##### Table of Contents



UNITED
    STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number:
    000-49842
  CEVA, INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

77-0556376(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)2033 Gateway Place,
    Suite 150, San Jose, California

95110-1002(Address of principal executive
    offices)

(Zip Code)   (408) 514-2900
 (Registrants telephone
    number, including area code)
  None
 (Former name, former address and
    former fiscal year, if changed since last report)
  Securities registered pursuant to Section 12(b) of the
    Act:
   Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par
    value per share

NASDAQ NATIONAL MARKET   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ
      Class

Outstanding at March 8, 2007Common Stock, $0.001 par
    value per share

19,466,805 shares   DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 



TABLE OF
    CONTENTS
  PagePART IItem 1.


Business


1Item 1A.


Risk
    Factors


13Item 1B.


Unresolved Staff
    Comments


20Item 2.


Properties


20Item 3.


Legal
    Proceedings


21Item 4.


Submission of
    Matters to a Vote of Security Holders


21Executive Officers of the
    Registrant


21PART IIItem 5.


Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


22Item 6.


Selected Financial
    Data


24Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


26Item 7A.


Quantitative and
    Qualitative Disclosure About Market Risk


40Item 8.


Financial
    Statements and Supplementary Data


41Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


41Item 9A.


Disclosure Controls
    and Procedures


41Item 9B.


Other
    Information


44PART IIIItem 10.


Directors,
    Executive Officers and Corporate Governance


44Item 11.


Executive
    Compensation


44Item 12.


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


44Item 13.


Certain
    Relationships and Related Transactions, and Director
    Independence


44Item 14.


Principal
    Accountant Fees and Services


44PART IVItem 15.


Exhibits, Financial
    Statement Schedules


45Financial
    Statements


F-1SignaturesEXHIBIT 21.1EXHIBIT 23.1EXHIBIT 23.2EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32   i




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FORWARD-LOOKING
    STATEMENTS AND INDUSTRY DATA
  and/or
  
    Our belief that given the complexity of applications for DSPs,
    there is increasingly an industry shift away from the
    traditional approach of licensing standalone DSPs, and towards
    licensing highly integrated application platforms incorporating
    all the necessary hardware and software for their target
    applications;
    Forward Concepts forecasts total DSP semiconductor shipments
    will grow 15% in 2007 to $9.7 billion, while
    system-on-chips
    incorporating DSP technology continues to be another growth
    sector for the technology;
    Our belief that the industry is indicating a continued demand
    for highly integrated, licensable application platforms
    incorporating DSP cores and all the necessary hardware and
    software and that the growth in the demand for these platforms
    will drive demand for our technology and that we are well
    positioned to take full advantage of these major industry shifts;
    Our anticipation that the APAC region, specifically China, will
    represent future growth potential for our business;
    Our planned future products are anticipated to enable true
    mobile multimedia integration into cellular handsets and the
    possible inclusion of other technologies and that these pioneer
    solutions will allow us to provide the desired flexibility for
    wireless semiconductors;
    Our belief that our introduction of additional features, such as
    advances in our video technology, high-end audio technologies
    and home entertainment applications will also contribute to our
    growth in future periods;
    Our anticipation that our current cash on hand, short term
    deposits and marketable securities, along with cash from
    operations, will provide sufficient capital to fund our
    operations for at least the next 12 months; and
    Our belief that a successful surrender of our long-term lease in
    Dublin, Ireland in 2007 will result in an associated cash
    outflow of approximately $3.3 million associated with
    restructuring charges.      Form 10-K
 ii




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PART I  ITEM 1.
    BUSINESS  Company
    Overview
    Voice-over-IP
  Voice-over-IP
  per-unit CEVA-powered
    Industry
    Background
  Digital
    Signal Processor(DSP) Cores
    system-on-chips
  Semiconductor
    Intellectual Property (SIP)
   1




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in-house.
  CEVA
    Business
  System-on-Chip
    IP
    Business Model
  DSP-of-choice
  per-unit
  Strategy
   2




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
    Continue to develop and enhance our range of DSP cores and
    associated subsystems.  We seek to enhance our
    existing family of DSP cores and DSP-based subsystems with
    additional features, performance and capabilities.
    Continue to develop and enhance our range of complete and
    highly-integrated platform solutions.  We intend
    to continue developing our integrated IP solutions which combine
    application-specific software and dedicated logic 
    such as video, audio and VOIP  built around our DSP
    cores, and deliver to our licensing partners as a complete and
    verified system solution.
    Capitalize on our relationships and
    leadership.  We seek to expand our worldwide
    community of semiconductor and system OEM licensees who are
    developing CEVA-based solutions.
    Capitalize on our IP licensing and royalty business
    model.  We seek to maximize the advantages of our
    IP model which we believe is the best vehicle for pervasive
    adoption of our technology. Furthermore, by not having to focus
    on manufacturing or selling of silicon products, we are free to
    focus most of our resources on research and development of new
    licensable technologies and applications.  Products
    system-on-chip
  
 3




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CEVA
    DSP Cores
      
    CEVA-X-CEVA-X is a scalable VLIW-SIMD DSP
    architecture delivering high levels of performance at low power
    consumption. CEVA-X is uniquely designed as a multipurpose
    architecture, allowing multiple derivative cores with the
    optimal performance/price/power point requirements to multiple
    markets such as 2.5G/3G multimedia phones, PDAs, digital cameras
    and camcorders, DTV, Set-top boxes and HD-DVD. CEVA-X combines
    extendibility  the architecture can be extended with
    user-defined instruction sets  with scalability,
    supporting between 2 to 8 MAC units as well as additional
    computational resources and memory bandwidth. CEVA-X enables
    licensees to efficiently develop software using high-level
    languages such as C and C++, which reduces the cost of
    development.  CEVA-X1620, the first implementation of the CEVA-X architecture
    family, is a
    16/32 bit
    data width, dual MAC DSP with four 40-bit arithmetic units. The
    CEVA-X1620 can run up to 8 instructions simultaneously and up to
    20 SIMD operations at any given cycle. Demonstration CEVA-X1620
    silicon runs at 400MHz (TSMC 0.13μ).CEVA-X1622 is the second implementation of the CEVA-X
    architecture. It offers the same basic features as the CEVA-X
    1620 but offers an enhanced memory architecture, including
    configurable memory size (64KB or 128KB), and configurable
    memory bank organizations in 2 or 4 blocks.CEVA-X1641 is the third implementation of the CEVA-X
    architecture. It is the first Quad-MAC DSP CEVA-X core and is
    designed specifically to run highly computational intensive
    tasks that require substantial data throughput and high memory
    bandwidth, such as WiMAX, WiBro, 3G LTE and advanced multimedia
    standards.CEVA-X DSP cores are complemented by development platforms and
    Software Development Kits (SDK). All components of CEVA-X tools
    are developed in-house by CEVA to deliver optimal performance.CEVA-X Markets:  4G/WiMAX, 3G wireless,
    portable multimedia video & audio processing, and home
    entertainment (Digital TV, HDTV, PVR and HD-DVD).  
    CEVA-Teak-CEVA-Teak is a 16-bit fixed-point
    general-purpose DSP core. Its dual MAC architecture features
    high-performance and bandwidth for complex signal processing
    implementations. Its capabilities to run up to 4 instructions
    simultaneously while using only a single 16-bit instruction word
    make it ideal for portable multimedia and wireless communication
    markets.  CEVA-Teak Markets:  2.5/3G wireless, portable
    multimedia, portable audio players, digital still cameras and
    VoIP.  
    CEVA-TeakLite-CEVA-TeakLite is a single
    Multiply-Accumulate (MAC) 16-bit fixed point DSP core. The
    TeakLite core is the most established and successful DSP core in
    CEVAs DSP family with over 750 million chips powered
    by CEVA- TeakLite shipped to date. CEVA-TeakLite is positioned
    to meet high volume, but very cost sensitive markets such as
    2G/2.5G and ultra-low-cost (ULC) wireless handsets, portable
    audio players, hard disk drives, optical drives, and home
    entertainment and communication devices. CEVA-TeakLite is fully
    compatible to the legacy CEVA-Oak DSP at assembly and binary
    levels which reduces our customers software development
    costs.  CEVA-TeakLite Markets:  2/2.5G and ULC
    wireless, portable audio players, VoIP phones, hard disk drives
    and hearing aids. 4




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
    CEVA-TeakLite-II-CEVA-TeakLite-II is a single
    Multiply-Accumulate (MAC) 16-bit fixed point DSP core. The core
    extends the architecture of CEVA-TeakLite and CEVA-Oak, the most
    established and successful DSP cores to date in CEVAs DSP
    family. CEVA-TeakLite-II achieves a performance increase
    compared to its predecessor core, and delivers higher-level of
    integration in a small silicon die size. CEVA-TeakLite-II is
    positioned to meet high volume, but very cost sensitive markets
    such as 2G/2.5G wireless handsets, portable media players, hard
    disk drives, optical drives, and digital cordless phones.
    CEVA-TeakLite-II is fully compatible to both CEVA-TeakLite and
    CEVA-Oak DSPs at assembly and binary levels, which reduces our
    customers software development costs.  CEVA-TeakLite-II Markets:  2/2.5G wireless,
    portable audio players, VoIP phones and hard disk drives.    CEVA
    DSP-based Subsystems
  system-on-chips
    
