
Shares of common stock outstanding after completion of this offering:		11,407,045 shares (assuming a combined public offering price of $0.766 per common unit, the last reported sale price of our common stock on Nasdaq on September 27, 2018).

Use of Proceeds:		We expect to use the net proceeds ~~we receive~~received from this offering for working capital and ~~other~~ general corporate purposes and to repay debt and payables, including ~~expansion~~$ of ~~sales~~the total indebtedness we owe under the Notes. See the section titled “Use of Proceeds” on page 22 of this prospectus for additional information.

No listing of warrants:		We do not intend to apply for listing of the warrants or thepre-funded warrants on any securities exchange or trading system.

NASDAQ Capital Market trading symbol for our common stock:		MOSY

Risk Factors:		Investing in our securities involves a high degree of risk and ~~marketing~~purchasers of our securities may lose their entire investment. See “Risk Factors” on page 10 below and ~~research and development. PROPOSED NASDAQ NATIONAL MARKET SYMBOL...................... MOSY~~ the other information included elsewhere in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our securities.

~~Unless otherwise indicated, the share information in this prospectus is as~~

The number of ~~June 30, 2000 and - - gives effect to our reincorporation in Delaware from California to be approved and effective prior to this offering; - reflects the conversion of all outstanding~~ shares of our ~~preferred~~common stock to be outstanding immediately before and after this offering is based on 8,273,886 shares outstanding as of ~~June 30, 2000 into 12,731,446~~August 31, 2018, and excludes, as of such date:

2,361,445 shares of common stock ~~which will occur automatically~~issuable upon the closing of this offering; - reflects the exercise of warrants to purchase 2,881,219 shares of common stock outstanding as of June 30, 2000, with a weighted average exercise price of $5.97 per share and the "cashless" exercise of a warrant to purchase shares of common stock by surrendering shares of common stock in paymentconversion of the ~~exercise price~~Senior Secured Convertible Notes due August 15, 2019 (calculated prior to the modification of ~~$8.50 per share, assuming a fair market value per share of common stock~~the Notes as described in the ~~offering of $~~ MOU); ~~- excludes 2,316,113~~

99,051 shares of common stock issuable upon exercise of outstanding exercisable stock options ~~outstanding as of June 30, 2000,~~ with a weighted average exercise price of ~~$0.89~~approximately $9.57 per share; ~~- excludes 5,000,000~~

240,232 shares of common stock ~~reserved~~issuable upon exercise of outstanding stock options that are not exercisable;

167,505 shares of common stock issuable upon vesting of restricted stock units;

214,271 shares of common stock available for future issuance under our ~~2000 employee stock option plan; - excludes 200,000~~equity incentive plans;

147,024 shares of common stock ~~reserved~~available for ~~issuance~~sale under our ~~2000~~ employee stock purchase plan; and - assumes that the underwriters' over-allotment option will not be exercised. We were originally incorporated in the State of California in September 1991. We will reincorporate in the State of Delaware prior to the effective date of this offering. Our principal executive offices are located at 1020 Stewart Drive, Sunnyvale, CA 94085, and our telephone number is (408) 731-1800. 3 SUMMARY FINANCIAL INFORMATION The following table sets forth summary financial data for our company. You should read this information together with our financial statements and the notes to those statements appearing elsewhere in this prospectus and the information under "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
-------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ---------------------------------------------------- ------------------- 1995 1996 1997 1998 1999 1999 2000 IN THOUSANDS, EXCEPT PER SHARE DATA -------- -------- -------- -------- -------- -------- -------- STATEMENT OF OPERATIONS DATA: Net revenue: Product....................... $ - $23,110 $34,822 $36,281 $15,356 $ 8,145 $ 4,028 Contract...................... - - - - - - 460 ------- ------- ------- ------- ------- ------- ------- - 23,110 34,822 36,281 15,356 8,145 4,488 Gross profit.................... - 1,675 5,312 4,389 5,294 2,698 2,269 Loss from operations............ (4,781) (6,796) (1,509) (2,677) (311) (163) (1,041) Net income (loss)............... (4,457) (7,059) (2,016) (2,322) 142 42 (582) Net income (loss) per share Basic......................... $ (0.53) $ (0.78) $ (0.22) $ (0.24) $ 0.01 $ 0.00 $ (0.06) Diluted....................... $ (0.53) $ (0.78) $ (0.22) $ (0.24) $ 0.01 $ 0.00 $ (0.06) ======= ======= ======= ======= ======= ======= ======= Shares used to compute net income (loss) per share Basic......................... 8,376 8,997 9,323 9,626 9,727 9,708 9,856 Diluted....................... 8,376 8,997 9,323 9,626 23,320 22,735 9,856 Pro forma net income (loss) per share Basic......................... $ 0.01 $ (0.03) ======= ======= Diluted....................... $ 0.01 $ (0.03) ======= ======= Shares used to compute pro forma net income (loss) per share Basic......................... 21,808 22,259 Diluted....................... 23,320 22,259
------------------------------------ AS OF JUNE 30, 2000 ------------------------------------ ACTUAL PRO FORMA AS ADJUSTED IN THOUSANDS --------- ---------- ----------- BALANCE SHEET DATA: Cash, cash equivalents and short-term investments........... $ 19,947 $ 19,947 $ Working capital............................................. 17,254 17,254 Total assets................................................ 23,221 23,221 Deferred revenue............................................ 3,878 3,878 Convertible preferred stock................................. 35,591 - Stockholders' equity (deficit).............................. (17,761) 17,830 Stockholders' equity (deficit) and preferred stock.......... 17,830 17,830
~~The pro forma net income (loss) and net income (loss) per share amounts above reflect the conversion of 6,582,472 shares of convertible preferred stock in issue at June 30, 2000 into 12,731,446~~

662,500 shares of common stock issuable upon ~~the completion~~exercise of ~~this offering. See note 1~~warrants dated July 6, 2017 at $2.35 per share; and

28,231,197 shares of ~~Notes to Financial Statements for an explanation~~our common stock issuable upon exercise of the ~~determination~~warrants and/orpre-funded warrants offered hereby.

Unless otherwise indicated, the information in this prospectus assumes no exercise of the warrants offered hereby. The total number of shares of our common stock shown above to be outstanding immediately after this offering may be higher or lower than shown above depending on relative investor demand for each kind of unit.

Our use of adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

Adjusted EBITDA does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness;

Adjusted EBITDA does not reflect income tax payments that may represent a reduction in cash available to us;

Although depreciation and amortization arenon-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements or contractual commitments for such replacements or for new capital expenditure requirements;

Adjusted EBITDA does not include the potentially dilutive impact ofstock-based compensation and asset impairments;

Adjusted EBITDA does not reflect the timing of customers’ product purchase prepayments;

Adjusted EBITDA does not include past restructuring and impairment charges; and

Other companies, including companies in our industry, may calculate adjusted EBITDA differently or not at all, which reduces its usefulness as a comparative measure.

Because of these limitations, you should consider adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income (loss) attributable to us and our financial results presented in accordance with GAAP.

The following table reconciles our net income (loss) to adjusted EBITDA:


	Six-months ended					Years ended
(In thousands; unaudited)	June 30, 2018		June 30, 2017			December 31, 2017			December 31, 2016
Reconciliation of GAAP net income (loss) and adjusted EBITDA:
GAAP net income (loss)	$	663	$	(8,399	)	$	(10,668	)	$	(32,048	)
Stock-based compensation expense		252		356			719			2,155
Restructuring and impairment charges		—		1,002			1,321			10,534
Amortization of intangible assets		55		56			112			111

Non-GAAP net income (loss)		970		(6,985	)		(8,516	)		(19,248	)
EBITDA adjustments:
Depreciation and amortization		340		389			747			998
Interest expense		427		447			927			687
Provision (benefit) for income taxes		2		12			(233	)		45

Adjusted EBITDA	$	1,739	$	(6,137	)	$	(7,075	)	$	(17,518	)

An investment in ~~computing per share data.~~our securities is risky. Prior to making a decision about investing in our securities, you should carefully consider the specific risks discussed in this prospectus or otherwise incorporated by reference in this prospectus. The ~~pro forma balance sheet~~risks and uncertainties described in our SEC filings are not the only ones facing us. Additional risks and uncertainties not presently known to us, or that we currently see as immaterial, may also harm our business. If any of the risks or uncertainties described in this prospectus or our SEC filings or any such additional risks and uncertainties actually occur, our business, results of operations, cash flows and financial condition could be materially and adversely affected. In that case, the trading price of our common stock could decline, and you might lose part or all of your investment.

This is a best efforts offering, no minimum amount of securities is required to be sold, and we may not raise the amount of capital we believe is required for our business.

We have retained Roth Capital Partners, LLC and The Benchmark Company, LLC to act as our placement agents in connection with this offering. The placement agents have agreed to use their reasonable best efforts to solicit offers to purchase the securities in this offering. The placement agents have no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of the securities. There is no required minimum number of securities that must be sold as a condition to completion of this offering. Because there is no minimum offering amount required as a condition to the closing of this offering, the actual offering amount, placement agent fees and proceeds to us are not presently determinable and may be substantially less than the maximum amounts ~~above reflect~~set forth above. We may sell fewer than all of the ~~same conversion~~securities offered hereby, which may significantly reduce the amount of ~~convertible preferred stock. The pro forma~~proceeds received by us, and investors in this offering will not receive a refund in the event that we do not sell an amount of securities sufficient to pursue the business goals outlined in this prospectus. Thus, we may not raise the amount of capital we believe is required for our business and may need to raise additional funds, which may not be available or available on terms acceptable to us. Despite this, any proceeds from the sale of securities offered by us will be available for our immediate use, and because there is no escrow account and no minimum offering amount in this offering, investors could be in a position where they have invested in us, but we are unable to fulfill our objectives due to a lack of interest in this offering.

An investment in the common units andpre-funded units is extremely speculative and there can be no assurance of any return on any such investment.

An investment in the common units andpre-funded units is extremely speculative and there is no assurance that investors will obtain any return on their investment. Investors will be subject to substantial risks involved in an investment in us, including the risk of losing their entire investment.

Our management has broad discretion as ~~adjusted balance sheet amounts above are adjusted~~ to ~~reflect~~ the ~~receipt~~use of the net proceeds from this offering.

We cannot specify with certainty the ~~sale~~particular uses of the net proceeds we will receive from this offering, and these uses may vary from our current plans. Our management will have discretion in the application of the net proceeds, including for working capital, general corporate purposes and repayment of indebtedness as described in “Use of Proceeds.” Accordingly, you will have to rely upon the judgment of our management with respect to the use of the proceeds. Our management may spend a portion or all of the net proceeds from this offering in ways that holders of our common stock may not desire or that may not yield a significant return or any return at all. The failure by our management to apply these funds effectively could harm our business. Pending their use, we may also invest the net proceeds from this offering in a manner that does not produce income or that loses value.

You will experience immediate and substantial dilution in the net tangible book deficit per share of the common stock included in the common units or issuable upon exercise of the warrants orpre-funded warrants in this offering.

Since the effective price per share of common stock included in the common units or issuable upon exercise of the warrants or thepre-funded warrants being offered is substantially higher than the net tangible book deficit per share of our common stock outstanding prior to this offering, you will suffer immediate and substantial dilution in the net tangible book deficit of the common stock included in the common units or issuable upon the exercise of the warrants or thepre-funded warrants issued in this offering. See the section titled “Dilution” below for a more detailed discussion of the dilution you will incur if you purchase units in this offering. The exercise price of the warrants included with the common units and the pre-funded units issued in this offering will be lowered in the event of certain dilutive issuances of common stock or common stock derivatives by us during the term of the warrants, which would result in the shares subject to those warrants being issued for substantially less than the current price of our common stock.

Holders of our warrants will have no rights as a common stockholder until they acquire our common stock.

Until you acquire shares of our common stock upon exercise of your warrants, you will have no rights with respect to shares of our common stock issuable upon exercise of your warrants. Upon exercise of your warrants, you will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise date.

A large number of shares issued in this offering may be sold in the market following this offering, which may depress the market price of our common stock.

A large number of shares issued in this offering may be sold in the market following this offering, which may depress the market price of our common stock. Sales of a substantial number of shares of our common stock in the public market following this offering could cause the market price of our common stock to decline. If there are more shares of common stock offered ~~hereby at an assumed initial public offering~~for sale than buyers are willing to purchase, then the market price of ~~$ per share, the exercise of warrants~~our common stock may decline to a market price at which buyers are willing to purchase ~~2,881,219~~the offered shares of common stock ~~outstanding as~~and sellers remain willing to sell the shares. All of ~~June 30, 2000 with a weighted average exercise price of $5.97 per share, and~~ the ~~"cashless" exercise of a warrant outstanding as of June 30, 2000 representing the right to acquire~~ shares of common stock ~~net. 4~~ RISK FACTORS YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN OUR STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD SUFFER SIGNIFICANTLY. IN ANY SUCH CASE, THE MARKET PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MIGHT LOSE ALL OR PART OF YOUR INVESTMENT. OUR SUCCESS DEPENDS UPON THE SEMICONDUCTOR MARKET'S ACCEPTANCE OF OUR 1T-SRAM TECHNOLOGY. issued in the offering will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended.

The warrants issued in this offering may not have any value but could entitle the holders to a disproportionate share of the proceeds of a change of control or other acquisition transaction.

Each warrant will have an exercise price equal to $ and will expire on the five-year anniversary of the date they first become exercisable. In the event our common stock price does not exceed the exercise price of the warrants during the period when the warrants are exercisable, the warrants may not have any value. Each of these warrants has a put feature that allows the holder to put the warrants back to us for cash and/or consideration equal to the Black-Scholes value upon a change of control or fundamental transaction. The Black-Scholes value of these warrants is determined taking into account a number of factors, including, (i) an underlying price per share equal to the price per share of common stock offered in the transaction (of if higher, the volume weighted average price, or VWAP, immediately before the signing or the announcement of the acquisition agreement, (ii) the remaining warrant term at the time of the transaction, (iii) a maximum volatility of 100%, and (iv) an applicable risk-free interest rate. At lower acquisition values, e.g., below the exercise price of the warrants, the warrant holders could get a disproportionate amount of the transaction consideration to the material detriment of our stockholders that do not own such warrants.

There is no public market for the warrants or thepre-funded warrants to purchase shares of our common stock included in the common units and thepre-funded units being offered by us in this offering.

There is no established public trading market for the warrants or thepre-funded warrants included in the common units and thepre-funded units being offered in this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list the warrants or thepre-funded warrants on any national securities exchange or other nationally recognized trading system, including the Nasdaq Capital Market. Without an active market, the liquidity of the warrants and thepre-funded warrants will be limited.

Our ability to utilize our net operating loss carryforwards may be limited as a result of an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as amended, triggered by this offering.

As of December 31, 2017, we had approximately $196 million of net operating loss (“NOL”) carryforwards for U.S. federal tax purposes. Under U.S. federal income tax law, we generally can use our NOL carryforwards (and certain related tax credits) to offset ordinary taxable income, thereby reducing our U.S. federal income tax liability, for up to 20 years from the year in which the losses were generated, after which time they will expire. Our California NOL carryforwards (and certain related tax credits) generally may be used to offset future state taxable income for 20 years from the year in which the losses are generated, depending on the state, after which time they will expire. The rate at which we can utilize our NOL carryforwards is limited (which could result in NOL carryforwards expiring prior to their use) each time we experience an “ownership change,” as determined under Section 382 of the Internal Revenue Code. A Section 382 ownership change generally occurs if a shareholder or a group of shareholders who are deemed to own at least 5% of our common stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. If an ownership change occurs, Section 382 generally would impose an annual limit on the amount of post-ownership change taxable income that may be offset with pre-ownership change NOL carryforwards equal to the product of the total value of our outstanding equity immediately prior to the ownership change (reduced by certain items specified in Section 382) and the U.S. federal long-term tax-exempt interest rate in effect at the time of the ownership change. A number of special and complex rules apply in calculating this Section 382 limitation. While the complexity of Section 382 makes it difficult to determine whether and when an ownership change has occurred, we believe that an additional ownership change may occur upon the consummation of this offering. In addition, our ability to use our NOL carryforwards will be limited to the extent we fail to generate enough taxable income in the future before they expire. Existing and future Section 382 limitations and our inability to generate enough taxable income in the future could result in a substantial portion of our NOL carryforwards expiring before they are used. We have recorded a full valuation allowance for our deferred tax assets. In addition, under recent federal tax legislation, effective for losses arising in taxable years beginning after December 31, 2017, the deduction for NOLs is limited to 80 percent of taxable income, NOLs can no longer be carried back, and NOLs can be carried forward indefinitely.

We have a history of losses and we will need to raise additional capital in the future.

We recorded operating income of approximately $1.1 million for the six-month period ended June 30, 2018, and we recorded an operating loss of approximately $10.0 million for the year ended December 31, 2017. As of June 30, 2018, we had an accumulated deficit of approximately $224 million. These and prior-year losses have resulted in significant negative cash flows and have required us to raise substantial amounts of additional capital during this period. To remain competitive and expand our product offerings to customers, we will need to increase revenues substantially beyond levels that we have attained in the past in order to generate sustainable operating profit and sufficient cash flows to continue doing business without raising additional capital from time to time. Given our history of fluctuating revenues and operating losses, the expected loss of a large IC customer, which will significantly reduce our revenue outlook, expected reduction in royalty revenues and challenges we face in securing and retaining customers for our IC products, we cannot be certain that we will be able to continue to achieve and maintain profitability on either a quarterly or annual basis in the future.

We currently lack the funds to repay the convertible notes due in August 2019, which raises doubt about our ability to continue as a going concern

In March 2016, we entered into a 10% Senior Secured Convertible Note Purchase Agreement and issued $8 million aggregate principal amount of 10% Senior Secured Convertible Notes due August 15, 2018 (the “Notes”) to the purchasers of the Notes. Accrued interest is payable semi-annually in cash or in kind through the issuance of identical new Notes, or with a combination of the two, at our option. The terms of the Notes were amended pursuant to a written amendment effective as of February 18, 2018. The amendment extended the maturity date of the Notes to August 15, 2019. The principal amount of the Notes is convertible into our common stock, as is the accrued and unpaid interest on the Notes. We have the option of paying the interestin-kind by converting it into additional note principal. Through August 2018, we have made the required interest paymentsin-kind through the issuance of additional notes totaling approximately $2.0 million.

The February 2018 amendment also: (i) reduced the conversion rate of the Notes from one share of our common stock for each $8.50 of outstanding debt to one share of our common stock for each $4.25 of outstanding debt under the Notes, (ii) reduced the interest rate to 8%, and (iii) reduced the redemption purchase price in the event of certain transactions like an acquisition from 120% to 100% of the total amount of debt to be redeemed. The Notes are secured by substantially all of our assets.

However, as described under “Modification of Senior Secured Convertible Notes” above, we have entered into a MOU with the holders of the Notes and their agent to provide for repayment of a substantial portion of the Notes and a modification of the terms of the Notes to expand the due date for the remaining amount of the indebtedness to August 15, 2023, and a reduction in the conversion rate to one share of our common stock for each $ of the remaining outstanding debt. If we fail to pay the Notes, including accrued interest, in full when due, the holders of the Notes, acting through their agent, will be entitled to pursue all of their remedies as secured creditors, including taking possession of the collateral securing the Notes and effecting a private sale of some or all of our assets securing the Notes. After the holders of the Notes take such actions, we may not have enough assets to make payments owed to other creditors, to continue operating our business, or distribute any funds to stockholders. Our inability to repay the convertible notes raises doubt about our ability to continue as a going concern.

Our failure to raise additional capital or generate the significant capital necessary to expand our operations and invest in new products could reduce our ability to compete and could harm our business.

We intend to continue spending substantial amounts to grow our business. Despite the extension of the repayment date for the Notes, as of the date of the prospectus, we still will need to obtain additional financing to pursue our business strategy, develop new products, respond to competition and market opportunities and acquire complementary businesses or technologies, in addition to repaying the Notes. There can be no assurance that such additional capital, whether in the form of debt or equity financing, will be sufficient or available and, if available, that such capital will be offered on terms and conditions acceptable to us.

If we were to raise additional capital through sales of our equity securities, our stockholders would suffer dilution of their equity ownership. If we engage in a subsequent debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, prohibit us from paying dividends, repurchasing our stock or making investments, and force us to maintain specified liquidity or other ratios, any of which could harm our business, operating results and financial condition. If we need additional capital and cannot raise it on acceptable terms, we may not be able to, among other things:

Develop or enhance our products;

Continue to expand our product development and sales and marketing organizations;

Acquire complementary technologies, products or businesses;

Expand operations, in the United States or internationally;

Hire, train and retain employees; or

Respond to competitive pressures or unanticipated working capital requirements.

Our failure to do any of these things could seriously harm our ability to execute our business strategy and may force us to curtail our research and development plans or existing operations.

Our success depends upon the acceptance of our integrated circuits, or ICs, by equipment suppliers to the cloud networking, security and other systems markets.

The future prospects of our business depend on the adoption and acceptance by our target markets, ~~of our 1T-SRAM technology for embedded memory applications~~which include cloud networking, communications, security appliances, video, test and ~~any future technology we might develop.~~monitoring, and data center. Our technology is intended to allow our licensees to develop embedded-memory integrated circuits to replace other embedded-memory applications with different cost and performance parameters. Our core technology solution utilizes a fundamentally different architecture with which the industry is not familiar. Therefore, it might prove difficult to convince product designers of the viability of our embedded memory solution andprospective customers may be unwilling to adopt anddesign-inour ~~technology instead~~ICs due to the uncertainties and risks surrounding designing a new IC into their systems and relying on a supplier that has a limited history of ~~other memory solutions which have proven effective in their products.~~manufacturing such ICs. In addition, our Bandwidth Engine IC products require our customers and their other IC suppliers to implement our proprietary GCIchip-to-chip communication protocol, which they may be unwilling to do. In the past, we ~~cannot assure you that~~have experienced reluctance to adopt the GCI interface from potential customers. We have determined and negotiated prices with a few customers for our ~~existing~~ICs but to date still have limited experience with the cost of making and ~~proposed technology will perform the desired functions, will operate reliably on a long-term basis or otherwise~~selling these products. Thus, currently, we do not know whether we will be ~~technically successful, or that it will offer sufficient cost~~able to generate adequate profit from making and ~~performance benefits to achieve widespread market acceptance.~~ selling these products.

An important part of our strategy to gain market acceptance is to penetrate new markets by targeting market leaders ~~as licensees of~~to accept our ~~technology.~~IC solutions. This strategy is designed to encourage other participants in those markets to follow these leaders in adopting our ~~technology. Should~~solutions. If a high-profile industry participant ~~adopt~~adopts our ~~technology~~ICs for one or more of its products but ~~fail~~fails to achieve success with those products, or is unable to successfully implement our ICs, other industry ~~participants'~~participants’ perception of our ~~technology~~solutions could be ~~adversely affected.~~harmed. Any such event could reduce the amount of future ~~licenses~~sales of our ~~technology. Likewise, were~~IC products.

Future revenue growth depends on our winning designs with existing and new customers, retaining current customers, and having those customers design our solutions into their product offerings and successfully selling and marketing such products. If we do not continue to win designs in the short term, our product revenue in the following years will not grow.

We sell our ICs to OEM customers that include our ICs in their products. Our technology is generally incorporated into products at the design stage, which we refer to as a ~~market leader~~design win, and which we define as the point at which a customer has made a commitment to ~~adopt~~build a board against a fixed schematic for his system, and this board will utilize our ICs. As a result, our future revenue depends on our OEM customers designing our ICs into their products, and on those products being produced in volume and successfully commercialized. If we fail to retain our current customers or convince our current or prospective customers to include our ICs in their products and fail to achieve a consistent number of design wins, our results of operations and business will be harmed. In addition, if a current or prospective customer designs a competitor’s offering into its product, it becomes significantly more difficult for us to sell our IC solutions to that customer because changing suppliers involves significant cost, time, effort and risk for the OEM. Even if a customer designs one of our ICs into its product, we cannot be assured that the OEM’s product will be commercially successful over time or at all or that we will receive or continue to receive any revenue from that customer. Furthermore, the customer product for which we obtain a design win may be canceled before the product enters production or before or after it is introduced into the market. Because of our extended sales cycle, our revenue in future years is highly dependent on design wins we are awarded today. Our lack of capital and uncertainty about our future technology roadmap also may limit our success in achieving additional design wins, as discussed under, “We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased costs.”

The design-win process is generally a lengthy, expensive and competitive process, with no guarantee of revenue, and, if we fail to generate sufficient revenue to offset our expenses, our business and operating results would suffer.

Achieving a ~~competing technology,~~design win is typically a lengthy, expensive and competitive process because our customers generally take a considerable amount of time to evaluate our ICs. In the markets we serve, the time from initial customer engagement to design win to production volume shipments can range from two to three years, though it may take longer for new customers or markets we intend to address. In order to win designs, we are required to both incur design and development costs and dedicate substantial engineering resources in pursuit of a single customer opportunity. Even though we incur these costs, we may not prevail in the competitive selection process, and, even if we do achieve a design win, we may never generate sufficient, or any, revenue to offset our development expenditures. Our customers have the option to decide whether or not to put our solutions into production after initially designing our products in the specification. The customer can make changes to its product after a design win has been awarded to us, which can have the effect of canceling a previous design win. This occurred in 2018 when a large customer decided to phase out its use of our products. The delays inherent in our protracted sales cycle increase the risk that a customer will decide to cancel, curtail, reduce or delay its product plans, causing us to lose anticipated revenue. In addition, any change, delay or cancellation of a customer’s plans could harm our financial results, as we may have incurred significant expense while generating no revenue.

If our foundries do not achieve satisfactory yields or quality, our cost of goods sold will increase, our operating margins will decline, and our reputation and ~~licensing program~~customer relationships could be ~~adversely affected. Failure~~harmed.

We depend not only on sufficient foundry manufacturing capacity and wafer prices, but also on good production yields (the number of good die per wafer) and timely wafer delivery to meet customer demand and maintain profit margins. The fabrication of our products is a complex and technically demanding process. Minor deviations in the manufacturing process can cause substantial decreases in yields, and in some cases, cause production to be suspended. Our foundry, Taiwan Semiconductor Manufacturing Company, or TSMC, from time to time, experiences manufacturing defects and reduced manufacturing yields. Changes in manufacturing processes or the inadvertent use of defective or contaminated materials by our foundries could result in lower than anticipated manufacturing yields, which would harm our revenue or increase our costs. For example, in the past, our foundry produced ICs and met its process specification

range but did not meet our customer’s specifications causing us to write off a portion of our production lot. Many of these problems are difficult to detect at an early stage of the manufacturing process and may be time consuming and expensive to correct. Poor yields from our foundry, or defects, integration issues or other performance problems in our ICs, could cause us significant customer relations and business reputation problems, harm our operating results and give rise to financial or other damages to our customers. Our customers might consequently seek damages from us for their losses. A product liability claim brought against us, even if unsuccessful, would likely be time consuming and costly to defend.

We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased costs.

We aim to use the most advanced manufacturing process technology appropriate for our solutions that is available from TSMC. As a result, we periodically evaluate the benefits of migrating our solutions to other technologies in order to improve performance and reduce costs. These ongoing efforts require us from time to time to modify the manufacturing processes for our products and to redesign some products, which in turn may result in delays in product deliveries. We are dependent on TSMC to support the production of wafers for future versions of our ICs, as TSMC is our sole foundry. Such production may require changes to TSMC’s existing process technology. If TSMC elects to not alter their process technology to ~~be adopted as an industry standard~~support future versions of our ICs, we would ~~inhibit~~need to identify a new foundry.

In addition, our ~~growth~~1T-SRAM technology used in our Bandwidth Engine and PSE products is not available at process nodes below 40 nanometers. To date, we have not developed any memory products below the40-nanometer process node. To continue the product roadmap for our Bandwidth Engine and PSE products, we will need to identify a new foundry and/or no longer use our1T-SRAM technology. We do not consider this to adversely affect our revenue. OUR EMBEDDED MEMORY TECHNOLOGY IS NEW AND HAS NOT YET BEEN PROVEN IN VOLUME PRODUCTION OF OUR LICENSEES' INTEGRATED CIRCUITS, AND THE DISCOVERY OF DEFECTS IN THIS TECHNOLOGY COULD PREVENT US FROM ACHIEVING MARKET ACCEPTANCE.current product offerings, but we expect to face difficulties, delays and increased expense as we transition our products to new processes, and potentially to new foundries for future products. For example, we believe our next generation of products will need to be designed using a FinFET process, which will require us to incur significantly high development costs for mask tooling and computer-aided design software. We ~~entered into~~currently lack the funds to pay for such development costs. Moreover, an inability to continue our ~~first license of a significant portion of our 1T-SRAM technology for embedded memory applications in March 1999. Our technology was silicon verified~~product roadmap can adversely affect, and has in the ~~most widely used standard logic~~past affected our efforts to win new customers, secure additional design wins and significantly grow our future revenues.

Because the manufacturing of integrated circuits is extremely complex, the process ~~generation in September 1999. While~~of qualifying a new foundry is a lengthy process and there can be no assurance that we and our licensees have evaluated and tested this technology, only one licensee has begun volume manufacture of products incorporating our technology. Complex technology like ours often contains errors or defects when first incorporated into customer products. The discovery of defects or problems regarding the reliability, quality or compatibility of our technology could require significant expenditures of capital and resources to fix, significantly delay or hinder market acceptance of our technology and damage our reputation. The discovery of a defect in our 1T-SRAM technology could lead our licensees to seek damages from us. Our standard license terms include provisions waiving implied warranties regarding our technology and limiting our liability to our licensees. We also maintain insurance coverage that is intended to protect us against potential liability for defects in our technology. We cannot be certain, however, that the waivers or limitations of liability contained in our licensee contracts will be ~~enforceable, that insurance coverage will continue~~able to ~~be available on reasonable terms or in amounts sufficient to cover one or more large claims or that~~find and qualify replacement suppliers without materially adversely affecting our insurer will not disclaim coverage as to any future claim. The successful assertion of one or more large claims that exceed available insurance coverage or changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could cause our expenses to increase and could have a material adverse effect on our costbusiness, financial condition, results of operations and ~~financial condition. 5~~ OUR EMBEDDED MEMORY TECHNOLOGY MIGHT NOT INTEGRATE AS WELL AS ANTICIPATED WITH OTHER SEMICONDUCTOR FUNCTIONS, WHICH WOULD SLOW OR PREVENT ADOPTION OF OUR TECHNOLOGY AND REDUCE OUR REVENUE. Our 1T-SRAM technology is new and incorporates a fundamentally new architecture. We and our licensees have conducted computer modeling and testing of integrated circuits utilizing our technology and we have verified our technology in production and sale of stand-alone 1T-SRAM integrated circuits. Nevertheless, detailed aspects of our interface could cause unforeseen problems in the efficient integration of our technology with other functions of particular integrated circuits. Any significant compatibility problems with our technology could reduce the attractiveness of our solution, impede its acceptance in the industry and reduce our potential revenue. MARKET ACCEPTANCE OF OUR 1T-SRAM TECHNOLOGY COULD BE SLOWED OR PREVENTED IF THIS TECHNOLOGY PRESENTS MANUFACTURING DIFFICULTIES OR CONTRIBUTES TO A FAILURE TO ACHIEVE ACCEPTABLE YIELDS. Semiconductor manufacturing yield could be adversely affected by difficulties in adapting our 1T-SRAM technology to our licensee's product design or to the manufacturing process technology of a particular foundry or semiconductor manufacturer. Yield problems might not be effectively determined or resolved until an actual product exists that can be analyzed and tested to identify process sensitivities relating to the design rules that are used.prospects for future growth. We cannot assure you that ~~products utilizing~~we will be able to maintain our ~~technology will achieve~~relationship with our current foundry or ~~maintain acceptable manufacturing yields. Any weakness~~develop relationships with new foundries. If we or TSMC experience significant delays in transitioning to smaller geometries or fail to efficiently implement transitions, we could experience reduced manufacturing yields, delays in product deliveries and increased costs, any of ~~integrated circuits utilizing~~which could harm our ~~technology could adversely impact~~relationships with our customers and our operating results.

Our main objective is the development and sale of our products to networking communications and data center systems providers and their subsystem and component vendors, and, if demand for these products does not grow, we may not achieve revenue growth and our strategic objectives.

We market and sell our ICs to cloud networking, communications, data center and other equipment providers and their subsystem and component vendors. We believe our future business and financial success depends on market acceptance and increasing sales of these products. In order to meet our growth and strategic objectives, networking infrastructure OEMs must incorporate our products into their systems, and the demand for their systems must grow as well. We cannot provide assurance that sales of our products to these OEMs will increase substantially in the future or that the demand for our customers’ systems will increase. Our future revenues from these products may not increase in accordance with our growth and strategic objectives if instead our OEM customers modify their product designs, select products sold by our competitors or develop their own proprietary ICs. Moreover, demand for their products that incorporate our ICs may not grow or result in significant sales of such products due to factors affecting the customers and their business, such as industry downturns, declines in capital spending in the enterprise and carrier markets and unfavorable macroeconomic conditions. Thus, the future success of our business depends in large part on factors outside our control, and sales of our products may not meet our revenue growth and ~~gross profit. OUR FAILURE TO CONTINUE TO ENHANCE OUR TECHNOLOGY OR DEVELOP NEW TECHNOLOGY ON A TIMELY BASIS COULD DIMINISH OUR ABILITY TO ATTRACT AND RETAIN LICENSEES AND PRODUCT CUSTOMERS.~~ strategic objectives.

Our failure to continue to develop new products and enhance our products on a timely basis could diminish our ability to attract and retain customers.

The existing and potential markets for ~~memory~~our products ~~and technology~~ are characterized by ~~ever increasing~~ever-increasing performance requirements, evolving industry standards, rapid technological change and product obsolescence. These characteristics lead to ~~frequent new product and technology introductions and enhancements,~~periodic changes in customer requirements, shorter product life cycles and changes in ~~consumer demands. The semiconductor~~ industry ~~might adopt or develop~~demands and mandate new product introductions and enhancements to maintain customer engagements and design wins. In order to attain and maintain a ~~completely different approach~~significant position in the market, we will need to ~~utilizing memory for many applications,~~continue to enhance and evolve our products and the underlying proprietary technologies in anticipation of these market trends which ~~could render~~may be impeded by our ~~existing technology unmarketable or obsolete. We might not be able to successfully develop new technology, or adapt our existing technology, to comply with these innovative standards.~~ reductions in design engineering staff since the beginning of 2017.

Our future performance depends on a number of factors, including our ability ~~to - -~~ to:

identify target markets and relevant emerging technological ~~trends, including new standards and protocols; -~~ trends;

develop and maintain competitive technology by improving performance and adding innovative features that differentiate our ~~technology~~products from alternative technologies; -

enable the incorporation of ~~enhanced technology in~~ our ~~licensees' and customers'~~products into the customers’ products on a timely basis and at competitive prices;

develop our products to be manufactured at smaller process geometries; and -

respond effectively to new technological developments or new product introductions by others. We cannot assure you that the design and introduction schedules of any additions and enhancements to our existing and future technology will be met, that this technology will achieve market acceptance or that we will be able to license this technology on terms that are favorable to us.

Our failure to enhance our existing IC products and develop future ~~technology~~products that ~~achieves~~achieve broad market acceptance ~~could adversely affect~~will harm our ~~results~~competitive position and impede our future growth.

Our ICs have a lengthy sales cycle, which makes it difficult to predict success in this market and the timing of ~~operations. 6~~ WE DEPEND SUBSTANTIALLY ON OUR CO-MARKETERS TO ASSIST US IN ATTRACTING POTENTIAL LICENSEES, AND A LOSS OR FAILURE TO INCREASE THE NUMBER OF THESE RELATIONSHIPS COULD INHIBIT OUR GROWTH AND REDUCE OUR REVENUE. A significant partfuture revenue.

Our ICs have a lengthy sales cycle, ranging from six to 24 months from the date of our ~~marketing strategy~~initial proposal to a prospective customer until the date on which the customer confirms that it has designed our product into its system. As lengthy, or an even lengthier period, could ensue before we would know the volume of products that such customer will, or is ~~dependent upon~~likely to, order. A number of factors can contribute to the length of the sales cycle, including technical evaluations of our ~~co-marketing agreements with foundries~~products by the customers, the design process required to integrate our products into the customers’ products and ~~design companies. These co-marketers have existing relationships,~~the timing of the customers’ new product announcements. In anticipation of product orders, we may incur substantial costs before the sales cycle is complete and ~~continually seek new relationships, with companies~~before we receive any customer payments. As a result, in the ~~markets~~event that a sale is not completed or is cancelled or delayed, we ~~target,~~may have incurred substantial expenses, making it more difficult for us to become profitable or otherwise negatively impacting our financial results. Furthermore, because of this lengthy sales cycle, the recording of revenues from our selling efforts may be substantially delayed, our ability to forecast our future revenue may be more limited and ~~have agreed~~our revenue may fluctuate significantly from quarter to ~~utilize these relationships~~quarter. We cannot provide any assurances that our efforts to introduce our technology to potential licensees. If we fail to maintain current relationships with these co-marketers in order to develop relationships with others in the semiconductor industry, we might fail to achieve anticipated growth. WE HAVE A HISTORY OF OPERATING LOSSES, AND ANY FUTURE PROFITABILITY IS UNCERTAIN. We have recorded operating losses in each year since inception. We had an accumulated deficit of $19.7 million as of June 30, 2000. From our inception through 1994, we were engaged primarily in researchbuild a strong and ~~product development. From 1995 through the third quarter of 1998, we focused~~profitable business based on the sale of ~~stand-alone memory products. We were profitable~~ICs will succeed. If these efforts are not successful, in light of the ~~fourth quarter~~substantial resources that we have invested, our future operating results and cash flows could be materially and adversely affected.

The semiconductor industry is cyclical in nature and subject to periodic downturns, which can negatively affect our revenue.

