##### 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, 2009
 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 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 8, 2010Common Stock, $0.001 par value per share
    
    20,807,101 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
    
    
    17Item 2. Properties
    
    
    17Item 3. Legal Proceedings
    
    
    17Item 4. Reserved
    
    
    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
    
    
    21Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    37Item 8. Financial Statements and Supplementary Data
    
    
    38Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    38Item 9A. Controls and Procedures
    
    
    38Item 9B. Other Information
    
    
    39PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    40Item 11. Executive Compensation
    
    
    40Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stock Holder
Matters
    
    
    40Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    40Item 14. Principal Accountant Fees and Services
    
    
    40PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    41Financial Statements
    
    
    F-1SignaturesExhibit 10.10Exhibit 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 emerging markets such as China, India and Latin America, presents future
growth potential for CEVA;
 
    
    Our belief that the full scale migration to our DSP cores and technologies
in the handsets market has not been fully realized and continues to
progress;
 
    
    Our optimism about adoption of our technologies for new categories of
products, such as data cards, netbooks, and eReaders;
 
    
    Our belief that Texas Instruments and Freescales announcement of their
intent to exit the baseband market, after historically having been large
players in this market, is a strong positive driver for our future market
share expansion;
 
    
    Our belief that both the handsets and mobile broadband markets continue to
present significant growth opportunities for us;
 
    
    Our optimism about 2010 resulting from key customers with production
capability for high volume products, including portable consumer products,
set-top boxes, ultra-low-cost phones and smartphones;
 
    
    Our belief that our research and development expenses will increase in 2010;
 
    
    Our expectation that CEVA-X, CEVA TeakLite and CEVA Teak family of products
will continue to generate a significant portion of our total revenues for
2010;
 
    
    Our belief that our new DSP core, CEVA-XC, is well positioned to expand our
licensee base in both existing wireless handsets and new wireless
infrastructure markets;
 
    
    Our anticipation that our current cash on hand, short-term deposits and
marketable securities, along with cash from operations, will provide
sufficient capital to fund our operations for at least the next 12 months;
and
 
    
    Our belief that changes in interest rates within our investment portfolio
will not have a material affect on our financial position on an annual or
quarterly basis.
     2




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




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




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
    
    capitalize on our relationships and leadership within our worldwide community of
semiconductor and OEM licensees who are developing CEVA-based solutions; and
 
    
    capitalize on our IP licensing and royalty business model which we believe is the
best vehicle for a pervasive adoption of our technology and allows us to focus our
resources on research and development of new licensable technologies and applications.
 Products
  CEVA DSP Cores
   CEVA 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.
   6




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Research and Development
    Competition
   
    
    IP vendors that offer programmable DSP cores;
 
    
    IP vendors of general purpose processors with DSP extensions;
 
    
    IP vendors that offer hardware-based DSP implementation as opposed to software-based
DSP, which is our specialization; and
 
    
    internal design groups of large chip companies that develop proprietary DSP cores or
engines for their own application-specific chipsets.
     
    
    in the multimedia market   Chips & Media, Hantro (acquired by On2), Imagination
Technologies and Virage Logic (through its acquisition of ARC);
  7




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
    
    in the serial storage technology area  ARM Holdings, Gennums Snowbush IP Group,
Silicon Image and Synopsys;
 
    
    in VoIP applications  ARM Holdings, MIPS Technologies and Verisilicon; and
 
    
    in audio applications   ARM Holdings, Tensilica, Verisilicon and Virage Logic.
 Proprietary Rights
        8




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##### Table of Contents



Employees
  NumberTotal employees
    
    
    184FunctionResearch and development
    
    
    125Sales and marketing
    
    
    22Technical support
    
    
    13Administration
    
    
    24LocationIsrael
    
    
    136Ireland
    
    
    16United Kingdom
    
    
    7United States
    
    
    10Elsewhere
    
    
    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.
  
    
    We compete directly in the DSP core space with Tensilica and Verisilicon;
 
    
    CPU IP providers, such as Virage Logic (through its acquisition of ARC), ARM
Holdings, MIPS Technologies and Tensilica, who offer DSP and DSP extensions to their
IP;
 
    
    Our video solution is software-based and competes with hardware implementations
offered by companies such as Hantro (acquired by On2), Imagination Technologies,
Chips & Media, and Virage Logic (through its acquisition of ARC);
 
    
    Internal engineering teams, such as Mediatek, NXP, STMicroelectronics and Zoran,
may design programmable DSP core products in-house and therefore not license our
technologies; and
 
    
    SATA and SAS IP markets are highly standardized with several vendors, such as ARM
Holdings, Gennums Snowbush IP group, Silicon Image and Synopsys, that offer similar
products, thereby 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;
 
    
    fluctuations in operating expenses and gross margins associated with the
introduction of new or enhanced technologies and adjustments to operating expenses
resulting from restructurings;
 
    
    our ability to scale our operations in response to changes in demand for our
technologies;
 
    
    entry into new markets, including China, India and Latin America;
 
    
    changes in our pricing policies and those of our competitors;
 
    
    restructuring, asset and goodwill impairment and related charges, as well as
other accounting changes or adjustments; and
 
    
    general economic conditions, including the current economic conditions, and its
effect on the semiconductor industry and sales of consumer products into which our
technologies are incorporated.
  10




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We rely significantly on revenue derived from a limited number of customers.
  We generate a significant amount of our total revenues from the handsets market and our business
and operating results may be materially adversely affected if we do not continue to succeed in this
highly competitive market.
  We depend on market acceptance of third-party semiconductor intellectual property.
    11




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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.
   Because we have significant international operations, we may be subject to political, economic and
other conditions relating to our international operations that could increase our operating
expenses and disrupt our revenues and business.
  
    
    unexpected changes in regulatory requirements;
 
    
    fluctuations in the exchange rate for the U.S. dollar;
 
    
    imposition of tariffs and other barriers and restrictions;
 
    
    burdens of complying with a variety of foreign laws, treaties and technical
standards;
 
    
    uncertainty of laws and enforcement in certain countries relating to the
protection of intellectual property;
 
    
    multiple and possibly overlapping tax structures and potentially adverse tax
consequences;
 
    
    political and economic instability; and
 
    
    changes in diplomatic and trade relationships.
 We depend on a limited number of key personnel who would be difficult to replace.
   12




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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 are affected by general economic conditions and the highly cyclical nature of
the semiconductor industry.
     13




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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.
  If we are unable to meet the changing needs of our end-users or address evolving market demands,
our business may be harmed.
  We may seek to expand our business through acquisitions that could result in diversion of resources
and extra expenses.
   14




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
    
    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.
 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.
   15




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The Israeli tax benefits that we currently receive and the government programs in which we
participate require us to meet certain conditions and may be terminated or reduced in the future,
which could increase our tax expenses.
  Our corporate tax rate may increase, which could adversely impact our cash flow, financial
condition and results of operations.
  Legislative action in the United States could materially and adversely affect us from a tax
perspective.
  Our stock price may be volatile so you may not be able to resell your shares of our common stock at
or above the price you paid for them.
   16




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ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
   AreaLocation
    
    Term
    
    
    Expiration
    
    
    (Sq. Feet)
    
    
    Principal ActivitiesSan Jose, CA, U.S. (1)
    
    3 years
    
    
    2010
    
    
    
    5,250
    
    
    Headquarters; sales and marketing; administrationHerzeliya, Israel (2)
    
    4 years
    
    
    2010
    
    
    
    26,460
    
    
    Research and development; administrationDublin, Ireland (3)
    
    1 year
    
    
    2010
    
    
    
    2,270
    
    
    Research and development; administrationCork, Ireland (4)
    
    25 years
    
    
    2025
    
    
    
    10,000
    
    
    Research and developmentBelfast, UK (5)
    
    15 years
    
    
    2019
    
    
    
    2,600
    
    
    Research and development
 (1)
    
    Lease expires in August 2010. We are currently considering options for an alternative
lease.(2)
    
    In January 2010, we extended the lease for an additional 4 years (expiration 2014).(3)
    
    We are currently negotiating to extend this lease.(4)
    
    Break clause in the lease exercisable in 2011.(5)
    
    Break clause in the lease exercisable on six months notice and payment of one years
rent. 
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. RESERVED
 
  17




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




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PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
  Price Range ofCommon StockHigh
    
    
    Low2009First Quarter
    
    $
    7.48
    
    
    $
    5.14Second Quarter
    
    $
    8.76
    
    
    $
    7.19Third Quarter
    
    $
    10.90
    
    
    $
    7.91Fourth Quarter
    
    $
    12.86
    
    
    $
    9.772008First Quarter
    
    $
    12.04
    
    
    $
    7.44Second Quarter
    
    $
    9.95
    
    
    $
    7.87Third Quarter
    
    $
    10.44
    
    
    $
    7.49Fourth Quarter
    
    $
    8.73
    
    
    $
    5.46
   2010 Annual Meeting of Stockholders
   19




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Stock Performance Graph
 Notwithstanding anything to the contrary set forth in any of the Companys previous or future
filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, that might incorporate this proxy statement or future filings made by the Company under
those statutes, the below Stock Performance Graph shall not be deemed filed with the United States
Securities and Exchange Commission and shall not be deemed incorporated by reference into any of
those prior filings or into any future filings made by the Company under those statutes.
 
