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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 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: 000-49842
 CEVA, INC.
  Delaware
    
    77-0556376(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)1943 Landings Drive, Mountain View, California
    
    94043(Address of principal executive offices)
    
    (Zip Code)
 (650) 417-7900
  Title of each class
    
    Name of each exchange on which registeredCommon Stock, $0.001 par value per share
    
    NASDAQ GLOBAL MARKET
  Yes o No þ
 Yes o No þ
 Yes þ No o
 Yes o No o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o No þ
   Class
    
    Outstanding at March 8, 2011Common Stock, $0.001 par value per share
    
    22,801,028 shares
 DOCUMENTS INCORPORATED BY REFERENCE




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##### 



TABLE OF CONTENTS
 PagePART IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    9Item 1B. Unresolved Staff Comments
    
    
    16Item 2. Properties
    
    
    16Item 3. Legal Proceedings
    
    
    17Item 4. Reserved
    
    
    17PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
    
    
    19Item 6. Selected Financial Data
    
    
    21Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    37Item 8. Financial Statements and Supplementary Data
    
    
    38Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    38Item 9A. Controls and Procedures
    
    
    38Item 9B. Other Information
    
    
    38PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    39Item 11. Executive Compensation
    
    
    39Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stock Holder
Matters
    
    
    39Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    39Item 14. Principal Accountant Fees and Services
    
    
    39PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    40Financial Statements
    
    
    F-1SignaturesEX-21.1EX-23.1EX-31.1EX-31.2EX-32
   1




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FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
  
    
    Our belief that there is an industry shift towards licensing DSP technology from
third party IP providers as opposed to developing it in-house;
 
    
    Our belief that the penetration of ultra-low-cost (ULC) handsets in emerging
markets such as China, India and Africa could generate future growth potential
for CEVA;
 
    
    Our belief that the full scale migration to our DSP cores and technologies in
the handsets market has not been fully realized and continues to progress;
 
    
    Our optimism about adoption of our technologies for new categories of products;
 
    
    Our belief that Texas Instruments and Freescales announcement of their intent
to exit the baseband market, after historically having been large players in
this market, is a strong positive driver for our future market share expansion;
 
    
    Our belief that both the handsets and mobile broadband markets continue to
present significant growth opportunities for us;
 
    
    Our belief that we are well-positioned to capitalize on the growth in the
smartphone, feature phone and mobile broadband markets;
 
    
    Our belief that our operating expenses will increase in 2011 as compared to 2010;
 
    
    Our belief that our new DSP core, CEVA-XC 323, is well positioned to expand our
licensee base in both existing wireless handsets and new wireless infrastructure
markets;
 
    
    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 changes in interest rates within our investment portfolio will
not have a material affect on our financial position on an annual or quarterly
basis.
     2




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PART I
 
 ITEM 1.
    
    BUSINESS
 Company Overview
  
    
    a family of programmable Digital Signal Processor (DSP) cores with a range of
cost, power-efficiency and performance points; and
 
    
    a portfolio of application-specific platforms, including wireless baseband,
multimedia (HD video and audio), voice (Voice over Internet Protocols (VoIP)),
Bluetooth and Serial Storage technology (Serial ATA (SATA) and Serial Attached SCSI
(SAS)).
       Industry Background
 Digital Signal Processor (DSP) Cores
   3




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Design Gap
  CEVA Business
   Our IP Business Model
   Strategy
  
    
    continue to develop and enhance our range of DSP cores with additional features,
performance and capabilities;
 
    
    continue to develop and enhance our range of complete and highly integrated platform
solutions to deliver to our licensing partners a complete and verified system solution;
  4




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
    
    capitalize on our relationships and leadership within our worldwide community of
semiconductor and OEM licensees who are developing CEVA-based solutions; and
 
    
    capitalize on our IP licensing and royalty business model which we believe is the
best vehicle for a pervasive adoption of our technology and allows us to focus our
resources on research and development of new licensable technologies and applications.
 Products
  CEVA DSP Cores
   CEVA Application-Specific Platforms
  Customers
  International Sales and Operations
   5




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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
     6




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Competition
   
    
    IP vendors that offer programmable DSP cores;
 
    
    IP vendors of general purpose processors with DSP extensions;
 
    
    IP vendors that offer hardware-based DSP implementation as opposed to software-based
DSP, which is our specialization; and
 
    
    internal design groups of large chip companies that develop proprietary DSP cores or
engines for their own application-specific chipsets.
     
    
    in the video market   Chips & Media, Hantro (acquired by On2) and Imagination
Technologies;
 
    
    in the serial storage technology area  Gennums Snowbush IP Group, Silicon Image
and Synopsys;
 
    
    in VoIP applications  ARM Holdings, MIPS Technologies and Verisilicon; and
 
    
    in audio applications   ARM Holdings, Tensilica, Verisilicon and Synopsys (through
its acquisition of Virage Logic).
 Proprietary Rights
   7




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Employees
  NumberTotal employees
    
    
    181FunctionResearch and development
    
    
    124Sales and marketing
    
    
    20Technical support
    
    
    14Administration
    
    
    23LocationIsrael
    
    
    133Ireland
    
    
    15United Kingdom
    
    
    7United States
    
    
    10Elsewhere
    
    
    16
   8




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Corporate History
  Available Information
 www.sec.gov
  
 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.
  
    
    We compete directly in the DSP core space with Verisilicon and Coresonic;
 
    
    CPU IP providers, such as ARM Holdings, MIPS Technologies, Synopsys (through its
acquisition of Virage Logic), and Tensilica, who offer DSP and DSP extensions to
their IP;
 
    
    Our video solution is software-based and competes with hardware implementations
offered by companies such as Imagination Technologies and Chips & Media, as well as
internal engineering teams at companies such as Mediatek, Qualcomm and ST Ericsson
that may design programmable DSP core products in-house and therefore not license
our technologies; and
 
    
    SATA and SAS IP markets are highly standardized with several vendors, such as
Gennums Snowbush IP group, Silicon Image and Synopsys that offer similar products,
thereby leading to pricing pressures for both licensing and royalty revenue.
   9




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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 and shifts by our customers from prepaid royalty arrangements to per
unit royalty arrangements;
 
    
    royalty pricing pressure and unit price reduction due to increase in volume
shipments or market product price erosion;
 
    
    the mix of revenues among licensing revenues, per unit and prepaid royalties and
service revenues;
 
    
    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;
 
    
    the gain or loss of significant licensees, partly due to our dependence on a
limited number of customers generating a significant amount of quarterly revenues;
 
    
    any delay in execution of any anticipated licensing arrangement during a
particular quarter;
 
    
    delays in the commercialization of end products that incorporate our technology;
 
    
    currency fluctuations of the Euro and NIS versus the U.S. dollar;
 
    
    fluctuations in operating expenses and gross margins associated with the
introduction of new or enhanced technologies and adjustments to operating expenses
resulting from restructurings;
 
    
    the timing of certain R&D government grant payments;
 
    
    our ability to scale our operations in response to changes in demand for our
technologies;
 
    
    entry into new markets, including China, India and Latin America;
 
    
    changes in our pricing policies and those of our competitors;
 
    
    restructuring, asset and goodwill impairment and related charges, as well as
other accounting changes or adjustments; and
 
    
    general economic conditions, including the current economic conditions, and its
effect on the semiconductor industry and sales of consumer products into which our
technologies are incorporated.
   We rely significantly on revenue derived from a limited number of customers.
   10




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Royalty rates could decrease for existing and future license agreements which could materially
adversely affect our operating results.
  We generate a significant amount of our total revenues from the handsets market and our business
and operating results may be materially adversely affected if we do not continue to succeed in this
highly competitive market.
  We depend on market acceptance of third-party semiconductor intellectual property.
   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.
   11




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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 U.S. dollar;
 
    
    imposition of tariffs and other barriers and restrictions;
 
    
    burdens of complying with a variety of foreign laws, treaties and technical
standards;
 
    
    uncertainty of laws and enforcement in certain countries relating to the protection
of intellectual property;
 
    
    multiple and possibly overlapping tax structures and potentially adverse tax
consequences;
 
    
    political and economic instability; and
 
    
    changes in diplomatic and trade relationships.
 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.
   12




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We may dispose of or discontinue existing product lines and technology developments, which may
adversely impact our future results.
  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 are affected by general economic conditions and the highly cyclical nature of
the semiconductor industry.
    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.
    13




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Our research and development expenses may increase if the grants we currently receive from the
Israeli government are reduced or withheld.
  We are exposed to fluctuations in currency exchange rates.
  If we are unable to meet the changing needs of our end-users or 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;
 
    
    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.
  14




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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.
  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.
   15




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Our corporate tax rate may increase, which could adversely impact our cash flow, financial
condition and results of operations.
  Legislative action in the United States could materially and adversely affect us from a tax
perspective.
  Our stock price may be volatile so you may not be able to resell your shares of our common stock at
or above the price you paid for them.
  
 ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
  
 ITEM 2.
    
    PROPERTIES
   16




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AreaLocation
    
    Term
    
    Expiration
    
    
    (Sq. Feet)
    
    
    Principal ActivitiesMountain View, CA, U.S.
    
    5 years
    
    
    2015
    
    
    
    3,643
    
    
    Headquarters; sales and marketing; administrationHerzeliya, Israel
    
    4 years
    
    
    2014
    
    
    
    28,880
    
    
    Research and development; administrationDublin, Ireland (1)
    
    1 year
    
    
    2011
    
    
    
    2,270
    
    
    Research and development; administrationCork, Ireland (2)
    
    25 years
    
    
    2025
    
    
    
    10,000
    
    
    Research and developmentBelfast, UK (3)
    
    15 years
    
    
    2019
    
    
    
    2,600
    
    
    Research and development
 (1)
    
    We are currently negotiating to extend this lease.(2)
    
    Break clause in the lease exercisable in 2011.(3)
    
    We have exercised a break clause in this lease and will vacate the facility in 2011. 
 ITEM 3.
    