The semiconductor industry is cyclical and has experienced pronounced downturns for sustained periods of ~~1997~~up to several years. To respond to any downturn, many semiconductor manufacturers and ~~the first quarter of 1998 under our~~their customers will slow their research and development activities, cancel or delay new product ~~sales business model, but, beginning in the fourth quarter of 1998, we altered~~developments, reduce their workforces and inventories and take a cautious approach to acquiring new equipment and technologies. As a result, our business plan to concentrate on developing and licensing our 1T-SRAM technology. We may not be profitable in 2000, and we cannot assure you that we will be profitable on a quarterly or annual basis in the future. OUR HISTORICAL FINANCIAL INFORMATION DOES NOT REFLECT THE RECENT CHANGES TO OUR BUSINESS AND STRATEGY. The historical financial information included in this prospectus does not reflect the many significant changes in our revenue structure that have occurred as a result of changes in our business model. Such historical financial information also does not reflect changes in our operations and expense structure that have resulted from this transition. Our profitability in the fourth quarter of 1997 and the first quarter of 1998 was attained prior to changing our focus to licensing our 1T-SRAM technology. While we expect to continue to generate revenue from stand-alone product sales, most of our stand-alone product sales efforts are now directed at the strategic and limited sale of our 1T-SRAM stand-alone product, and we do not anticipate that product revenue will ever reach the levels attained in the past. The absence of meaningful historical financial information could make it more difficult for potential investors to evaluate us and our prospects, and could complicate our efforts to undertake meaningful financial planning. OUR OPERATING RESULTS MIGHT FLUCTUATE SIGNIFICANTLY AND REMAIN UNCERTAIN, WHICH COULD NEGATIVELY IMPACT THE VALUE OF YOUR INVESTMENT. Our results of operations have fluctuated significantlyhas been in the past and could be adversely affected in the future by an industry downturn, which could negatively impact our future ~~quarterly~~revenue and annual operating results are likely to fluctuate due to a wide variety of factors, many of which are outside of our control, including - - market acceptance of our 1T-SRAM and any future technology we might develop; -profitability. Also, the timing of significant licenses and cancellations or rescheduling of our licensees' product introductions or project completion dates; - the timing and announcement of new technology or product introductions by us and our competitors; - our failure to anticipate evolving licensee or customer technology requirements; - increased expenses associated with new technology introductions or process changes; - our lengthy licensing cycle and our licensees' often lengthy product development cycles; - seasonal fluctuations in demand for and variabilitycyclical nature of the ~~life cycles of our licensees' products; 7~~ - the gain or loss of one or more key licensees or co-marketers; and - variations in manufacturing yields, increases in materials costs and other manufacturing risks. Because of these and other factors,semiconductor industry may cause our operating results ~~might not meet~~to fluctuate significantly fromyear-to-year, which may tend to increase the ~~expectations~~volatility of ~~public market analysts or investors in any particular quarter. In such an event,~~ the ~~market~~ price of our common ~~stock could decline.~~ stock.

We ~~cannot accurately forecast all~~expect our royalty revenues to decrease compared with our historical results, and there is no guarantee revenues from our IC products will replace these lost revenues in the near future.

In 2011, we began to place greater emphasis on our IC business andre-deploy engineering, marketing and sales resources from IP to IC activities. We are no longer actively pursuing new license arrangements, and, as a result, our royalty and other revenues in 2017 declined when compared with prior years. In addition, the production volumes of the above factors or their impact on our results of operations. In part because of this probable fluctuation, we believe that period-to-period comparisons are not necessarily meaningful and should not be relied upon as indicative of future operating results. OUR LENGTHY LICENSING CYCLE AND OUR LICENSEES' LENGTHY PRODUCT DEVELOPMENT CYCLES WILL MAKE THE OPERATING RESULTS OF OUR LICENSING BUSINESS DIFFICULT TO PREDICT. We anticipate difficulty in accurately predicting the timing and amounts of revenue generated from licensing our 1T-SRAM technology. The establishment of a business relationship with a potential licensee is a lengthy process, frequently spanning a year or more. Following the establishment of the relationship, the negotiation of licensing terms can be a lengthy process, and a potential licensee could require an extended evaluation and testing period. Once a license agreement is executed, the timing and amount of our licensing revenue from contract revenue and royalties will remain difficult to predict. Generally, we will recognize contract revenue related to our licensees' development engineering projects only when the licensee manufacturescurrent royalty-bearing products that meet the contract's performance specifications. We will recognize royalty revenue, if any, when the licensees report to us the manufacture or sale of products that include our 1T-SRAM technology. The completion of the licensees' development projects and the commencement of production will be subject to the licensees' efforts, development risks and other factors outside our control. The timing and level of our royalties depend on the licensees' ability to market, produce and ship products incorporating our technology. All of these factors will prevent us from making predictions of revenue with any certainty. In addition, none of our licensees is under any obligation to incorporate our technology in any present or future product or to pursue the manufacture or sale of any product incorporating our technology. The long development cycle of our licensees' products increases the risk that, due to changing economic, marketing or strategic factors, our licensees might discontinue a product line or cancel a product introduction. A failureshipped by our licensees are expected to ~~market products incorporating~~decrease; therefore we expect our ~~technology could cause our~~royalty revenue to ~~decline. ROYALTY AMOUNTS OWED TO US MIGHT BE DIFFICULT TO VERIFY, AND WE MIGHT FIND IT DIFFICULT, EXPENSIVE AND TIME-CONSUMING TO ENFORCE OUR LICENSE AGREEMENTS. The standard terms~~decrease in 2018 and future periods. Historically, royalties have generated a 100% gross margin, and any decrease in royalties adversely affects our gross margin, operating results and cash flows.

Our revenue has been highly concentrated among a small number of ~~our license agreements require our~~ licensees ~~to document the manufacture~~ and sale of products that incorporate our technology and report this data to us after the end of each quarter. We must rely to a large extent upon the accuracy of these reports, as we do not have the capacity to independently verify this information. Though our standard license terms give us the right to audit the books and records of any licensee to attempt to verify the information provided to us in these reports, an audit of a licensee's records can be expensive and time-consuming, and potentially detrimental to the business relationship. If we are unable to fully enforce the royalty provisions of our license agreements, our revenue could decreasecustomers, and our results of operations could be adversely affected. WE EXPECT OUR REVENUE TO BE HIGHLY CONCENTRATED AMONG A SMALL NUMBER OF LICENSEES AND CUSTOMERS, AND OUR RESULTS OF OPERATIONS COULD BE HARMED IF WE LOSE AND FAIL TO REPLACE THIS REVENUE. Throughharmed if we lose a key revenue source and fail to replace it.

Our overall revenue has been highly concentrated, with a few customers accounting for a significant percentage of our total revenue. For the six-months ended June 30, 2000 we had not recognized any royalty revenue. An examination of our existing licenses, however, leads us to expect that royalty revenue will be highly concentrated among a few licensees in the near 8 future. In particular, we expect projected revenue from the licenses to Nintendo to represent a very substantial portion of projected licensing revenue in 2001 and 2002. Nintendo faces intense competitive pressure in the video game market, which is characterized by extreme volatility, frequent new product introductions and rapidly shifting consumer preferences. We cannot assure you that Nintendo's products incorporating our technology will succeed in the marketplace or that we will receive substantial royalty revenue from Nintendo. Our product sales also are highly concentrated. Revenue derived from2018, our three largest customers represented ~~29.1%~~33%, ~~10.8%~~22% and ~~10.1%, respectively,~~12% of ~~our~~ total revenue, ~~in 1998. In 1999,~~respectively. For the year ended December 31, 2017, our ~~two~~three largest customers represented ~~16.4%~~46%, 17% and ~~10.9%~~11% of total revenue, respectively. For the year ended December 31, 2016, our three largest customers represented 47%, 21% and 13% of total revenue, respectively. We expect that a relatively small number of customers will continue to account for a substantial portion of our ~~product~~ revenue for the foreseeable future. However, we were recently informed by a large customer that it will be phasing out our Bandwidth Engine IC products over the next 24 months. The loss of future business with this customer is expected to result in a material reduction in our revenue outlook beginning in the fourth quarter of 2018.

As a result of this revenue concentration, our results of operations could be adversely affected by the decision of a single key licensee or customer to cease using our technology or products or by a decline in the number of products that incorporate our technology that are sold by a single licensee or customer or by a small group of licensees or customers. ~~OUR REVENUE CONCENTRATION MAY POSE CREDIT RISKS.~~

Our revenue concentration may also pose credit risks, which could negatively affect our cash flow and financial condition.

We might also face credit risks associated with the concentration of our revenue among a small number of ~~licenses~~licensees and customers. As of ~~December 31, 1999, four~~June 30, 2018, two customers ~~accounted for 66%~~represented 76% of total receivables, each of whom accounted for at least 11% of the total. As of December 31, 1998, two customers accounted for 41% of total receivables at year end, each of whom represented at least 12% of the total.trade receivables. Our failure to collect receivables from any customer that represents a large percentage of receivables on a timely basis, or at all, could adversely affect our cash flow or results of operations and might cause our stock price to fall. OUR EXISTING PATENTS MIGHT NOT PROVIDE US WITH SUFFICIENT PROTECTION OF OUR INTELLECTUAL PROPERTY, AND OUR PATENT APPLICATIONS MIGHT NOT RESULT IN THE ISSUANCE OF PATENTS, EITHER OF WHICH COULD REDUCE THE VALUE OF OUR CORE TECHNOLOGY AND HARM OUR BUSINESS. We rely on a combination

Our products must meet exact specifications, and defects and failures may occur, which may cause customers to return or stop buying our products.

Our customers generally establish demanding specifications for quality, performance and reliability that our products must meet. However, our products are highly complex and may contain defects and failures when they are first introduced or as new versions are released. If defects and failures occur in our products during the design phase or after, we could experience lost revenues, increased costs, including warranty and customer support expenses and penalties fornon-performance stipulated in customer purchase agreements, delays in or cancellations or rescheduling of ~~patents, trademarks, copyrights, trade secret laws~~orders or shipments, product returns or discounts, diversion of management resources or damage to our reputation and ~~confidentiality procedures to protect~~brand equity, and in some cases consequential damages, any of which would harm our ~~intellectual property rights. As of June 30, 2000, we held 30 patents in the United States, which expire at various times from 2013 to 2018, and 8 corresponding foreign patents.~~operating results. In addition, delays in our ability to fill product orders as a result of June 30, 2000, we had 20 patent applications pending in the United States and 21 pending foreign applications, and had received notice of allowance of two of these pending patent applications in the United States.quality control issues may negatively impact our relationship with our customers. We cannot assure you that we will have sufficient resources to satisfy any ~~patents~~asserted claims. Furthermore, any such defects, failures or delays may be particularly damaging to us as we attempt to establish our reputation as a reliable provider of IC products.

Because we sell our products on a purchase order basis and rely on estimated forecasts of our customers’ needs, inaccurate forecasts could adversely affect our business.

We sell our IC products pursuant to individual purchase orders, rather than long-term purchase commitments. Therefore, we will ~~issue~~rely on estimated demand forecasts, based upon input from our customers, to determine how much product to manufacture. Because our sales will be based primarily on purchase orders, our customers may cancel, delay or otherwise modify their purchase commitments with little or no notice to us. For these reasons, we will generally have limited visibility regarding our customers’ product needs. In addition, the product design cycle for networking OEMs is lengthy, and it may be difficult for us to accurately anticipate when they will commence commercial shipments of products that include our ICs.

Furthermore, if we experience substantial warranty claims, our customers may cancel existing orders or cease to place future orders. Any cancellation, delay or other modification in our customers’ orders could significantly reduce our revenue, cause our operating results to fluctuate from period to period, and make it more difficult for us to predict our revenue. In the event of a cancellation or reduction of an order, we may not have enough time to reduce operating expenses to mitigate the effect of the lost revenue on our business.

If we overestimate customer demand for our products, we may purchase products from our manufacturers that we cannot sell. Conversely, if we underestimate customer demand or if sufficient manufacturing and testing capacity were unavailable, we would forego revenue opportunities and could lose market share in the markets served by our products and could incur penalty payments under our customer purchase agreements. In addition, our inability to meet customer requirements for our products could lead to delays in product shipments, force customers to identify alternative sources and otherwise adversely affect our ongoing relationships with our customers.

We depend on contract manufacturers for a significant portion of our revenue from the sale of our IC products.

Many of our current and prospective OEM customers use third party contract manufacturers to manufacture their systems, and these contract manufacturers purchase our products directly from us on behalf of the OEMs. Although we expect to work with our OEM customers in the design and development phases of their systems, these OEMs often give contract manufacturers some authority in product purchasing decisions. If we cannot compete effectively for the business of these contract manufacturers, or, if any of the contract manufacturers that work with our OEM customers experience financial or other difficulties in their businesses, our revenue and our business could be adversely affected. For example, if a contract manufacturer becomes subject to bankruptcy proceedings, we may not be able to obtain our products held by the contract manufacturer or recover payments owed to us by the contract manufacturer for products already delivered to the contract manufacturer. If we are unable to persuade contract manufacturers to purchase our products, or if the contract manufacturers are unable to deliver systems with our products to OEMs on a timely basis, our business would be adversely affected.

We rely on independent foundries and contractors for the manufacture, assembly, testing and packaging of our integrated circuits, and the failure of any of these third parties to deliver products or otherwise perform as requested could damage our relationships with our customers and harm our sales and financial results.

As a fabless semiconductor company, we rely on third parties for substantially all of our manufacturing operations. We depend on these parties to supply us with material in a timely manner that meets our standards for yield, cost and quality. We do not have long-term supply contracts with any of our ~~pending applications~~suppliers or ~~that~~manufacturing service providers, and therefore they are not obligated to manufacture products for us for any ~~claims allowed from pending applications will~~specific period, in any specific quantity or at any specified price, except as may be ~~of sufficient scope or strength, or issue~~provided in ~~all countries where~~a particular purchase order. Any problems with our manufacturing supply chain could adversely impact our ability to ship our products ~~can be sold,~~ to our customers on time and in the quantity required, which in turn could damage our customer relationships and impede market acceptance of our IC solutions.

Our third party wafer foundries, and testing and assembly vendors are located in regions at high risk for earthquakes and other natural disasters. Any disruption to the operations of these foundries and vendors resulting from earthquakes or other natural disasters could cause significant delays in the development, production, shipment and sales of our IC products.

TSMC, which manufactures our products, is located in Asia, as are other foundries we may use in the future. Our vendors that provide ~~meaningful protection~~substrates and wafer sorting and handle the testing of our products, are headquartered in either Asia or ~~any commercial advantage~~the San Francisco Bay Area of California. Our primary manufacturing operations are located in San Jose, California. The risk of an earthquake in the Pacific Rim region is significant due to ~~us. Also, competitors might~~the proximity of major earthquake fault lines. The occurrence of earthquakes or other natural disasters could result in the disruption of the wafer foundry or assembly and test capacity of the third parties that supply these services to us and may impede our research and development efforts, as well as our ability to market and sell our products. We may not be able to ~~design around~~obtain alternate capacity on favorable terms, if at all.

We might not be able to protect and enforce our ~~patents. Failure~~intellectual property rights, which could impair our ability to compete and reduce the value of our patents or patent applications to provide meaningful protection would have a material adverse effect on our business and results of operations. WE MIGHT NOT BE ABLE TO PROTECT AND ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS, WHICH COULD IMPAIR OUR ABILITY TO COMPETE AND ADVERSELY AFFECT OUR RESULTS OF OPERATIONS. technology.

Our technology is complex and is intended for use in ~~complicated integrated circuits. A very large number of new~~complex SoCs and ~~existing~~networking systems. Our licensees’ products utilize our embedded memory and/or interface technology, and a ~~still larger~~large number of companies manufacture and market these products. Because of these factors, policing the unauthorized use of our intellectual property is difficult and expensive. We cannot be certain that we will be able to detect unauthorized use of our technology or prevent other parties from designing and marketing unauthorized products based on our technology. ~~Likewise,~~In the event we ~~cannot assure you that others will not independently develop or otherwise acquire the same or substantially equivalent technology as ours. Although we are not aware of~~identify any past or present infringement of our patents, copyrights or trademarks, or any violation of our trade secrets, confidentiality procedures or licensing agreements, ~~to date,~~ we cannot assure you that the steps taken by us to protect our proprietary information will be adequate to prevent misappropriation of our technology. Our inability to adequately protect ~~adequately~~ our intellectual property would reduce 9 significantly the barriers of entry for directly competing technologies and could reduce the value of our ~~technology solution.~~technology. Furthermore, we might initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Litigation by us could result in significant expense and divert the efforts of our technical and management personnel, whether or not such litigation results in a determination favorable to us. ANY CLAIM THAT OUR PRODUCTS OR TECHNOLOGY INFRINGE THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS COULD INCREASE OUR COSTS OF OPERATION AND DISTRACT MANAGEMENT AND COULD RESULT IN EXPENSIVE SETTLEMENT COSTS OR THE DISCONTINUANCE OF OUR TECHNOLOGY LICENSING OR PRODUCT OFFERINGS.

Our existing patents might not provide us with sufficient protection of our intellectual property, and our patent applications might not result in the issuance of patents, either of which could reduce the value of our core technology and harm our business.

We rely on a combination of patents, trademarks, trade secret laws and confidentiality procedures to protect our intellectual property rights. We cannot be sure that any patents will be issued from any of our pending applications or that any claims allowed from pending applications will be of sufficient scope or strength, or issued in all countries where our products can be sold, to provide meaningful protection or any commercial advantage to us. Failure of our patents or patent applications to provide meaningful protection might allow others to utilize our technology without any compensation to us.

Any claim that our products or technology infringe third party intellectual property rights could increase our costs of operation and distract management and could result in expensive settlement costs or the discontinuance of our technology licensing or product offerings. In addition, we may incur substantial litigation expense, which would adversely affect our profitability.

The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights or positions, which has resulted in often protracted and expensive litigation. We are not aware of any ~~currently pending~~third party intellectual property ~~litigation~~that our products or ~~threatened claim against us.~~technology would infringe. However, like many companies of our size with limited resources, we have not searched for all potentially applicable intellectual property in the public databases. It is possible that a third party now has, or may in the future obtain, patents or other intellectual property rights that our products or technology may now, or in the future, infringe. Our licensees and IC customers, or we, might, from time to time, receive notice of claims that we have infringed patents or other intellectual property rights ~~owned by~~of others. Litigation against us ~~could~~can result in significant expense and divert the efforts of our technical and management personnel, whether or not the litigation has merit or results in a determination adverse to us. ~~In the event~~

The discovery of ~~an adverse result~~defects in any such litigation, we could be required to pay substantial damages, cease the licensing of certain technology or the sale of infringing products, expend significant resources to develop non-infringing technology or obtain licenses for the infringing technology. We cannot assure you that we would be successful in such development or that such licenses would be available on reasonable terms, or at all. IF WE FAIL TO COMPETE EFFECTIVELY IN THE MARKET FOR EMBEDDED MEMORY TECHNOLOGY AND PRODUCTS, OUR BUSINESS WILL BE ADVERSELY AFFECTED. Competition in the market for embedded memoryour technology and products ~~is intense. Our licensees and prospective licensees can meet their need~~could expose us to liability for ~~embedded memory with traditional memory solutions with different cost and performance parameters. To the extent that alternative technologies provide comparable system performance at lower cost than~~damages.

The discovery of a defect in our 1T-SRAM technology, or do not require the payment of comparable royalties, our results of operations could be harmed. A number of competitive developers of alternative technologies are more established, benefit from greater market recognition and have substantially greater financial, development, manufacturing and marketing resources than we have. These advantages might permit these developers to respond more quickly to new or emerging technologies and ~~changes in licensee requirements. We cannot assure you that future competition will not have a material adverse effect on the adoption~~products could lead our customers to seek damages from us. Many of our agreements with customers include provisions waiving implied warranties regarding our technology and products and limiting our market penetration. WE MIGHT BE UNABLE TO DELIVER OUR CUSTOMIZED MEMORY TECHNOLOGY IN THE TIME FRAME DEMANDED BY OUR LICENSEES, WHICH COULD DAMAGE OUR REPUTATION AND FUTURE SALES. A significant numberliability to our customers. We cannot be certain, however, that the waivers or limitations of liability contained in our agreements with customers will be enforceable.

Royalty amounts owed to us might be difficult to verify, and we might find it difficult, expensive and time-consuming to enforce our license agreements.

The standard terms of our ~~licenses requires~~1T-SRAM license agreements require our licensees to document the manufacture and sale of products that incorporate our technology and generally report this data to us after the end of each quarter. We have the right to ~~customize~~audit these royalty reports periodically, although we have not conducted any such audits recently. These audits can be expensive, time-consuming and potentially detrimental to our 1T-SRAM technology within a certain delivery timetable. Not all of the factors relating to this customization are within our control. We cannot assure you that we will be able to meet the time requirements under these licenses. Anybusiness relationships. A failure to ~~meet significant~~fully enforce the royalty provisions of our license ~~milestones~~agreements could ~~damage~~cause our ~~reputation in the industry~~revenue to decrease and ~~harm~~impede our ability to ~~attract new licensees~~achieve and maintain profitability.

If we fail to retain key personnel, our business and growth could ~~preclude our receipt of licensing fees. FACTORS THAT NEGATIVELY AFFECT THE BUSINESSES OF OUR LICENSEES COULD ADVERSELY AFFECT OUR BUSINESS. Because we expect licensing revenue to~~ be ~~the largest source of our future revenue, factors~~ negatively affecting a significant licensee or group of licensees could adversely affect our results of operations and financial condition. We are subject to many risks beyond our control that influence the success of our licensees, including, for example, the highly competitive environment in which they operate, the strength of the markets for their products, their engineering capabilities and their financial and other resources. 10 Likewise, we have no control over the product development, pricing and marketing strategies of our licensees, which directly affect product sales and the corresponding royalties payable to us. A decline in sales of our licensees' royalty-generating products for any reason would reduce our revenue. Additionally, a claim of infringement against any of our licensees could severely disrupt the development, marketing and sales of royalty-generating products by them, which could decrease our revenue and negatively impact our reputation and market share. WE INTEND TO GROW RAPIDLY, AND OUR FAILURE TO MANAGE THIS GROWTH COULD HARM OUR BUSINESS. Our planned expansion of the development, licensing and marketing of our technology will require us to implement and improve our operational, financial and management information systems, procedures and controls on a timely basis and to expand, train, motivate and manage our work force. Our ability to manage growth and any future changes effectively will require us to continue to - - implement and manage new marketing channels to penetrate different and broader markets; - manage an increasing number of complex relationships with licensees and co-marketers and their customers and other third parties; - improve our operating systems, procedures and financial controls on a timely basis; - hire additional key management personnel; and - expand, train and manage our workforce and, in particular, our software development, sales, marketing and support organizations. We cannot assure you that we will adequately manage our growth or meet the foregoing objectives. IF WE FAIL TO RETAIN KEY PERSONNEL OR ATTRACT NEEDED MANAGEMENT AND TECHNICAL PERSONNEL, OUR BUSINESS AND GROWTH COULD BE NEGATIVELY AFFECTED. affected.

Our business has been dependent to a significant degree upon the services of a small number of executive officers and technical ~~employees, including Dr. Fu-Chieh Hsu,~~employees. The loss of key personnel could negatively impact our ~~Chairman of the Board, President~~technology development efforts, our ability to deliver under our existing agreements, maintain strategic relationships with our partners, and ~~Chief Executive Officer, and Dr. Wing-Yu Leung, our Vice President and Chief Technical Officer.~~obtain new customers. We generally have not entered into employment or ~~noncompetition~~non-competition agreements with any of our ~~employees. We~~employees and do not maintain ~~key man~~key-man life insurance on the lives of any of our key personnel.

We may incur additional debt in the future, subject to certain limitations contained in our Notes.

The ~~loss~~degree to which we are leveraged and the restrictions governing our indebtedness could have important consequences including, but not limited to:

limiting our ability to service all of ~~any~~our debt obligations;

impacting our ability to incur additional indebtedness or obtain additional financing in the future for working capital, capital expenditures, acquisitions or general corporate or other purposes;

increasing our vulnerability to general economic downturns and adverse industry conditions;

limiting our flexibility in planning for, or reacting to, changes in our business and our industry; and

limiting our ability to engage in certain transactions or capitalize on acquisition or other business opportunities.

If we are in violation of ~~these individuals~~the terms of the Notes in the future and do not receive a waiver, the Note holders could choose to accelerate payment on all outstanding loan balances. If we needed to obtain replacement financing, we may not be able to quickly obtain equivalent or suitable replacement financing. If we are unable to secure alternative sources of funding, such acceleration would have a material adverse ~~effect~~impact on our company. In addition, we continue to seek to hire additional marketing and technical personnel. The competition for qualified personnel is intense, and our failure to recruit additional key personnel in a timely manner could adversely affect us. We cannot assure you that we will be able to continue to attract and retain qualified management, sales and technical personnel necessary for the developmentfinancial condition.

Provisions of our business. A MAJORITY OF OUR PRODUCT REVENUE DERIVES PRIMARILY FROM OUR PROPRIETARY INTEGRATED CIRCUITS USING THE 1T-SRAM TECHNOLOGY, AND A DECLINE IN DEMAND FOR THESE PRODUCTS COULD REDUCE OUR REVENUE SUBSTANTIALLY. Our 1T-SRAM stand-alone products, which currently account forcertificate of incorporation and bylaws or Delaware law might delay or prevent a ~~majority~~change-of-control transaction and depress the market price of our product revenue, have only recently been introduced. Our 1T-SRAM stand-alone product accounted for approximately 11% and 26% of our revenue in 1998 and 1999, respectively, and 57% in the first six months of 2000. We anticipate that these products will continue to account for a majority of our revenue for 2000. As a result, our revenue and results of operations would be adversely affected if for any reason we were unsuccessful in selling this product or if the market for this product declines. We cannot assure you that our stand-alone products will perform the desired functions, will operate reliably on a long-term basis or otherwise will be technically successful, that we will be able to manufacture adequate quantities of any products we develop at commercially acceptable costs or on a timely basis. 11 A DECLINE IN THE AVERAGE SELLING PRICES OF OUR STAND-ALONE PRODUCTS COULD REDUCE OUR PRODUCT REVENUE AND GROSS PROFIT. As has been typical in the semiconductor industry, we expect that the average unit selling prices of our stand-alone products will decline over the course of their commercial lives, principally due to the supply of competing products, falling demand from customers and product cycle changes. Declining average selling prices will adversely affect the gross margins of our stand-alone products. We might not be able to adjust our costs rapidly or deeply enough to offset the pricing declines and, as a consequence, our product revenue and gross profit could fall. WE CONTRACT THE MANUFACTURE, ASSEMBLY AND TESTING OF OUR PRODUCTS FROM THIRD-PARTIES THAT WE DO NOT CONTROL, AND A LOSS OF THESE SERVICES COULD HARM OUR LICENSING BUSINESS AND DECREASE OUR PRODUCT REVENUE. Our marketing efforts with respect to licensing our 1T-SRAM technology include the use of our stand-alone 1T-SRAM product to demonstrate the performance and manufacturability of the underlying technology and to facilitate acceptance of our technology by potential licensees. A loss of foundry capacity, assembly services or testing services for our stand-alone products, or any other failure to produce our 1T-SRAM product, could materially threaten our licensing business. We are a fabless semiconductor company, and currently rely on Taiwan Semiconductor Manufacturing Corporation, or TSMC, in Taiwan for the manufacture of substantially all of our stand-alone products. If TSMC ceases to provide us with required production capacity with respect to our stand-alone products, we cannot assure you that we will be able to enter into manufacturing arrangements with other foundries on commercially reasonable terms, or that these arrangements, if established, will result in successful manufacturing of our products. These arrangements might require us to share control over our manufacturing process technologies or to relinquish rights to our technology and might be subject to unilateral termination by the foundries. Even if such capacity is available from another manufacturer, we would need to qualify the manufacturer, which process could take six months or longer. We cannot assure you that we would be able to identify or qualify manufacturing sources that would be able to produce wafers with acceptable manufacturing yields. Under the contractual provisions of our supply agreement with TSMC, we are required to provide forecasts of anticipated purchases and place purchase orders months in advance of shipment. Forecasts of monthly purchases might not coincide with our eventual customer requirements. Should our purchases of wafers exceed customer demand for our products, we could have a significant exposure to high inventory levels. If we cannot sell the excess inventory or avoid selling it at a price below cost, we would be required to write down or write off this inventory, which would adversely affect our financial condition. All of our semiconductor memory products are assembled and tested by third-party vendors, primarily in Hong Kong and Taiwan. We have designed and developed internally our own test software and certain test equipment, which we provide to our test vendors. Our reliance on independent assembly and testing vendors involves a number of risks, including reduced control over delivery schedules, quality assurance and costs. The inability of these third-party contractors to deliver products of acceptable quality and in a timely manner could result in the loss of customers and a reduction in our product revenue and could ultimately harm our licensing business. THE CYCLICAL NATURE OF THE SEMICONDUCTOR INDUSTRY MAY MAKE IT DIFFICULT TO PLAN OUR BUSINESS AND COULD CAUSE OUR RESULTS OF OPERATIONS TO FLUCTUATE SUBSTANTIALLY. The semiconductor industry has historically been characterized by a number of factors that could adversely affect our business, including - - rapid technological change; - cyclical market patterns; 12 - significant price erosion; - fluctuating inventory levels; - alternating periods of over-capacity and capacity constraints; - variations in manufacturing costs and yields; and - significant expenditures for capital equipment and product development. In addition, the industry has experienced significant economic downturns at various times, characterized by diminished product demand and accelerated erosion of product prices. We could experience substantial period-to-period fluctuations in operating results due to any of these conditions. INTERNATIONAL LICENSES ACCOUNT FOR A SIGNIFICANT PORTION OF OUR REVENUE, AND OUR FAILURE TO SUCCESSFULLY ADDRESS THE RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS COULD INCREASE OUR COSTS OF OPERATION AND NEGATIVELY IMPACT OUR REVENUE. We anticipate that licenses to companies that operate primarily outside the United States will account for a substantial portion of our licensing revenue in future periods. Moreover, all of our products are manufactured, assembled and tested outside of the United States. We are, therefore, subject to many international risks, including - - foreign currency exchange fluctuations; - unanticipated changes in local regulation; - potentially adverse tax consequences; - difficulties regarding timing and availability of export and import licenses; - political and economic instability; and - reduced or limited protection of our intellectual property. The occurrence of any of these risks could have an adverse effect on our business. PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS, DELAWARE LAW OR OUR RIGHTS PLAN MIGHT DELAY OR PREVENT A CHANGE OF CONTROL TRANSACTION AND DEPRESS THE MARKET PRICE OF OUR STOCK. Certainstock.

Various provisions of our certificate of incorporation and bylaws might have the effect of making it more difficult for a third party to acquire, or discouraging a third party from attempting to acquire, control of our company. ~~Such~~These provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock. Certain of these provisions eliminate cumulative voting in the election of directors, ~~eliminate~~limit the right of stockholders to ~~act by written consent without a meeting~~call special meetings and establish specific procedures for director nominations by stockholders and the submission of other proposals for consideration at stockholder meetings.

We are also subject to ~~certain~~ provisions of Delaware law which could delay or make more difficult a merger, tender offer or proxy contest involving our company. In particular, Section 203 of the Delaware General Corporation Law prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years unless ~~certain~~specific conditions are met. Any of these provisions could have the effect of delaying, deferring or preventing a change in control, including without limitation, discouraging a proxy contest or making more difficult the acquisition of a substantial block of our common stock. ~~Our~~

Under our certificate of incorporation, our board of directors ~~might~~may issue up to 20,000,000 shares of preferred stock without stockholder approval on such terms as the board might determine. The rights of the holders of common stock will be subject to, and might be adversely affected by, the rights of the holders of any preferred stock that might be issued in the future. 13

Our ~~board of directors has approved~~stockholder rights plan could prevent stockholders from receiving a premium over the ~~adoption of~~market price for their shares from a potential acquirer.

We adopted a stockholder rights plan ~~which will become effective prior to the effectiveness of this offering. This plan~~that generally entitles our stockholders to rights to acquire additional shares of our common stock ~~generally~~ when a third party acquires 15% of our common stock or commences or announces its intent to commence a tender offer for at least 15% of our common stock. The plan also includes an exception to permit the acquisition of shares representing more than 15% of our common stock by a brokerage firm that manages independent customer accounts and generally does not have any discretionary voting power with respect to such shares. This plan could delay, deter or prevent an investor from acquiring us in a transaction that could otherwise result in stockholders receiving a premium over the market price for their shares of common stock. ~~For more information, please refer~~Our intention is to ~~"Description~~maintain and enforce the terms of Capital Stock - Antitakeover Effects of Our Stockholder Rights Plan." A LIMITED NUMBER OF STOCKHOLDERS WILL HAVE THE ABILITY TO INFLUENCE THE OUTCOME OF DIRECTOR ELECTIONS AND OTHER MATTERS REQUIRING STOCKHOLDER APPROVAL. Our executive officers, directors and entities affiliated with them will,this plan, which could delay, deter or prevent an investor from acquiring us in ~~the aggregate, beneficially own approximately % of our common stock following this offering. These~~a transaction that could otherwise result in stockholders acting together will have the ability to exert substantial influence over all matters requiring the approval of our stockholders, including the election and removal of directors and any proposed acquisition, consolidation or sale of all or substantially all of our assets. In addition, they could dictate the management of our business and affairs. The stockholder rights plan that we will adopt prior to the completion of the offering will contain a higher threshold ownership before the rights take effect with respect to additional share acquisitions by Drs. Hsu and Leung, West Coast Venture Capital Limited, L.P., or West Coast, and DynaTech Capital, LLC, or DynaTech, as well as their affiliates and associates. This concentration of ownership could have the effect of delaying, deferring or preventing a change in control, or impeding an acquisition, consolidation, takeover or other business combination, which might otherwise involve the payment ofreceiving a premium over the market price for ~~your~~their shares of ~~our~~ common stock. ~~WE MIGHT SPEND A SUBSTANTIAL PORTION OF THE NET PROCEEDS IN WAYS WITH WHICH YOU MIGHT NOT AGREE. The principal purposes~~

Potential volatility of ~~this offering are to obtain additional capital, create a public market for our common stock and facilitate future access to public equity markets. We expect to use~~ the net proceeds from this offering for working capital and other general corporate purposes. A portion of the proceeds might also be used to acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies. There are currently no negotiations, commitments or agreements with respect to any such transactions, however. Pending the use of the net proceeds for the above purposes, we intend to invest such funds in short-term, interest-bearing, investment grade securities. Accordingly, our management will retain broad discretion as to the allocation of the net proceeds from this offering and, subject to certain exceptions, will be able to use and allocate such net proceeds without first obtaining stockholder approval. ANY ACQUISITIONS WE MAKE COULD DISRUPT OUR BUSINESS AND HARM OUR FINANCIAL CONDITION. As part of our growth strategy, we might consider opportunities to acquire other businesses or technologies that would complement our current offerings, expand the breadth of our markets or enhance our technical capabilities. To date, we have not made any acquisitions, and we are currently not subject to any agreement or letter of intent with respect to potential acquisitions. Acquisitions entail a number of risks that could materially and adversely affect our business and operating results, including - - problems integrating the acquired employees, operations, technologies or products with our existing business and products; - diversion of management's time and attention from our core business; - difficulties in retaining business relationships with suppliers and customers of the acquired company; - risks associated with entering markets in which we lack prior experience; and - potential loss of key employees of the acquired company. 14 THERE HAS BEEN NO PRIOR TRADING MARKET FOR OUR COMMON STOCK, AND THE POTENTIAL VOLATILITY OF THE PRICE OF OUR COMMON STOCK COULD NEGATIVELY AFFECT YOUR INVESTMENT. Prior to this offering, there has been no public market for our common stock, and we cannot assure you that an active trading market will develop or be sustained after this offering. The initial public offering price will be determined through negotiations between us and the representatives of the underwriters, and will be based on several factors and might not be indicative of the market price of our common stock ~~after this offering. The~~could negatively affect your investment.

We cannot assure you that there will continue to be an active trading market ~~price of the shares of~~for our common stock is likely to be highly volatile and might be significantly affected by factors such as - - actual or anticipated fluctuations in our operating results; - product or technology announcements by us or our competitors; - new contracts entered into by us or our competitors; - developments with respect to patents or intellectual property rights; - conditions and trends in the semiconductor and other technology industries; - changes in financial estimates by securities analysts; and - general market conditions. Recently,stock. Historically, the stock market, as well as our common stock, has experienced significant price and volume fluctuations. Market prices of securities of technology companies ~~particularly following an initial public offering,~~ have been highly volatile and frequently reach levels that bear no relationship to the operating performance of such companies. These market prices generally are not sustainable and are subject to wide variations. If our common stock trades to unsustainably high levels, ~~following this offering,~~ it is likely that the market price of our common stock will thereafter experience a material decline. In the past, our board of directors approved stock repurchase programs, and any future program could impact the price of our common stock and increase volatility.

In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. We could be the target of similar litigation in the future. Securities litigation could cause us to incur substantial costs, divert ~~management's~~management’s attention and resources, ~~and~~ harm our reputation in the industry and the securities markets and negatively impact our operating results.

Our stock price could drop, and there could be significantly less trading activity in our stock, if securities or industry analysts downgrade our stock or do not publish research or reports about our business.

Our stock price and the trading market for our stock are likely to be affected significantly by the research and reports concerning our company and our business which are published by industry and securities analysts. We do not have any influence or control over these analysts, their reports or their recommendations. Our stock price and the trading market for our stock could be negatively affected if any analyst downgrades our stock, publishes a report which is critical of our business, or discontinues coverage of us.

We are a “smaller reporting company” and, as a result of the reduced disclosure and governance requirements applicable to smaller reporting companies, our common stock may be less attractive to investors.

We are a “smaller reporting company,” and we are subject to lesser disclosure obligations in our SEC filings compared to other issuers. Specifically, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings, are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial ~~condition~~reporting and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as a “smaller reporting company” may make it harder for investors to analyze our operating results and financial prospects.

If we fail to maintain compliance with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.

Our common stock currently trades on the Nasdaq Capital Market under the symbol “MOSY.” This market has continued listing standards that we must comply with in order to maintain the listing of our common stock. The continued listing standards include, among others, a minimum bid price requirement of $1.00 per share and any of: (i) a minimum stockholders’ equity of $2.5 million; (ii) a market value of listed securities of at least $35.0 million; or (iii) net income from continuing operations of $500,000 in the most recently completed fiscal year or in the two of the last three fiscal years. Our results of ~~operations. THE PRICE OF~~operations and fluctuating stock price directly impact our ability to satisfy these continued listing standards. In the event we are unable to maintain these continued listing standards, our common stock may be subject to delisting from the Nasdaq Capital Market.

On August 23, 2018, we received a deficiency notification letter from the Listing Qualifications Department (the Staff) of Nasdaq. Previously, on August 13, 2018, the Staff provided notification that the Company: (i) was not in compliance with the independent director and audit committee composition requirements, as set forth in Listing Rules 5605(b)(1) and 5605(c)(2), respectively, and (ii) would be provided a cure period to comply. However, the August 23, 2018 notification letter provided notice that due to the resignation of Stephen Domenik from our board of directors effective August 20, 2018, we are no longer eligible for the cure period described in the Staff’s August 13, 2018 notification letter. We have submitted a plan to regain compliance. If our plan is accepted, the Staff can grant an extension of up to 180 calendar days from the date of the letter to evidence compliance. If the Staff does not accept our plan, we will have the opportunity to appeal that decision before a Nasdaq Hearings Panel (Panel). There can be no assurance that, if we do appeal a subsequent delisting determination by the Staff to a Panel, that such appeal would be successful.

In addition, we no longer have at least two independent members serving on the committee of the board of directors. We intend to fill the vacant board of directors and committee seats prior to our next annual meeting of shareholders.

