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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

(Mark One)

|ý                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACTS OF 1934.
|--------------------------------------------- | ------------------------------------------------------------------------------------------
|FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
|OR                                           
|o                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from  to
.

Commission file number 000-24487

MIPS Technologies, Inc.(Exact name of registrant as specified in its charter)

|DELAWARE                                                       |  | 77-0322161                             
|-------------------------------------------------------------- |  | ---------------------------------------
|(State or other jurisdiction of
Incorporation or organization) |  | (I.R.S. Employer
Identification Number)

1225 CHARLESTON ROAD, MOUNTAIN VIEW, CA 94043-1353(Address of principal executive offices)

Registrants'
telephone number, including area code:(650) 567-5000

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

As
of May 1, 2002, the number of outstanding shares of the Registrant's Class A common stock, $.001 par value, was 14,153,164. As of May 1, 2002, the number of
outstanding shares of the Registrant's Class B common stock, $.001 par value, was 25,057,830.

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PART IFINANCIAL INFORMATION

|                          |  |                                                                                       |  | Page
|------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|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 Results of Operations and Financial Condition |  | 11  
|Item 3.                   |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 19  
|PART IIOTHER INFORMATION
|Item 1.                   |  | Legal Proceedings                                                                     |  | 20  
|Item 6.                   |  | Exhibits and Reports on Form 8-K                                                      |  | 20  
|Signatures                |  | 21                                                                                   

2

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PART IFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MIPS TECHNOLOGIES, INC.  CONDENSED CONSOLIDATED BALANCE SHEETS  (In thousands)

|                                     |                                           | March 31,
2002             |         | June 30,
2001 |        
|------------------------------------ | ----------------------------------------- | -------------------------- | ------- | ------------- | -------
|
|ASSETS                               |                                           |                            |         |               |        
|Current assets:                      |                                           |                            |         |               |        
|                                     | Cash and cash equivalents                 |                            | $       | 78,423        |        
|                                     | Short-term investments                    |                            |         | 19,375        |        
|                                     | Accounts receivable                       |                            |         | 5,567         |        
|                                     | Prepaid expenses and other current assets |                            |         | 8,052         |        
|                                     |                                           |                            |         |               |        
|                                     |                                           | Total current assets       |         |               | 111,417
|Equipment and furniture, net         |                                           |                            | 6,793   |               |        
|Intangible assets                    |                                           |                            | 4,393   |               |        
|Other assets                         |                                           |                            | 5,369   |               |        
|                                     |                                           |                            |         |               |        
|                                     |                                           | $                          | 127,972 |               | $      
|                                     |                                           |                            |         |               |        
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                           |                            |         |               |        
|Current liabilities:                 |                                           |                            |         |               |        
|                                     | Accounts payable                          |                            | $       | 468           |        
|                                     | Accrued liabilities                       |                            |         | 6,309         |        
|                                     | Deferred revenue                          |                            |         | 3,593         |        
|                                     |                                           |                            |         |               |        
|                                     |                                           | Total current liabilities  |         |               | 10,370 
|Stockholders' equity:                |                                           |                            |         |               |        
|                                     | Common stock                              |                            |         | 39            |        
|                                     | Additional paid-in capital                |                            |         | 176,363       |        
|                                     | Accumulated other comprehensive loss      |                            |         | (459          | )      
|                                     | Accumulated deficit                       |                            |         | (58,341       | )      
|                                     |                                           |                            |         |               |        
|                                     |                                           | Total stockholders' equity |         |               | 117,602
|                                     |                                           |                            |         |               |        
|                                     |                                           | $                          | 127,972 |               | $      
|                                     |                                           |                            |         |               |        

See
accompanying notes.

3

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MIPS TECHNOLOGIES, INC.  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)  (In thousands, except per share data)

|                                                                         |                                              | Three Months Ended
March 31, |        | Nine Months Ended
March 31, |       
|------------------------------------------------------------------------ | -------------------------------------------- | ---------------------------- | ------ | --------------------------- | ------
|
|
|Revenue:                                                                 |                                              |                              |        |                             |       
|                                                                         | Royalties                                    |                              | $      | 4,135                       |       
|                                                                         | Contract revenue                             |                              |        | 8,607                       |       
|                                                                         |                                              |                              |        |                             |       
|                                                                         |                                              | Total revenue                |        |                             | 12,742
|Costs and expenses:                                                      |                                              |                              |        |                             |       
|                                                                         | Cost of contract revenue                     |                              |        |                            |       
|                                                                         | Research and development                     |                              |        | 8,446                       |       
|                                                                         | Sales and marketing                          |                              |        | 4,916                       |       
|                                                                         | General and administrative                   |                              |        | 1,948                       |       
|                                                                         | Acquired in-process research and development |                              |        |                            |       
|                                                                         | Restructuring                                |                              |        |                            |       
|                                                                         |                                              |                              |        |                             |       
|                                                                         |                                              | Total costs and expenses     |        |                             | 15,310
|                                                                         |                                              |                              |        |                             |       
|Operating income (loss)                                                  |                                              |                              | (2,568 | )                           |       
|Other income, net                                                        |                                              |                              | 510    |                             |       
|                                                                         |                                              |                              |        |                             |       
|Income (loss) before income taxes                                        |                                              |                              | (2,058 | )                           |       
|Provision (benefit) for income taxes                                     |                                              |                              | (380   | )                           |       
|                                                                         |                                              |                              |        |                             |       
|Income (loss) before cumulative effect of change in accounting principle |                                              |                              | (1,678 | )                           |       
|Cumulative effect of change in accounting principle, net of tax benefit  |                                              |                              |       |                             |       
|                                                                         |                                              |                              |        |                             |       
|Net income (loss)                                                        |                                              | $                            | (1,678 | )                           | $     
|                                                                         |                                              |                              |        |                             |       
|Per basic share amounts:                                                 |                                              |                              |        |                             |       
|Income (loss) before cumulative effect of change in accounting principle |                                              | $                            | (0.04  | )                           | $     
|Cumulative effect of change in accounting principle                      |                                              |                              |       |                             |       
|                                                                         |                                              |                              |        |                             |       
|Net income (loss) per basic share                                        |                                              | $                            | (0.04  | )                           | $     
|                                                                         |                                              |                              |        |                             |       
|Per diluted share amounts:                                               |                                              |                              |        |                             |       
|Income (loss) before cumulative effect of change in accounting principle |                                              | $                            | (0.04  | )                           | $     
|Cumulative effect of change in accounting principle                      |                                              |                              |       |                             |       
|                                                                         |                                              |                              |        |                             |       
|Net income (loss) per diluted share                                      |                                              | $                            | (0.04  | )                           | $     
|                                                                         |                                              |                              |        |                             |       
|Shares used in computing basic net income (loss) per share               |                                              |                              | 39,014 |                             |       
|                                                                         |                                              |                              |        |                             |       
|Shares used in computing diluted net income (loss) per share             |                                              |                              | 39,014 |                             |       
|                                                                         |                                              |                              |        |                             |       