 12/31/04
    
    
    12/31/05
    
    
    12/31/06
    
    
    12/31/07
    
    
    12/31/08
    
    
    12/31/09CEVA, Inc
    
    
    100.00
    
    
    
    68.74
    
    
    
    71.04
    
    
    
    134.07
    
    
    
    76.86
    
    
    
    141.21NASDAQ Composite
    
    
    100.00
    
    
    
    101.33
    
    
    
    114.01
    
    
    
    123.71
    
    
    
    73.11
    
    
    
    105.61Specialized Semiconductor
    
    
    100.00
    
    
    
    102.35
    
    
    
    117.55
    
    
    
    151.72
    
    
    
    69.29
    
    
    
    104.13
     20




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ITEM
6. SELECTED FINANCIAL DATA
  Year Ended December 31,2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(in thousands)Consolidated Statements of Operations Data:Revenues:Licensing
    
    $
    23,935
    
    
    $
    22,160
    
    
    $
    19,499
    
    
    $
    21,701
    
    
    $
    18,764Royalties
    
    
    6,820
    
    
    
    6,324
    
    
    
    9,095
    
    
    
    14,349
    
    
    
    16,225Other revenue
    
    
    4,881
    
    
    
    4,021
    
    
    
    4,617
    
    
    
    4,315
    
    
    
    3,478Total revenues
    
    
    35,636
    
    
    
    32,505
    
    
    
    33,211
    
    
    
    40,365
    
    
    
    38,467Cost of revenues
    
    
    4,217
    
    
    
    4,035
    
    
    
    3,851
    
    
    
    4,668
    
    
    
    4,117Gross profit
    
    
    31,419
    
    
    
    28,470
    
    
    
    29,360
    
    
    
    35,697
    
    
    
    34,350Operating expenses:Research and development, net
    
    
    20,153
    
    
    
    18,769
    
    
    
    19,136
    
    
    
    20,172
    
    
    
    16,561Sales and marketing
    
    
    6,577
    
    
    
    6,268
    
    
    
    6,253
    
    
    
    7,088
    
    
    
    6,732General and administrative
    
    
    5,742
    
    
    
    5,882
    
    
    
    5,721
    
    
    
    6,637
    
    
    
    6,087Amortization of intangible assets
    
    
    823
    
    
    
    414
    
    
    
    148
    
    
    
    53
    
    
    
    Reorganization, restructuring and
severance charge
    
    
    3,207
    
    
    
    
    
    
    
    
    
    
    
    4,121
    
    
    
    Impairment of assets
    
    
    510
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    37,012
    
    
    
    31,333
    
    
    
    31,258
    
    
    
    38,071
    
    
    
    29,380Operating income (loss)
    
    
    (5,593
    )
    
    
    (2,863
    )
    
    
    (1,898
    )
    
    
    (2,374
    )
    
    
    4,970Financial income, net
    
    
    1,820
    
    
    
    2,620
    
    
    
    3,211
    
    
    
    2,729
    
    
    
    2,048Other income, net
    
    
    1,507
    
    
    
    57
    
    
    
    425
    
    
    
    12,011
    
    
    
    3,712Income (loss) before taxes on income
    
    
    (2,266
    )
    
    
    (186
    )
    
    
    1,738
    
    
    
    12,366
    
    
    
    10,730Income tax expense (income)
    
    
    
    
    
    
    (88
    )
    
    
    447
    
    
    
    3,801
    
    
    
    2,384Net income (loss)
    
    $
    (2,266
    )
    
    $
    (98
    )
    
    $
    1,291
    
    
    $
    8,565
    
    
    $
    8,346Basic net income (loss) per share
    
    $
    (0.12
    )
    
    $
    (0.01
    )
    
    $
    0.07
    
    
    $
    0.43
    
    
    $
    0.42Diluted net income (loss) per share
    
    $
    (0.12
    )
    
    $
    (0.01
    )
    
    $
    0.06
    
    
    $
    0.42
    
    
    $
    0.41
 December 31,2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(in thousands)Consolidated Balance Sheet Data:Working capital
    
    $
    61,240
    
    
    $
    65,001
    
    
    $
    77,312
    
    
    $
    83,886
    
    
    $
    101,169Total assets
    
    
    115,749
    
    
    
    121,080
    
    
    
    128,989
    
    
    
    137,586
    
    
    
    155,260Total long-term liabilities
    
    
    4,295
    
    
    
    4,216
    
    
    
    4,647
    
    
    
    3,788
    
    
    
    4,483Total stockholders equity
    
    $
    102,233
    
    
    $
    106,143
    
    
    $
    114,388
    
    
    $
    121,659
    
    
    $
    139,096
  21




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QUARTERLY FINANCIAL INFORMATION
 Three months endedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,
    
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2008
    
    
    2009Revenues:Licensing
    
    $
    5,088
    
    
    $
    6,026
    
    
    $
    5,974
    
    
    $
    4,613
    
    
    $
    4,544
    
    
    $
    4,273
    
    
    $
    5,242
    
    
    $
    4,705Royalties
    
    
    3,733
    
    
    
    3,038
    
    
    
    3,296
    
    
    
    4,282
    
    
    
    3,759
    
    
    
    3,950
    
    
    
    3,694
    
    
    
    4,822Other revenue
    
    
    1,246
    
    
    
    1,019
    
    
    
    936
    
    
    
    1,114
    
    
    
    1,210
    
    
    
    887
    
    
    
    723
    
    
    
    658Total revenues
    
    
    10,067
    
    
    
    10,083
    
    
    
    10,206
    
    
    
    10,009
    
    
    
    9,513
    
    
    
    9,110
    
    
    
    9,659
    
    
    
    10,185Cost of revenues
    
    
    1,170
    
    
    
    1,268
    
    
    
    1,105
    
    
    
    1,125
    
    
    
    1,210
    
    
    
    1,152
    
    
    
    849
    
    
    
    906Gross profit
    
    
    8,897
    
    
    
    8,815
    
    
    
    9,101
    
    
    
    8,884
    
    
    
    8,303
    
    
    
    7,958
    
    
    
    8,810
    
    
    
    9,279Operating expenses:Research and development, net
    
    
    5,120
    
    
    
    5,235
    
    
    
    4,778
    
    
    
    5,039
    
    
    
    4,075
    
    
    
    3,996
    
    
    
    4,061
    
    
    
    4,429Sales and marketing
    
    
    1,773
    
    
    
    1,806
    
    
    
    1,822
    
    
    
    1,687
    
    
    
    1,636
    
    
    
    1,650
    
    
    
    1,628
    
    
    
    1,818General and administrative
    
    
    1,590
    
    
    
    1,696
    
    
    
    1,705
    
    
    
    1,646
    
    
    
    1,472
    
    
    
    1,558
    
    
    
    1,525
    
    
    
    1,532Amortization of other
intangible assets
    
    
    21
    
    
    
    20
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reorganization,
restructuring and severance
charge
    
    
    3,537
    
    
    
    
    
    
    
    
    
    
    
    584
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    12,041
    
    
    
    8,757
    
    
    
    8,317
    
    
    
    8,956
    
    
    
    7,183
    
    
    
    7,204
    
    
    
    7,214
    
    
    
    7,779Operating income (loss)
    
    
    (3,144
    )
    
    
    58
    
    
    
    784
    
    
    
    (72
    )
    
    
    1,120
    
    
    
    754
    
    
    
    1,596
    
    
    
    1,500Financial income, net
    
    
    808
    
    
    
    522
    
    
    
    645
    
    
    
    754
    
    
    
    476
    
    
    
    474
    
    
    
    551
    
    
    
    547Other income, net
    
    
    10,869
    
    
    
    24
    
    
    
    358
    
    
    
    760
    
    
    
    
    
    
    
    1,901
    
    
    
    
    
    
    
    1,811Income before taxes on income
    
    
    8,533
    
    
    
    604
    
    
    
    1,787
    
    
    
    1,442
    
    
    
    1,596
    
    
    
    3,129
    
    
    
    2,147
    
    
    
    3,858Income taxes expense (income)
    
    
    3,022
    
    
    
    (87
    )
    
    
    384
    
    
    
    482
    
    
    
    228
    
    
    
    814
    
    
    
    394
    
    
    