    CEVA-XS1100  a low-power,
    highly-integrated DSP-based subsystem, designed to ease the
    development and integration process and further reduce
    development costs and
    time-to-market
    for CEVA-X1620 DSP-based 3G wireless baseband designs. The
    CEVA-XS1100 exploits multiple innovative power-saving techniques
    such as system modules active only when needed, level-two memory
    architecture and caching, adjustable DSP system speed,
    decentralized interconnect topology and selective
    hardware/software
    wake-up
    events. The CEVA-XS1100 includes a complete set of DSP
    peripherals and interfaces, such as an Interrupt Controller,
    Power Management Unit, Timers and General Purpose I/Os, and
    provides easy means of connectivity to other systems present on
    chip.  CEVA-XS1100 Markets:  3G Wireless Modems.  
    CEVA-XS1102  a low-power,
    highly-integrated DSP-based subsystem, designed to ease the
    development and integration process and further reduce
    development costs and
    time-to-market
    for CEVA-X1622 DSP-based 3G wireless baseband designs. The
    CEVA-XS1102 exploits multiple innovative power-saving techniques
    such as system modules active only when needed, level-two memory
    architecture and caching, adjustable DSP system speed,
    decentralized interconnect topology and selective
    hardware/software
    wake-up
    events. The CEVA-XS1102 includes a complete set of DSP
    peripherals and interfaces, such as an Interrupt Controller,
    Power Management Unit, Timers and General Purpose I/Os, and
    provides easy means of connectivity to other systems present on
    chip.  CEVA-XS1102 Markets:  3G/3.5G Wireless Modems.  
    CEVA-XS1200  a low-power,
    highly-integrated DSP-based subsystem, designed to ease the
    development and integration process and further reduce
    development costs and
    time-to-market
    for CEVA-X DSP-based 5




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designs. The CEVA-XS1200 subsystem is based on the CEVA-XS1100
    subsystem and enhanced with a programmable 3D DMA co-processor
    and glue- less TDM ports. This provides designers with the
    ability to target high-performance applications, such as
    Multimedia, Communications, VoIP and Storage.  CEVA-XS1200 Markets:  3G wireless applications,
    portable multimedia players, home entertainment and high
    fidelity audio systems and VoIP multi-channel applications.  
    Xpert-TeakLite-II  a complete, low
    power, low cost, programmable DSP-based subsystem, designed for
    the embedded application markets. It includes configurable
    cached program memory, direct program, data memories, high
    performance Direct Memory Access (DMA) controller, Buffered Time
    Division Multiplexing Port (BTDMP), Host processor
    interface unit (PIU), standard AMBA bridges (AHB & APB)
    and optional Ethernet MAC.  Xpert-TeakLite-II Markets:  2G/2.5G wireless
    applications, portable multimedia players, consumer/professional
    audio, VoIP, VoCable, VoDSL and Voice over optical networks
    applications.  
    Xpert-Teak  a complete DSP-based
    subsystem for low-power, low-cost SoC designs targeted at
    applications, such as wireless baseband and portable multimedia
    markets. Xpert-Teak includes multiple hardware peripherals and
    incorporates on-chip data and program memories, high-performance
    DMA controller, Buffered Time Division Multiplexing Port
    (BTDMP), high-throughput Host Processor Interface (HPI) and
    other peripherals.  Xpert-Teak Markets:  2/2.5G wireless
    applications, image and video processing, consumer/professional
    audio, VoIP, VoCables and VoDSL applications.  CEVA
    Application-Specific Platforms
  time-to-market
  
    CEVA-Audio- a high performance, low-power audio
    platform for consumer devices. CEVA-Audio is a fully
    synthesizable soft IP, operating at up to 200MHz, and built
    around a small DSP core and cache memory subsystem. With overall
    die size of less than two square mm, and 0.1 mW/MHz for stereo
    MP3 decoder (using TSMC 0.13u G process), it supports all of the
    industry standard audio and speech codecs, including MP3, WMA,
    AAC, HE-AAC, Ogg Vorbis, BSAC,
    NB-AMR and
    WB-AMR.  CEVA-Audio Markets:  portable audio players,
    cellular handsets and home entertainment systems.  
    CEVA Mobile-Media2000- a flexible, integrated
    software based platform, combining audio, video, voice and
    imaging functions at extremely low power consumption and at a
    small die size. Programmable for a wide range of multimedia
    standards, resolutions and frame rates, the CEVA
    Mobile-Media2000 solution allows licensees to re-target a single
    silicon platform for any multimedia processing requirements,
    thus negating the need for costly, time-consuming silicon
    re-spins.  CEVA Mobile-Media2000 solution is a complete hardware plus
    software platform. The hardware portion includes the high
    performance CEVA-X1620 DSP core, the CEVA-XS1200 subsystem
    platform. The software element is a collection of industry
    standard video and audio codes, such as H.264 decoder and
    encoder, MPEG4 decoder and encoder, MP3 and AMR. The video codes
    of Mobile-Media2000 make use of CEVA-patented FST technology
    that allows high resolution video (DVD quality) to be processed
    fully in software using a low cost and low power DSP.Mobile-Media2000 Markets:  high-end feature
    phones, smartphones and portable multimedia devices.  
    CEVA-VoP- is a complete platform enabling a wide
    range of cost-sensitive VoIP products targeting residential and
    enterprise telecom markets. Based on CEVAs
    Xpert-TeakLite-II, the CEVA-VoP platform is a complete hardware
    and software solution that can be deployed as a subsystem in an
    integrated networking 6




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and VoP SoC. The platform integrates the widely adopted,
    programmable CEVA-TeakLite-II DSP core, with added hardware
    peripherals capable of handling multiple, simultaneous,
    packet-voice channels on a single core. The solution includes
    all required DSP software, such as speech compression and
    decompression, echo cancellation, telephony functions and
    signaling/networking. The software is open, allowing design
    licensees to add proprietary algorithms and broaden the use of
    the design for other markets or applications.  CEVA-VoP Markets:  residential and consumer
    Voice over Packet (e.g. VoIP).  
    CEVA Bluetooth- a flexible, silicon-proven
    Bluetooth platform containing all the required deliverables for
    OEM, semiconductor, ASIC, and fabless customers to rapidly
    design
    Bluetooth®technology
    into their ASICs and ASSPs. The platform is designed to
    accelerate Bluetooth deployment and reduce
    time-to-certification
    and
    time-to-revenue.
    It complies fully with Bluetooth version 1.2 and implements all
    mandatory and optional features. The complete solution includes
    Bluetooth baseband RTL, Bluetooth protocol stack and full
    Bluetooth profile support.  CEVA Bluetooth Markets:  Wireless handsets,
    smartphones / PDAs, cordless phones, wireless PBX and Bluetooth
    headsets.  
    CEVA SATA- a complete, verified Serial ATA
    licensable solution combining a SATA 1.5Gbps PHY or SATA 3.0Gbps
    PHY with a Link/Transport/Command Protocol stack, and is fully
    compliant to the Serial ATA Revision 2.5 specification. The
    SATA PHY is supplied in the form of a GDSII hard macro with
    simulation models and physical views. The SATA Protocol (PHY
    Control, Link, Transport and Command/DMA layers) is delivered in
    the form of an RTL package, and supported by a comprehensive
    test bench environment plus physical design scripts for
    realization on the target semiconductor processes.  CEVA-SATA Markets:  Storage, set-top boxes, PVR
    and HD-DVD.    Principal
    Markets
    
    Wireless Handsets  CEVA is the worlds leading licensor of DSP technology to
    the wireless industry. Hundreds of millions of cellphones have
    deployed CEVA technology. Today seven of the worlds top 12
    wireless handset companies utilize the ultra power efficient
    high-performance CEVA DSP cores. With complete solutions
    spanning modem and application processing platforms and
    Bluetooth technologies, the portfolio of CEVA IP greatly
    accelerate
    time-to-market,
    functionality and performance of next generation handsets.  
    Portable Multimedia Players  CEVAs portable multimedia solutions integrate a DSP core,
    DSP-based subsystem and comprehensive software codecs that
    support all industry audio, video and imaging standards in a
    silicon proven platform. Architected for ultra low-power,
    minimal memory requirements and highest levels of resolution,
    the solutions offer the industries only complete software
    programmable multimedia platform.  
    Portable Audio  CEVA offers a complete, highly-integrated, low-power, low-cost
    audio platform for consumer devices, including wireless
    handsets, portable audio players and home entertainment systems.
    CEVA-Audio combines several CEVA-developed technologies,
    including CEVA-TeakLite-II, the new and enhanced version 7




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of the widely-adopted CEVA-TeakLite DSP core, a cache memory
    subsystem, audio peripherals, a comprehensive set of audio
    codecs and complete tool chain support.  
    Storage  CEVA technologies are incorporated annually in tens of millions
    of disk drives, DVD players and recorders. CEVA technologies are
    chosen for a combination of high-performance with small die size
    and low power consumption. CEVA storage offerings include DSP
    cores for magnetic and optical drive controllers, as well as
    high speed serial communications, including SATA.  
    Automotive  Innovation in todays vehicles is principally driven by
    microelectronics spanning diverse areas such as navigation,
    wireless communication, handsfree systems, multimedia
    entertainment and digital radio. CEVA provides a portfolio of
    connectivity, multimedia and Bluetooth solutions, powered by
    CEVA DSPs, for next generation telematic applications.  
    Telecom / Networking  CEVA provides networking and telecommunications semiconductor
    vendors a broad range of solutions targeting
    IP-phones,
    Residential Gateways including PON (Passive Optical network).
    Complete VoIP, Giga Ethernet and Serdes silicon verified
    solutions from CEVA are architected to reduce the cost and
    time-to-market
    for telecom and networking products.  Customers
  N
  International
    Sales and Operations
     8




