##### Table of Contents



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, 2008
 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.)2033 Gateway Place, Suite 150, San Jose, California
    
    95110-1002(Address of principal executive offices)
    
    (Zip Code)
 (408) 514-2900    None
  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
 o þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 Yes o No þ
   Class
    
    Outstanding at March 6, 2009Common Stock, $0.001 par value per share
    
    19,530,111 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
    
    
    17Item 3. Legal Proceedings
    
    
    17Item 4. Submission of Matters to a Vote of Security Holders
    
    
    17Executive Officers of the Registrant
    
    
    18PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    19Item 6. Selected Financial Data
    
    
    22Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 7A. Quantitative and Qualitative Disclosure About Market Risk
    
    
    39Item 8. Financial Statements and Supplementary Data
    
    
    40Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    40Item 9A. Controls and Procedures
    
    
    40Item 9B. Other Information
    
    
    41PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    42Item 11. Executive Compensation
    
    
    42Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    42Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    42Item 14. Principal Accountant Fees and Services
    
    
    42PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    43Financial Statements
    
    
    F-1SignaturesExhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 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 growing demand for highly integrated, licensable
application platforms incorporating DSP cores and all the necessary
hardware and software will drive demand for our technology;
    
    Our belief that the handsets market, including the penetration of
handsets in rural sites such as in China, the increasing market share
of Smartphones and the trend towards 3G/3G+ capabilities in handsets,
presents significant growth opportunities 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 belief that Texas Instruments announcement of its intent to exit
the merchant baseband market, after historically being the largest
player in this space, is a strong positive driver for our future
market share expansion;
    
    Our belief that our research and development expenses may increase in
the future to keep pace with new trends in our industry;
    
    Our belief that our new mobile multimedia platforms and CEVA-HD-Audio
technology may increase our future royalty potential;
    
    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;
 
    
    DSP-based subsystems (the essential hardware components integrated with the DSP
core to form a System-on-Chip (SoC) design); and
 
    
    a portfolio of application-specific platforms, including video, audio, Voice over
Internet Protocols (VoIP), Bluetooth and Serial Advanced Technology Attachment
(SATA).
       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 and associated subsystems  we
seek to enhance our existing family of DSP cores and DSP-based subsystems with
additional features, performance and capabilities;
 
    
    continue to develop and enhance our range of complete and highly integrated platform
solutions  we intend to continue developing our integrated IP solutions which combine
application-specific software and dedicated logic  such as video, audio and VoIP -
built around our DSP cores, and delivered to our licensing partners as a complete and
verified system solution;
  4




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
    
    capitalize on our relationships and leadership  we seek to expand our worldwide
community of semiconductor and OEM licensees who are developing CEVA-based solutions;
and
 
    
    capitalize on our IP licensing and royalty business model  we seek to maximize the
advantages of our IP model which we believe is the best vehicle for 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 DSP-based Subsystems
  CEVA Application-Specific Platforms
  Customers
   5




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International Sales and Operations
   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;
 
    
    internal design groups of large chip companies that develop proprietary DSP solutions
for their own application-specific chipsets; and
 
    
    semiconductor companies that offer off-the-shelf programmable DSP chipsets.
      
    
    in the multimedia market  ARC, Chips & Media, Hantro (acquired by On2), Imagination
Technologies and Tensilica;
 
    
    in the serial storage technology area  ARM Holdings, Gennum, Silicon Image and
Synopsys;
  7




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
    
    in VoIP applications  ARM Holdings, MIPS Technologies and Verisilicon; and
 
    
    in audio applications  ARC, ARM Holdings, Tensilica and Verisilicon.
 Proprietary Rights
        8




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Employees
  NumberTotal employees
    
    
    187FunctionResearch and development
    
    
    128Sales and marketing
    
    
    20Technical support
    
    
    15Administration
    
    
    24LocationIsrael
    
    
    126Ireland
    
    
    30United Kingdom
    
    
    7United States
    
    
    9Elsewhere
    
    
    15
     Corporate History
  Available Information
   
 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.
  9




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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.
  
    
    microprocessor IP providers, such as ARC, ARM Holdings, MIPS Technologies and
Tensilica, are offering DSP extensions to their IP;
 
    
    our video solution is software-based and competes with hardware implementation
offered by companies such as Hantro (acquired by On2) and companies offering other
software solutions, such as Imagination Technologies, Tensilica and ARC;
 
    
    ARC is offering a licensing model based on royalty payments specifically for
Chinese customers that waive initial licensee fees; and
 
    
    SATA IP market is highly standardized with several vendors offering similar
products, leading to pricing pressures for both licensing and royalty revenue.
  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;
 
    
    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;
 
    
    increased operating expenses and gross margin fluctuations associated with the
introduction of new or enhanced technologies;
 
    
    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 global economic slowdown, and
its effect on the semiconductor industry and sales of consumer products into which
our technologies are incorporated.
   10




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We rely significantly on revenue derived from a limited number of customers.
  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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We depend on a limited number of key personnel who would be difficult to replace.
  The sales cycle for our IP solutions is lengthy, which makes forecasting of our customer orders and
revenues difficult.
  We may dispose of or discontinue existing product lines and technology developments, which may
adversely impact our future results.
  Because our IP solutions are complex, the detection of errors in our products may be delayed, and
if we deliver products with defects, our credibility will be harmed, the sales and market
acceptance of our products may decrease and product liability claims may be made against us.
  Our operating results may fluctuate significantly due to the cyclicality of the semiconductor
industry or global economy slowdown, which could adversely affect the market price of our stock.
   12




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Our success will depend on our ability to successfully manage our geographically dispersed
operations.
  Our operations in Israel may be adversely affected by instability in the Middle East region.
   Our research and development expenses may increase if the grants we currently receive from the
Israeli and Irish governments are reduced or withheld.
  We are exposed to fluctuations in currency exchange rates.
   13




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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;
 
    
    political and economic instability; and
 
    
    changes in diplomatic and trade relationships.
 If we are unable to meet the changing needs of our end-users or to address evolving market demands,
our business may be harmed.
  We may seek to expand our business through acquisitions that could result in diversion of resources
and extra expenses.
   
    
    issuance of equity securities that would dilute our current stockholders
percentages of ownership;
 
    
    large one-time write-offs;
 
    
    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.
  Our cash and cash equivalents and investment portfolio could be adversely affected by the current
downturn in the financial and credit markets.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
   16




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ITEM 2. PROPERTIES
   AreaLocation
    
    Term
    
    
    Expiration
    
    
    (Sq. Feet)
    
    
    Principal ActivitiesSan Jose, CA, U.S.
    
    3 years
    
    
    
    2010
    
    
    
    5,250
    
    
    Headquarters; sales and marketing; administrationHerzeliya, Israel
    
    4 years
    
    
    
    2010
    
    
    
    27,300
    
    
    Research and development; administrationDublin, Ireland
    
    1 year
    
    
    
    2009
    
    
    
    2,270
    
    
    Research and development; administrationCork, Ireland (*)
    
    25 years
    
    
    
    2025
    
    
    
    10,000
    
    
    Research and developmentLimerick, Ireland
    
    10 years
    
    
    
    2010
    
    
    
    4,000
    
    
    Research and developmentBelfast, UK (**)
    
    15 years
    
    
    
    2019
    
    
    
    2,600
    
    
    Research and development
 (*)
    
    Break clause in the lease exercisable in 2010.(**)
    
    Break clause in the lease exercisable in 2009. 
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   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
    
    
    Low2008First Quarter
    
    $
    12.04
    
    
    $
    7.44Second Quarter
    
    $
    9.95
    
    
    $
    7.87Third Quarter
    
    $
    10.44
    
    
    $
    7.49Fourth Quarter
    
    $
    8.73
    
    
    $
    5.462007First Quarter
    
    $
    8.11
    
    
    $
    6.49Second Quarter
    
    $
    8.58
    
    
    $
    7.11Third Quarter
    
    $
    9.41
    
    
    $
    7.81Fourth Quarter
    
    $
    13.22
    
    
    $
    8.63
    19




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Unregistered Sales of Equity Securities and Use of Proceeds
  (c) Total Number of
    
    
    (d) Maximum Number ofShares Purchased as Part
    
    
    Shares that May Yet Be(a) Total Number of
    
    
    (b) Average Price Paid
    
    
    of Publicly Announced
    
    
    Purchased Under the PlansPeriod
    
    Shares Purchased
    
    
    per Share
    
    
    Plans or Programs
    
    
    or Programs (1)Month #1 (October
1, 2008 to October
31, 2008)
    
    
    475,730
    
    
    $
    7.75
    
    
    
    475,730
    
    
    
    325,500Month #2 (November
1, 2008 to November
30, 2008)
    
    
    78,263
    
    
    $
    6.31
    
    
    
    78,263
    
    
    
    247,237Month #3 (December
1, 2008 to December
31, 2008)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TOTAL
    
    
    553,993
    
    
    $
    7.55
    
    
    
    553,993
    
    
    
    247,237
    (2)
 (1)
    
    On August 4, 2008, our board of directors approved a share repurchase program for up to 1.0
million shares of common stock. On September 3, 2008, our board approved the adoption of a
share repurchase plan in accordance with Rule 10b5-1 of the United States Securities Exchange
Act of 1934, as amended (the 10b5-1 Plan), for the repurchase of up to 500,000 of the 1.0
million shares of common stock authorized by the board for repurchase under the repurchase
program. We have fully utilized the shares available for repurchase under the 10b5-1 Plan.
Our repurchase program is being affected from time to time, depending on market conditions and
other factors, through open market purchases and privately negotiated transactions. The
repurchase program has no set expiration or termination date.(2)
    
    The number represents the number of shares of our common stock that remain available for the
repurchase pursuant to our Boards authorizations as of December 31, 2008.  2009 Annual Meeting of Stockholders
   20




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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.
 