    948Net income
    
    $
    5,511
    
    
    $
    691
    
    
    $
    1,403
    
    
    $
    960
    
    
    $
    1,368
    
    
    $
    2,315
    
    
    $
    1,753
    
    
    $
    2,910Basic net income per share
    
    $
    0.27
    
    
    $
    0.03
    
    
    $
    0.07
    
    
    $
    0.05
    
    
    $
    0.07
    
    
    $
    0.12
    
    
    $
    0.09
    
    
    $
    0.14Diluted net income per share
    
    $
    0.27
    
    
    $
    0.03
    
    
    $
    0.07
    
    
    $
    0.05
    
    
    $
    0.07
    
    
    $
    0.12
    
    
    $
    0.09
    
    
    $
    0.14Weighted average number of
shares of Common Stock used in
computation of net income per
share (in thousands):Basic
    
    
    20,095
    
    
    
    20,140
    
    
    
    20,157
    
    
    
    19,647
    
    
    
    19,557
    
    
    
    19,515
    
    
    
    19,689
    
    
    
    20,101Diluted
    
    
    20,724
    
    
    
    20,804
    
    
    
    20,799
    
    
    
    19,977
    
    
    
    19,754
    
    
    
    20,014
    
    
    
    20,492
    
    
    
    21,375
  22




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##### Table of Contents



ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 You should read the following discussion together with the consolidated 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
         23




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES, ESTIMATES AND ASSUMPTIONS
  
    
    revenue recognition;
 
    
    allowances for doubtful accounts;
 
    
    accounting for income taxes;
 
    
    impairment of goodwill;
 
    
    equity-based compensation; and
 
    
    accounting for marketable securities.
  24




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##### Table of Contents



Revenue Recognition
         25




---



##### Table of Contents



Allowances for Doubtful Accounts
  Accounting for Income Taxes
     26




---



##### Table of Contents



Goodwill
       Accounting for Equity-Based Compensation
   27




---



##### Table of Contents



Accounting for Marketable Securities
   Recently issued accounting standards:
       28




---



##### Table of Contents



RESULTS OF OPERATIONS
  2007
    
    
    2008
    
    
    2009Consolidated Statements of Operations Data:Revenues:Licensing
    
    
    58.7
    %
    
    
    53.8
    %
    
    
    48.8
    %Royalties
    
    
    27.4
    %
    
    
    35.5
    %
    
    
    42.2
    %Other revenue
    
    
    13.9
    %
    
    
    10.7
    %
    
    
    9.0
    %Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    11.6
    %
    
    
    11.6
    %
    
    
    10.7
    %Gross profit
    
    
    88.4
    %
    
    
    88.4
    %
    
    
    89.3
    %Operating expenses:Research and development, net
    
    
    57.6
    %
    
    
    50.0
    %
    
    
    43.1
    %Sales and marketing
    
    
    18.8
    %
    
    
    17.6
    %
    
    
    17.5
    %General and administrative
    
    
    17.2
    %
    
    
    16.4
    %
    
    
    15.8
    %Amortization of other intangible assets
    
    
    0.5
    %
    
    
    0.1
    %
    
    
    Reorganization, restructuring and severance charge
    
    
    
    
    
    
    10.2
    %
    
    
    Total operating expenses
    
    
    94.1
    %
    
    
    94.3
    %
    
    
    76.4
    %Operating income (loss)
    
    
    (5.7
    )%
    
    
    (5.9
    )%
    
    
    12.9
    %Financial income, net
    
    
    9.6
    %
    
    
    6.7
    %
    
    
    5.3
    %Other income
    
    
    1.3
    %
    
    
    29.8
    %
    
    
    9.7
    %Income before taxes on income
    
    
    5.2
    %
    
    
    30.6
    %
    
    
    27.9
    %Taxes on income
    
    
    1.3
    %
    
    
    9.4
    %
    
    
    6.2
    %Net income
    
    
    3.9
    %
    
    
    21.2
    %
    
    
    21.7
    %
 Discussion and Analysis
  Revenues
 Total Revenues
 2007
    
    
    2008
    
    
    2009Total revenues (in millions)
    
    $
    33.2
    
    
    $
    40.4
    
    
    $
    38.5Change year-on-year
    
    
    
    
    
    
    21.5
    %
    
    
    (4.7
    )%
   29




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##### Table of Contents



Year ended December 31,2007
    
    
    2008
    
    
    2009CEVA-X family
    
    
    19
    %
    
    
    27
    %
    
    
    40
    %CEVA TeakLite family
    
    
    45
    %
    
    
    38
    %
    
    
    35
    %CEVA Teak family
    
    
    16
    %
    
    
    15
    %
    
    
    13
    %
   Licensing Revenues
 2007
    
    
    2008
    
    
    2009Licensing revenues (in millions)
    
    $
    19.5
    
    
    $
    21.7
    
    
    $
    18.8Change year-on-year
    
    
    
    
    
    
    11.3
    %
    
    
    (13.5
    )%
   Royalty Revenues
 2007
    
    
    2008
    
    
    2009Royalty revenues (in millions)
    
    $
    9.1
    
    
    $
    14.3
    
    
    $
    16.2Change year-on-year
    
    
    
    
    
    
    57.8
    %
    
    
    13.1
    %
    30




---



##### Table of Contents



Other Revenues
  2007
    
    
    2008
    
    
    2009Other revenues (in millions)
    
    $
    4.6
    
    
    $
    4.3
    
    
    $
    3.5Change year-on-year
    
    
    
    
    
    
    (6.5
    )%
    
    
    (19.4
    )%
  Geographic Revenue Analysis
 2007
    
    
    2008
    
    
    2009(in millions, except percentages)United States
    
    $
    6.9
    
    
    
    20.9
    %
    
    $
    5.3
    
    
    
    13.1
    %
    
    $
    6.0
    
    
    
    15.5
    %Europe, Middle East (EME) (1) (2)
    
    $
    11.5
    
    
    
    34.6
    %
    
    $
    22.3
    
    
    
    55.2
    %
    
    $
    17.9
    
    
    
    46.4
    %Asia Pacific (APAC) (3) (4) (5)
    
    $
    14.8
    
    
    
    44.5
    %
    
    $
    12.8
    
    
    
    31.7
    %
    
    $
    14.6
    
    
    
    38.1
    %(1) Sweden
    
    $
    3.8
    
    
    
    11.3
    %
    
    $
    8.0
    
    
    
    19.9
    %
    
    $
    7.5
    
    
    
    19.4
    %(2) Switzerland
    
    
    *
    )
    
    
    *
    )
    
    $
    5.9
    
    
    
    14.7
    %
    
    
    *
    )
    
    
    *
    )(3) Japan
    
    $
    4.4
    
    
    
    13.2
    %
    
    $
    5.1
    
    
    
    12.7
    %
    
    $
    4.5
    
    
    
    11.6
    %(4) Taiwan
    
    $
    6.1
    
    
    
    18.2
    %
    
    
    *
    )
    
    
    *
    )
    
    
    *
    )
    
    
    *
    )(5) China
    
    
    *
    )
    
    
    *
    )
    
    
    *
    )
    
    
    *
    )
    
    $
    6.4
    
    
    
    16.7
    %
 *)
    
    Less than 10%    31




---



##### Table of Contents



Cost of Revenues
 2007
    
    
    2008
    
    
    2009Cost of revenues (in millions)
    
    $
    3.9
    
    
    $
    4.7
    
    
    $
    4.1Change year-on-year
    
    
    
    
    
    
    21.2
    %
    
    
    (11.8
    )%
   Operating Expenses
 2007
    
    
    2008
    
    
    2009(in millions)Research and development, net
    
    $
    19.1
    
    
    $
    20.2
    
    
    $
    16.6Sales and marketing
    
    $
    6.2
    
    
    $
    7.1
    
    
    $
    6.7General and administration
    
    $
    5.7
    
    
    $
    6.6
    
    
    $
    6.1Amortization of intangible assets
    
    $
    0.2
    
    
    $
    0.1
    
    
    
    Reorganization, restructuring and severance charge
    
    $
    
    
    
    $
    4.1
    
    
    $
    Total operating expenses
    
    $
    31.2
    
    
    $
    38.1
    
    
    $
    29.4Change year-on-year
    
    
    
    
    
    
    21.8
    %
    
    
    (22.8
    )%
  Research and Development Expenses, Net
 2007
    
    
    2008
    
    
    2009Research and development expenses, net (in millions)
    
    $
    19.1
    
    
    $
    20.2
    
    
    $
    16.6Change year-on-year
    
    
    
    
    
    
    5.4
    %
    
    
    (17.9
    )%
  32




---



##### Table of Contents



Sales and Marketing Expenses
 2007
    
    
    2008
    
    
    2009Sales and marketing expenses (in millions)
    
    $
    6.2
    
    
    $
    7.1
    
    
    $
    6.7Change year-on-year
    
    
    
    
    