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Sales and
    Marketing
        Technical
    Support
    
    assistance with implementation, responding to customer-specific
    inquiries, training and, when and if they become available,
    distributing updates and upgrades of our products;
    application support, consisting of providing general hardware
    and software design examples,
    ready-to-use
    software modules and guidelines to our licensees to assist them
    in using our technology; and
    design services, consisting of creating customer-specific
    implementations of our DSP cores and application platforms.    Research
    and Development
       9




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Competition
      
    IP vendors that offer programmable DSP cores;
    IP vendors of general purpose processors with DSP extensions;
    internal design groups of large chip companies that develop
    proprietary DSP solutions for their own application-specific
    chips; and
    semiconductor companies that offer
    off-the-shelf
    programmable DSP chips.            
    in the multimedia market  Hantro, Imagination
    Technologies, ARC, Chips & Media and Tensilica;
    in the serial storage technology area  ARM, Synopsys
    and Silicon Image;
    in
    Voice-over-IP
    applications  MIPS Technologies, ARM; and
    in audio applications  ARM, Tensilica and ARC.  Proprietary
    Rights
   10




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11




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Employees
    NumberTotal employees


196FunctionResearch and development


136Sales and marketing


20Technical support


13Administration


27LocationIsrael


124Ireland


35United Kingdom


10United States


12Elsewhere


15         Corporate
    History
    Available
    Information
  Form 10-K, Form 10-Q, Form 8-K www.sec.gov
  Form 10-K.
 12




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ITEM 1A.
    RISK
    FACTORS  We caution you that the following important factors, among
    others, could cause our actual future results to differ
    materially from those expressed in forward-looking statements
    made by or on behalf of us in filings with the Securities and
    Exchange Commission, press releases, communications with
    investors and oral statements. Any or all of our forward-looking
    statements in this annual report, and in any other public
    statements we make, may turn out to be wrong. They can be
    affected by inaccurate assumptions we might make or by known or
    unknown risks and uncertainties. Many factors mentioned in the
    discussion below will be important in determining future
    results. We undertake no obligation to publicly update any
    forward-looking statements, whether as a result of new
    information, future events or otherwise. You are advised,
    however, to consult any further disclosures we make in our
    reports filed with the Securities and Exchange Commission.
  The
    markets in which we operate are highly competitive, and as a
    result we could experience a loss of sales, lower prices and
    lower revenue.
  off-the-shelf
  
    Microprocessor IP providers, such as ARM, MIPS Technologies,
    Tensilica and ARC, are offering DSP extensions to their IP.
    SATA IP market is highly standardized with several vendors
    offering similar products, leading to price pressure for both
    licensing and royalty revenue.
    Our video solution is software based and competes with hardware
    implementation offered by companies such as Hantro and other
    software solution offered by Hantro, Imagination Technologies,
    Tensilica and Chips & Media.
    ARC is offering a licensing model based on royalty payments
    specifically for Chinese customers that waives initial licensee
    fees.
    Lower license fees and overall erosion of average selling prices
    of our IP.    Our
    quarterly operating results fluctuate from quarter to quarter
    due to a variety of factors, including our lengthy sales cycle,
    and may not be a meaningful indicator of future
    performance.
    
    the timing of the introduction of new or enhanced technologies
    by us and our competitors, as well as the market acceptance of
    such technologies;
    the timing and volume of orders and production by our customers,
    as well as fluctuations in royalty revenues resulting from
    fluctuations in unit shipments by our licensees;
    our lengthy sales cycle and specifically in the third quarter of
    any fiscal year during which summer vacations slow down
    decision-making processes of our customers in executing
    contracts; 13




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
    the gain or loss of significant licensees;
    delays in the commercialization of end products that incorporate
    our technology;
    changes in our pricing policies and those of our
    competitors; and
    restructuring, asset impairment and related charges.  We
    rely significantly on revenue derived from a limited number of
    customers.
  period-to-period, period-to-period, period-to-period,
  We
    depend on market acceptance of third-party semiconductor
    intellectual property.
  off-the-shelf
  Because
    our IP solutions are components of end products, if
    semiconductor companies and electronic equipment manufacturers
    do not incorporate our solutions into their end products or if
    the end products of our customers do not achieve market
    acceptance, we may not be able to generate adequate sales of our
    products.
  and/or
 14




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We
    depend on a limited number of key personnel who would be
    difficult to replace.
    The
    sales cycle for our IP solutions is lengthy, which makes
    forecasting of our customer orders and revenues
    difficult.
    We may
    dispose of or discontinue existing product lines and technology
    developments, which may adversely impact our future
    results.
   15




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Our
    restructuring efforts in 2005 and 2006, as well as the
    divestment of our GPS technology and related business, could
    disrupt the operation of our business, distract our management
    from focusing on revenue-generating efforts, result in the
    erosion of employee morale, and impair our ability to respond
    rapidly to growth opportunities in the future.
    Because
    our IP solutions are complex, the detection of errors in our
    products may be delayed, and if we deliver products with
    defects, our credibility will be harmed, the sales and market
    acceptance of our products may decrease and product liability
    claims may be made against us.
    Our
    operating results may fluctuate significantly due to the
    cyclicality of the semiconductor industry, which could adversely
    affect the market price of our stock.
   16




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Our
    success will depend on our ability to successfully manage our
    geographically dispersed operations.
    Our
    operations in Israel may be adversely affected by instability in
    the Middle East region.
      Our
    research and development expenses may increase if the grants we
    currently receive from the Israeli and Irish governments are
    reduced or withheld.
    We are
    exposed to fluctuations in currency exchange
    rates.
    Because
    we have significant international operations, we may be subject
    to political, economic and other conditions relating to our
    international operations that could increase our operating
    expenses and disrupt our revenues and business.
    
    unexpected changes in regulatory requirements;
    fluctuations in the exchange rate for the United States dollar; 17




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
    imposition of tariffs and other barriers and restrictions;
    burdens of complying with a variety of foreign laws;
    political and economic instability; and
    changes in diplomatic and trade relationships.  If we
    are unable to meet the changing needs of our end-users or to
    address evolving market demands, our business may be
    harmed.
    We may
    seek to expand our business through acquisitions that could
    result in diversion of resources and extra
    expenses.
      
    issuance of equity securities that would dilute our current
    stockholders percentages of ownership;
    large one-time write-offs;
    the incurrence of debt and contingent liabilities;
    difficulties in the assimilation and integration of operations,
    personnel, technologies, products and information systems of the
    acquired companies;
    diversion of managements attention from other business
    concerns;
    contractual disputes;
    risks of entering geographic and business markets in which we
    have no or only limited prior experience; and
    potential loss of key employees of acquired organizations. 18




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##### Table of Contents



We may
    not be able to adequately protect our intellectual
    property.
      Our
    business will suffer if we are sued for infringement of the
    intellectual property rights of third parties or if we cannot
    obtain licenses to these rights on commercially acceptable
    terms.
    Our
    business depends on our customers and their suppliers obtaining
    required complementary components.
    The
    future growth of our business depends in part on our ability to
    license to system OEMs and
    small-to-medium-sized
    semiconductor companies directly and to expand our sales
    geographically.
   19




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##### Table of Contents



The
    Israeli tax benefits that we currently receive and the
    government programs in which we participate require us to meet
    certain conditions and may be terminated or reduced in the
    future, which could increase our tax expenses.
    Our
    corporate tax rate may increase, which could adversely impact
    our cash flow, financial condition and results of
    operations.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES      AreaLocation

Term

Expiration


(Sq. Feet)


Principal ActivitiesSan Jose, CA, U.S.

2 years


2007



9,450


Headquarters; sales and marketing;
    administrationHerzeliya, Israel

4 years


2010



23,600


Research and development;
    administrationDublin, Ireland

25 years


2021/2025



26,600


Research and development;
    administrationDublin, Ireland

2 years


2007



2,270


Research and development;
    administrationCork, Ireland

25 years


2025



10,000


Research and developmentLimerick, Ireland

10 years


2010



4,000


Research and developmentBelfast, Northern Ireland

15 years


2019



2,600


Research and development  20




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##### Table of Contents



sub-let
  ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    EXECUTIVE
    OFFICERS OF THE REGISTRANT
    Gideon Wertheizer
  Yaniv Arieli
  Issachar Ohana
 21




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##### Table of Contents



PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    Price Range ofCommon StockHigh


Low2005First Quarter

$
9.00


$
7.10Second Quarter

$
7.52


$
5.80Third Quarter

$
5.91


$
5.03Fourth Quarter

$
6.32


$
5.072006First Quarter

$
6.88


$
5.80Second Quarter

$
7.90


$
5.62Third Quarter

$
6.15


$
5.05Fourth Quarter

$
6.89


$
5.30       2007
    Annual Meeting of Stockholders
   22




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##### Table of Contents



Stock
    Performance Graph
  Notwithstanding anything to the contrary set forth in any of
    the Companys previous or future filings under the
    Securities Act of 1933, as amended, or the Securities Exchange
    Act of 1934, as amended, that might incorporate this Annual
    Report on Form 10-K or future filings made by the Company
    under those statutes, the below Stock Performance Graph shall
    not be deemed filed with the United States Securities and
    Exchange Commission and shall not be deemed incorporated by
    reference into any of those prior filings or into any future
    filings made by the Company under those statutes.
  Comparison
    of Cumulative Total Return among CEVA, Inc.,
    The NASDAQ Stock Market (U.S.) and the MG Specialized
    Semiconductor Group Index
  
  11/01/02


12/31/02


12/31/03


12/31/04


12/31/05


12/31/06CEVA, Inc.