 12/31/03
    
    
    12/31/04
    
    
    12/31/05
    
    
    12/31/06
    
    
    12/31/07
    
    
    12/31/08CEVA, Inc
    
    
    100.00
    
    
    
    87.48
    
    
    
    60.13
    
    
    
    62.15
    
    
    
    117.29
    
    
    
    67.24NASDAQ Composite
    
    
    100.00
    
    
    
    110.08
    
    
    
    112.88
    
    
    
    126.51
    
    
    
    138.13
    
    
    
    80.47Specialized Semiconductor
    
    
    100.00
    
    
    
    84.28
    
    
    
    88.76
    
    
    
    97.89
    
    
    
    130.71
    
    
    
    65.41
     21




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ITEM 6. SELECTED FINANCIAL DATA
  Year Ended December 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008(in thousands)Consolidated Statements of Operations Data:Revenues:Licensing
    
    $
    26,237
    
    
    $
    23,935
    
    
    $
    22,160
    
    
    $
    19,499
    
    
    $
    21,701Royalties
    
    
    6,034
    
    
    
    6,820
    
    
    
    6,324
    
    
    
    9,095
    
    
    
    14,349Other revenue
    
    
    5,402
    
    
    
    4,881
    
    
    
    4,021
    
    
    
    4,617
    
    
    
    4,315Total revenues
    
    
    37,673
    
    
    
    35,636
    
    
    
    32,505
    
    
    
    33,211
    
    
    
    40,365Cost of revenues
    
    
    5,178
    
    
    
    4,217
    
    
    
    4,035
    
    
    
    3,851
    
    
    
    4,668Gross profit
    
    
    32,495
    
    
    
    31,419
    
    
    
    28,470
    
    
    
    29,360
    
    
    
    35,697Operating expenses:Research and development, net
    
    
    17,276
    
    
    
    20,153
    
    
    
    18,769
    
    
    
    19,136
    
    
    
    20,172Sales and marketing
    
    
    6,965
    
    
    
    6,577
    
    
    
    6,268
    
    
    
    6,253
    
    
    
    7,088General and administrative
    
    
    5,863
    
    
    
    5,742
    
    
    
    5,882
    
    
    
    5,721
    
    
    
    6,637Amortization of intangible assets
    
    
    892
    
    
    
    823
    
    
    
    414
    
    
    
    148
    
    
    
    53Reorganization, restructuring and
severance charge
    
    
    
    
    
    
    3,207
    
    
    
    
    
    
    
    
    
    
    
    4,121Impairment of assets
    
    
    
    
    
    
    510
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    30,996
    
    
    
    37,012
    
    
    
    31,333
    
    
    
    31,258
    
    
    
    38,071Operating income (loss)
    
    
    1,499
    
    
    
    (5,593
    )
    
    
    (2,863
    )
    
    
    (1,898
    )
    
    
    (2,374
    )Financial income, net
    
    
    796
    
    
    
    1,820
    
    
    
    2,620
    
    
    
    3,211
    
    
    
    2,729Other income, net
    
    
    
    
    
    
    1,507
    
    
    
    57
    
    
    
    425
    
    
    
    12,011Income (loss) before taxes on income
    
    
    2,295
    
    
    
    (2,266
    )
    
    
    (186
    )
    
    
    1,738
    
    
    
    12,366Income tax expense (income)
    
    
    645
    
    
    
    
    
    
    
    (88
    )
    
    
    447
    
    
    
    3,801Net income (loss)
    
    $
    1,650
    
    
    $
    (2,266
    )
    
    $
    (98
    )
    
    $
    1,291
    
    
    $
    8,565Basic net income (loss) per share
    
    $
    0.09
    
    
    $
    (0.12
    )
    
    $
    (0.01
    )
    
    $
    0.07
    
    
    $
    0.43Diluted net income (loss) per share
    
    $
    0.09
    
    
    $
    (0.12
    )
    
    $
    (0.01
    )
    
    $
    0.06
    
    
    $
    0.42
 December 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008(in thousands)Consolidated Balance Sheet Data:Working capital
    
    $
    57,960
    
    
    $
    61,240
    
    
    $
    65,001
    
    
    $
    77,312
    
    
    $
    83,886Total assets
    
    
    119,163
    
    
    
    115,749
    
    
    
    121,080
    
    
    
    128,989
    
    
    
    137,586Total long-term liabilities
    
    
    2,626
    
    
    
    4,295
    
    
    
    4,216
    
    
    
    4,647
    
    
    
    3,788Total stockholders equity
    
    $
    102,549
    
    
    $
    102,233
    
    
    $
    106,143
    
    
    $
    114,388
    
    
    $
    121,659
  22




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QUARTERLY FINANCIAL INFORMATION
 Three months endedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,
    
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2007
    
    
    2008Revenues:Licensing
    
    $
    4,639
    
    
    $
    5,534
    
    
    $
    5,314
    
    
    $
    4,012
    
    
    $
    5,088
    
    
    $
    6,026
    
    
    $
    5,974
    
    
    $
    4,613Royalties
    
    
    1,957
    
    
    
    1,918
    
    
    
    2,178
    
    
    
    3,042
    
    
    
    3,733
    
    
    
    3,038
    
    
    
    3,296
    
    
    
    4,282Other revenue
    
    
    1,130
    
    
    
    1,063
    
    
    
    1,237
    
    
    
    1,187
    
    
    
    1,246
    
    
    
    1,019
    
    
    
    936
    
    
    
    1,114Total revenues
    
    
    7,726
    
    
    
    8,515
    
    
    
    8,729
    
    
    
    8,241
    
    
    
    10,067
    
    
    
    10,083
    
    
    
    10,206
    
    
    
    10,009Cost of revenues
    
    
    1,007
    
    
    
    918
    
    
    
    1,001
    
    
    
    925
    
    
    
    1,170
    
    
    
    1,268
    
    
    
    1,105
    
    
    
    1,125Gross profit
    
    
    6,719
    
    
    
    7,597
    
    
    
    7,728
    
    
    
    7,316
    
    
    
    8,897
    
    
    
    8,815
    
    
    
    9,101
    
    
    
    8,884Operating expenses:Research and development, net
    
    
    4,700
    
    
    
    4,610
    
    
    
    4,705
    
    
    
    5,121
    
    
    
    5,120
    
    
    
    5,235
    
    
    
    4,778
    
    
    
    5,039Sales and marketing
    
    
    1,555
    
    
    
    1,619
    
    
    
    1,471
    
    
    
    1,608
    
    
    
    1,773
    
    
    
    1,806
    
    
    
    1,822
    
    
    
    1,687General and administrative
    
    
    1,246
    
    
    
    1,373
    
    
    
    1,515
    
    
    
    1,587
    
    
    
    1,590
    
    
    
    1,696
    
    
    
    1,705
    
    
    
    1,646Amortization of other
intangible assets
    
    
    42
    
    
    
    41
    
    
    
    41
    
    
    
    24
    
    
    
    21
    
    
    
    20
    
    
    
    12
    
    
    
    Reorganization, restructuring
and severance charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,537
    
    
    
    
    
    
    
    
    
    
    
    584Total operating expenses
    
    
    7,543
    
    
    
    7,643
    
    
    
    7,732
    
    
    
    8,340
    
    
    
    12,041
    
    
    
    8,757
    
    
    
    8,317
    
    
    
    8,956Operating income (loss)
    
    
    (824
    )
    
    
    (46
    )
    
    
    (4
    )
    
    
    (1,024
    )
    
    
    (3,144
    )
    
    
    58
    
    
    
    784
    
    
    
    (72
    )Financial income, net
    
    
    824
    
    
    
    626
    
    
    
    745
    
    
    
    1,016
    
    
    
    808
    
    
    
    522
    
    
    
    645
    
    
    
    754Other income, net
    
    
    
    
    
    
    
    
    
    
    425
    
    
    
    
    
    
    
    10,869
    
    
    
    24
    
    
    
    358
    
    
    
    760Income (loss) before taxes on
income (loss)
    
    
    
    
    
    
    580
    
    
    
    1,166
    
    
    
    (8
    )
    
    
    8,533
    
    
    
    604
    
    
    
    1,787
    
    
    
    1,442Income taxes expense (income)
    
    
    
    
    
    
    150
    
    
    
    54
    
    
    
    243
    
    
    
    3,022
    
    
    
    (87
    )
    
    
    384
    
    
    
    482Net income (loss)
    
    $
    
    
    
    $
    430
    
    
    $
    1,112
    
    
    $
    (251
    )
    