    
    13.4
    %
    
    
    (5.0
    )%
   General and Administrative Expenses
 2007
    
    
    2008
    
    
    2009General and administrative expenses (in millions)
    
    $
    5.7
    
    
    $
    6.6
    
    
    $
    6.1Change year-on-year
    
    
    
    
    
    
    16.0
    %
    
    
    (8.3
    )%
   33




---



##### Table of Contents



Amortization of Other Intangible Assets
 2007
    
    
    2008
    
    
    2009Amortization of other intangible assets (in millions)
    
    $
    0.2
    
    
    $
    0.1
    
    
    $
    Change year-on-year
    
    
    
    
    
    
    (64.2
    )%
    
    
    
  Reorganization, Restructuring and Severance Charge
 2007
    
    
    2008
    
    
    2009Reorganization, restructuring and severance charge (in millions)
    
    $
    
    
    
    $
    4.1
    
    
    $
    
   Financial Income, net and Other Income
 2007
    
    
    2008
    
    
    2009(in millions)Financial income, net
    
    $
    3.21
    
    
    $
    2.73
    
    
    $
    2.05of which:Interest income and gains and losses from marketable securities, net
    
    $
    3.17
    
    
    $
    2.86
    
    
    $
    2.19Foreign exchange gain (loss)
    
    $
    0.04
    
    
    $
    (0.13
    )
    
    $
    (0.14
    )Other income, net
    
    $
    0.43
    
    
    $
    12.01
    
    
    $
    3.71of which:Gain on realization of investments
    
    $
    0.43
    
    
    $
    12.15
    
    
    $
    3.71Impairment of assets
    
    $
    
    
    
    $
    (0.14
    )
    
    $
    
     34




---



##### Table of Contents



Provision for Income Taxes
      LIQUIDITY AND CAPITAL RESOURCES
   35




---



##### Table of Contents



36




---



##### 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
    
    
    1,142
    
    
    
    981
    
    
    
    161
    
    
    
    
    
    
    
    Operating Lease Obligations  Other
    
    
    542
    
    
    
    342
    
    
    
    200
    
    
    
    
    
    
    
    Purchase Obligations
    
    
    602
    
    
    
    494
    
    
    
    108
    
    
    
    
    
    
    
    Severance Pay (*)
    
    
    4,483
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    6,769
    
    
    
    1,817
    
    
    
    469
    
    
    
    
    
    
    
    
  (*)
    
    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 $28,000 is unfunded. Off-Balance Sheet Arrangements
  
 ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    37




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##### Table of Contents



ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM
9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
    38




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##### Table of Contents



Managements Annual Report on Internal Control Over Financial Reporting.
    
 ITEM
9B. OTHER INFORMATION
   39




---



##### 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
   40




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##### Table of Contents



PART IV
 
 ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 The following documents are filed as part of or are included in this Annual Report on Form
10-K:
  
    
    Consolidated Balance Sheets as of December 31, 2009 and 2008.
 
    
    Consolidated Statements of Operations for the Years Ended December 31, 2009, 2008
and 2007.
 
    
    Statements of Changes in Stockholders Equity for the Years Ended December 31,
2009, 2008 and 2007.
 
    
    Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008
and 2007.
 
    
    Notes to Consolidated Financial Statements.
  
    
    Schedule II: Valuation and Qualifying Accounts
     41




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets
    
    
    F-4Consolidated Statements of Operations
    
    
    F-5Statements of Changes in Stockholders Equity
    
    
    F-6Consolidated Statements of Cash Flows
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8
  F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           F-2




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           March 15, 2010
  F-3




---



##### Table of Contents



CEVA, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (U.S. dollars in thousands, except share and per share data)
 December 31,
    
    
    December 31,2008
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    13,328
    
    
    $
    12,104Short-term bank deposits
    
    
    39,423
    
    
    
    40,056Marketable securities (Note 2)
    
    
    31,878
    
    
    
    48,438Trade receivables (net of allowance for doubtful accounts of $743 in 2008 and $700 in 2009)
    
    
    5,390
    
    
    
    5,995Deferred tax assets (Note 12)
    
    
    1,085
    
    
    
    1,096Prepaid expenses and other accounts receivable (Note 6)
    
    
    4,921
    
    
    
    5,345Total current assets
    
    
    96,025
    
    
    
    113,034Long-term assets:Severance pay fund
    
    
    3,441
    
    
    
    4,455Deferred tax assets (Note 12)
    
    
    351
    
    
    
    309Property and equipment, net (Note 4)
    
    
    1,271
    
    
    
    1,148Goodwill (Note 5)
    
    
    36,498
    
    
    
    36,498Total long-term assets
    
    
    41,561
    
    
    
    42,410Total assets
    
    $
    137,586
    
    
    $
    155,444LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade payables
    
    $
    615
    
    
    $
    530Deferred revenues
    
    
    1,034
    
    
    
    432Accrued expenses and other payables (Note 7)
    
    
    10,490
    
    
    
    9,735Deferred tax liabilities
    
    
    
    
    
    
    1,168Total current liabilities
    
    
    12,139
    
    
    
    11,865Long-term liabilities:Accrued severance pay
    
    
    3,788
    
    
    
    4,483Total long-term liabilities
    
    
    3,788
    
    
    
    4,483Stockholders equity:Preferred stock:$0.001 par value: 5,000,000 shares authorized at December 31, 2008 and 2009; none
issued and outstanding
    
    
    
    
    
    
    Common stock:$0.001 par value: 60,000,000 shares authorized at December 31, 2008, and 2009;
19,532,026 and 20,429,736 shares issued and outstanding at December 31, 2008 and
2009, respectively
    
    
    20
    
    
    
    20Additional paid in capital
    
    
    153,712
    
    
    
    158,325Treasury stock
    
    
    (5,077
    )
    
    
    Accumulated other comprehensive income (loss)
    
    
    (24
    )
    
    
    251Accumulated deficit
    
    
    (26,972
    )
    
    
    (19,500
    )Total stockholders equity
    
    
    121,659
    
    
    
    139,096Total liabilities and stockholders equity
    
    $
    137,586
    
    
    $
    155,444
   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 31,2007
    
    
    2008
    
    
    2009Revenues:Licensing
    
    $
    19,499
    
    
    $
    21,701
    
    
    $
    18,764Royalties
    
    
    9,095
    
    
    
    14,349
    
    
    
    16,225Other revenues
    
    
    4,617
    
    
    
    4,315
    
    
    
    3,478Total revenues
    
    
    33,211
    
    
    
    40,365
    
    
    
    38,467Cost of revenues
    
    
    3,851
    
    
    
    4,668
    
    
    
    4,117Gross profit
    
    
    29,360
    
    
    
    35,697
    
    
    
    34,350Operating expenses:Research and development, net
    
    
    19,136
    
    
    
    20,172
    
    
    
    16,561Sales and marketing
    
    
    6,253
    
    
    
    7,088
    
    
    
    6,732General and administrative
    
    
    5,721
    
    
    
    6,637
    
    
    
    6,087Amortization of intangible assets
    
    
    148
    
    
    
    53
    
    
    
    Reorganization, restructuring and severance charge (Note 13)
    
    
    
    
    
    
    4,121
    
    
    
    Total operating expenses
    
    
    31,258
    
    
    
    38,071
    
    
    
    29,380Operating income (loss)
    
    
    (1,898
    )
    
    
    (2,374
    )
    
    
    4,970Financial income, net (Note 11)
    
    
    3,211
    
    
    
    2,729
    
    
    
    2,048Other income, net (Note 11)
    
    
    425
    
    
    
    12,011
    
    
    
    3,712Income before taxes on income
    
    
    1,738
    
    
    
    12,366
    
    
    
    10,730Income tax expenses (Note 12)
    
    
    447
    
    
    
    3,801
    
    
    
    2,384Net income
    
    $
    1,291
    
    
    $
    8,565
    
    
    $
    8,346Basic net income per share
    
    $
    0.07
    
    
    $
    0.43
    
    
    $
    0.42Diluted net income per share
    
    $
    0.06
    
    
    $
    0.42
    
    
    $
    0.41Weighted average number of shares of Common Stock used in
computation of net income per share (in thousands)Basic
    
    
    19,606
    
    
    
    20,009
    
    
    
    19,717Diluted
    
    
    20,150
    
    
    
    20,575
    
    
    
    20,411
   F-5




---



##### Table of Contents



CEVA, INC.
 
 STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (U.S. dollars in thousands, except share data)
 AccumulatedAdditional
    
    
    
    
    
    
    other
    
    
    
    
    
    
    Total
    
    
    TotalCommon Stock
    
    
    paid-in
    
    
    
    
    
    
    comprehensive
    
    
    Accumulated
    
    
    comprehensive
    
    
    stockholdersShares
    
    
    Amount
    
    
    capital
    
    
    Treasury Stock
    
    
    income (loss)
    
    
    deficit
    
    
    income
    
    
    equityBalance as of January 1, 2007
    
    
    19,330,144
    
    
    $
    19
    
    
    $
    142,826
    
    
    $
    
    
    
    $
    
    
    
    $
    (36,702
    )
    
    
    
    
    
    $
    106,143Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,291
    
    
    $
    1,291
    
    
    
    1,291Unrealized loss from available-for-sale securities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58
    )
    
    
    
    
    
    
    (58
    )
    
    
    (58
    )Unrealized gain from hedging activities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    65
    
    
    
    65Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,298Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    2,131
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,131Issuance 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    897Balance as of December 31, 2007
    
    
    20,033,897
    
    
    $
    20
    
    
    $
    149,772
    
    
    $
    
    
    
    $
    7
    
    
    $
    (35,411
    )
    
    
    
    
    
    $
    114,388Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,565
    
    
    $
    8,565
    
    
    
    8,565Unrealized loss from available-for-sale securities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (111
    )
    
    
    
    
    
    
    (111
    )
    
    
    (111
    )Unrealized gain from hedging activities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    80
    
    
    
    80Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,534Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    2,922
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,922Issuance of Common Stock upon exercise of employee stock options (a)
    
    
    58,693
    
    
    
    (*
    )
    
    
    410
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    410Issuance of Common Stock under employee stock purchase plan (a)
    
    
    99,631
    
    
    
    (*
    )
    
    
    608
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    608Purchase of Treasury Stock (a)
    
    
    (752,763
    )
    
    
    (*
    )
    
    
    
    
    
    
    (5,821
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,821
    )Issuance of Treasury Stock upon exercise of employee stock options (a)
    
    
    23,368
    
    
    
    (*
    )
    
    
    
    
    
    
    192
    
    
    
    
    
    
    
    (48
    )
    
    
    
    
    
    
    144Issuance of Treasury Stock under employee stock purchase plan (a)
    
    
    69,200
    
    
    
    (*
    )
    
    
    
    
    
    
    552
    
    
    
    
    
    
    
    (78
    )
    
    
    
    
    
    
    474Balance as of December 31, 2008
    
    
    19,532,026
    
    
    $
    20
    
    
    $
    153,712
    
    
    $
    (5,077
    )
    
    $
    (24
    )
    
    $
    (26,972
    )
    
    
    
    
    
    $
    121,659Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,346
    
    
    $
    8,346
    
    
    
    8,346Unrealized gain from available-for-sale securities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    333
    
    
    
    
    
    
    
    333
    
    
    
    333Unrealized loss from hedging activities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58
    )
    
    
    
    
    
    
    (58
    )
    
    
    (58
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,621Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    2,920
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,920Issuance of Common Stock upon exercise of employee stock options (a)
    
    
    237,515
    
    
    
    (*
    )
    
    
    1,610
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,610Purchase of Treasury Stock (a)
    
    
    (140,828
    )
    
    
    (1
    )
    
    
    
    
    
    
    (822
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (823
    )Issuance of Treasury Stock upon exercise of employee stock options (a)
    
    
    633,008
    
    
    
    1
    
    
    
    83
    
    
    
    4,639
    
    
    
    
    
    
    
    (593
    )
    
    
    
    
    
    
    4,130Issuance of Treasury Stock under employee stock purchase plan (a)
    
    
    168,015
    
    
    
    (*
    )
    
    
    
    
    
    
    1,260
    
    
    
    
    
    
    
    (281
    )
    
    
    
    
    
    
    979Balance as of December 31, 2009
    
    
    20,429,736
    
    
    $
    20
    
    
    $
    158,325
    
    
    $
    
    
    
    $
    251
    
    
    $
    (19,500
    )
    
    
    
    
    
    $
    139,096Accumulated unrealized gain from available-for-sale securities,
net of taxes of $85
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    164Accumulated unrealized gain from hedging activities, net of
taxes of $14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    87Accumulated other comprehensive gain, net as of December 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    251
 
 (*)
    
    Represent an amount lower than $1.(a)
    
    See Note 8 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 31,2007
    
    
    2008
    
    
    2009Cash flows from operating activities:Net income
    
    $
    1,291
    
    
    $
    8,565
    
    
    $
    8,346Adjustments required to reconcile net income to net cash provided by (used
in) operating activities:Depreciation
    
    
    882
    
    
    
    673
    
    
    
    488Impairment of assets
    
    
    
    
    
    
    138
    
    
    
    Amortization of intangible assets
    
    
    148
    
    
    
    53
    
    
    
    Equity-based compensation
    
    
    2,131
    
    
    
    2,922
    
    
    
    2,920Gain from sale of property and equipment
    
    
    (3
    )
    
    
    (4
    )
    
    
    Gain on trading marketable securities
    
    
    (137
    )
    
    
    
    
    
    
    Loss on sale of available-for-sale marketable securities
    
    
    4
    
    
    
    287
    
    
    
    21Amortization of premiums (discounts) on available-for-sale
marketable securities
    
    
    (26
    )
    
    
    179
    
    
    
    652Unrealized foreign exchange loss (gain)
    
    
    (40
    )
    
    
    223
    
    
    
    85Accrued interest on short-term bank deposits
    
    
    (127
    )
    
    
    (729
    )
    
    
    (1,049
    )Gain on realization of investments
    
    
    (425
    )
    
    
    (12,145
    )
    
    
    (3,712
    )Trading marketable securities, net
    
    
    21,312
    
    
    
    
    
    
    
    Changes in operating assets and liabilities:Decrease (increase) in trade receivables
    
    
    5,919
    
    
    
    (2,888
    )
    
    
    (605
    )Increase in other accounts receivable and prepaid expenses
    
    
    (712
    )
    
    
    (1,571
    )
    
    
    (438
    )Decrease (increase) in deferred tax, net
    
    
    (321
    )
    
    
    (120
    )
    
    
    1,100Increase (decrease) in trade payables
    
    
    (283
    )
    
    
    160
    
    
    
    (88
    )Increase (decrease) in deferred revenues
    
    
    321
    
    
    
    307
    
    
    
    (602
    )Increase (decrease) in accrued expenses and other payables
    
    
    (1,550
    )
    
    
    216
    
    
    
    (784
    )Increase (decrease) in accrued severance pay, net
    
    
    (151
    )
    
    
    306
    
    
    
    (325
    )Net cash provided by (used in) operating activities
    
    
    28,233
    
    
    
    (3,428
    )
    
    
    6,009Cash flows from investing activities:Purchase of property and equipment
    
    
    (807
    )
    
    
    (456
    )
    
    
    (368
    )Proceeds from sale of property and equipment
    
    
    8
    
    
    
    4
    
    
    
    3Investment in short-term bank deposits
    
    
    (5,000
    )
    
    
    (47,911
    )
    
    
    (46,182
    )Proceeds from short-term bank deposits
    
    
    1,026
    
    
    
    16,347
    
    
    
    46,598Investment in available-for-sale marketable securities
    
    
    (39,990
    )
    
    
    (28,485
    )
    
    
    (48,402
    )Proceeds from maturity and sale of available-for-sale marketable securities
    
    
    13,468
    
    
    
    24,578
    
    
    
    31,587Transaction cost related to the GPS divestment
    
    
    (39
    )
    
    
    
    
    
    
    Proceeds from realization of investment
    
    
    425
    
    
    
    16,378
    
    
    
    3,712Net cash used in investing activities
    
    
    (30,909
    )
    
    
    (19,545
    )
    
    
    (13,052
    )Cash flows from financing activities:Purchase of Treasury Stock
    
    
    
    
    
    
    (5,821
    )
    
    
    (823
    )Proceeds from issuance of Common Stock and Treasury Stock upon exercise of
employee stock options
    
    
    3,919
    
    
    
    554
    
    
    
    5,740Proceeds from issuance of Common Stock and Treasury Stock under employee stock
purchase plan
    
    
    897
    
    
    
    1,082
    
    
    
    979Net cash provided by (used in) financing activities
    
    
    4,816
    
    
    
    (4,185
    )
    
    
    5,896Effect of exchange rate movements on cash
    
    
    589
    
    
    
    (211
    )
    
    
    (77
    )Increase (decrease) in cash and cash equivalents
    
    
    2,729
    
    
    
    (27,369
    )
    
    
    (1,224
    )Cash and cash equivalents at the beginning of the year
    
    
    37,968
    
    
    
    40,697
    
    
    
    13,328Cash and cash equivalents at the end of the year
    
    $
    40,697
    
    
    $
    13,328
    
    
    $
    12,104Supplemental information of cash-flows activities:Cash paid during the year for:Income and withholding taxes, net
    
    $
    889
    
    
    $
    5,124
    
    
    $
    1,105
   F-7




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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-8




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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 expected lease term or useful economic life)
   F-9




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
 Goodwill :
       Revenue recognition :
    F-10