See
accompanying notes.

4

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MIPS TECHNOLOGIES, INC.  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)  (In thousands)

|                                                                |                                                                                                    | Nine Months Ended March 31,                                             |                                  
|--------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ---------------------------------
|
|
|Operating activities:                                           |                                                                                                    |                                                                         |                                  
|                                                                | Net income (loss)                                                                                  |                                                                         | $                                
|                                                                | Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |                                                                         |                                  
|                                                                |                                                                                                    | Cumulative effect of change in accounting principle, net of tax benefit |                                  
|                                                                |                                                                                                    | Depreciation                                                            |                                  
|                                                                |                                                                                                    | Other non-cash charges                                                  |                                  
|                                                                |                                                                                                    | Changes in operating assets and liabilities:                            |                                  
|                                                                |                                                                                                    |                                                                         | Accounts receivable              
|                                                                |                                                                                                    |                                                                         | Accounts payable                 
|                                                                |                                                                                                    |                                                                         | Other assets and liabilities, net
|                                                                |                                                                                                    |                                                                         |                                  
|                                                                |                                                                                                    |                                                                         |                                  
|Investing activities:                                           |                                                                                                    |                                                                         |                                  
|                                                                | Purchases of short-term investments                                                                |                                                                         |                                  
|                                                                | Maturities of short-term investments                                                               |                                                                         |                                  
|                                                                | Capital purchases                                                                                  |                                                                         |                                  
|                                                                | Purchases of intangible assets                                                                     |                                                                         |                                  
|                                                                | Purchases of investments in privately held company                                                 |                                                                         |                                  
|                                                                |                                                                                                    |                                                                         |                                  
|                                                                |                                                                                                    |                                                                         |                                  
|Financing activitiesnet proceeds from issuance of common stock |                                                                                                    |                                                                         | 842                              
|Foreign currency translation adjustment                         |                                                                                                    |                                                                         | 195                              
|                                                                |                                                                                                    |                                                                         |                                  
|Net increase (decrease) in cash and cash equivalents            |                                                                                                    |                                                                         | (38,097                          
|Cash and cash equivalents, beginning of period                  |                                                                                                    |                                                                         | 116,520                          
|                                                                |                                                                                                    |                                                                         |                                  
|Cash and cash equivalents, end of period                        |                                                                                                    | $                                                                       | 78,423                           
|                                                                |                                                                                                    |                                                                         |                                  

See
accompanying notes.

5

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MIPS TECHNOLOGIES, INC.        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSUNAUDITED

Note 1. Description of Business and Basis of Presentation

Formation of MIPS Technologies, Inc. (MIPS).MIPS Technologies' predecessor, MIPS Computer
Systems, Inc., was founded in 1984 and was engaged in the design and development of RISC processors for the computer systems and embedded markets. Silicon Graphics, Inc. adopted the MIPS
architecture for its computer systems in 1988 and acquired MIPS Computer Systems, Inc. in 1992. Following the acquisition, Silicon Graphics continued the MIPS processor business through its
MIPS Group (a division of Silicon Graphics), which focused primarily on the development of high-performance processors for Silicon Graphics' workstations and servers. In order to increase
the focus of the MIPS Group on the design and development of processor applications dedicated to the embedded market, in December 1997, Silicon Graphics initiated a plan to separate the
business of the MIPS Group from its other operations.

In
April 1998, our Board of Directors approved a transaction pursuant to which Silicon Graphics transferred to us the assets and liabilities related to the design and development
of processor intellectual property for embedded market applications. From the closing of our initial public offering on July 6, 1998 and until June 20, 2000, we were a majority owned
subsidiary of Silicon Graphics. On June 20, 2000, Silicon Graphics distributed all of its remaining interest in us in the form of a stock dividend of Class B common stock to its
stockholders.

Basis of Presentation.The unaudited results of operations for the interim periods shown in these
financial statements are not necessarily indicative of operating results for the entire fiscal year. In our opinion, the condensed consolidated financial statements include all adjustments (consisting
only of
normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows for each interim period shown.

The
condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC") applicable to interim
financial information. Certain information and footnote disclosures included in financial statements prepared in accordance with generally accepted accounting principles have been omitted in these
interim statements as allowed by such SEC rules and regulations. The balance sheet at June 30, 2001 has been derived from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. However, we believe that the disclosures are adequate to make the information presented not misleading. The unaudited condensed consolidated
financial statements included in this Form 10-Q should be read in conjunction with the audited consolidated financial statements and related notes for the fiscal year ended
June 30, 2001, included in our 2001 Annual Report on Form 10-K.

Use of Estimates.We prepare our financial statements in conformity with accounting principles
generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual results inevitably will differ from the estimates, and such differences may require material adjustments to our financial
statements to reconcile actual results with estimates previously made. Estimates are used for, among other things, the recognition of revenues under engineering services contracts, depreciation and
amortization, recognition of restructuring costs and the effect of contingencies.