    LEGAL PROCEEDINGS
  
 ITEM 4.
    
    RESERVED
 
  17




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EXECUTIVE OFFICERS OF THE REGISTRANT
  Gideon Wertheizer
 Yaniv Arieli
 Issachar Ohana
  18




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PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
  Price Range ofCommon StockHigh
    
    
    Low2010First Quarter
    
    $
    13.01
    
    
    $
    10.72Second Quarter
    
    $
    12.92
    
    
    $
    10.93Third Quarter
    
    $
    14.57
    
    
    $
    11.20Fourth Quarter
    
    $
    23.77
    
    
    $
    14.122009First Quarter
    
    $
    7.48
    
    
    $
    5.14Second Quarter
    
    $
    8.76
    
    
    $
    7.19Third Quarter
    
    $
    10.90
    
    
    $
    7.91Fourth Quarter
    
    $
    12.86
    
    
    $
    9.77
   2011 Annual Meeting of Stockholders
   19




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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 proxy statement 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.
 
 12/31/05
    
    
    12/31/06
    
    
    12/31/07
    
    
    12/31/08
    
    
    12/31/09
    
    
    12/31/10CEVA, Inc
    
    
    100.00
    
    
    
    103.35
    
    
    
    195.05
    
    
    
    111.82
    
    
    
    205.43
    
    
    
    327.48NASDAQ Composite
    
    
    100.00
    
    
    
    110.25
    
    
    
    121.88
    
    
    
    73.10
    
    
    
    106.22
    
    
    
    125.36Morningstar Semiconductor
    
    
    100.00
    
    
    
    94.39
    
    
    
    98.37
    
    
    
    53.66
    
    
    
    89.17
    
    
    
    103.42Specialized Semiconductor
    
    
    100.00
    
    
    
    97.94
    
    
    
    123.49
    
    
    
    62.42
    
    
    
    89.17
    
    
    
    95.77
     20




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ITEM 6.
    
    SELECTED FINANCIAL DATA
  Year Ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(in thousands)Consolidated Statements of Operations Data:Revenues:Licensing
    
    $
    22,160
    
    
    $
    19,499
    
    
    $
    21,701
    
    
    $
    18,764
    
    
    $
    18,395Royalties
    
    
    6,324
    
    
    
    9,095
    
    
    
    14,349
    
    
    
    16,225
    
    
    
    22,866Other revenue
    
    
    4,021
    
    
    
    4,617
    
    
    
    4,315
    
    
    
    3,478
    
    
    
    3,650Total revenues
    
    
    32,505
    
    
    
    33,211
    
    
    
    40,365
    
    
    
    38,467
    
    
    
    44,911Cost of revenues
    
    
    4,035
    
    
    
    3,851
    
    
    
    4,668
    
    
    
    4,117
    
    
    
    3,712Gross profit
    
    
    28,470
    
    
    
    29,360
    
    
    
    35,697
    
    
    
    34,350
    
    
    
    41,199Operating expenses:Research and development, net
    
    
    18,769
    
    
    
    19,136
    
    
    
    20,172
    
    
    
    16,561
    
    
    
    17,909Sales and marketing
    
    
    6,268
    
    
    
    6,253
    
    
    
    7,088
    
    
    
    6,732
    
    
    
    7,308General and administrative
    
    
    5,882
    
    
    
    5,721
    
    
    
    6,637
    
    
    
    6,087
    
    
    
    6,108Amortization of intangible assets
    
    
    414
    
    
    
    148
    
    
    
    53
    
    
    
    
    
    
    
    Reorganization, restructuring and
severance charge
    
    
    
    
    
    
    
    
    
    
    4,121
    
    
    
    
    
    
    
    Total operating expenses
    
    
    31,333
    
    
    
    31,258
    
    
    
    38,071
    
    
    
    29,380
    
    
    
    31,325Operating income (loss)
    
    
    (2,863
    )
    
    
    (1,898
    )
    
    
    (2,374
    )
    
    
    4,970
    
    
    
    9,874Financial income, net
    
    
    2,620
    
    
    
    3,211
    
    
    
    2,729
    
    
    
    2,048
    
    
    
    2,095Other income, net
    
    
    57
    
    
    
    425
    
    
    
    12,011
    
    
    
    3,712
    
    
    
    Income (loss) before taxes on income
    
    
    (186
    )
    
    
    1,738
    
    
    
    12,366
    
    
    
    10,730
    
    
    
    11,969Income tax expense (income)
    
    
    (88
    )
    
    
    447
    
    
    
    3,801
    
    
    
    2,384
    
    
    
    591Net income (loss)
    
    $
    (98
    )
    
    $
    1,291
    
    
    $
    8,565
    
    
    $
    8,346
    
    
    $
    11,378Basic net income (loss) per share
    
    $
    (0.01
    )
    
    $
    0.07
    
    
    $
    0.43
    
    
    $
    0.42
    
    
    $
    0.54Diluted net income (loss) per share
    
    $
    (0.01
    )
    
    $
    0.06
    
    
    $
    0.42
    
    
    $
    0.41
    
    
    $
    0.51
 December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(in thousands)Consolidated Balance Sheet Data:Working capital
    
    $
    65,001
    
    
    $
    77,312
    
    
    $
    83,886
    
    
    $
    101,169
    
    
    $
    114,928Total assets
    
    
    121,080
    
    
    
    128,989
    
    
    
    137,586
    
    
    
    155,444
    
    
    
    186,608Total long-term liabilities
    
    
    4,216
    
    
    
    4,647
    
    
    
    3,788
    
    
    
    4,483
    
    
    
    5,486Total stockholders equity
    
    $
    106,143
    
    
    $
    114,388
    
    
    $
    121,659
    
    
    $
    139,096
    
    
    $
    168,468
 QUARTERLY FINANCIAL INFORMATION
 Three months endedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,
    
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2009
    
    
    2010Revenues:Licensing
    
    $
    4,544
    
    
    $
    4,273
    
    
    $
    5,242
    
    
    $
    4,705
    
    
    $
    4,722
    
    
    $
    4,593
    
    
    $
    4,459
    
    
    $
    4,621Royalties
    
    
    3,759
    
    
    
    3,950
    
    
    
    3,694
    
    
    
    4,822
    
    
    
    4,980
    
    
    
    5,154
    
    
    
    5,238
    
    
    
    7,494Other revenue
    
    
    1,210
    
    
    
    887
    
    
    
    723
    
    
    
    658
    
    
    
    899
    
    
    
    862
    
    
    
    978
    
    
    
    911Total revenues
    
    
    9,513
    
    
    
    9,110
    
    
    
    9,659
    
    
    
    10,185
    
    
    
    10,601
    
    
    
    10,609
    
    
    
    10,675
    
    
    
    13,026Cost of revenues
    
    
    1,210
    
    
    
    1,152
    
    
    
    849
    
    
    
    906
    
    
    
    714
    
    
    
    863
    
    
    
    1,001
    
    
    
    1,134Gross profit
    
    
    8,303
    
    
    
    7,958
    
    
    
    8,810
    
    
    
    9,279
    
    
    
    9,887
    
    
    
    9,746
    
    
    
    9,674
    
    
    
    11,892Operating expenses:Research and development, net
    
    
    4,075
    
    
    
    3,996
    
    
    
    4,061
    
    
    
    4,429
    
    
    
    4,609
    
    
    
    4,505
    
    
    
    4,129
    
    
    
    4,666Sales and marketing
    
    
    1,636
    
    
    
    1,650
    
    
    
    1,628
    
    
    
    1,818
    
    
    
    1,808
    
    
    
    1,776
    
    
    
    1,664
    
    
    
    2,060General and administrative
    
    
    1,472
    
    
    
    1,558
    
    
    
    1,525
    
    
    
    1,532
    
    
    
    1,546
    
    
    
    1,570
    
    
    
    1,593
    
    
    
    1,399
  21




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##### Table of Contents



Three months endedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,
    
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2009
    
    
    2010Total operating expenses
    
    
    7,183
    
    
    
    7,204
    
    
    
    7,214
    
    
    
    7,779
    
    
    
    7,963
    
    
    
    7,851
    
    
    
    7,386
    
    
    
    8,125Operating income
    
    
    1,120
    
    
    
    754
    
    
    
    1,596
    
    
    
    1,500
    
    
    
    1,924
    
    
    
    1,895
    
    
    
    2,288
    
    
    
    3,767Financial income, net
    
    
    476
    
    
    
    474
    
    
    
    551
    
    
    
    547
    
    
    
    557
    
    
    
    541
    
    
    
    493
    
    
    
    504Other income, net
    
    
    
    
    
    
    1,901
    
    
    
    
    
    
    
    1,811
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income before taxes on income
    
    
    1,596
    
    
    
    3,129
    
    
    
    2,147
    
    
    
    3,858
    
    
    
    2,481
    
    
    
    2,436
    
    
    
    2,781
    
    
    
    4,271Income taxes expense (income)
    
    
    228
    
    
    
    814
    
    
    
    394
    
    
    
    948
    
    
    
    422
    
    
    
    313
    
    
    
    (208
    )
    
    
    64Net income
    
    $
    1,368
    
    
    $
    2,315
    
    
    $
    1,753
    
    
    $
    2,910
    
    
    $
    2,059
    
    
    $
    2,123
    
    
    $
    2,989
    
    
    $
    4,207Basic net income per share
    
    $
    0.07
    
    
    $
    0.12
    
    
    $
    0.09
    
    
    $
    0.14
    
    
    $
    0.10
    
    
    $
    0.10
    
    
    $
    0.14
    
    
    $
    0.19Diluted net income per share
    
    $
    0.07
    
    
    $
    0.12
    
    
    $
    0.09
    
    
    $
    0.14
    
    
    $
    0.09
    
    
    $
    0.10
    
    
    $
    0.13
    
    
    $
    0.18Weighted average number of
shares of Common Stock used in
computation of net income per
share (in thousands):Basic
    