    $
    5,511
    
    
    $
    691
    
    
    $
    1,403
    
    
    $
    960Basic net income (loss) per share
    
    $
    0.00
    
    
    $
    0.02
    
    
    $
    0.06
    
    
    $
    (0.01
    )
    
    $
    0.27
    
    
    $
    0.03
    
    
    $
    0.07
    
    
    $
    0.05Diluted net income (loss) per share
    
    $
    0.00
    
    
    $
    0.02
    
    
    $
    0.05
    
    
    $
    (0.01
    )
    
    $
    0.27
    
    
    $
    0.03
    
    
    $
    0.07
    
    
    $
    0.05Weighted average number of shares
of Common Stock used in
computation of net income (loss)
per share (in thousands):Basic
    
    
    19,420
    
    
    
    19,473
    
    
    
    19,647
    
    
    
    19,873
    
    
    
    20,095
    
    
    
    20,140
    
    
    
    20,157
    
    
    
    19,647Diluted
    
    
    19,420
    
    
    
    19,776
    
    
    
    20,287
    
    
    
    19,873
    
    
    
    20,724
    
    
    
    20,804
    
    
    
    20,799
    
    
    
    19,977
  23




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF  OPERATIONS
 You should read the following discussion together with the consolidated financials statements
and related notes appearing elsewhere in this annual report. This discussion contains
forward-looking statements that involve risks and uncertainties. Actual results may differ
materially from those included in such forward-looking statements. Factors that could cause actual
results to differ materially include those set forth under Risk Factors, as well as those
otherwise discussed in this section and elsewhere in this annual report. See Forward-Looking
Statements and Industry Data.
 BUSINESS OVERVIEW
         24




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CRITICAL ACCOUNTING POLICIES, ESTIMATES AND ASSUMPTIONS
  
    
    revenue recognition;
 
    
    allowances for doubtful accounts;
 
    
    accounting for income taxes;
 
    
    impairment of goodwill;
 
    
    equity-based compensation;
 
    
    reorganization, restructuring and severance charges; and
 
    
    accounting for marketable securities.
  25




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Revenue Recognition
         26




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Allowances for Doubtful Accounts
  Accounting for Income Taxes
     27




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Goodwill
   Accounting for Equity-Based Compensation
  Reorganization, Restructuring and Severance Charge
  Accounting for Marketable Securities
   28




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Recently issued accounting standards:
       29




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RESULTS OF OPERATIONS
  2006
    
    
    2007
    
    
    2008Consolidated Statements of Operations Data:Revenues:Licensing
    
    
    68.2
    %
    
    
    58.7
    %
    
    
    53.8
    %Royalties
    
    
    19.4
    %
    
    
    27.4
    %
    
    
    35.5
    %Other revenue
    
    
    12.4
    %
    
    
    13.9
    %
    
    
    10.7
    %Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    12.4
    %
    
    
    11.6
    %
    
    
    11.6
    %Gross profit
    
    
    87.6
    %
    
    
    88.4
    %
    
    
    88.4
    %Operating expenses:Research and development, net
    
    
    57.7
    %
    
    
    57.6
    %
    
    
    50.0
    %Sales and marketing
    
    
    19.3
    %
    
    
    18.8
    %
    
    
    17.6
    %General and administrative
    
    
    18.1
    %
    
    
    17.2
    %
    
    
    16.4
    %Amortization of other intangible assets
    
    
    1.3
    %
    
    
    0.5
    %
    
    
    0.1
    %Reorganization, restructuring and severance charge
    
    
    
    
    
    
    
    
    
    
    10.2
    %Total operating expenses
    
    
    96.4
    %
    
    
    94.1
    %
    
    
    94.3
    %Operating loss
    
    
    (8.8
    )%
    
    
    (5.7
    )%
    
    
    (5.9
    )%Financial income, net
    
    
    8.0
    %
    
    
    9.6
    %
    
    
    6.7
    %Other income
    
    
    0.2
    %
    
    
    1.3
    %
    
    
    29.8
    %Income (loss) before taxes on income
    
    
    (0.6
    )%
    
    
    5.2
    %
    
    
    30.6
    %Taxes on income
    
    
    (0.3
    )%
    
    
    1.3
    %
    
    
    9.4
    %Net income (loss)
    
    
    (0.3
    )%
    
    
    3.9
    %
    
    
    21.2
    %
  30




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Discussion and Analysis
  Revenues
 Total Revenues
 2006
    
    
    2007
    
    
    2008Total revenues (in millions)
    
    $
    32.5
    
    
    $
    33.2
    
    
    $
    40.4Change year-on-year
    
    
    
    
    
    
    2.2
    %
    
    
    21.5
    %
    Licensing Revenues
 2006
    
    
    2007
    
    
    2008Licensing revenues (in millions)
    
    $
    22.2
    
    
    $
    19.5
    
    
    $
    21.7Change year-on-year
    
    
    
    
    
    
    (12.0
    )%
    
    
    11.3
    %
   Royalty Revenues
 2006
    
    
    2007
    
    
    2008Royalty revenues (in millions)
    
    $
    6.3
    
    
    $
    9.1
    
    
    $
    14.3Change year-on-year
    
    
    
    
    
    
    43.8
    %
    
    
    57.8
    %
  31




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##### Table of Contents



Other Revenues
  2006
    
    
    2007
    
    
    2008Other revenues (in millions)
    
    $
    4.0
    
    
    $
    4.6
    
    
    $
    4.3Change year-on-year
    
    
    
    
    
    
    14.8
    %
    
    
    (6.5
    )%
  Geographic Revenue Analysis
 2006
    
    
    2007
    
    
    2008(in millions, except percentages)United States
    
    $
    11.7
    
    
    
    35.9
    %
    
    $
    6.9
    
    
    
    20.9
    %
    
    $
    5.3
    
    
    
    13.1
    %Europe, Middle East (EME) (1) (2)
    
    $
    11.7
    
    
    
    35.9
    %
    
    $
    11.5
    
    
    
    34.6
    %
    
    $
    22.3
    
    
    
    55.2
    %Asia Pacific (APAC) (3) (4)
    
    $
    9.2
    
    
    
    28.2
    %
    
    $
    14.8
    
    
    
    44.5
    %
    
    $
    12.8
    
    
    
    31.7
    %(1) Sweden
    
    
    
    *)
    
    
    
    *)
    
    $
    3.8
    
    
    
    11.3
    %
    
    $
    8.0
    
    
    
    19.9
    %(2) Switzerland
    
    
    
    *)
    
    
    
    *)
    
    
    
    *)
    
    
    
    *)
    
    $
    5.9
    
    
    
    14.7
    %(3) Japan
    
    
    
    *)
    
    
    
    *)
    
    $
    4.4
    
    
    
    13.2
    %
    
    $
    5.1
    
    
    
    12.7
    %(4) Taiwan
    
    
    
    *)
    
    
    
    *)
    
    $
    6.1
    
    
    
    18.2
    %
    
    
    
    *)
    
    
    
    *)
 *)
    
    Less than 10%.   32




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Cost of Revenues
 2006
    
    
    2007
    
    
    2008Cost of revenues (in millions)
    
    $
    4.0
    
    
    $
    3.9
    
    
    $
    4.7Change year-on-year
    
    
    
    
    
    
    (4.6
    )%
    
    
    21.2
    %
   Operating Expenses
 2006
    
    
    2007
    
    
    2008(in millions)Research and development, net
    
    $
    18.8
    
    
    $
    19.1
    
    
    $
    20.2Sales and marketing
    
    $
    6.2
    
    
    $
    6.2
    
    
    $
    7.1General and administration
    
    $
    5.9
    
    
    $
    5.7
    
    
    $
    6.6Amortization of intangible assets
    
    $
    0.4
    
    
    $
    0.2
    
    
    $
    0.1Reorganization, restructuring and severance charge
    
    $
    
    
    
    $
    
    
    
    $
    4.1Total operating expenses
    
    $
    31.3
    
    
    $
    31.2
    
    
    $
    38.1Change year-on-year
    
    
    
    
    
    
    (0.2
    )%
    
    
    21.8
    %
   33




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##### Table of Contents



Research and Development Expenses, Net
 2006
    
    
    2007
    
    
    2008Research and development expenses, net (in millions)
    
    $
    18.8
    
    
    $
    19.1
    
    
    $
    20.2Change year-on-year
    
    
    
    
    
    
    2.0
    %
    
    
    5.4
    %
    Sales and Marketing Expenses
 2006
    
    
    2007
    
    
    2008Sales and marketing expenses (in millions)
    
    $
    6.2
    
    
    $
    6.2
    
    
    $
    7.1Change year-on-year
    
    
    
    
    
    
    (0.2
    )%
    
    
    13.4
    %
    34




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##### Table of Contents



General and Administrative Expenses
 2006
    
    
    2007
    
    
    2008General and administrative expenses (in millions)
    
    $
    5.9
    
    
    $
    5.7
    
    
    $
    6.6Change year-on-year
    
    
    
    
    
    
    (2.7
    )%
    
    
    16.0
    %
  Amortization of Other Intangible Assets
 2006
    
    
    2007
    
    
    2008Amortization of other intangible assets (in millions)
    