On September 21, 2018, we received an additional deficiency notification letter from the Staff of Nasdaq stating that the bid price for our common stock must close at $1.00 per share or more for a minimum of ten consecutive trading days during the 180 calendar day period ending March 20, 2019 or we might be delisted. As mentioned above, the price of our common stock can be volatile, and there can be no assurance that we will be able to meet the minimum $1.00 bid price requirement or the other NASDAQ continued listing requirements in the future, and we may be subject to delisting as a result.

If we are delisted, we would expect our common stock to be traded in theover-the-counter market, which could adversely affect the liquidity of our common stock. Additionally, we could face significant material adverse consequences, including:

a limited availability of market quotations for our common stock;

a reduced amount of analyst coverage;

a decreased ability to issue additional securities or obtain additional financing in the future;

reduced liquidity for our stockholders;

potential loss of confidence by customers, collaboration partners and employees; and

loss of institutional investor interest.

MARKET INFORMATION FOR OUR COMMON STOCK ~~COULD DECREASE AS A RESULT OF SHARES BEING SOLD IN THE MARKET AFTER THE OFFERING. Sales~~

The following table sets forth the range of ~~a substantial number~~high and low sales prices of ~~shares of~~our common stock on Nasdaq for the periods indicated:

We have never declared or paid any cash dividends on our common stock and do not currently anticipate declaring or paying cash dividends on our common stock in the ~~public market following~~foreseeable future. We currently intend to retain all of our future earnings, if any, to finance operations. Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including future earnings, capital requirements, financial conditions, future prospects, contractual restrictions and other factors that our board of directors may deem relevant.

As of August 31, 2018, there were five holders of record of our common stock. The actual number of stockholders is greater than this number of record stockholders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. This number of stockholders of record also does not include stockholders whose shares may be held in trust by other entities.

Assuming that we sell all of the securities offered hereby, we estimate that we will receive net proceeds of approximately $11,100,000 from the sale of units in this offering, ~~could adversely affect the market~~after deducting placement agent fees and estimated offering expenses of approximately $900,000 payable by us, based on an assumed public offering price of $0.766 per common unit (the last reported sale price of our common stock on Nasdaq on September 27, 2018).

We intend to use the net proceeds from this public offering for working capital and general corporate purposes (including research and development and sales and marketing, and capital expenditures). Assuming that we sell all of the securities offered hereby, we would expect to repay approximately $8 million of such indebtedness at the closing of this offering.

In addition, the amount and timing of what we actually spend for these purposes may vary and will depend on a number of factors, including our future revenue and cash generated by operations and the other factors described in “Risk Factors.” Accordingly, our management will have discretion and flexibility in applying the net proceeds of this offering. Pending use of the net proceeds as described above, we intend to invest the net proceeds in money market funds and investment-grade debt securities.

Because there is no minimum offering amount required as a condition to the closing of this offering, the actual offering amount, placement agent fees and proceeds to us are not presently determinable and may be substantially less than the amount set forth above. We may sell fewer than all of the securities offered hereby, which may significantly reduce the amount of proceeds received by us. Thus, we may not raise the amount of capital we believe is required for our business and may need to raise additional funds, which may not be available or available on terms acceptable to us.

The following table sets forth our actual cash and cash equivalents and our capitalization as of June 30, 2018, sale of the securities offered hereby and the use of proceeds, as described in the section entitled “Use of Proceeds.”

The pro forma information set forth in the table below is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.

If you invest in the common ~~stock prevailing from time~~units being offered by this prospectus, your ownership interest will be immediately diluted to ~~time. The number~~the extent of ~~shares~~the difference between the public offering price per common unit and the as adjusted net tangible book value per share of our common stock ~~available for sale in the public market is limited by restrictions under the Securities Act~~immediately after giving effect to this offering. Our unaudited net tangible book deficit as of ~~1933, as amended,~~June 30, 2018 was approximately $(4.9) million, or ~~the Securities Act, and lock-up agreements executed by certain~~$(0.60) per share of our ~~security holders under which such security holders have agreed not~~common stock. Net tangible book value (deficit) per share is equal to sell or otherwise dispose of any of their shares until 180 days after the date of this prospectus without the prior written consent of the underwriters. In addition to the shares of common stock offered hereby, assuming no exercise of the underwriters' over-allotment option, there will be 22,629,281our total tangible assets minus total liabilities, divided by 8,170,910 shares of common stock outstanding as of ~~the date of~~June 30, 2018.

The following table illustrates this prospectus, all of which are "restricted" shares under the Securities Act. As a result of the lock-up agreements described above and the provisions of Rules 144(k), 144 and 701, the restricted shares will be available for sale in the public market as follows - - no shares will be eligible for immediate saledilution based solely on the ~~date~~number of this prospectus; - shares will be eligible for sale 90 days after the date of this prospectus; - approximately shares will be eligible for sale 180 days after the date of this prospectus; and - approximately shares will be eligible for sale approximately one year from the date of this prospectus. 15 ~~After this offering, the holders of approximately 12,731,446~~ shares of common stock issued as part of the common units and ~~rights~~pre-funded units at closing, and assumes that no warrants other than thepre-funded warrants offered hereby are exercised, prior to ~~acquire shares of common stock~~the reset taking effect.

The dilution information set forth in the table above is illustrative only and will be entitled to certain demand and piggyback rights with respect to registration of such shares under the Securities Act. See "Description of Capital Stock - Registration Rights." If such holders, by exercising their demand registration rights, cause a large number of securities to be registered and sold in the public market, such sales could have an adverse effectadjusted based on the market price for our common stock. If we were to initiate a registration and include shares held by such holders pursuant to the exercise of their piggyback registration rights, such sales might have an adverse effect on our ability to raise capital. PURCHASERS OF COMMON STOCK IN THIS OFFERING WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of the shares of common stock offered hereby will incur immediate and substantial dilution of approximately $ per share in the net tangible book value of common stock from the initialactual public offering ~~price. Purchasers might incur additional~~price and other terms of this offering determined at pricing.

This table does not take into account further dilution to new investors that could occur upon the exercise of the warrants offered hereby or outstanding ~~stock~~ options and ~~warrants. For~~warrants having a ~~more detailed description of~~per share exercise price less than the public offering price per common unit in this ~~dilution, please see "Dilution." 16~~ ~~SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA This prospectus contains forward-looking statements which include, without limitation, statements about~~offering. To the extent that outstanding options or warrants are exercised, or restricted stock units vest and settle, investors purchasing our common stock will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our ~~technology, our strategy, competition and expected financial performance. Our actual results could differ materially from those expressed~~current or ~~implied by these forward-looking statements as a result of various factors, including~~future operating plans. To the risk factors described above and elsewhere in this prospectus. We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. This prospectus contains statistical data regarding the semiconductor industryextent that we obtained from industry reports generated by Dataquest Inc. These reports generally indicate that their information has been obtained from sources believed to be reliable, but do not guarantee the accuracy and completeness of their information. Although we believe that the reports are reliable, we have not independently verified their data. USE OF PROCEEDS The net proceeds to us fromadditional capital is raised through the sale of equity or convertible debt securities, the ~~shares~~issuance of ~~common stock being sold~~these securities could result in this offering are estimated to be $ at an assumed initial public offering price of $ per share and after deducting the estimated underwriting discount and offering expenses. Net proceeds will be $ if the underwriters' over-allotment option is exercised in full. We intend to use the net proceeds for working capital and other general corporate purposes, including to expand sales and marketing and research and development. We might also use a portion of the net proceeds for the acquisition of technologies, businesses or products that are complementaryfurther dilution to our ~~business, although no such acquisitions are planned or being negotiated as~~stockholders.

The number of the date of this prospectus, and no portion of the net proceeds has been allocated for any specific acquisition. Pending such uses, the net proceeds of this offering will be invested in short-term, interest-bearing, investment-grade securities. DIVIDEND POLICY We have never declared or paid cash dividends on our capital stock. We currently anticipate that we will retain any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. 17 CAPITALIZATION The following table sets forth - - our actual capitalization as of June 30, 2000; - our actual capitalization on a pro forma basis giving effect to the conversion of all outstanding shares of our ~~preferred stock into 12,731,446 shares of~~ common stock ~~upon the closing of~~shown above to be outstanding immediately before and after this ~~offering; and - our pro forma capitalization as adjusted to reflect the sale and issuance of the shares of common stock in this~~ offering at an assumed initial public offering price of $ per share, after deducting the estimated underwriting discount and offering expenses and the application of the estimated proceeds therefrom; and to reflect the exercise of warrants to purchase a total of additional shares of common stock. This information should be read in conjunction with our financial statements and the notes relating to those statements appearing elsewhere in this prospectus.

~~The actual outstanding share information in this table~~ is based on ~~our~~8,170,910 shares outstanding as of June 30, ~~2000~~2018, and excludes, ~~- - 2,316,113~~as of such date:

2,271,338 shares of common stock issuable upon conversion of the 8% Senior Secured Convertible Notes due August 15, 2019 (calculated without regard to the effects of the MOU);

94,122 shares of common stock issuable upon exercise of outstanding exercisable stock options ~~outstanding as of June 30, 2000,~~ with a weighted average exercise price of ~~$0.89~~approximately $7.68 per share; ~~- 2,881,219~~

249,354 shares of common stock issuable upon exercise of outstanding stock options that are not exercisable;

302,014 shares of common stock issuable upon vesting of restricted stock units;

186,403 shares of common stock available for future issuance under our equity incentive plan;

147,024 shares of common stock available for sale under our employee stock purchase plan;

662,500 shares of common stock issuable upon exercise of warrants ~~outstanding as~~dated July 6, 2017 at $2.35 per share; and

28,231,197 shares of ~~June 30, 2000, with a weighted average exercise price of $5.97 per share, and shares of~~our common stock issuable upon ~~the~~ exercise of ~~another warrant outstanding as~~the warrants and/orpre-funded warrants offered hereby.

We are a fabless semiconductor company focused on the development and sale of ~~June 30, 2000~~integrated circuits, or ICs, for the high-speed cloud networking, communications, security appliance, video, monitor and test, data center and computing markets. Our solutions delivertime-to-market, performance, power, area and economic benefits for system original equipment manufacturers, or OEMs. Our primary product line is marketed under the Bandwidth Engine and Programmable Search Engine names and marks, and these IC products integrate our proprietary,1T-SRAM high-density embedded memory and a highly-efficient serial interface protocol resulting in a monolithic memory IC solution optimized for memory bandwidth and transaction access performance. Further performance benefits can be achieved to offload statistical, search or other custom functions using our optional integrated logic and processor elements. As data rates and the amount of high-speed processing increase, critical memory access bottlenecks occur. Our Bandwidth Engine, or BE, and Programmable Search Engine, or PSE, ICs drastically increase memory accesses per second, removing these bottlenecks. In addition, the serial interface and high-memory capacity reduce the board footprint, number of pins and complexity, while using less power.

In April 2017, we implemented restructuring initiatives to effect a reduction in our workforce and associated operating expenses, net loss and cash burn. Under these initiatives, we significantly reduced our headcount, closed international sales offices and relocated and downsized our corporate headquarters. We are primarily focusing our resources on ~~a "cashless" basis; - 5,000,000 shares of common stock reserved~~producing and selling our existing products, and have substantially curtailed new product development. Despite the reduction in new product development, we believe our current product portfolio and roadmap position us for future ~~issuance under our 2000 employee stock option plan;~~growth and ~~- 200,000 shares of common stock reserved for issuance under our 2000 employee stock purchase plan. 18~~ ~~DILUTION Our pro forma net tangible book value as of June 30, 2000 was approximately $17.8 million, or [$0.79] per share of common stock. Pro forma net tangible book value per share is determined~~profitability, although we were recently informed by dividing our pro forma net tangible book value, calculated as total pro forma tangible assets less total pro forma liabilities, by the number of outstanding shares of common stock, after giving affect to the adjustments indicated below. After giving effect to the sale of shares of common stock in this offering, based upon an assumed initial public offering price of $ per share and after deducting the estimated underwriting discount and offering expenses, our as adjusted pro forma net tangible book value as of June 30, 2000 would have been $ , or $ per share. This represents an immediate increase in pro forma net tangible book value of $ per share to existing stockholders and an immediate dilution in pro forma net tangible book value of $ per share to new investors. The following table illustrates this per share dilution:

~~The following table summarizes, on~~ a pro forma as adjusted basis as of June 30, 2000, the total number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by existing stockholders and by new investors purchasing shares in this offering.

The foregoing tables give effect to - - the conversion of all of our outstanding shares of preferred stock outstanding as of June 30, 2000 into 12,731,446 shares of common stock; and - the issuance of 2,881,219 shares of common stock upon the exercise of warrants outstanding as of June 30, 2000 at a weighted average exercise price of $5.97 per share, and the "cashless" exercise of an additional warrant outstanding as of June 30, 2000 representing the right to acquire shares of common stock, net. The foregoing tables exclude the issuance of 2,316,113 shares of common stock upon the exercise of options outstanding as of June 30, 2000 under our 1992 stock option plan and our 1996 stock plan, with a weighted average exercise price of $0.89 per share. To the extentlarge customer that ~~any shares are issued upon exercise of options that are presently outstanding or granted in the future, there~~it will be ~~further dilution~~phasing out our Bandwidth Engine IC products over the next 24 months, which is expected to ~~new public investors. 19~~ ~~SELECTED FINANCIAL DATA The following selected financial data should be read~~result in conjunction with our financial statements and notes related to those statements, and with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. The statement of operations data for the years ended December 31, 1997, 1998 and 1999 and the balance sheet data as of December 31, 1998 and 1999 are derived from our financial statements that have been audited by PricewaterhouseCoopers LLP, independent accountants, and are included elsewhere in this prospectus. The statement of operations data for the years ended December 31, 1995 and 1996 and the balance sheet data as of December 31, 1995, 1996 and 1997 are derived from our financial statements that have been audited by PricewaterhouseCoopers LLP, independent accountants, and are not included in this prospectus. The statement of operations data for the six months ended June 30, 1999 and 2000 and the balance sheet data as of June 30, 2000 are derived from our unaudited financial statements that have been prepared on the same basis as the audited financial statements and,a material reduction in our opinion, include all adjustments consisting only of normal recurring adjustments, necessary for a fair presentation of the information set forth therein. Operating results for the six months ended June 30, 2000 are not necessarily indicative of the results that could be expected for the year ending December 31, 2000 or any other future period.

21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. OVERVIEW We design, develop, license and market memory technologies used by the semiconductor industry and electronic product manufacturers. We license our 1T-SRAM technology on a non-exclusive and worldwide basis to semiconductor companies and electronic product manufacturers. From our inception in 1991 through 1998, we focused primarily on the sale of stand-alone products. In the fourth quarter of 1998, we changed our business model to focus primarily on the licensing of our 1T-SRAM technology. Development of our stand-alone memory products during the early years of our existence enabled us to validate critical elements of the 1T-SRAM technology we currently license. Sales of our stand-alone memory products grew rapidly, peaking at $36.3 million in 1998. We achieved profitability on sales of our stand-alone memory productsrevenue outlook beginning in the fourth quarter of ~~1997 and the first quarter of 1998.~~2018. We ~~determined, however, that the competition for memory~~will continue to seek opportunities to sell existing products, volatile pricing and low margins would limit our profitability in the long term. Consequently, using our existing memory technology as a foundation, in 1998, we completed initial development of our innovative, proprietary 1T-SRAM technology to distinguish ourselves from other memory providers. Once we had successfully implemented the new technology and demonstrated its benefits through the manufacture of our stand-alone products, we adopted a new business model focused on licensing our 1T-SRAM technology. After changing our business model, we signed our first license agreement for this technology at the end of the fourth quarter of 1998 and recognized licensing contract revenue for the first time in the first quarter of 2000. As of July 31, 2000, we had signed 1T-SRAM license agreements with six companies and had signed memoranda of understanding, each of which requires an up-front payment to us, with seven additional companies. We recognized our first license revenue from our 1T-SRAM technology in the first quarter of 2000. Generally, we expect our total sales cycle, or the period that begins with our initial discussion with a prospective licensee to our receipt of royalties from the licensee's use of our 1T-SRAM technology, to run from 18 to 24 months. We have had a limited operating history and have incurred net losses in every year of operation until 1999. REVENUE. We generate our revenue from licensing our technology and ~~selling stand-alone~~obtain third-party funding for new product development efforts. Our future success and ability to achieve and maintain profitability are dependent on the marketing and sales of our IC products into cloud networking, communications, security appliances, monitoring and test, data center, video, and other markets requiring high-bandwidth memory ~~products. Contract revenues~~access.

The amount of data and the number of users and devices is growing exponentially, driven primarily by commercial and consumer cloud applications, video services, high speed mobile networks, Internet of Things, or IoT, and many other cloud applications. In order to meet these demands, the new cloud infrastructure; including the backbone, edge, access network and data centers must scale in both speed and intelligence to handle real-time security, bandwidth allocation, and service-level expectations. In addition, workloads or applications delivered at a massive scale from ~~our licensing activities consist~~the cloud require flexible, efficient data and computing transmission to optimize resources to enable these applications and lower the overall cost, size and power of ~~fees paid~~the data center. These increased demands strain communication between onboard IC devices, limiting the data throughput in network switches and routers and the network backbone.

To meet these demands, carrier and enterprise networks are merging with the cloud and are undergoing significant changes and, most significantly, are migrating to packet-based Ethernet networks that enable higher throughput, lower cost and uniform technology across access, core and metro network infrastructure. These networks are now being designed to deliver voice, video and high-speed Internet services on one converged, efficient and flexible network. These trends require networking systems, especially the high-speed switches and routers that primarily comprise these networks, to comply with evolving market requirements and be capable of providing new services and better quality of service while supporting new protocols and standards. To support these trends, traditional OEM network and telecommunications equipment manufacturers, such as Alcatel-Lucent (a subsidiary of Nokia Corporation), Cisco Systems, Inc., Tel. LM Ericsson, Fujitsu Ltd., Hitachi Ltd., Huawei Technologies, Juniper Networks, Inc., Nokia Corporation, and ZTE Corporation, as well as a new set ofwhite-box solutions from new vendors and cloud-service providers, must offer higher levels of packet forwarding rates, bandwidth density and be optimized to enable higher-density, lower power data path connectivity in the next generations of their networking systems.

Networking communications, security, video and computing systems throughout the cloud network must operate at higher speed and performance levels, and so require new generations of packet processors and improved memory subsystems to enable system performance. These systems and their component line cards generally need to support aggregate rates of 100 gigabits per second, or Gbps, and above to meet the continued growth in network traffic.

Cloud services have accelerated this transition with applications such as security. Data centers and access equipment that were previously aggregating slower traffic at rates of 1Gbps to 10Gbps, and 40Gbps, now are being designed to aggregate traffic at 100 Gbps, or more. The transition to 100 Gbps networks is underway, and the increase in data rates for ~~engineering development~~these networks is expected to continue to grow rapidly over the coming years.

Several types of semiconductors are included on each line card, including one or more processors and ~~engineering support services. Under all our licensing agreements, we will receive royalties when our licensees manufacture~~multiple memory chips. These processors are complex ICs or ~~sell products~~IC chipsets that ~~incorporate our technology. We receive contract fees~~perform high-speed data or packet processing for ~~providing circuit design, layout~~functions, such as traffic routing, shaping, metering, billing, statistics, detection, steering, security, video processing, monitoring and ~~testing services~~workload acceleration. The line cards use various types of memory ICs to ~~a licensee that is embedding our memory technology into its product. For some licensees, we also provide engineering support services to~~facilitate temporary packet storage and assist in the ~~commencement~~analysis and tracking of ~~production of their products. Contract fees range from several hundred thousand dollars to several million dollars, depending~~information embedded within the data flowing through the processors. After a packet enters the line card, a packet or data processor helps separate the packet into smaller pieces for rapid analysis. In a typical packet-based network for example, the data is broken up into the packet header, which contains vital information on packet destination and type, such as the ~~scope and complexity of the development project, the licensee's rights~~Internet protocol address, and the ~~royalty to~~payload, which contains the data being sent. Generally, the line card operations must occur at full data rates and typically require accessing memory ICs many times. Simultaneously, the packet’s payload, which may be ~~paid under~~substantially larger than the ~~contract. The licensee generally pays contract fees~~packet header, is also stored in ~~installments at the beginning of the contract and upon achieving certain milestones. For contracts involving performance specifications that we have not yet met, we defer the recognition of revenue~~memory ICs until the licensee manufactures products that meet the contract performance specifications. Contract fees billed prior to revenue recognition are recorded as deferred contract revenue. We recognized contract revenue for the first time in the six-month period ended June 30, 2000. The recognized revenue of $460,000 arose under two licensing contract projects that we completed during the period. Deferred contract revenue at June 30, 2000 was $3.9 million. Our licensing contracts provide for royalty payments at a stated rate. We negotiate royalty rates taking into account such factors as the amount of contract fees to be paid, the anticipated volume of the licensee's sales of 22 ~~products that utilize our technology~~processing is complete and the ~~cost savings~~packet canre-combine and be sent to ~~be achieved by~~its next system destination. Within the ~~licensee when using our technology. Our agreements require licensees~~line card, communication between the packet processor and memory ICs occurs through an interface consisting of combinations of physical pins on each type of chip. These pins are grouped together in a parallel or a serial architecture to ~~report the manufacture or sale of products that include our technology after the end of the quarter in~~form a pathway, called a bus, through which ~~the sale or manufacture occurs. We will recognize royalties in the quarter in which we receive the licensee's report. We have recorded no royalties through June 30, 2000. We anticipate that revenue~~information is transferred from our licensing activities will fluctuate from period to period and that it will be difficult to predict the timing and magnitude of such revenue. Our license contracts involve long sales cycles, which make it difficult to predict the timing of signing agreements. These contracts are also associated with lengthy and complicated engineering development projects, and so the completion of development and commencement of production may be difficult for us to predict. Furthermore, substantial amounts of revenue arising from these contracts will be recognized only when the licensee manufactures the products meeting the performance specification. We believe that the amount of licensing contract revenues for any period are not necessarily indicative of results for any future period. The timing and level of royalties will likewise be difficult to predict because they are totally dependent on the licensees' ability to market, produce and ship product that incorporates our technology. For a discussion of factors that could contributeone IC to the fluctuation of our revenues, please see "Risk Factors - Our operating results might fluctuate significantly and remain uncertain, which could negatively impact the value of your investment," and "Our lengthy licensing cycle and our licensees' lengthy development cycles will make the operating results of our licensing business difficult to predict." Since 1998, we have reduced the development of follow-on versions of our stand-alone products, which development had been key to our generation of revenue in preceding periods. Our stand-alone product revenue has declined accordingly. Moreover, these stand-alone products address specific semiconductor applications required by our customers and are not intended to be widely distributed. Product revenue derived from our three largest customers represented 29.1%, 10.8% and 10.1% of our total revenue in 1998. In 1999, our two largest customers represented 16.4% and 10.9% of our total revenue. All of our sales are denominated in U.S. dollars. Our stand-alone products are subject to competitive pricing pressure that might result in fluctuating gross profits, which we have experienced in the past. Product sales are typically on a purchase-order basis, with shipment of product from one to six months later. Provisions for potential warranty liability and estimated returns are recorded at the time revenue is recognized. We procure the manufacture of our stand-alone memory products from TSMC. Our products are assembled and tested prior to shipment by independent, third-party contractors. We contract for all of these manufacturing services on a purchase-order basis and have no long-term commitments for the supply of any of our stand-alone memory products. If we are unable to obtain manufacturing, assembly or testing services required to fill our customer orders for these products, our revenues from these products will decline substantially. During the next 12 months, our revenue may continue to consist primarily of stand-alone product sales revenue, with contract and royalty revenue generating an increasing portion of our revenue. We expect that licensing revenue will representnext.

Today, the majority of ~~our total revenue~~physical buses that connect networking equipment and components use a parallel architecture to communicate between processors and memory ICs, which means information can travel only in ~~the following years. COST OF REVENUE. Cost of product revenue consists primarily of costs associated with the manufacture, assembly~~one direction and test of our stand-alone memory products by independent, third-party contractors. Cost of contract revenue consists primarily of deferred engineering costs directly related to engineering development projects specified in ~~agreements we have with licensees of our memory technology. To the extent that the amount of engineering costs does not exceed the amount of the related contract revenues, these costs are deferred on~~one instance at a contract-by-contract basis from the time we have established technological feasibility of the product to be developed under the contract. This occurs when we have completed all of the activities necessary to establish that the licensee's product can be produced to meet the performance specifications when incorporating our technology. Deferred costs are charged to cost of contract revenue when the related revenue is recognized. RESEARCH AND DEVELOPMENT. Research and development expenses consist primarily of salaries and related employee expenses, material costs for prototype and test units and expenses associated with engineering 23 development software and equipment. Prior to 1998 our research and development expenses were incurred primarily in support of design, development and production of stand-alone memory products. Since changing our business model in 1998, we have devoted our research and development efforts primarily to developing the 1T-SRAM technology and the licensing activities required to serve the embedded-memory market. Most of these efforts have been directly related to projects specified in various licensee agreements we have with the early adopters of our memory technology. These projects have included development and design of variations of the 1T-SRAM technology for use in a number of different wafer manufacturing processes used by licensees, the development of interface circuitry that enables embedding our memory on a licensee's integrated circuit, the development and testing of devices to prove the technological feasibility of embedding our memory designs in licensees' products and engineering support to assist in commencement of production of a licensee's products. We generally record engineering cost as research and development expense in the period incurred except when the engineering cost is being deferred under a licensing contract for which technological feasibility has been established. We intend to focus an increasing percentage of our research and development efforts on the development of new intellectual property for licensing to semiconductor companies, electronic product manufacturers and their customers. The success of our business will depend on our ability to develop these new technologies. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses consist primarily of employee-related expenses, occupancy costs, sales commissions to independent sales representatives and professional fees. We pay commissions to our independent sales representatives on most of our sales of stand-alone memory products. We leverage our licensing and co-marketing relationships to promote our technology, and currently do not use sales representatives or distributors in our licensing business. After the offering, we anticipate an increase in our administrative expenses as we hire additional staff and incur additional professional fees to address reporting and similar requirements applicable to a public company. We also anticipate an increase in our sales and marketing expenses as wetime. As processing speeds increase, the number of personnel devoted to the licensing of our technology. RESULTS OF OPERATIONS The table set forth below shows our historical results of operations, expressed as a percentage of revenue. As we changed our business model in the fourth quarter of 1998 and have concentrated our efforts on licensing 24 ~~1T-SRAM technology only since early 1999, these historical results of operations~~pins required and the ~~ensuing discussion~~speed of ~~them are unlikely to be representative of our operating results going forward.~~

~~YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 REVENUE. Revenue increased from $34.8 million~~the bus in 1997 to $36.3 million in 1998, then decreased to $15.4 million in 1999. From 1997 to 1998 we shipped more units of stand-alone memory. The decrease in revenue from 1998 to 1999 reflected the change in our business model to the licensing of our technologya parallel architecture become a limitation on system performance and ~~a corresponding reduction in~~capability. In contrast, the number of ~~new product introductions~~connections is reduced substantially across fewer, higher-rate pins in a serial architecture, and ~~unit shipments. GROSS PROFIT. Gross profit decreased~~data is transferred simultaneously in both directions. Data transfer rates are limited by the data access rates of the various ICs included on the line card, thus leading to bottlenecks when these ICs perform inadequately. In order to remove these bottlenecks and meet next-generation bandwidth requirements, the line card ICs need to support higher access rates enabled by internal memory or high-speed serial bus architectures and these more advanced interface protocols.

Most networking and communication systems sold and in operation today include line cards that process data at speeds ranging from ~~$5.3 million in 1997~~10 Gbps, to ~~$4.4 million in 1998, then increased to $5.3 million in 1999. The decrease in gross profit in 1998 was due to lower average selling prices of stand-alone memories, caused by an over-supply in~~100 Gbps, and support many aggregated slower ports. To accommodate the ~~memory market~~substantial and our product mix which was weighted towards lower margin memories. The increase from 1998 to 1999 again reflected our decision to shift to a licensing-based business model and our reduction of sales of lower margin SGRAM products, together with a recovery in average selling prices. Also thegrowing increase in ~~gross margin~~demand for networking communications and applications, networking systems manufacturers are developing and bringing to market next-generation systems that run at aggregate speeds of 100 Gbps to 400 Gbps or more with developments underway to scale to thousands of Gbps, or terabits, per second. However, although processor performance in ~~1999 resulted from the introduction of our higher-margin 1T-SRAM products. RESEARCH AND DEVELOPMENT. Research~~applications such as computing and ~~development expense increased from $3.6 million in 1997~~networking has continued to $4.2 million in 1998, and then decreased to $3.1 million in 1999. The increase in research and development expenses from 1997 to 1998 resulted primarily from higher prototype and tooling costs associated with qualifying additional manufacturing sources for our stand-alone products. These expenses decreased in 1999 because we had fewer prototype production runs of new products during the period. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expense decreased from $3.2 million in 1997 to $2.8 million in 1998 and $2.4 million in 1999. The decrease over these three years resulted from a 25 reduction in commissions paid to independent sales representatives and in personnel cost due to decreasing product revenue. INTEREST INCOME AND INTEREST EXPENSE. Interest income reflects interest earned on average cash and cash equivalents. Interest income was $523,000, $649,000 and $520,000 in 1997, 1998 and 1999, respectively. The fluctuation in interest income levels corresponded to differences in average cash balances. Interest expense consists of interest on debt and capital lease obligations. Interest expense was $1.0 million, $294,000 and $0 in 1997, 1998 and 1999, respectively. All interest expense was incurred on $13.1 million of notes issued to entities controlled by two of our directors and other unrelated parties. Principal of $6.7 million was converted into Series F preferred stock in 1997. We repaid the balance of these notes in 1998. PROVISION FOR INCOME TAXES. We have incurred losses in each year through 1998 and consequently did not provide for federal or state income taxes. In 1999, a provision of $67,000 was recorded. At December 31, 1999, we had federal net operating loss carryforwards of approximately $15.0 million that we expect to be available to reduce future income tax liabilities to the extent permitted under federal and applicable state income tax laws. The federal net operating loss carryforwards expire from 2002 to 2019. SIX MONTHS ENDED JUNE 30, 1999 AND 2000 REVENUE. Total revenue was $8.1 million and $4.5 million in the six months ended June 30, 1999 and 2000, respectively. Product revenue declined by $4.1 million as we decreased unit shipments of stand-alone memory products, consistent with our decision to focus our efforts on the embedded-memory market. During the six-month period ended June 30, 1999 we recognized contract revenue for the first time, which totaled $460,000. GROSS PROFIT. Gross profit decreased from $2.7 million in the six-month period ended June 30, 1999 to $2.3 million in the same period of 2000, due primarily to the decrease in product revenue. Total gross profit as a percent of total revenue was 33.2% and 50.6% for the six-month periods ended June 30, 1999 and 2000, respectively. The increase occurred primarily because of higher average selling prices on our 1T-SRAM stand-alone memory products. In addition, gross profit for the six months ended June 30, 2000 reflects $267,000 of engineering costs deferred previously under two licensing contract projects that we completed during the period. RESEARCH AND DEVELOPMENT. Research and development expenses were $1.6 million in each of the six-month periods ended June 30, 1999 and 2000 as we have not yet been required to add engineering staff to support our licensing activities. In addition, we recorded approximately $113,000 of engineering expense incurred in the six-month period ended June 30, 2000 as cost of contract revenue. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expenses were $1.2 million and $1.3 million in the six-month periods ended June 30, 1999 and 2000, respectively. The small increase resulted from the addition of staff to support the expansion of sales and marketing activities in licensing our technology. INTEREST INCOME AND INTEREST EXPENSE. Interest income increased from approximately $225,000 in the six-month period ended June 30, 1999 to $459,000 in the corresponding period in 2000. This increase resulted from higher average cash balances in the year 2000 period. 26 QUARTERLY RESULTS OF OPERATIONS The following tables set forth unaudited results of operations data for the six quarters ended June 30, 2000. This unaudited information has been prepared on a basis consistent with our audited financial statements appearing elsewhere in this prospectus and, in the opinion or our management, includes all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the information for the periods presented. The unaudited quarterly information should be read in conjunction with the financial statements and notes included elsewhere in this prospectus.

27 Revenue generally decreased each quarter during the six-quarter period ended June 30, 2000, with the most significant decline occurring from the fourth quarter of 1999 to the first quarter of 2000. This decrease over the six-quarter period was due to the decline in product revenue and unit shipments of stand-alone memory products, consistent with the change in our business model to focusing our efforts on the licensing of embedded-memory technology. In the second quarter of 2000, revenue increased to $2.7 million due to increased unit shipments of our 1T-SRAM stand-alone memory products and recording of contract revenue of $400,000 related to a completed contract. Cost of revenue generally declined during the six-quarter period ended June 30, 2000, reflecting a decrease in unit shipments of stand-alone memory products. Gross profit as a percent of revenue ranged from 30.0% to 37.1% during most of this period, but rose to 54.8% and 47.8% in the first and second quarter of 2000, respectively. The increase in the percentage was due to higher prices received for 1T-SRAM stand-alone memory products. Research and development expenses remained generally constant during the periods, as we shifted engineering resources from product development and introduction to developing intellectual property and supporting our licensees. Selling, general and administrative expenses generally have been flat. These expenses increased moderately in the quarter ending March 31, 2000, despite a decrease in sales commissions paid during the period because we increased marketing expenses related to licensing our technology. Interest income increased each quarter, primarily as our cash position increased and we ceased paying interest expense following the retirement of all outstanding indebtedness in 1998. We believe that quarterly and annual results of operations will be affected by a variety of factors that could materially and adversely affect revenue, gross profit and income from operations. Accordingly, and in light of our limited operating history under our new business model, we believe that period-to-period comparisons of our results of operations should not be relied upon as an indication of future performance. LIQUIDITY AND CAPITAL RESOURCES Since our inception, we have financed our operations through a combination of equity and debt financing. In our most recent equity financing, we issued 650,000 shares of Series H preferred stock in May 2000 to two of our licensees, Galileo Technology, Ltd. and LSI Logic, Inc. with aggregate proceeds to us of $5.2 million. Including this financing, we have raised $35.6 million through the issuance of preferred stock, including $6.7 million of indebtedness converted to preferred stock in 1997. We borrowed an aggregate of $13.1 million through various debt financings between 1996 and 1998. As of June 30, 2000, we had repaid in full all amounts due under these loans. As of June 30, 2000, we had cash and cash equivalents of $19.9 million, an increase of $7.2 million from cash and cash equivalents held as of December 31, 1999. Our primary capital requirements are to fund working capital needs. Net cash used in operations was $6.5 million and $1.2 million in 1997 and 1998, respectively. We generated cash from operations of $3.6 million in 1999. Net cash used in operations in 1997 consisted primarily of the net operating loss, increases in accounts receivable and inventory and decreases in balances payable to related party and accounts payable, offset by an increase in accrued liabilities. Net cash used in operations in 1998 consisted primarily of the operating loss and decreases in accounts payable and accrued liabilities offset by decreases in accounts receivable and inventories. Net cash generated from operations in 1999 resulted principally from decreases in accounts receivable and inventory and the deferral of revenues, offset by a decrease in accounts payable. Net cash provided by investing activities was $6.1 million in 1997, principally as a result of releasing restricted cash previously required to be held as collateral for a line of credit cancelled in that year. Net cash provided by 28 investing activities was approximately $641,000 in 1998, generated from the maturity and sale of short-term securities. In 1999, net cash used in investing activities was approximately $726,000, representing capital expenditure on property and equipment. Proceeds from the sales of preferred stock and existing cash were used to repay $4.2 million of loans in 1997. In 1998, cash generated from the sales of preferred stock was used to repay outstanding loans totaling $6.9 million from entities controlled by two of our shareholders. Our future liquidity and capital requirements are expected to vary from quarter to quarter, depending on numerous factors, including - - level and timing of licensing and stand-alone product revenues; - cost, timing and success of technology development efforts; - market acceptance of our existing and future technologies and products; - competing technological and market developments; - cost of maintaining and enforcing patent claims and intellectual property rights; and - variations in manufacturing yields, materials costs and other manufacturing risks. We will continue to require substantial working capital to fund our operations. We expect that the net proceeds of this offering, together with our existing capital and cash generated from operations, if any, will be sufficient to meet our capital requirements for the next 12 months. However, we cannot be certain that we will not require additional financing at some point in time. Should our cash resources prove inadequate, we might need to raise additional financing through public or private financing. There can be no assurance that such additional funding will be available to us on favorable terms, if at all. The failure to raise capital when needed could have a material, adverse effect on our business and financial condition. We currently do not have any third-party indebtedness. QUANTITATIVE AND QUALITATIVE DISCUSSION OF MARKET INTEREST RATE RISK We invest primarily in short-term bank money market rate accounts, and also have investments in short-term, investment-grade corporate securities. These securities are highly liquid and generally mature within threedouble nearly every 18 months, or less of purchase date. We do not use our investments for trading or other speculative purposes. We do not believe that we have any significant exposure to market risk related to changes in interest rates, foreign currency exchange rates and equity prices. RECENT ACCOUNTING PRONOUNCEMENTS In December 1999, the staff of the Securities and Exchange Commission, or the SEC, issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 provides interpretive guidance on the recognition, presentation and disclosure of revenue in financial statements under certain circumstances. We adopted the provisions of SAB 101 in these financial statements for all periods presented. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 133 ("SFAS 133"), "Accounting for Derivatives and Hedging Activities." SFAS 133 establishes accounting and reporting standards of derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. In July 1999, the Financial Accounting Standards Board issued SFAS No. 137 ("SFAS 137"), "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133." SFAS 137 deferred the effective date until the fiscal year beginning after June 15, 2000. We will adopt SFAS 133 in the quarter ending March 31, 2001. We have not engaged in hedging activities or invested in derivative instruments. 29 In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving Stock Compensation," an interpretation of APB Opinion No. 25. FIN 44 establishes guidance for the accounting for stock option grants or modifications to existing stock options awards and is effective for option grants made after June 30, 2000, but certain conclusions cover specific events that occur after either December 15, 1998 or January 12, 2000. FIN 44 also establishes guidance for the repricing of stock options and determining whether a grantee is an employee, for which the guidance was effective after December 15, 1999 and modifying a fixed option to add a reload feature, for which the guidance was effective after January 12, 2000. The adoption of certain of the provisions of FIN 44 prior to June 30, 2000 did not have a material effect on the financial statements. We do not expect that the adoption of the remaining provisions to have a material effect on the financial statements. 30 BUSINESS COMPANY OVERVIEW We design, develop, license and market memory technologies used by the semiconductor industry and electronic product manufacturers. We have developed an innovative embedded-memory technology, called 1T-SRAM, that offers major advantages over traditional embedded six transistor SRAM, or traditional SRAM. Our patented 1T-SRAM technology offers a combination of high density, low power consumption and high speed at performance and cost levels that other embedded memory technologies do not match. We license our 1T-SRAM technology on a non-exclusive and worldwide basis to semiconductor companies and electronic product manufacturers. From our inception until 1998, we focused primarily on the development of innovative memory technologies and the sale of stand-alone memory products. Development of our stand-alone memory products during the early years of our existence enabled us to validate critical elements of the 1T-SRAM technology. In the fourth quarter of 1998, we changed our business model to focus primarily on the licensing of our 1T-SRAM technology, which we expect will represent a majority of our future revenue. We generate contract revenues from our licensing activities which consist of fees paid for engineering development and engineering support services. Under all our licensing agreements, we will receive royalties when our licensees manufacture or sell products that incorporate our technology. INDUSTRY BACKGROUND TRENDS IN THE SEMICONDUCTOR INDUSTRY Electronic products play an increasingly important role in our lives, as evidenced by the growth of the personal computer, wireless communications, networking equipment and consumer electronics markets. These markets are characterized by intensifying competition, rapid innovation, increasing performance requirements and continuing cost pressures. To manufacture electronic products that achieve optimal performance and cost levels, semiconductor companies must produce integrated circuits that offer higher-performance, greater functionality and lower-cost. Two important measures of performance are speed and power consumption. Higher-speed integrated circuits can allow electronic products to operate faster, enablingeven sooner, the performance of ~~more functions. Reducing the~~memory technology has generally been able to double only once every 10 years. Existing memory IC solutions based on parallel interface architecture easily support speeds up to 40 Gbps, but are not optimal for meeting speeds of 100 Gbps and beyond due to system-level limitations for pin counts, power ~~consumption~~and performance. These networking and communications systems are generally comprised of ~~integrated circuits contributes~~a chassis populated by four to ~~increased battery life and reduced heat generation in electronic products. Reduced power consumption also enables integrated circuit designers~~16 line cards. Often, these systems are shipped to overcome costly design hurdles, such as meeting the thermal limitations of low-cost packaging materials. In addition to offering high performance products, semiconductor companies must produce integrated circuits that are cost effective. High-density integrated circuits reduce the amount of silicon on the integrated circuit, thus reducing the size and costcustomers with only a portion of the integrated circuit. Cost reduction can also be achieved by simplifying the integrated circuit's manufacturing process and improving manufacturing yield. Additionally, to avoid the high cost of substantial redesigns, semiconductor companies can use technology which is scalable, which means it can be readily incorporated into multiple generations of manufacturing process technologies. IMPORTANCE OF INTEGRATION For decades, the semiconductor industry has continuously increased the value of integrated circuits by improving their density, power consumption, speed and cost. The main driver for these improvements has been the success of shrinking the size of the basic semiconductor building block, or transistor. Transistors have become small enough to make it economical to combine multiple functions, such as microprocessors, memory, analog components and digital signal processors, on a single integrated circuit, in what is commonly referred to as System-on-a-Chip, or SOC. Highly integrated circuits such as SOCs often offer advantages in density, power consumption, speed and cost that cannot be matched using separate, discrete integrated circuits. SOCs are essential for most electronic products, such as cellular phones, video game consoles, networking equipment and 31 Internet appliances, to achieve desired performance at a reasonable cost. According to Dataquest, Inc., a technology market research company, the SOC market is projected to grow from more than $14 billion in 1999 to over $58 billion by 2004, representing a compound annual growth rate of approximately 33%. IMPORTANCE OF EMBEDDED MEMORY Historically, semiconductor companies implemented memory in separate integrated circuits. Rather than using separate memory circuits, semiconductor companies today are embedding memory on highly integrated circuits, in order to optimize performance and size. The increasing sophistication of electronic products is driving a rapid increase in the amount of memory required. According to Dataquest, in 2000 the percentage of silicon area of a typical SOC occupied by memory is 32% and is expected to rise significantly over the next five years. We believe this percentage will exceed 70% by 2003. The high cost of incorporating the memory component represents a major challenge to achieving high levels of integration. Embedded memory accounts for an increasing percentage of the size of a highly integrated circuit and is often the slowest or rate limiting function in the circuit. Not only must integrated circuits contain a larger amount of embedded memory, this memory must be dense enough to be economically attractive and must offer sufficiently high speed and low power consumption. Embedded memory has become a crucial design consideration for determining the overall cost and performance of highly integrated circuitsline card slots populated, and the ~~growing number of electronic products in which they are incorporated. TRADITIONAL SRAM The most widely used embedded memory today utilizes traditional SRAM technology,~~customer will add additional line cards subsequently to increase system performance, capacity and has the following characteristics - - it operates at the same high speeds as other functions of the integrated circuit; - its simple and familiar interface allows for quick design into an integrated circuit with less risk that the design will not function according to specification; and - it utilizes the standard logic manufacturing process that is both economical and the most widely available. As memory requirements increase, however, traditional SRAM becomes relatively more expensive compared to the total cost of the integrated circuit. Specifically, traditional SRAM has the following drawbacks that can lead to higher cost - - itfeatures.