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
           F-11




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
 Cost of revenue :
  Income taxes :
     Research and development :
  Government grants :
    F-12




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
 Employee benefit plan :
    Accrued severance pay :
     Accounting for equity-based compensation :
     F-13




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
  2007
    
    
    2008
    
    
    2009Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    30%-46
    %
    
    
    37%-64
    %
    
    
    47%-78
    %Risk-free interest rate
    
    
    3.9%-5.1
    %
    
    
    1.4%-3.8
    %
    
    
    0.4%-3.4
    %Expected forfeiture (employees)
    
    
    20
    %
    
    
    15
    %
    
    
    10
    %Expected forfeiture (executives)
    
    
    10
    %
    
    
    10
    %
    
    
    5
    %Contractual term of up to
    
    7 years
    
    
    7 years
    
    
    7 yearsSuboptimal exercise multiple (employees)
    
    
    1.6
    
    
    
    1.6
    
    
    
    1.5Suboptimal exercise multiple (executives)
    
    
    1.6
    
    
    
    1.2
    
    
    
    1.3
   Year ended December 31,2007
    
    
    2008
    
    
    2009Cost of revenue
    
    $
    83
    
    
    $
    112
    
    
    $
    115Research and development, net
    
    
    935
    
    
    
    1,088
    
    
    
    873Sales and marketing
    
    
    334
    
    
    
    531
    
    
    
    590General and administrative
    
    
    779
    
    
    
    1,191
    
    
    
    1,342Total equity-based compensation expense
    
    $
    2,131
    
    
    $
    2,922
    
    
    $
    2,920
  Fair value of financial instruments :
  Comprehensive income (loss) :
  Concentration of credit risk :
   F-14




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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 :
   F-15




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
   Advertising expenses :
  Treasury stock :
   Net income per share of common stock :
  Year ended December 31,(in thousands except per share data)
    
    2007
    
    
    2008
    
    
    2009Numerator:Numerator for basic and diluted net income per share
    
    $
    1,291
    
    
    $
    8,565
    
    
    $
    8,346Denominator:Denominator for basic net income per share
    
    
    19,606
    
    
    
    20,009
    
    
    
    19,717Effect of employee stock options
    
    
    544
    
    
    
    566
    
    
    
    694Denominator for diluted net income per share
    
    
    20,150
    
    
    
    20,575
    
    
    
    20,411Basic net income per share
    
    $
    0.07
    
    
    $
    0.43
    
    
    $
    0.42Diluted net income per share
    
    $
    0.06
    
    
    $
    0.42
    
    
    $
    0.41
   F-16




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
 Recently issued accounting standards :
        F-17




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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, 2009Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    valueCertificates of deposits
    
    $
    1,842
    
    
    $
    6
    
    
    $
    (1
    )
    
    $
    1,847U.S. government and agency securities
    
    
    1,934
    
    
    
    16
    
    
    
    
    
    
    
    1,950Corporate bonds and securities
    
    
    44,413
    
    
    
    318
    
    
    
    (90
    )
    
    
    44,641$
    48,189
    
    
    $
    340
    
    
    $
    (91
    )
    
    $
    48,438
 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, 2009Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    valueDue in one year or less
    
    $
    19,528
    
    
    $
    159
    
    
    $
    (2
    )
    
    $
    19,685Due after one year to two years
    
    
    28,661
    
    
    
    181
    
    
    
    (89
    )
    
    
    28,753$
    48,189
    
    
    $
    340
    
    
    $
    (91
    )
    
    $
    48,438
     F-18




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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, 2009
    
    
    Level I
    
    
    Level II
    
    
    Level IIIMarketable securities:Certificates of deposits
    
    $
    1,847
    
    
    $
    
    
    
    $
    1,847
    
    
    $
    U.S. government and agency
securities
    
    
    1,950
    
    
    
    
    
    
    
    1,950
    
    
    
    Corporate bonds and securities
    
    
    44,641
    
    
    
    
    
    
    
    44,641
    
    
    
    Derivative assets
    
    
    128
    
    
    
    
    
    
    
    128
    
    
    
    Derivative liabilities
    
    
    27
    
    
    
    
    
    
    
    27
    
    
    
    
 NOTE 4: PROPERTY AND EQUIPMENT, NET
  Year ended December 31,2008
    
    
    2009Cost:Computers, software and equipment
    
    $
    10,727
    
    
    $
    11,082Office furniture and equipment
    
    
    894
    
    
    
    904Leasehold improvements
    
    
    668
    
    
    
    66812,289
    
    
    
    12,654Less  Accumulated depreciation
    
    
    (11,018
    )
    
    
    (11,506
    )Depreciated cost
    
    $
    1,271
    
    
    $
    1,148
   NOTE 5: GOODWILL
 Year ended December 31,2008
    
    
    2009Gross carrying amount
    
    $
    38,398
    
    
    $
    38,398Accumulated impairment loss/ asset write down
    
    
    1,900
    
    
    
    1,900$
    36,498
    
    
    $
    36,498
  F-19




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
 NOTE 6: PREPAID EXPENSES AND OTHER ACCOUNTS RECEIVABLE
 PREPAID EXPENSES
 Year ended December 31,2008
    
    
    2009Prepaid leased design tools
    
    $
    981
    
    
    $
    1,180Prepaid directors and officers insurance
    
    
    75
    
    
    
    91Prepaid car leases
    
    
    190
    
    
    
    174Prepaid rent
    
    
    113
    
    
    
    276IT consumables
    
    
    230
    
    
    
    233Other prepaid expenses
    
    
    84
    
    
    
    58$
    1,673
    
    
    $
    2,012
 OTHER ACCOUNTS RECEIVABLE
 Year ended December 31,2008
    
    
    2009Taxes
    
    $
    2,286
    
    
    $
    2,135Interest receivable
    
    
    428
    
    
    
    776Other
    
    
    534
    
    
    
    422$
    3,248
    
    
    $
    3,333
 NOTE 7: ACCRUED EXPENSES AND OTHER PAYABLES
 Year ended December 31,2008
    
    
    2009Accrued compensation and benefits
    
    $
    6,537
    
    
    $
    6,506Restructuring accruals (see Note 13)
    
    
    645
    
    
    
    Engineering accruals
    
    
    686
    
    
    
    701Professional fees
    
    
    956
    
    
    
    1,017Taxes payable
    
    
    44
    
    
    
    46Other accruals
    
    
    1,622
    
    
    
    1,465$
    10,490
    
    
    $
    9,735
 NOTE 8: STOCKHOLDERS EQUITY
 a. Common stock:
   b. Preferred stock:
   F-20




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
 c. Share repurchase program:
     d. Employee and non-employee stock plans:
   WeightedWeighted
    
    
    averageNumber of
    
    
    average exercise
    
    
    remaining
    
    
    Aggregate intrinsicoptions
    
    
    price
    
    
    contractual term
    
    
    valueOutstanding at the beginning of the year
    
    
    4,522,154
    
    
    $
    7.68Granted
    
    
    563,000
    
    
    
    7.70Exercised
    
    
    (870,523
    )
    
    
    6.59Forfeited or expired
    
    
    (248,976
    )
    
    
    11.75Outstanding at the end of the year
    
    
    3,965,655
    
    
    $
    7.66
    
    
    
    4.4
    
    
    $
    20,615,098Vested or expected to vest as of December 31
    
    
    3,857,150
    
    
    $
    7.65
    
    
    
    4.4
    
    
    $
    20,101,243Exercisable as of December 31
    
    
    2,389,584
    
    
    $
    7.27
    
    
    
    3.7
    
    
    $
    13,347,511
   F-21




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
  Options
    
    
    Weighted average
    
    
    
    
    
    
    
    
    
    
    Weighted averageExercise price
    
    outstanding as of
    
    
    remaining contractual
    
    
    Weighted average
    
    
    Options exercisable as of
    
    
    exercise price of(range)
    
    December 31, 2009
    
    
    life (years)
    
    
    exercise price
    
    
    December 31, 2009
    
    
    options exercisable4.255.88
    
    
    812,366
    
    
    
    3.8
    
    
    $
    5.16
    
    
    
    759,117
    
    
    $
    5.126.057.37
    
    
    733,435
    
    
    
    4.9
    
    
    
    7.10
    
    
    
    284,654
    
    
    
    7.157.427.97
    
    
    689,630
    
    
    
    3.3
    
    
    
    7.59
    
    
    
    590,463
    
    
    
    7.538.038.78
    
    
    865,784
    
    
    
    5.2
    
    
    
    8.44
    
    
    
    305,178
    
    
    
    8.469.1011.75
    
    
    864,440
    
    
    
    4.6
    
    
    
    9.77
    
    
    
    450,172
    
    
    
    9.863,965,655
    
    
    
    4.4
    
    
    $
    7.66
    
    
    