100.00




112.14




197.53




172.81




118.79




122.77Hemscott Specialized Semiconductor
    Index



100.00




100.45




178.74




157.02




154.10




169.97Nasdaq Market Index



100.00




100.45




151.33




165.87




167.33




184.50   ASSUMES $100
    INVESTED ON NOV. 01, 2002
         23




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA      Year Ended December 31,2002


2003


2004


2005


2006(In thousands)Consolidated Statement of
    Operations Data:Revenues:Licensing and royalties

$
14,739


$
29,795


$
32,271


$
30,755


$
28,484Other revenue


4,457



7,041



5,402



4,881



4,021Total revenues


19,196



36,836



37,673



35,636



32,505Cost of revenues


2,168



6,061



5,178



4,217



4,035Gross profit


17,028



30,775



32,495



31,419



28,470Operating expenses:Research and development, net


8,414



17,382



17,276



20,153



18,769Sales and marketing


3,356



6,058



6,965



6,577



6,268General and administrative


3,557



6,109



5,863



5,742



5,882Amortization of intangible assets


189



1,127



892



823



414In-process research and development


15,771















Reorganization, restructuring and
    severance charge


6,442



8,620







3,207



Impairment of assets






3,233







510



Total operating expenses


37,729



42,529



30,996



37,012



31,333Operating income (loss)


(20,701
)


(11,754
)


1,499



(5,593
)


(2,863
)Financial income (expense), net


(207
)


63



796



1,820



2,620Other income














1,507



57Income (loss) before taxes on
    income


(20,908
)


(11,691
)


2,295



(2,266
)


(186
)Taxes on income (loss)


1,014



300



645







(88
)Net income (loss)

$
(21,922
)

$
(11,991
)

$
1,650


$
(2,266
)

$
(98
)Basic and diluted net income
    (loss) per share

$
(2.15
)

$
(0.66
)

$
0.09


$
(0.12
)

$
(0.01
)   December 31,2002


2003


2004


2005


2006(In thousands)Consolidated Balance Sheet
    DataWorking capital

$
58,318


$
53,440


$
57,960


$
61,240


$
65,001Total assets


135,182



119,433



119,163



115,749



121,080Total long term liabilities


1,231



3,093



2,626



4,295



4,216Total stockholders equity

$
110,072


$
98,479


$
102,549


$
102,233


$
106,143  24




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##### Table of Contents



QUARTERLY
    FINANCIAL INFORMATION
  Three Months Ended2005


2006March 31,


June 30,


September 30,


December 31,


March 31,


June 30,


September 30,


December 31,Revenues:Licensing and royalties

$
8,847


$
8,219


$
7,169


$
6,520


$
7,160


$
7,455


$
6,938


$
6,931Other revenue


1,194



1,309



1,217



1,161



974



957



955



1,135Total revenues


10,041



9,528



8,386



7,681



8,134



8,412



7,893



8,066Cost of revenues


1,293



1,116



1,003



805



895



1,135



992



1,013Gross profit


8,748



8,412



7,383



6,876



7,239



7,277



6,901



7,053Operating expenses:Research and development, net


4,926



5,515



5,036



4,676



5,016



4,873



4,270



4,610Sales and marketing


1,676



1,560



1,619



1,722



1,771



1,606



1,414



1,477General and administrative


1,471



1,611



1,399



1,261



1,484



1,474



1,577



1,347Amortization of other intangible
    assets


223



218



191



191



190



141



42



41Reorganization, restructuring and
    severance charge






1,657



1,650



(100
)














Impairment of assets






510























Total operating expenses


8,296



11,071



9,895



7,750



8,461



8,094



7,303



7,475Operating income (loss)


452



(2,659
)


(2,512
)


(874
)


(1,222
)


(817
)


(402
)


(422
)Financial income, net


335



443



475



567



541



573



778



728Other income










1,507











57







Income before taxes on income
    (loss)


787



(2,216
)


(530
)


(307
)


(681
)


(187
)


376



306Taxes on income (tax benefit)


160











(160
)


120



30



35



(273
)Net income (loss)

$
627


$
(2,216
)

$
(530
)

$
(147
)

$
(801
)

$
(217
)

$
341


$
579Basic net income (loss) per share

$
0.03


$
(0.12
)

$
(0.03
)

$
(0.01
)

$
(0.04
)

$
(0.01
)

$
0.02


$
0.03Diluted net income (loss) per share

$
0.03


$
(0.12
)

$
(0.03
)

$
(0.01
)

$
(0.04
)

$
(0.01
)

$
0.02


$
0.03Weighted average number of shares
    of Common Stock used in computation of net income (loss) per
    share (in thousands):Basic


18,675



18,742



18,875



18,923



19,061



19,142



19,239



19,315Diluted


19,227



18,742



18,875



18,923



19,061



19,142



19,324



19,432  25




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##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  You should read the following discussion together with the
    consolidated financials statements and related notes appearing
    elsewhere in this annual report. This discussion contains
    forward-looking statements that involve risks and uncertainties.
    Actual results may differ materially from those included in such
    forward-looking statements. Factors that could cause actual
    results to differ materially include those set forth under
    Risk Factors, as well as those otherwise discussed
    in this section and elsewhere in this annual report. See
    Forward-Looking Statements and Industry Data.
  BUSINESS
    OVERVIEW
    per-unit
         26




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##### Table of Contents



CRITICAL
    ACCOUNTING POLICIES, ESTIMATES AND ASSUMPTIONS
    
    revenue recognition;
    allowances for doubtful accounts;
    accounting for income taxes;
    impairment of goodwill and other intangible assets;
    stock based compensation;
    reorganization, restructuring and severance charge; 27




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##### Table of Contents




    investments in other companies; and
    foreign currency.    Revenue
    Recognition
      97-2, SOP 97-2, SOP 97-2 SOP 98-9, SOP 97-2, SOP 98-9
  SOP 97-2 SOP 97-2 SOP 97-2
  81-1, (SOP 81-1),
 28




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##### Table of Contents



catch-up
        Allowances
    for Doubtful Accounts
    Accounting
    for Income Taxes
     29




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##### Table of Contents



Goodwill
      Other
    Intangible Assets
    
    significant underperformance relative to expected historical or
    projected future operating results;
    significant changes in the manner of our use of the acquired
    assets or the strategy for our overall business;
    significant negative industry or economic trends;
    significant decline in our stock price for a sustained
    period; and
    significant decline in our market capitalization relative to net
    book value.     30




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##### Table of Contents



Accounting
    for Stock-Based Compensation:
            Reorganization,
    Restructuring and Severance Charge
  sub-let
     31




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##### Table of Contents



sub-let
  Investment
    in Other Company, Net:
    U.S.-based 115-1,
  Foreign
    Currency
  non-U.S. dollar non-U.S. dollar
    Recently
    Issued Accounting Standards:
   32




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##### Table of Contents



RESULTS
    OF OPERATIONS
    2004


2005


2006Consolidated Statement of
    Operations Data:Revenues:Licensing and royalties


85.7
%


86.3
%


87.6
%Other revenue


14.3
%


13.7
%


12.4
%Total revenues


100.0
%


100.0
%


100.0
%Cost of revenues


13.7
%


11.8
%


12.4
%Gross profit


86.3
%


88.2
%


87.6
%Operating expenses:Research and development, net


45.9
%


56.6
%


57.7
%Sales and marketing


18.5
%


18.5
%


19.3
%General and administrative


15.6
%


16.1
%


18.1
%Amortization of other intangible
    assets


2.3
%


2.3
%


1.3
%Reorganization, restructuring and
    severance charge






9.0
%


Impairment of assets






1.4
%


Total operating expenses


82.3
%


103.9
%


96.4
%Operating income (loss)


4.0
%


(15.7
)%


(8.8
)%Financial income, net


2.1
%


5.1
%


8.0
%Other income






4.2
%


0.2
%Income (loss) before taxes on
    income


6.1
%


(6.4
)%


(0.6
)%Taxes on income


1.7
%






(0.3
)%Net income (loss)


4.4
%


(6.4
)%


(0.3
)%   Discussion
    and Analysis
  year-on-year, year-to-year.
 33




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##### Table of Contents



Revenues
  Total
    Revenues
  2004


2005


2006Total revenues (in millions)

$
37.7


$
35.6


$
32.5Change
    year-on-year






(5.4
)%


(8.8
)%         Licensing
    and Royalty Revenues
  2004


2005


2006Licensing and royalty revenues (in
    millions)

$
32.3


$
30.8


$
28.5Change
    year-on-year






(4.7
)%


(7.4
)%of which:Licensing revenues (in millions)

$
26.3


$
23.9


$
22.2Change
    year-on-year






(8.8
)%


(7.4
)%Royalty revenues (in millions)

$
6.0


$
6.8


$
6.3Change
    year-on-year






13.1
%


(7.3
)%        34




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##### Table of Contents



Other
    Revenues
    2004


2005


2006Other revenues (in millions)

$
5.4


$
4.9


$
4.0Change
    year-on-year






(9.6
)%


(17.6
)%     Geographic
    Revenue Analysis
  2004


2005


2006(In millions, except percentages)United States

$
11.2



29.5
%

$
12.5



35.2
%

$
11.7



35.9
%Europe, Middle East, Africa (EMEA)

$
16.6



44.1
%

$
7.9



22.1
%

$
11.7



35.9
%Asia Pacific (APAC)

$
9.9



26.4
%

$
15.2



42.7
%

$
9.2



28.2
%       Cost
    of Revenues
  2004


2005


2006Cost of revenues (in millions)