    
    19,557
    
    
    
    19,515
    
    
    
    19,689
    
    
    
    20,101
    
    
    
    20,654
    
    
    
    21,061
    
    
    
    21,244
    
    
    
    22,029Diluted
    
    
    19,754
    
    
    
    20,014
    
    
    
    20,492
    
    
    
    21,375
    
    
    
    21,911
    
    
    
    22,069
    
    
    
    22,356
    
    
    
    23,367
  22




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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 financial 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
        23




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CRITICAL ACCOUNTING POLICIES, ESTIMATES AND ASSUMPTIONS
          24




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Revenue Recognition
          25




---



##### Table of Contents



Allowances for Doubtful Accounts
  Accounting for Income Taxes
     Goodwill
   26




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##### Table of Contents



Accounting for Equity-Based Compensation
   Accounting for Marketable Securities
   27




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Recently issued accounting standards:
 Subsequent Events
 Improving Disclosures about Fair Value
Measurements,
 Multiple-Deliverable Revenue Arrangements
 RESULTS OF OPERATIONS
  2008
    
    
    2009
    
    
    2010Consolidated Statements of Operations Data:Revenues:Licensing
    
    
    53.8
    %
    
    
    48.8
    %
    
    
    41.0
    %Royalties
    
    
    35.5
    %
    
    
    42.2
    %
    
    
    50.9
    %Other revenue
    
    
    10.7
    %
    
    
    9.0
    %
    
    
    8.1
    %Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    11.6
    %
    
    
    10.7
    %
    
    
    8.3
    %Gross profit
    
    
    88.4
    %
    
    
    89.3
    %
    
    
    91.7
    %Operating expenses:Research and development, net
    
    
    50.0
    %
    
    
    43.1
    %
    
    
    39.9
    %Sales and marketing
    
    
    17.6
    %
    
    
    17.5
    %
    
    
    16.3
    %General and administrative
    
    
    16.4
    %
    
    
    15.8
    %
    
    
    13.6
    %Amortization of other intangible assets
    
    
    0.1
    %
    
    
    
    
    
    
    Reorganization, restructuring and severance charge
    
    
    10.2
    %
    
    
    
    
    
    
    Total operating expenses
    
    
    94.3
    %
    
    
    76.4
    %
    
    
    69.8
    %Operating income (loss)
    
    
    (5.9
    )%
    
    
    12.9
    %
    
    
    21.9
    %Financial income, net
    
    
    6.7
    %
    
    
    5.3
    %
    
    
    4.7
    %Other income
    
    
    29.8
    %
    
    
    9.7
    %
    
    
    Income before taxes on income
    
    
    30.6
    %
    
    
    27.9
    %
    
    
    26.6
    %Taxes on income
    
    
    9.4
    %
    
    
    6.2
    %
    
    
    1.3
    %Net income
    
    
    21.2
    %
    
    
    21.7
    %
    
    
    25.3
    %
  28




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Discussion and Analysis
  Revenues
 Total Revenues
 2008
    
    
    2009
    
    
    2010Total revenues (in millions)
    
    $
    40.4
    
    
    $
    38.5
    
    
    $
    44.9Change year-on-year
    
    
    
    
    
    
    (4.7
    )%
    
    
    16.8
    %
     Year ended December 31,2008
    
    
    2009
    
    
    2010CEVA-X family
    
    
    27
    %
    
    
    40
    %
    
    
    32
    %CEVA TeakLite family
    
    
    38
    %
    
    
    35
    %
    
    
    48
    %CEVA Teak family
    
    
    15
    %
    
    
    13
    %
    
    
    12
    %
    29




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##### Table of Contents



Licensing Revenues
 2008
    
    
    2009
    
    
    2010Licensing revenues (in millions)
    
    $
    21.7
    
    
    $
    18.8
    
    
    $
    18.4Change year-on-year
    
    
    
    
    
    
    (13.5
    )%
    
    
    (2.0
    )%
   Royalty Revenues
 2008
    
    
    2009
    
    
    2010Royalty revenues (in millions)
    
    $
    14.3
    
    
    $
    16.2
    
    
    $
    22.9Change year-on-year
    
    
    
    
    
    
    13.1
    %
    
    
    40.9
    %
    Other Revenues
  2008
    
    
    2009
    
    
    2010Other revenues (in millions)
    
    $
    4.3
    
    
    $
    3.5
    
    
    $
    3.7Change year-on-year
    
    
    
    
    
    
    (19.4
    )%
    
    
    4.9
    %
   30




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##### Table of Contents



Geographic Revenue Analysis
 2008
    
    
    2009
    
    
    2010(in millions, except percentages)United States
    
    $
    5.3
    
    
    
    13.1
    %
    
    $
    6.0
    
    
    
    15.5
    %
    
    $
    9.3
    
    
    
    20.8
    %Europe, Middle East (EME) (1) (2) (3)
    
    $
    22.3
    
    
    
    55.2
    %
    
    $
    17.9
    
    
    
    46.4
    %
    
    $
    18.8
    
    
    
    41.9
    %Asia Pacific (APAC) (4) (5)
    
    $
    12.8
    
    
    
    31.7
    %
    
    $
    14.6
    
    
    
    38.1
    %
    
    $
    16.8
    
    
    
    37.3
    %(1) Germany
    
    
    *
    )
    
    
    *
    )
    
    
    *
    )
    
    
    *
    )
    
    $
    8.7
    
    
    
    19.3
    %(2) Switzerland
    
    $
    5.9
    
    
    
    14.7
    %
    
    
    *
    )
    
    
    *
    )
    
    $
    6.2
    
    
    
    13.7
    %(3) Sweden
    
    $
    8.0
    
    
    
    19.9
    %
    
    $
    7.5
    
    
    
    19.4
    %
    
    
    *
    )
    
    
    *
    )(4) China
    
    
    *
    )
    
    
    *
    )
    
    $
    6.4
    
    
    
    16.7
    %
    
    $
    11.1
    
    
    
    24.7
    %(5) Japan
    
    $
    5.1
    
    
    
    12.7
    %
    
    $
    4.5
    
    
    
    11.6
    %
    
    
    *
    )
    
    
    *
    )
 *)
    
    Less than 10%   Cost of Revenues
 2008
    
    
    2009
    
    
    2010Cost of revenues (in millions)
    
    $
    4.7
    
    
    $
    4.1
    
    
    $
    3.7Change year-on-year
    
    
    
    
    
    
    (11.8
    )%
    
    
    (9.8
    )%
   31




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Operating Expenses
 2008
    
    
    2009
    
    
    2010(in millions)Research and development, net
    
    $
    20.2
    
    
    $
    16.6
    
    
    $
    17.9Sales and marketing
    
    $
    7.1
    
    
    $
    6.7
    
    
    $
    7.3General and administration
    
    $
    6.6
    
    
    $
    6.1
    
    
    $
    6.1Amortization of intangible assets
    
    $
    0.1
    
    
    $
    
    
    
    $
    Reorganization, restructuring and severance charge
    
    $
    4.1
    
    
    $
    
    
    
    $
    Total operating expenses
    
    $
    38.1
    
    
    $
    29.4
    
    
    $
    31.3Change year-on-year
    
    
    
    
    
    
    (22.8
    )%
    
    
    6.6
    %
  Research and Development Expenses, Net
 2008
    
    
    2009
    
    
    2010Research and development expenses, net (in millions)
    
    $
    20.2
    
    
    $
    16.6
    
    
    $
    17.9Change year-on-year
    
    
    
    
    
    
    (17.9
    )%
    
    
    8.1
    %
      32




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##### Table of Contents



Sales and Marketing Expenses
 2008
    
    
    2009
    
    
    2010Sales and marketing expenses (in millions)
    
    $
    7.1
    
    
    $
    6.7
    
    
    $
    7.3Change year-on-year
    
    
    
    
    
    
    (5.0
    )%
    
    
    8.6
    %
   General and Administrative Expenses
 2008
    
    
    2009
    
    
    2010General and administrative expenses (in millions)
    
    $
    6.6
    
    
    $
    6.1
    
    
    $
    6.1Change year-on-year
    
    
    
    
    
    
    (8.3
    )%
    
    
    0.3
    %
  Amortization of Other Intangible Assets
 2008
    
    
    2009
    
    
    2010Amortization of other intangible assets (in millions)
    
    $
    0.1
    
    
    $
    
    
    
    $
    
  Reorganization, Restructuring and Severance Charge
 2008
    
    
    2009
    
    
    2010Reorganization, restructuring and severance charge (in millions)
    
    $
    4.1
    
    
    $
    
    
    
    $
    
    33




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##### Table of Contents



Financial Income, net and Other Income
 2008
    
    
    2009
    
    
    2010(in millions)Financial income, net
    
    $
    2.73
    
    
    $
    2.05
    
    
    $
    2.10of which:Interest income, and gains and losses from marketable securities, net
    
    $
    2.86
    
    
    $
    2.19
    
    
    $
    2.16Foreign exchange loss
    
    $
    (0.13
    )
    
    $
    (0.14
    )
    
    $
    (0.06
    )Other income, net
    
    $
    12.01
    
    
    $
    3.71
    
    
    $
    of which:Gain on realization of investments
    
    $
    12.15
    
    
    $
    3.71
    
    
    $
    Impairment of assets
    
    $
    (0.14
    )
    
    $
    
    
    
    $
    
    Provision for Income Taxes
     34




---



##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
      35




---



##### Table of Contents



36




---



##### Table of Contents



Contractual Obligations
  Payments Due by Period($ in thousands)Less than
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsOperating Lease Obligations  Leasehold properties
    
    
    2,911
    
    
    
    837
    
    
    
    1,357
    
    
    
    717
    
    
    
    Operating Lease Obligations  Other
    
    
    3,099
    
    
    
    1,440
    
    
    
    1,659
    
    
    
    
    
    
    
    Purchase Obligations
    
    
    414
    
    
    
    414
    
    
    
    
    
    
    
    
    
    
    
    Severance Pay (*)
    
    
    5,486
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    11,910
    
    
    
    2,691
    
    
    
    3,016
    
    
    
    717
    
    
    
    
  (*)
    
    Severance pay relates to accrued severance obligations to our Israeli employees as required
under Israeli labor laws. These obligations are payable only upon termination, retirement or
death of the respective employee. Of this amount, only $53,000 is unfunded. Off-Balance Sheet Arrangements
  
 ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     37




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##### Table of Contents



ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Managements Annual Report on Internal Control Over Financial Reporting.
    