    2,389,584
    
    
    $
    7.27
 2003 Director Stock Option Plan
   Year ended December 31,2009WeightedNumber of
    
    
    average exerciseoptions
    
    
    priceOutstanding at the beginning of the year
    
    
    667,500
    
    
    $
    7.03Granted
    
    
    
    
    
    
    Exercised
    
    
    (65,000
    )
    
    
    5.97Forfeited or expired
    
    
    
    
    
    
    Outstanding at the end of the year
    
    
    602,500
    
    
    $
    7.14
      F-22




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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 31,2009WeightedNumber of
    
    
    average exerciseoptions
    
    
    priceOutstanding at the beginning of the year
    
    
    1,479,653
    
    
    $
    5.92Granted (*)
    
    
    405,000
    
    
    
    7.54Exercised
    
    
    (582,865
    )
    
    
    6.22Forfeited or expired
    
    
    (21,190
    )
    
    
    6.94Outstanding at the end of the year
    
    
    1,280,598
    
    
    $
    6.28
 (*)
    
    Options to purchase 132,000 shares of common stock were granted to non-employee directors
during 2009. The exercise price of such grants was $8.68.      F-23




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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 31,2009WeightedNumber of
    
    
    average exerciseoptions
    
    
    priceOutstanding at the beginning of the year
    
    
    2,375,001
    
    
    $
    8.95Granted (*)
    
    
    158,000
    
    
    
    8.10Exercised
    
    
    (222,658
    )
    
    
    7.75Forfeited or expired
    
    
    (227,786
    )
    
    
    12.19Outstanding at the end of the year
    
    
    2,082,557
    
    
    $
    8.66
 (*)
    
    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 per share in
2007 and 2008, respectively.   2002 Employee Stock Purchase Plan (ESPP)
     F-24




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
  
    
    85% of the fair market value of common stock on the date of grant of the purchase
right, which is the commencement of the offer period; or
    
    85% of the fair market value of common stock on the exercise date, which is the last
day of a purchase period.
    e. Dividend policy:
  NOTE 9: DERIVATIVES AND HEDGING ACTIVITIES
  As at December 31,2008
    
    
    2009Derivative assets:Foreign exchange option contracts
    
    $
    87
    
    
    $
    103Foreign exchange forward contracts
    
    
    58
    
    
    
    25145
    
    
    
    128Derivative liabilities:Foreign exchange forward contracts
    
    
    
    
    
    
    27
    
    
    
    27derivative instruments- net
    
    $
    145
    
    
    $
    101
   Year ended December 31,2008
    
    
    2009Derivatives in cash flow hedging transaction:Foreign exchange option contracts
    
    $
    (22
    )
    
    $
    (209
    )Foreign exchange forward contracts
    
    
    122
    
    
    
    52$
    100
    
    
    $
    (157
    )
  F-25




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
  Year ended December 31,2008
    
    
    2009Derivatives in cash flow hedging transaction:Foreign exchange option contracts
    
    $
    108
    
    
    $
    226Foreign exchange forward contracts
    
    
    (128
    )
    
    
    (113
    )$
    (20
    )
    
    $
    113
 NOTE 10: GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA
 a. Summary information about geographic areas:
  Year ended December 31,2007
    
    
    2008
    
    
    2009Revenues based on customer location:United States
    
    $
    6,937
    
    
    $
    5,276
    
    
    $
    5,982Europe, Middle East (1) (2)
    
    
    11,477
    
    
    
    22,278
    
    
    
    17,843Asia Pacific (3) (4) (5)
    
    
    14,797
    
    
    
    12,811
    
    
    
    14,642$
    33,211
    
    
    $
    40,365
    
    
    $
    38,467(1) Sweden
    
    $
    3,755
    
    
    $
    8,019
    
    
    $
    7,454(2) Switzerland
    
    
    *
    )
    
    $
    5,946
    
    
    
    *
    )(3) Japan
    
    $
    4,375
    
    
    $
    5,144
    
    
    $
    4,455(4) Taiwan
    
    $
    6,058
    
    
    
    *
    )
    
    
    *
    )(5) China
    
    
    *
    )
    
    
    *
    )
    
    $
    6,420*) Less than 10%
 December 31,2007
    
    
    2008
    
    
    2009Long-lived assets by geographic region:United States
    
    $
    44
    
    
    $
    28
    
    
    $
    25Ireland (*)
    
    
    283
    
    
    
    36
    
    
    
    69Israel
    
    
    1,261
    
    
    
    1,188
    
    
    
    1,044Other
    
    
    38
    
    
    
    19
    
    
    
    10$
    1,626
    
    
    $
    1,271
    
    
    $
    1,148
 (*)
    
    The Company recorded relating to 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.  F-26




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
 b. Major customer data as a percentage of total revenues:
  Year ended December 31,2007
    
    
    2008
    
    
    2009Customer A
    
    
    
    
    
    
    *
    )
    
    
    20
    %Customer B
    
    
    *
    )
    
    
    *
    )
    
    
    13
    %Customer C
    
    
    17
    %
    
    
    *
    )
    
    
    *
    )Customer D
    
    
    11
    %
    
    
    20
    %
    
    
    *
    )Customer E
    
    
    12
    %
    
    
    *
    )
    
    
    
 *)
    
    Less than 10%  c. Information about Products and Services:
  Year ended December 31,2007
    
    
    2008
    
    
    2009CEVA-X family
    
    
    19
    %
    
    
    27
    %
    
    
    40
    %CEVA TeakLite family
    
    
    45
    %
    
    
    38
    %
    
    
    35
    %CEVA Teak family
    
    
    16
    %
    
    
    15
    %
    
    
    13
    %
  NOTE 11: SELECTED STATEMENTS OF OPERATIONS DATA
  Year ended December 31,2007
    
    
    2008
    
    
    2009Interest income
    
    $
    3,014
    
    
    $
    3,329
    
    
    $
    2,863Gain (loss) on marketable securities, net (*)
    
    
    159
    
    
    
    (466
    )
    
    
    (673
    )Foreign exchange gain (loss), net
    
    
    38
    
    
    
    (134
    )
    
    
    (142
    )$
    3,211
    
    
    $
    2,729
    
    
    $
    2,048
 (*)
    
    Including amortization of discount (premium) on marketable securities, net  F-27




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
  Year ended December 31,2007
    
    
    2008
    
    
    2009Gain on realization of investments
    
    $
    425
    
    
    $
    12,145
    
    
    $
    3,712Gain from sale of a property
    
    
    
    
    
    
    4
    
    
    
    Impairment of assets
    
    
    
    
    
    
    (138
    )
    
    
    $
    425
    
    
    $
    12,011
    
    
    $
    3,712
    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
   F-28




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
 2. Israeli Subsidiary
              F-29




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
              F-30




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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 31,2007
    
    
    2008
    
    
    2009Domestic taxes:Current
    
    $
    52
    
    
    $
    3,104
    
    
    $
    109Deferred
    
    
    
    
    
    
    (138
    )
    
    
    920Foreign taxes:Current
    
    
    716
    
    
    
    817
    
    
    
    1,175Deferred
    
    
    (321
    )
    
    
    18
    
    
    
    180$
    447
    
    
    $
    3,801
    
    
    $
    2,384Income (loss) before taxes on income:Domestic
    
    $
    (2,123
    )
    
    $
    (3,321
    )
    
    $
    (3,571
    )Foreign
    
    
    3,861
    
    
    
    15,687
    
    
    
    14,301$
    1,738
    
    
    $
    12,366
    
    
    $
    10,730
 c. Reconciliation between the Companys effective tax rate and the U.S. statutory rate:
 Year ended December 31,2007
    
    
    2008
    
    
    2009Income before taxes on income
    
    $
    1,738
    
    
    $
    12,366
    
    
    $
    10,730Theoretical tax at U.S. statutory rate-35%
    
    
    608
    
    
    
    4,328
    
    
    
    3,756Foreign income taxes at rates other than U.S. rate
    
    
    (962
    )
    
    
    (4,017
    )
    
    
    (3,273
    )Subpart F
    
    
    
    
    
    
    4,360
    
    
    
    1,189Non-deductible items
    
    
    1,554
    
    
    
    809
    
    
    
    1,008Valuation allowance
    
    
    (548
    )
    
    
    (1,187
    )
    
    
    (265
    )Other
    
    
    (205
    )
    
    
    (492
    )
    
    
    (31
    )Taxes on income
    
    $
    447
    
    
    $
    3,801
    
    
    $
    2,384
  F-31




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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 31,2008
    
    
    2009Deferred tax assetsOperating loss carryforward
    
    $
    7,681
    
    
    $
    7,450Accrued expenses
    
    
    358
    
    
    
    366Temporary differences related to R&D expenses
    
    
    1,109
    
    
    
    991Other
    
    
    69
    
    
    