Each line card requires ~~a substantial amount of silicon area because of its low density; and - it consumes~~ a significant amount of ~~power when operating at high speeds. To overcome the density limitations of traditional SRAM, some manufacturers have utilized embedded~~memory to support its processing capabilities. Traditional external memory IC solutions currently used on line cards include both dynamic random access memory, or ~~embedded DRAM. While embedded~~ DRAM, ~~is denser~~and static random access memory, or SRAM. Line cards in networking systems use both specialized, high-performance DRAM ICs, such as reduced-latency DRAM, or RLDRAM,low-latency DRAM, or LLDRAM, and commodity DRAM, such as double data rate, or DDR. The latest DDR memory called high-bandwidth memory, or HBM, provides high bandwidth, but has fundamentally slow access time. For very high access, networking systems use higher-performance SRAM ICs such as quad data rate, or QDR SRAM. These memories are very fast, but are much smaller, more costly and burn more power than traditional ~~SRAM, it~~DRAM. Substantially all of these traditional memory IC solutions use parallel interfaces, which are slower than serial interfaces, so we believe they will be increasingly challenged to meet the performance, pin count, area and power requirements as networking systems expand beyond 100 Gbps. The result is ~~typically ten times slower. Manufacturing~~a gap between processor and memory performance. To meet the higher performance requirements being demanded by the industry, while using current components and architectural approaches, system designers must add more discrete memory ICs to the line cards and/or add more embedded ~~DRAM also requires additional process steps and~~memory on the packet processor. This results in ~~low yields, which translate into increased manufacturing time~~higher cost and cost. Additionally, because of its complex interface requirements, embedded DRAM is more difficult to incorporate on integrated circuits, leading to a higher risk of failure. As integrated circuit designers have experimented with embedded DRAM, they have discovered that these limitations of embedded DRAM preclude its use in almost all applications. Therefore, traditional SRAM continues to be the most widely used technology for embedded memory. One of the major challenges for the semiconductor industry today is to find an embedded memory solution that combines high density, low

power consumption, ~~high speed~~the use of more space on the line cards and ~~low cost. SOLUTION~~ additional communication interference between the ICs, which in turn results in additional bandwidth limitation problems. We believe our Bandwidth Engine family of products is well suited to address these challenges and replace these traditional memory solutions.

We have developed our ICs to synergistically address the need for high-speed data access and throughput currently confronting system designers. We expect our IC products to meet the increasing demands placed on conventional memory technology used on the line cards in high-speed systems. We believe that our products and technology are well positioned as replacements for existing IC solutions in order to meet the needs of a growing number of data processing applications with aggregate rates greater than 100 Gbps that require high bandwidth and high access rate to memory.

We have leveraged our proprietary intellectual property, or IP, to design our IC products to help networking OEMs address the growing bottlenecks in system performance. We have incorporated critical features into our product families to accomplish this objective.

One significant performance bottleneck in any network line card is the need to transfer data between discrete ICs. Many of these data-transfer operations are iterative in nature, requiring subsequent,back-to-back accesses of the memory IC by the processor IC. Our Bandwidth Engine ICs include an ~~innovative~~arithmetic logic unit, or ALU, which enables the performance of mathematical operations on data. Moving certain processing functions from the processor IC to the Bandwidth Engine IC through the use of this embedded ALU, reduces the number of processing transactions and frees the processor IC to perform other important networking or micro-processing functions.

The PSE takes this concept one step further by incorporating integrated search-optimized processors. The processors can be programmed by the user to offload and accelerate standard and/or customized functions from the main processor thereby reducing memory ~~architecture, 1T-SRAM~~transactions and data path complexity to provide improved performance and lower system latency.

High-speed, efficient interfaces are critical building blocks to meet high data transfer rate requirements for communication between ICs on network line cards. We believe that current networking system requirements necessitate an industry transition from parallel to serial interface. As a result, semiconductor companies are increasingly turning to serial interface architectures to achieve needed system performance. For example, high-performance ICs that are sold into wide markets, such as field programmable gate arrays, or FPGAs, and network processing units, NPUs, are using serial interfaces to ensure they can compete with custom designed application specific ICs, or ASICs, by matching their performance. Using serial interfaces, IC developers also are able to reduce pin count (the wired electrical pins that connect an IC to the network line card on which it is mounted) on the IC. With reducing geometries, the size of most high-performance ICs is dictated by the number of pins required, rather than the amount of logic and memory embedded in the chip. As a result, using serial interface facilitates cost reduction and reduced system power consumption, while improving the performance of both the IC itself and the overall system. While serial interfaces provide significantly enhanced performance over parallel interfaces, SerDes interfaces traditionally have had higher power consumption, which ~~provides major advantages over traditional SRAM in density,~~is a challenge for IC designers. Our SerDes interfaces, however, are optimized to meet our customers’ signal integrity, low- power consumption and ~~cost, thus making it more economical for designers to 32~~ ~~incorporate large amounts of embedded memory in their designs.~~latency requirements.

We make our interface technologies compliant with industry standards so that they can interoperate with interfaces on existing ICs. In addition, ~~1T-SRAM technology offers all~~we make them programmable to support multiple data rates, which allows for greater flexibility for the system designer, while lowering their development and validation costs. Interoperability reduces development time, thereby reducing the overall time to market of our customers’ systems.

In addition to the physical characteristics of the ~~benefits of traditional SRAM, such as high~~serial interface, the protocol used to transmit data is also an important element that impacts speed ~~simple~~and performance. To address this and complement our Bandwidth Engine devices, we have developed the GigaChip^® Interface protocol, or GCI, which is an open-interface transport protocol optimized for efficientchip-to-chip communications. The GCI electrical interface is compatible with the current industry standard (Common Electrical Interface, release #11, orCEI-11G-SRand ~~ease of manufacturability. Its core architecture~~XFI) to simplify electrical interoperability between devices. GCI can enable highly efficient serial chip-to- chip communications, and its transport efficiency averages 90% for the data transfers it handles. GCI is ~~already production proven~~included in ~~millions~~our ICs and is offered to customers and prospective partners on terms intended to encourage widespread adoption.

The high-density of our ~~stand-alone memory products and offers integrated circuit designers~~proprietary1T-SRAM technologies stems from the ~~following characteristics compared~~use of a single-transistor, or 1T, which is similar to ~~traditional SRAM -~~

~~Our 1T-SRAM technology can achieve these advantages while utilizing standard logic manufacturing processes and the simple, standard SRAM interface that designers are accustomed to today. HIGH DENSITY~~DRAM, with a storage cell for each bit of information. Embedded memory utilizing our1T-SRAM ~~technology~~ technologies is typically two to three times denser than thesix-transistor storage cells used by traditional SRAM. Increased density enables manufacturers of electronic products, such as cellular phones and video game consoles, to incorporate additional functionality into a single integrated circuit, resulting in overall cost savings. Semiconductor designers can take advantage of the high density of 1T-SRAM technology and embed large quantities of high-performance memory and other components that in the past might not have been feasible. LOW POWER CONSUMPTIONSRAM, or6T-SRAM. Embedded memory utilizing our 1T-SRAM ~~technology~~technologies typically ~~consumes~~provides speeds essentially equal to or greater than the speeds of traditional SRAM and DRAM, particularly for larger memory sizes. Our1T-SRAM memory designs can sustain random access cycle times of less than ~~one-quarter~~three nanoseconds, significantly faster than DRAM technology. Embedded memory utilizing our1T-SRAM technologies can consume as little asone-half the active power and ~~generates~~generate less heat than traditional SRAM when operating at the same speed. ~~This feature facilitates longer battery life~~The1T-SRAM allows us to integrate more high-performance memory using less expensive processing technology, reduces system level heat dissipation and enables reliable operation using lower-cost packaging. ~~HIGH SPEED Embedded~~

Our primary business objective is to be a profitableIP-rich fabless semiconductor company offering ICs that deliver unparalleled memory ~~utilizing~~bandwidth and access rate performance for high-performance data processing in cloud networking, security appliances, video, test and monitoring, and data center systems. The key components of our ~~1T-SRAM technology typically provides speeds equal~~strategic plan include the following strategies:

Our initial strategy is to target the multi-billion-dollar networking telecommunications, security appliance and data center OEM equipment markets, and we have developed products to support the growth in 100 Gbps and higher networking speeds. We are currently supporting numerous customers, with whom we have achieved design wins. We continue to actively pursue additional design wins for the use of our ICs in our target markets. We believe our design wins represent the potential for significant future revenue growth. With limited history to date, however, we cannot estimate how much revenue each design win is likely to generate, or ~~greater than~~how much revenue all of these (and future design wins) are likely to generate. There is no assurance that these customer designs will be shipped in large volume by our customers to their customers, however.

We have provided our GCI interface protocol as an open industry standard that may be designed into other ICs in the system, as we believe this will further enable serial communication on network line cards and encourage adoption of ~~traditional SRAM, especially for larger memory sizes. Our 1T-SRAM memory can sustain random access cycle times~~our Bandwidth Engine IC products. A number of ~~less than three nanoseconds.~~IC providers and partners have publicly announced their support of GCI and Bandwidth Engine, including the largest FPGA providers, Altera Corporation (a subsidiary of Intel Corporation), Xilinx, Inc., and EZchip Semiconductor Ltd. (a subsidiary of Mellanox Technologies Ltd.), with whom we work closely to support common customers. In ~~today's 0.18-micron manufacturing process technology,~~addition, multiple networking systems companies, including actual and prospective customers, have adopted GCI.

Build Long-Term Relationships with FPGA Vendors and Suppliers of Data Processing Solutions

We believe that having long-term relationships with FPGA providers is critical to our ~~1T-SRAM technology can operate~~success, as such relationships enable us to reduce ourtime-to-market, provide us with a ~~random access frequency in excess~~competitive advantage and expand our target markets. A key consideration of 300 megahertz for multi-megabit memory. MANUFACTURING PROCESS INDEPENDENCE We have been able to implement our technology without requiring the manufacturer to make any significant changes to either standard logic or alternative manufacturing processes. 1T-SRAM's portability or the ease with which it can be implemented in different semiconductor manufacturing facilities, has been silicon-proven at TSMC, UMC and Chartered, the world's three largest independent foundries. 1T-SRAM's scalability, or the ease with which it can be implemented in different generations of manufacturing processes, has already been silicon- proven in 0.25-micron, 0.18-micron and 0.15-micron process generations. We expect our technology to continue to scale readily to future process generations. This portability and scalability provides for wide availability, inexpensive implementation and quick product time to market for our licensees. SIMPLICITY OF INTERFACE Our 1T-SRAM technology utilizes the simple, standard SRAM interface thatnetwork system designers are accustomed to today. Our use of this standard high-performance interface minimizes design time, thus optimizing time to market for our licensees. This simple interface also helps minimize the risk that integrated circuit designs will not operate according to specifications. 33 ~~STRATEGY AND BUSINESS MODEL Our goal~~ is to ~~establish~~demonstrate interoperability between our ~~1T-SRAM technology as~~IC products and the ~~standard for~~data processing utilized in their systems. To obtain design wins, we must demonstrate this interoperability, and also show that our IC works optimally with the ~~embedded memory market. We intend~~packet processor to achieve ~~this goal by licensing~~the performance requirements. In addition, our ~~technology on a non-exclusive and worldwide basis to semiconductor companies and electronic product manufacturers. The following are integral aspects of our~~current strategy and business model. PROLIFERATE TECHNOLOGY THROUGH A DIVERSE DISTRIBUTION STRATEGY Our solution offers performance features and cost benefits that existing embedded memory solutions do not provide. We have strategic relationships with many companies, including Allayer Communications, Analog Devices, Chartered, Galileo Technology, Lara Networks, Lexra, LSI Logic, Lucent, NEC, Nintendo, Pixelworks, PMC-Sierra, TSMC, UMC, Via Technologies and Virage Logic. We license our technology to semiconductor companies who incorporate our technology into integrated circuits that they then sell to customers. We also license our technology to electronic product manufacturers, who then require theirrequires packet processor suppliers to adopt our GCI interface. To that end, we have been working closely with FPGA and application specific standard product providers, to enable interoperability between our Bandwidth Engine IC products and their high-performance products. To facilitate the acceptance of our Bandwidth Engine ICs, we have made available development and characterization kits for system designers to evaluate and develop code for next-generation networking systems. Our characterization kits are fully-functional hardware platforms that allow FPGA and ASIC providers, and their customers, to demonstrate interoperability of the Bandwidth Engine IC with the ASIC or FPGA the designers use within their networking systems.

The Bandwidth Engine is a memory-dominated IC that has been designed to be a high-performance companion IC to packet processors. While the Bandwidth Engine primarily functions as a memory device with a high-performance and high-efficiency interface, it also can accelerate certain processing operations by serving as aco-processor element. Our Bandwidth Engine ICs combine: (1) our proprietary high-density, high-speed, low latency embedded memory, (2) our high-speed serial interface technology, or SerDes, (3) an open-standard interface protocol and (4) intelligent access technology. We believe an IC combining our1T-SRAM memory and serial interface with logic and other intelligence functions provides a system-level solution and significantly improves overall system performance at lower cost, size and power consumption. Our Bandwidth Engine ICs can provide up to and over 4.5 billion memory accesses per second, which is more than twice the performance of current memory-based solutions. They also can enable system designers to significantly narrow the gap between processor and memory IC performance. Customers that design Bandwidth Engine ICs onto the line cards in their networking systems willre-architect their systems at the line-card level and use our product to replace traditional memory solutions. When compared with existing commercially available solutions, our Bandwidth Engine ICs may:

provide up to four times the performance;

reduce power by approximately 50%;

reduce cost by greater than 50%; and

result in a dramatic reduction in IC pin counts on the line card.

Our first-generation Bandwidth Engine IC products contain 576 megabytes, or MB, of memory and use a serial interface with up to 16 lanes operating at up to 10.3 Gbps per lane. We announced theend-of-life of these products and expect to complete fulfillment of last-time customer orders by June 30, 2019.

Our second-generation Bandwidth Engine IC products contain 576 MB of memory and use a SerDes interface with up to 16 lanes operating at up to 15 Gbps per lane. In addition ~~we engage in co-marketing activities with foundries and design companies to promote our technology~~ to a ~~wide base~~speed improvement of up to 50% over our first-generation products, the architecture has enabled multiple family-member parts with added specialized features. We have been shipping our Bandwidth Engine 2 IC products since 2013 and expect these products to be our primary revenue source for the foreseeable future.

Our third-generation Bandwidth Engine IC products contain 1152 MB of memory and use a SerDes interface with up to 16 lanes operating at up to 30 Gbps per lane. Bandwidth Engine 3 targets support for packet-processing applications with up to five billion memory single word accesses per second, as well as burst mode to enable full duplex buffering up to 400 Gbps for ingress, egress and oversubscription applications. The devices provide benefits of size, power, pin count and cost savings to our customers. We ~~believe that~~do not anticipate significant revenues from these ~~distribution channels will broaden the acceptance and availability of~~products until 2019 or later.

We brought our ~~technology~~PSE IC products to market in the industry. Because our technology is becoming available through an increasing number of channels, it is less likely that customers will be required to alter their procurement practices in order to acquire our technology. We intend to continue to expand significantly this base of strategic relationships2016 to further ~~proliferate~~leverage our ~~technology. TARGET LARGE AND GROWING MARKETS Although~~proven serial interface technology and high-density integrated memory with the processor engine architecture to enable high-speed customizable search, security, and data analysis functions for networking, security, and data center applications. Our PSE architecture features 32 search-optimized processor engines, data flow schedulers, and over a terabit of internal access bandwidth. The device leverages our ~~1T-SRAM~~GCI technology ~~is applicable to many markets,~~and high-density integrated memory (1152 Mb of1T-SRAM embedded memory).

Historically, we ~~presently focus~~have offered our memory and interface technologies on the rapidly growing communications and consumer electronics sectors. These sectors increasingly require embedded memory solutions with higher density, lower power consumption, higher speeds and lower cost. We will also focus over the longer term on other markets that are projected to achieve strong, long-term growth. WORK CLOSELY WITH OUR LICENSEES AND CO-MARKETERS TO DELIVER OPTIMAL TECHNOLOGY SOLUTIONS We intend to continue to work closely with our licensees and co-marketers to gain broad and detailed insight into their own and their customers' current and next-generation technology requirements. This insight helps us identify trends and focus our development efforts on optimizing our technology solution, resulting in shorter product time to market and lower costs. EXTEND TECHNOLOGY LEADERSHIP Our goal is to continue to enhance our 1T-SRAM architecture and increase our share of the embedded memory market. We will continue to develop our technology in order to offer even higher-density, lower-power-consumption, higher-speed and lower-cost designs for our licensees. We will continue to invest heavily in research and development to develop related embedded memory technologies. LEVERAGE STAND-ALONE PRODUCT LINE TO DEMONSTRATE LEADING-EDGE TECHNOLOGY Stand-alone product revenue has constituted a majority of our historical revenue. We expect to continue to generate stand-alone product revenue, as these products serve to demonstrate the manufacturability of our leading-edge technologies. Our direct involvement in these products also helps to keep our research and development efforts focused on delivering leading-edge technologies and meeting industry requirements. 34 FOCUS ON HIGHER-MARGIN LICENSING MODEL Our intellectual property licensing revenue consists of contract revenue and royalties. This licensing revenue typically produces higher gross margins than can be achieved with our stand-alone memory products. We intend to focus on our intellectual property licenses as the major source of our future revenue. STRATEGIC RELATIONSHIPS We offer our technology on a non-exclusive and worldwide basis to semiconductor companies, electronic product manufacturers, foundries, intellectual property companies and design ~~companies. An important element~~companies through product development, technology licensing and joint marketing relationships. We licensed our technology to semiconductor companies who incorporated our technology into ICs that they sold to their customers. As a result of the change in our corporate strategy, since 2012, our licensing activities have primarily been limited to collecting royalties on existing agreements, and we expect this trend to continue. Royalty and other revenue represented 12% of our ~~strategy is to offer~~total revenues for the six-months ended June 30, 2018. Royalty and other revenue generated from our ~~technology broadly~~existing agreements represented 11%, 24%, and 45% of our total revenue for the years ended December 31, 2017, 2016, and 2015, respectively. Licensing and royalty revenues have been declining since 2010, and we expect continued decline of royalty revenues in ~~order to establish 1T-SRAM technology as the standard in the embedded memory market. Our licensees~~2018.

Research and ~~co-marketers act as important indirect channels to promote our technology. The following table lists our current 1T-SRAM technology relationships, in reverse chronological order.~~

~~The following table illustrates our current co-marketing relationships, in reverse chronological order.~~

~~RESEARCH AND DEVELOPMENT~~ Development

Our ability to compete in the future ~~will depend~~depends on successfully improving our technology to meet the ~~market's increasingly demanding~~market’s increasing demand for higher performance and lower cost requirements. We have assembled a team of highly skilled engineers whose activities are focused on developing even higher-density, lower-power-consumption, higher-speed and lower-cost 1T-SRAM designs. We expect to continue to focus our research and development efforts on extending our 1T-SRAM technology and developing new memory technologies. We will also continue our focus on porting our technology to additional semiconductor manufacturing facilities and scaling our technology to new generations of manufacturing process technologies. 35 As of June 30, 2000, we employed 22 engineers, representing 59% of our employees, with specific expertise in circuit design and layout and in a variety of manufacturing processes. For the years ended 1997, 1998 and 1999, research and development expenditures totaled approximately $3.6 million, $4.2 million and $3.4 million, respectively. During the first six months of 2000, our research and development expenditures were approximately $1.6 million. TECHNOLOGY Our innovative 1T-SRAM technology includes many new and proprietary architectural features. Development of our ~~stand-alone memory~~IC products ~~during~~requires specialized chip design and product engineers, as well as significant fabrication and testing costs, including mask costs, as we bring these products to market. During 2017, we substantially reduced our headcount, and have limited internal resources available for new IC product development, which will result in fewer product improvements and new developments. In the ~~early years~~near term, our planned product roadmap will include software-based capabilities and features that leverage our existing base of ~~our existence was critical~~IC products.

We believe that systems OEMs typically prefer to validating elements of the 1T-SRAM technology we license today. This technology combines the high density advantages of DRAM with the high performance and utility of SRAM. Underlying this architecture are several distinct pieces of proprietary technology. SINGLE-TRANSISTOR MEMORY CELL The high density of 1T-SRAM stems fromextend the use of ~~a single-transistor, or 1T, storage cell for each bit of information, which is similar to DRAM. Our 1T storage cell using one transistor~~traditional memory solutions and one capacitor represents a very significant improvement in density over the six-transistor storage cells used by traditional SRAM. The following diagrams illustrate the difference between the traditional SRAM storage cell and our 1T-SRAM storage cell. The diagrams are drawn to scale, but not to actual size. [EDGAR REPRESENTATION OF PRINTED GRAPHIC] [THE GRAPHIC ON THE LEFT, LABELED "SIX TRANSISTOR STORAGE CELL SCHEMATIC", ILLUSTRATES THE BASIC STRUCTURE OF A SIX TRANSISTOR SRAM MEMORY CELL. THE ILLUSTRATION SHOWS WORD LINES AND BIT LINES CONNECTED BY SIX TRANSISTORS, WHICH ARE REPRESENTED BY THEIR NORMAL ELECTRICAL SCHEMATIC SYMBOLS. THE GRAPHIC ON THE RIGHT, LABELED "1T-SRAM STORAGE CELL SCHEMATIC", ILLUSTRATES THE BASIC STRUCTURE FOR A 1T-SRAM MEMORY CELL. THIS ILLUSTRATION SHOWS A WORD LINE AND BIT LINE CONNECTED BY ONE TRANSISTOR, AGAIN REPRESENTED BY ITS NORMAL ELECTRICAL SCHEMATIC SYMBOL.] [UNDERNEATH EACH OF THE SCHEMATICS, THERE IS A SQUARE THAT REPRESENTS THE AREA OF THE MEMORY CELL. THE SIX TRANSISTOR SRAM SQUARE IS SIGNIFICANTLY LARGER THAN THE 1T-SRAM SQUARE.] MULTIBANK TECHNOLOGY The high speed and low power consumption of 1T-SRAM are enabled by our MultiBank technology, as illustrated below. This technology efficiently partitions the memory into many, typically hundreds, of fast, small sub-blocks of memory, or banks, that can operate independently over high-speed data buses. Only one small bank containing 36 the required memory data must be active for each access to the memory. Therefore, the remaining banks can stay in a low-power, standby mode, reducing the overall power consumption of the memory. [EDGAR REPRESENTATION OF PRINTED GRAPHIC] [GRAPHIC DEPICTS MOSYS' MULTIBANK PARTITIONING TECHNOLOGY USED IN 1T-SRAM. IT CONSISTS OF MANY ROWS AND COLUMNS REPRESENTING BANK CELLS, WITH TWO-WAY HORIZONTAL ARROWS REPRESENTING HIGH SPEED DATA BUSES CROSSING THROUGH THE BANKS AND TERMINATING AT A RECTANGULAR COLUMN ON THE RIGHT, LABELED "SRAM INTERFACE".] STANDARD SRAM INTERFACE Our architecture incorporates all of the circuitry required to present the simple hightheir parallel interfaces, despite performance interface to which integrated circuit designers are accustomed. Our 1T-SRAM technology appears to the rest of the integrated circuit and the designer as if it were traditional SRAM. ABILITY TO USE STANDARD LOGIC MANUFACTURING PROCESS Another key area of innovation in our 1T-SRAM memory technology is the ability to use a standard logic manufacturing process. This is advantageous because standard logic is the most widely available process. As many of the other functions on an integrated circuit are implemented in a standard logic process, the ability to implement 1T-SRAM memories using the same process saves time and costs ~~for the manufacturer. Other embedded memory technologies do not achieve the same density~~challenges, and ~~performance using the standard logic process. LICENSED TECHNOLOGY AND STAND-ALONE PRODUCTS We license the 1T-SRAM~~are reluctant to change their technology ~~in the form of customized memory~~platforms and adopt new designs and ~~memory compilers. Compilers~~technologies, such as serial interfaces, which are software programs that translate required memory design parameters into actual physical circuit designs. We also make and sell stand-alone memory products based on our 1T-SRAM technology. 37 LICENSED MEMORY DESIGNS We offer standard memory designs and generate customized memory designs to meet a specific customer's design parameters. We also offer a variety of options for interface and power management. Our licensed memory designs can be ported to the manufacturing processes of leading foundries and semiconductor manufacturers. The table below details the variety of specificationsan integral part of our ~~customized memory designs.~~

~~MEMORY COMPILERS AND COMPILED MEMORY SOLUTIONS In January 2000, we announced 1T-SRAM compilers for TSMC's 0.18-micron~~product solutions. Therefore, our principal selling and ~~0.15-micron standard logic processes~~marketing activities to date have been focused on persuading these OEMs and key component specialists that our solutions provide critical performance advantages, as ~~part of a joint development agreement~~well as on securing design wins with ~~Virage Logic. Under this agreement, we will license these compilers to enable our licensees and their customers to automatically generate and configure 1T-SRAM designs.~~ them.

In addition to ~~licensing~~our direct sales personnel, we sell through sales representatives and distributors in the ~~1T-SRAM compilers, companies will be able~~United States and Asia. We also have applications engineers who support our customer engagements and engage with the customers’ system architects and designers to ~~license standard 1T-SRAM pre-compiled memory designs from us. We expect to develop additional 1T-SRAM compilers for other processes at TSMC~~propose and ~~other foundries. STAND-ALONE MEMORY PRODUCTS We offer a range of stand-alone memory products that utilize the 1T-SRAM technology~~implement our IC and offer high performance and low power consumption but are cost competitive with other commercially available memory products. We have developed these 1T-SRAM products in a number of configurations, bit densities and clock speeds to support specific targeted products. We sell our products mostly to suppliers of communications equipment,IP solutions, such as ~~Accton Technology Corporation, Cisco Systems,~~the GCI Interface, to address their systems challenges.

In the markets we serve, the time from initial customer engagement to design win to production volume shipments can range from 18 to 36 months. Networking, communications and security appliance systems can have a product life from a few years to over 10 years once a product like ours has been designed into the system.

Our revenue has been highly concentrated, with a few customers accounting for a significant percentage of our total revenue. For the six-months ended June 30, 2018, Flextronics International, Ltd., or Flextronics, and Nokia, formerly Alcatel-Lucent, and Palo Alto Networks, Inc., ~~Cobalt Networks, Foundry Networks, Integral Technologies, International Business Machines Corporation, Lucent~~represented 33%, 8% and ~~Maxtek Technology~~22% of total revenue, respectively. For the year ended December 31, 2017, Flextronics, Clavis Company ~~Ltd. In addition to these existing stand-alone memory products, we are currently developing new products based on~~and Nokia, represented 46%, 17% and 11% of total revenue, respectively. For the ~~1T-SRAM technology for our customers. We also sell a limited number~~year ended December 31, 2016, Alcatel-Lucent, Clavis Company and Taiwan Semiconductor Manufacturing Co., Ltd., or TSMC, represented 47%, 21% and 13% of ~~stand-alone memory products based on some of our earlier technologies to customers who have incorporated these integrated circuits into their existing product lines. INTELLECTUAL PROPERTY~~ total revenue, respectively.

We regard our patents, copyrights, trademarks, trade secrets and similar intellectual property as critical to our success, and rely on a combination of patent, trademark, copyright, and trade secret laws to protect our proprietary rights.

As of ~~June 30, 2000,~~August 31, 2018, we held 3068 U.S. and 43 foreign patents on various aspects of our technology, with expiration dates ranging from ~~2013~~2018 to ~~2018. Our 1T-SRAM technology incorporates technology covered by seven patents.~~2035. We ~~currently have 20~~also held 10 pending ~~U.S.~~ patent applications in the U.S. and have received notices of allowance with respect to two of these applications. We also hold eight foreign patents with expiration dates ranging from 2009 to 2019, and 21 pending foreign patent applications.abroad. There can be no assurance that others will not independently develop or patent similar or competing technology or design around any patents that may be issued to us, or that we will be able to ~~be able to~~successfully enforce our patents against ~~infringement.~~ infringement by others.

The semiconductor industry is characterized by frequent litigation regarding patent and other intellectual property rights. ~~While~~Our licensees or we might, from time to time, receive notice of claims that we have ~~not received formal notice~~infringed patents or other intellectual property rights owned by others. Our successful protection of any infringement of the rights of any third party, questions of infringement in the semiconductor field involve highly technical and subjective analyses. Litigation may be necessary in the future to enforce our patents and other intellectual property rights and our ability to ~~protect our trade secrets,~~make, use, import, offer to ~~determine~~sell, and sell products free from the ~~validity and scope of the proprietary~~intellectual property rights of others orare subject to ~~defend against claims~~a number of ~~infringement or invalidity, and there can be no assurance that we would prevail in any future litigation. Any such litigation, 38~~ whether or not determined in our favor or settled by us, would be costly and would divert the efforts and attention to our management and technical personnel from normal business operations, which would have a material adverse effect on our business, financial condition and results of operations. Adverse determinations in litigation could result in the loss of our proprietary rights, subject us to significant liabilities, require us to seek licenses from third parties or prevent us from licensing our technology, any of which could have a material adverse effect on our business, financial condition and results of operations. Moreover, the laws of certain foreign countries in which our technology is or may in the future be licensed may not protect our intellectual property rights to the same extent as the laws of the United States, thus increasing the possibility of infringement of our intellectual property. SALES AND MARKETING We market our technology to semiconductor companies, electronic product manufacturers, foundries and design companies. An important element of our strategy is to offer our 1T-SRAM technology broadly in order to establish it as the standard in the embedded memory market. In order to focus our sales and marketing resources, we generally enter into a license when the licensee has identified an initial product that will utilize our technology. The licensee can then incorporate the technology into additional productsfactors, particularly those described under the, terms of the original license. Our licensees and co-marketers act as distribution channels by incorporating our technology into their integrated circuits or manufacturing processes. Our licensees include semiconductor manufacturers, fabless semiconductor companies and electronic product manufacturers. Our co-marketers include foundries, intellectual property companies and design service companies, as they all can help proliferate our technology to semiconductor manufacturers and fabless semiconductor companies. Semiconductor manufacturers and fabless semiconductor companies can also use our technology for their customers, electronic product manufacturers. They introduce our technology to their customers, who in turn could incorporate our technology into their future product specifications. These distribution channels reduce our need to build a large, internal sales force. Below is an illustration of our sales and marketing channels: [EDGAR REPRESENTATION OF PRINTED GRAPHIC] [SALES CHANNEL STRUCTURE DIAGRAM] [GRAPHIC DEPICTS OUR SALES CHANNEL STRUCTURE. THE MOSYS LOGO, LOCATED AT THE TOP OF THE DIAGRAM, HAS ARROWS POINTING TO THREE SALES CHANNELS, REPRESENTED BY THREE BOXES LABELED "FOUNDRIES AND IP/DESIGN SERVICE COMPANIES", "SEMICONDUCTOR MANUFACTURERS" AND "FABLESS SEMICONDUCTOR COMPANIES". THESE THREE BOXES HEAD VERTICAL COLUMNS ACROSS THE PAGE, FROM LEFT TO THE RIGHT. THE LEFT BOX LABELED "FOUNDRIES AND IP/DESIGN SERVICE COMPANIES" HAS LOGOS FOR TSMC, UMC AND VIRAGE LOGIC UNDER IT, AND ARROWS POINTING TOWARD THE OTHER TWO COLUMNS. THE MIDDLE BOX LABELED "SEMICONDUCTOR MANUFACTURERS" HAS LOGOS FOR LSI LOGIC AND NEC UNDER IT, AND ARROWS POINTED TOWARD THE COLUMN LABELED "FABLESS SEMICONDUCTOR COMPANIES". THE RIGHT BOX LABELED "FABLESS SEMICONDUCTOR COMPANIES" HAS LOGOS FOR ALLAYER COMMUNICATIONS, GALILEO AND PIXELWORKS BELOW IT. THE MOSYS LOGO AND THE THREE SALES CHANNEL COLUMNS ALSO POINT TO A BOX AT THE BOTTOM OF THE PAGE, TITLED "ELECTRONIC PRODUCT MANUFACTURERS".] Our sales and marketing efforts also include technical support“Risk Factors” above.

The markets for our licensees and customers, publishing articles in trade and research journals and participation in trade shows and other traditional marketing activities. As of June 30, 2000, our sales and marketing staff included eight people, with six based in our corporate 39 headquarters in Sunnyvale, California, one based in our sales office in Melrose, Massachusetts and one based in Helsinki, Finland. We also have 17 stand-alone product representatives in North America and Asia. COMPETITION In order to remain competitive, we believe we must continue to provide higher-density, lower-power-consumption, higher-speed and lower-cost technology solutions to the semiconductor industry and electronic product manufacturers.products are highly competitive. We believe that the principal competitive factors ~~in our industry are - -~~ are:

processing speed and performance;

power consumption; ~~- speed; - portability to different manufacturing processes; - scalability to different manufacturing process generations; -~~

interface requirements; ~~and - the~~

ease with which technology can be customized for and incorporated into ~~customers' products. Our customers~~customers’ products; and prospective customers can meet their current needs for embedded memory using other memory solutions with different cost and performance parameters. Many companies provide these solutions, including several which are much larger and have greater access to financial,

level of technical ~~and other resources.~~ support provided.

We believe that our products compete favorably with respect to each of these criteria. Our proprietary1T-SRAM ~~technology offers~~ embedded memory and high-speed serial interface IP can provide our Bandwidth Engine ICs with a ~~high degree~~competitive advantage over alternative devices. Alternative solutions are either DRAM or SRAM-based and can support either the memory size or speed requirements of ~~overall~~high-performance networking systems, but generally not both. DRAM solutions provide a significant amount of memory at competitive cost, but DRAM solutions do not have the required fast access and cycle times to enable high-performance. The DRAM solutions currently used in networking systems include RLDRAM from Micron Technology, Inc., or Micron, and Integrated Silicon Solutions, Inc., LLDRAM from Renesas, DDR from Samsung Electronics Co., Ltd., Micron and others, and HBM, which is stacked memory from Samsung Electronics Co. and SK Hynix. SRAM solutions can meet high-speed performance ~~improvement over traditional SRAM. We have spent significant time~~requirements, but often lack adequate memory size. The SRAM solutions currently used in networking systems primarily include QDR or similar SRAM products from Cypress Semiconductor Corporation and ~~resources in developing our 1T-SRAM memory architecture. We believe that many~~GSI Technology, Inc. Most of the currently available SRAM and DRAM solutions use a parallel, rather than a serial interface. To offset these drawbacks, system designers generally must use more discrete memory ICs, resulting in higher power consumption and greater utilization of space on the line card.