$
5.2


$
4.2


$
4.0Change
    year-on-year






(18.6
)%


(4.3
)%      35




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##### Table of Contents



Operating
    Expenses
  2004


2005


2006(In millions)Research and development, net

$
17.3


$
20.2


$
18.8Sales and marketing

$
6.9


$
6.6


$
6.2General and administration

$
5.9


$
5.7


$
5.9Amortization of intangible assets

$
0.9


$
0.8


$
0.4Reorganization, restructuring and
    severance charge

$



$
3.2


$
Impairment of assets

$



$
0.5


$
Total operating expenses

$
31.0


$
37.0


$
31.3Change
    year-on-year






19.4
%


(15.3
)%     Research
    and Development Expenses, Net
  2004


2005


2006Research and development expenses,
    net (in millions)

$
17.3


$
20.2


$
18.8Change
    year-on-year






16.7
%


(6.9
)%   sub-contract sub-contract
     36




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##### Table of Contents



Sales and
    Marketing Expenses
  2004


2005


2006Sales and marketing expenses (in
    millions)

$
6.9


$
6.6


$
6.2Change
    year-on-year






(5.6
)%


(4.7
)%       General
    and Administrative Expenses
  2004


2005


2006General and administrative
    expenses (in millions)

$
5.9


$
5.7


$
5.9Change
    year-on-year






(2.1
)%


2.4
%     Amortization
    of Other Intangible Assets
  2004


2005


2006Amortization of other intangible
    assets (in millions)

$
0.9


$
0.8


$
0.4Change
    year-on-year






(7.7
)%


(49.7
)%     Reorganization,
    Restructuring and Severance Charge
  2004


2005


2006Reorganization, restructuring and
    severance charge (in millions)

$



$
3.2


$
    37




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##### Table of Contents



sub-let
    Impairment
    of Assets
  2004


2005


2006Impairment of assets (in millions)

$



$
0.5


$
     Financial
    Income, net and Other Income
  2004


2005


2006Financial income, net (in millions)

$
0.80


$
1.82


$
2.62of which:Interest income and gains from
    marketable securities (in millions)

$
0.76


$
1.71


$
2.77Foreign exchange gain (loss) (in
    millions)

$
0.04


$
0.11


$
(0.15
)Other incomeGain on realization of investment
    (in millions)

$



$
1.51


$
0.06     non-U.S. dollar non-U.S. dollar
   38




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##### Table of Contents



Provision
    for Income Taxes
      LIQUIDITY
    AND CAPITAL RESOURCES
         39




---



##### Table of Contents



Contractual
    Obligations
    Payments Due by PeriodLess Than








More ThanTotal


1 Year


1-3 Years


3-5 Years


5 Years($ in thousands)Operating Lease
    Obligations  Leasehold properties


24,301



2,675



4,689



4,018



12,919Operating Lease
    Obligations  Other


2,472



1,071



1,247



154



Purchase Obligations


579



579











Total


27,352



4,325



5,936



4,172



12,919     Off-Balance
    Sheet Arrangements
    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  non-U.S. dollar non-U.S. dollar
 40




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  page F-1.
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
     41




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##### Table of Contents



Managements
    Annual Report on Internal Control Over Financial
    Reporting.
  Rules 13a-15(f) 15d-15(f)
    Form 10-K
 42




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                Kost
    Forer Gabbay & Kasierer
      43




---



##### Table of Contents



ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE      ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCK HOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   44




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##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES  The following documents are filed as part of or are
    included in this Annual Report on
    Form 10-K:
  Financial Statements:
  
    Consolidated Balance Sheets as of December 31, 2006 and
    2005.
    Consolidated Statements of Operations for the Years Ended
    December 31, 2006, 2005 and 2004.
    Statements of Changes in Stockholders Equity for the Years
    Ended December 31, 2006, 2005 and 2004.
    Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2006, 2005 and 2004.
    Notes to Consolidated Financial Statements.  Financial Statement Schedules:
  
    Schedule II: Valuation and Qualifying Accounts    Exhibits:
  Form 10-K 000-49842.
 45




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##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA CONSOLIDATED
    FINANCIAL STATEMENTS
    AS OF DECEMBER 31, 2006  PageReport of
    Independent Registered Public Accounting Firm (Kost Forer
    Gabbay & Kasierer, a member of Ernst & Young
    Global)


F-2Report of
    Independent Registered Public Accounting Firm (Ernst &
    Young)


F-3Consolidated
    Balance Sheets


F-4Consolidated
    Statements of Operations


F-5Statements of
    Changes in Stockholders Equity


F-6Consolidated
    Statements of Cash Flows


F-7Notes to
    Consolidated Financial Statements


F-8  F-1




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM              
    F-2




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM          Ernst & Young llp
    F-3




---



##### Table of Contents



CEVA,
    INC.
  CONSOLIDATED
    BALANCE SHEETS
  December 31,


December 31,2005


2006(U.S. dollars in thousands, except share and per share
    data)ASSETSCurrent assets:Cash and cash equivalents

$
35,111


$
37,968Short term bank deposits


8,335



3,029Marketable securities (Note 2)


18,174



23,237Trade receivables (net of
    allowance for doubtful accounts of $667 in 2005 and $682 in 2006)


6,159



8,421Deferred tax assets (Note 11)


600



613Prepaid expenses (Note 6)


1,040



564Other accounts receivable
    (Note 6)


1,042



1,890Total current assets


70,461



75,722Long-term assets:Severance pay fund


1,912



2,338Deferred tax assets (Note 11)


292



382Property and equipment, net
    (Note 3)


3,226



1,706Investment in other company, net
    (Note 4)






4,233Goodwill (Note 5)


38,398



36,498Other intangible assets, net
    (Note 5)


1,460



20145,288



45,358Total assets

$
115,749


$
121,080LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Trade payables

$
548


$
718Accrued expenses and other
    payables (Note 7)


7,778



9,462Taxes payable


442



135Deferred revenues


453



406Total current liabilities


9,221



10,721Long term liabilities:Accrued severance pay


2,100



2,519Accrued expenses (Note 12)


2,195



1,697Total long term liabilities


4,295



4,216Commitments and Contingent
    (Note 14)Stockholders equity:Preferred Stock:$0.001 par value:
    5,000,000 shares authorized at December 31, 2005 and
    2006; none issued and outstanding






Common Stock:$0.001 par value:
    60,000,000 shares authorized at December 31, 2005, and
    2006; 18,923,071 and 19,330,144 shares issued and
    outstanding at December 31, 2005 and 2006, respectively


19



19Additional paid in capital


138,818



142,826Accumulated deficit


(36,604
)


(36,702
)Total stockholders equity


102,233



106,143Total liabilities and
    stockholders equity

$
115,749


$
121,080    F-4




---



##### Table of Contents



CEVA,
    INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended December 31,2004


2005


2006(U.S. dollars in thousands, except share and per share
    data)Revenues:Licensing and royalties

$
32,271


$
30,755


$
28,484Other revenue


5,402



4,881



4,021Total revenues


37,673



35,636



32,505Cost of revenues


5,178



4,217



4,035Gross profit


32,495



31,419



28,470Operating expenses:Research and development, net


17,276



20,153



18,769Sales and marketing


6,965



6,577



6,268General and administrative


5,863



5,742



5,882Amortization of intangible assets


892



823



414Reorganization, restructuring and
    severance charge (Note 12)






3,207



Impairment of assets






510



Total operating expenses


30,996



37,012



31,333Operating income (loss)


1,499



(5,593
)


(2,863
)Financial income, net


796



1,820



2,620Other income






1,507



57Income (loss) before taxes on
    income


2,295



(2,266
)


(186
)Income Taxes expense (income)
    (Note 11)


645







(88
)Net income (loss)

$
1,650


$
(2,266
)

$
(98
)Basic net income (loss) per share

$
0.09


$
(0.12
)

$
(0.01
)Diluted net income (loss) per share

$
0.09


$
(0.12
)

$
(0.01
)Weighted average number of shares
    of Common Stock used in computation of net income (loss) per
    share (in thousands)Basic


18,421



18,807



19,191Diluted


19,016



18,807



19,191    F-5




---



##### Table of Contents



CEVA,
    INC.
  STATEMENTS
    OF CHANGES IN STOCKHOLDERS EQUITY
  Additional





TotalCommon Stock



Paid-In


Accumulated


StockholdersShares


Amount



capital


Deficit


Equity(U.S. dollars in thousands, except share data)Balance as of January 1,
    2004


18,167,332


$
18



$
134,449


$
(35,988
)

$
98,479Issuance of Common Stock upon
    exercise of employee stock options(a)


193,886




(
*)


1,417







1,417Issuance of Common Stock under
    employee stock purchase plan(a)


196,600



1
(
*)


773







774Stock-based compensation











229







229Net income















1,650



1,650Balance as of December 31,
    2004


18,557,818


$
19



$
136,868


$
(34,338
)

$
102,549Issuance of Common Stock upon
    exercise of employee stock options(a)


72,820




(
*)


369







369Issuance of Common Stock under
    employee stock purchase plan(a)


292,433




(
*)


1,386







1,386Stock-based compensation











195







195Net loss















(2,266
)


(2,266
)Balance as of December 31,
    2005


18,923,071


$
19



$
138,818


$
(36,604
)

$
102,233Issuance of Common Stock upon
    exercise of employee stock options(a)


86,536




(
*)


430







430Issuance of Common Stock under
    employee stock purchase plan(a)


320,537




(
*)


1,374







1,374Stock-based compensation











2,204







2,204Net loss















(98
)


(98
)Balance as of December 31,
    2006


19,330,144


$
19



$
142,826


$
(36,702
)

$
106,143     (*)
    
    Represent an amount lower than $1.(a)
    