 ITEM 9B.
    
    OTHER INFORMATION
   38




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##### Table of Contents



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
   39




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##### Table of Contents



PART IV
 
 ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 The following documents are filed as part of or are included in this Annual Report on Form
10-K:
 1.
    
    Financial Statements:
 
    
    Consolidated Balance Sheets as of December 31, 2010 and 2009.
 
    
    Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009
and 2008.
 
    
    Statements of Changes in Stockholders Equity for the Years Ended December 31,
2010, 2009 and 2008.
 
    
    Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009
and 2008.
 
    
    Notes to Consolidated Financial Statements.
 2.
    
    Financial Statement Schedules:
 
    
    Schedule II: Valuation and Qualifying Accounts
  3.
    
    Exhibits:
   40




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##### Table of Contents



ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 CONSOLIDATED FINANCIAL STATEMENTS
 AS OF DECEMBER 31, 2010
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets
    
    
    F-4Consolidated Statements of Operations
    
    
    F-5Statements of Changes in Stockholders Equity
    
    
    F-6Consolidated Statements of Cash Flows
    
    
    F-8Notes to Consolidated Financial Statements
    
    
    F-10
  F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      /s/ KOST FORER GABBAY & KASIERERA Member of Ernst & Young Global
    F-2




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
        /s/ KOST FORER GABBAY & KASIERERA Member of Ernst & Young Global
    F-3




---



##### Table of Contents



CEVA, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (U.S. dollars in thousands, except share and per share data)
 December 31,
    
    
    December 31,2009
    
    
    2010ASSETSCurrent assets:Cash and cash equivalents
    
    $
    12,104
    
    
    $
    17,098Short-term bank deposits
    
    
    40,056
    
    
    
    24,807Marketable securities (Note 2)
    
    
    48,438
    
    
    
    73,874Trade receivables (net of allowance for doubtful accounts of $700 in 2009 and $25 in 2010)
    
    
    5,995
    
    
    
    5,906Deferred tax assets (Note 12)
    
    
    1,096
    
    
    
    1,288Prepaid expenses and other accounts receivable (Note 6)
    
    
    5,345
    
    
    
    4,609Total current assets
    
    
    113,034
    
    
    
    127,582Long-term assets:Long term bank deposits
    
    
    
    
    
    
    15,173Severance pay fund
    
    
    4,455
    
    
    
    5,433Deferred tax assets (Note 12)
    
    
    309
    
    
    
    574Property and equipment, net (Note 4)
    
    
    1,148
    
    
    
    1,348Goodwill (Note 5)
    
    
    36,498
    
    
    
    36,498Total long-term assets
    
    
    42,410
    
    
    
    59,026Total assets
    
    $
    155,444
    
    
    $
    186,608LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade payables
    
    $
    530
    
    
    $
    616Deferred revenues
    
    
    432
    
    
    
    616Accrued expenses and other payables (Note 7)
    
    
    9,735
    
    
    
    10,521Deferred tax liabilities
    
    
    1,168
    
    
    
    901Total current liabilities
    
    
    11,865
    
    
    
    12,654Long-term liabilities:Accrued severance pay
    
    
    4,483
    
    
    
    5,486Total long-term liabilities
    
    
    4,483
    
    
    
    5,486Stockholders equity:Preferred stock:$0.001 par value: 5,000,000 shares authorized at December 31, 2009 and 2010;
none issued and outstanding
    
    
    
    
    
    
    Common stock:$0.001 par value: 60,000,000 shares authorized at December 31, 2009, and 2010;
20,429,736 and 22,524,449 shares issued and outstanding at December 31, 2009 and
2010, respectively
    
    
    20
    
    
    
    23Additional paid in capital
    
    
    158,325
    
    
    
    176,838Accumulated other comprehensive income
    
    
    251
    
    
    
    317Accumulated deficit
    
    
    (19,500
    )
    
    
    (8,710
    )Total stockholders equity
    
    
    139,096
    
    
    
    168,468Total liabilities and stockholders equity
    
    $
    155,444
    
    
    $
    186,608
   F-4




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##### Table of Contents



CEVA, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (U.S. dollars in thousands, except share and per share data)
 Year Ended December 31,2008
    
    
    2009
    
    
    2010Revenues:Licensing
    
    $
    21,701
    
    
    $
    18,764
    
    
    $
    18,395Royalties
    
    
    14,349
    
    
    
    16,225
    
    
    
    22,866Other revenues
    
    
    4,315
    
    
    
    3,478
    
    
    
    3,650Total revenues
    
    
    40,365
    
    
    
    38,467
    
    
    
    44,911Cost of revenues
    
    
    4,668
    
    
    
    4,117
    
    
    
    3,712Gross profit
    
    
    35,697
    
    
    
    34,350
    
    
    
    41,199Operating expenses:Research and development, net
    
    
    20,172
    
    
    
    16,561
    
    
    
    17,909Sales and marketing
    
    
    7,088
    
    
    
    6,732
    
    
    
    7,308General and administrative
    
    
    6,637
    
    
    
    6,087
    
    
    
    6,108Amortization of intangible assets
    
    
    53
    
    
    
    
    
    
    
    Reorganization, restructuring and severance charge (Note 13)
    
    
    4,121
    
    
    
    
    
    
    
    Total operating expenses
    
    
    38,071
    
    
    
    29,380
    
    
    
    31,325Operating income (loss)
    
    
    (2,374
    )
    
    
    4,970
    
    
    
    9,874Financial income, net (Note 11)
    
    
    2,729
    
    
    
    2,048
    
    
    
    2,095Other income, net (Note 11)
    
    
    12,011
    
    
    
    3,712
    
    
    
    Income before taxes on income
    
    
    12,366
    
    
    
    10,730
    
    
    
    11,969Income tax expenses (Note 12)
    
    
    3,801
    
    
    
    2,384
    
    
    
    591Net income
    
    $
    8,565
    
    
    $
    8,346
    
    
    $
    11,378Basic net income per share
    
    $
    0.43
    
    
    $
    0.42
    
    
    $
    0.54Diluted net income per share
    
    $
    0.42
    
    
    $
    0.41
    
    
    $
    0.51Weighted average number of shares of Common Stock used in
computation of net income per share (in thousands)Basic
    
    
    20,009
    
    
    
    19,717
    
    
    
    21,251Diluted
    
    
    20,575
    
    
    
    20,411
    
    
    
    22,430
   F-5




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##### Table of Contents



CEVA, INC.
 
 STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (U.S. dollars in thousands, except share data)
 AccumulatedAdditional
    
    
    
    
    
    
    other
    
    
    
    
    
    
    Total
    
    
    TotalCommon Stock
    
    
    paid-in
    
    
    
    
    
    
    comprehensive
    
    
    Accumulated
    
    
    comprehensive
    
    
    stockholdersShares
    
    
    Amount
    
    
    capital
    
    
    Treasury Stock
    
    
    income (loss)
    
    
    deficit
    
    
    income
    
    
    equityBalance as of January 1, 2008
    
    
    20,033,897
    
    
    $
    20
    
    
    $
    149,772
    
    
    $
    
    
    
    $
    7
    
    
    $
    (35,411
    )
    
    
    
    
    
    $
    114,388Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,565
    
    
    $
    8,565
    
    
    
    8,565Unrealized loss from available-for-sale securities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (111
    )
    
    
    
    
    
    
    (111
    )
    
    
    (111
    )Unrealized gain from hedging activities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    80
    
    
    
    80Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,534Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    2,922
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,922Issuance of Common Stock upon exercise of employee stock options (a)
    
    
    58,693
    
    
    
    
    (*)
    
    
    410
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    410Issuance of Common Stock under employee stock purchase plan (a)
    
    
    99,631
    
    
    
    
    (*)
    
    
    608
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    608Purchase of Treasury Stock (a)
    
    
    (752,763
    )
    
    
    
    (*)
    
    
    
    
    
    
    (5,821
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,821
    )Issuance of Treasury Stock upon exercise of employee stock options (a)
    
    
    23,368
    
    
    
    
    (*)
    
    
    
    
    
    
    192
    
    
    
    
    
    
    
    (48
    )
    
    
    
    
    
    
    144Issuance of Treasury Stock under employee stock purchase plan (a)
    
    
    69,200
    
    
    
    
    (*)
    
    
    
    
    
    
    552
    
    
    
    
    
    
    
    (78
    )
    
    
    
    
    
    
    474Balance as of December 31, 2008
    
    
    19,532,026
    
    
    $
    20
    
    
    $
    153,712
    
    
    $
    (5,077
    )
    
    $
    (24
    )
    
    $
    (26,972
    )
    
    
    
    
    
    $
    121,659Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,346
    
    
    $
    8,346
    
    
    
    8,346Unrealized gain from available-for-sale securities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    333
    
    
    
    
    
    
    
    333
    
    
    
    333Unrealized loss from hedging activities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58
    )
    
    
    
    
    
    
    (58
    )
    
    
    (58
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,621Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    2,920
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,920Issuance of Common Stock upon exercise of employee stock options (a)
    
    
    237,515
    
    
    
    
    (*)
    
    
    1,610
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,610Purchase of Treasury Stock (a)
    
    
    (140,828
    )
    
    
    (1
    )
    
    
    
    
    
    
    (822
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (823
    )Issuance of Treasury Stock upon exercise of employee stock options (a)
    