Revenue Recognition and Cumulative Effect of Change in Accounting Principle.We derive revenue from
fees for the transfer of proven and reusable intellectual property components and from the performance of engineering services. We enter into licensing agreements that provide licensees the right to
incorporate MIPS' intellectual property components in their products with terms and conditions that

6

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have historically varied by licensee. Generally, these agreements include a nonrefundable technology license fee, which is payable upon the transfer of intellectual property, or a nonrefundable
engineering service fee, which generally is payable upon achievement of defined milestones. In addition, these agreements also include royalty payments, which are payable upon sale of a licensee's
product, and maintenance and limited support fees. We classify all revenue that involves the future sale of a licensee's products as royalty revenue. Royalty revenue generally is recognized in the
quarter in which a report is received from a licensee detailing the shipments of products incorporating our intellectual property components (i.e., in the quarter following the sale of licensed
product by the licensee). We classify all revenue that does not involve the future sale of a licensee's products, primarily license fees and engineering service fees and maintenance and support fees,
as contract revenue. License fees are recognized upon the execution of the license agreement and transfer of intellectual property, provided no further significant performance obligations exist and
collectibility is deemed probable.

Fees
related to engineering services contracts, which are performed on a best efforts basis and for which we receive periodic milestone payments, are recognized as revenue over the
estimated development period, using a cost-based percentage of completion method.

In
the fourth quarter of fiscal 2001, but effective to July 1, 2000, we changed our method of accounting to that described above for fees related to engineering services
contracts. We historically recognized these fees as revenue when all of the contractual obligations required to earn each milestone payment had been met, there were no further performance obligations
for such milestone, and collection was deemed probable. We believe the change in accounting principle is preferable based on guidance provided in SEC Staff Accounting Bulletin
No. 101Revenue Recognition in Financial Statements, released in December 1999.

As
a result of this change in method of accounting, the results of the third quarter and first nine months of fiscal 2001 were restated, and a charge of $1.2 million ($741,000 net
of tax effect) was recorded to reflect the cumulative effect of the change as of the beginning of the fiscal year. During the third quarter of fiscal year 2001, we recorded no contract revenue that
was included in the cumulative effect adjustment as of July 1, 2000. During the first nine months of fiscal 2001, we recorded $1.2 million in contract revenue that was included in the
cumulative effect adjustment as of July 1, 2000. There was no amount of contract revenue recorded in the third quarter or first nine months of fiscal 2002 that was included in the cumulative
effect adjustment as of July 1, 2000.

Annual
maintenance and support fees, renewable by licensee, are classified as contract revenue and are amortized over the period of support, generally 12 months. Revenue from
these arrangements is not significant.

Cash, Cash Equivalents and Short-term Investments.Cash and cash equivalents consists
mainly of financial instruments which are readily convertible into cash and have original maturities of three months or less at the time of acquisition. Short-term investments consists
mainly of financial instruments which have original maturities of one year or less at the time of original acquisition. The average maturity of our short-term investment balance at
March 31, 2002 is 102 days.

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Note 2. Computation of Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):

|                                                                                                                      |                                                     | Three Months Ended
March 31, |        | Nine Months Ended
March 31, |  
|--------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ---------------------------- | ------ | --------------------------- | -
|
|
|Numerator:                                                                                                            |                                                     |                              |        |                             |  
|                                                                                                                      | Net income (loss)                                   |                              | $      | (1,678                      | )
|                                                                                                                      |                                                     |                              |        |                             |  
|Denominator:                                                                                                          |                                                     |                              |        |                             |  
|                                                                                                                      | Weighted-average shares of common stock outstanding |                              |        | 39,039                      |  
|                                                                                                                      | Less: Weighted-average shares subject to repurchase |                              |        | (25                         | )
|                                                                                                                      |                                                     |                              |        |                             |  
|Shares used in computing basic net income (loss) per share                                                            |                                                     |                              | 39,014 |                             |  
|Effect of dilutive securities-employee stock options and shares subject to repurchase                                 |                                                     |                              |       |                             |  
|                                                                                                                      |                                                     |                              |        |                             |  
|Shares used in computing diluted net income (loss) per share                                                          |                                                     |                              | 39,014 |                             |  
|                                                                                                                      |                                                     |                              |        |                             |  
|Basic net income (loss) per share                                                                                     |                                                     | $                            | (0.04  | )                           | $
|                                                                                                                      |                                                     |                              |        |                             |  
|Diluted net income (loss) per share                                                                                   |                                                     | $                            | (0.04  | )                           | $
|                                                                                                                      |                                                     |                              |        |                             |  
|Potentially dilutive securities excluded from diluted net income per share computation because they are anti-dilutive |                                                     |                              | 4,240  |                             |  

Note 3. Comprehensive Income

Total comprehensive income includes net income (loss) and other comprehensive income, which for us primarily comprises unrealized gains and losses from foreign
currency adjustments. Total comprehensive loss for the third quarter of fiscal 2002 was $1.9 million and for the first nine months of fiscal 2002 was $5.9 million compared to total
comprehensive income of $8.3 million and $16.7 million for the comparable periods in fiscal 2001.

Note 4. Purchased Intangible Assets

In December 2001, we acquired from Lexra, Inc. certain technology related to our processor architectures and cores for cash consideration of
$6.0 million. We incurred acquisition costs of approximately $400,000. The purchase price was allocated to the acquired technology assets based on their estimated fair value. Developed
technology, core technology, and in-process technology were recorded at $1.8 million, $2.9 million and $1.7 million, respectively.

The
values of developed and core technologies were determined, with the assistance of independent third-party appraisers, by estimating the present value of cash flows from those
technologies as based on MIPS management and industry assumptions and market data. Developed and core technologies are being amortized, on a straight-line basis, over their estimated
useful lives of three and seven years, respectively.

A
charge of $1.7 million for purchased in-process research and development expenses was recorded upon acquisition of the technology. The amount allocated to
in-process research and development was expensed upon acquisition because technological feasibility had not been established and no future alternative uses for the technology existed. The
value of the projects was determined, with the assistance of an independent third-party appraiser, by estimating the present value of the net cash flows management believed would result from the
acquired technology.

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As
of March 31, 2002, our accrued liabilities included a remaining balance payable to Lexra, Inc. of approximately $900,000, which will be due in July 2002.