Our competitors include established semiconductor companies ~~offering~~with significantly longer operating histories, greater name recognition and reputation, large customer bases, dedicated manufacturing facilities and greater financial, technical, sales and marketing resources. This may allow them to respond more quickly than us to new or emerging technologies or changes in customer requirements. Generally, customers prefer suppliers with greater financial resources than we have currently. Many of our competitors also have significant influence in the semiconductor industry. They may be able to introduce new technologies or devote greater resources to the development, marketing and sales of their products than we can. Furthermore, in the event of a manufacturing capacity shortage, these competitors may be able to manufacture products when we are unable to do so.

Our Bandwidth Engine ICs compete with embedded memory solutions, stand-alone memory ICs, including both DRAM and SRAM ICs, and ASICs designed by customersin-house to meet their system requirements. Our prospective customers may be unwilling to adopt anddesign-in our ICs due to the uncertainties and risks surrounding

designing a new IC into their systems and relying on a supplier that has limited history of manufacturing such ICs and limited financial resources. In addition, Bandwidth Engine ICs require the customer and its other ~~solutions~~IC suppliers to implement ourchip-to-chip communication protocol, the GCI interface. These parties may be unwilling to do this if they believe it could ~~seek to license our technology because~~adversely impact their own future product developments or competitive advantages, or, if they believe it might complicate their development process or increase the cost of their products. To remain competitive, we believe we must provide unparalleled memory IC solutions with the highest bandwidth capability for our target markets, which solutions are engineered and built for high-reliability carrier and enterprise applications.

We depend on third-party vendors to manufacture, package, assemble and test our IC products, as we do not own or operate a ~~license from~~semiconductor fabrication, packaging or production testing facility for boards and system assembly. By outsourcing manufacturing, we can avoid the high cost associated with owning and operating our own facilities, allowing us ~~would be lower than~~to focus our efforts on the ~~cost~~design and ~~time required~~marketing of our products.

We perform an ongoing review of product manufacturing and testing processes. Our IC products are subjected to ~~independently develop a directly competing technology. MANUFACTURING~~extensive testing to assess whether their performance meets design specifications. Our test vendors provide us with immediate test data and the ability to generate characterization reports that are made available to our customers. We have ~~designed the architecture~~achieved ISO 9001:2015 certification, and all of our 1T-SRAM technology so that our licensees can manufacture it in standard logic process as well as other widely used embedded memory processes. For our stand-alone memory products, we implement a fabless manufacturing ~~strategy by using relationships with independent foundries. Today, we rely predominantly upon TSMC for our stand-alone product manufacturing. We~~vendors have also ~~use domestic and offshore subcontractors for assembly, testing and packaging. Assembly and test services provided by these subcontractors comply with the requirements of ISO-9000. EMPLOYEES~~ achieved ISO 9001 certification.

As of ~~June 30, 2000,~~August 31, 2018, we had ~~37 full time~~22 employees all of whom are located in the United States, consisting of 2213 in research and development ~~eight~~and manufacturing operations and 9 in sales, general and ~~marketing, four~~administrative functions.

We were founded in ~~finance~~1991, and ~~administration~~reincorporated in Delaware in September 2000. Our website address is www.mosys.com. The information in our website is not incorporated by reference into this report. Through a link on the Investor section of our website, we make available our annual reports onForm 10-K, quarterly reports onForm 10-Q, current reports onForm 8-K, and ~~three in operations management. We believe our future success will depend, in part, on our ability~~any amendments to ~~continue~~those reports filed or furnished pursuant to ~~attract~~Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after they are filed with, or furnished to, the Securities and ~~retain qualified technical~~Exchange Commission, or SEC. You can also read and ~~management personnel, particularly highly skilled design engineers involved in new product development, for whom competition is intense. Our employees are not represented~~obtain copies of any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by ~~any collective bargaining unit~~calling the SEC at 1.800.SEC.0330. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and ~~we have not experienced any work stoppage. We believe~~information statements, and other information regarding issuers that our employee relations are good. FACILITIES Our principal administrative, sales, marketing, support and research and development functions are located in a leased facility in Sunnyvale, California. We currently occupy approximately 19,500 square feet of space infile electronically with the Sunnyvale facility, the lease for which extends through June 2005. We hold an option to extend our lease for three additional years. We believe that our existing facility is adequate to meet our current needs. LEGAL PROCEEDINGS We are not currently a party to any legal proceedings. 40 SEC, including us.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ~~DIRECTORS~~ AND ~~EXECUTIVE OFFICERS~~ RELATED

The following table sets forth certain information as of August 31, 2018 concerning the ~~directors and executive officers~~ownership of our ~~company as~~common stock by:

each stockholder known by us to be the beneficial owner of ~~July 31, 2000.~~
- -------------------------------------------------------------------------------------------------------------- NAME AGE POSITION - ------------------------------------- -------- ------------------------------------------------------------ Fu-Chieh Hsu......................... 44 Chairman of the Board, President and Chief Executive Officer Wing-Yu Leung........................ 45 Executive Vice President and Chief Technical Officer, Director and Secretary Mark-Eric Jones...................... 45 Vice President and General Manager - Intellectual Property F. Judson Mitchell................... 64 Vice President, Finance & Administration, Chief Financial Officer Andre Hassan......................... 40 General Manager - Discrete Products Carl E. Berg(1)(2)................... 61 Director Denny R. S. Ko(1)(2)................. 60 Director
~~(1) Member of Audit Committee (2) Member of Compensation Committee. FU-CHIEH HSU has served as our Chairman~~more than 5% of the Board since September 1991 and as our President and Chief Executive Officer since April 1992. Dr. Hsu also served as our Chief Financial Officer from April 1992 until May 1996. Prior to joining our company, Dr. Hsu was the President and Chairman of the Board of Myson Technology, Inc., a developer of high performance semiconductor products from August 1990 to August 1991. From May 1985 to August 1990, Dr. Hsu served as Vice President and Chief Technology Officer of Integrated Device Technology, Inc., or IDT, a developer of high performance semiconductor products and modules. Dr. Hsu holds a B.S. in electrical engineering from National Taiwan University and an M.S. and Ph.D. in electrical engineering from the University of California at Berkeley. WING-YU LEUNG has served as our Vice President, Engineering and Chief Technical Officer and as a member of our board of directors since April 1992. Dr. Leung also served as our Secretary from April 1992 until May 1996 and again since May 1997. Prior to joining our company, Dr. Leung served as a technology consultant to several high technology companies, including Rambus, Inc., or Rambus, a developer of a high-speed chip-to-chip interface technology. Prior to that time, Dr. Leung served as a member of the technical staff of Rambus, and as a senior engineering manager at IDT, where he managed and participated in circuit design activities. Dr. Leung holds a B.S. in electrical engineering from the University of Maryland, an M.S. in electrical engineering from the University of Illinois and a Ph.D. in electrical engineering and computer science from the University of California at Berkeley. MARK-ERIC JONES has served as our Vice President and General Manager - Intellectual Property since October 1998. Prior to joining our company, Mr. Jones served as Director, Intellectual Property Division of Mentor Graphics Corporation., a developer of EDA tools and provider of intellectual property from January 1996 to September 1998. Mr. Jones founded 3SOFT, Inc., a developer of intellectual property and served as its President and Chief Executive Officer from May 1976 to January 1996. Mr. Jones holds a M.A. from Trinity College, University of Cambridge, United Kingdom. F. JUDSON MITCHELL has served as our Vice President of Finance and Administration and Chief Financial Officer since July 2000. Prior to joining our company, Mr. Mitchell served as Vice President and Chief Financial Officer of Wavespan, Inc., a manufacturer of microwave radio links from November 1997 until December 1999. Prior to that time, Mr. Mitchell served as a financial consultant to high technology companies. Mr. Mitchell also served as Vice President and Chief Financial Officer of the DSP Group from August 1993 until September 1995. Mr. Mitchell has also served as Chief Financial Officer of Adaptec, Inc., IXYS Corporation and Finnigan 41 Corporation. Mr. Mitchell holds a B.S. in Mechanical Engineering and an A.B. in Liberal Arts from Columbia College in New York and an M.B.A. from the Stanford Graduate School of Business. ANDRE HASSAN has served as our General Manager - Discrete Products since January 1999. Prior to this, Mr. Hassan was Director of Marketing from February 1996 to December 1998. Prior to joining our company, Mr. Hassan served as Strategic Marketing Manager for S3, Inc., a developer of semiconductor multimedia products from June 1994 to January 1996. Mr. Hassan holds a B.S. in electrical engineering from Worcester Polytechnic Institute. CARL E. BERG has served as a member of our Board of Directors since September 1992. Since 1997, Mr. Berg has served as the Chairman of the Board and Chief Executive Officer of Mission West Properties, Inc., a real estate investment trust. Mr. Berg is also the President of the sole General Partner of West Coast Venture Capital Ltd. Mr. Berg has been actively engaged in the ownership, development and management of industrial real estate and in venture capital investment for over 30 years. He currently serves as a member of the board of directors for IDT, Valence Technology, Inc., a developer of advanced rechargeable battery technology, and Videonics, Inc., a developer of post-production video equipment. Mr. Berg holds a B.A. in business from the University of New Mexico. DENNY R. S. KO has served as a Member of our Board of Directors since May 1994. Dr. Ko has been managing general partner of DynaFund Ventures, a venture capital firm, since August 1997. Dr. Ko also serves as Chairman of the Board of Dynamic Technologies, Inc., a technical research, engineering and consulting company, which he founded in 1976. Dr. Ko holds a B.S. in mechanical engineering from National Taiwan University, an M.S. in aeronautical sciences from the University of California at Berkeley and a Ph.D. in aeronautics and applied mathematics from the California Institute of Technology. DIRECTOR COMPENSATION Members of our board of directors do not receive compensation for their services as directors. Under our 1996 stock plan we have authorized the grant of options to purchase 10,000outstanding shares of our common stock in (currently our only class of voting securities);

each of ~~the fiscal years 1997 through 2000 to~~ our two non-employee directors. Each of these grants vests at a rate of 1/12th of the shares each month in the fiscal year. Our 2000 employee stock option plan provides that options will be granted to our non-employee directors pursuant to an automatic, nondiscretionary grant mechanism. Beginning with the 2001 annual meeting, each non-employee director will receive automatically a grant of an option to purchase 10,000 shares of our common stock at the first meeting of our board of directors after each annual meeting of stockholders. Each option will be granted at the fair market value of the common stock on the date of grant. The options granted to non-employee directors will vest at a rate of 1/12th of the shares each month following the date of grant. No additional options will be granted to our non-employee directors in any year for which the director has already been granted options in a like or greater number. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Our compensation committee is responsible for determining salaries, incentives and other forms of compensation for directors, officers and other employees, and administers our incentive compensation and benefit plans. The compensation committee consists of Carl Berg and Denny Ko. Dr. Hsu participates in all discussions and decisions regarding salaries and incentive compensation for all of our employees and consultants, except that he is excluded from discussions regarding his own salary and incentive compensation. During 1999, none of our executive officers served as a member of the board of directors or compensation committee of any entity that had one or more of its executive officers serving as a member of our board of directors or compensation committee. 42 EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following table sets forth in summary form information concerning the compensation of our Chief Executive Officer and our other executive officers, referred to in this prospectus as the named executive officers, whose salary and bonus for 1999 exceeded $100,000 and who were serving as officers as of the end of 1999. Mr. Voll resigned in July 2000.
- ------------------------------------------------------------------------------------------------------------------ ANNUAL COMPENSATION LONG-TERM COMPENSATION -------------------- ----------------------------- NAME SALARY SECURITIES UNDERLYING OPTIONS - ------------------------------------------------------------ -------------------- ----------------------------- Fu-Chieh Hsu................................................ $ 210,000 35,000 Wing-Yu Leung............................................... 175,002 30,000 Mark-Eric Jones............................................. 170,000 - Mark Voll................................................... 130,000 15,000 Andre Hassan................................................ 110,539 60,000
~~OPTION GRANTS IN LAST FISCAL YEAR The following table contains information concerning the stock option grants made to~~ directors;

each of the named executive ~~officers in 1999. Each stock option was awarded under our 1996 stock plan~~officers; and ~~vests in 12 equal installments from the executive's respective vesting commencement date or dates. The per share purchase price of~~

all ~~of these options represents our board of directors' determination of the fair market value of our common stock on the grant date.~~
- -------------------------------------------------------------------------------------------------------------- POTENTIAL REALIZABLE INDIVIDUAL GRANTS VALUE AT ASSUMED ---------------------------------------------------- ANNUAL RATES OF NUMBER OF % OF TOTAL STOCK PRICE SECURITIES OPTIONS APPRECIATION FOR UNDERLYING GRANTED TO OPTION TERM OPTIONS EMPLOYEES EXERCISE --------------------- NAME GRANTED IN 1999 PRICE EXPIRATION DATE 5% 10% - -------------------------------- ---------- ---------- -------- --------------- --------- --------- Fu-Chieh Hsu.................... 35,000 6.3% $ 1.00 May 17, 2009 $22,011 $55,781 Wing-Yu Leung................... 30,000 5.4 1.00 May 17, 2009 18,867 47,812 Mark-Eric Jones................. - - - - - - Mark Voll....................... 15,000 2.7 1.00 May 17, 2009 9,433 23,906 Andre Hassan.................... 60,000 10.8 1.00 May 17, 2009 37,734 95,625
The percentage of total options granted is based upon options to purchase an aggregate of 554,000 shares of common stock granted during the fiscal year ended December 31, 1999 to our employees, including the named executive officers and outside directors. Amounts described under the heading "Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term" were calculated by assuming that the market price of our common stock appreciates 5% and 10% each year from the date of grant of the options until the expiration of the options. These assumed annual rates of appreciation were used in compliance with the rules of the Securities and Exchange Commission and are not intended to forecast future price appreciation of our common stock. The actual value realized from the options could be substantially higher or lower than the values reported above, depending upon the future appreciation or depreciation of the common stock during the option period and the timing of the exercise of the options. Unless the executive officer remains employed until he vests in the option shares and the market price of the common stock appreciates over the option term, no value will be realized from the option grants made to the executive officers. 43 The grants to Drs. Hsu and Leung have a vesting commencement date of July 1, 2002. We made four grants to Mr. Hassan in 1999, in the amounts of 6,000 shares, 19,000 shares, 25,000 shares and 10,000 shares. The vesting commencement dates for these grants are February 12, 1999, 2000, 2001 and 2002, respectively. The grant of an option to purchase 15,000 shares to Mr. Voll had a vesting commencement date of April 6, 2002. Due to Mr. Voll's resignation in July 2000, this option has lapsed without exercise. FISCAL YEAR END OPTION AND VALUES None of our named executive officers exercised stock options in the fiscal year ended December 31, 1999. The following table sets forth information concerning the number and value of unexercised options held by each of our named executive officers on December 31, 1999. The value of "in-the-money" options represents the positive spread between the exercise price of the options and the fair market value of our common stock. There was no public market for our common stock as of December 31, 1999. Accordingly, for the purpose of this table only, the fair market value on December 31, 1999 is deemed to be the initial public offering price of $ per share. Pursuant to the option agreements regarding these grants, option holders may elect to exercise all or any part of their vested and unvested options at any time. Any shares of common stock received by the optionee on exercise of unvested options become subject to our right of repurchase pursuant to a restricted stock purchase agreement. The number of shares so obtained that are subject to our right of repurchase decreases over time in accordance with the vesting schedule applicable to the unvested options exercised. Accordingly, all options granted to the named executive officers under the 1996 plan are deemed to be exercisable for the purpose of the following table.
---------------------------------------------------------------- NUMBER OF SHARES OF COMMON STOCK UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS AT YEAR END OPTIONS AT YEAR END ---------------------------- --------------------------------- Fu-Chieh Hsu...................................... 140,500 $ Wing-Yu Leung..................................... 100,000 Mark-Eric Jones................................... 350,000 Mark Voll......................................... 165,000 Andre Hassan...................................... 201,000
Of the options to purchase 165,000 shares granted to Mr. Voll, options to purchase shares remained exercisable at July 31, 2000. LIMITATIONS ON LIABILITY AND INDEMNIFICATION Our bylaws provide that we will indemnify our directors and executive officers and may indemnify our other officers, employees and other agents to the fullest extent permitted by Delaware law. Our bylaws allow us to enter into indemnification agreements with our directors and officers and to purchase insurance for any person whom we are required or permitted to indemnify. We are presently in the process of obtaining a policy of directors' and officers' liability insurance that insures these people against the cost of defense, settlement or payment of a judgment under certain circumstances. We intend to enter into agreements with our directors and executive officers regarding indemnification. Under these agreements, we will indemnify them against amounts actually and reasonably incurred in connection with an actual or threatened proceeding if they are made a party because of their role as a director or officer. We will be obligated to pay these amounts only if the officer or director acted in good faith and in a manner that he reasonably believed to be in or not opposed to our best interest. With respect to any criminal proceeding, we are obligated to pay these amounts only if the officer or director had no reasonable cause to believe his conduct was unlawful. 44 In addition, our certificate of incorporation filed in connection with this offering provides that the liability of our directors for monetary damages shall be eliminated to the fullest extent permissible under Delaware law. This provision does not eliminate a director's duty of care. Each director will continue to be subject to liability for - - breaches of the director's duty of loyalty to us; - acts or omissions not in good faith or involving intentional misconduct or knowing violations of law; - acts or omissions that the director believes to be contrary to the best interests of our company or our stockholders; - any transaction from which the director derived an improper personal benefit; - improper transactions between the director and our company; - improper distributions to stockholders; and - improper loans to directors and officers. There is no pending litigation or proceeding involving any of our directors or officers for which indemnification is being sought, nor are we aware of any threatened claim that could result in indemnification of any director or officer. BENEFIT PLANS 2000 EMPLOYEE STOCK OPTION PLAN Our 2000 employee stock option plan, or our 2000 plan, has been adopted by our board of directors and will be approved by our stockholders in connection with our reincorporation in the state of Delaware. A total of 5,000,000 shares of common stock have been reserved for issuance under the 2000 plan. In addition, the 2000 plan provides for an annual increase in the number of shares reserved under the plan on January 1 of each year, equal to the lesser of 500,000 shares, two percent of our outstanding shares of common stock on such date or a lesser amount determined by the board of directors. The 2000 plan provides for grants to employees, including officers and employee directors, of incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or the code, and for grants of nonstatutory stock options to employees, including officers and employee directors, and to consultants. The purpose of the 2000 plan is to attract and retain the best available personnel and to encourage stock ownership by employees, officers, and consultants in order to give them a greater personal stake in our success. The 2000 plan is administered by the board of directors or by a committee appointed by the board, which identifies optionees and determines the terms of options granted, including the exercise price, number of shares subject to the option and the timing and terms of exercise. The term of options granted under the 2000 plan may not exceed ten years. The term of all incentive stock options granted to an optionee who, at the time of grant, owns stock representing more than 10% of the voting power of all classes of our stock may not exceed five years. Generally, 25% of the options granted under the 2000 plan will vest and become exercisable on the first anniversary of the date of grant, and 1/48th of the options will vest and become exercisable each month thereafter. The exercise price of incentive stock options granted under the 2000 plan must be at least equal to the fair market value of the shares on the date of grant. The exercise price of nonstatutory stock options granted under the 2000 plan will be determined by the board of directors, but in no event will be less than 85% of the fair market value of the common stock on the date of grant. The exercise price of any incentive stock option or nonstatutory stock option granted to a ten-percent stockholder must equal at least 110% of the fair market value of the common stock on the date of grant. 45 1996 STOCK PLAN Our 1996 stock plan, or the 1996 plan, was adopted by the board of directors of our California predecessor and approved by its shareholders in May 1996. The 1996 plan will be assumed in connection with our Delaware reincorporation prior to the effectiveness of this offering. As of June 30, 2000, options to purchase 1,967,813 shares of common stock were outstanding under the 1996 plan. After this offering, we do not intend to make additional option grants under the 1996 plan. The terms of the 1996 plan are generally consistent with the terms of the 2000 plan described above. In making grants under the 1996 plan, the board of directors gave all optionees the right to exercise their options, including unvested options, immediately, subject to the optionee's execution and delivery of a restricted stock purchase agreement. This agreement gives us the right to repurchase all shares obtained by an optionee from the early exercise of unvested options upon the termination of the optionee's employment or consulting relationship with our company. The repurchase price of these shares in that event is equal to the exercise price of the underlying option. Our repurchase right lapses as to these shares according to the vesting schedule applicable to the underlying option. As of June 30, 2000, no shares obtained by exercise of unvested options under the 1996 plan were outstanding and subject to our right of repurchase. 1992 STOCK OPTION PLAN Our 1992 stock option plan, or the 1992 plan, was adopted by the board of directors of our California predecessor and approved by its shareholders in August 1992. No options have been granted under the 1992 plan since 1996. The 1992 plan will be assumed in connection with our Delaware reincorporation prior to the effectiveness of this offering. As of June 30, 2000, options to purchase 348,300 shares of our common stock were outstanding under the 1992 plan. As was done under the 1996 plan, the board of directors gave all optionees under the 1992 plan the right to exercise all options immediately, including unvested options, subject to the optionee's execution and delivery of a restricted stock purchase agreement. As of June 30, 2000, no shares obtained by exercise of unvested options under the 1992 plan were outstanding and subject to our right of repurchase. The terms of the 1992 plan are generally consistent with the terms of the 2000 plan. The 1992 plan gave the board full discretion in establishing the vesting schedule of options granted under it. All outstanding options granted under the 1992 plan have fully vested as of June 30, 2000. 2000 EMPLOYEE STOCK PURCHASE PLAN Our 2000 employee stock purchase plan, or the purchase plan, has been adopted by the board of directors and will be approved by our stockholders in connection with our Delaware reincorporation. A total of 200,000 shares of common stock will be reserved for issuance under the purchase plan. In addition, the purchase plan provides for an annual increase in the number of shares reserved under the plan on January 1 of each year, equal to the lesser of 100,000 shares, one percent of our outstanding shares of common stock on such date or a lesser amount determined by the board of directors. The purchase plan, which is intended to qualify under Section 423 of the code, will be administered by the board of directors or a committee appointed by the board of directors. Employees, including officers and employee directors but excluding 5% stockholders, are eligible to participate if they are customarily employed for at least 20 hours per week and for more than five months in any calendar year. The purchase plan permits eligible employees to purchase common stock through payroll deductions, which may not exceed 10% of an employee's compensation. Employees will be permitted to invest a maximum of $25,000 in any offering period. The purchase plan will be implemented in a series of overlapping offering periods, each to be approximately 12 months in duration. The initial offering period under the purchase plan will begin on the pricing date of this offering and expires on the third enrollment date, which is the first day of the third offering period. Offering periods begin on the first trading day on or after January 1 and July 1 of each year and end on the last trading 46 day in the period ending twelve months later. Each participant will be granted an option on the first day of the offering period, and such option will be automatically exercised on the last day of each offering period. The purchase price of the common stock under the purchase plan will be equal to 85% of the lesser of the fair market value per share of common stock on the start date of the offering period or on the date on which the option is exercised. Employees may end their participation in an offering period at any time during that period, and participation ends automatically on termination of employment with us. The purchase plan will terminate in June 2010, unless sooner terminated by the board of directors. As of the date of this prospectus, no shares have been issued under the purchase plan. 401(k) PLAN We have adopted a tax-qualified employee savings and retirement plan, referred to in this prospectus as the 401(k) plan. All full-time employees who are at least 21 years old are eligible to participate as of their date of hire. Eligible employees may elect to defer between one percent and fifteen percent of their compensation in the 401(k) plan, subject to the statutorily prescribed annual limit. We may make matching contributions on behalf of all participants in the 401(k) plan in an amount determined by our board of directors. We also may make discretionary profit-sharing contributions in amounts determined by the board of directors, subject to statutory limitations on contributions made by employees and employers under such plans. Employees must complete a minimum of 500 hours of service during a year to be eligible for profit-sharing contributions. Matching contributions and all earnings on these contributions are subject to a vesting schedule, providing for ratable vesting in equal annual installments over five years. All other contributions and earnings are fully vested at all times. Employees may borrow from the 401(k) plan, and may request withdrawal from their account in the case of hardship or on attainment of age 59 1/2. The 401(k) plan is intended to qualify under Sections 401 and 501 of the Internal Revenue Code of 1986, as amended, so that contributions by employees or by us to the 401(k) plan, and income earned on plan contributions, are not taxable to employees until withdrawn from the 401(k) plan, and so that contributions by us, if any, will be deductible by us when made. The trustee under the 401(k) plan, at the direction of each participant, invests the assets of the 401(k) plan in any of a number of investment options. EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS We currently have confidentiality and invention assignment agreement in place with the named executive officers. We do not, however, have any compensatory plan or arrangement with the named executive officers that is activated upon the resignation, termination or retirement of any of these executive officer or upon a change in control of our company. The employment offer letter between us and our Chief Financial Officer, F. Judson Mitchell, provides for the immediate vesting of all stock options granted to Mr. Mitchell, which are exercisable for an aggregate of 250,000 shares of common stock, upon the termination of Mr. Mitchell's employment without cause in connection with or within 12 months following a change of control of our company. In addition, the letter provides that Mr. Mitchell will receive a severance payment of one fourth of his annual salary if he is terminated at any time without cause. The letter defines cause to mean an intentional, material act of fraud or dishonesty in connection with his employment, his conviction of a felony, his willful act injurious to us or his willful failure to perform substantially his duties. 47 RELATED PARTY TRANSACTIONS FINANCING TRANSACTIONS In 1996, we entered into note and warrant purchase agreements with two of our directors, Denny Ko and Carl Berg, certain preferred stockholders and other unrelated parties, pursuant to which we borrowed an aggregate of $13.1 million. The notes had an interest rate of 8.25% per annum and a maturity date of May 31, 1998. Each noteholder received a warrant to purchase a number of shares of our common stock determined by dividing half the principal amount of the note by the exercise price of the warrant at the time of subscription. The exercise price ranged from $6.50 to $8.50. These warrants had an expiration date of May 31, 1998. In June 1997, upon cancellation of the note and warrant purchase agreements, $6,703,200 of the principal was converted into Series F preferred stock at a conversion price of $5.50 per share. In connection with this conversion, all of the outstanding warrants held by the noteholders were exchanged for new warrants. We issued 196,037 shares of Series F preferred stock and a warrant to purchase 196,037 shares of common stock to West Coast; 588,848 shares of Series F preferred stock and a warrant to purchase 588,848 shares of common stock to DynaTech Capital; and 51,012 shares of Series F preferred stock and a warrant to purchase 51,012 shares of common stock to Denny Ko. Carl Berg is the President and sole general partner of West Coast. Denny Ko is the managing general partner of DynaFund Ventures and the Chairman of the Board of DynaTech Capital. In May 1998, we repaid the remaining principal balance of $6,418,000 and the accrued interest owed under the notes. TRANSACTIONS WITH M-ONE In 1993, we formed M-One Technology Corporation, or M-One, as a wholly-owned subsidiary incorporated under the laws of the Republic of China. The intended business activities of M-One were to manufacture and sell our products under two licenses from us. We contributed $1.5 million in cash to M-One in connection with its formation. Subsequently, M-One paid us $700,000 in cash for the license of some of our technology. In 1994, we spun off M-One to our stockholders. As a result, our principal stockholders, including Drs. Hsu and Leung, became the principal stockholders of M-One. We assumed responsibility for the intended business activities, including the production and sale of its products, and liabilities of M-One in 1995. Due to continued operating losses, significant accumulated deficits and difficult market conditions, M-One ceased its operations in 1997 and terminated all of its employees. In October 1995 and April 1996, Tseng Labs, Inc. loaned M-One $1.5 million and $5.0 million, respectively, in order to secure M-One's obligation to make available to it certain of our products that M-One was manufacturing. We guaranteed M-One's obligations under these loans, and in connection with the $5.0 million April 1996 loan, we granted Tseng Labs a conversion right that would permit it to purchase up to $2.5 million of our common stock at a per share price of $6.50 prior to April 22, 1997, and $8.50 thereafter. In March 1997, we repaid in full the loans owed to Tseng Labs and the corresponding conversion right held by Tseng Labs was terminated. LOANS TO EXECUTIVE OFFICERS On January 13, 1995 and June 13, 1995, in connection with the formation of M-One, we made loans in the form of secured, full-recourse promissory notes, each with an annual interest rate of 7% per year compounded annually, for the principal amounts of $125,375 and $130,000, respectively, to Fu-Chieh Hsu and Wing-Yu Leung. These loans each had a maturity date of the fifth anniversary of the date of issuance. In December 1997, Drs. Hsu and Leung repaid in full their respective notes. TRANSACTIONS WITH TSMC We and M-One entered into an option agreement with TSMC in November 1995 to secure manufacturing capacity of TSMC. Pursuant to the option agreement, we issued two promissory notes to TSMC, one in the amount of 48 $29.4 million with a maturity date of November 1996 and one in the amount of $5.9 million with a maturity date of June 1997. On September 23, 1996, we amended the agreement. Under the terms of this amendment, the promissory notes referenced above were canceled and we issued to TSMC six new promissory notes totaling $23.4 million with varying due dates ranging from 1997 through 2000. These notes did not bear interest until they became due, at which date a rate of 10% per annum was to be applied on any unpaid amounts. We paid $840,000 to TSMC in 1997 in accordance with the amended agreement. In connection with this amendment, we issued TSMC a warrant to purchase 3,392,310 shares of our common stock at $6.50 per share. On January 1, 1998, we again amended the option agreement to cancel the promissory notes signed under the 1996 amendment. We issued to TSMC five new promissory notes totaling $22.5 million with due dates ranging from November 1998 through June 2001. The other terms of the original agreement remained substantially the same. On August 6, 1998, we and TSMC terminated the option agreement, as amended, including all obligations and rights of the parties under the agreement and all warrants to purchase our common stock held by TSMC. In connection with this termination, we issued to TSMC a warrant to purchase 1,200,000 shares of our common stock at an exercise price of $6.50. TSMC may exercise this warrant any time prior to August 6, 2002. In March 1999, we entered in a development and promotion agreement with TSMC. This agreement required us to develop a demonstration macro for TSMC's 0.25-micron standard logic process. We completed our obligations under this agreement in the first quarter of 2000, for which TSMC paid us $60,000. In October 1999, we signed a memorandum of understanding, or MOU, with TSMC and Virage Logic. The MOU sets the parameters for a future agreement requiring us to develop a compiler for TSMC's 0.18-micron and 0.15-micron standard logic manufacturing processes in conjunction with Virage Logic. In connection with the development of the compiler, TSMC has agreed to pay $250,000 to us. In addition to the above agreements, we have paid TSMC $13.4 million, $24.1 million, $7.8 million and $1.5 million in fiscal 1997, 1998, 1999 and the first six months of 2000, respectively, for the purchase of wafers. 49 PRINCIPAL STOCKHOLDERS The following table sets forth information regarding the beneficial ownership of common stock as of July 31, 2000 for - - each person known to our management to beneficially own more than 5% of our outstanding common stock, - each of our directors, - each of the named executive officers, and - all executive officers and directors as a group.

Beneficial ownership is determined in accordance withRule 13d-3 of the ~~Securities~~ Exchange Act, ~~of 1934,~~ and includes all shares over which the beneficial owner exercises voting or investment power. ~~Options~~Shares that are issuable upon the exercise of options, warrants and ~~warrants~~other rights to ~~purchase~~acquire common stock that are presently exercisable or exercisable within 60 days of ~~July~~August 31, ~~2000 and~~2018 are ~~included~~reflected in a separate column in the table below. These shares are taken into account in the calculation of the total number of shares beneficially owned ~~for~~by a particular holder and the ~~person holding those options or warrants are considered~~total number of shares outstanding for the purpose of calculating percentage ownership of the particular holder. We have relied on information supplied by our officers, directors and certain stockholders and on information contained in filings with the SEC. Except as otherwise indicated, and subject to community property laws where applicable, we believe, based on information provided by these persons, that the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.

50 (1) Includes a warrant to purchase 196,037 shares of our common stock issued in connection with our issuance of Series F preferred stock in November 1997. (2) Includes a warrant to purchase 588,848 shares of our common stock granted in connection with our issuance of Series F Preferred Stock in November 1997. (3) Represents a currently exercisable warrant to purchase 1,200,000 shares of our common stock, granted in connection with the termination of an option agreement and the surrender of other outstanding warrants. (4) Includes options to purchase 140,500 shares of common stock which are presently exercisable or will become exercisable within 60 days after July 31, 2000. Also includes 480,000 shares of common stock held by Dr. Hsu as trustee for trusts established for the benefit of Dr. Hsu's children and 40,000 shares of common stock held directly by such children. (5) Includes options to purchase 100,000 shares of common stock which are presently exercisable or will become exercisable within 60 days after July 31, 2000. Also includes 600,000 shares of common stock held by Dr. Leung as trustee of trusts established for the benefit of Dr. Leung's children. (6) Represents options to purchase 250,000 shares of common stock which are presently exercisable or will become exercisable within 60 days after July 31, 2000. (7) Represents options to purchase 350,000 shares of common stock which are presently exercisable or will become exercisable within 60 days after July 31, 2000. (8) Represents options to purchase 201,000 shares of common stock which are presently exercisable or will become exercisable within 60 days after July 31, 2000. (9) Includes options to purchase 60,000 shares of common stock which are presently exercisable or will become exercisable within 60 days after July 31, 2000. Also includes 2,872,802 shares issued to West Coast and warrants to purchase 196,037 shares of common stock. Mr. Berg is a director and the President of West Coast Venture Capital, Inc., the sole general partner of West Coast. As such, he may be deemed to own beneficially all shares owned by West Coast. Mr. Berg also is a limited partner of West Coast. Mr. Berg disclaims beneficial ownership of all shares held by West Coast except to the extent of his pecuniary interest therein. Mr. Berg is a director of IDT, and disclaims beneficial ownership of all shares held by IDT. Excludes 5,000 shares owned by Mr. Berg's wife and 5,000 shares owned by Mr. Berg's daughter, as to which he disclaims beneficial ownership. (10) Includes options to purchase 60,000 shares of common stock which are presently exercisable or will become exercisable within 60 days after July 31, 2000. Includes 51,012 shares issuable to Mr. Ko upon exercise of outstanding warrants to purchase common stock. Also includes 2,058,848 shares held by DynaTech Capital and an additional 588,848 shares issuable to DynaTech Capital upon exercise of outstanding warrants to purchase common stock. (11) Includes options to purchase 1,161,500 shares of common stock which are presently exercisable or will become exercisable within 60 days after July 31, 2000 and warrants to purchase 835,897 shares of ccommon stock which are presently exercisable. Unless indicated otherwise, the address of each person listed in the table is c/o Monolithic System Technology, Inc., 1020 Stewart Drive, Sunnyvale, California 94086. Under the terms of their respective stock option agreements, all vested and unvested options held by our officers and directors can be exercised immediately. Shares obtained on exercise of unvested options are subject to our right of repurchase at cost. Shares are released from this right of repurchase according to the corresponding option vesting schedule. The percentage of beneficial ownership ~~before the offering~~ is based on ~~22,676,161 shares, consisting of 9,944,715~~8,273,886 shares of common stock outstanding as of ~~July~~August 31, ~~2000~~2018.

Unless otherwise stated, the business address of each of our directors and ~~12,731,446 shares issuable upon conversion of all shares of preferred stock outstanding as of July 31, 2000. The percentage of beneficial ownership after~~named executive officers listed in the ~~offering~~table is ~~based on shares, including shares sold by us in this offering. 51~~ 2309 Bering Drive, San Jose, California 95131.

The following description of our capital stock, warrants and provisions of our certificate of incorporation and bylaws is a summary only and not a complete description. The descriptions of the common stock and preferred stock reflect changes to our capital structure that will occur on the effectiveness of our reincorporation in Delaware, which occur prior to this offering, including the automatic conversion of all outstanding preferred stock into common stock. Upon completion of the offering, our

Our authorized capital stock ~~will consist~~consists of 120,000,000 shares of common stock, par value ~~$0.01~~$0.001 per share, and 20,000,000 shares of preferred stock, par value $0.01 per ~~share. COMMON STOCK~~ share

As of ~~June 30, 2000, 9,934,715~~August 31, 2018, 8,273,886 shares of our common stock were outstanding and held of record by 77five stockholders. Each holder of our common stock is entitled ~~to - -~~ to—

one vote per share on all matters submitted to a vote of the stockholders; -

dividends as may be declared by our board of directors out of funds legally available for that purpose, subject to the rights of any preferred stock that may be outstanding; and -

his, her or its pro rata share in any distribution of our assets after payment or providing for the payment of liabilities and the liquidation preference of any outstanding preferred stock in the event of liquidation.

Holders of common stock have no cumulative voting rights, redemption rights or preemptive rights to purchase or subscribe for any shares of our common stock or other securities. All of the outstanding shares of common stock are fully paid and nonassessable. AsThe rights, preferences and privileges of ~~June 30, 2000, options to purchase 2,316,113 shares~~holders of our common stock ~~were outstanding, at a weighted average exercise price~~are subject to, and may be adversely affected by, the rights of ~~$0.89 per share. COMMON STOCK PURCHASE WARRANTS As~~the holders of ~~June 30, 2000, warrants to purchase 3,481,219~~ shares of ~~our common stock were issued and outstanding, as follows:~~

The warrant to purchase 600,000 shares of common stock may be exercised on a "cashless" basis by surrendering shares of common stock in payment of the exercise price. PREFERRED STOCK As of June 30, 2000, 6,582,472 sharesany series of preferred stock ~~were outstanding. As of~~that we may designate and issue in the closing of this offering, all shares of preferred stock outstanding will convert automatically into 12,731,446 shares of common stock, and no shares of preferred stock will remain outstanding. Prior to the completion of the offering, we intend to designatefuture.

We have designated 20,000 shares of our preferred stock as Series AA preferred stock for issuance pursuant to the exercise of rights under our rights ~~plan.~~plan, none of which are outstanding. For more information on the rights plan, see the discussion below. ~~We have no current intention to issue any other shares of preferred stock. 52~~

Our board of directors has the authority, subject to any limitations prescribed by Delaware law, to issue shares of preferred stock in one or more series and to fix and determine the relative rights and preferences of the shares constituting any series to be established, without any further vote or action by the stockholders. Any shares of our preferred stock so issued may have priority over ~~the~~our common stock with respect to dividend, liquidation and other rights. ~~The~~

Our board of directors may authorize the issuance of our preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. Although the issuance of our preferred stock could provide us with flexibility in connection with possible acquisitions and other corporate purposes, under some circumstances, it could have the effect of delaying, deferring or preventing a change of control. ~~ANTITAKEOVER EFFECTS OF PROVISIONS OF OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS AND OF DELAWARE LAW~~

On July 6, 2017, we issued warrants to purchase 662,500 shares of our common stock. The warrants have an exercise price of $2.35 per share of our common stock, may be exercised from time to time beginning January 6, 2018 (the “Initial Exercise Date”), and at any time thereafter up to the date that is five years from the Initial Exercise Date, at which time any unexercised warrants will expire and cease to be exercisable.

