   |                     |   | 54 |   |   |   | 54 |   |   |   | 54 |   |
| Income (loss) from operations                     |   |                       | 5       |   |                     |   | 1 |   |   |   | 2 |   |   |   | — |   |
| Interest and other income (expense), net          |   |                       | — |   |                     |   | 3 |   |   |   | (1 | ) |   |   | 2 |   |
| Income (loss) before taxes                        |   |                       | 5       |   |                     |   | 4 |   |   |   | 1 |   |   |   | 2 |   |
| Income tax provision                              |   |                       | 5       |   |                     |   | 2 |   |   |   | 3 |   |   |   | 3 |   |
| Net income (loss)                                 |   |                       | — | %      |                     |   | 2 | % |   |   | (2 | )% |   |   | (1 | )% |

|                                   |   | Three Months Ended June 30, |   |   | $      |   |   |   | %      |   |
|----------------------------------------|--------|----------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Revenues                               |   | 2011                             |   |   | 2010   |   |   | Change |   |   | Change |   |
| (In thousands, except for percentages) |   |                             |
| Design-to-silicon-yield solutions      |   | $                                | 13,003 |   |   | $      | 10,814 |   |   | $      | 2,189 |   |   |   | 20 | % |
| Gainshare performance incentives       |   |                             | 4,157  |   |   |   | 4,538  |   |   |   | (381 | ) |   |   | (8 | )% |
| Total                                  |   | $                                | 17,160 |   |   | $      | 15,352 |   |   | $      | 1,808 |   |   |   | 12 | % |

----

|                                              |   | Three Months Ended June 30, |   |   | $      |   |   |   | %      |   |
|---------------------------------------------------|--------|-----------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Cost of Design-to-Silicon-Yield Solutions         |   | 2011                        |   |   | 2010   |   |   | Change |   |   | Change |   |
| (In thousands, except for percentages)            |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Direct costs of design-to-silicon-yield solutions |   | $                           | 7,263  |   |   | $      | 6,487  |   |   | $      | 776 |   |   |   | 12 | % |
| Amortization of acquired technology               |   |                        | 156    |   |   |   | 360    |   |   |   | (204 | ) |   |   | (57 | )% |
| Total                                             |   | $                           | 7,419  |   |   | $      | 6,847  |   |   | $      | 572 |   |   |   | 8 | % |

|                                   |   | Three Months Ended June 30, |   |   | $      |   |   |   | %      |   |
|----------------------------------------|--------|-----------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Research and Development               |   | 2011                        |   |   | 2010   |   |   | Change |   |   | Change |   |
| (In thousands, except for percentages) |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Research and development               |   | $                           | 3,717  |   |   | $      | 3,865  |   |   | $      | (148 | ) |   |   | (4 | )% |

|                                   |   | Three Months Ended June 30, |   |   | $      |   |   |   | %      |   |
|----------------------------------------|--------|-----------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Selling, General and Administrative    |   | 2011                        |   |   | 2010   |   |   | Change |   |   | Change |   |
| (In thousands, except for percentages) |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative    |   | $                           | 5,242  |   |   | $      | 4,381  |   |   | $      | 861 |   |   |   | 20 | % |

----

|                                             |   | Three Months Ended June 30, |   |   | $      |   |   |   | %      |   |
|--------------------------------------------------|--------|-----------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Amortization of Other Acquired Intangible Assets |   | 2011                        |   |   | 2010   |   |   | Change |   |   | Change |   |
| (In thousands, except for percentages)           |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Amortization of other acquired intangible assets |   | $                           | 51     |   |   | $      | 82     |   |   | $      | (31 | ) |   |   | (38 | )% |

|                                   |   | Three Months Ended June 30, |   |   | $      |   |   |   | %      |   |
|----------------------------------------|--------|-----------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Restructuring Charges                  |   | 2011                        |   |   | 2010   |   |   | Change |   |   | Change |   |
| (In thousands, except for percentages) |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Restructuring charges (credits)        |   | $                           | (122   | )      |   | $      | (33    | )      |   | $      | (89 | ) |   |   | 270 | % |