    $
    0.4
    
    
    $
    0.2
    
    
    $
    0.1Change year-on-year
    
    
    
    
    
    
    (64.3
    )%
    
    
    (64.2
    )%
  Reorganization, Restructuring and Severance Charge
 2006
    
    
    2007
    
    
    2008Reorganization, restructuring and severance charge (in millions)
    
    $
    
    
    
    $
    
    
    
    $
    4.1
    35




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##### Table of Contents



Financial Income, net and Other Income
 2006
    
    
    2007
    
    
    2008(in millions)Financial income, net
    
    $
    2.62
    
    
    $
    3.21
    
    
    $
    2.73of which:Interest income and gains and losses from marketable securities, net
    
    $
    2.77
    
    
    $
    3.17
    
    
    $
    2.86Foreign exchange gain (loss)
    
    $
    (0.15
    )
    
    $
    0.04
    
    
    $
    (0.13
    )Other income, net
    
    $
    0.06
    
    
    $
    0.43
    
    
    $
    12.01of which:Gain on realization of investments
    
    $
    0.06
    
    
    $
    0.43
    
    
    $
    12.15Impairment of assets
    
    $
    
    
    
    $
    
    
    
    $
    (0.14
    )
     36




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##### Table of Contents



Provision for Income Taxes
      LIQUIDITY AND CAPITAL RESOURCES
   37




---



##### Table of Contents



38




---



##### Table of Contents



Contractual Obligations
  Payments Due by Period($ in thousands)Less than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    
    year
    
    
    1-3 years
    
    
    3-5 years
    
    
    yearsOperating Lease Obligations  Leasehold properties
    
    
    1,987
    
    
    
    1,194
    
    
    
    793
    
    
    
    
    
    
    
    Operating Lease Obligations  Other
    
    
    1,881
    
    
    
    1,313
    
    
    
    568
    
    
    
    
    
    
    
    Purchase Obligations
    
    
    102
    
    
    
    102
    
    
    
    
    
    
    
    
    
    
    
    Severance Pay (*)
    
    
    3,788
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    7,758
    
    
    
    2,609
    
    
    
    1,361
    
    
    
    
    
    
    
    
  (*)
    
    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 $0.3 million is unfunded. Off-Balance Sheet Arrangements
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    39




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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
    40




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Managements Annual Report on Internal Control Over Financial Reporting.
    
 ITEM 9B. OTHER INFORMATION
   41




---



##### 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
   42




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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:
  
    
    Consolidated Balance Sheets as of December 31, 2008 and 2007.
 
    
    Consolidated Statements of Operations for the Years Ended December 31, 2008, 2007
and 2006.
 
    
    Statements of Changes in Stockholders Equity for the Years Ended December 31,
2008, 2007 and 2006.
 
    
    Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007
and 2006.
 
    
    Notes to Consolidated Financial Statements.
  
    
    Schedule II: Valuation and Qualifying Accounts
    
  43




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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2008
 PageReport of Independent Registered Public Accounting Firm (Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global)
    
    
    F-2Consolidated Balance Sheets
    
    
    F-4Consolidated Statements of Operations
    
    
    F-5Consolidated
Statements of Changes in Stockholders Equity
    
    
    F-6Consolidated Statements of Cash Flows
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-9
  F-1




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##### Table of Contents



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




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




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##### Table of Contents



CEVA, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (U.S. dollars in thousands, except share and per share data)
 December 31,
    
    
    December 31,2007
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    40,697
    
    
    $
    13,328Short-term bank deposits
    
    
    7,130
    
    
    
    39,423Marketable securities (Note 2)
    
    
    28,548
    
    
    
    31,878Trade receivables (net of allowance for doubtful accounts of $868 in 2007 and $743 in 2008)
    
    
    2,502
    
    
    
    5,390Deferred tax assets (Note 12)
    
    
    861
    
    
    
    1,085Investment in other company, net (Note 5)
    
    
    4,233
    
    
    
    Prepaid expenses and other accounts receivable (Note 7)
    
    
    3,295
    
    
    
    4,921Total current assets
    
    
    87,266
    
    
    
    96,025Long-term assets:Severance pay fund
    
    
    3,091
    
    
    
    3,441Deferred tax assets (Note 12)
    
    
    455
    
    
    
    351Property and equipment, net (Note 4)
    
    
    1,626
    
    
    
    1,271Goodwill (Note 6)
    
    
    36,498
    
    
    
    36,498Other intangible assets, net (Note 6)
    
    
    53
    
    
    
    Total long-term assets
    
    
    41,723
    
    
    
    41,561Total assets
    
    $
    128,989
    
    
    $
    137,586LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade payables
    
    $
    455
    
    
    $
    615Deferred revenues
    
    
    727
    
    
    
    1,034Taxes payable
    
    
    320
    
    
    
    44Accrued expenses and other payables (Note 8)
    
    
    8,452
    
    
    
    10,446Total current liabilities
    
    
    9,954
    
    
    
    12,139Long-term liabilities:Accrued severance pay
    
    
    3,141
    
    
    
    3,788Accrued liabilities (Note 13)
    
    
    1,506
    
    
    
    Total long-term liabilities
    
    
    4,647
    
    
    
    3,788Commitments and contingencies liabilities (Note 15)Stockholders equity:Preferred Stock:$0.001 par value: 5,000,000 shares authorized at December 31, 2007 and 2008; none
issued and outstanding
    
    
    
    
    
    
    Common Stock:$0.001 par value: 60,000,000 shares authorized at December 31, 2007, and 2008;
20,033,897 and 19,532,026 shares issued and outstanding at December 31, 2007 and
2008, respectively
    
    
    20
    
    
    
    20Additional paid in capital
    
    
    149,772
    
    
    
    153,712Treasury Stock
    
    
    
    
    
    
    (5,077
    )Accumulated other comprehensive income (loss)
    
    
    7
    
    
    
    (24
    )Accumulated deficit
    
    
    (35,411
    )
    
    
    (26,972
    )Total stockholders equity
    
    
    114,388
    
    
    
    121,659Total liabilities and stockholders equity
    
    $
    128,989
    
    
    $
    137,586
   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 31,2006
    
    
    2007
    
    
    2008Revenues:Licensing
    
    $
    22,160
    
    
    $
    19,499
    
    
    $
    21,701Royalties
    
    
    6,324
    
    
    
    9,095
    
    
    
    14,349Other revenues
    
    
    4,021
    
    
    
    4,617
    
    
    
    4,315Total revenues
    
    
    32,505
    
    
    
    33,211
    
    
    
    40,365Cost of revenues
    
    
    4,035
    
    
    
    3,851
    
    
    
    4,668Gross profit
    
    
    28,470
    
    
    
    29,360
    
    
    
    35,697Operating expenses:Research and development, net
    
    
    18,769
    
    
    
    19,136
    
    
    
    20,172Sales and marketing
    
    
    6,268
    
    
    
    6,253
    
    
    
    7,088General and administrative
    
    
    5,882
    
    
    
    5,721
    
    
    
    6,637Amortization of intangible assets
    
    
    414
    
    
    
    148
    
    
    
    53Reorganization, restructuring and severance charge (Note 13)
    
    
    
    
    
    
    
    
    
    
    4,121Total operating expenses
    
    
    31,333
    
    
    
    31,258
    
    
    
    38,071Operating loss
    
    
    (2,863
    )
    
    
    (1,898
    )
    
    
    (2,374
    )Financial income, net (Note 11)
    
    
    2,620
    
    
    
    3,211
    
    
    
    2,729Other income, net (Note 11)
    
    
    57
    
    
    
    425
    
    
    
    12,011Income (loss) before taxes on income
    
    
    (186
    )
    
    
    1,738
    
    
    
    12,366Income taxes expense (income) (Note 12)
    
    
    (88
    )
    
    
    447
    
    
    
    3,801Net income (loss)
    
    $
    (98
    )
    
    $
    1,291
    
    
    $
    8,565Basic net income (loss) per share
    
    $
    (0.01
    )
    
    $
    0.07
    
    
    $
    0.43Diluted net income (loss) per share
    
    $
    (0.01
    )
    
    $
    0.06
    
    
    $
    0.42Weighted average number of shares of Common Stock used in
computation of net income (loss) per share (in thousands)Basic
    
    
    19,191
    
    
    
    19,606
    
    
    
    20,009Diluted
    
    
    19,191
    
    
    
    20,150
    
    
    
    20,575
   F-5




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##### Table of Contents



CEVA, INC.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (U.S. dollars in thousands, except share data)
 AccumulatedAdditional
    
    
    
    
    
    
    other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    paid-in
    
    
    
    
    
    
    comprehensive
    
    
    Accumulated
    
    
    stockholdersShares
    
    
    Amount
    
    
    capital
    
    
    Treasury Stock
    
    
    income (loss)
    
    
    deficit
    
    
    equityBalance as of January 1, 2006
    
    
    18,923,071
    
    
    $
    19
    
    
    $
    138,818
    
    
    $
    
    
    
    $
    
    
    
    $
    (36,604
    )
    
    $
    102,233Issuance of Common Stock upon
exercise of employee stock
options (a)
    