The warrants are exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and by payment in full in immediately available funds for the number of shares of common stock purchased upon such exercise. If a registration statement registering the issuance of the shares of common stock underlying the warrants under the Securities Act is not then effective or available, the holder may exercise the warrant

through a cashless exercise, in whole or in part, in which case the holder would receive upon such exercise the net number of shares of common stock determined according to the formula set forth in the warrant. No fractional shares of common stock will be issued in connection with the exercise of a warrant. In lieu of fractional shares, we will either pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price or round up to the next whole share. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock.

A holder will not have the right to exercise any portion of the warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% (or on election of the holder, 9.99%) of the number of shares of our stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99% upon notice to us, provided that any increase in such percentage shall not be effective until 61 days after such notice to us.

In the event of a fundamental transaction, as described in the warrants, which generally includes any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the holders of the warrants will be entitled to receive upon exercise of the warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the warrants immediately prior to such fundamental transaction.

We filed a registration statement onForm S-1 to fulfill our obligation under the purchase agreement to provide for the resale by these investors of up to 662,500 shares of common stock issuable upon exercise of the warrants, which registration statement was declared effective by the SEC on February 2, 2018. We agreed to use commercially reasonable efforts to keep such registration statement effective at all times until (a) the warrant shares are sold under such registration statement or pursuant to Rule 144 under the Securities Act, (b) the warrant shares may be sold without volume ormanner-of-sale restrictions pursuant to Rule 144 under the Securities Act, and (c) the five-year anniversary of the Initial Exercise Date, whichever is the earliest to occur.

Antitakeover Effects of Provisions of Our Certificate of Incorporation and Bylaws and of Delaware Law.

Certain provisions of our charter documents and Delaware law could have an anti-takeover effect and could delay, discourage or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interests, including attempts that might otherwise result in a premium being paid over the market price of our common stock. ~~CERTIFICATE OF INCORPORATION AND BYLAWS. Upon completion~~

Our certificate of incorporation ~~will provide~~provides that stockholders can take action only at a duly called annual or special meeting of the stockholders and not by written consent. At the same time, our bylaws ~~will~~ provide that special meetings of stockholders may be called only by our chairman of the board, ~~the president, any~~our chief executive officer, ~~at the request in writing of~~ a majority of the total number of authorized directors or ~~by the holders~~any individual holder of ~~at least~~ 25% of ~~our~~the outstanding ~~shares.~~shares of common stock. These provisions could delay consideration of a stockholder proposal until the next annual meeting. Our bylaws ~~will~~ provide for an advance notice procedure for the nomination, other than by or at the direction of our board of directors, of candidates for election as directors, as well as for other stockholder proposals to be considered at annual meetings of stockholders. ~~DELAWARE TAKEOVER STATUTE. We will~~In addition, under our bylaws newly created directorships resulting from any increase in the number of directors or any vacancies in the board resulting from death, resignation, retirement, disqualification, removal from office or other cause during a director’s term in office can be ~~subject~~filled by the vote of the remaining directors in office, and the board is expressly authorized to amend the bylaws, without stockholder consent. These provisions may preclude a third party from removing incumbent directors and can control of our board of directors. Accordingly, these provisions could discourage a third party from initiating a proxy contest, making a tender offer or otherwise attempting to gain control of our company.

Section 203 of the Delaware ~~law. In general, this statute~~General Corporation Law, or DGCL, generally prohibits a publicly-held Delaware corporation from engaging in ~~a "business combination" with~~ an "interested stockholder" for a period of three years after the date that the person became an interested stockholder unless, subject to exceptions, the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Prior to the offering, each stockholder which is an interested stockholder became an interested stockholder in a transaction approved by our board of directors. Therefore, Section 203 would not impose any restriction on a business combination between us and any of our existing interested stockholders. However, the restrictions of Section 203 would apply to a business combination between us and any of our other stockholders who in the future become interested stockholders in a transaction not approved by our board of directors, unless the business combination involving such stockholder is approved in advance by the board of directors. Generally, a "business combination" includes a merger,acquisition, asset ~~or stock~~ sale or other transaction resulting in a financial benefit to ~~the stockholder. Generally, an "interested stockholder" is a~~any person who, together with affiliates and associates, owns, or within three years ~~prior,~~ did own, ~~15%~~15.0% or more of a corporation’s voting stock. The prohibition continues for a period of three years after the date of the transaction in which the person becomes an owner of 15.0% or more of the ~~corporation's~~corporation’s voting ~~stock. These provisions may have~~stock, unless the ~~effect of delaying, deferring~~business combination is approved in a prescribed manner. The statute could prohibit, delay, defer or ~~preventing~~prevent a change in control with respect to our company.

On November 10, 2010, we executed a rights agreement in connection with the declaration by our board of directors of a dividend of one preferred stock purchase right to be paid on November 10, 2010, referred to as the “record date,” for each share of our company without further action by the stockholders. ANTITAKEOVER EFFECTS OF OUR RIGHTS PLAN We intend to adopt a rights plan under which we will issue, prior to the completion of this offering, as a dividend on each outstanding share of common stock ~~one~~issued and outstanding at the close of business on the record date. Each right entitles the registered holder to purchase oneone-thousandth of a share of our Series AA 53 ~~preferred stock,~~Preferred Stock, $0.01 par value per share, ~~or the preferred shares,~~ at a price of $$48.00 per oneone-thousandth of a ~~preferred~~ share of such Series AA Preferred Stock, subject to ~~adjustment. The~~adjustment, including as a result of ourone-for-ten reverse stock split in February 2017 (which adjustment is not reflected here). Generally, the rights will not be exercisable until a third party acquires 15% of our common stock or commences or announces its intent to commence a tender offer for at least 15% of our common stock, other than holders of “grandfathered stock” as defined in the ~~distribution date, which~~rights agreement.

Under the rights agreement, the firm of Ingalls & Snyder LLC, or Ingalls, and its managed account beneficial owners collectively will ~~be defined~~not trigger the rights as long as none of their shares are held for the ~~date that is the earlier~~purpose of ~~- - 10 days after a public announcement that a person~~acquiring control or ~~group~~effecting change or influence in control of ~~affiliated or associated persons have acquired beneficial ownership of 15% or more of the outstanding~~us. This exclusion applies only to shares of common stock ~~other than~~for which there is only shared dispositive power and Ingalls has onlynon-discretionary voting power.

The rights agreement could delay, deter or prevent an investor from acquiring us in a ~~person or such a group~~transaction that obtains the prior written approval of the board of directors or holders of grandfathered stock, as defined below, which person or group is referred to as an acquiring person, or - 10 business days, or such later date as may be determined by action of the board of directors prior to such time as any person or group becomes an acquiring person, after the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which wouldcould otherwise result in our stockholders receiving a premium over the ~~beneficial ownership by a person or group of 15% or more of such outstanding~~market price for their shares of common stock. The above discussion of the rights agreement is not complete, and we urge you to read the entire rights agreement and our certificate of incorporation, as amended, to see all of the terms and conditions applicable to the Series AA Preferred Stock and the rights to acquire shares of such stock. (See item (n) under “Information Incorporated by Reference.”)

The transfer agent and registrar for our common stock ~~unless~~is Equiniti Trust Company.

The following description summarizes the material terms and provisions of the warrants that we may offer under this prospectus and any related warrant agreements and warrant certificates.

We are offering up to (i) 3,133,159 common units, each common unit consisting of one share of our ~~board~~common stock, and one warrant to purchase one share of ~~directors has approved the offer. Holders~~common stock, and up to (ii) 12,549,019 pre-funded units, each pre-funded unit consisting of ~~grandfathered~~one pre-funded warrant to purchase one share of our common stock, ~~are subject~~and one warrant to ~~higher ownership thresholds prior to triggering a distribution date through their ownership of shares~~purchase one share of our common stock. ~~They are Fu-Chieh Hsu, Wing-Yu Leung, West Coast and Dynatech Capital, and their respective affiliates and associates. Their~~The share ~~ownership must reach [20%] rather than 15% as set forth above, and beneficial owners~~ of ~~their grandfathered~~common stock, must beneficially own 1% more than such grandfathered stockholder, rather than 15% as set forth above, before a distribution date would be deemed to occur. The rights agreement will provide that, until the distribution date, the rightswarrant included in each common unit will be ~~transferred only with~~issued separately, and the pre-funded warrant to purchase one share of common stock and the accompanying warrant included in each pre-funded unit will be issued separately. Units will not be issued or certificated. We are also registering the shares of common stock ~~including~~included in the common units and the shares of common stock ~~sold~~issuable from time to time upon exercise of the pre-funded warrants included in pre-funded units and warrants included in the ~~offering. Until~~common units and the ~~distribution date~~pre-funded units offered hereby. We may issue a larger number or ~~earlier redemption~~smaller number of common units and a larger or ~~expiration~~smaller number of pre-funded units depending on relative investor demand for each type of unit.

The material terms and provisions of our common stock and each other class of our securities which qualifies or limits our common stock are described under the caption “Description of Capital Stock” in this prospectus.

The following summary of certain terms and provisions of the ~~rights, new~~warrants included in the common ~~stock certificates issued after~~units and the ~~record date or upon transfer or new~~pre-funded units that are being offered hereby is not complete and is subject to, and qualified in its entirety by, the provisions of the warrants, the form of which will be filed as an exhibit to the registration statement of which this prospectus forms a part. Prospective investors should carefully review the terms and provisions of the form of warrant for a complete description of the terms and conditions of the warrants.

Each warrant included in the common units and thepre-funded units offered hereby will have an initial exercise price per whole share equal to $ . The warrants will be immediately exercisable and will expire on the five-year anniversary of the original issuance date. The exercise price and number of shares of common stock ~~will contain a notation incorporating~~issuable upon exercise is subject to appropriate adjustment in the ~~rights agreement by reference~~event of stock dividends, stock splits, reorganizations or similar events affecting our common stock and the ~~surrender for transfer~~exercise price. If, at any time after the initial issuance of the warrants, we sell or grant any ~~certificates~~option to purchase or sell or grant any right to reprice, or otherwise dispose of or issue, any of our common stock or securities convertible into or exercisable for shares of our common stock ~~outstanding as~~at an effective price per share that is lower than the then exercise price of the ~~record date, even without~~warrant, then the exercise price will be reduced to equal such ~~notation, will also constitute the transfer~~lower price, subject to a floor of % of the ~~rights associated~~original exercise price of the warrants; except that no adjustment will be made with respect to issuances (a) of equity securities pursuant to our equity compensation plans, (b) securities issuable upon the exercise or exchange of or conversion of securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of the securities purchase agreement, provided that such securities have not been amended since the date of the securities purchase agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations) or to extend the term of such securities, but this provision will not prohibit the issuance of securities in exchange for, or payment of, debt owed under the Notes, and (c) unregistered securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company.

The warrants will be issued separately from the common stock ~~represented by such certificate. The rights~~included in the common units, or thepre-funded warrants included in thepre-funded units, as the case may be, and may be transferred separately immediately thereafter. A warrant to purchase one share of our common stock will ~~expire on , 2010, unless the rights are earlier redeemed or exchanged by us,~~be included in each ~~case as described below. In~~common unit orpre-funded unit purchased in this offering.

The warrants will be exercisable, at the ~~event the rights become exercisable, the plan will require that proper provision shall be made so that~~option of each holder, ofin whole or in part, by delivering to us a ~~right will thereafter have~~duly executed exercise notice accompanied by payment in full for the ~~right to receive upon exercise that~~ number of shares of our common stock ~~having~~purchased upon such exercise (except in the case of a ~~market value~~cashless exercise as discussed below). A holder (together with its affiliates) may not exercise any portion of ~~two times~~the warrant to the extent that the holder would own more than 4.99% (or, at the election of a purchaser prior to issuance of the warrant, 9.99%) of the outstanding common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the amount of ownership of outstanding stock after exercising the holder’s warrants up to 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, ~~price~~as such percentage ownership is determined in accordance with the terms of the ~~right, and rights beneficially owned by an acquiring person will automatically become void. The plan also will provide that if we are acquired~~warrants.

If, at the time a holder exercises its warrants, a registration statement registering the issuance of the shares of common stock underlying the warrants under the Securities Act is not then effective or available for the issuance of such shares, then in ~~a merger or other business combination transaction or 50% or more~~lieu of ~~our consolidated assets or earning power are sold after~~making the ~~distribution date, proper provision will~~cash payment otherwise contemplated to be made ~~so that each~~to us upon such exercise in payment of the aggregate exercise price, the holder ~~of a right will thereafter have the right~~may elect instead to receive upon such exercise (either in whole or in part) the ~~exercise of the right at the then current exercise price of the right, that~~net number of shares of common stock ofdetermined according to a formula set forth in the acquiring company which at the time of such transaction will have a market value of two times the exercise price of the right. The plan also will include provisions that permit our board of directors to - - exchange the rights, other than rights owned by an acquiring person which have become void, in whole or in part, at an exchange ratio of one share of common stock, or one one-thousandth of a preferred share, per right, subject to adjustment at any time after a person becomes an acquiring person and before the acquiring person acquires 50% or more of the outstanding shares of common stock; - redeem the rights, in whole, but not in part, at a price of $0.01 per right at any time after a person or group becomes an acquiring person; 54 - reinstate the rights of redemption, if prior to completion of certain recapitalizations, mergers or other business combinations, an acquiring person reduces its beneficial ownership to less than 15% of the outstandingwarrants.

No fractional shares of common stock will be issued upon the exercise of the warrants. Rather, the number of shares of common stock to be issued will, at our election, either be rounded up to the nearest whole number or we will pay a cash adjustment in ~~transactions that~~respect of such final fraction in an amount equal to such fraction multiplied by the exercise price.

Subject to applicable laws, a warrant may be transferred at the option of the holder upon surrender of the warrant to us together with the appropriate instruments of transfer.

We do not ~~involve us; and - amend~~intend to list the ~~terms~~warrants on any securities exchange or nationally recognized trading system.

Except as otherwise provided in the warrants or by virtue of ~~the rights without the consent~~such holder’s ownership of shares of our common stock, the holders of the warrants do not have the rights ~~under certain circumstances, except that once~~or privileges of holders of our common stock, including any voting rights, until they exercise their warrants.

In the event of a “fundamental transaction,” as defined in the warrant, and generally including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group ~~becomes an acquiring person, no such amendment may adversely affect~~becoming the ~~interests~~beneficial owner of 50% of the voting power represented by our outstanding common stock, the holders of the rights. Until a right is exercised, the holder of a right will not, by reason of being such a holder, have rights as a stockholder of our company, including, without limitation, the right to vote or to receive dividends. The distribution of the rights will not be taxable to our stockholders, but stockholders may, depending on the circumstances, recognize taxable income if the rights become exercisable or upon the commencement of certain events thereafter. Preferred shares purchasable upon exercise of the rights will not be redeemable. Each preferred share will be entitled to a minimum preferential dividend payment of 1,000 times the dividend declared on each share of common stock. In the event of liquidation, the holders of the preferred shares will be entitled to a preferential liquidation payment equal to 1,000 times the payment made per share of common stock. Each preferred share will have 1,000 votes, voting together with the common stock, plus accrued and unpaid dividends. Finally, in the event of any merger, consolidation or other transaction in which shares of common stock are exchanged, each preferred sharewarrants will be entitled to receive ~~1,000 times the amount received per share of common stock. These rights will be protected by customary antidilution provisions. Because~~upon exercise of the ~~nature~~warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the warrants immediately prior to such fundamental transaction. In the event of a fundamental transaction, we are obligated, at the holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the ~~preferred shares' dividend, liquidation~~fundamental transaction (or, if later, the date of the public announcement of the applicable fundamental transaction), purchase the warrants from the holder by paying to the holder an amount of consideration equal to the Black Scholes Value of the remaining unexercised portion of the warrant on the date of the execution of the consummation of such fundamental transaction, provided that, the holder shall only be entitled to receive from us or our successor, as of the date of consummation of such fundamental transaction, the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of the warrant, that is being offered and ~~voting rights,~~paid to the holders of our common stock in connection with the fundamental transaction. Under the warrant, “Black Scholes Value” means the value of the ~~one one-thousandth~~warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable fundamental transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the warrant expiration date, (B) an expected volatility equal to 100%, (C) the underlying price per share used in ~~a preferred~~such calculation shall be the greater of (i) the sum of the price per share ~~purchasable upon exercise of each right should approximate~~being offered in cash, if any, plus the value of ~~one~~any non-cash consideration, if any, being offered in such fundamental transaction and (ii) the greater of (x) the last VWAP immediately prior to the public announcement of such fundamental transaction and (y) the last VWAP immediately prior to the consummation of such fundamental transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable fundamental transaction and the warrant expiration date.

The following summary of certain terms and provisions ofpre-funded warrants included in thepre-funded units that are being offered hereby is not complete and is subject to, and qualified in its entirety by, the provisions of thepre-funded warrant, the form of which will be filed as an exhibit to the registration statement of which this prospectus forms a part. Prospective investors should carefully review the terms and provisions of the form ofpre-funded warrant for a complete description of the terms and conditions of thepre-funded warrants.

Eachpre-funded warrant will have an initial exercise price per share equal to $0.001. Thepre-funded warrants will be immediately exercisable and may be exercised at any time until thepre-funded warrants are exercised in full. The exercise price and number of shares of common ~~stock. The rights plan~~stock issuable upon exercise is ~~intended~~subject to ~~protect and maximize the value of our outstanding equity interests~~appropriate adjustment in the event of ~~an unsolicited attempt by an acquiror to take over~~stock dividends, stock splits, reorganizations or similar events affecting our company, in a manner or on terms not approved by the board of directors. The rights are not intended to prevent a takeover of our company and will not do so. REGISTRATION RIGHTS After this offering, the holders of approximately 12,731,446 shares of common stock and ~~rights to acquire shares of common stock subject to outstanding warrants as of June 30, 2000 and their permitted transferees will be entitled, upon expiration of lockup agreements with~~ the ~~underwriters, to~~ exercise ~~certain rights with respect~~price. This prospectus also relates to the registration of their shares under the Securities Act. Under the terms of an agreement between us and these stockholders, the holders of these shares may require, on two occasions, that we use our best efforts to register these shares for public resale; provided, however, that the anticipated gross offering price of the sale of such shares must exceed $2.0 million before we will be required to undertake such registration. In addition, if we propose to register any of our securities under the Securities Act, either for our own account or for the account of other security holders exercising registration rights, these stockholders are entitled to notice of such registration and to include their shares, at our expense, in that registration. These stockholders may also require us, on no more than three occasions, to file, at our expense, a registration statement on Form S-3 under the Securities Act with respect to their shares, when use of such form becomes available to us. All registration rights are subject to certain conditions and limitations, including the right of the underwriters of an offering to limit the number of shares to be included in such registration. In addition, we need not effect a registration within six months following a previous registration, or within six months following any offering of securities for our account made subsequent to this offering, or after such time as all of these stockholders may sell under Rule 144 in a three-month period all shares of common stock to which such registration rights apply. TRANSFER AGENT The transfer agent and registrar for the common stock is [ ]. 55 SHARES ELIGIBLE FOR FUTURE SALE If our stockholders sell substantial amounts of our stock in the public market following the offering, then the market price of our stock could fall. After the offering, shares of our common stock will be outstanding, assuming no exercise of the underwriters' over-allotment option and no exercise of outstanding options or warrants. Of those shares, the shares sold in the offering will be freely tradable, except for any shares purchased by our "affiliates," as defined in Rule 144 under the Securities Act. The remaining shares are "restricted securities," as defined in Rule 144, and may be sold in the public market only if registered or if they qualify for an exemption from registration under Rule 144 or Rule 701, which rules are summarized below. The following table depicts securities eligible for future sale: Total shares outstanding.................................... ---------- Total restricted securities................................. ---------- Shares that are freely tradable after the date of this prospectus under Rule 144(k), subject to the 180-day lockup agreement.......................................... ---------- Shares that are freely tradable 90 days after the date of this prospectus under Rule 144 or Rule 701, subject to the 180-day lockup agreement.................................. ---------- Shares that are freely tradable 180 days after the date of this prospectus under Rule 144 (subject, in some cases, to volume limitations), under Rule 144(k) or pursuant to a registration statement to register for resale shares of common stock issued on exercise of stock options.......... ----------

LOCKUP AGREEMENTS. All of our officers and directors and all of our stockholders owning more than 1% of our outstanding securities prior to the offering have signed lockup agreements pursuant to which they have agreed not to sell any shares of common stock, or any securities convertible into or exercisable or exchangeable for common stock, for 180 days after the offering without the prior written consent of J.P. Morgan Securities Inc. J.P. Morgan Securities Inc. may, in its sole discretion, release all or any portion of the shares subject to the lockup agreements. RULE 144. In general, Rule 144 provides that any person who has beneficially owned shares for at least one year, including an affiliate, is generally entitled to sell, within any three-month period, a number of shares that does not exceed the greater of 1% of the shares of common stock ~~then outstanding, which~~issuable upon exercise of thepre-funded warrants. The pre-funded warrants will be ~~approximately~~issued separately from the accompanying warrants included in thepre-funded units, and may be transferred separately immediately thereafter.

Thepre-funded warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder (together with its affiliates) may not exercise any portion of thepre-funded warrant to the extent that the holder would own more than 4.99% (or, at the election of a purchaser prior to issuance of the warrant, 9.99%) of the outstanding common stock immediately after exercise, except that upon at least 61 days’ prior notice from the ~~offering, and~~holder to us, the ~~reported average weekly trading volume~~holder may increase the amount of ownership of outstanding stock after exercising the holder’spre-funded warrants up to 9.99% of the number of shares of our common stock ~~during the four calendar weeks~~outstanding immediately ~~preceding the date on which notice of the sale is sent~~after giving effect to the ~~SEC. Sales under Rule 144 are subject to manner of sale restrictions, notice requirements and availability of current public information concerning us. RULE 144(k). A person who~~exercise, as such percentage ownership is not our affiliate and who has not been our affiliate within three months prior to the sale generally may sell shares without regard to the limitations of Rule 144, provided that the person has held the shares for at least one year. Under Rule 144(k), a person who is not deemed to have been our affiliate at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, is entitled to sell the shares without complyingdetermined in accordance with the ~~manner~~terms of ~~sale, public information, volume limitation or notice provisions of Rule 144. RULE 701. Any of our employees, directors, officers or consultants holding shares purchased pursuant to~~thepre-funded warrants.

If, at the time a written compensatory plan or contract, including options, entered into prior to the offering is entitled to rely on the resale provisions of Rule 701, which permit nonaffiliates to sell shares without having to comply with the public information, holding period, volume limitation or notice requirements of Rule 144 and permit affiliates to sell their Rule 701 shares without having to comply with the holding period restrictions of Rule 144, in each case beginning 90 days after the date of this prospectus. 56 ~~STOCK PLANS. Following the offering, we intend to file~~holder exercises itspre-funded warrants, a registration statement ~~on Form S-8~~registering the issuance of the shares of common stock underlying thepre-funded warrants under the Securities Act ~~covering~~is not then effective or available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of common stock ~~reserved for issuance under~~determined according to a formula set forth in the ~~1992 plan,~~pre-funded warrants.

Subject to applicable laws, apre-funded warrant may be transferred at the ~~1996 plan, the 2000 plan and the 2000 employee stock purchase plan. Upon expiration~~option of the ~~lockup agreements, at least~~holder upon surrender of thepre-funded warrant to us together with the appropriate instruments of transfer.

No fractional shares of common stock will be ~~subject to vested options, based on options outstanding as~~issued upon the exercise of ~~June 30, 2000. The registration statement is expected~~thepre-funded warrants. Rather, the number of shares of common stock to be ~~filed and become effective prior~~issued will, at our election, either be rounded up to ~~expiration~~the nearest whole number or we will pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the ~~lockup agreements; accordingly, shares registered under the registration statement will be~~exercise price.

~~There is no trading market available for ~~sale~~thepre-funded warrants on any securities exchange or nationally recognized trading system.~~

Except as otherwise provided in the ~~open market. REGISTRATION RIGHTS. After this offering, the holders~~pre-funded warrants or by virtue of ~~approximately 12,731,446~~such holder’s ownership of shares of our common stock, ~~and~~the holders of thepre-fundedwarrants ~~to purchase shares~~do not have the rights or privileges of holders of our common stock, including any voting rights, until they exercise theirpre-funded warrants.

In the event of a “fundamental transaction,” as defined in thepre-funded warrant, and generally including any reorganization, recapitalization or ~~their transferees,~~reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, the holders of the warrants will be entitled to ~~certain rights with respect~~receive upon exercise of thepre-funded warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised thepre-funded warrants immediately prior to the registration of those shares under the Securities Act. After any registration of these shares, these shares will become freely tradable without restriction under the Securities Act. These sales could have a material adverse effect on the trading price of our common stock. 57 ~~UNDERWRITING The underwriters named below, for whom J.P. Morgan Securities Inc. and Wit SoundView Corporation are~~such fundamental transaction.

Roth Capital Partners, LLC, which we refer to as “Roth Capital Partners” is acting as ~~representatives, have severally agreed,~~the lead placement agent in connection with this offering, subject to the terms and conditions ~~set forth~~of a placement agency agreement dated , 2018. The Benchmark Company, LLC, which we refer to as “Benchmark” is acting as co-placement agent. The placement agents are not purchasing or selling any of the units offered by this prospectus, nor are the placement agents required to

arrange the purchase or sale of any specific number or dollar amount of the units. The placement agents have agreed to use reasonable best efforts to arrange for the sale of all of the units offered hereby. Therefore, we may not sell the entire amount of the units offered pursuant to this prospectus. The placement agents may engage one or moresub-agents or selected dealers in connection with this offering.

In connection with the ~~underwriting~~offering, we will be entering into a securities purchase agreement ~~between~~with each purchaser of not less than $100,000 of common units or pre-funded units. This agreement includes representations and warranties by us and the ~~underwriters, to purchase from us, and we have agreed to sell to~~purchaser. This agreement also includes a covenant that in no event shall the ~~underwriters, the respective~~total number of shares of common stock owned by a purchaser, or a group of which such purchaser is a part, exceed 19.9% of the number of shares of common stock outstanding prior to the offering, unless stockholder approval is obtained for such excess holding.

Only certain institutional investors purchasing the securities offered hereby will execute, at such investors’ option, a securities purchase agreement with us, providing such investors with certain representations, warranties and covenants from us, which representations, warranties and covenants will not be available to other investors who will not execute a securities purchase agreement in connection with the purchase of the securities offered pursuant to this prospectus. Therefore, those investors shall rely solely on this prospectus in connection with the purchase of securities in the offering.

We will deliver the securities being issued to the investors upon receipt of investor funds for the purchase of the securities offered pursuant to this prospectus. We expect to deliver the securities being offered pursuant to this prospectus on or about , 2018.

We have agreed to pay the placement agents an aggregate cash placement fee equal to 6.5% of the gross proceeds received at the closing from the sale of the units with respect to the base offering amount which is the amount of gross proceeds from the sale of units to investors excluding the proceeds of sales of units to the holders of Notes at the closing.

~~The following table showsper-unit and total cash placement agent fees we will pay to the placement agents in connection with the sale of the units offered pursuant to this prospectus.~~

Because there is no minimum offering amount required as a condition to closing in this offering, the actual aggregate cash placement fee, if any, is not presently determinable and may be substantially less than the maximum amount set forth ~~opposite their names below:~~
- ------------------------------------------------------------------------------ UNDERWRITERS NUMBER OF SHARES - ------------ ---------------- J.P. Morgan Securities Inc.................................. Wit SoundView Corporation................................... ------------- Total....................................................... =============
~~The nature~~above. In addition, subject to FINRA Rule 5110(f)(2)(d)(i), we have agreed to reimburse the placement agents for reasonableout-of-pocket expenses up to a maximum of $80,000. We estimate that the total expenses of the ~~underwriters' obligations under~~offering payable by us, excluding the ~~underwriting agreement is such that all~~placement agent fees, will be approximately $380,000.

The public offering price of the securities we are offering was negotiated between us and the investors, in consultation with the placement agents based on the trading of our common stock ~~being offered, excluding shares covered by the over-allotment option granted~~prior to the underwriters, must be purchased if any are purchased. The representatives of the underwriters have advised us that the several underwriters propose to offer the common stock to the public initially atoffering, among other things. Other factors considered in determining the public offering price ~~set forth on the cover page~~ of ~~this prospectus and may offer the~~our common stock ~~to selected dealers at this price less a concession not to exceed $ per share. The underwriters may allow,~~we are offering include the history and ~~these dealers may reallow, a concession to other dealers not to exceed $ per share. After the initial public offering~~prospects of the ~~common stock,~~Company, the ~~public offering price~~stage of development of our business, our business plans for the future and ~~other selling terms may be changed by~~ the ~~representatives. We~~extent to which they have ~~granted~~been implemented, an assessment of our management, general conditions of the ~~underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to additional shares of common stock~~securities markets at the ~~same price per share to be paid by the underwriters for the other shares offered hereby. If the underwriters purchase any such additional shares pursuant to the option, each~~time of the ~~underwriters will be committed to purchase~~offering and such ~~additional shares in approximately the same proportion~~other factors as shown in the above table. The underwriters may exercise the option only to cover over-allotments, if any, made in connection with the distribution of the common stock offered in this prospectus. The underwriters have reserved for sale, at the initial public offering price, shares of the common stock for some of our directors, officers, employees, friends and family who, after receiving a preliminary prospectus and a letter explaining our directed share program, have expressed a non-binding interest in purchasing shares of common stock in the offering. These persons are expected to purchase, in the aggregate, not more than percent of the common stock offered in the offering. The number of shares available for sale to the general public in the offering will be reduced to the extent these persons purchase reserved shares. Any reserved shares not so purchased will be offered to the general public on the same basis as the other shares offered by this prospectus. The following table shows the per share and total underwriting discounts to be paid to the underwriters by us. These amounts are shown assuming both no exercise and full exercise of the underwriters' over-allotment option.
--------------------------- NO EXERCISE FULL EXERCISE ----------- ------------- Per share:.................................................. $ $ ----------- ------------ Total:...................................................... $ $ =========== ============
were deemed relevant.

We have agreed to indemnify the ~~underwriters~~placement agents against ~~certain liabilities, including~~ liabilities under the Securities ~~Act of 1933, or~~Act. We have also agreed to contribute to payments the ~~underwriters~~placement agents may be required to make in respect ~~thereof. We estimate that~~of such liabilities.

The placement agents may be deemed to be underwriters within the ~~total expenses~~meaning of ~~this offering, excluding underwriting discounts, will be $ . We will be responsible for all of these expenses. 58~~ ~~In connection with this offering, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price~~Section 2(a)(11) of the ~~common stock. Specifically,~~Securities Act, and any commissions received by it and any profit realized on the underwriters may overallot this offering, creating a syndicate short position. In addition, the underwriters may bid for, and purchase, shares of common stock in the open market to cover syndicate shorts or to stabilize the price of the common stock. Finally, the underwriting syndicate may reclaim selling concessions allowed for distributing shares of common stock in this offering, if the syndicate repurchases previously distributed common stock in syndicate covering transactions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market priceresale of the shares ~~of common stock above independent market levels. The underwriters are not~~sold by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. As an underwriter, each placement agent would be required to comply with the requirements of the Securities Act and the Exchange Act, including, without limitation, Rule 415(a)(4) under the Securities Act andRule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases and sales of shares by the placement agents acting as principals. Under these rules and regulations, the placement agents may not engage in ~~these activities,~~any stabilization activity in connection with our securities; and may ~~end any of these activities at any time. There has been no public market~~not bid for the common stock prior to this offering. We and the underwriters negotiated the initial offering price. In determining the price, we and the underwriters considered a number of factors in addition to prevailing market conditions, including: - the history of and prospects for our industry and for technology companies generally; - an assessment of our management; - our present operations; - our historical results of operations' - the trend of our revenues and earnings; and - our earnings prospects. We and the underwriters considered these and other relevant factors in relation to the price of similar securities of generally comparable companies. Neither we nor the underwriters can assure investors that an active trading market will develop for the common stock, or that the common stock will trade in the public market at or above the initial offering price. We and our executive officers, directors and certain stockholders have agreed, with limited exceptions, that, during the period beginning from the date of this prospectus and continuing and including the date 180 days after the date of this prospectus, none of us will, directly or indirectly offer, sell, offer to sell, contract to sell or otherwise dispose of any shares of common stock orpurchase any of our securities ~~which are substantially similar~~or attempt to ~~the common stock, including but not limited~~induce any person to purchase any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or any such substantially similar securities or enter into any swap, option, future, forward or other agreement that transfers, in whole or in part, the economic consequence of ~~ownership of common stock or any~~our securities, ~~substantially similar to the common stock,~~ other than pursuant to employee benefits plans existing on the date of this prospectus, without the prior written consent of J.P. Morgan Securities Inc. It is expected that delivery of the shares will be made to investors on or about , 2000. We have applied to have our common stock quoted on the Nasdaq National Marketas permitted under the ~~symbol MOSY. From time to time~~Exchange Act, until they have completed their participation in the ordinary course of their respective businesses, members of the underwriters and their affiliates have engaged in and may in the future engage in commercial and/or investment banking transactions with us and our affiliates. Adistribution.

This prospectus ~~in electronic format is being made available on Internet web sites maintained by Wit SoundView Corporation's affiliate, Wit Capital Corporation, and~~ may be made available ~~on web sites maintained by other underwriters. In addition, other dealers purchasing shares from Wit SoundView in this offering have agreed to make a prospectus~~ in electronic format ~~available~~ on ~~web sites~~websites or through other online services maintained by ~~each of these dealers.~~the placement agents, or by an affiliate. Other than ~~the~~this prospectus in electronic format, the information on ~~any underwriter's web site~~the placement agents’ website and any information contained in any other ~~web site~~website maintained by ~~an underwriter is not part of~~ the ~~prospectus~~placement agents or ~~the registration statement of 59~~ which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter in its capacity as underwriter and should not be relied upon by investors. Other than the prospectus in electronic format, the information contained on any underwriter's web site and any information contained on any other web site maintained by an ~~underwriter~~affiliate is not part of this prospectus or the registration statement of which this prospectus ~~forms~~is a part, has not been approved and/or endorsed by us or ~~any underwriter in its capacity as an underwriter~~the placement agents, and should not be relied upon by investors.

The foregoing does not purport to be a complete statement of the terms and conditions of the placement agency agreement or the securities purchase agreement, copies of which are incorporated by reference into the registration statement of which this prospectus is a part. See “Where You Can Find More Information.”

The placement agents may be deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act, and any commissions received by it and any profit realized on the resale of any units sold by it while acting as a principal might be deemed to be underwriting discounts or commissions under the Securities Act. As an underwriter, the placement agents would be required to comply with the requirements of the Securities Act and the Securities Exchange Act of 1934, as amended, or the “Exchange Act,” including Rule 415(a)(4) under the Securities Act and Rule10b-5 and Regulation M promulgated under the Exchange Act. These rules and regulations may limit the timing of purchases and sales of shares offered hereby by any placement agent acting as a principal. Under these rules and regulations, a placement agent:

~~must not engage in any stabilization activity in connection with our securities; and~~

must not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until it has completed its participation in the distribution.

In connection with this offering, the placement agents may engage in passive market making transactions in our Common Stock on the Nasdaq Capital Market in accordance with Rule 103 of Regulation M promulgated under the Exchange Act during a period before the commencement of offers or sales of the units and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. If all independent bids are lowered below the passive market maker’s bid, however, that bid must then be lowered when specified purchase limits are exceeded.

We and each of our officers and directors have agreed not to offer, pledge, sell, contract to sell, grant any option or contract to purchase, purchase any option or contract to sell, or otherwise dispose of, directly or indirectly, any common stock or any securities convertible into, exercisable for, or exchangeable for common stock, or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock for a period of 90 days after the effective date of the registration statement of which this prospectus is a part without the prior written consent of Roth Capital Partners, except for sales of shares to satisfy tax withholding obligations upon settlement of restricted stock units outstanding as of the date of thelock-up agreement. This consent may be given at any time without public notice. Each officer and director shall be immediately and automatically released from all restrictions and obligations under the lock up agreement in the event that he or she ceases to be a director or officer of our company and has no further reporting obligations under Section 16 of the Exchange Act.

From time to time, the placement agents and their affiliates may in the future provide various investment banking, financial advisory and other services to us and our affiliates for which services they may receive customary fees, but we have no present arrangements to do so. Subject to Regulation M and other applicable statutes and regulations, in the course of its businesses, the placement agents and their affiliates may actively trade our securities or loans for their own account or for the accounts of customers, and, accordingly, the placement agents may at any time hold long or short positions in such securities or loans.

Our common stock is listed on the Nasdaq Capital Market under the symbol “MOSY.” There is no established trading market for the warrants or thepre-funded warrants offered by this prospectus, and we do not expect a market to develop. In addition, we do not intend to apply for listing of the warrants or thepre-funded warrants offered by this prospectus on any securities exchange or recognized trading system.

This prospectus does not constitute an approved prospectus under Directive 2003/71/EC and no such prospectus is intended to be prepared and approved in connection with this offering. Accordingly, in relation to each Member State of the European Economic Area which has implemented Directive 2003/71/EC (each, a “Relevant Member State”) an offer to the public of any shares of common stock, which are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State except that an offer to the public in that Relevant Member State of any shares of common stock may be made at any time under the following exemptions under the Prospectus Directive, if and to the extent that they have been implemented in that Relevant Member State:

For the purposes of this provision, the expression an “offer to the public” in relation to any shares of common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares of common stock to be offered so as to enable an investor to decide to purchase any shares of common stock, as the expression may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (and any amendments thereto including the 2010 PD Amending Directive to the extent implemented in each Relevant Member State) and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

This prospectus is not an approved prospectus for purposes of the UK Prospectus Rules, as implemented under the EU Prospectus Directive (2003/71/EC), and have not been approved under section 21 of the Financial Services and Markets Act 2000 (as amended) (the “FSMA”) by a person authorized under FSMA. The financial promotions contained in this prospectus is directed at, and this prospectus is only being distributed to (1) persons who receive this prospectus outside of the United Kingdom, and (2) persons in the United Kingdom who fall within the exemptions under articles 19 (investment professionals) and 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons together being referred to as “Relevant Persons”). This prospectus must not be acted upon or relied upon by any person who is not a Relevant Person. Any investment or investment activity to which this prospectus relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person that is not a Relevant Person.