|                                     |   | Three Months Ended June 30, |   |   | $      |   |   |   | %      |   |
|------------------------------------------|--------|-----------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Interest and Other Income (Expense), net |   | 2011                        |   |   | 2010   |   |   | Change |   |   | Change |   |
| (In thousands, except for percentages)   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Interest and other income (loss), net    |   | $                           | (32    | )      |   | $      | 404    |   |   | $      | (436 | ) |   |   | (108 | )%  |

|                                   |   | Three Months Ended June 30, |   |   | $      |   |   |   | %      |   |
|----------------------------------------|--------|-----------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Income Tax Provision                   |   | 2011                        |   |   | 2010   |   |   | Change |   |   | Change |   |
| (In thousands, except for percentages) |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Income tax provision                   |   | $                           | 878    |   |   | $      | 275    |   |   | $      | 603 |   |   |   | 219 | % |

----

|                                   |   | Six Months Ended June 30, |   |   | $      |   |   |   | %      |   |
|----------------------------------------|--------|--------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Revenues                               |   | 2011                           |   |   | 2010   |   |   | Change |   |   | Change |   |
| (In thousands, except for percentages) |   |                           |
| Design-to-silicon-yield solutions      |   | $                              | 23,570 |   |   | $      | 21,231 |   |   | $      | 2,339 |   |   |   | 11 | % |
| Gainshare performance incentives       |   |                           | 8,607  |   |   |   | 9,373  |   |   |   | (766 | ) |   |   | (8 | )% |
| Total                                  |   | $                              | 32,177 |   |   | $      | 30,604 |   |   | $      | 1,573 |   |   |   | 5 | % |

|                                              |   | Six Months Ended June 30, |   |   | $      |   |   |   | %      |   |
|---------------------------------------------------|--------|---------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Cost of Design-to-Silicon-Yield Solutions         |   | 2011                      |   |   | 2010   |   |   | Change |   |   | Change |   |
| (In thousands, except for percentages)            |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Direct costs of design-to-silicon-yield solutions |   | $                         | 13,701 |   |   | $      | 13,467 |   |   | $      | 234 |   |   |   | 2 | % |
| Amortization of acquired technology               |   |                      | 312    |   |   |   | 719    |   |   |   | (407 | ) |   |   | (57 | )% |
| Total                                             |   | $                         | 14,013 |   |   | $      | 14,186 |   |   | $      | (173 | ) |   |   | (1 | )% |

|                                   |   | Six Months Ended June 30, |   |   | $      |   |   |   | %      |   |
|----------------------------------------|--------|---------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Research and Development               |   | 2011                      |   |   | 2010   |   |   | Change |   |   | Change |   |
| (In thousands, except for percentages) |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Research and development               |   | $                         | 7,429  |   |   | $      | 7,259  |   |   | $      | 170 |   |   |   | 2 | % |

|                                   |   | Six Months Ended June 30, |   |   | $      |   |   |   | %      |   |
|----------------------------------------|--------|---------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Selling, General and Administrative    |   | 2011                      |   |   | 2010   |   |   | Change |   |   | Change |   |
| (In thousands, except for percentages) |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative    |   | $                         | 10,081 |   |   | $      | 9,132  |   |   | $      | 949 |   |   |   | 10 | % |

----

|                                             |   | Six Months Ended June 30, |   |   | $      |   |   |   | %      |   |
|--------------------------------------------------|--------|---------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Amortization of Other Acquired Intangible Assets |   | 2011                      |   |   | 2010   |   |   | Change |   |   | Change |   |
| (In thousands, except for percentages)           |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Amortization of other acquired intangible assets |   | $                         | 102    |   |   | $      | 168    |   |   | $      | (66 | ) |   |   | (39 | )% |

|                                   |   | Six Months Ended June 30, |   |   | $      |   |   |   | %      |   |
|----------------------------------------|--------|---------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Restructuring Charges                  |   | 2011                      |   |   | 2010   |   |   | Change |   |   | Change |   |
| (In thousands, except for percentages) |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Restructuring charges (credits)        |   | $                         | (133   | )      |   | $      | (32    | )      |   | $      | (101 | ) |   |   | 316 | % |