    
    86,536
    
    
    
    
    (*)
    
    
    430
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    430Issuance of Common Stock under
employee stock purchase plan
(a)
    
    
    320,537
    
    
    
    
    (*)
    
    
    1,374
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,374Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    2,204
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,204Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98
    )
    
    
    (98
    )Balance as of December 31, 2006
    
    
    19,330,144
    
    
    $
    19
    
    
    $
    142,826
    
    
    $
    
    
    
    $
    
    
    
    $
    (36,702
    )
    
    $
    106,143Issuance of Common Stock upon
exercise of employee stock
options (a)
    
    
    498,043
    
    
    
    1
    
    
    
    3,918
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,919Issuance of Common Stock under
employee stock purchase plan
(a)
    
    
    205,710
    
    
    
    
    (*)
    
    
    897
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    897Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    2,131
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,131Unrealized loss from
available-for-sale securities,
net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58
    )
    
    
    
    
    
    
    (58
    )Unrealized gain from hedging
activities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    65Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,291
    
    
    
    1,291Balance as of December 31, 2007
    
    
    20,033,897
    
    
    $
    20
    
    
    $
    149,772
    
    
    $
    
    
    
    $
    7
    
    
    $
    (35,411
    )
    
    $
    114,388Issuance 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
    )
    
    
    474Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    2,922
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,922Unrealized loss from
available-for-sale securities,
net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (111
    )
    
    
    
    
    
    
    (111
    )Unrealized gain from hedging
activities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    80Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,565
    
    
    
    8,565Balance as of December 31, 2008
    
    
    19,532,026
    
    
    $
    20
    
    
    $
    153,712
    
    
    $
    (5,077
    )
    
    $
    (24
    )
    
    $
    (26,972
    )
    
    $
    121,659Accumulated unrealized loss
from available-for-sale
securities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (169
    )Accumulated unrealized gain
from hedging
activities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    145Accumulated other
comprehensive loss, net
as of December 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (24
    )
 
 (*)
    
    Represent an amount lower than $ 1.(a)
    
    See Note 9 to these consolidated financial statements.   F-6




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##### Table of Contents



CEVA, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (U.S. dollars in thousands)
 Year ended December 31,2006
    
    
    2007
    
    
    2008Cash flows from operating activities:Net income (loss)
    
    $
    (98
    )
    
    $
    1,291
    
    
    $
    8,565Adjustments required to reconcile net income (loss) to net cash provided
by (used in) operating activities:Depreciation
    
    
    1,422
    
    
    
    882
    
    
    
    673Impairment of assets
    
    
    
    
    
    
    
    
    
    
    138Amortization of intangible assets
    
    
    414
    
    
    
    148
    
    
    
    53Equity-based compensation
    
    
    2,204
    
    
    
    2,131
    
    
    
    2,922Gain from sale of property and equipment
    
    
    
    
    
    
    (3
    )
    
    
    (4
    )Loss (gain) on trading marketable securities
    
    
    52
    
    
    
    (137
    )
    
    
    Loss on sale of available-for-sale marketable securities
    
    
    
    
    
    
    4
    
    
    
    287Amortization of discount (premium) on available-for-sale
marketable securities
    
    
    
    
    
    
    (26
    )
    
    
    179Unrealized foreign exchange loss (gain)
    
    
    48
    
    
    
    (40
    )
    
    
    223Accrued interest on short-term bank deposits
    
    
    102
    
    
    
    (127
    )
    
    
    (729
    )Gain on realization of investments
    
    
    (57
    )
    
    
    (425
    )
    
    
    (12,145
    )Trading marketable securities, net
    
    
    (5,115
    )
    
    
    21,312
    
    
    
    Changes in operating assets and liabilities:Decrease (increase) in trade receivables
    
    
    (2,262
    )
    
    
    5,919
    
    
    
    (2,888
    )Increase in other accounts receivable and prepaid expenses
    
    
    (332
    )
    
    
    (712
    )
    
    
    (1,571
    )Increase in deferred tax assets
    
    
    (103
    )
    
    
    (321
    )
    
    
    (120
    )Increase (decrease) in trade payables
    
    
    145
    
    
    
    (283
    )
    
    
    160Increase (decrease) in deferred revenues
    
    
    (47
    )
    
    
    321
    
    
    
    307Increase (decrease) in accrued expenses and other payables
    
    
    582
    
    
    
    (1,735
    )
    
    
    492Increase (decrease) in taxes payable
    
    
    (307
    )
    
    
    185
    
    
    
    (276
    )Increase (decrease) in accrued severance pay, net
    
    
    (19
    )
    
    
    (151
    )
    
    
    306Net cash provided by (used in) operating activities
    
    
    (3,371
    )
    
    
    28,233
    
    
    
    (3,428
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (424
    )
    
    
    (807
    )
    
    
    (456
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    8
    
    
    
    4Investment in short-term bank deposits
    
    
    (3,930
    )
    
    
    (5,000
    )
    
    
    (47,911
    )Proceeds from short-term bank deposits
    
    
    9,134
    
    
    
    1,026
    
    
    
    16,347Investment in available-for-sale marketable securities
    
    
    
    
    
    
    (39,990
    )
    
    
    (28,485
    )Proceeds from maturity and sale of available-for-sale marketable securities
    
    
    
    
    
    
    13,468
    
    
    
    24,578Transaction cost related to the GPS divestment
    
    
    (927
    )
    
    
    (39
    )
    
    
    Proceeds from realization of investment
    
    
    57
    
    
    
    425
    
    
    
    16,378Net cash provided by (used in) investing activities
    
    
    3,910
    
    
    
    (30,909
    )
    
    
    (19,545
    )Cash flows from financing activities:Purchase of Treasury Stock
    
    
    
    
    
    
    
    
    
    
    (5,821
    )Proceeds from issuance of Common Stock and Treasury Stock upon exercise of
employee stock options
    
    
    430
    
    
    
    3,919
    
    
    
    554Proceeds from issuance of Common Stock and Treasury Stock under employee stock
purchase plan
    
    
    1,374
    
    
    
    897
    
    
    
    1,082Net cash provided by (used in) financing activities
    
    
    1,804
    
    
    
    4,816
    
    
    
    (4,185
    )Effect of exchange rate movements on cash
    
    
    514
    
    
    
    589
    
    
    
    (211
    )Increase (decrease) in cash and cash equivalents
    
    
    2,857
    
    
    
    2,729
    
    
    
    (27,369
    )Cash and cash equivalents at the beginning of the year
    
    
    35,111
    
    
    
    37,968
    
    
    
    40,697Cash and cash equivalents at the end of the year
    
    $
    37,968
    
    
    $
    40,697
    
    
    $
    13,328
   F-7




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##### Table of Contents



CEVA, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS(Continued)
 (U.S. dollars in thousands)
 Year ended December 31,2006
    
    
    2007
    
    
    2008Supplemental information of cash-flows activities:Cash paid during the year for:Income and withholding taxes, net
    
    $
    652
    
    
    $
    889
    
    
    $
    5,124Non-cash transactions (see Note 5):Goodwill
    
    
    (1,900
    )
    
    
    
    
    
    
    Intangible asset
    
    
    (845
    )
    
    
    
    
    
    
    Net working capital
    
    
    (522
    )
    
    
    
    
    
    
    Transaction cost related to the GPS divestment
    
    
    (39
    )
    
    
    
    
    
    
    Deferred gain related to the GPS divestment
    
    
    (1,751
    )
    
    
    
    
    
    
    
   F-8




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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 :
   F-9




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##### Table of Contents



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




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
 Investment in other company, net :
     Goodwill :
      F-11




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
    Other intangible assets net :
   
    
    significant underperformance relative to expected historical or projected future
operating results;
 
    
    significant changes in the manner of the Companys use of the acquired assets or the
strategy for the Companys overall business;
 
    
    significant negative industry or economic trends;
 
    
    significant decline in the Companys stock price for a sustained period; and
 
    
    significant decline in the Companys market capitalization relative to net book
value.
   F-12




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##### Table of Contents



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




---



##### Table of Contents



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




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
   Research and development :
  Government grants :
   Employee benefit plan :
    Accrued severance pay :
     F-15




---



##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
  Accounting for equity-based compensation :
       F-16




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
   2006Expected dividend yield
    
    
    0%Expected volatility
    
    
    40%Risk-free interest rate
    
    
    5%Expected option term
    
    4 yearsExpected forfeiture (employees)
    
    
    10%Expected forfeiture (executives)
    
    
    10%
  2007
    
    
    2008Expected dividend yield
    
    
    0%
    
    
    
    0%Expected volatility
    
    
    30%-46%
    
    
    
    37%-64%Risk-free interest rate
    
    
    3.9%-5.1%
    
    
    
    1.4%-3.8%Expected forfeiture (employees)
    
    
    20%
    
    
    
    15%Expected forfeiture (executives)
    
    
    10%
    
    
    
    10%Contractual term of up to
    
    7 years
    
    7 yearsSuboptimal exercise multiple (employees)
    
    
    1.6
    
    
    
    1.6Suboptimal exercise multiple (executives)
    
    
    1.6
    
    
    