The validity of the issuance of shares of common stock ~~being~~ offered hereby will be passed upon for us by ~~McCutchen, Doyle, Brown & Enersen,~~Pillsbury Winthrop Shaw Pittman LLP, Palo Alto, California. ~~Morrison~~Ellenoff Grossman & ~~Foerster~~Schole LLP, ~~San Francisco, California,~~New York, New York is acting as counsel for the ~~underwriters~~placement agents in connection with ~~certain legal matters relating to the shares~~this offering.

The consolidated financial statements of ~~common stock offered by this prospectus. EXPERTS Our financial statements~~MoSys, Inc. as of December 31, ~~1998~~2017 and ~~1999~~2016 and for each of the three years in the period ended December 31, ~~1999 included~~2017, incorporated in this prospectus by reference to the Annual Report onForm 10-K for the year ended December 31, 2017, have been so ~~included~~incorporated in reliance on the report of ~~PricewaterhouseCoopers~~BPM LLP, an independent ~~accountants,~~registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

We ~~have~~were founded in 1991 and reincorporated in Delaware in September 2000. Our website address is www.mosys.com. The information in our website is not incorporated by reference into this report. Through a link on the Investor section of our website, we make available our annual reports onForm 10-K, quarterly reports onForm 10-Q, current reports onForm 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after they are filed with, or furnished to, the Securities and Exchange Commission, or SEC. You can also read and obtain copies of any materials we file with the SEC a registration statement on Form S-1 with respect to the common stock in this offering. This prospectus, which constitutes a part of the registration statement, does not contain all the information set forth in the registration statement. For further information about us and the shares of common stock to be sold in the offering, please refer to the registration statement and the exhibits and schedules thereto. The registration statement and exhibits may be inspected, without charge, and copies may be obtained at prescribed rates, at the ~~SEC's~~SEC’s Public Reference Room at 450 Fifth Street, ~~N.W.,~~NW, Washington, ~~D.C.~~DC 20549. ~~The public may~~You can obtain additional information onabout the operation of the Public Reference Room by calling the SEC at ~~1-800-SEC-0330. The registration statement and other information filed with~~1.800.SEC.0330. In addition, the SEC ~~is also available at the web site maintained by the SEC at http://www.sec.gov. As~~maintains a result of this offering, we will become subject to the information and reporting requirements of the Securities Exchange Act of 1934 and will file periodic reports, proxy statements and other information with the SEC. Thesewebsite (www.sec.gov) that contains reports, proxy and information statements, and other information ~~may also be inspected at~~regarding issuers that file electronically with the ~~offices~~SEC, including us.

This prospectus is part of ~~Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006. 60~~ ~~MONOLITHIC SYSTEM TECHNOLOGY, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~PAGE --------~~ Report of Independent Accountants........................... F-2 Consolidated Balance Sheets................................. F-3 Consolidated Statements of Operations....................... F-4 Consolidated Statements of Stockholders' Equity............. F-5 Consolidated Statements of Cash Flow........................ F-6 Notes to Consolidated Financial Statements.................. F-7
~~F-1~~ REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Monolithic System Technology, Inc. The reincorporation of Monolithic Systems Technology, Inc., in the State of Delaware, described in Note 13 to the financial statements, has not yet been consummated. When it has been consummated, we will be in a position to furnish the following report: "In our opinion, the accompanying balance sheets and the related statements of operations, of stockholders' equity (deficit) and of cash flows present fairly, in all material respects, the financial position of Monolithic System Technology, Inc. at December 31, 1998 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinionregistration statement on ~~these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States which require~~Form S-1 that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above." PricewaterhouseCoopers LLP San Jose, California August 3, 2000 F-2 ~~MONOLITHIC SYSTEM TECHNOLOGY, INC. BALANCE SHEETS (IN THOUSANDS)~~
---------------------------------------------------- PRO FORMA STOCKHOLDERS' DECEMBER 31, EQUITY (DEFICIT) ------------------- JUNE 30, AT JUNE 30, 1998 1999 2000 2000 -------- -------- ----------- ---------------- (UNAUDITED) (UNAUDITED) ASSETS Current assets: Cash and cash equivalents................................. $ 9,750 $ 12,720 $ 19,947 Accounts receivable, net.................................. 2,654 1,591 1,122 Inventories............................................... 4,442 1,049 1,238 Prepaid expenses and other current assets................. 83 304 338 -------- -------- ----------- Total current assets.................................... 16,929 15,664 22,645 Property and equipment, net................................. 953 778 547 Other assets................................................ 50 39 29 -------- -------- ----------- Total assets............................................ $ 17,932 $ 16,481 $ 23,221 ======== ======== =========== LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable.......................................... $ 4,484 $ 647 $ 396 Accrued expenses and other liabilities.................... 1,058 1,064 1,117 Deferred revenue.......................................... - 2,045 3,878 -------- -------- ----------- Total current liabilities............................... 5,542 3,756 5,391 -------- -------- ----------- Commitments and contingencies (Note 12) Mandatorily redeemable convertible preferred stock, $0.01 par value; 9,500 shares authorized; 5,932 shares in 1998 and 5,932 shares in 1999 and 6,582 (unaudited) shares at June 30, 2000 and none (unaudited) at June 30, 2000 (pro forma) issued and outstanding............................. 30,391 30,391 35,591 $ - -------- -------- ----------- Stockholders' equity (deficit): Common Stock, $0.01 par value; 30,000 shares authorized; 9,697 shares in 1998 and 9,804 shares in 1999 and 9,935 (unaudited) shares at June 30, 2000 and 22,666 (unaudited) shares at June 30, 2000 (pro forma) issued and outstanding......................................... 97 98 99 227 Additional paid-in capital................................ 1,185 2,098 2,630 38,093 Accumulated deficit....................................... (19,283) (19,141) (19,723) (19,723) Deferred stock-based compensation......................... - (721) (767) (767) -------- -------- ----------- -------------- Total stockholders' equity (deficit).................... (18,001) (17,666) (17,761) $ 17,830 -------- -------- ----------- ============== Total liabilities, mandatorily redeemable convertible preferred stock and stockholders' equity (deficit)........................................... $ 17,932 $ 16,481 $ 23,221 ======== ======== ===========
~~The accompanying notes are an integral part of these financial statements. F-3~~ ~~MONOLITHIC SYSTEM TECHNOLOGY, INC. STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)~~
--------------------------------------------- SIX MONTHS YEAR ENDED ENDED DECEMBER 31, JUNE 30, --------------------------- --------------- 1997 1998 1999 1999 2000 ------- ------- ------- ------ ------ (UNAUDITED) Net revenue: Product................................................. $34,822 $36,281 $15,356 $8,145 $4,028 Contract................................................ - - - - 460 ------- ------- ------- ------ ------ $34,822 $36,281 $15,356 $8,145 $4,488 Cost of net revenue: Product................................................. 29,510 31,892 10,062 5,447 1,952 Contract................................................ - - - - 267 ------- ------- ------- ------ ------ 29,510 31,892 10,062 5,447 2,219 ------- ------- ------- ------ ------ Gross profit.............................................. 5,312 4,389 5,294 2,698 2,269 ------- ------- ------- ------ ------ Operating expenses: Research and development................................ 3,596 4,224 3,110 1,647 1,630 Selling, general and administrative..................... 3,225 2,842 2,388 1,194 1,338 Stock-based compensation charge(*)...................... - - 107 20 342 ------- ------- ------- ------ ------ Total operating expenses.............................. 6,821 7,066 5,605 2,861 3,310 ------- ------- ------- ------ ------ Loss from operations...................................... (1,509) (2,677) (311) (163) (1,041) Interest expense.......................................... (1,030) (294) - - - Interest and other income................................. 523 649 520 225 459 ------- ------- ------- ------ ------ Income (loss) before income taxes......................... (2,016) (2,322) 209 62 (582) Provision for income taxes................................ - - (67) (20) - ------- ------- ------- ------ ------ Net income (loss)......................................... $(2,016) $(2,322) $ 142 $ 42 $ (582) ======= ======= ======= ====== ====== Net income (loss) per share: Basic................................................... $ (0.22) $ (0.24) $ 0.01 $ 0.00 $(0.06) ======= ======= ======= ====== ====== Diluted................................................. $ (0.22) $ (0.24) $ 0.01 $ 0.00 $(0.06) ======= ======= ======= ====== ====== Shares used in computing net income (loss) per share: Basic................................................... 9,323 9,626 9,727 9,708 9,856 Diluted................................................. 9,323 9,626 23,320 22,735 9,856 Pro forma net income (loss) per share: Basic................................................... $ 0.01 $(0.03) ======= ====== Diluted................................................. $ 0.01 $(0.03) ======= ====== Shares used in computing pro forma net income (loss) per share: Basic................................................... 21,808 22,259 Diluted................................................. 23,320 22,259 (*) Stock-based compensation in operating expenses: Research and development.............................. $ - $ - $ 56 $ 11 $ 152 Selling, general and administrative................... - - 51 9 190 ------- ------- ------- ------ ------ $ - $ - $ 107 $ 20 $ 342 ======= ======= ======= ====== ======
~~The accompanying notes are an integral part of these financial statements. F-4~~ ~~MONOLITHIC SYSTEM TECHNOLOGY, INC. STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (IN THOUSANDS)~~
------------------------------------------------------------------------------------- COMMON STOCK ADDITIONAL DEFERRED DEFERRED ------------------- PAID-IN WARRANT STOCK-BASED ACCUMULATED SHARES AMOUNT CAPITAL COST COMPENSATION DEFICIT TOTAL -------- -------- ---------- -------- ------------- ------------ -------- Balance at December 31, 1996......... 9,216 $ 92 $ 1,113 $ (337) $ - $ (14,945) $(14,077) Issuance of Common Stock upon exercise of options................ 209 2 27 - - - 29 Amortization of warrants............. - - - 161 - - 161 Net loss............................. - - - - - (2,016) (2,016) -------- -------- --------- -------- ------------- ------------ -------- Balance at December 31, 1997......... 9,425 94 1,140 (176) - (16,961) (15,903) Issuance of Common Stock upon exercise of options................ 272 3 31 - - - 34 Issuance of common stock warrant..... - - 14 - - - 14 Amortization of warrants............. - - - 176 - - 176 Net loss............................. - - - - - (2,322) (2,322) -------- -------- --------- -------- ------------- ------------ -------- Balance at December 31, 1998......... 9,697 97 1,185 - - (19,283) (18,001) Issuance of Common Stock upon exercise of options................ 107 1 64 - - - 65 Stock options granted in exchange of services........................... - - 21 - - - 21 Deferred stock-based compensation.... - - 828 - (828) - - Amortization of deferred stock-based compensation....................... - - - - 107 - 107 Net loss............................. - - - - - 142 142 -------- -------- --------- -------- ------------- ------------ -------- Balance at December 31, 1999......... 9,804 98 2,098 - (721) (19,141) (17,666) Issuance of Common Stock upon exercise of options (unaudited).... 131 1 122 - - - 123 Deferred stock-based compensation (unaudited)........................ - - 410 - (410) - - Amortization of deferred stock-based compensation (unaudited)........... - - - - 364 - 364 Net loss (unaudited)................. - - - - - (582) (582) -------- -------- --------- -------- ------------- ------------ -------- Balance at June 30, 2000 (unaudited)........................ 9,935 $ 99 $ 2,630 $ - $ (767) $ (19,723) $(17,761) ======== ======== ========= ======== ============= ============ ========
~~The accompanying notes are an integral part of these financial statements. F-5~~ ~~MONOLITHIC SYSTEM TECHNOLOGY, INC. STATEMENTS OF CASH FLOWS (IN THOUSANDS)~~
------------------------------------------------ SIX MONTHS YEARS ENDED ENDED DECEMBER 31, JUNE 30, ---------------------------- ----------------- 1997 1998 1999 1999 2000 ------- -------- ------- ------- ------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net profit (loss)..................................... $(2,016) $ (2,322) $ 142 $ 42 $ (582) Adjustments to reconcile net profit (loss) to net cash used in operating activities: Depreciation and amortization....................... 1,027 1,031 901 460 268 Issuance of stock options for services.............. - - 21 - - Warrant costs....................................... 161 190 - - - Amortization of deferred stock-based compensation... - - 107 20 364 Changes in current assets and liabilities: Accounts receivable............................... (5,074) 4,016 1,063 938 469 Inventories....................................... (873) 2,709 3,393 2,847 (189) Prepaid expenses and other assets................. 749 257 (210) (37) (24) Deferred revenue.................................. - - 2,045 1,640 1,833 Payable to related party.......................... (1,035) 91 - - - Accounts payable.................................. (1,497) (3,776) (3,837) (4,228) (251) Accrued expenses and other liabilities............ 2,062 (3,350) 6 303 53 ------- -------- ------- ------- ------- Net cash provided by (used in) operating activities.................................... (6,496) (1,154) 3,631 1,985 1,941 ------- -------- ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment.................... (828) (134) (726) (198) (37) Release of restricted cash held as collateral for line of credit........................................... 6,136 - - - - Maturity and sale of short-term investments........... 765 775 - - - ------- -------- ------- ------- ------- Net cash provided by (used in) investing activities.................................... 6,073 641 (726) (198) (37) ------- -------- ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of notes payable............................ (4,219) (6,923) - - - Proceeds from issuance of convertible preferred stock............................................... 1,595 8,061 - - 5,200 Proceeds from issuance of common stock................ 29 34 65 27 123 ------- -------- ------- ------- ------- Net cash provided by (used in) financing activities.................................... (2,595) 1,172 65 27 5,323 ------- -------- ------- ------- ------- Net increase/(decrease) in cash and cash equivalents.... (3,018) 659 2,970 1,814 7,227 Cash and cash equivalents at beginning of period........ 12,109 9,091 9,750 9,750 12,720 ------- -------- ------- ------- ------- Cash and cash equivalents at end of period.............. $ 9,091 $ 9,750 $12,720 $11,564 $19,947 ======= ======== ======= ======= ======= SUPPLEMENTAL DISCLOSURE: Interest paid......................................... $ 151 $ 160 $ - $ - $ - ======= ======== ======= ======= ======= SUPPLEMENTAL DISCLOSURE FOR NON-CASH FINANCING AND INVESTING ACTIVITIES: Reduction of obligations under notes payable in connection with termination of capacity commitments......................................... $ - $(22,540) $ - $ - $ - ======= ======== ======= ======= ======= Reduction of other long-term assets in connection with termination of capacity commitments................. $ - $ 22,540 $ - $ - $ - ======= ======== ======= ======= ======= Issuance of convertible preferred stock upon conversion of debt.................................. $ 6,703 $ - $ - $ - $ - ======= ======== ======= ======= =======
~~The accompanying notes are an integral part of these financial statements. F-6~~ MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: THE COMPANY Monolithic System Technology, Inc. (the "Company") was incorporated in California on September 16, 1991 to design, develop and market high performance semiconductor memory products and technologies used by the semiconductor industry and electronic product manufacturers. The Company has developed an innovative embedded-memory technology, called 1T-SRAM, which the Company licenses on a non-exclusive and worldwide basis to semiconductor companies and electronic product manufacturers. From its inception in 1991 through 1998, the Company focused primarily on the sale of stand-alone memory products. In the fourth quarter of 1998, the Company changed its business model to focus primarily on the licensing of its 1T-SRAM technology. USE OF ESTIMATES The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. REPORTING PERIODS The Company operates and reports financial results on a 52-53 week fiscal year. In 1997, 1998 and 1999, the fiscal years ended on January 4, 1998, January 3, 1999 and January 2, 2000, respectively. For convenience, the Company has presented its fiscal year as ending on December 31 for all periods. The six-month periods presented ended on July 4, 1999 and July 2, 2000. For convenience, the Company has presented the six-month period as ending on June 30 in both years. INTERIM RESULTS (UNAUDITED) The interim financial statements as of June 30, 2000 and for the six months ended June 30, 1999 and 2000 are unaudited. In the opinion of management, these interim financial statements have been prepared on the same basis as the audited financial statements and reflect all adjustments, consisting only of normal, recurring adjustments necessary for the fair presentation of the results of interim periods. The financial data and other information disclosed in these notes to the financial statements for the related periods are unaudited. The results of the interim periods are not necessarily indicative of the results to be expected for future periods. CASH AND CASH EQUIVALENTS Cash equivalents consist of highly liquid investment instruments with a maturity of three months or less when purchased. The fair value of these investment instruments approximated their costs at the respective balance sheet dates. INVENTORIES Inventories are stated at the lower of cost, determined using the first-in, first-out method, or market. F-7 MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is generally computed using the straight-line method over the estimated useful lives of the assets, generally 3 years. The Company evaluates the recoverability of its long-lived assets in accordance with Statement of Financial Accounting Standards ("SFAS No. 121"), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS No. 121 requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds the future undiscounted cash flows attributable to such assets. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensuratefiled with the ~~risk involved. Losses on long-lived assets to be disposed~~SEC, of ~~are determined in~~which this prospectus is a similar manner, except that fair values are reduced for the cost of disposal. No losses from impairment have been recognized in the financial statements. REVENUE RECOGNITION Revenue from product sales is recognized upon shipment to customers. Provisions for potential warranty liability and estimated returns are recorded at the time revenue is recognized. Contract revenues from licensing activities consist of fees paid for engineering development and engineering support services. For contracts involving performance specifications that the Company has not yet met, the Company defers the recognition of revenue until the licensee manufactures products that meet the contract performance specifications. Fees billed prior to revenue recognition are recorded as deferred contract revenue. Licensing contracts provide for royalty payments at a stated rate. Agreements require licensees to report the manufacture or sale of products that include the Company's technology after the end of the quarter in which the sale or manufacture occurs. The Company will recognize royalties in the quarter in which the licensee's report is received. COST OF REVENUE Cost of product revenue consists primarily of costs associated with the manufacture, assembly and test of the Company's stand-alone memory products by independent, third-party contractors. Cost of contract revenue consists primarily of deferred engineering costs directly related to development projects specified in agreements we have with licensees of our memory technology. To the extent that the amount of engineering costs does not exceed the amount of the related contract revenue, these costs are deferred on a contract-by-contract basis from the time the Company has established technological feasibility of the product to be developedpart, under the ~~contract. This occurs when~~Securities Act, with respect to the Company has completed all of the activities necessary to establish that the licensee's product can be produced to meet the performance specifications when incorporating the Company's technology. Deferred costs are charged to cost of contract revenue when the related revenue is recognized. RESEARCH AND DEVELOPMENT Research and development costs are expensed as incurred. The Company has not capitalized any software development costs to date and is in compliance with Statement of Financial Accounting Standards No. 86 ("SFAS F-8 MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) No. 86"), "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed." Capitalization of software development costs begins upon the establishment of technological feasibility of the product. After technological feasibility is established, material software development costs are capitalized. The capitalized cost is then amortized on a straight-line basis over the estimated product life, or on the ratio of current revenues to total projected product revenues, whichever is greater. To date, the period between achieving technological feasibility, which the Company has defined as the establishment of a working model which typically occurs when beta testing commences, and the general availability of such software has been short, and as such, software development costs qualifying for capitalization have been insignificant. STOCK-BASED COMPENSATION The Company accounts for stock-based compensation arrangements in accordance with the provisions of APB No. 25 ("APB No. 25"), "Accounting for Stock Issued to Employees" and complies with the disclosure provisions of Statement of Financial Accounting Standard No. 123 ("SFAS No. 123"), "Accounting for Stock-Based Compensation." Under APB No. 25, compensation cost is, in general, recognized based on the excess, if any, of the fair market value of the Company's stock on the date of grant over the amount an employee must pay to acquire the stock. Equity instruments issued to non-employees are accounted for in accordance with the provision of SFAS No. 123 and Emerging Issues Task Force 96-18. Deferred stock-based compensation is being amortized using the graded vesting method in accordance with Financial Accounting Standards Board Interpretation No. 28 ("FIN No. 28") over the vesting period of each respective option, which is generally four years. Under the graded vesting method, each option grant is separated into portions based on its vesting terms which results in acceleration of amortization expense for the overall award. NET INCOME (LOSS) PER SHARE Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of shares of common stock ~~outstanding during~~offered hereby. This prospectus omits some information contained in the ~~period. Diluted net loss per share~~registration statement in accordance with SEC rules and regulations. You should review the information and exhibits in the registration statement for further information about us and the securities being offered hereby. Statements in this prospectus concerning any document we filed as an exhibit to the registration statement or that we otherwise filed with the SEC are not intended to be comprehensive and are qualified by reference to the filings. You should review the complete document to evaluate these statements.

The SEC allows us to “incorporate by reference” the information we file with them, which means that we can disclose important information by referring you to those documents. The information incorporated by reference is ~~computed~~considered to be part of the accompanying prospectus, and information that we file later with the SEC will automatically update and supersede this information. We incorporate by ~~dividing~~reference the ~~net loss available~~documents listed below:

In addition, all filed information contained in reports and documents filed with the SEC pursuant to ~~common stockholders for~~Sections 13(a), 13(c), 14 or 15(d) of the ~~period by~~Exchange Act subsequent to the ~~weighted average number~~date of ~~common~~filing the registration statement that includes the accompanying prospectus and potential common equivalent shares outstanding during the period. The calculation of diluted net loss per share excludes potential common shares if the effect is anti-dilutive. Potential common shares are composed of incremental shares of common stock issuable upon the exercise of stock options and warrants and common stock issuable upon conversion of preferred stock. PRO FORMA BALANCE SHEET INFORMATION (UNAUDITED) Immediately prior to the ~~effective date~~filing of a post-effective amendment to the ~~Company's initial public offering,~~registration statement containing the ~~Company's outstanding convertible preferred stock will automatically convert into common stock. The pro forma effects~~accompanying prospectus, which indicates that all securities offered have been sold or which deregisters all of such securities then remaining unsold, shall be deemed to be incorporated by reference in this prospectus. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes hereof to the extent that a statement contained herein or in any other subsequently filed document which is also incorporated or deemed to be incorporated herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this ~~transaction are unaudited and have been reflected~~prospectus.

~~You may request a copy of these filings, at no cost, by writing or telephoning us at the following address or telephone number:~~

In addition, you may obtain a copy of these filings from the SEC as described in the ~~accompanying pro forma stockholders' equity (deficit) as~~section entitled “Where You Can Find More Information.”

Up to 3,133,159 Common Units (each Common Unit contains one Share of ~~June 30, 2000. PRO FORMA NET INCOME (LOSS) PER SHARE (UNAUDITED) Pro forma net income (loss) per share for the year ended December 31, 1999~~Common Stock, and the six months ended June 30, 2000 is computed using the weighted average number of common shares outstanding, including the conversion of the Company's convertible preferred stock into the Company's common stock effective upon the closing of the Company's initial public offering, as if such conversion occurred at January 1, 1999 or at date of original F-9 MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) issuance, if later. The calculation of pro forma diluted net income (loss) per share excludes incremental common stock issuable upon the exercise of stock options and warrants as the effect would be anti-dilutive. INCOME TAXES The Company accounts for deferred income taxes under the liability approach whereby the expected future tax consequences of temporary differences between the book and tax basis of assets and liabilities are recognized as deferred tax assets and liabilities. A valuation allowance is established for any deferred tax assets for which realization is uncertain. COMPREHENSIVE INCOME Financial Accounting Standards Statement No. 130 "Reporting Comprehensive Income"("SFAS No. 130") requires the disclosure of comprehensive income, defined as all changes in equity during a period except for investments by owners and distributions to owners. For the three years ended December 31,1999 and the six months ended June 30, 2000, the Company did not have comprehensive income other than net income. SEGMENT REPORTING Financial Accounting Standards Board Statement No. 131, "Disclosure about Segments of an Enterprise and Related Information" ("SFAS No. 131") requires that companies report separately in the financial statements certain financial and descriptive information about operating segments profit or loss, certain specific revenue and expense items and segment assets. The Company operates in one segment, using one measurement of profitability for its business. The Company has sales outside the United States which are described in Note 11. All long-lived assets are maintained in the United States. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard No. 133 ("SFAS No. 133"), "Accounting for Derivatives and Hedging Activities." This statement establishes accounting and reporting standards of derivative instruments and requires recognition of all derivatives as assets or liabilities in the balance sheet and measurement of those instruments at fair value. The statement is effective for fiscal years beginning after June 15, 2000. The Company will adopt the standard no later than the first quarter of fiscal year 2001 and management does not expect a material impact on the Company's financial statements. In December 1999, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 provides interpretive guidance on the recognition, presentation and disclosure of revenue in financial statements under certain circumstances. The Company adopted the provisions of SAB 101 in these financial statements for all periods presented. In March 2000, the FASB issued Interpretation No. 44 ("FIN No. 44"), "Accounting for Certain Transactions Involving Stock Compensation - an interpretation of APB Opinion No. 25." FIN No. 44 establishes guidance for the accounting for stock option grants or modifications to existing stock option awards and is effective for option grants made after June 30, 2000, but certain conclusions cover specific events that occur after either December 15, 1998 or January 12, 2000. FIN 44 also establishes guidance for the repricing of stock options and determining whether a grantee is an employee, for which the guidance was effective after December 15, 1999 F-10 MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) and modifying a fixed option to add a reload feature, for which guidance was effective after January 12, 2000. The Company does not expect the adoption of certain of the provisions of FIN No. 44 prior to June 30, 2000 to have a material effect on the financial statements. The Company does not expect the adoption of certain of the provisions of FIN No. 44 prior to June 30, 2000 to have a material effect on the financial statements. The Company does not expect the adoption of the remaining provisions to have a material effect on the financial statements. NOTE 2 - RELATED PARTY TRANSACTIONS: M-ONE In 1994, the Company completed the spin-off of a majority of its equity interest in M-One Technology Corporation ("M-One"), a subsidiary in Taiwan through a stock distribution of M-One's shares and sold its remaining interest in M-One. Responsibility for the intended business activities of M-One were assumed by the Company in 1995. The Company then became directly responsible for the production and sale of its products. Due to continued operating losses and significant accumulated deficits and difficult market conditions, M-One ceased its operations in early 1997 and terminated all of its employees. As of December 31, 1997, M-One had no assets and the Company had accrued certain liabilities related to the obligations of M-One. As of March 31, 2000, the Company had filed papers with the appropriate authorities in Taiwan to terminate M-One's existence. FINANCING TRANSACTIONS In 1996, the Company entered into note and warrant purchase agreements with two directors, certain preferred stockholders and other unrelated parties, borrowing an aggregate of $13.1 million. The notes had an interest rate of 8.25% per annum and a maturity date of May 31, 1998. Each agreement holder received a warrantWarrant to purchase ~~a number~~one Share of common stock shares determined by dividing half the principal amount of the note signed by the holder by the exercise price of the warrant at the time of subscription. The exercise price ranged from $6.50Common Stock)

Up to $8.50. These warrants had an expiration date of May 31, 1998. The Company estimated the fair market value of the warrants was $141,000, using the Black-Scholes method. The following assumptions were applied when estimating the fair value of these warrants: dividend yield of 0%, risk-free rate of 6.18%, term of 2 years and volatility of 40%. The value of the warrants was amortized as interest expense over the term of the note. Amortization of these warrants amounted to $37,000 in 1996. In June 1997, upon cancellation of the note and warrant purchase agreements, $6.7 million of the principal was converted into Series F preferred stock at a conversion price of $5.50 per share. In connection with this conversion, all of the outstanding warrants held by the noteholders were exchanged for new warrants. The Company estimated the fair value of the new warrants was $136,000 (Note 8), which approximates the value of the old warrant. The Company continued to amortize the remaining deferred warrant cost as interest expense. Interest expense for the years ended December 31, 1997 and 1998 amounted to $54,000 and $46,000 respectively. In May 1998, the Company repaid the remaining balance of $6.4 million and the accrued interest owed under the notes. F-11 MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 3 - WAFER FOUNDRY AGREEMENT: Under the terms of a 1996 agreement with the Company's foundry to ensure that the Company would be supplied with a certain minimum number of wafers, the Company signed six promissory notes totaling $23,380,000 with varying due dates ranging from 1997 through 2000. The notes did not bear interest until they became due, at which date a rate of 10% per annum was applied on any unpaid amounts. The Company paid $840,000 in 1997 in accordance with the agreement. Upon recording the notes, the Company recorded an asset in the same amount representing its right to future wafer production. In connection with this agreement, the Company issued a warrant to the foundry12,549,019Pre-Funded Units (eachPre-Funded Unit contains onePre-funded Warrant to purchase ~~3,392,310 shares~~one Share of the Company's common stock at a price of $6.50 per share. The Company determined the value of the warrant was $237,000 using the Black-Scholes method. The following assumptions were applied when estimating the fair value of these warrants: dividend yield of 0%, risk-free rate of 6.18%, term of 2.17 yearsCommon Stock, and volatility of 40%. The value of the warrant was amortized over the period of benefit of the agreement. Amortization expense amounted to $100,000 during the year ended December 31, 1997. On January 1, 1998 (prior to the close of fiscal 1997), the agreement was amended. The terms of this amendment canceled the promissory notes and the Company signed five new promissory notes totaling $22,540,000 with due dates ranging from November 1999 through June 2001. The other terms of the original agreement remained substantially the same. On August 6, 1998, the amended agreement with the foundry was terminated. The terms of the termination canceled the existing promissory notes totaling $22,540,000 and the right to future wafer production. Accordingly, the amount of the notes and corresponding asset in the same amount representing the right to future production was reversed. In conjunction with the termination of the foundry agreement, the Company issued a new warrant to the foundryone Warrant to purchase ~~1,200,000 shares~~one Share of Common Stock)

~~Shares of Common Stock Underlying the ~~Company's common stock at~~Warrants and~~

Item 13. Other Expenses of $6.50 per share to replace the old warrant agreement with the foundry. The new warrant expires in November 2002. The fair value of the new warrant was determined to be $127,000 based on the Black-Scholes method. This amount was expensed immediately in 1998 because the warrant related to the termination of the agreement. F-12 ~~MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - DETAILS OF BALANCE SHEET COMPONENTS (IN THOUSANDS):~~
------------------------------- DECEMBER 31, ----------------- JUNE 30, 1998 1999 2000 ------- ------- ----------- (UNAUDITED) CASH AND CASH EQUIVALENTS: Cash...................................................... $ 1,466 $ 1,720 $ 656 Certificates of deposit and commercial paper.............. 8,284 11,000 19,291 ------- ------- --------- $ 9,750 $12,720 $ 19,947 ======= ======= ========= ACCOUNTS RECEIVABLE: Trade accounts receivable................................. $ 2,954 $ 1,790 $ 1,322 Less: Allowance for doubtful accounts..................... (300) (199) (200) ------- ------- --------- $ 2,654 $ 1,591 $ 1,122 ======= ======= ========= INVENTORIES: Work-in-progress.......................................... $ 2,740 $ 728 $ 1,080 Finished goods............................................ 1,702 321 158 ------- ------- --------- $ 4,442 $ 1,049 $ 1,238 ======= ======= ========= PREPAID EXPENSES AND OTHER CURRENT COSTS: Deferred costs of contract revenue........................ $ - $ 184 $ - Prepaid expenses and other assets......................... 83 120 338 ------- ------- --------- $ 83 $ 304 $ 338 ======= ======= ========= PROPERTY AND EQUIPMENT: Equipment, fixtures and fittings.......................... $ 2,376 $ 2,559 $ 2,553 Software.................................................. 1,150 1,369 1,412 ------- ------- --------- 3,526 3,928 3,965 Less: Accumulated depreciation and amortization........... (2,573) (3,150) (3,418) ------- ------- --------- $ 953 $ 778 $ 547 ======= ======= ========= ACCRUED EXPENSES AND OTHER LIABILITIES: Sales return reserve...................................... $ 200 $ 293 $ 255 Accrued wages and employee benefits....................... 164 212 394 Assembly costs............................................ 301 179 220 Professional fees......................................... 54 63 36 Other..................................................... 339 317 212 ------- ------- --------- $ 1,058 $ 1,064 $ 1,117 ======= ======= =========
~~F-13~~ ~~MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 5 - INCOME TAXES: The provision for income taxes consist of the following (in thousands):~~
------------------------------ YEAR ENDED DECEMBER 31, ------------------------------ 1997 1998 1999 -------- -------- -------- Current portion: U.S. federal.............................................. $ - $ - $ 65 State..................................................... - - 2 -------- -------- -------- - - 67 Deferred.................................................... - - - -------- -------- -------- $ - $ - $ 67 ======== ======== ========
~~No current provision or benefit for federal~~Issuance and state income taxes was provided for the years ended December 31, 1997 and 1998 as the Company incurred net operating losses for income tax purposes. No deferred provision or benefit for income taxes has been recorded as the Company is in a net deferred tax asset position for which a full valuation allowance has been provided due to the uncertainty as to the realization. Deferred tax assets consist of the following (in thousands):
----------------- DECEMBER 31, ----------------- 1998 1999 ------- ------- DEFERRED TAX ASSETS: Federal and state loss carryforwards...................... $ 4,819 $ 4,555 Inventory................................................. 96 363 Reserves and accruals..................................... 234 293 Depreciation and amortization............................. - 404 Research and development credit carryforwards............. 897 1,139 ------- ------- 6,046 6,754 Less: Valuation allowance................................... (6,046) (6,754) ------- ------- Net deferred tax asset...................................... $ - $ - ======= =======
As of December 31, 1999, the Company had net operating loss carryforwards of approximately $15,000,000 and $9,000,000 for federal and state income tax purposes, respectively. These losses are available to reduce taxable income and expire from 2002 through 2019. Because of certain changes in the ownership of the Company in December 1996, there is an annual limitation of approximately $774,000 on the use of approximately $10,000,000 net operating loss carryforwards pursuant to Section 382 of the Internal Revenue Code. F-14 ~~MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 - NET INCOME (LOSS) PER SHARE:~~ Distribution.