    
    633,008
    
    
    
    1
    
    
    
    83
    
    
    
    4,639
    
    
    
    
    
    
    
    (593
    )
    
    
    
    
    
    
    4,130Issuance of Treasury Stock under employee stock purchase plan (a)
    
    
    168,015
    
    
    
    
    (*)
    
    
    
    
    
    
    1,260
    
    
    
    
    
    
    
    (281
    )
    
    
    
    
    
    
    979Balance as of December 31, 2009
    
    
    20,429,736
    
    
    $
    20
    
    
    $
    158,325
    
    
    $
    
    
    
    $
    251
    
    
    $
    (19,500
    )
    
    
    
    
    
    $
    139,096
  F-6




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##### Table of Contents



CEVA, INC.
 AccumulatedAdditional
    
    
    
    
    
    
    other
    
    
    
    
    
    
    Total
    
    
    TotalCommon Stock
    
    
    paid-in
    
    
    
    
    
    
    comprehensive
    
    
    Accumulated
    
    
    comprehensive
    
    
    stockholdersShares
    
    
    Amount
    
    
    capital
    
    
    Treasury Stock
    
    
    income (loss)
    
    
    deficit
    
    
    income
    
    
    equityNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,378
    
    
    $
    11,378
    
    
    
    11,378Unrealized loss from available-for-sale securities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (66
    )
    
    
    
    
    
    
    (66
    )
    
    
    (66
    )Unrealized gain from hedging activities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132
    
    
    
    
    
    
    
    132
    
    
    
    132Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    11,444Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    2,132
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,132Excess tax benefit related to exercise of stock options
    
    
    
    
    
    
    
    
    
    
    1,692
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,692Issuance of Common Stock upon exercise of employee stock options (a)
    
    
    1,960,887
    
    
    
    3
    
    
    
    13,893
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,896Issuance of Common Stock under employee stock purchase plan (a)
    
    
    133,826
    
    
    
    
    (*)
    
    
    795
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    795Purchase of Treasury Stock (a)
    
    
    (139,709
    )
    
    
    
    (*)
    
    
    
    
    
    
    (1,567
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,567
    )Issuance of Treasury Stock upon exercise of employee stock options (a)
    
    
    91,389
    
    
    
    
    (*)
    
    
    1
    
    
    
    1,027
    
    
    
    
    
    
    
    (340
    )
    
    
    
    
    
    
    688Issuance of Treasury Stock under employee stock purchase plan (a)
    
    
    48,320
    
    
    
    
    (*)
    
    
    
    
    
    
    540
    
    
    
    
    
    
    
    (248
    )
    
    
    
    
    
    
    292Balance as of December 31, 2010
    
    
    22,524,449
    
    
    $
    23
    
    
    $
    176,838
    
    
    $
    
    
    
    $
    317
    
    
    $
    (8,710
    )
    
    
    
    
    
    $
    168,468Accumulated unrealized gain from available-for-sale
securities, net of taxes of $41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    98Accumulated unrealized gain from hedging activities, net of taxes of $22
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    219Accumulated other comprehensive gain, net as of December 31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    317
 
 (*)
    
    Represent an amount lower than $1.(a)
    
    See Note 8 to these consolidated financial statements.   F-7




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##### Table of Contents



CEVA, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (U.S. dollars in thousands)
 Year ended December 31,2008
    
    
    2009
    
    
    2010Cash flows from operating activities:Net income
    
    $
    8,565
    
    
    $
    8,346
    
    
    $
    11,378Adjustments required to reconcile net income to net cash provided by (used in) operating activities:Depreciation
    
    
    673
    
    
    
    488
    
    
    
    528Impairment of assets
    
    
    138
    
    
    
    
    
    
    
    Amortization of intangible assets
    
    
    53
    
    
    
    
    
    
    
    Equity-based compensation
    
    
    2,922
    
    
    
    2,920
    
    
    
    2,132Gain from sale of property and equipment
    
    
    (4
    )
    
    
    
    
    
    
    Loss (gain) on sale of available-for-sale marketable securities
    
    
    287
    
    
    
    21
    
    
    
    (35
    )Amortization of premiums on available-for-sale marketable securities
    
    
    179
    
    
    
    652
    
    
    
    1,603Unrealized foreign exchange loss
    
    
    223
    
    
    
    85
    
    
    
    26Accrued interest on short-term bank deposits
    
    
    (729
    )
    
    
    (1,049
    )
    
    
    (589
    )Gain on realization of investments
    
    
    (12,145
    )
    
    
    (3,712
    )
    
    
    Changes in operating assets and liabilities:Decrease (increase) in trade receivables
    
    
    (2,888
    )
    
    
    (605
    )
    
    
    89Decrease (increase) in other accounts receivable and prepaid expenses
    
    
    (1,571
    )
    
    
    (438
    )
    
    
    2,567Decrease (increase) in deferred tax, net
    
    
    (120
    )
    
    
    1,100
    
    
    
    (688
    )Increase (decrease) in trade payables
    
    
    160
    
    
    
    (88
    )
    
    
    46Increase (decrease) in deferred revenues
    
    
    307
    
    
    
    (602
    )
    
    
    184Increase (decrease) in accrued expenses and other payables
    
    
    216
    
    
    
    (784
    )
    
    
    695Excess tax benefit from equity-based compensation
    
    
    
    
    
    
    
    
    
    
    (1,692
    )Increase (decrease) in accrued severance pay, net
    
    
    306
    
    
    
    (325
    )
    
    
    21Net cash provided by (used in) operating activities
    
    
    (3,428
    )
    
    
    6,009
    
    
    
    16,265Cash flows from investing activities:Purchase of property and equipment
    
    
    (456
    )
    
    
    (368
    )
    
    
    (728
    )Proceeds from sale of property and equipment
    
    
    4
    
    
    
    3
    
    
    
    Investment in bank deposits
    
    
    (47,911
    )
    
    
    (46,182
    )
    
    
    (39,177
    )Proceeds from bank deposits
    
    
    16,347
    
    
    
    46,598
    
    
    
    40,420Investment in available-for-sale marketable securities
    
    
    (28,485
    )
    
    
    (48,402
    )
    
    
    (59,593
    )Proceeds from maturity and sale of available-for-sale marketable securities
    
    
    24,578
    
    
    
    31,587
    
    
    
    32,479Proceeds from realization of investment
    
    
    16,378
    
    
    
    3,712
    
    
    
    Net cash used in investing activities
    
    
    (19,545
    )
    
    
    (13,052
    )
    
    
    (26,599
    )Cash flows from financing activities:Purchase of Treasury Stock
    
    
    (5,821
    )
    
    
    (823
    )
    
    
    (1,567
    )Proceeds from issuance of Common Stock and Treasury Stock upon exercise of employee stock options
    
    
    554
    
    
    
    5,740
    
    
    
    14,584Proceeds from issuance of Common Stock and Treasury Stock under employee stock purchase plan
    
    
    1,082
    
    
    
    979
    
    
    
    1,087Excess tax benefit from equity-based compensation
    
    
    
    
    
    
    
    
    
    
    1,692Net cash provided by (used in) financing activities
    
    
    (4,185
    )
    
    
    5,896
    
    
    
    15,796Effect of exchange rate movements on cash
    
    
    (211
    )
    
    
    (77
    )
    
    
    (468
    )Increase (decrease) in cash and cash equivalents
    
    
    (27,369
    )
    
    
    (1,224
    )
    
    
    4,994Cash and cash equivalents at the beginning of the year
    
    
    40,697
    
    
    
    13,328
    
    
    
    12,104Cash and cash equivalents at the end of the year
    
    $
    13,328
    
    
    $
    12,104
    
    
    $
    17,098
   F-8




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##### Table of Contents



CEVA, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS(Continued)
 (U.S. dollars in thousands)
 Year ended December 31,2008
    
    
    2009
    
    
    2010Supplemental information of cash-flows activities:Cash paid (received) during the year for:Income and withholding taxes, net
    
    $
    5,124
    
    
    $
    1,105
    
    
    $
    (136
    )
   F-9




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##### Table of Contents



CEVA, INC.
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 ( in thousands, except share data )
 NOTE 1: ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
 Organization:
    Basis of presentation:
  Use of estimates:
  Financial statements in U.S. dollars:
   Principles of consolidation:
  Cash equivalents:
   F-10




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
 Short-term bank deposits:
  Marketable securities:
   Long-term bank deposits:
  Property and equipment, net:
  %Computers, software and equipment
    
    15-33Office furniture and equipment
    
    7-25Leasehold improvements
    
    10-25(the shorter of the expected leaseterm or useful economic life)
   F-11




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)  (in thousands, except share data)
 Goodwill:
       Revenue recognition:
    F-12




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
           F-13




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
 Cost of revenue:
  Income taxes:
     Research and development:
  Government grants:
    F-14




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
 Employee benefit plan:
    Accrued severance pay:
     Accounting for equity-based compensation:
     F-15




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
  2008
    
    2009
    
    2010Expected dividend yield
    
    0%
    
    0%
    
    0%Expected volatility
    
    37%-64%
    
    47%-78%
    
    38%-62%Risk-free interest rate
    
    1.4%-3.8%
    
    0.4%-3.4%
    
    0.2%-3.2%Expected forfeiture (employees)
    
    15%
    
    10%
    
    10%Expected forfeiture (executives)
    
    10%
    
    5%
    
    5%Contractual term of up to
    
    7 years
    
    7 years
    
    7 yearsSuboptimal exercise multiple (employees)
    
    1.6
    
    1.5
    
    1.5Suboptimal exercise multiple (executives)
    
    1.2
    
    1.3
    
    1.3
   Year ended December 31,2008
    
    
    2009
    
    
    2010Cost of revenue
    
    $
    112
    
    
    $
    115
    
    
    $
    77Research and development, net
    
    
    1,088
    
    
    
    873
    
    
    