    1.2
   Year ended December 31,2006
    
    
    2007
    
    
    2008Cost of revenue
    
    $
    53
    
    
    $
    83
    
    
    $
    112Research and development, net
    
    
    656
    
    
    
    935
    
    
    
    1,088Sales and marketing
    
    
    449
    
    
    
    334
    
    
    
    531General and administrative
    
    
    1,046
    
    
    
    779
    
    
    
    1,191Total equity-based compensation expense
    
    $
    2,204
    
    
    $
    2,131
    
    
    $
    2,922
 .
   F-17




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
 Fair value of financial instruments :
  Comprehensive income (loss) :
  Concentration of credit risk :
        F-18




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
 Derivative and hedging activities :
      Advertising expenses :
  Treasury stock :
   F-19




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
 Net income (loss) per share of common stock :
  Year ended December 31,(in thousands except per share data)
    
    2006
    
    
    2007
    
    
    2008Numerator:Numerator for basic and diluted net income (loss) per share
    
    $
    (98
    )
    
    $
    1,291
    
    
    $
    8,565Denominator:Denominator for basic net income (loss) per share
    
    
    19,191
    
    
    
    19,606
    
    
    
    20,009Effect of employee stock options
    
    
    
    
    
    
    544
    
    
    
    566Denominator for diluted net income (loss) per share
    
    
    19,191
    
    
    
    20,150
    
    
    
    20,575Basic net income (loss) per share
    
    $
    (0.01
    )
    
    $
    0.07
    
    
    $
    0.43Diluted net income (loss) per share
    
    $
    (0.01
    )
    
    $
    0.06
    
    
    $
    0.42
  Recently issued accounting standards :
      F-20




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
  NOTE 2: MARKETABLE SECURITIES
  As at December 31, 2008Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    valueCertificates of deposits
    
    $
    1,743
    
    
    $
    8
    
    
    $
    
    
    
    $
    1,751U.S. government and agency securities
    
    
    6,401
    
    
    
    85
    
    
    
    
    
    
    
    6,486Corporate bonds and securities
    
    
    23,903
    
    
    
    30
    
    
    
    (292
    )
    
    
    23,641$
    32,047
    
    
    $
    123
    
    
    $
    (292
    )
    
    $
    31,878
 As at December 31, 2007Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    valueU.S. government and agency securities
    
    $
    4,997
    
    
    $
    8
    
    
    $
    
    
    
    $
    5,005Corporate bonds and securities
    
    
    23,609
    
    
    
    13
    
    
    
    (79
    )
    
    
    23,543$
    28,606
    
    
    $
    21
    
    
    $
    (79
    )
    
    $
    28,548
  As at December 31, 2008Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    valueDue in one year or less
    
    $
    21,959
    
    
    $
    55
    
    
    $
    (168
    )
    
    $
    21,846Due after one year to two years
    
    
    10,088
    
    
    
    68
    
    
    
    (124
    )
    
    
    10,032$
    32,047
    
    
    $
    123
    
    
    $
    (292
    )
    
    $
    31,878
    F-21




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
   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).
   Description
    
    December 31, 2008
    
    
    Level I
    
    
    Level II
    
    
    Level IIIMarketable securities
    
    $
    31,878
    
    
    $
    31,878
    
    
    $
    
    
    
    $
    Derivative assets
    
    $
    145
    
    
    $
    
    
    
    $
    145
    
    
    $
    
  F-22




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
 NOTE 4: PROPERTY AND EQUIPMENT, NET
  Year ended December 31,2007
    
    
    2008Cost:Computers, software and equipment
    
    $
    11,150
    
    
    $
    10,727Office furniture and equipment
    
    
    960
    
    
    
    894Leasehold improvements
    
    
    1,126
    
    
    
    66813,236
    
    
    
    12,289Less  Accumulated depreciation
    
    
    (11,610
    )
    
    
    (11,018
    )Depreciated cost
    
    $
    1,626
    
    
    $
    1,271
   NOTE 5: INVESTMENT IN OTHER COMPANY, NET
  Equity investment in Glonav
    
    $
    5,984Goodwill
    
    
    (1,900
    )Intangible asset
    
    
    (845
    )Net working capital
    
    
    (522
    )Transaction cost related to the GPS divestment
    
    
    (966
    )Deferred gain related to the GPS divestment
    
    $
    1,751
 December 31,2007Investment in other company, net:Investment in other company
    
    $
    5,984Deferred gain
    
    
    (1,751
    )Total investment in other company, net
    
    $
    4,233
   F-23




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
 NOTE 6: GOODWILL AND OTHER INTANGIBLE ASSETS, NET
 Year ended December 31, 2007
    
    
    Year ended December 31, 2008Accumulated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedGross
    
    
    Impairment
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    ImpairmentCarrying
    
    
    Loss/Asset
    
    
    Accumulated
    
    
    
    
    
    
    Carrying
    
    
    Loss/Asset
    
    
    AccumulatedAmount
    
    
    write down
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    write down
    
    
    Amortization
    
    
    NetGoodwill
    
    $
    38,398
    
    
    $
    1,900
    
    
    $
    
    
    
    $
    36,498
    
    
    $
    38,398
    
    
    $
    1,900
    
    
    $
    
    
    
    $
    36,498Other
intangible assets  amortizableParthus name
    
    
    610
    
    
    
    478
    
    
    
    132
    
    
    
    
    
    
    
    610
    
    
    
    478
    
    
    
    132
    
    
    
    Patent portfolio
    
    
    2,247
    
    
    
    640
    
    
    
    1,607
    
    
    
    
    
    
    
    2,247
    
    
    
    640
    
    
    
    1,607
    
    
    
    Current
technology and customer backlog
    
    
    2,824
    
    
    
    1,264
    
    
    
    1,560
    
    
    
    
    
    
    
    2,824
    
    
    
    1,264
    
    
    
    1,560
    
    
    
    Purchased technology
    
    
    347
    
    
    
    
    
    
    
    294
    
    
    
    53
    
    
    
    347
    
    
    
    
    
    
    
    347
    
    
    
    Total identifiable intangible assets
    
    $
    6,028
    
    
    $
    2,382
    
    
    $
    3,593
    
    
    $
    53
    
    
    $
    6,028
    
    
    $
    2,382
    
    
    $
    3,646
    
    
    $
    
    NOTE 7: PREPAID EXPENSES AND OTHER ACCOUNTS RECEIVABLE
 PREPAID EXPENSES
 Year ended December 31,2007
    
    
    2008Prepaid leased design tools
    
    $
    336
    
    
    $
    981Prepaid directors and officers insurance
    
    
    90
    
    
    
    75Prepaid car leases
    
    
    172
    
    
    
    190Prepaid rent
    
    
    216
    
    
    
    113IT consumables
    
    
    17
    
    
    
    230Other prepaid expenses
    
    
    73
    
    
    
    84$
    904
    
    
    $
    1,673
  F-24




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
 OTHER ACCOUNTS RECEIVABLE
 Year ended December 31,2007
    
    
    2008Taxes
    
    $
    1,260
    
    
    $
    2,286Rental deposits
    
    
    144
    
    
    
    88Interest receivable
    
    
    718
    
    
    
    428Other
    
    
    269
    
    
    
    446$
    2,391
    
    
    $
    3,248
 NOTE 8: ACCRUED EXPENSES AND OTHER PAYABLES
 Year ended December 31,2007
    
    
    2008Accrued compensation and benefits
    
    $
    5,208
    
    
    $
    6,537Restructuring accruals (see Note 13)
    
    
    868
    
    
    
    645Engineering accruals
    
    
    933
    
    
    
    686Professional fees
    
    
    795
    
    
    
    956Other accruals
    
    
    648
    
    
    
    1,622$
    8,452
    
    
    $
    10,446
 NOTE 9: STOCKHOLDERS EQUITY
 a. Common stock:
   F-25




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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:
   F-26




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
   WeightedWeighted
    
    
    average
    
    
    AggregateNumber of
    
    
    average exercise
    
    
    remaining
    
    
    intrinsic valueoptions
    
    
    price
    
    
    contractual term
    
    
    ($000)Outstanding at the beginning of the year
    
    
    3,588,670
    
    
    $
    7.33Granted
    
    
    1,219,500
    
    
    
    8.98Exercised
    
    
    (82,061
    )
    
    
    6.75Forfeited or expired
    
    
    (203,955
    )
    
    
    9.74Outstanding at the end of the year
    
    
    4,522,154
    
    
    $
    7.68
    
    
    
    4.8
    
    
    $
    Vested or expected to vest as of December 31
    
    
    4,284,854
    
    
    $
    7.65
    
    
    
    4.7
    
    
    $
    Exercisable as of December 31
    
    
    2,529,060
    
    
    $
    7.23
    
    
    
    3.9
    
    
    $
    
   Options
    
    
    Weighted average
    
    
    
    
    
    
    
    
    
    
    Weighted averageExercise price
    
    outstanding as of
    
    
    remaining contractual
    
    
    Weighted average
    
    
    Options exercisable as of
    
    
    exercise price of(range) $
    
    December 31, 2008
    
    
    life (years)
    
    
    exercise price $
    
    
    December 31, 2008
    
    
    options exercisable $4.25
    
    
    296,251
    
    
    