Note 5. Restructuring Charge

A restructuring charge of $437,000 was recorded during the second quarter of fiscal 2002 and is comprised of employee severance and benefit payments. We
eliminated 18 regular positions, or approximately 8% of our global workforce, affecting all of our functional groups, with the objective of reducing our operating expenses. All of the severance and
benefit costs associated with the eliminated positions were paid by January 2002.

Note 6. Contingencies

In October 1999, we filed suit against Lexra, Inc. in the United States District Court for the Northern District of California for infringement of
two United States patents, seeking injunctive relief and compensatory and enhanced damages. In November 1999, Lexra, Inc. filed counterclaims against us that sought a declaratory
judgment that the two asserted patents were invalid and not infringed and also asserted claims for unfair competition, intentional interference with business relations, and statutory unfair
competition. In September 2001, the District Court issued its ruling on the appropriate interpretation of the disputed patent claim terms to govern all further proceedings in the District
Court. In addition to its actions in the District Court, Lexra filed three separate requests with the Patent and Trademark Office seeking re-examination of one of the patents at issue in
this litigation. In December 2001, we and Lexra settled this litigation and dismissed all claims against each other in the litigation. In connection with this settlement, Lexra recognized the
validity of our patents, agreed to cease licensing processor cores, and became a MIPS32 architecture licensee. In addition, we purchased Lexra's intellectual property rights and technology related to
its processor cores and architectural extensions and a small equity interest in Lexra. In February 2002, the Patent and Trademark Office completed its reexamination of one of our patents based
on Lexra's reexamination requests. The Patent and Trademark Office confirmed the patentability of all claims contained in the patent thereby rejectingLexra's
repeatedattempts to invalidateseveral of theseclaims.

We
are not aware of any pending disputes, including that discussed above, that would be likely to have a material adverse effect on our business, results of operations or financial
condition.

From
time to time, we receive communications from third parties asserting patent or other rights covering our products and technologies. Based upon our evaluation, we may take no action
or we may seek to obtain a license. There can be no assurance in any given case that a license will be available on terms we consider reasonable, or that litigation will not ensue. In addition, from
time to time we evaluate possible patent infringement claims against third parties and may assert such claims if appropriate.

Note 7. Stock Option Exchange Offer

On November 15, 2001, we completed a voluntary stock option exchange program for our employees. Under the program, employees were given the opportunity to
submit for cancellation any of their outstanding stock options in a one-for-one exchange for replacement options to be granted on a day that is at least six months and one day
from the date of cancellation of the submitted options. A total of 4,471,121 options were cancelled in connection with the option exchange program. The exercise price of the replacement options will
be equal to the closing price of our Class A common stock as reported on the Nasdaq National Market on the grant date of the replacement options. For certain of our executive officers, the
exercise price of the replacement options will be equal to the higher of the closing price of our common stock on the grant date of the replacement options or on the date of cancellation.

9

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Note 8. Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards No. 141, Business Combinations(SFAS 141), and No. 142,Goodwill and Other Intangible Assets(SFAS 142). SFAS 141 eliminates the pooling-of-interests method of accounting for business combinations except for qualifying business combinations that were
initiated prior to July 1, 2001. SFAS 141 further clarifies the criteria to recognize intangible assets separately from goodwill. The requirements of SFAS 141 are effective for
any business combination accounted for by the purchase method that is completed after June 30, 2001. Under SFAS 142, goodwill and indefinite lived intangible assets are no longer
amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be
amortized over their useful lives (but with no maximum life). The amortization provisions of SFAS 142 apply to goodwill and intangible assets acquired after June 30, 2001. The adoption
of SFAS 141 on July 1, 2001 did not have a material impact on our financial position or results of operations, and we do not expect the adoption of SFAS 142 on July 1, 2002
will have a material impact on our financial position or results of operations.

In
August 2001, the FASB issued Statements of Financial Accounting Standards No. 144,Accounting for the Impairment or Disposal of
Long-Lived Assets(SFAS 144), which is effective for fiscal periods beginning after December 15, 2001 and interim periods within those fiscal years.
SFAS 144 establishes an accounting model for impairment or disposal of long-lived assets to be disposed of by sale. We are currently evaluating the potential impact, if any, the
adoption of FAS 144 will have on our financial position and results of operations.

10

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

You should read the following discussion and analysis together with our unaudited condensed consolidated financial statements and the
notes to those statements included elsewhere in this report.This discussion may contain forward-looking statements that involve risks and uncertainties. These forward-looking
statements within this Quarterly Report on Form 10-Q are identified by words such as "believes," "anticipates," "expects," "intends," "may" and other similar expressions. Our actual
results could differ materially from those indicated in these forward-looking statements as a result of certain factors, including those described under "Factors That May Affect Our Business", and
other risks affecting our business. We undertake no obligation to update any forward-looking statements included in this discussion.

Accounting Policies and Estimates

Our revenue consists of royalties and contract revenue earned under contracts with our licensees. Our contracts with our licensees are typically subject to
periodic renewal or extension and expire at various dates through June 2018. Although the precise terms of our contracts vary, they typically provide for royalties, technology license or
engineering service fees, and maintenance fees.

We
generate royalties from the sale by our licensees of products incorporating our technology. Royalty revenue generally is recognized in the quarter in which a report is received from a
licensee detailing the shipments of products incorporating our intellectual property, typically in the quarter following the sale of the licensee's product to its customer. Royalties are calculated
either as a percentage of the revenue received by the seller on sales of such products or on a per unit basis.

Contract
revenue includes technology license fees and engineering services fees. We receive license fees for the use of technology that we have developed internally and, in some cases,
which we have licensed from third parties. License fees are typically recognized upon the execution of the license agreement and transfer of intellectual property, provided no further significant
performance obligations exist and collectibility is deemed probable. Technology license fees vary based on, among other things, whether a particular technology is licensed on a per use application or
for multiple or unlimited applications, and whether the license granted covers a particular design or a broader architecture. Fees related to engineering services contracts, which are performed on a
best efforts basis and for which we receive
periodic milestone payments, are recognized as revenue over the estimated development period using a cost-based percentage of completion method. In most instances, the technology we
develop, including under engineering services contracts, can be licensed to multiple customers.