    652Sales and marketing
    
    
    531
    
    
    
    590
    
    
    
    380General and administrative
    
    
    1,191
    
    
    
    1,342
    
    
    
    1,023Total equity-based compensation expense
    
    $
    2,922
    
    
    $
    2,920
    
    
    $
    2,132
   Fair value of financial instruments:
  Comprehensive income (loss):
   F-16




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
 Concentration of credit risk:
       Derivative and hedging activities:
   F-17




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
   Advertising expenses:
  Treasury stock:
   Net income per share of common stock:
  Year ended December 31,(in thousands except per share data)
    
    2008
    
    
    2009
    
    
    2010Numerator:Numerator for basic and diluted net income per share
    
    $
    8,565
    
    
    $
    8,346
    
    
    $
    11,378Denominator:Denominator for basic net income per share
    
    
    20,009
    
    
    
    19,717
    
    
    
    21,251Effect of employee stock options
    
    
    566
    
    
    
    694
    
    
    
    1,179Denominator for diluted net income per share
    
    
    20,575
    
    
    
    20,411
    
    
    
    22,430Basic net income per share
    
    $
    0.43
    
    
    $
    0.42
    
    
    $
    0.54Diluted net income per share
    
    $
    0.42
    
    
    $
    0.41
    
    
    $
    0.51
  F-18




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
  Recently issued accounting standards:
    NOTE 2: MARKETABLE SECURITIES
  As at December 31, 2010Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    valueCertificates of deposits
    
    $
    5,358
    
    
    $
    3
    
    
    $
    
    
    
    $
    5,361Corporate bonds and securities
    
    
    68,377
    
    
    
    328
    
    
    
    (192
    )
    
    
    68,513$
    73,735
    
    
    $
    331
    
    
    $
    (192
    )
    
    $
    73,874
 As at December 31, 2009Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    valueCertificates of deposits
    
    $
    1,842
    
    
    $
    6
    
    
    $
    (1
    )
    
    $
    1,847U.S. government and agency securities
    
    
    1,934
    
    
    
    16
    
    
    
    
    
    
    
    1,950Corporate bonds and securities
    
    
    44,413
    
    
    
    318
    
    
    
    (90
    )
    
    
    44,641$
    48,189
    
    
    $
    340
    
    
    $
    (91
    )
    
    $
    48,438
  F-19




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
  As at December 31, 2010Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    valueDue in one year or less
    
    $
    31,267
    
    
    $
    115
    
    
    $
    (23
    )
    
    $
    31,359Due after one year to three years
    
    
    42,468
    
    
    
    216
    
    
    
    (169
    )
    
    
    42,515$
    73,735
    
    
    $
    331
    
    
    $
    (192
    )
    
    $
    73,874
    NOTE 3: FAIR VALUE OF FINANCIAL INSTRUMENTS
  Level 1
    
    Unadjusted quoted prices in active markets that are accessible on
the measurement date for identical, unrestricted assets or
liabilities;Level 2
    
    Quoted prices in markets that are not active, or inputs that are
observable, either directly or indirectly, for substantially the
full term of the asset or liability; andLevel 3
    
    Prices or valuation techniques that require inputs that are both
significant to the fair value measurement and unobservable
(supported by little or no market activity).
   F-20




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
  December 31,Description
    
    2010
    
    
    Level I
    
    
    Level II
    
    
    Level IIIAssets:Short term bank deposits
    
    $
    24,807
    
    
    $
    
    
    
    $
    24,807
    
    
    $
    Marketable securities:Certificates of deposits
    
    
    5,361
    
    
    
    4,316
    
    
    
    1,045
    
    
    
    Corporate bonds and securities
    
    
    68,513
    
    
    
    
    
    
    
    68,513
    
    
    
    Foreign exchange contracts
    
    
    241
    
    
    
    
    
    
    
    241
    
    
    
    Long term bank deposits
    
    
    15,173
    
    
    
    
    
    
    
    15,173
    
    
    
    Liabilities:Foreign exchange contracts
    
    
    709
    
    
    
    
    
    
    
    709
    
    
    
    
 December 31,Description
    
    2009
    
    
    Level I
    
    
    Level II
    
    
    Level IIIAssets:Short term bank deposits
    
    $
    40,056
    
    
    $
    
    
    
    $
    40,056
    
    
    $
    Marketable securities:Certificates of deposits
    
    
    1,847
    
    
    
    
    
    
    
    1,847
    
    
    
    U.S. government and agency
securities
    
    
    1,950
    
    
    
    
    
    
    
    1,950
    
    
    
    Corporate bonds and securities
    
    
    44,641
    
    
    
    
    
    
    
    44,641
    
    
    
    Foreign exchange contracts
    
    
    128
    
    
    
    
    
    
    
    128
    
    
    
    Liabilities:Foreign exchange contracts
    
    
    27
    
    
    
    
    
    
    
    27
    
    
    
    
 NOTE 4: PROPERTY AND EQUIPMENT, NET
  As at December 31,2009
    
    
    2010Cost:Computers, software and equipment
    
    $
    11,082
    
    
    $
    11,682Office furniture and equipment
    
    
    904
    
    
    
    925Leasehold improvements
    
    
    668
    
    
    
    77512,654
    
    
    
    13,382Less  Accumulated depreciation
    
    
    (11,506
    )
    
    
    (12,034
    )Depreciated cost
    
    $
    1,148
    
    
    $
    1,348
  NOTE 5: GOODWILL
 As at December 31,2009
    
    
    2010Gross carrying amount
    
    $
    38,398
    
    
    $
    38,398Accumulated impairment loss/ asset write down
    
    
    1,900
    
    
    
    1,900$
    36,498
    
    
    $
    36,498
  F-21




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
 NOTE 6: PREPAID EXPENSES AND OTHER ACCOUNTS RECEIVABLE
 PREPAID EXPENSES
 As at December 31,2009
    
    
    2010Prepaid leased design tools
    
    $
    1,180
    
    
    $
    306Prepaid directors and officers insurance
    
    
    91
    
    
    
    37Prepaid car leases
    
    
    174
    
    
    
    183Prepaid rent
    
    
    276
    
    
    
    231IT consumables
    
    
    233
    
    
    
    29Other prepaid expenses
    
    
    58
    
    
    
    47$
    2,012
    
    
    $
    833
 OTHER ACCOUNTS RECEIVABLE
 As at December 31,2009
    
    
    2010Taxes
    
    $
    2,135
    
    
    $
    2,242Interest receivable
    
    
    776
    
    
    
    1,014Foreign exchange contracts
    
    
    128
    
    
    
    241Other
    
    
    294
    
    
    
    279$
    3,333
    
    
    $
    3,776
 NOTE 7: ACCRUED EXPENSES AND OTHER PAYABLES
 As at December 31,2009
    
    
    2010Accrued compensation and benefits
    
    $
    6,506
    
    
    $
    6,937Engineering accruals
    
    
    701
    
    
    
    782Professional fees
    
    
    1,017
    
    
    
    763Income tax payable
    
    
    46
    
    
    
    70Foreign exchange contracts
    
    
    27
    
    
    
    709Other accruals
    
    
    1,438
    
    
    
    1,260$
    9,735
    
    
    $
    10,521
 NOTE 8: STOCKHOLDERS EQUITY
 a. Common stock:
    F-22




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
 b. Preferred stock:
  c. Share repurchase program:
     d. Employee and non-employee stock plans:
   WeightedWeighted
    
    
    averageNumber of
    
    
    average exercise
    
    
    remaining
    
    
    Aggregate intrinsicoptions
    
    
    price
    
    
    contractual term
    
    
    valueOutstanding at the beginning of the year
    
    
    3,965,655
    
    
    $
    7.66Granted
    
    
    193,000
    
    
    
    12.48Exercised
    
    
    (2,052,276
    )
    
    
    7.11Forfeited or expired
    
    
    (65,301
    )
    
    
    8.47Outstanding at the end of the year
    
    
    2,041,078
    
    
    $
    8.65
    
    
    
    4.4
    
    
    $
    24,186,144Vested or expected to vest as of December 31
    
    
    1,977,993
    
    
    $
    8.64
    
    
    
    4.3
    
    
    $
    23,467,268Exercisable as of December 31
    
    
    1,082,940
    
    
    $
    8.12
    
    
    
    3.8
    
    
    $
    13,406,330
  F-23




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
   Options
    
    
    Weighted average
    
    
    
    
    
    
    
    
    
    
    Weighted averageExercise price
    
    outstanding as of
    
    
    remaining contractual
    
    
    Weighted average
    
    
    Options exercisable as of
    
    
    exercise price of(range)
    
    December 31, 2010
    
    
    life (years)
    
    
    exercise price
    
    
    December 31, 2010
    
    
    options exercisable5.50-6.99
    
    
    351,098
    
    
    
    4.4
    
    
    $
    6.61
    
    
    
    205,898
    
    
    $
    6.347.22-7.97
    
    
    394,890
    
    
    
    3.1
    
    
    
    7.54
    
    
    
    309,214
    
    
    
    7.468.03-8.68
    
    
    563,994
    
    
    
    4.5
    
    
    
    8.43
    
    
    
    247,414
    
    
    
    8.419.10-9.80
    
    
    548,096
    
    
    
    4.3
    
    
    
    9.69
    
    
    
    320,414
    
    
    
    9.6811.17-17.56
    
    
    183,000
    
    
    
    6.4
    
    
    
    12.54
    
    
    
    
    
    
    
    2,041,078
    
    
    
    4.4
    
    
    $
    8.65
    
    
    
    1,082,940
    
    
    $
    8.12
 2003 Director Stock Option Plan
   Year ended December 31,2010WeightedNumber of
    
    
    average exerciseoptions
    
    
    priceOutstanding at the beginning of the year
    
    
    602,500
    
    
    $
    7.14Granted
    
    
    13,000
    
    
    
    12.60Exercised
    
    
    (419,250
    )
    
    
    7.10Forfeited or expired
    
    
    