    See Note 8 to these consolidated financial statements.   F-6




---



##### Table of Contents



CEVA,
    INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2004


2005


2006(U.S. dollars in thousands)Cash flows from operating
    activities:Net income (loss)

$
1,650


$
(2,266
)

$
(98
)Adjustments required to reconcile
    net income (loss) to net cash provided by (used in) operating
    activities:Depreciation


2,523



2,016



1,422Impairment of tangible assets






110



Amortization of intangible assets


892



823



414Impairment of intangible assets






400



Stock-based compensation


229



195



2,204Gain from sale of property and
    equipment


(9
)


(14
)


Loss (gain) on marketable securities


(50
)


16



52Unrealized foreign exchange loss
    (gain)


(72
)


(109
)


48Accrued interest on short term bank
    deposits






(131
)


102Gain on realization of investment






(1,507
)


(57
)Marketable securities


(30,744
)


12,604



(5,115
)Changes in operating assets and
    liabilities:Decrease (increase) in trade
    receivables


(569
)


4,526



(2,262
)Decrease (increase) in other
    accounts receivable and prepaid expenses


612



(806
)


(332
)Increase in deferred income taxes


(195
)


(697
)


(103
)Increase (decrease) in trade
    payables


(404
)


(1,052
)


145Increase (decrease) in deferred
    revenues


687



(1,298
)


(47
)Increase (decrease) in accrued
    expenses and other payables


(4,233
)


142



582Decrease in taxes payable


(184
)


(265
)


(307
)Increase (decrease) in accrued
    severance pay, net


108



57



(19
)Net cash provided by (used in)
    operating activities


(29,759
)


12,744



(3,371
)Cash flows from investing
    activities:Purchase of property and equipment


(3,125
)


(908
)


(424
)Proceeds from sale of property and
    equipment


54



14



Investment in short term bank
    deposits






(8,204
)


(3,930
)Proceeds from short term bank
    deposits










9,134Transaction cost related to the GPS
    divestment










(927
)Proceeds from realization of
    investment






1,507



57Purchase of technology


(115
)


(153
)


Net cash provided by (used in)
    investing activities


(3,186
)


(7,744
)


3,910Cash flows from financing
    activities:Proceeds from issuance of Common
    Stock upon exercise of employee options


1,417



369



430Proceeds from issuance of Common
    Stock under employee stock purchase plan


774



1,386



1,374Net cash provided by financing
    activities


2,191



1,755



1,804Effect of exchange rate movements
    on cash


468



(488
)


514Increase (decrease) in cash and
    cash equivalents


(30,286
)


6,267



2,857Cash and cash equivalents at the
    beginning of the year


59,130



28,844



35,111Cash and cash equivalents at the
    end of the year

$
28,844


$
35,111


$
37,968Supplemental information of
    cash-flows activities:Cash paid during the year for:Income and withholding taxes, net

$
842


$
1,383


$
652Non-cash transactions (see
    Note 4):Goodwill










(1,900
)Intangible asset










(845
)Net working capital










(522
)Transaction cost related to the GPS
    divestment










(39
)Deferred gain related to GPS
    divestment transaction










(1,751
)    F-7




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (in
    thousands, except share data)
  NOTE 1:
    ORGANIZATION
    AND SIGNIFICANT ACCOUNTING POLICIES  Organization:
    Voice-over-IP
  Voice-over-IP
  a.  Basis
    of presentation
    b.  Use
    of estimates:
    c.  Financial
    statements in U.S. dollars:
      d.  Principles
    of consolidation:
   F-8




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   e.  Cash
    equivalents:
    f.  Short
    term bank deposits:
    g.  Marketable
    securities:
    h.  Property
    and equipment:
    %Computers, software and equipment

25-33Office furniture and equipment

7-25Leasehold improvements

10-25(the shorter of the lease term
    or useful economic life)     i.  Investment
    in other company, net:
    U.S.-based
 F-9




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  115-1, Other-Than-Temporary
    j.  Goodwill:
           F-10




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        k.  Other
    intangible assets:
      
    significant underperformance relative to expected historical or
    projected future operating results;
    significant changes in the manner of the Companys use of
    the acquired assets or the strategy for the Companys
    overall business;
    significant negative industry or economic trends;
    significant decline in the Companys stock price for a
    sustained period; and
    significant decline in the Companys market capitalization
    relative to net book value.    l.  Revenue
    recognition:
   F-11




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    97-2, (SOP 97-2). SOP 97-2, SOP 97-2 SOP 98-9, SOP 97-2, SOP 98-9
  SOP 97-2 SOP 97-2 SOP 97-2
  81-1, (SOP 81-1), SOP 81-1
  catch-up
   F-12




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       Year Ended December 31,2004


2005


2006Licensing and royalties revenues:Licensing

$
26,240


$
23,935


$
22,160Royalties


6,031



6,820



6,324$
32,271


$
30,755


$
28,484   e-mail
          m.  Cost
    of revenue:
    n.  Income
    taxes:
     F-13




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      o.  Research
    and development:
    p.  Government
    grants:
      q.  Employee
    benefit plan:
       F-14




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   r.  Accrued
    severance pay:
        s.  Accounting
    for stock-based compensation:
             F-15




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Year Ended December 31,2004


2005


2006Dividend yield


0
%


0
%


0
%Expected volatility


58
%


35
%


40
%Risk-free interest rate


2
%


3
%


5
%Expected term


4 years



4 years



4 yearsForfeiture rate










10
%     Weighted Average Fair Valueof Option Grants at anExercise Price2004

2005Equal to fair value at dates of
    grant

$
8.10


$
5.79     Year Ended December 31,2004


2005Net income (loss) as reported

$
1,650


$
(2,266
)Add: Total stock based employee
    compensation expense determined under the fair value based
    method of SFAS 123 for all awards, net of related tax
    effects


(10,462
)


(2,892
)Pro forma net loss:

$
(8,812
)

$
(5,158
)Net income (loss) per share:Basic and diluted  as
    reported

$
0.09


$
(0.12
)Basic and diluted 
    pro-forma

$
(0.48
)

$
(0.27
)    F-16




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year EndedDecember 31,2006Cost of revenue

$
53Research and development, net


656Sales and marketing


449General and administrative


1,046Total stock-based compensation
    expense

$
2,204   t.  Fair
    value of financial instruments:
    u.  Concentration
    of credit risk:
             F-17




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   v.  Advertising
    expenses:
    w.  Net
    income (loss) per share of common stock:
    Year Ended December 31,2004


2005


2006(In thousands except per share data)Numerator:Numerator for basic and diluted
    net income (loss) per share

$
1,650


$
(2,266
)

$
(98
)Denominator:Denominator for basic net income
    (loss) per share


18,421



18,807



19,191Effect of employee stock options


595







Denominator for diluted net income
    (loss) per share


19,016



18,807



19,191Basic net income (loss) per share

$
0.09


$
(0.12
)

$
(0.01
)Diluted net income (loss) per share

$
0.09


$
(0.12
)

$
(0.01
)   Recently
    issued accounting standards:
       F-18




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    NOTE 2:
    MARKETABLE
    SECURITIES    As at December 31, 2005


As at December 31, 2006Cost


Gain (loss)


Market Value


Cost


Gain (loss)


Market ValueCorporate bonds and securities


8,284



(11
)


8,273



15,382



(112
)


15,270U.S. government and agency
    securities


9,906



(5
)


9,901



7,923



44



7,967$
18,190


$
(16
)

$
18,174


$
23,305


$
(68
)

$
23,237   NOTE 3:
    PROPERTY
    AND EQUIPMENT, NET    Year Ended December 31,2005


2006Cost:Computers, software and equipment

$
11,452


$
10,424Office furniture and equipment


986



957Leasehold improvements


1,044



1,05613,482



12,437Less  Accumulated
    depreciation


(10,256
)


(10,731
)Depreciated cost

$
3,226


$
1,706       NOTE 4:
    INVESTMENT
    IN OTHER COMPANY, NET  Series A-1 Series A-1) Series A-2 Series A-2). Series A-1 Series A-2 one-for-one Series A-2
 F-19




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Equity investment in GloNav

$
5,984Goodwill


(1,900
)Intangible asset


(845
)Net working capital


(522
)Transaction cost related to the
    GPS divestment


(966
)Deferred gain related to
    transaction with GloNav

$
1,751Investment in other company, net:Investment in other company

$
5,984Deferred gain


(1,751
)Total investment in other company,
    net

$
4,233     NOTE 5:
    GOODWILL
    AND OTHER INTANGIBLE ASSETS, NET  Year Ended








Year EndedDecember 31, 2005








December 31, 2006Accumulated











AccumulatedGross


Impairment








Gross


ImpairmentCarrying


Loss/Asset


Accumulated





Carrying


Loss/Asset


AccumulatedAmount


write down


Amortization


Net


Amount


write down


Amortization


NetGoodwill

$
38,398


$



$



$
38,398


$
38,398


$
1,900


$



$
36,498Other intangible
    assets  amortizableParthus name


610



478



132







610



478



132



Patent portfolio


2,247







1,420



827



2,247



640



1,607



Current technology and customer
    backlog


2,824



1,059



1,349



416



2,824



1,264



1,493



67Purchased technology


347







130



217



347







213



134Total identifiable intangible
    assets

$
6,028


$
1,537


$
3,031


$
1,460


$
6,028


$
2,382


$
3,445


$
201    F-20




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     December 31,2007

$
1482008


53$
201         NOTE 6:
    PREPAID
    EXPENSES AND OTHER ACCOUNTS RECEIVABLE  PREPAID
    EXPENSES
  Year Ended December 31,2005