In
the fourth quarter of fiscal 2001, but effective to July 1, 2000, we changed our method of accounting to that described above for fees related to engineering services
contracts. We historically recognized these fees as revenue when all of the contractual obligations required to earn each milestone payment had been met, there were no further performance obligations
for such milestone, and collection was deemed probable. We believe the change in accounting principle is preferable based on guidance provided in SEC Staff Accounting Bulletin
No. 101Revenue Recognition in Financial Statements, released in December 1999.

As
a result of this change in method of accounting, the results of the third quarter and first nine months of fiscal 2001 were restated, and a charge of $1.2 million ($741,000 net
of tax effect) was recorded to reflect the cumulative effect of the change as of the beginning of the fiscal year. During the third quarter of fiscal 2001, we recorded no contract revenue that was
included in the cumulative effect adjustment as of July 1, 2000. During the first nine months of fiscal 2001, we recorded $1.2 million in contract revenue that was included in the
cumulative effect adjustment as of July 1, 2000. There was no amount of contract revenue recorded in the third quarter or first nine months of fiscal 2002 that was included in the cumulative
effect adjustment as of July 1, 2000.

11

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We
prepare our financial statements in conformity with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results inevitably will differ
from the estimates, and such differences may require material adjustments to our financial statements to reconcile actual results with estimates previously made. Estimates are used for, among other
things, the recognition of revenues under engineering services contracts, depreciation and amortization, recognition of restructuring costs and the effect of contingencies.

Results of Operations

Revenue.Total revenue for the third quarter of fiscal 2002 was $12.7 million and for the first nine months of fiscal
2002 was $37.2 million compared to $28.1 million and $67.3 million for the comparable periods in fiscal 2001. Total revenue excluding royalties from Nintendo 64 game products was
$11.7 million in the third quarter of fiscal 2002 and for the first nine months of fiscal 2002 was $33.2 million compared to $16.2 million and $44.2 million for the
comparable periods in fiscal 2001. This was a decline of 28%
during the third quarter of fiscal 2002 and 25% during the first nine months of fiscal 2002 over the comparable periods in fiscal 2001. Royalties for the third quarter of fiscal 2002 were
$4.1 million and for the first nine months of fiscal 2002 were $13.5 million compared to $16.1 million and $34.2 million for the comparable periods in fiscal 2001. The
decrease in royalty revenues in both periods was primarily due to lower royalties derived from sales of Nintendo products. As the Nintendo 64 video game product line continues further into its life
cycle, sales of such products, and the related royalties we receive, are trending downward, subject to seasonal fluctuations and the impact of particular game titles introduced by Nintendo from time
to time. We anticipate that revenue related to sales of Nintendo 64 game players and related cartridges will continue to decline and will be insignificant by the end of fiscal 2002. Royalties
excluding royalties from Nintendo 64 game products declined 26% in the third quarter of fiscal 2002 and 14% during the first nine months of fiscal 2002 over the comparable periods in fiscal 2001.
Contract revenue for the third quarter of fiscal 2002 was $8.6 million and for the first nine months of fiscal 2002 was $23.6 million compared to $12.0 million and
$33.1 million for the same periods in fiscal 2001. The decrease in contract revenues in both the third quarter and first nine months of fiscal 2002 was primarily due to lower revenue from both
unlimited use and per use licenses than in the comparable periods of fiscal 2001. In addition, fees related to engineering service contracts were lower during the third quarter and first nine months
of fiscal 2002 due to lower average fees per service contract. We expect that contract revenue, except for seasonal fluctuations in royalties, will be greater than 50% of our total revenue for the
next several years.

Cost of Contract Revenue.Our cost of contract revenue consists of sublicense fees payable to third parties. We incur an
obligation to pay these fees when we sublicense technology to our customers that we have licensed from third parties. Sublicense fees are recorded as cost of contract revenue when the obligation is
incurred, which is typically the same period in which the related revenue is recognized.

Cost
of contract revenue for the third quarter of fiscal 2002 and 2001 was zero and for the first nine months of fiscal 2002 and 2001 was $250,000. We expect that in future periods cost
of contract revenue will be minimal.

Research and Development.Costs incurred with respect to technology we develop internally and engineering services we perform
which are not directly related to any particular licensee, license agreement or license fee are recorded as research and development expense.

Research
and development expenses for the third quarter of fiscal 2002 were $8.4 million and for the first nine months of fiscal 2002 were $25.3 million compared with
research and development expenses of $9.5 million and $24.9 million for the comparable periods in fiscal 2001. The decrease in research and development expenses during the third quarter
of fiscal 2002 was due to our reduced

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demand for services from independent contractors and outside testing services needed to meet project milestones. The increase in research and development expenses during the first nine months of
fiscal 2002 was due to the addition of resources and computer aided design tools to support various project development activities, including a net increase of 18 employees to the development team
during the past twelve months. These increases were partially offset by our reduced demand for services from
independent contractors needed to meet project milestones. We expect research and development expenses to increase slightly as we continue to develop technologies to extend our product line offering.

Sales and Marketing.Sales and marketing expenses for the third quarter of fiscal 2002 were $4.9 million and for the
first nine months of fiscal 2002 were $13.3 million compared to $4.3 million and $11.4 million for the comparable periods in fiscal 2001. The increase in sales and marketing
expenses was due to increased spending on third party software development tools as we partner with tool vendors to enhance the offering of MIPS compatible development tools such as compilers,
debuggers, probes and operating systems. Expenses associated with third party tools are typically driven by attainment of milestones and vary from period to period. We expect our other sales and
marketing expenses to remain relatively stable over the next few quarters.

General and Administrative.General and administrative expenses for the third quarter of fiscal 2002 were $1.9 million
and for the first nine months of fiscal 2002 were $5.5 million compared to $2.6 million and $6.8 million for the comparable periods in fiscal 2001. The decrease in the third
quarter of fiscal 2002 and year-to-date general and administrative expenses was primarily because fewer projects were outsourced to third party accounting and legal firms. Our general and
administrative costs are subject to quarterly fluctuation depending on our requirements for third party services regarding tax, patent and trademark projects and other legal and accounting matters.