    4.3
    
    
    $
    4.25
    
    
    
    296,251
    
    
    $
    4.254.26-7.59
    
    
    2,232,643
    
    
    
    4.4
    
    
    
    6.59
    
    
    
    1,642,815
    
    
    
    6.627.60-10.40
    
    
    1,853,335
    
    
    
    5.7
    
    
    
    9.03
    
    
    
    450,069
    
    
    
    9.1810.41-17.64
    
    
    139,925
    
    
    
    0.2
    
    
    
    14.33
    
    
    
    139,925
    
    
    
    14.334,522,154
    
    
    
    4.8
    
    
    $
    7.68
    
    
    
    2,529,060
    
    
    $
    7.23
  F-27




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
 2003 Director Stock Option Plan
   Year ended December 31,2006
    
    
    2007
    
    
    2008Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber of
    
    
    average exercise
    
    
    Number of
    
    
    average exercise
    
    
    Number of
    
    
    average exerciseoptions
    
    
    price
    
    
    options
    
    
    price
    
    
    options
    
    
    priceOutstanding at the beginning of the year
    
    
    581,000
    
    
    $
    7.30
    
    
    
    687,000
    
    
    $
    7.02
    
    
    
    667,500
    
    
    $
    7.03Granted
    
    
    132,000
    
    
    
    5.76
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    (19,500
    )
    
    
    6.87
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (26,000
    )
    
    
    6.88
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at the end of the year
    
    
    687,000
    
    
    $
    7.02
    
    
    
    667,500
    
    
    $
    7.03
    
    
    
    667,500
    
    
    $
    7.03
       F-28




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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 31,2006
    
    
    2007
    
    
    2008Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber of
    
    
    average exercise
    
    
    Number of
    
    
    average exercise
    
    
    Number of
    
    
    average exerciseoptions
    
    
    price
    
    
    options
    
    
    price
    
    
    options
    
    
    priceOutstanding at the beginning of the year
    
    
    2,317,436
    
    
    $
    6.30
    
    
    
    1,971,377
    
    
    $
    6.14
    
    
    
    1,558,492
    
    
    $
    5.94Granted
    
    
    203,000
    
    
    
    6.04
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (64,377
    )
    
    
    4.64
    
    
    
    (285,931
    )
    
    
    6.90
    
    
    
    (58,706
    )
    
    
    6.31Forfeited or expired
    
    
    (484,682
    )
    
    
    7.05
    
    
    
    (126,954
    )
    
    
    6.96
    
    
    
    (20,133
    )
    
    
    6.25Outstanding at the end of the year
    
    
    1,971,377
    
    
    $
    6.14
    
    
    
    1,558,492
    
    
    $
    5.94
    
    
    
    1,479,653
    
    
    $
    5.92
      F-29




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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 31,2006
    
    
    2007
    
    
    2008Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber of
    
    
    average exercise
    
    
    Number of
    
    
    average exercise
    
    
    Number of
    
    
    average exerciseoptions
    
    
    price
    
    
    options
    
    
    price
    
    
    options
    
    
    priceOutstanding at the beginning of the year
    
    
    2,121,947
    
    
    $
    11.33
    
    
    
    1,592,533
    
    
    $
    11.12
    
    
    
    1,362,678
    
    
    $
    9.07Granted (*)
    
    
    
    
    
    
    
    
    
    
    939,500
    
    
    
    7.78
    
    
    
    1,219,500
    
    
    
    8.98Exercised
    
    
    (22,159
    )
    
    
    5.93
    
    
    
    (192,612
    )
    
    
    9.42
    
    
    
    (23,355
    )
    
    
    7.86Forfeited or expired
    
    
    (507,255
    )
    
    
    12.16
    
    
    
    (976,743
    )
    
    
    11.10
    
    
    
    (183,822
    )
    
    
    10.12Outstanding at the end of the year
    
    
    1,592,533
    
    
    $
    11.12
    
    
    
    1,362,678
    
    
    $
    9.07
    
    
    
    2,375,001
    
    
    $
    8.95
 (*)
    
    Options to purchase 132,000 shares of common stock were granted to non-employee directors
during both 2007 and 2008. The exercise price of such grants was $8.50 and $7.97 in 2007 and
2008, respectively.   2002 Employee Stock Purchase Plan
     F-30




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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 the common stock on the date of the grant of the
purchase right, which is the commencement of the offer period; or
 
    
    85% of the fair market value of the common stock on the exercise date, which is the
last day of a purchase period.
    e. Dividend policy:
  NOTE 10: GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA
 a. Summary information about geographic areas:
  Year ended December 31,2006
    
    
    2007
    
    
    2008Revenues based on customer location:United States
    
    $
    11,657
    
    
    $
    6,937
    
    
    $
    5,276Europe, Middle East (1) (2)
    
    
    11,670
    
    
    
    11,477
    
    
    
    22,278Asia Pacific (3) (4)
    
    
    9,178
    
    
    
    14,797
    
    
    
    12,811$
    32,505
    
    
    $
    33,211
    
    
    $
    40,365(1) Sweden
    
    
    
    *)
    
    $
    3,755
    
    
    $
    8,019(2) Switzerland
    
    
    
    *)
    
    
    
    *)
    
    $
    5,946(3) Japan
    
    
    
    *)
    
    $
    4,375
    
    
    $
    5,144(4) Taiwan
    
    
    
    *)
    
    $
    6,058
    
    
    
    
    *)
 *)
    
    Less than 10%.  F-31




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
 December 31,2006
    
    
    2007
    
    
    2008Long-lived assets by geographic region:United States
    
    $
    80
    
    
    $
    44
    
    
    $
    28Ireland (*)
    
    
    253
    
    
    
    283
    
    
    
    36Israel
    
    
    1,280
    
    
    
    1,261
    
    
    
    1,188Other
    
    
    93
    
    
    
    38
    
    
    
    19$
    1,706
    
    
    $
    1,626
    
    
    $
    1,271
 (*)
    
    The Company recorded in its Irish subsidiary a loss of $138 in 2008 related to the disposal
of SATA-related fixed assets in connection with the restructuring of SATA activities. b. Major customer data as a percentage of total revenues:
  Year ended December 31,2006
    
    
    2007
    
    
    2008Customer A
    
    
    16
    %
    
    

    *)    
    

    *)Customer B
    
    

    *)    
    
    17
    %
    
    

    *)Customer C
    
    

    *)    
    
    12
    %
    
    

    *)Customer D
    
    

    *)    
    
    11
    %
    
    
    20
    %
 *)
    
    Less than 10%.  c. Information about Products and Services:
   F-32




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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 31,2006
    
    
    2007
    
    
    2008Interest income
    
    $
    2,822
    
    
    $
    3,014
    
    
    $
    3,329Loss (gain) on marketable securities, net (*)
    
    
    (52
    )
    
    
    159
    
    
    
    (466
    )Foreign exchange gain (loss), net
    
    
    (150
    )
    
    
    38
    
    
    
    (134
    )$
    2,620
    
    
    $
    3,211
    
    
    $
    2,729
 (*)
    
    Including amortization of premium (discount) on marketable securities, net. Other income, net:
  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-33




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
            F-34




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
              F-35




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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 31,2006
    
    
    2007
    
    
    2008Domestic taxes:Current
    
    $
    17
    
    
    $
    52
    
    
    $
    3,104Deferred
    
    
    
    
    
    
    
    
    
    
    (138
    )Foreign taxes:Current
    
    
    (2
    )
    
    
    716
    
    
    
    817Deferred
    
    
    (103
    )
    
    
    (321
    )
    
    
    18Taxes on income
    
    $
    (88
    )
    
    $
    447
    
    
    $
    3,801Income (loss) before taxes on income:Domestic
    
    $
    (939
    )
    
    $
    (2,123
    )
    
    $
    (3,321
    )Foreign
    
    
    753
    
    
    
    3,861
    
    
    
    15,687$
    (186
    )
    
    $
    1,738
    
    
    $
    12,366
 c. Reconciliation between the Companys effective tax rate and the U.S. statutory rate:
 Year ended December 31,2006
    
    
    2007
    
    
    2008Income (loss) before taxes on income
    
    $
    (186
    )
    
    $
    1,738
    
    
    $
    12,366Theoretical tax at U.S. statutory rate-35%
    
    
    (65
    )
    
    
    608
    
    
    
    4,328Foreign income taxes at rates other than U.S. rate
    
    
    (88
    )
    
    
    (962
    )
    
    
    (4,017
    )Subpart F
    
    
    
    
    
    
    
    
    
    
    4,360Non-deductible items
    
    
    707
    
    
    
    1,554
    
    
    
    809Valuation allowance
    
    
    (924
    )
    
    
    (548
    )
    
    
    (1,187
    )Other
    
    
    282
    
    
    
    (205
    )
    
    
    (492
    )Taxes on income
    
    $
    (88
    )
    
    $
    447
    
    
    $
    3,801
  F-36




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
 d. Deferred taxes on income:
  Year ended December 31,2007
    
    
    2008Operating loss carryforward
    
    $
    8,534
    
    
    $
    7,681Accrued expenses
    
    
    540
    
    
    