2006Prepaid leased design tools

$
500


$
219Prepaid directors and officers
    insurance


183



103Prepaid car leases


182



116Other prepaid expenses


175



126$
1,040


$
564   OTHER
    ACCOUNTS RECEIVABLE
  Year Ended December 31,2005


2006Indirect taxes

$
562


$
880Rental deposits


119



119Interest receivable


220



642Other accounts receivable


141



249$
1,042


$
1,890  F-21




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 7:
    ACCRUED
    EXPENSES AND OTHER PAYABLES  Year Ended December 31,2005


2006Accrued compensation and benefits

$
3,841


$
4,237Restructuring accruals (see
    Note 12)


1,019



1,609Engineering accruals


539



606Professional fees


945



1,137Other accruals


1,434



1,873$
7,778


$
9,462   NOTE 8:
    STOCKHOLDERS
    EQUITY  a.  Common
    stock:
        b.  Preferred
    stock:
    c.  Employee
    and non-employee stock plans:
   F-22




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       Year Ended December 31,2004


2005


2006Weighted





Weighted





WeightedAverage





Average





AverageNumber of


Exercise


Number of


Exercise


Number of


ExerciseOptions


Price


Options


Price


Options


PriceOutstanding at the beginning of
    the year


5,010,707


$
9.66



5,897,634


$
8.84



5,020,383


$
8.54Granted


1,851,055



8.10



1,099,700



5.79



335,000



5.93Exercised


(193,886
)


7.31



(72,820
)


5.07



(86,536
)


4.97Forfeited or expired


(770,242
)


11.01



(1,904,131
)


8.02



(1,017,937
)


9.59Outstanding at the end of the year


5,897,634


$
8.84



5,020,383


$
8.54



4,250,910


$
8.15Number of options exercisable as
    of December 31,


2,788,677


$
10.06



2,990,138


$
9.79



2,941,188


$
8.93   Year Ended December 31, 2006WeightedAverageRemaining


AggregateNumber


Contractual


Intrinsicof Options


Term


Value ($000)Outstanding at beginning of year


5,020,383Granted


335,000Exercised


(86,536
)Forfeiture or expired


(1,017,937
)Outstanding as of
    December 31, 2006


4,250,910



4.4


$
Exercisable, Vested or expected to
    vest as of December 31, 2006


2,941,188



3.4


$
    F-23




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    WeightedAverageOptions


Weighted


Weighted


Options


ExerciseOutstanding


Average


Average


Exercisable


Price ofas of


Remaining


Exercise


as of


OptionsDecember 31,


Contractual


Price


December 31,


ExercisableExercise Price (Range) $

2006


Life (Years)


$


2006


$3.52-5.10


309,387



6.2



4.24



278,134



4.245.11-7.60


2,154,965



5.8



6.47



1,040,686



6.957.61-11.40


1,456,855



2.7



9.71



1,296,824



9.7711.41-15.0


261,013



1.5



13.85



256,854



13.8415.01-20.0


19,689



1.0



17.64



19,689



17.6420.01-30.0


49,001



0.3



26.13



49,001



26.134,250,910



4.4



8.15



2,941,188



8.93   2003 Director
    Stock Option Plan
      Year Ended December 31,2004


2005


2006Weighted





Weighted





WeightedAverage





Average





AverageNumber of


Exercise


Number of


Exercise


Number of


ExerciseOptions


Price


Options


Price


Options


PriceOutstanding at the beginning of
    the year


242,000


$
7.45



423,000


$
7.81



581,000


$
7.30Granted


181,000



8.29



158,000



5.95



132,000



5.76Exercised






















Forfeited or expired


















(26,000
)


6.88Outstanding at the end of the year


423,000


$
7.81



581,000


$
7.30



687,000


$
7.02        F-24




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            2002
    Stock Incentive Plan
      Year Ended December 31,2004


2005


2006Weighted





Weighted





WeightedAverage





Average





AverageNumber of


Exercise


Number of


Exercise


Number of


ExerciseOptions


Price


Options


Price


Options


PriceOutstanding at the beginning of
    the year


1,795,955


$
6.64



2,767,866


$
6.95



2,317,436


$
6.30Granted


1,298,055



7.48



941,700



5.76



203,000



6.04Exercised


(77,344
)


4.17



(21,428
)


4.00



(64,377
)


4.64Forfeited or expired


(248,800
)


8.16



(1,370,702
)


7.30



(484,682
)


7.05Outstanding at the end of the year


2,767,866


$
6.95



2,317,436


$
6.30



1,971,377


$
6.14      F-25




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        2000
    Stock Incentive Plan
      Year Ended December 31,2004


2005


2006Weighted





Weighted





WeightedAverage





Average





AverageNumber of


Exercise


Number of


Exercise


Number of


ExerciseOptions


Price


Options


Price


Options


PriceOutstanding at the beginning of
    the year


2,972,752


$
11.66



2,706,768


$
10.93



2,121,947


$
11.33Granted


372,000



10.17















Exercised


(116,542
)


9.39



(51,392
)


5.52



(22,159
)


5.93Forfeited or expired


(521,442
)


12.37



(533,429
)


9.87



(507,255
)


12.16Outstanding at the end of the year


2,706,768


$
10.93



2,121,947


$
11.33



1,592,533


$
11.12       2002
    Employee Stock Purchase Plan
     F-26




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       
    85% of the fair market value of the common stock on the date of
    the grant of the option, which is the commencement of the offer
    period; or
    85% of the fair market value of the common stock on the exercise
    date, which is the last day of a purchase period.        d.  Dividend
    policy:
    NOTE 9:
    GEOGRAPHIC
    INFORMATION AND MAJOR CUSTOMER DATA  a.  Summary
    information about geographic areas:
   F-27




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2004


2005


2006Revenues based on customer
    location:United States

$
11,104


$
12,545


$
11,657Europe, Middle East and Africa


16,628



7,890



11,670Asia Pacific(1)


9,941



15,201



9,178$
37,673


$
35,636


$
32,505$
5,498


$
4,969


$
3,070     (1)
    Japan  December 31,2004


2005


2006Long-lived assets by geographic
    region:United States

$
41,169


$
39,986


$
41,012Ireland


2,005



1,193



253Israel


1,994



1,615



1,280Other


264



290



93$
45,432


$
43,084


$
42,638   b.  Major
    customer data as a percentage of total revenues:
    Year Ended December 31,2004


2005


2006Customer A






10
%


Customer B


12
%






16
%   period-to-period,
  c.  Information
    about Products and Services:
   F-28




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##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 10:
    SELECTED
    STATMENTS OF OPERATIONS DATA    Year Ended December 31,2004


2005


2006Interest income and gains from
    marketable securities

$
759


$
1,711


$
2,770Foreign exchange gain (loss)


37



109



(150
)$
796


$
1,820


$
2,620Other income;   Year Ended December 31,2004


2005


2006Gain on realization of investment

$



$
1,507


$
57   See Note 1i.  NOTE 11:
    TAXES ON
    INCOME    Irish
    Subsidiary
    Israeli Subsidiary
         F-29




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
                    F-30




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     a.
    The
    provision for income taxes is as follows:  Year Ended December 31,2004


2005


2006Domestic taxes:Current

$
5


$
3


$
17Deferred










5



3



17Foreign taxes:Current


835



694



(2
)Deferred


(195
)


(697
)


(103
)Taxes on income

$
645


$



$
(88
)Income (loss) before taxes on
    income:Domestic

$
(783
)

$
(1,879
)

$
(939
)Foreign


3,078



(387
)


753$
2,295


$
(2,266
)

$
(186
)   b.  Reconciliation
    between the Companys effective tax rate and the
    U.S. statutory rate:
  Year Ended December 31,2004


2005


2006Income (loss) before taxes on
    income

$
2,295


$
(2,266
)

$
(186
)Theoretical tax at
    U.S. statutory rate-35%


803



(794
)


(65
)Foreign income taxes at rates
    other than U.S. rate


(1,420
)


217



(88
)Rate differential-intercompany
    recharge


(887
)






Non-deductible items


(89
)


27



707Valuation allowance


2,490



1,222



(924
)Other


(252
)


(672
)


282Taxes on income

$
645


$



$
(88
)  F-31




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##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  c.  Deferred
    taxes on income:
    Year Ended December 31,2004


2005


2006Operating loss carryforward

$
8,438


$
9,941


$
9,065Accrued expenses


850



511



481Temporary differences related to
    R&D expenses






722



812Other


125



158



153Valuation allowance


(9,218
)


(10,440
)


(9,516
)Balance at the end of the year

$
195


$
892


$
995     d.  Separation
    from DSPG:
    e.  Tax
    loss carryforwards:
    NOTE 12:
    REORGANIZATION,
    RESTRUCTURING AND SEVERANCE CHARGE     F-32




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    sub-let
  sub-let
    Under-UtilizedSeverance and


Building Operating


Legal andRelated Costs


Lease Obligations


Professional Fees


TotalBalance as of December 31,
    2004

$
855


$
2,211


$



$
3,066Charge, net(1)


870



1,897



440



3,207Non-cash stock compensation charge


(117
)










(117
)Cash outlays


(1,608
)


(1,224
)


(110
)


(2,942
)Balance as of December 31,
    2005

$



$
2,884


$
330


$
3,214Effect of exchange rate






315







315Cash outlays






(223
)






(223
)Balance as of December 31,
    2006(2)

$



$
2,976


$
330


$
3,306     (1)
    
    The net charge includes a reversal of a provision made in a
    prior year.(2)
    
    The legal fees are related to the under-utilized building.  Year Ended December 31,2005


2006Short Term 
    Restructuring accruals (see Note 7)