Acquired In-Process Research and Development.In December 2001, we acquired from Lexra, Inc.
certain technology related to our processor architectures and cores and we recorded a charge of $1.7 million for purchased in-process research and development expenses upon
acquisition of the technology. The amount allocated to in-process research and development was expensed upon acquisition because technological feasibility had not been established and no
future alternative uses for the technology existed. The value of the projects was determined, with the assistance of an independent third-party appraiser, by estimating the present value of the net
cash flows management believed would result from the acquired technology.

Restructuring.The restructuring charge of $437,000 recorded during the second quarter of fiscal 2002 is comprised of
employee severance and benefit payments. We eliminated 18 regular positions or about 8% of our global workforce with the objective of reducing our operating expenses. All of the severance and benefit
costs associated with the 18 positions eliminated were paid by January 2002.

Other Income, Net.For the third quarter of fiscal 2002, other income, net, was $510,000 and for the first nine months of
fiscal 2002 was $2.4 million compared to other income, net, of $1.7 million and $4.9 million for the comparable periods in fiscal 2001. The decrease in both periods was primarily
due to a decline in interest income due to lower interest rates.

Income Taxes.We recorded an income tax benefit of $380,000 for the third quarter of fiscal 2002 and $780,000 for the first
nine months of fiscal 2002 compared to an income tax provision of $4.9 million and $11.0 million for the same periods in fiscal 2001. The income tax benefit recorded for the
three-and-nine-month periods ended March 31, 2002 represents a projected recovery of previously paid US federal income taxes reduced by current year foreign
income taxes. The income tax provision recorded for the three-and-nine-month periods ended March 31, 2001 represents a combined US federal, state and foreign
effective tax rate of approximately 38%.

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Financial Condition

At March 31, 2002, we had cash and cash equivalents and short-term investments of $97.8 million and total working capital of $101.0 million.

Our
operating activities used net cash of $12.1 million for the nine months ended March 31, 2002 compared to net cash provided by operating activities of
$24.7 million for the comparable period in the prior year. During the nine-month period ended March 31, 2002, net cash used by operating activities consisted mainly of our
net loss, including the one-time in-process research and development charge and the restructuring charge, combined with an increase in other assets, and a decrease in accounts
payable and accruals, partially offset by depreciation. The increase in other assets pertains to increased licensing of computer aided design tools. An increasing number of our computer aided design
tools are now secured through term licenses of three to seven years. In the past, the majority of our tools were acquired through purchases of perpetual licenses, which were recorded as capital
assets. The decrease in accounts payable is due to the timing of asset purchases and related payments. The decrease in accruals is primarily due to a decrease in our tax provision resulting from
estimated payments and a tax benefit in the first nine months of fiscal 2002. During the nine months ended March 31, 2001, net cash provided by operations consisted primarily of net income, a
net increase in other assets and liabilities, an increase in accounts payable and the non-cash benefit of depreciation expense, offset in part by an increase in accounts receivable. The
increase in accounts payable was due to the timing of asset purchases and related payments. The net increase in other assets and liabilities in fiscal 2001 was primarily due to the tax provision,
offset by a decrease in deferred revenue. The increase in accounts receivable reflects the timing of the invoicing and collection of fees owed us under licensing agreements.

Net
cash used in investing activities was $27.1 million for the nine months ended March 31, 2002 compared to $4.7 million for the comparable period in the prior
year. Net cash used in investing activities during the first nine months of fiscal 2002 includes purchases net of maturities of short-term investments as well as purchases of equipment and
computer aided design tools used in development, in addition to the purchase price for intangible assets from Lexra, Inc. and a small equity interest in Lexra, Inc. As of
March 31, 2002, our accrued liabilities included the remaining balance payable to Lexra, Inc. of approximately $900,000, which will be due in July 2002. Net cash used in investing
activities for the comparable period of fiscal 2001 represents purchases of equipment and computer aided design tools used in development. Capital expenditures have been, and future expenditures are
anticipated to be, primarily for facilities, equipment and computer aided design tools used in development.

Net
cash provided by financing activities was $842,000 for the nine months ended March 31, 2002 compared to $6.6 million for the comparable period in the prior year. Net
cash provided in both periods resulted primarily from the exercise of employee stock options and activity in our employee stock purchase plan, and the decrease in fiscal 2002 is due to fewer stock
option exercises than in the same period of the prior year.

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



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We
believe that we have sufficient cash to meet our projected operating and capital requirements for the foreseeable future. However, we may in the future be required to raise additional
funds through public or private financing, strategic relationships or other arrangements, particularly if we continue to consume cash due to losses from operations. If available, additional equity
financing may be dilutive to holders of our common stock, and debt financing, if available, may involve restrictive covenants. Moreover, strategic relationships may require that we relinquish our
rights to certain of our technologies. Our failure to raise capital when needed could adversely affect our business, results of operations and financial condition.

On
June 20, 2000, Silicon Graphics distributed all of the shares of our common stock that it owned in a transaction intended to be tax-free to Silicon Graphics and its
stockholders. Our ability to issue additional shares of our common stock in connection with acquisitions or to raise equity capital during the 30-month period following this distribution
will be limited under the terms of a distribution tax indemnification agreement which we have entered into with Silicon Graphics. The agreement contains covenants under which we may not issue capital
stock in an acquisition or private or public offering within the 30-month period following the tax-free distribution, except (a) pursuant to the exercise of employee,
director or consultant stock options or awards and (b) for the issuance of up to a cumulative amount of 10% of our outstanding stock at the time of the tax-free distribution unless
certain conditions are met.

Factors That May Affect Our Business

Our success is subject to numerous risk and uncertainties, including those discussed below. These factors could hinder our growth, cause
us to sustain losses or have other adverse effects on us, all of which could cause our stock price to decline.