    358Temporary differences related to R&D expenses
    
    
    1,088
    
    
    
    1,109Other
    
    
    122
    
    
    
    69Valuation allowance
    
    
    (8,968
    )
    
    
    (7,781
    )Balance at the end of the year (*)
    
    $
    1,316
    
    
    $
    1,436
 (*)
    
    Deferred tax for the year ended December 31, 2007 was only from a foreign jurisdiction.
Deferred tax for the year ended December 31, 2008 from domestic and foreign jurisdictions was
$138 and $1,298, respectively.  e. Separation from DSPG:
  f. Tax loss carryforwards:
  g.
FIN 48:
   F-37




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
 h
 NOTE 13: REORGANIZATION, RESTRUCTURING AND SEVERANCE CHARGE
       F-38




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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, 2006 (1)
    
    $
    
    
    
    $
    2,976
    
    
    $
    330
    
    
    $
    3,306Effect of exchange rate
    
    
    
    
    
    
    292
    
    
    
    
    
    
    
    292Reallocation
    
    
    
    
    
    
    100
    
    
    
    (100
    )
    
    
    Cash outlays
    
    
    
    
    
    
    (1,224
    )
    
    
    
    
    
    
    (1,224
    )Balance 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
    
    
    $
    645
 (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. Year ended December 31,2007
    
    
    2008Short-term  Restructuring accruals (see Note 8)
    
    $
    868
    
    
    $
    645Long-term  Restructuring accruals
    
    $
    1,506
    
    
    $
    
 NOTE 14: RELATED PARTY TRANSACTIONS
    F-39




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##### Table of Contents



CEVA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
( in thousands, except share data )
  NOTE 15: COMMITMENTS AND CONTINGENCIES
     Minimum rentalcommitments for
    
    
    commitments for other
    
    
    Other purchaseleasehold properties
    
    
    lease obligations
    
    
    obligations
    
    
    Total2009
    
    $
    1,194
    
    
    $
    1,313
    
    
    $
    102
    
    
    $
    2,6092010
    
    
    787
    
    
    
    368
    
    
    
    
    
    
    
    1,1552011
    
    
    6
    
    
    
    200
    
    
    
    
    
    
    
    206$
    1,987
    
    
    $
    1,881
    
    
    $
    102
    
    
    $
    3,970
     F-40




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##### Table of Contents



SIGNATURES
  CEVA, INC.By:
    
    /s/ Gideon Wertheizer

Gideon WertheizerChief Executive Officer
  POWER OF ATTORNEY
   Signature
    
    Title
    
    Date/s/ Gideon Wertheizer

Gideon Wertheizer
    
    Chief Executive Officer (Principal
Executive Officer)
    
    March 13, 2009/s/ Yaniv Arieli

Yaniv Arieli
    
    Chief Financial Officer and
Treasurer  (Principal
Financial Officer and
Principal Accounting Officer)
    
    March 13, 2009/s/ PETER MCMANAMON

Peter McManamon
    
    Director and Chairman
    
    March 13, 2009/s/ ELIYAHU AYALON

Eliyahu Ayalon
    
    Director
    
    March 13, 2009/s/ ZVI LIMON

Zvi Limon
    
    Director
    
    March 13, 2009/s/ BRUCE MANN

Bruce Mann
    
    Director
    
    March 13, 2009/s/ SVEN-CHRISTER-NILSSON

Sven-Christer Nilsson
    
    Director
    
    March 13, 2009/s/ LOUIS SILVER

Louis Silver
    
    Director
    
    March 13, 2009/s/ DAN TOCATLY

Dan Tocatly
    
    Director
    
    March 13, 2009




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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, 2008Allowance for doubtful accounts
    
    $
    868
    
    
    $
    
    
    
    $
    125
    
    
    $
    743Year ended December 31, 2007Allowance for doubtful accounts
    
    $
    682
    
    
    $
    186
    
    
    $
    
    
    
    $
    868Year ended December 31, 2006Allowance for doubtful accounts
    
    $
    667
    
    
    $
    15
    
    
    $
    
    
    
    $
    682
 (1)
    
    Actual write-offs of
uncollectible accounts receivables.




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description2.1
    (1)
    
    Combination Agreement, dated as of April 4, 2002, among DSP Group, Inc., the Registrant and CEVA
Technologies Limited (formerly Parthus Technologies plc)2.2
    (2)
    
    Amendment No. 1 to Combination Agreement, dated as of August 29, 2002, among DSP Group, Inc., the
Registrant and CEVA Technologies Limited (formerly Parthus Technologies plc)3.1
    (1)
    
    Amended and Restated Certificate of Incorporation of the Registrant3.2
    (3)
    
    Certificate of Ownership and Merger (merging CEVA, Inc. into ParthusCeva, Inc.)3.3
    (4)
    
    Third Amended and Restated Bylaws of the Registrant3.7
    (5)
    
    Amendment to the Amended and Restated Certificate of Incorporation of the Registrant4.1
    (2)
    
    Specimen of Common Stock Certificate10.1
    (6)
    
    Separation Agreement among DSP Group, Inc., DSP Group, Ltd., the Registrant, CEVA Technologies, Inc.
(formerly DSP CEVA, Inc.) and CEVA D.S.P. Ltd. (formerly Corage, Ltd.) dated as of November 1, 200210.2
    (6)
    
    Tax Indemnification and Allocation Agreement between DSP Group, Inc. and the Registrant dated as of
November 1, 200210.3
    (6)
    
    Technology Transfer Agreement between DSP Group, Inc. and the Registrant dated as of November 1, 200210.4
    (6)
    
    Technology Transfer Agreement between DSP Group, Ltd. and CEVA D.S.P. Ltd. (formerly Corage, Ltd.) dated
as of November 1, 200210.5
    (6)
    
    Technology Transfer Agreement between CEVA Technologies, Inc. (formerly DSP CEVA, Inc.) and the
Registrant dated as of November 1, 200210.6
    (7)
    
    CEVA, Inc. 2000 Stock Incentive Plan10.7
    (7)
    
    CEVA, Inc. 2002 Stock Incentive Plan10.8
    (7)
    
    CEVA, Inc. 2003 Director Stock Option Plan10.9
    (7)
    
    Parthus 2000 Share Option Plan10.10
    (8)
    
    CEVA, Inc. 2002 Employee Stock Purchase Plan10.11
    (1)
    
    Form of Indemnification Agreement10.12
    (6)
    
    Employment Agreement between the Registrant and Gideon Wertheizer dated as of November 1, 200210.13
    (6)
    
    Employment Agreement between the Registrant and Issachar Ohana dated as of November 1, 200210.14
    (9)
    
    Personal and Special Employment Agreement between the Registrant and Yaniv Arieli dated as of August 18,
200510.15
    (10)
    
    Form of Stock Option Agreement under the CEVA, Inc. 2002 Stock Incentive Plan10.16
    (10)
    
    Form of Israeli Stock Option Agreement under the CEVA, Inc. 2002 Stock Incentive Plan10.17
    (10)
    
    Form of Stock Option Agreement under the CEVA, Inc. 2000 Stock Incentive Plan10.18
    (10)
    
    Form of Israeli Stock Option Agreement under the CEVA, Inc. 2000 Stock Incentive Plan10.19
    (10)
    
    Form of Option Agreement under the CEVA, Inc. 2003 Director Stock Option Plan10.20
    (11)
    
    Form of Stock Option Agreement for Directors under the CEVA, Inc. 2000 Stock Incentive Plan10.21
    (11)
    
    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
    (12)
    
    Amendment, dated July 22, 2003, to the Employment Agreement by and between Issachar Ohana and CEVA, Inc.,
dated November 1, 200210.23
    (13)
    
    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, 2003




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##### Table of Contents



ExhibitNumber
    
    Description10.24
    (14)
    
    Assignment of Leasehold Interest, dated January 18, 2008, by and between CEVA Ireland Limited and Ivor
Fitzpatrick21.1
    *
    
    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
 
 (1)
    
    Filed as an exhibit to CEVAs registration statement on Form 10, as amended, initially filed
with the Commission on June 3, 2002 (registration number 000-49842), and incorporated herein
by reference.(2)
    
    Filed as an exhibit to CEVAs registration statement on Form S-1, as amended, initially filed
with the Commission on July 30, 2002 (registration number 333-97353), and incorporated herein
by reference.(3)
    
    Filed as an exhibit to CEVAs Report on Form 8-K, filed with the Commission on December 8,
2003, and incorporated hereby by reference.(4)
    
    Filed as an exhibit to CEVAs Current Report on Form 8-K, filed with the Commission on
October 29, 2008, and incorporated hereby by reference.(5)
    
    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.(6)
    
    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.(7)
    
    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.(8)
    
    Filed as an exhibit to CEVAs Quarterly Report on Form 10-Q, filed with the Commission on May
10, 2006, and incorporated hereby by reference.(9)
    
    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.(10)
    
    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.(11)
    
    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.(12)
    
    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.(13)
    
    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.(14)
    
    Filed as Exhibit 10.1 to CEVAs Current Report on Form 8-K, filed with the Securities and
Exchange Commission on January 18, 2008, 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.