|                                   |   | Six Months Ended June 30, |   |   | $      |   |   |   | %      |   |
|----------------------------------------|--------|---------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Interest and Other Income, net         |   | 2011                      |   |   | 2010   |   |   | Change |   |   | Change |   |
| (In thousands, except for percentages) |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Interest and other income (loss), net  |   | $                         | (411   | )      |   | $      | 666    |   |   | $      | (1,077 | ) |   |   | (162 | %)  |

|                                   |   | Six Months Ended June 30, |   |   | $      |   |   |   | %      |   |
|----------------------------------------|--------|---------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Income Tax Provision                   |   | 2011                      |   |   | 2010   |   |   | Change |   |   | Change |   |
| (In thousands, except for percentages) |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Income tax provision                   |   | $                         | 930    |   |   | $      | 776    |   |   | $      | 154 |   |   |   | 20 | % |

----

----

| Contractual obligations         |   | 2011(six monthsremaining) |   |   | 2012   |   |    | 2013   |   |   | 2014    |   |   | Total  |    |
|---------------------------------|--------|---------------------------|--------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|
| Debt principal (1)              |   | $                         | 57     |   |   | $      | — |   |   | $      | — |   |   | $      | — |   |   | $ | 57 |   |
| Debt interest (1)               |   |                      | 2      |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 2 |   |
| Operating lease obligations (2) |   |                      | 2,650  |   |   |   | 2,533   |   |   |   | 1,899   |   |   |   | 171     |   |   |   | 7,253 |   |
| Total (3)                       |   | $                         | 2,709  |   |   | $      | 2,533   |   |   | $      | 1,899   |   |   | $      | 171     |   |   | $ | 7,312 |   |

----

|   | (1) | Amount represents the current contractual obligation under a €400,000 loan with a variable interest rate based on the EURIBOR plus 160 basis points. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Operating lease amounts include minimum rental payments under our operating leases for our office facilities, as well as computers, office equipment, and vehicles that we utilize under lease agreements. These minimum rental payments include payments on those facilities abandoned as part of the restructuring activities. These agreements expire at various dates through 2014. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | The contractual obligation table above excludes liabilities for uncertain tax positions of $3.4 million, which are not practicable to assign to any particular years, due to the inherent uncertainty of the tax positions.  See Note 9 of “Notes to Condensed Consolidated Financial Statements (Unaudited)” for further discussion.   |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | The Company hired personnel with requisite experience for non-routine or complex transactions, including with respect to the application of generally accepted accounting principles for percentage of completion contracts, certain multi-element revenue arrangements, and stock-based compensation transactions; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Company expanded its controls to include identification of non-routine or complex transactions for increased periodic and on-going review by  personnel with the requisite expertise; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Company implemented procedures to ensure that our revenue controls are enhanced to include specific consideration of the accounting for contract costs and the cost estimation process for the Company's design-to-silicon yield services contracts; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Company implemented procedures to ensure that our controls surrounding stock-based compensation transactions are enhanced to include specific consideration of the accounting for non-routine modifications and other complex transactions; and, |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Company provided on-going training of our employees on generally accepted accounting principles in general, and existing and new policies and procedures around revenue and stock-based compensation in particular. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|      Period            |   | TotalNumber ofSharesPurchased (2) |    |   |     AveragePrice PaidPer Share |   |    | Total Number ofSharesPurchased asPart of PubliclyAnnounced Plansor Programs (1) |   |   |   Approximate DollarValue of Shares thatMay Yet BePurchased Under thePlans or Programs(1) |   |
|-------------------------------------------------|--------|-----------------------------------|---------|--------|-----------------------------------------------|--------|---------|---------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------------------|--------|
| Month #4 (April 1, 2011 through April 30, 2011) |   |                              | — |   |                                          | $      | — |                                                                            |   |   | —                                                                                        |   |   | $ | 9,697 |   |
| Month #5 (May 1, 2011 through May 30, 2011)     |   |                              | 169     |   |                                          |   | 6.85    |                                                                            |   |   | 169                                                                                            |   |   | $ | 8,668 |   |
| Month #6 (June 1, 2011 through June 30, 2011)   |   |                              | 12      |   |                                          |   | 6.11    |                                                                            |   |   | 12                                                                                             |   |   | $ | 8,595 |   |
| Total                                           |   |                              | 181     |   |                                          | $      | 6.23    |                                                                            |   |   | 181                                                                                            |   |   |   |   |   |