We must diversify our sources of revenue to offset the decline in revenue we derive from sales of Nintendo video game
products.Historically, royalties from Nintendo and NEC Corporation relating to Nintendo 64 video game players and related cartridges have accounted for a
substantial portion of our total revenues. We anticipate that royalties related to Nintendo 64 game products, will continue to decline and will be insignificant by the end of fiscal 2002. In addition,
the next generation Nintendo video game system will not incorporate our technology. We must diversify our sources of revenue to offset the decline in these Nintendo-related revenues. However, our
ability to diversify our sources of revenue is uncertain and will depend on whether our processors and related designs are selected for design, which we refer to as design wins, into a broader range
of both digital consumer and business products. Our ability to achieve design wins is subject to several risks and uncertainties, including:



Even
if our technology is incorporated into new products, we cannot be certain that any such products will ultimately be brought to market, achieve commercial acceptance or generate meaningful
royalties for us.

Our future growth depends in significant part on our receipt of royalties from the sale of products incorporating our technology, and we have limited visibility
as to the timing and amount of such sales.Our license agreements generally provide for our receipt of license fees, which we characterize as contract revenue,
paid for access to our technology, and, ultimately, for royalties that are owed to us upon the sale of products incorporating this technology. In recent years we have had an increase in contract
revenues from licenses of our technology. While we expect that we will continue to grant additional licenses to new licensees and develop new products to license to both new and existing

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licensees, our contract revenue has slowed recently and we do not expect it to continue to grow at the same rate as it had in the past. Generally our licensees are not obligated to license new or
future generations of our products, so past contract revenue may not be indicative of the amount of such revenue in any future period. Our future growth depends significantly on our receipt of
royalties from the sales of products using our technology. Frequently these sales upon which our royalties depend are based on the sales of products incorporating the semiconductors or other products
of our licensees, and as a result we do not have direct access to information that will help us anticipate the timing and amount of future royalties. To date most of our royalties have come from the
sale of Nintendo 64 products, and it is difficult to predict royalties from other sources.

Because
of our dependence on royalties from the sale of products incorporating our technology, our success is linked to the success of our licensees and, in the case of our semiconductor
company licensees, the success of their customers. Factors that negatively affect our licensees and their customers could adversely affect our business. The success of our direct and indirect
customers is subject to a number of factors, including:



Because
we do not control the business practices of our licensees and their customers, we have little influence on the degree to which our licensees promote our technology and do not set the prices at
which products incorporating our technology are sold.

Our quarterly financial results are subject to significant fluctuations that could adversely affect our stock price.Our
quarterly financial results may vary significantly due to a number of factors, many of which are outside of our control. In addition, our revenue components are difficult to predict and may fluctuate
significantly from period to period. Because our expenses are largely independent of our revenue in any particular period, it is difficult to accurately forecast our operating results. Our
operating expenses are based, in part, on anticipated future revenue and a high percentage of our expenses are fixed in the short term. As a result, if our revenue is below expectations in any
quarter, the adverse effect may be magnified by our inability to adjust spending in a timely manner to compensate for the revenue shortfall. Therefore, we believe that
quarter-to-quarter comparisons of our revenue and operating results may not be a good indication of our future performance.

It
is possible that in some future periods our results of operations may be below the expectations of public market analysts and investors. In this event, the price of our common stock
may fall.

Factors
that could cause our revenue and operating results to vary from quarter to quarter include:



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We depend on semiconductor companies and digital consumer and business product manufacturers to adopt our technology and use it in the products they
sell.The adoption and continued use of our technology by semiconductor companies and digital consumer and business product manufacturers is essential to our
continued success. We face numerous risks in obtaining agreements with semiconductor companies and digital consumer and business product manufacturers on terms consistent with our business model,
including:



We
cannot assure you that we will be able to maintain our current relationships or establish new relationships with additional licensees, and any failure by us to do so could have a
material adverse effect on our business. In addition, we may devote substantial resources to the pursuit of a relationship with a potential licensee that ultimately is not successful.

We depend on the emerging markets for digital consumer and business products and customer acceptance of the products that integrate our
technology.The digital consumer and business products industries are presently the primary market for our processor, core and related designs. The markets for
digital consumer and business products are relatively new and emerging, and our success will depend largely on the level of interest in digital consumer and business products, many of which have only
recently been introduced to the market and for us to grow, it is necessary that a significant number of additional products incorporating our technology be developed and successfully marketed.
Further, customer acceptance of both consumer and business products may be hampered during periods of general economic uncertainty, as many consumers and businesses might delay their purchase
decisions. We cannot assure you that any products that incorporate our technology will achieve commercial acceptance or generate meaningful royalties for us.

Our
dependence on the digital consumer and business products industries involves several risks and uncertainties, including:



If we are unable to develop enhancements and new generations of our intellectual property, we may be unable to achieve design
wins.Our future success will depend on our ability to develop enhancements and new generations of our processors, cores and other intellectual property that
satisfy the requirements of specific product applications and introduce these new technologies to the marketplace in a timely manner. If our development efforts are not successful or are significantly

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delayed, or if the characteristics of our processor, core and related designs are not compatible with the requirements of specific product applications, our ability to achieve design wins may be
limited. Our failure to achieve a sufficient number of design wins would adversely affect our business, results of operations and financial condition.

Technical
innovations of the type critical to our success are inherently complex and involve several risks, including:



Our
failure to adequately address these risks could render our existing processor, core and related designs obsolete and adversely affect our business, results of operations and
financial condition. In addition, we cannot assure you that we will have the financial and other resources necessary to develop processor, core and related designs in the future, or that any
enhancements or new generations of the technology that we develop will generate revenue in excess of or sufficient to cover the costs of development.

If we fail to compete effectively in the market for embedded processors, our business will be adversely affected.Competition
in the market for embedded processors is intense. Our products compete with those of other designers and developers of processors and cores, as well as those of semiconductor manufacturers whose
product lines include processors for embedded and non-embedded applications. In addition, we may face competition from the producers of unauthorized MIPS-based clones and
non-RISC based technology designs. We cannot assure you that we will be able to compete successfully or that competitive pressures will not materially and adversely affect our business,
results of operations and financial condition.

In
order to be successful in marketing our products to semiconductor companies, we must differentiate our processors, cores and related designs from those available or under development
by the internal design groups of these companies, including some of our current and prospective licensees. Many of these internal design groups have substantial engineering and design resources and
are part of larger organizations with substantial financial and marketing resources. These internal design groups may develop products that compete directly with ours or may actively seek to license
their own technology to third-party semiconductor companies.