1,019



1,609Long Term 
    Restructuring accruals

$
2,195


$
1,697   NOTE 13:
    RELATED
    PARTY TRANSACTIONS   F-33




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       face-to-face
      NOTE 14:
    COMMITMENTS
    AND CONTINGENCIES       F-34




---



##### Table of Contents



CEVA,
    INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Minimum RentalPayments2007

$
4,3252008


3,2922009


2,6442010


2,3952011 and thereafter


14,696$
27,352        F-35




---



##### Table of Contents



SIGNATURES
  Form 10-K
  CEVA, Inc.
  By:
    /s/  Gideon
    Wertheizer  Gideon Wertheizer
 Chief Executive Officer
    Form 10-K
  Signature

Title

Date/s/  Gideon
    WertheizerGideon
    Wertheizer

Chief Executive Officer
    (Principal Executive Officer)

March 16, 2007/s/  Yaniv
    ArieliYaniv
    Arieli

Chief Financial Officer and
    Treasurer (Principal Financial Officer and 
    Principal Accounting Officer)

March 16, 2007/s/  Peter
    McManamonPeter
    McManamon

Director and Chairman

March 16, 2007/s/  Eliyahu
    AyalonEliyahu
    Ayalon

Director

March 16, 2007/s/  Zvi
    LimonZvi
    Limon

Director

March 16, 2007/s/  Bruce
    MannBruce
    Mann

Director

March 12, 2007/s/  Sven-Christer
    NilssonSven-Christer
    Nilsson

Director

March 16, 2007/s/  Louis
    SilverLouis
    Silver

Director

March 16, 2007/s/  Dan
    TocatlyDan
    Tocatly

Director

March 16, 2007




---



##### Table of Contents



CEVA,
    INC.
  SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS
  Balance at








BalanceBeginning








at Endof Period


Additions


Deduction(1)


of PeriodYear ended December 31, 2006Allowance for doubtful accounts

$
667


$
15


$



$
682Year ended December 31, 2005Allowance for doubtful accounts

$
813


$



$
146


$
667Year ended December 31, 2004Allowance for doubtful accounts

$
795


$
478


$
460


$
813     (1)
    
    Actual write-offs of uncollectible accounts receivables




---



##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description2
.1(1)

Combination Agreement, dated as of
    April 4, 2002, among DSP Group, Inc., the Registrant and
    CEVA Technologies Limited (formerly Parthus Technologies plc)2
.2(2)

Amendment No. 1 to
    Combination Agreement, dated as of August 29, 2002, among
    DSP Group, Inc., the Registrant and CEVA Technologies Limited
    (formerly Parthus Technologies plc)3
.1(1)

Amended and Restated Certificate
    of Incorporation of the Registrant3
.2(3)

Certificate of Ownership and
    Merger (merging CEVA, Inc. into ParthusCeva, Inc.)3
.3(7)

Second Amended and Restated Bylaws
    of the Registrant3
.4(8)

Bylaws Amendment to the Second
    Amended and Restated Bylaws of the Registrant3
.5(9)

Bylaws Amendment to the Second
    Amended and Restated Bylaws of the Registrant3
.6(10)

Bylaws Amendment to the Second
    Amended and Restated Bylaws of the Registrant3
.7(11)

Amendment to the Amended and
    Restated Certificate of Incorporation of the Registrant4
.1(2)

Specimen of Common Stock
    Certificate10
.1(4)

Separation Agreement among DSP
    Group, Inc., DSP Group, Ltd., the Registrant, CEVA Technologies,
    Inc. (formerly DSP CEVA, Inc.) and CEVA D.S.P. Ltd. (formerly
    Corage, Ltd.) dated as of November 1, 200210
.2(4)

Tax Indemnification and Allocation
    Agreement between DSP Group, Inc. and the Registrant dated as of
    November 1, 200210
.3(4)

Technology Transfer Agreement
    between DSP Group, Inc. and the Registrant dated as of
    November 1, 200210
.4(4)

Technology Transfer Agreement
    between DSP Group, Ltd. and CEVA D.S.P. Ltd. (formerly Corage,
    Ltd.) dated as of November 1, 200210
.5(4)

Technology Transfer Agreement
    between CEVA Technologies, Inc. (formerly DSP CEVA, Inc.) and
    the Registrant dated as of November 1, 200210
.6(2)

CEVA, Inc. 2000 Stock Incentive
    Plan10
.7(2)

CEVA, Inc. 2002 Stock Incentive
    Plan10
.8(13)

CEVA, Inc. 2002 Employee Stock
    Purchase Plan10
.9(5)

CEVA, Inc. 2003 Director
    Stock Option Plan10
.10(6)

Parthus 2000 Share Option Plan10
.13(1)

Form of Indemnification Agreement
    executed between the Registrant and each of Eliyahu Ayalon,
    Brian Long, Bruce Mann, Sven-Christer Nilsson, Issachar Ohana,
    Bat-Sheva Ovadia, Christine Russell, Louis Silver, Chester J.
    Silvestri and Gideon Wertheizer10
.17(4)

Employment Agreement between the
    Registrant and Gideon Wertheizer dated as of November 1,
    200210
.18(4)

Employment Agreement between the
    Registrant and Issachar Ohana dated as of November 1, 200210
.19(7)

Lease dated November 8, 1996
    with Veton Properties Limited, as amended by an Assignment dated
    May 16, 2003 and Memorandum of Rent Review dated as of
    May 23, 200310
.20(12)

Personal and Special Employment
    Agreement between the Registrant and Yaniv Arieli dated as of
    August 18, 200510
.21(14)

CEVA, Inc. 2006 Executive Bonus
    Plan10
.21(15)

Form of Stock Option Agreement
    under the CEVA, Inc. 2002 Stock Incentive Plan10
.22(15)

Form of Israeli Stock Option
    Agreement under the CEVA, Inc. 2002 Stock Incentive Plan10
.21(15)

Form of Stock Option Agreement
    under the CEVA, Inc. 2000 Stock Incentive Plan10
.22(15)

Form of Israeli Stock Option
    Agreement under the CEVA, Inc. 2000 Stock Incentive Plan10
.23(15)

Form of Option Agreement under the
    CEVA, Inc. 2003 Director Stock Option Plan21
.1*

Subsidiaries of the Registrant23
.1*

Consent of Kost Forer
    Gabbay & Kasierer, a member of Ernst & Young
    Global23
.2*

Consent of Ernst & Young




---



##### Table of Contents



ExhibitNumber

Description31
.1*

Rule 13a-14(a)/15d-14(a)
    Certification of Chief Executive Officer31
.2*

Rule 13a-14(a)/15d-14(a)
    Certification of Chief Financial Officer32*


Section 1350 Certification of
    Chief Executive Officer and Chief Financial Officer     (1)
    
    Filed as an exhibit to CEVAs registration statement on
    Form 10, as amended, initially filed with the Commission on
    June 3, 2002 (registration number
    000-49842),
    and incorporated herein by reference.(2)
    
    Filed as an exhibit to CEVAs registration statement on
    Form S-1,
    as amended, initially filed with the Commission on July 30,
    2002 (registration
    number 333-97353),
    and incorporated herein by reference.(3)
    
    Filed as an exhibit to CEVAs Report on
    Form 8-K,
    filed with the Commission on December 8, 2003, and
    incorporated hereby by reference.(4)
    
    Filed as an exhibit to CEVAs 2002 Annual Report on
    Form 10-K,
    filed with the Commission on March 28, 2003, and
    incorporated hereby by reference.(5)
    
    Filed as an exhibit to CEVAs Quarterly Report on
    Form 10-Q/A,
    filed with the Commission on August 12, 2003, and
    incorporated hereby by reference.(6)
    
    Filed as an exhibit to the registration statement on
    Form S-8
    of Parthus Technologies plc, filed with the Commission on
    June 6, 2000 (registration
    number 333-12090),
    and incorporated herein by reference.(7)
    
    Filed as an exhibit to CEVAs 2003 Annual Report on
    Form 10-K,
    filed with the Commission on March 12, 2004, and
    incorporated hereby by reference.(8)
    
    Filed as an exhibit to CEVAs Quarterly Report on
    Form 10-Q,
    filed with the Commission on May 7, 2004, and incorporated
    hereby by reference.(9)
    
    Filed as an exhibit to CEVAs Report on
    Form 8-K,
    filed with the Commission on January 31, 2005, and
    incorporated hereby by reference.(10)
    
    Filed as an exhibit to CEVAs Report on
    Form 8-K,
    filed with the Commission on June 10, 2005, and
    incorporated hereby by reference.(11)
    
    Filed as an exhibit to CEVAs Report on
    Form 8-K,
    filed with the Commission on July 22, 2005, and
    incorporated hereby by reference.(12)
    
    Filed as an exhibit to CEVAs Quarterly Report on
    Form 10-Q,
    filed with the Commission on November 9, 2005, and
    incorporated hereby by reference.(13)
    
    Filed as an exhibit to CEVAs Quarterly Report on
    Form 10-Q,
    filed with the Commission on May 10, 2006, and incorporated
    hereby by reference.(14)
    
    Filed as an exhibit to CEVAs Report on
    Form 8-K,
    filed with the Commission on May 30, 2006, and incorporated
    hereby by reference.(15)
    
    Filed as an exhibit to CEVAs Quarterly Report on
    Form 10-Q,
    filed with the Commission on August 9, 2006, and
    incorporated hereby by reference.
    
    Management contract or compensatory plan or arrangement required
    to be filed as an exhibit pursuant to Item 15(c) of
    Form 10-K.*
    
    Filed herewith.