    Total gross deferred tax assets
    
    
    9,217
    
    
    
    8,807Valuation allowance
    
    
    (7,781
    )
    
    
    (7,402
    )Net deferred tax assets
    
    $
    1,436
    
    
    $
    1,405Deferred tax liabilitiesSubpart F carryforward
    
    $
    
    
    
    $
    1,062Other
    
    
    
    
    
    
    106Total gross deferred tax liabilities
    
    $
    
    
    
    $
    1,168Net deferred tax assets (*)
    
    $
    1,436
    
    
    $
    237
 (*)
    
    Deferred tax for the year ended December 31, 2008 from domestic and foreign jurisdictions was
$138 and $1,298, respectively. Deferred tax for the year ended December 31, 2009 from
domestic and foreign jurisdictions was $(851) and $1,088, respectively.  e. Separation from DSPG:
  f. Tax loss carryforwards:
  g
  F-32




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##### Table of Contents



CEVA, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)(in thousands, except share data)
 NOTE 13: REORGANIZATION, RESTRUCTURING AND SEVERANCE CHARGE
    Under-utilizedSeverance and
    
    
    building operating
    
    
    Legal andrelated costs
    
    
    lease obligations
    
    
    professional fees
    
    
    TotalBalance as of December 31, 2007 (1)
    
    $
    
    
    
    $
    2,144
    
    
    $
    230
    
    
    $
    2,374Charge, net
    
    
    663
    
    
    
    3,586
    
    
    
    (128
    )
    
    
    4,121Effect of exchange rate
    
    
    61
    
    
    
    3
    
    
    
    5
    
    
    
    69Cash outlays
    
    
    (103
    )
    
    
    (5,733
    )
    
    
    (83
    )
    
    
    (5,919
    )Balance as of December 31, 2008 (2)
    
    $
    621
    
    
    $
    
    
    
    $
    24
    
    
    $
    645Cash outlays
    
    
    (621
    )
    
    
    
    
    
    
    (24
    )
    
    
    (645
    )Balance as of December 31, 2009
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 (1)
    
    The legal and professional fees were related to the termination of the Harcourt lease.(2)
    
    The legal and professional fees were related to charges associated with the restructuring of
the SATA business. Year ended December 31,2008
    
    
    2009Short-term  Restructuring accruals (see Note 7)
    
    $
    645
    
    
    $
    
 NOTE 14: RELATED PARTY TRANSACTIONS
     F-33




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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
    
    
    Total2010
    
    $
    981
    
    
    $
    342
    
    
    $
    494
    
    
    $
    1,8172011
    
    
    161
    
    
    
    200
    
    
    
    108
    
    
    
    469$
    1,142
    
    
    $
    542
    
    
    $
    602
    
    
    $
    2,286
     F-34




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##### Table of Contents



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

Gideon Wertheizer
    
    Chief Executive Officer and Director
(Principal Executive Officer & Director)
    
    March 15, 2010/s/ Yaniv Arieli

Yaniv Arieli
    
    Chief Financial Officer and Treasurer
(Principal Financial Officer and Principal
Accounting Officer)
    
    March 15, 2010/s/ Peter McManamon

Peter McManamon
    
    Director and Chairman
    
    March 15, 2010/s/ Eliyahu Ayalon

Eliyahu Ayalon
    
    Director
    
    March 15, 2010/s/ Zvi Limon

Zvi Limon
    
    Director
    
    March 15, 2010/s/ Bruce Mann

Bruce Mann
    
    Director
    
    March 15, 2010/s/ Sven-Christer-Nilsson

Sven-Christer Nilsson
    
    Director
    
    March 15, 2010/s/ Louis Silver

Louis Silver
    
    Director
    
    March 15, 2010/s/ Dan Tocatly

Dan Tocatly
    
    Director
    
    March 15, 2010




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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, 2009
Allowance for doubtful accounts
    
    $
    743
    
    
    $
    
    
    
    $
    43
    
    
    $
    700Year ended December 31, 2008
Allowance for doubtful accounts
    
    $
    868
    
    
    $
    
    
    
    $
    125
    
    
    $
    743Year ended December 31, 2007
Allowance for doubtful accounts
    
    $
    682
    
    
    $
    186
    
    
    $
    
    
    
    $
    868
 (1)
    
    Actual write-offs of uncollectible accounts receivables




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    (1)
    
    Amended and Restated Certificate of Incorporation of the Registrant3.2
    (2)
    
    Certificate of Ownership and Merger (merging CEVA, Inc. into ParthusCeva, Inc.)3.3
    (3)
    
    Third Amended and Restated Bylaws of the Registrant3.7
    (4)
    
    Amendment to the Amended and Restated Certificate of Incorporation of the Registrant4.1
    (5)
    
    Specimen of Common Stock Certificate10.1
    (6)
    
    CEVA, Inc. 2000 Stock Incentive Plan10.7
    (6)
    
    CEVA, Inc. 2002 Stock Incentive Plan10.8
    (6)
    
    CEVA, Inc. 2003 Director Stock Option Plan10.9
    (6)
    
    Parthus 2000 Share Option Plan10.10
    *
    
    CEVA, Inc. 2002 Employee Stock Purchase Plan10.11
    (1)
    
    Form of Indemnification Agreement10.12
    (7)
    
    Employment Agreement between the Registrant and Gideon Wertheizer dated as of November 1, 200210.13
    (7)
    
    Employment Agreement between the Registrant and Issachar Ohana dated as of November 1, 200210.14
    (8)
    
    Personal and Special Employment Agreement between the Registrant and Yaniv Arieli dated as of
August 18, 200510.15
    (9)
    
    Form of Stock Option Agreement under the CEVA, Inc. 2002 Stock Incentive Plan10.16
    (9)
    
    Form of Israeli Stock Option Agreement under the CEVA, Inc. 2002 Stock Incentive Plan10.17
    (9)
    
    Form of Stock Option Agreement under the CEVA, Inc. 2000 Stock Incentive Plan10.18
    (9)
    
    Form of Israeli Stock Option Agreement under the CEVA, Inc. 2000 Stock Incentive Plan10.19
    (9)
    
    Form of Option Agreement under the CEVA, Inc. 2003 Director Stock Option Plan10.20
    (10)
    
    Form of Stock Option Agreement for Directors under the CEVA, Inc. 2000 Stock Incentive Plan10.21
    (10)
    
    Yaniv Arielis Amended and Restated Nonstatutory Stock Option Agreement under the CEVA, Inc. 2002
Stock Incentive Plan, dated as of August 1, 200710.22
    (11)
    
    Amendment, dated July 22, 2003, to the Employment Agreement by and between Issachar Ohana and
CEVA, Inc., dated November 1, 200210.23
    (12)
    
    Amendment, effective as of November 1, 2007, to the Employment Agreement by and between Issachar
Ohana and CEVA, Inc., dated November 1, 2002 and as amended on July 22, 200321.1
    *
    
    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.




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##### Table of Contents



(2)
    
    Filed as an exhibit to CEVAs Report on Form 8-K, filed with the Commission on December 8,
2003, and incorporated hereby by reference.(3)
    
    Filed as an exhibit to CEVAs Current Report on Form 8-K, filed with the Commission on
October 29, 2008, and incorporated hereby by reference.(4)
    
    Filed as an exhibit to CEVAs Report on Form 8-K, filed with the Commission on July 22, 2005,
and incorporated hereby by reference.(5)
    
    Filed as an exhibit to CEVAs registration statement on Form S-1, as amended, initially filed
with the Commission on July 30, 2002 (registration number 333-97353), and incorporated herein
by reference.(6)
    
    Filed as an exhibit to CEVAs 2007 Annual Report on Form 10-K, filed with the Commission on
March 14, 2008, and incorporated hereby by reference.(7)
    
    Filed as an exhibit to CEVAs 2002 Annual Report on Form 10-K, filed with the Commission on
March 28, 2003, and incorporated hereby by reference.(8)
    
    Filed as an exhibit to CEVAs Quarterly Report on Form 10-Q, filed with the Commission on
November 9, 2005, and incorporated hereby by reference.(9)
    
    Filed as an exhibit to CEVAs Quarterly Report on Form 10-Q, filed with the Commission on
August 9, 2006, and incorporated hereby by reference.(10)
    
    Filed as an exhibit of the same number to CEVAs Quarterly Report on Form 10-Q, filed with
the Securities and Exchange Commission on August 9, 2007, and incorporated hereby by
reference.(11)
    
    Filed as Exhibit 10.27 to CEVAs Quarterly Report on Form 10-Q, filed with the Securities and
Exchange Commission on November 9, 2007, and incorporated hereby by reference.(12)
    
    Filed as Exhibit 99.1 to CEVAs Current Report on Form 8-K, filed with the Securities and
Exchange Commission on November 7, 2007, and incorporated hereby by reference.
    
    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.