Many
of our existing competitors, as well as a number of potential new competitors, have longer operating histories, greater brand recognition, larger customer bases as well as greater
financial and marketing resources than we do. This may allow them to respond more quickly than we can to new or emerging technologies and changes in customer requirements. It may also allow them to
devote greater resources than we can to the development and promotion of their technologies and products.

Our intellectual property may be misappropriated or subject to claims of infringement.Policing the unauthorized use of our
intellectual property is difficult, and we cannot be certain that the steps we

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have taken will prevent the misappropriation or unauthorized use of our technologies, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United
States. In addition, we cannot be certain that we will be able to prevent other parties from designing and marketing unauthorized MIPS-based products or that others will not independently
develop or otherwise acquire the same or substantially equivalent technologies as ours. Moreover, cross licensing arrangements, in which we license certain of our patents but do not generally transfer
know-how or other proprietary information, may facilitate the ability of cross-licensees, either alone or in conjunction with others, to develop competitive products and designs.

We
cannot assure you that any of our patent applications will be approved or that any of the patents or other intellectual property rights that we own or use will not be challenged,
invalidated or circumvented by others or be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. Significant litigation regarding intellectual property
rights exists in our industry. We cannot be certain that third parties will not make a claim of infringement against us, our licensees, or their manufacturers' customers in connection with use of our
technology. Any claims, even those without merit, could be time consuming to defend, result in costly litigation and/or require us to enter into royalty or licensing agreements. These royalty or
licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against us or one of our licensees in connection with its use of our
technology could adversely affect our business.

We depend on our key personnel to succeed.Our success depends to a significant extent on the continued contributions of our
key management, technical, sales and marketing personnel, many of whom are highly skilled and difficult to replace. Generally, our employees are not bound by employment or non-competition
agreements, and we cannot assure you that we will retain our key officers and employees. Further, we expect that we will continue to need to hire highly skilled personnel, particularly engineering and
other technical personnel for our research and development activities. Competition for qualified personnel, particularly those with significant experience in the semiconductor and processor design
industries, remains intense. The loss of the services of any of our key personnel or our inability to attract and retain qualified personnel in the future could adversely affect our business, results
of operations and financial condition.

Our revenue is subject to fluctuations in currency exchange rates.A substantial portion of our revenue has been, and is
expected to continue to be, derived from customers outside the United States, primarily in Japan. To date, substantially all of our revenue from international customers has been denominated in U.S.
dollars. However, to the extent that the sales by our licensees to their customers are denominated in foreign currencies, the royalties we receive on such sales could be subject to fluctuations in
currency exchange rates. In addition, if the effective price of the technology we sell to our licensees were to increase due to fluctuations in foreign currency exchange rates, demand for our
technology could fall, which would, in turn, reduce our royalties. Because we cannot predict the amount of non-U.S. dollar denominated revenue earned by our licensees, we have not
historically attempted to mitigate the effect that currency fluctuations may have on our revenue, and we do not presently intend to do so in the future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to interest rate risk on investments of our excess cash. The primary objective of our investment activities is to preserve capital. To achieve this
objective and minimize the exposure due to adverse shifts in interest rates, we invest in high quality short-term maturity commercial paper and municipal bonds, and money market funds
operated by reputable financial institutions in the United States. Due to the nature of our investments, we believe that we do not have a material interest rate risk exposure.

We
are exposed to fluctuations in currency exchange rates because a substantial portion of our revenue has been, and is expected to continue to be, derived from customers located outside
the United States, primarily in Japan. To date, substantially all of our revenue from international customers has been denominated in U.S. dollars. Because we cannot predict the amount of
non-U.S. dollar denominated revenue earned by our licensees, we have not historically attempted to mitigate the effect that currency fluctuations may have on our revenue, and we do not
presently intend to do so in the future.

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PART IIOTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In October 1999, we filed suit against Lexra, Inc. in the United States District Court for the Northern District of California for infringement of
two United States patents, seeking injunctive relief and compensatory and enhanced damages. In November 1999, Lexra, Inc. filed counterclaims against us that sought a declaratory
judgment that the two asserted patents were invalid and not infringed and also asserted claims for unfair competition, intentional interference with business relations, and statutory unfair
competition. In September 2001, the District Court issued its ruling on the appropriate interpretation of the disputed patent claim terms to govern all further proceedings in the District
Court. In addition to its actions in the District Court, Lexra filed three separate requests with the Patent and Trademark Office seeking re-examination of one of the patents at issue in
this litigation.

In
December 2001, we and Lexra settled this litigation and dismissed all claims against each other in the litigation. In connection with this settlement, Lexra recognized the
validity of our patents, agreed to cease licensing processor cores, and became a MIPS32 architecture licensee. In addition, we purchased Lexra's intellectual property rights and technology related to
its processor cores and architectural extensions and a small equity interest in Lexra. In February 2002, the Patent and Trademark Office completed its reexamination of one of our patents based
on Lexra's reexamination requests. The Patent and Trademark Office confirmed the patentability of all claims contained in the patent thereby rejectingLexra's
repeatedattempts to invalidateseveral of theseclaims.

We
are not aware of any pending disputes, including that discussed above, that would be likely to have a material adverse effect on our business, results of operations or financial
condition.

From
time to time, we receive communications from third parties asserting patent or other rights covering our products and technologies. Based upon our evaluation, we may take no action
or we may seek to obtain a license. There can be no assurance in any given case that a license will be available on terms we consider reasonable, or that litigation will not ensue. In addition, from
time to time we
evaluate possible patent infringement claims against third parties and may assert such claims if appropriate.

ITEM 6. Exhibits and Reports on Form 8-K





ITEMS
2, 3, 4 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.

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SIGNATURES

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

| |  | MIPS Technologies, Inc.
a Delaware corporation
| |  | ----------------------------------------------
| |  | By:                                           

Dated:
May 10, 2002

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Index of Exhibits

Exhibit
No.

10.10    Directors'
Stock Option Plan, as amended

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