    
    
    
    Outstanding at the end of the year
    
    
    196,250
    
    
    $
    7.60
    F-24




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
     2002 Stock Incentive Plan
   Year ended December 31,2010WeightedNumber of
    
    
    average exerciseoptions
    
    
    priceOutstanding at the beginning of the year
    
    
    1,280,598
    
    
    $
    6.28Granted (*)
    
    
    31,000
    
    
    
    13.43Exercised
    
    
    (818,406
    )
    
    
    5.73Forfeited or expired
    
    
    (17,984
    )
    
    
    6.99Outstanding at the end of the year
    
    
    475,208
    
    
    $
    7.66
 (*)
    
    Options to purchase 13,000 shares of common stock were granted to non-employee directors
during 2010. The exercise price of such grants was $12.60.    F-25




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
   2000 Stock Incentive Plan
   Year ended December 31,2010WeightedNumber of
    
    
    average exerciseoptions
    
    
    priceOutstanding at the beginning of the year
    
    
    2,082,557
    
    
    $
    8.66Granted (*)
    
    
    149,000
    
    
    
    12.28Exercised
    
    
    (814,620
    )
    
    
    8.49Forfeited or expired
    
    
    (47,317
    )
    
    
    9.04Outstanding at the end of the year
    
    
    1,369,620
    
    
    $
    9.14
 (*)
    
    Options to purchase 106,000 shares of common stock were granted to non-employee directors
during 2010. The exercise price of such grants was $12.60.   2002 Employee Stock Purchase Plan (ESPP)
    F-26




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
   
    
    85% of the fair market value of common stock on the date of grant of the purchase
right, which is the commencement of an offer period; or
 
    
    85% of the fair market value of common stock on the exercise date, which is the last
day of a purchase period.
   e. Dividend policy:
  NOTE 9: DERIVATIVES AND HEDGING ACTIVITIES
  As at December 31,2009
    
    
    2010Derivative assets:Derivatives designated as cash flow hedging instruments:Foreign exchange option contracts
    
    $
    103
    
    
    $
    151Foreign exchange forward contracts
    
    
    25
    
    
    
    90Total
    
    $
    128
    
    
    $
    241Derivative liabilities:Derivatives designated as cash flow hedging instruments:Foreign exchange forward contracts
    
    $
    27
    
    
    $
    Derivatives not designated as hedging instruments:Foreign exchange forward contracts
    
    
    
    
    
    
    709Total
    
    $
    27
    
    
    $
    709
   F-27




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
  Year ended December 31,2008
    
    
    2009
    
    
    2010Derivatives designated as cash flow hedging instruments:Foreign exchange option contracts
    
    $
    (22
    )
    
    $
    (209
    )
    
    $
    176Foreign exchange forward contracts
    
    
    122
    
    
    
    52
    
    
    
    143$
    100
    
    
    $
    (157
    )
    
    $
    319
  Year ended December 31,2008
    
    
    2009
    
    
    2010Derivatives designated as cash flow hedging instruments:Foreign exchange option contracts
    
    $
    108
    
    
    $
    226
    
    
    $
    (128
    )Foreign exchange forward contracts
    
    
    (128
    )
    
    
    (113
    )
    
    
    (51
    )$
    (20
    )
    
    $
    113
    
    
    $
    (179
    )
  NOTE 10: GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA
 a. Summary information about geographic areas:
  Year ended December 31,2008
    
    
    2009
    
    
    2010Revenues based on customer location:United States
    
    $
    5,276
    
    
    $
    5,982
    
    
    $
    9,326Europe, Middle East (1) (2) (3)
    
    
    22,278
    
    
    
    17,843
    
    
    
    18,825Asia Pacific (4) (5)
    
    
    12,811
    
    
    
    14,642
    
    
    
    16,760$
    40,365
    
    
    $
    38,467
    
    
    $
    44,911(1) Germany
    
    
    *
    )
    
    
    *
    )
    
    $
    8,670(2) Switzerland
    
    $
    5,946
    
    
    
    *
    )
    
    $
    6,163(3) Sweden
    
    $
    8,019
    
    
    $
    7,454
    
    
    
    *
    )(4) China
    
    
    *
    )
    
    $
    6,420
    
    
    $
    11,098(5) Japan
    
    $
    5,144
    
    
    $
    4,455
    
    
    
    *
    )
 *)
    
    Less than 10%  F-28




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
 December 31,2008
    
    
    2009
    
    
    2010Long-lived assets by geographic region:United States
    
    $
    28
    
    
    $
    25
    
    
    $
    35Ireland (*)
    
    
    36
    
    
    
    69
    
    
    
    47Israel
    
    
    1,188
    
    
    
    1,044
    
    
    
    1,260Other
    
    
    19
    
    
    
    10
    
    
    
    6$
    1,271
    
    
    $
    1,148
    
    
    $
    1,348
 (*)
    
    The Company recorded a loss of $138 in 2008 related to the disposal of SATA-related fixed
assets in connection with the restructuring of SATA activities associated with its Irish
subsidiary. b. Major customer data as a percentage of total revenues:
  Year ended December 31,2008
    
    
    2009
    
    
    2010Customer A
    
    
    *
    )
    
    
    20
    %
    
    
    16
    %Customer B
    
    
    *
    )
    
    
    13
    %
    
    
    18
    %Customer C
    
    
    *
    )
    
    
    *
    )
    
    
    19
    %Customer D
    
    
    20
    %
    
    
    *
    )
    
    
    *
    )
 *)
    
    Less than 10% c. Information about Products and Services:
  Year ended December 31,2008
    
    
    2009
    
    
    2010CEVA-X family
    
    
    27
    %
    
    
    40
    %
    
    
    32
    %CEVA TeakLite family
    
    
    38
    %
    
    
    35
    %
    
    
    48
    %CEVA Teak family
    
    
    15
    %
    
    
    13
    %
    
    
    12
    %
   F-29




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
 NOTE 11: SELECTED STATEMENTS OF OPERATIONS DATA
  Year ended December 31,2008
    
    
    2009
    
    
    2010Interest income
    
    $
    3,329
    
    
    $
    2,863
    
    
    $
    3,724Gain (loss) on available-for-sale marketable securities, net
    
    
    (287
    )
    
    
    (21
    )
    
    
    35Amortization of premium on available-for-sale marketable
securities, net
    
    
    (179
    )
    
    
    (652
    )
    
    
    (1,603
    )Foreign exchange loss, net
    
    
    (134
    )
    
    
    (142
    )
    
    
    (61
    )$
    2,729
    
    
    $
    2,048
    
    
    $
    2,095
  Year ended December 31,2008
    
    
    2009
    
    
    2010Gain on realization of investments
    
    $
    12,145
    
    
    $
    3,712
    
    
    $
    Gain from sale of a property
    
    
    4
    
    
    
    
    
    
    
    Impairment of assets
    
    
    (138
    )
    
    
    
    
    
    
    $
    12,011
    
    
    $
    3,712
    
    
    $
    
    F-30




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
  NOTE 12: TAXES ON INCOME
 a. A number of the Companys operating subsidiaries are taxed at rates lower than U.S. rates.
 1. Irish Subsidiaries
  2. Israeli Subsidiary
         F-31




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
              F-32




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
         b. The provision for income taxes is as follows:
 Year ended December 31,2008
    
    
    2009
    
    
    2010Domestic taxes:Current
    
    $
    3,104
    
    
    $
    109
    
    
    $
    (885
    )Deferred
    
    
    (138
    )
    
    
    920
    
    
    
    (877
    )Foreign taxes:Current
    
    
    817
    
    
    
    1,175
    
    
    
    2,164Deferred
    
    
    18
    
    
    
    180
    
    
    
    189$
    3,801
    
    
    $
    2,384
    
    
    $
    591Income (loss) before taxes on income:Domestic
    
    $
    (3,321
    )
    
    $
    (3,571
    )
    
    $
    (3,426
    )Foreign
    
    
    15,687
    
    
    
    14,301
    
    
    
    15,395$
    12,366
    
    
    $
    10,730
    
    
    $
    11,969
  F-33




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
 c. Reconciliation between the Companys effective tax rate and the U.S. statutory rate:
 Year ended December 31,2008
    
    
    2009
    
    
    2010Income before taxes on income
    
    $
    12,366
    
    
    $
    10,730
    
    
    $
    11,969Theoretical tax at U.S. statutory rate-35%
    
    
    4,328
    
    
    
    3,756
    
    
    
    4,189Foreign income taxes at rates other than U.S. rate
    
    
    (4,017
    )
    
    
    (3,273
    )
    
    
    (4,182
    )Changes in foreign tax rates
    
    
    
    
    
    
    
    
    
    
    (1,714
    )Subpart F
    
    
    4,360
    
    
    
    1,189
    
    
    
    216Non-deductible items
    
    
    809
    
    
    
    1,008
    
    
    
    408Valuation allowance
    
    
    (1,187
    )
    
    
    (265
    )
    
    
    1,633Other, net
    
    
    (492
    )
    
    
    (31
    )
    
    
    41Taxes on income
    
    $
    3,801
    
    
    $
    2,384
    
    
    $
    591
 d. Deferred taxes on income:
  As at December 31,2009
    
    
    2010Deferred tax assetsOperating loss carryforward
    
    $
    7,450
    
    
    $
    9,067Accrued expenses
    
    
    366
    
    
    
    397Temporary differences related to R&D expenses
    
    
    991
    
    
    
    857Equity-based compensation
    
    
    495
    
    
    
    533Other
    
    
    
    
    
    
    637Total gross deferred tax assets
    
    
    9,302
    
    
    
    11,491Valuation allowance
    
    
    (7,897
    )
    
    
    (9,629
    )Net deferred tax assets
    
    $
    1,405
    
    
    $
    1,862Deferred tax liabilitiesSubpart F carryforward
    
    $
    1,062
    
    
    $
    751Other
    
    
    106
    
    
    