----

|   | (1) | On October 29, 2007, the Board of Directors approved a program to repurchase up to $10.0 million of the Company’s common stock on the open market. The right to repurchase stock under this program expired on October 29, 2010. An amendment to this repurchase program was approved by the Board of Directors on October 19, 2010 that extended the program's term for two more years to October 29, 2012 and reset the aggregate amount available for repurchase under the program to $10.0 million. As of June 30, 2011, 2.9 million shares were repurchased at the average price of $3.66 per share under this program and $8.6  million remained available for repurchases. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Included in the shares indicated in the table above are shares that the Company withheld through net share settlements to cover tax withholding obligations upon the vesting of restricted stock unit awards under the Company’s equity compensation plans. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ExhibitNumber |   | Description                                                                                      |
|---------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.01         |   | Form of Nonstatutory Stock Option Agreement under the PDF Solutions, Inc. 2001 Stock Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.02         |   | Form of Restricted Stock Agreement under the PDF Solutions, Inc. 2001 Stock Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.03         |   | Form of Stock Option Agreement (France) under the PDF Solutions, Inc. 2001 Stock Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.04         |   | Form of Restricted Stock Agreement (France) under the PDF Solutions, Inc. 2001 Stock Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.05         |   | Employment Offer Letter to Michael Shahbazian from PDF Solutions, Inc. dated June 10, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 31.01         |   | Certification of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 31.02         |   | Certification of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 32.01         |   | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *                                                                                                                                                                                                                                                                                                                                                                                                                 |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 32.02         |   | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *                                                                                                                                                                                                                                                                                                                                                                                                                 |

----

|  * | As contemplated by SEC Release No. 33-8212, these exhibits are furnished with this Quarterly Report on Form 10-Q and are not deemed filed with the Securities and Exchange Commission and are not incorporated by reference in any filing of PDF Solutions, Inc. under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings. |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                 | PDF SOLUTIONS, INC. |                                  |
|----------------------|---------------------|---------------------------------------|
|                 |                |                                  |
|                 |                |                                  |   |
| Date: August 9, 2011 | By:                 | /s/ John K. Kibarian             |   |
|                 |                | John K. Kibarian                      |   |
|                 |                | President and Chief Executive Officer |   |
|                 |                | (Principal Executive Officer)         |   |

| Date: August 9, 2011 | By:    | /s/ Michael Shahbazian                     |   |
|----------------------|--------|-------------------------------------------------|--------|
|                 |   | Michael Shahbazian                              |   |
|                 |   | Vice President, Interim Chief Financial Officer |   |
|                 |   | (Principal Financial Officer)                   |   |

----

| ExhibitNumber |   | Description                                                                                      |
|---------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.01         |   | Form of Nonstatutory Stock Option Agreement under the PDF Solutions, Inc. 2001 Stock Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.02         |   | Form of Restricted Stock Agreement under the PDF Solutions, Inc. 2001 Stock Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.03         |   | Form of Stock Option Agreement (France) under the PDF Solutions, Inc. 2001 Stock Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.04         |   | Form of Restricted Stock Agreement (France) under the PDF Solutions, Inc. 2001 Stock Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.05         |   | Employment Offer Letter to Michael Shahbazian from PDF Solutions, Inc. dated June 10, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 31.01         |   | Certification of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 31.02         |   | Certification of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 32.01         |   | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *                                                                                                                                                                                                                                                                                                                                                                                                                 |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 32.02         |   | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *                                                                                                                                                                                                                                                                                                                                                                                                                 |

----

|  * | As contemplated by SEC Release No. 33-8212, these exhibits are furnished with this Quarterly Report on Form 10-Q and are not deemed filed with the Securities and Exchange Commission and are not incorporated by reference in any filing of PDF Solutions, Inc. under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings. |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|