    150Total gross deferred tax liabilities
    
    $
    1,168
    
    
    $
    901Net deferred tax assets (*)
    
    $
    237
    
    
    $
    961
 (*)
    
    Net deferred tax for the year ended December 31, 2009 from domestic and foreign jurisdictions
was $(851) and $1,088, respectively. Net deferred tax for the year ended December 31, 2010 from domestic and foreign jurisdictions was $77 and $884, respectively.
    F-34




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
 e. Uncertain tax positions
  Year endedDecember 31,2010Beginning of year
    
    $
    Additions for current year tax positions
    
    
    847Balance at December 31
    
    $
    847
  f. Tax loss carryforwards:
   g
 NOTE 13: REORGANIZATION, RESTRUCTURING AND SEVERANCE CHARGE
    F-35




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
  Under-utilizedSeverance and
    
    
    building operating
    
    
    Legal andrelated costs
    
    
    lease obligations
    
    
    professional fees
    
    
    TotalBalance as of December 31, 2007 (1)
    
    $
    
    
    
    $
    2,144
    
    
    $
    230
    
    
    $
    2,374Charge, net
    
    
    663
    
    
    
    3,586
    
    
    
    (128
    )
    
    
    4,121Effect of exchange rate
    
    
    61
    
    
    
    3
    
    
    
    5
    
    
    
    69Cash outlays
    
    
    (103
    )
    
    
    (5,733
    )
    
    
    (83
    )
    
    
    (5,919
    )Balance as of December 31, 2008 (2)
    
    $
    621
    
    
    $
    
    
    
    $
    24
    
    
    $
    645Cash outlays
    
    
    (621
    )
    
    
    
    
    
    
    (24
    )
    
    
    (645
    )Balance as of December 31, 2009
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 (1)
    
    The legal and professional fees were related to the termination of the Harcourt lease.(2)
    
    The legal and professional fees were related to charges associated with the restructuring of
the SATA business. NOTE 14: RELATED PARTY TRANSACTIONS
    NOTE 15: COMMITMENTS AND CONTINGENCIES
     F-36




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued) (in thousands, except share data)
  Minimum rentalcommitments for
    
    
    Commitments for other
    
    
    Other purchaseleasehold properties
    
    
    lease obligations
    
    
    obligations
    
    
    Total2011
    
    $
    837
    
    
    $
    1440
    
    
    $
    414
    
    
    $
    2,6912012
    
    
    677
    
    
    
    954
    
    
    
    
    
    
    
    1,6312013
    
    
    680
    
    
    
    705
    
    
    
    
    
    
    
    1,3852014
    
    
    637
    
    
    
    
    
    
    
    
    
    
    
    6372015
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    80$
    2,911
    
    
    $
    3,099
    
    
    $
    414
    
    
    $
    6,424
     F-37




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##### Table of Contents



SIGNATURES
  CEVA, INC.By:
    /s/ Gideon WertheizerGideon WertheizerChief Executive Officer  POWER OF ATTORNEY
   Signature
    
    Title
    
    Date/s/ Gideon Wertheizer

Gideon Wertheizer
    
    Chief Executive Officer and Director
(Principal Executive Officer & Director)
    
    March 15, 2011/s/ Yaniv Arieli

Yaniv Arieli
    
    Chief Financial Officer and Treasurer
(Principal Financial Officer and Principal
Accounting Officer)
    
    March 15, 2011/s/ Peter McManamon

Peter McManamon
    
    Director and Chairman
    
    March 15, 2011/s/ Eliyahu Ayalon

Eliyahu Ayalon
    
    Director
    
    March 15, 2011/s/ Zvi Limon

Zvi Limon
    
    Director
    
    March 15, 2011/s/ Bruce Mann

Bruce Mann
    
    Director
    
    March 15, 2011/s/ Sven-Christer-Nilsson

Sven-Christer Nilsson
    
    Director
    
    March 15, 2011/s/ Louis Silver

Louis Silver
    
    Director
    
    March 15, 2011/s/ Dan Tocatly

Dan Tocatly
    
    Director
    
    March 15, 2011




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##### Table of Contents



CEVA, INC.
 SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
 Balance atbeginning of
    
    
    
    
    
    
    
    
    
    
    Balance at endperiod
    
    
    Additions
    
    
    Deduction (1)
    
    
    of periodYear ended December 31, 2010Allowance for doubtful accounts
    
    $
    700
    
    
    $
    
    
    
    $
    675
    
    
    $
    25Year ended December 31, 2009Allowance for doubtful accounts
    
    $
    743
    
    
    $
    
    
    
    $
    43
    
    
    $
    700Year ended December 31, 2008Allowance for doubtful accounts
    
    $
    868
    
    
    $
    
    
    
    $
    125
    
    
    $
    743
 (1)
    
    Actual write-offs of uncollectible accounts receivables




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    (1)
    
    Amended and Restated Certificate of Incorporation of the Registrant3.2
    (2)
    
    Certificate of Ownership and Merger (merging CEVA, Inc. into ParthusCeva, Inc.)3.3
    (3)
    
    Third Amended and Restated Bylaws of the Registrant3.7
    (4)
    
    Amendment to the Amended and Restated Certificate of Incorporation of the Registrant4.1
    (5)
    
    Specimen of Common Stock Certificate10.1
    (6)
    
    CEVA, Inc. 2000 Stock Incentive Plan10.7
    (6)
    
    CEVA, Inc. 2002 Stock Incentive Plan10.8
    (6)
    
    CEVA, Inc. 2003 Director Stock Option Plan10.9
    (6)
    
    Parthus 2000 Share Option Plan10.10
    
    
    CEVA, Inc. 2002 Employee Stock Purchase Plan10.11
    (1)
    
    Form of Indemnification Agreement10.12
    (7)
    
    Employment Agreement between the Registrant and Gideon Wertheizer dated as of November 1, 200210.13
    (7)
    
    Employment Agreement between the Registrant and Issachar Ohana dated as of November 1, 200210.14
    (8)
    
    Personal and Special Employment Agreement between the Registrant and Yaniv Arieli dated as of August
18, 200510.15
    (9)
    
    Form of Stock Option Agreement under the CEVA, Inc. 2002 Stock Incentive Plan10.16
    (9)
    
    Form of Israeli Stock Option Agreement under the CEVA, Inc. 2002 Stock Incentive Plan10.17
    (9)
    
    Form of Stock Option Agreement under the CEVA, Inc. 2000 Stock Incentive Plan10.18
    (9)
    
    Form of Israeli Stock Option Agreement under the CEVA, Inc. 2000 Stock Incentive Plan10.19
    (9)
    
    Form of Option Agreement under the CEVA, Inc. 2003 Director Stock Option Plan10.20
    (10)
    
    Form of Stock Option Agreement for Directors under the CEVA, Inc. 2000 Stock Incentive Plan10.21
    (10)
    
    Yaniv Arielis Amended and Restated Nonstatutory Stock Option Agreement under the CEVA, Inc. 2002
Stock Incentive Plan, dated as of August 1, 200710.22
    (11)
    
    Amendment, dated July 22, 2003, to the Employment Agreement by and between Issachar Ohana and CEVA,
Inc., dated November 1, 200210.23
    (12)
    
    Amendment, effective as of November 1, 2007, to the Employment Agreement by and between Issachar
Ohana and CEVA, Inc., dated November 1, 2002 and as amended on July 22, 200310.24
    (13)
    
    2010 Incentive Plan for Issachar Ohana, effective as of January 1, 201010.25
    (14)
    
    2011 Incentive Plan for Issachar Ohana, effective as of January 1, 201110.26
    (15)
    
    2010 Executive Bonus Plan for Gideon Wertheizer and Yaniv Arieli, effective as of January 1, 201010.27
    (16)
    
    2011 Executive Bonus Plan for Gideon Wertheizer and Yaniv Arieli, effective as of January 1, 201121.1
    *
    
    Subsidiaries of the Registrant23.1
    *
    
    Consent of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global24.1
    *
    
    Power of Attorney (See signature page of this Annual Report on Form 10-K)31.1
    *
    
    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




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##### Table of Contents



(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 Report on Form 8-K, filed with the Commission on December 8,
2003, and incorporated hereby by reference.(3)
    
    Filed as an exhibit to CEVAs Current Report on Form 8-K, filed with the Commission on
October 29, 2008, and incorporated hereby by reference.(4)
    
    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.(5)
    
    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.(6)
    
    Filed as an exhibit to CEVAs 2007 Annual Report on Form 10-K, filed with the Commission on
March 14, 2008, and incorporated hereby by reference.(7)
    
    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.(8)
    
    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.(9)
    
    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.(10)
    
    Filed as an exhibit of the same number to CEVAs Quarterly Report on Form 10-Q, filed with
the Securities and Exchange Commission on August 9, 2007, and incorporated hereby by
reference.(11)
    
    Filed as Exhibit 10.27 to CEVAs Quarterly Report on Form 10-Q, filed with the Securities and
Exchange Commission on November 9, 2007, and incorporated hereby by reference.(12)
    
    Filed as Exhibit 99.1 to CEVAs Current Report on Form 8-K, filed with the Securities and
Exchange Commission on November 7, 2007, and incorporated hereby by reference.(13)
    
    Filed as Exhibit 10.1 to CEVAs Current Report on Form 8-K, filed with the Securities and
Exchange Commission on March 30, 2010, and incorporated hereby by reference.(14)
    
    Filed as Exhibit 10.1 to CEVAs Current Report on Form 8-K, filed with the Securities and
Exchange Commission on February 1, 2011, and incorporated hereby by reference.(15)
    
    Description filed with CEVAs Current Report on Form 8-K, filed with the Securities and
Exchange Commission on August 3, 2010, and incorporated hereby by reference.(16)
    
    Description filed as Exhibit 99.1 to CEVAs Current Report on Form 8-K, filed with the
Securities and Exchange Commission on February 1, 2011, 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.