The following table sets forth the ~~computation of basic~~estimated costs and ~~diluted net income (loss) per share for the periods indicated (in thousands, except per share amounts):~~
----------------------------------------------- YEAR ENDED SIX MONTHS ENDED DECEMBER 31, JUNE 30, --------------------------- ----------------- 1997 1998 1999 1999 2000 ------- ------- ------- ------- ------- (UNAUDITED) Numerator: Net income (loss)............................ $(2,016) $(2,322) $ 142 $ 42 $ (582) ======= ======= ======= ======= ======= Denominator: Shares used in computing net income (loss) per share: Basic...................................... 9,323 9,626 9,727 9,708 9,856 ======= ======= ======= ======= ======= Diluted.................................... 9,323 9,626 23,320 22,735 9,856 ======= ======= ======= ======= ======= Net income (loss) per share: Basic........................................ $ (0.22) $ (0.24) $ 0.01 $ 0.00 $ (0.06) ======= ======= ======= ======= ======= Diluted...................................... $ (0.22) $ (0.24) $ 0.01 $ 0.00 $ (0.06) ======= ======= ======= ======= ======= Antidilutive securities including options, warrants, convertible preferred stock not included in net loss per share calculation... 18,741 17,515 - - 18,201 ======= ======= ======= ======= ======= Pro forma: Shares used above............................ 9,727 9,856 Pro forma adjustment to reflect weighted average effect of the assumed conversion of convertible preferred stock................ 12,081 12,403 ------- ------- Shares used in computing pro forma net income (loss) per share attributable to common stockholders Basic........................................ 21,808 22,259 ======= ======= Diluted...................................... 23,320 22,259 ======= ======= Pro forma net income (loss) per share attributable to common stockholders Basic........................................ $ 0.01 $ (0.03) ======= ======= Diluted...................................... $ 0.01 $ (0.03) ======= =======
~~F-15~~ MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 7 - MANDATORILY REDEEMABLE PREFERRED STOCK: The Company is authorized to issue 9,500,000 shares of Preferred Stock, which had been designated Series A through H as follows (in thousands, except per share amounts):
- --------------------------------------------------------------------------------------------------------------- CONVERSION SERIES RATIO PRICE PER SHARE SHARES AMOUNT - ------------------------------------------------------------ ---------- --------------- -------- ------- A........................................................... 1 to 3 $ 1.00 500 $ 500 B........................................................... 1 to 3 2.00 1,000 2,000 C........................................................... 1 to 3 5.00 1,010 5,050 D........................................................... 1 to 3 7.50 300 2,250 E........................................................... 1 to 3 16.00 264 4,232 F........................................................... 1 to 1 5.50 1,225 6,703 F-1......................................................... 1 to 1 5.50 290 1,595 G........................................................... 1 to 1 6.00 1,343 8,061 -------- ------- Balance at December 31, 1998 and 1999....................... 5,932 30,391 H (unaudited)............................................... 1 to 1 $ 8.00 650 5,200 -------- ------- Balance at June 30, 2000 (unaudited)........................ 6,582 $35,591
~~------------------ SHARES AMOUNT -------- -------~~ Balance at December 31, 1996................................ 3,074 $14,032 Issuance of Series F Preferred Shares....................... 1,225 6,703 Issuance of Series F-1 Preferred Shares..................... 290 1,595 -------- ------- Balance at December 31, 1997................................ 4,589 22,330 Issuance of Series G Preferred Shares....................... 1,343 8,061 -------- ------- Balance at December 31, 1998 and 1999....................... 5,932 30,391 Issuance of Series H Preferred Shares (unaudited)........... 650 5,200 -------- ------- Balance at June 30, 2000 (unaudited)........................ 6,582 $35,591 ======== =======
The rights, preferences, privileges and restrictions with respect to the Company's Preferred Stock are as follows: CONVERSION Each issued share of Series A, B, C, D and E Preferred Stock is convertible, at the option of the holder, into three shares of Common Stock. Each issued share of Series F, F-1, G and H Preferred Stock is convertible, at the option of the holder, into one share of Common Stock. All issued Preferred Stock will be automatically converted at the close of a public offering of the Company's Common Stock at a price not less than $8.00 per share and an aggregate offering price to the public of not less than $7,500,000. The conversion price of the Series A, B, C, D, E, F, F-1, G and H Preferred Stock is $0.33, $0.67, $1.67, $2.50, $5.33, $5.50, $5.50, $6.00 and $8.00 per share, respectively. A total of 12,730,000 shares of Common Stock have been reserved for issuance upon the conversion of the Preferred Stock. F-16 MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 7 - MANDATORILY REDEEMABLE PREFERRED STOCK: (CONTINUED) REDEMPTION Convertible Preferred Stock is redeemable upon a change in control or sale of substantially all of the assets of the Company at a redemption price equal to the liquidation preferences as described below. DIVIDENDS Holders of Series A, B, C, D, E, F, F-1, G and H Preferred Stock are entitled to receive non-cumulative dividends at the annual rate of $0.10, $0.20, $0.50, $0.75, $1.60, $0.55, $0.57, $0.59 and $0.80 per share, respectively, if and when declared by the Board of Directors. Such dividends are payable in preference to any dividends for Common Stock declared by the Board of Directors. LIQUIDATION In the event of any liquidation, dissolution or winding up of the Company, the holders of Series A, B, C, D, E, F, F-I, G and H Preferred Stock are entitled to a distribution in preference to holders of Common Stock, at an amount up to their respective original issue price, plus any declared but unpaid dividends. A merger, acquisition, sale of voting control or sale of substantially all of the assets of the Company, in which the shareholders of the Company do not own a majority (50% or more) of the outstanding shares of the surviving corporation is deemed to be a liquidation. VOTING The holders of Series A, B, C, D, E, F, F-1, G and H Preferred Stock have one vote for each share of Common Stock into which such shares may be converted. SERIES F AND F-1 PREFERRED STOCK In conjunction with the issuance of Series F and F-1 Preferred Stock in 1997, the Company issued warrants to purchase 1,515,000 shares of its Common Stock at $5.50 per share. The warrants are exercisable immediately and expire in April 2001. As of December 31, 1999, no warrants were exercised. F-17 MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 8 - COMMON STOCK WARRANTS: The following table summarizes the activity of outstanding warrants (in thousands, except per share amounts):
- -------------------------------------------------------------------------------------------------------------- WARRANTS EXERCISE EXERCISABLE AT COMMON STOCK PRICE PER EACH YEAR UNDER WARRANTS SHARE END -------------- -------------- -------------- Outstanding at December 31, 1996............................ 5,386 $6.50-$8.50 4,786 Granted to Series F and F-1 Preferred Stockholders.......... 1,515 $5.50 Cancelled warrants, previously granted to credit providers................................................. (865) $6.50 ------------ Outstanding at December 31, 1997............................ 6,036 $5.50-$8.50 5,636 Granted to a foundry........................................ 1,200 $6.50 Granted to a Company's advisor.............................. 167 $6.50 Expired and cancelled warrants, previously granted to a foundry and credit providers.............................. (3,921) $6.50 ------------ Outstanding at December 31, 1998, December 31, 1999 and June 30, 2000 (unaudited)................................. 3,482 $5.50-$8.50 3,482 ============
~~The following table summarizes the outstanding warrants as of December 31, 1999 (in thousands, except per share amounts):~~
- ------------------------------------------------------------------------------------------------------------------- FAIR MARKET COMMON EXERCISE VALUE OF THE STOCK UNDER PRICE WARRANT AT DESCRIPTION OF WARRANTS ISSUANCE DATE WARRANTS PER SHARE ISSUANCE DATE EXPIRATION DATE - -------------------------------------- ------------- ------------ --------- ------------- --------------- Warrant, permitting cashless exercises, issued for marketing purposes............................ June 1996 600 $ 8.50 $ 258 June 2001 Warrant issuance in connection with Series F and F-1 Convertible Preferred Stock financing (Note 2).. November 1997 1,515 $ 5.50 $ 136 April 2001 Warrant issued to an advisor.......... March 1998 167 $ 6.50 $ 14 January 2002 Warrant issued to a foundry in connection with termination of a capacity agreement (Note 3)......... August 1998 1,200 $ 6.50 $ 127 November 2002 ------------ Total outstanding and exercisable at December 31, 1999 and June 30, 2000 (unaudited)......................... 3,482 ============
The following assumptions were applied when estimating the fair value of the above warrants using the Black-Scholes option pricing model: dividend yield of 0%, risk-free interest rate of 5.45%-5.84%, terms of 3.5 years to 4.25 years and volatility of 40%-60%. F-18 MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 9 - COMMON STOCK OPTIONS: COMMON STOCK OPTION PLANS The 1992 Stock Option Plan (the "1992 Plan") authorizes the Board of Directors to grant incentive stock options and nonqualified stock options to employees, directors and consultants for up to 3,300,000 shares of Common Stock. Under the 1992 Plan, incentive stock options are to be granted at a price not less than 100% of the fair value of the stock at the date of grant, as determined by the Board of Directors. Nonqualified stock options are to be granted at a price not less than 85% of the fair value of the stock at the date of grant, as determined by the Board of Directors. Options generally vest over a four year period and are exercisable for a maximum period of ten years after the date of grant. The 1992 Plan was terminated in 1996 and no further options were granted under the plan. In 1996, the Company adopted the 1996 Stock Plan (the "1996 Plan") which authorizes the Board of Directors to grant incentive stock options and nonqualified stock options to employees, directors and consultants for up to 2,500,000 shares of Common Stock. The option terms under the 1996 Plan are substantially the same as the 1992 Plan except that options granted under the 1996 Plan may be exercised immediately. Common Stock purchased pursuant to the exercise of an unvested option is subject to re-purchase by the Company, at the exercise price, under certain conditions. There were no shares of common stock subject to repurchase at 1997, 1998 and 1999. Options generally vest over a four year period and are exercisable for a maximum period of ten years after the date of grant. In March 1997, the Company canceled 918,500 options representing all unexercised options with exercise prices greater than $1.00, and immediately reissued the options with an exercise price of $1.00. F-19 MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 9 - COMMON STOCK OPTIONS: (CONTINUED) A summary of activity under the 1992 and 1996 Plans is as follows (in thousands, except per share amounts):
------------------------------------------- OPTIONS OUTSTANDING -------------------- NUMBER AVAILABLE OF EXERCISE WEIGHTED FOR GRANT SHARES PRICE AVERAGE --------- ------ ----------- -------- Balance at December 31, 1996......................... 1,695 2,337 $0.33-$2.75 $ 1.20 Granted.............................................. (1,524) 1,524 $1.00 $ 1.00 Cancelled............................................ 1,685 (1,685) $0.07-$2.75 $ 1.75 Exercised............................................ - (209) $0.33-$1.00 $ 0.16 --------- ------ Balance at December 31, 1997......................... 1,856 1,967 $0.33-$1.00 $ 0.69 Authorized........................................... 600 - Granted.............................................. (915) 915 $1.00 $ 1.00 Cancelled............................................ 658 (658) $0.33-$1.00 $ 0.89 Exercised............................................ - (272) $0.33-$1.00 $ 0.11 Terminated under 1992 Plan........................... (621) - - --------- ------ Balance at December 31, 1998......................... 1,578 1,952 $0.03-$1.00 $ 0.85 Granted.............................................. (557) 557 $1.00 $ 1.00 Cancelled............................................ 161 (161) $0.50-$1.00 $ 0.99 Exercised............................................ - (106) $0.03-$1.00 $ 0.63 Terminated under 1992 Plan........................... (13) - - --------- ------ Balance at December 31, 1999......................... 1,169 2,242 $0.03-$1.00 $ 0.88 Granted (unaudited).................................. (408) 408 $4.00-8.00 $ 7.83 Cancelled (unaudited)................................ 203 (203) $1.00-$6.00 $ 1.32 Exercised (unaudited)................................ - (131) $0.17-$1.00 $ 0.94 --------- ------ Balance at June 30, 2000 (unaudited)................. 964 2,316 $0.03-$4.00 $ 0.89 ========= ======
~~Information relating to stock options outstanding at December 31, 1999 is as follows (in thousands, except per share amounts):~~
- -------------------------------------------------------------------------------------------------------------------- OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------------------ ------------------------------ WEIGHTED AVERAGE NUMBER REMAINING CONTRACTUAL WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE RANGE OF EXERCISE PRICE OUTSTANDING LIFE (IN YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE - --------------------------- ----------- --------------------- ---------------- ----------- ---------------- $0.03-$0.50................ 279 3.22 $ 0.07 279 $ 0.07 $0.83...................... 3 5.85 $ 0.83 3 $ 0.83 $1.00...................... 1,960 8.31 $ 1.00 625 $ 1.00 ----------- ----------- 2,242 907 =========== ===========
~~F-20~~ MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 9 - COMMON STOCK OPTIONS: (CONTINUED) APB NO. 25 DEFERRED COMPENSATION COST TO EMPLOYEES During the year ended December 31, 1999 and the six months ended June 30, 2000, the Company recorded deferred compensation of approximately $828,000 and $410,000, respectively. This deferred compensation represents the difference between the grant price and the fair value for financial statement reporting purposes of the Company's common stock options granted during this period. Deferred compensation expense is being amortized using the graded vesting method, in accordance with SFAS No. 123 and FASB Interpretation No. 28, over the vesting period of each respective option, generally four years. Under the graded vesting method, each option grant is separated into portions based on their vesting terms which results in acceleration of amortization expense for the overall award. The accelerated amortization pattern results in expensing approximately 52% of the total award in year 1, 27% in year 2, 15% in year 3 and 6% in year 4. Deferred compensation expense was allocated among the associated expense categories as follows (in thousands):
--------------------------- SIX MONTHS YEARS ENDED ENDED JUNE DECEMBER 31, 30, ------------- ----------- 1998 1999 1999 2000 ----- ----- ---- ---- (UNAUDITED) Cost of contract revenue.................................... $ - $ - $ - $ 22 Research and development.................................... - 56 11 152 Selling, general and administrative......................... - 51 9 190 ---- ---- ---- ---- $ - $107 $ 20 $342 ---- ---- ---- ---- $ - $107 $ 20 $364 ==== ==== ==== ====
SFAS NO. 123 PRO FORMA DISCLOSURES Had compensation cost for the Company's option plans been determined based on the fair value at the grant dates, as prescribed in SFAS 123, the Company's net income (loss) would have been as follows (in thousands, except per share amounts):
----------------------------------------------- YEARS ENDED SIX MONTHS ENDED DECEMBER 31, JUNE 30, --------------------------- ----------------- 1997 1998 1999 1999 2000 ------- ------- ------- ------- ------- (UNAUDITED) Net income (loss): As reported.................................... $(2,016) $(2,322) $ 142 $ 42 $ (582) ======= ======= ======= ======= ======= Pro forma...................................... $(2,351) $(2,491) $ (34) $ (46) $ (934) ======= ======= ======= ======= ======= Pro forma net income (loss) per share Basic and diluted............................ $ (0.26) $ (0.26) $ (0.00) $ (0.00) $ (0.09) ======= ======= ======= ======= =======
The fair value of each grant is estimated on the date of grant using the Black-Scholes method with the following assumptions used for grants during the applicable period: dividend yield of 0% for all periods: risk-free interest F-21 MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 9 - COMMON STOCK OPTIONS: (CONTINUED) rates of 6.5%, 5.0% and 6.0% for options granted during 1997, 1998 and 1999, respectively; a weighted average expected option life of five years for all periods; and a volatility factor of 0% for all periods. The weighted average fair value of options granted during 1997, 1998 and 1999 was $0.45, $1.00 and $1.87, respectively. NOTE 10 - EMPLOYEE BENEFITS: RETIREMENT SAVINGS PLAN Effective January 1997, the Company adopted the MoSys 401(k) Plan (the "Savings Plan") which qualifies as a thrift plan under Section 401(k) of the Internal Revenue Code. All full-time employees who are at least 21 years old are eligible to participate in the Savings Plan at the time of hire. Participants may contribute up to 15% of their earnings to the Savings Plan. A discretionary matching amount may be made by the Company. The Company did not make any contributions in the years ended December 31, 1997, 1998 and 1999. NOTE 11 - BUSINESS SEGMENTS, CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS: The Company operates in a single industry segment. This industry segment is characterized by rapid technological change and significant competition. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. Cash and cash equivalents are deposited with high credit quality institutions. The Company sells its products and technology to customers in the Far East, North America and Europe (in thousands).
----------------------------------------------- YEARS ENDED SIX MONTHS ENDED DECEMBER 31, JUNE 30, --------------------------- ----------------- 1997 1998 1999 1999 2000 ------- ------- ------- ------- ------- (UNAUDITED) United States.................................... $10,592 $18,454 $ 6,156 $3,315 $3,011 Japan............................................ 980 2,209 1,156 927 510 Taiwan........................................... 22,859 15,365 7,614 3,725 847 Europe........................................... 391 253 433 178 120 ------- ------- ------- ------ ------ Total............................................ $34,822 $36,281 $15,359 $8,145 $4,488 ======= ======= ======= ====== ======
One customer accounted for 12% of net sales in fiscal 1997. Three customers accounted for 29%, 11% and 10% of net sales in fiscal 1998. Two customers accounted for 16% and 11% of net sales in fiscal 1999. One customer accounted for 48% of gross accounts receivable at December 31, 1997. Two customers accounted for 33% (unaudited) and 13% (unaudited) of net sales in the six months ended June 30, 2000. Two customers accounted for 29% and 12% of gross accounts receivable at December 31, 1998. Four customers accounted for 28%, 14%, 13% and 11% of gross accounts receivable at December 31, 1999. Three customers accounted for 47% (unaudited), 13% (unaudited) and 11% (unaudited) of gross accounts receivable at June 30, 2000. The Company performs ongoing credit evaluations of its customers' financial condition and maintains an allowance for uncollectible accounts receivable based upon the expected collectibility of all accounts receivable. Write off F-22 MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 11 - BUSINESS SEGMENTS, CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS: (CONTINUED) accounts receivable were $0, $0, $161,000 and $0 (unaudited) in years ended December 31, 1997,1998 and 1999 and the six months ended June 30, 2000, respectively. NOTE 12 - OTHER COMMITMENTS AND CONTINGENCIES: The Company leases its facility and certain equipment under non-cancelable operating leases which expire in 2001. The leases provide for monthly payments and are being charged to operations ratably over the lease terms. In addition to the minimum lease payments, the Company is responsible for property taxes, insurance and certain other operating costs. Future minimum lease payments under non-cancelable operating leases as of December 31, 1999 are as follows (in thousands):
- ------------------------------------------------------------------------------ YEAR ENDING DECEMBER 31, OPERATING LEASES - ------------------------------------------------------------ ---------------- 2000........................................................ $ 149 2001........................................................ 134 ------------- Total minimum payments...................................... $ 283 =============
Rent expense under operating leases totaled $367,000, $138,000, $134,000 and $70,000 (unaudited) for the years ended December 31, 1997,1998 and 1999 and the period ended June 30, 2000, respectively. In the normal course of business, the Company from time to time may receive and make inquiries with regard to possible patent infringement. Management believes that it is unlikely that the outcome of these patent infringement inquiries would have a material adverse effect on the Company's financial position or results of operations. NOTE 13 - SUBSEQUENT EVENTS: On July 27, 2000, the Board of Directors authorized the reincorporation of the Company in the State of Delaware subject to shareholder approval at a forthcoming special meeting of shareholders. Following the reincorporation, the Company is authorized to issued 120,000,000 shares of $0.01 par value common stock and 20,000,000 shares of $0.01 par value preferred stock. The Board of Directors has the authority to issued the undesignated preferred stock in one or more series and to fix the rights, preferences, privileges and restriction thereof. BENEFIT PLANS 2000 EMPLOYEE STOCK OPTION PLAN The Company's 2000 employee stock option plan ("2000 plan") will be adopted in connection with its reincorporation in the state of Delaware. A total of 5,000,000 shares of common stock have been reserved for issuance under the 2000 plan. In addition, the 2000 plan provides for an annual increase in the number of shares reserved under the plan on January 1 of each year, equal to the lesser of 500,000 shares, two percent of the Company's outstanding shares of common F-23 MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 13 - SUBSEQUENT EVENTS: (CONTINUED) stock on such date or a lesser amount determined by the board of directors. The 2000 plan provides for grants to employees, including officers and employee directors, of incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or the code, and for grants of nonstatutory stock options to employees, including officers and employee directors, and to consultants. The purpose of the 2000 plan is to attract and retain the best available personnel and to encourage stock ownership by employees, officers and consultants in order to give them a greater personal stake in the Company's success. The 2000 plan is administered by the board of directors or by a committee appointed by the board, which identifies optionees and determines the terms of options granted, including the exercise price, number of shares subject to the option and the timing and terms of exercise. The term of options granted under the 2000 plan may not exceed ten years. The term of all incentive stock options granted to an optionee who, at the time of grant, owns stock representing more than 10% of the voting power of all classes of the Company's stock may not exceed five years. Generally, 25% of the options granted under the 2000 plan will vest and become exercisable on the first anniversary of the date of grant, and 1/48th of the options will vest and become exercisable each month thereafter. The exercise price of incentive stock options granted under the 2000 plan must be at least equal to the fair market value of the shares on the date of grant. The exercise price of nonstatutory stock options granted under the 2000 plan will be determined by the board of directors, but in no event will be less than 85% of the fair market value of the common stock on the date of grant. The exercise price of any incentive stock option or nonstatutory stock option granted to a ten-percent stockholder must equal at least 110% of the fair market value of the common stock on the date of grant. 2000 EMPLOYEE STOCK PURCHASE PLAN The Company's 2000 employee stock purchase plan will be adopted in connection with its Delaware reincorporation. A total of 200,000 shares of common stock will be reserved for issuance under the purchase plan. In addition, the purchase plan provides for an annual increase in the number of shares reserved under the plan on January 1 of each year, equal to the lesser of 100,000 shares, one percent of the Company's outstanding shares of common stock on such date or a lesser amount determined by the board of directors. The purchase plan, which is intended to qualify under Section 423 of the code, will be administered by the board of directors or a committee appointed by the board of directors. Employees, including officers and employee directors but excluding 5% stockholders, are eligible to participate if they are customarily employed for at least 20 hours per week and for more than five months in any calendar year. The purchase plan permits eligible employees to purchase common stock through payroll deductions, which may not exceed 10% of an employee's compensation. Employees will be permitted to invest a maximum of $25,000 in any offering period. The purchase plan will be implemented in a series of overlapping offering periods, each to be approximately 12 months in duration. The initial offering period under the purchase plan will begin on the pricing date of this offering and expires on the third enrollment date, which is the first day of the third offering period. Offering periods will begin on the first trading day on or after January 1 and July 1 of each year and end on the last trading day in the period ending twelve months later. Each participant will be granted an option on the first day of the offering period, and such option will be automatically exercised on the last day of each offering period. The purchase price of the common stock under the purchase plan will be equal to 85% of the lesser of the fair market value per share of common stock on the start date of the offering period or on the date on which the F-24 MONOLITHIC SYSTEM TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 13 - SUBSEQUENT EVENTS: (CONTINUED) option is exercised. Employees may end their participation in an offering period at any time during that period, and participation ends automatically on termination of employment with the Company. The purchase plan will terminate in June 2010, unless sooner terminated by the board of directors. As of the date of this report, no shares have been issued under the purchase plan. F-25 [back inside cover] A picture of an integrated circuit that incorporates the MoSys 1T-SRAM technology, which is positioned on two sections of the integrated circuit. Each block of 1T-SRAM is highlighted by a black rectangular border. Above the picture the title reads "An example of an integrated circuit incorporating MoSys' 1T-SRAM technology." Below the picture, a caption reads "The 1T-SRAM blocks occupy over 30% of the integrated circuit area." ~~[LOGO]~~ ~~PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the~~ expenses payable by the ~~Company (the "Registrant")~~registrant in connection with the offering of the securities being registered, other than the underwriting discounts and commissions. All of the amounts shown are estimates except for the SEC registration fee, and the NASD filing fee and the Nasdaq National Market filing fee. registered.



Title of each class of securities to be registered	Proposed maximum aggregate offering price(1)	Amount of registration fee
Common ~~stock.......................................... $50,000,000 $13,200~~ Units consisting of:⁽⁴⁾	$2,400,000
(i) common stock, par value $0.001 per share⁽²⁾
(ii) warrants to purchase shares of common stock⁽²⁾⁽³⁾
Pre-funded Units consisting of:⁽⁴⁾	$9,600,000
(i) pre-funded warrants to purchase shares of common stock
(ii) warrants to purchase shares of common stock⁽²⁾⁽³⁾
Shares of common stock issuable upon exercise of warrants⁽²⁾	$12,000,000
Shares of common stock issuable upon exercise ofpre-funded warrants⁽²⁾⁽³⁾
Total	$24,000,000	$2,895.00⁽⁵⁾


Common units offered by us:		Up to 3,133,159 common units, each consisting of (i) one share of our common stock and (ii) a warrant to purchase one share of common stock.

Pre-funded units offered by us:		We are also offering to each purchaser whose purchase of common units in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding common stock immediately following the consummation of this offering, 12,549,019pre-funded units (eachpre-funded unit consisting of onepre-funded warrant to purchase one share of our common stock and one warrant to purchase one share of our common stock) in lieu of common units that would otherwise result in the purchaser’s beneficial ownership exceeding 4.99% of our outstanding common stock (or, at the election of the purchaser, 9.99%). The purchase price of eachpre-funded unit is equal to the price at which the common units are being sold to the public in this offering, minus $0.001, and the exercise price of eachpre-funded warrant included in eachpre-funded unit is $0.001 per share. Because we will issue a warrant as part of each common unit orpre-funded unit, the number of warrants sold in this offering will not change as a result of a change in the mix of the common units andpre-funded units sold. This offering also relates to the shares ~~COMMON STOCK TO BE OUTSTANDING AFTER THIS OFFERING..........~~of common stock issuable upon exercise of anypre-funded warrants sold in this offering.

Common Unit Offering price:		The purchase price for a common unit is $0.766.

Pre-funded Unit Offering price:		The purchase price for apre-funded unit is $0.765.

Description of warrants:		The warrants will be exercisable beginning on the closing date and expire on the five-year anniversary of the closing date at an initial exercise price per share equal to $ subject to appropriate adjustment in the event of recapitalization events, share dividends, share splits, share combinations, reclassifications, reorganizations or similar events affecting our common stock. In addition, the warrant exercise price will be adjusted for dilutive issuances during the term of the warrant, except for certain exempt issuances described elsewhere in this prospectus under “Description of Securities We are Offering,” subject to a floor of % of the original exercise price of the warrants. This prospectus also relates to the offering of the shares ~~USE OF PROCEEDS.............................................~~ of common stock issuable upon exercise of the warrants.



Description ofpre-funded warrants:		Thepre-funded warrants will be exercisable beginning on the closing date and expire when exercised in full at an initial exercise price per share equal to $0.001, subject to appropriate adjustment in the event of recapitalization events, share dividends, share splits, share combinations, reclassifications, reorganizations or similar events affecting our common stock. This prospectus also relates to the offering of the shares of common stock issuable upon exercise of thepre-funded warrants.

Repayment and Modification of 10% Senior Secured Convertible Notes		We ~~intend~~have entered into a Memorandum of Understanding for Modification of our 10% Senior Secured Convertible Notes (the “MOU”) with the purchasers’ agent and the holder of a majority-in-interest of such notes under the 10% Senior Secured Convertible Note Purchase Agreement, dated March 14, 2016 (the “Purchase Agreement”), as amended. The MOU provides that the total indebtedness of $10,036,141 of senior secured convertible notes currently due August 15, 2019 with interest at the annual rate of 8% (the “Notes”) will be restructured with gross proceeds of $ being used to repay all or a portion of such indebtedness. The holders of the Notes will purchase in the offering an amount of the common units and pre-funded units being offered pursuant to this prospectus with a total purchase price of $ and the Purchase Agreement and the Notes will be amended effective as of the date of this offering to provide that the remaining balance of any indebtedness subject to the Notes will be due August 15, 2023 and the conversion price of the Notes will be reduced from $4.25 to $ per share of common stock. See “Modification of Senior Secured Convertible Notes” on page 9 for additional information.

Shares of common stock outstanding before this offering:		8,273,886


	Six months ended						Years ended
(In thousands)	June 30, 2018			June 30, 2017			December 31, 2017			December 31, 2016
Statement of Operations Data:
Net revenue	$	8,806		$	2,596		$	8,842		$	6,024
Product gross profit		4,321			732			3,139			1,529
Product gross margin		56	%		35	%		40	%		33	%
Total gross profit		5,372			1,262			4,148			2,949
Total gross margin		61	%		49	%		47	%		49	%
Operating expenses		4,280			9,215			14,181			34,313
Net income (loss)		663			(8,399	)		(10,668	)		(32,048	)


	Page
ABOUT THIS PROSPECTUS		1
FORWARD-LOOKING STATEMENTS		1
PROSPECTUS SUMMARY		2
RISK FACTORS		10
MARKET INFORMATION FOR OUR COMMON STOCK		22
USE OF PROCEEDS		22
CAPITALIZATION		23
DILUTION		23
BUSINESS		25
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		33
DESCRIPTION OF CAPITAL STOCK		35
DESCRIPTION OF SECURITIES WE ARE OFFERING		38
PLAN OF DISTRIBUTION		40
LEGAL MATTERS		44
EXPERTS		44
WHERE YOU CAN FIND MORE INFORMATION		44
INFORMATION INCORPORATED BY REFERENCE		45



	As of				As of
	June 30, 2018		June 30, 2017		December 31, 2017		December 31, 2016
Balance Sheet Data:
Cash	$	3,595	$	2,743	$	3,868	$	8,766
Total assets		21,897		19,888		23,139		27,145
Total liabilities		13,456		12,625		15,793		11,817
Total stockholders’ equity		8,441		7,263		7,346		15,328


	High		Low
2018
First Quarter (January 1 – March 31, 2018)	$	2.08	$	1.03
Second Quarter (April 1 – June 30, 2018)	$	2.23	$	1.14
2017
First Quarter (January 1 – March 31, 2017)	$	4.32	$	1.75
Second Quarter (April 1 – June 30, 2017)	$	2.70	$	0.55
Third Quarter (July 1 – September 30, 2017)	$	1.81	$	0.89
Fourth Quarter (October 1 – December 31, 2017)	$	1.45	$	0.64
2016
First Quarter (January 1 – March 31, 2016)	$	11.70	$	5.70
Second Quarter (April 1 – June 30, 2016)	$	6.50	$	3.23
Third Quarter (July 1 – September 30, 2016)	$	8.03	$	4.10
Fourth Quarter (October 1 – December 31, 2016)	$	7.80	$	2.30


As of June 30, 2018 (in thousands)
	Actual			Pro Forma
Cash and cash equivalents	$	3,595		$	—

Convertible notes payable		9,647			—
Stockholders’ equity:
Convertible preferred stock, $0.01 par value; 20,000 shares authorized and undesignated, actual, pro forma or as adjusted; no shares issued and outstanding, actual or pro forma		—			—
Common stock, $0.001 par value, 120,000 shares authorized; 8,171 shares issued and outstanding, actual; shares issued and outstanding, pro forma		8			—
Additionalpaid-in capital		232,228			—
Accumulated deficit		(223,795	)		—

Total stockholders’ equity		8,441			—

Total capitalization	$	18,088		$	—


	Proforma(1)
Assumed public offering price per common unit	$	0.766
Net tangible book deficit per share as of June 30, 2018	$	(0.60	)
Increase in pro forma net tangible book value (deficit) per share attributable to new investors in common stock from units purchased at closing	$	—

Pro forma,as-adjusted, net tangible book value per share after this offering	$	—

Dilution per share to investors in this offering	$	—


Name and Address of Beneficial Owner	Number of Shares Beneficially Owned (Excluding Outstanding Options)(1)		Number of Shares Issuable on Exercise of Outstanding Options or Convertible Securities(2)			Percent of Class
Ingalls & Snyder LLC		-		736,548	(3)		9.9
1325 Avenue of the Americas
New York, NY 10019
Directors and Officers:
Daniel Lewis				33,334			*
Daniel O’Neil		-		33,334			*
Leonard Perham		176,853		—			2.1
James Sullivan		20,700		17,025			*
John Monson		18,047		14,906			*
All current directors and executive officers as a group (5 persons)		255,600		172,916			5.2


	Per Common Unit	Per Pre-funded Unit
Placement Agent Fees
Total


SEC registration fee	$	2,895
FINRA filing fee		2,000
Accounting fees and expenses		50,000
Legal fees and expenses		255,000
Printing and miscellaneous expenses		70,105

Total		$380,000


EXHIBIT NUMBER		DESCRIPTION

3.1(1)		Restated Certificate of Incorporation of the Registrant

3.1.1(1A)		Certificate of Amendment to Restated Certificate of Incorporation of the Registrant

3.2(2)		Amended and Restated Bylaws of the Registrant

4.1(3)		Specimen Common Stock Certificate

4.4(4)		Rights Agreement, dated November 10, 2010, by and between Registrant and Wells Fargo Bank, N.A., as Rights Agent

4.4.1(4)		Form of Right Certificate

4.4.2(4)		Summary of Rights to Purchase Shares

4.4.3(5)		Amendment No. 1 to Rights Agreement, dated July 22, 2011, by and between Registrant and Wells Fargo Bank, N.A. as Rights Agent

4.4.4(6)		Amendment No. 2 to Rights Agreement, dated May 18, 2012, by and between Registrant and Wells Fargo Bank, N.A. as Rights Agent

4.5(7)		Form of Common Stock Purchase Warrant dated July 6, 2017

4.6**		Form of Common Stock Purchase Warrant

4.7**		Form ofPre-Funded Warrant

5.1***		Opinion of Pillsbury Winthrop Shaw Pittman LLP

10.1(3)		Form of Indemnity Agreement between Registrant and each of its directors and executive officers

10.2(8)		Placement Agency Agreement

10.3(9)*		Amended and Restated 2000 Stock Option and Equity Incentive Plan

10.4(10)*		Form of Stock Option Agreement pursuant to Amended and Restated 2000 Stock Option and Equity Incentive Plan

10.5(11)*		Form of New Employee Inducement Grant Stock Option Agreement

10.6(12)*		Employment offer letter agreement and Mutual Agreement to Arbitrate between Registrant and Leonard Perham dated as of November 8, 2007

10.7(13)		Form of Securities Purchase Agreement dated June 30, 2017

10.8(14)*		Employment offer letter agreement between Registrant and James Sullivan dated December 21, 2007

10.9(15)*		Amended and Restated 2010 Equity Incentive Plan

10.10(16)*		Form of Option Agreement for Stock Option Grant pursuant to 2010 Equity Incentive Plan

10.11(17)*		2010 Employee Stock Purchase Plan



10.12(18)		Lease Agreement between Registrant and M West Propco XII, LLC. dated July 19, 2010

10.13(19)*		Form of Notice of Restricted Stock Unit Award and Agreement

10.14(20)		Lease Termination Agreement with M West Propco XII LLC dated October 3, 2017

10.15(21)		Sublease Agreement with Cyren, Inc. dated October 3, 2017

10.16(22)		Amendment to 10% Senior Secured Convertible Note Purchase Agreement and every 10% Senior Secured Convertible Note due August 15, 2018 Issued Thereunder

10.17(23)*		Offer to Exchange Certain Outstanding Stock Options for a Number of Replacement Stock Options

10.18(24)*		Form of New Employee Inducement Grant Stock Option Agreement (revised February 2012)

10.19(25)*		Form of Indemnification Agreement used from June 5, 2012

10.20(26)*		Form of Notice of Grant of Restricted Stock Unit Award and Agreement under the Amended and Restated 2010 Equity Incentive Plan

10.21(27)*		Employment Offer Letter Agreement between Registrant and John Monson dated February 21, 2012

10.22(28)		10% Senior Secured Convertible Note Purchase Agreement

10.23(29)		Security Agreement

10.24(30)		10% Senior Secured Convertible Note due August 15, 2018

10.25(31)*		ExecutiveChange-in-Control and Severance Policy

10.26**		Form of Securities Purchase Agreement

10.27***		Form of Placement Agency Agreement

10.28,**		Employment offer letter agreement between Registrant and Daniel Lewis dated August 8, 2018

10.29***		Memorandum of Understanding for modification of 10% Senior Secured Convertible Notes

23.1**		Consent of Independent Registered Public Accounting Firm – BPM LLP

23.2***		Consent of Pillsbury Winthrop Shaw Pittman LLP (included in Exhibit 5.1)

24***		Power of Attorney (filed as part of signature page to Registration Statement)


*		Management contract, compensatory plan or arrangement.
**		Filed herewith.
***		Previously filed.
(1)		Incorporated by reference to Exhibit 3.6 toForm 8-K filed by the Registrant on November 12, 2010 (Commission FileNo. 000-32929).
(1A)		Incorporated by reference to Exhibit 3.1 toForm 8-K filed by the Registrant on February 14, 2017 (Commission FileNo. 000-32929).
(2)		Incorporated by reference to Exhibit 3.4 toForm 8-K filed by the Registrant on October 29, 2008 (Commission FileNo. 000-32929).
(3)		Incorporated by reference to the same-numbered exhibit to the Registration Statement onForm S-1, as amended, originally filed by the Registrant with the SEC on August 4, 2000, declared effective June 27, 2001 (Commission FileNo. 333-43122).
(4)		Incorporated by reference to the same-numbered exhibit toForm 8-K by the Registrant on November 12, 2010 (Commission FileNo. 000-32929).
(5)		Incorporated by reference to Exhibit 4.2.3 to the Current Report onForm 8-K, filed by the Registrant on July 27, 2011 (Commission FileNo. 000-32929).


(6)		Incorporated by reference to Exhibit 4.2.4 to the Current Report onForm 8-K, filed by the Registrant on May 24, 2012 (Commission FileNo. 000-32929).
(7)		Incorporated by reference to Exhibit 4.1 to the Current Report onForm 8-K, filed by the Registrant on June 30, 2017 (Commission FileNo. 000-32929).
(8)		Incorporated by reference to the same-numbered exhibit toForm 8-K by the Registrant on June 30, 2017 (Commission FileNo. 000-32929).
(9)		Incorporated by reference to Appendix B to the Registrant’s proxy statement on Schedule 14A filed by the Registrant on October 7, 2004 (Commission FileNo. 000-32929).
(10)		Incorporated by reference to Exhibit 10.15 toForm 10-Q filed by the Registrant on August 9, 2005 (Commission FileNo. 000-32929).
(11)		Incorporated by reference to Exhibit 10.25 toForm 10-K filed by the Registrant on March 17, 2008 (Commission FileNo. 000-32929).
(12)		Incorporated by reference to Exhibit 10.24 toForm 10-K filed by the Registrant on March 17, 2008 (Commission FileNo. 000-32929).
(13)		Incorporated by reference to the Exhibit 10.1 toForm 8-K by the Registrant on June 30, 2017 (Commission FileNo. 000-32929).
(14)		Incorporated by reference to Exhibit 10.26 toForm 10-K filed by the Registrant on March 17, 2008 (Commission FileNo. 000-32929).
(15)		Incorporated by reference to Exhibit 4.8 to FromS-8 filed by the Registrant on August 8, 2014 (Commission FileNo. 000-197989).
(16)		Incorporated by reference to Exhibit 4.10 toForm S-8 filed by the Registrant on July 28, 2010 (Commission FileNo. 333-168358).
(17)		Incorporated by reference to Appendix B to the proxy statement on Schedule 14A filed by the Registrant on May 26, 2010 (Commission FileNo. 000-32929).
(18)		Incorporated by reference to Exhibit 10.35 toForm 8-K filed by the Registrant on July 22, 2010 (Commission FileNo. 000-32929).
(19)		Incorporated by reference to Exhibit 4.8 toForm S-8 filed by the Registrant on June 5, 2009 (Commission FileNo. 333-159753).
(20)		Incorporated by reference to Exhibit 99.1 toForm 10-Q filed by the Registrant on November 14, 2017 (Commission FileNo. 000-32929).
(21)		Incorporated by reference to Exhibit 99.2 toForm 10-Q filed by the Registrant on November 14, 2017 (Commission FileNo. 000-32929).
(22)		Incorporated by reference to Exhibit 10.4 to Form8-K filed by the Registrant on February 27, 2018 (Commission FileNo. 000-32929).
(23)		Incorporated by reference to Exhibit 99(A)(1)(A) to Schedule TO filed by the Registrant on July 26, 2016 (Commission FileNo. 005-78033), as amended).
(24)		Incorporated by reference to Exhibit 10.19 toForm 10-K filed by the Registrant on March 15, 2012 (Commission FileNo. 000-32929).
(25)		Incorporated by reference to Exhibit 10.22 toForm 10-Q filed by the Registrant on August 9, 2012 (Commission FileNo. 000-32929).
(26)		Incorporated by reference to Exhibit 10.24 toForm 10-K filed by the Registrant on March 14, 2014 (Commission FileNo. 000-32929).
(27)		Incorporated by reference to Exhibit 10.25 toForm 10-K filed by the Registrant on March 14, 2014 (Commission FileNo. 000-32929).
(28)		Incorporated by reference to Exhibit 10.1 toForm 8-K filed by the Registrant on March 15, 2016 (Commission FileNo. 000-32929).
(29)		Incorporated by reference to Exhibit 10.2 toForm 8-K filed by the Registrant on March 15, 2016 (Commission FileNo. 000-32929).
(30)		Incorporated by reference to Exhibit 10.3 toForm 8-K filed by the Registrant on March 15, 2016 (Commission FileNo. 000-32929 (Commission FileNo. 333-159753).
(31)		Incorporated by reference to Exhibit 99(D)(7) to Schedule TO filed by the Registrant on July 26, 2016 (Commission FileNo. 005-78033), as amended).


MOSYS, INC

By:		/s/ Daniel Lewis
		Daniel Lewis
		Chief Executive Officer, President and Director (principal executive officer)

By:		/s/ James W. Sullivan
		James W. Sullivan
		Vice President and Chief Financial Officer (principal accounting officer and principal financial officer)


SIGNATURE	TITLE	DATE ~~- ------------------------------------------------ ----------------------------------- ---------------~~ ~~/s/ FU-CHIEH HSU Chairman of the Board, President -------------------------------------- and~~

/s/ Daniel Lewis Daniel Lewis	Chief Executive Officer, ~~August 4, 2000 Fu-Chieh Hsu (Principal Executive Officer) /s/ F. JUDSON MITCHELL~~ President and Director (principal executive officer)	September 28, 2018

/s/ James W. Sullivan James W. Sullivan	Vice President ~~Finance~~ and Chief ~~--------------------------------------~~ Financial Officer ~~(Principal August 4, 2000 F. Judson Mitchell Financial~~(principal accounting officer and Accounting Officer) /s/ CARL E. BERG -------------------------------------- Director August 4, 2000 Carl E. Berg /s/ DENNY R. S. KO -------------------------------------- Director August 4, 2000 Denny R. S. Ko /s/ WING-YU LEUNG -------------------------------------- Director August 4, 2000 Wing-Yu Leung

	September 27, 1997 4.3* Rights Agreement, to be in effect on the Registrant's reincorporation in Delaware 5.1* Opinion of McCutchen, Doyle, Brown & Enersen, LLP 10.1 Form of Indemnity Agreement between the Registrant and each of its directors and executive officers 10.2 1992 Stock Option Plan and form of Option Agreement thereunder 10.3 1996 Stock Plan and form of Option Agreement thereunder 10.4 Form of Restricted Stock Purchase Agreement 10.5 2000 Employee Stock Option Plan and form of Option Agreement thereunder 10.6 2000 Employee Stock Purchase Plan and form of Subscription Agreement thereunder 10.7 Standard Industrial Lease, dated 28, 2018

* Leonard Perham		Director	September 24, 1996, between the Registrant and McCandless Properties 10.8 First Amendment to Lease, dated June 30, 2000, between the Registrant and McCandless Properties 10.9+ Agreement between Nintendo Co., Ltd. and the Registrant dated August 31, 1999 10.10+ License Agreement between NEC Corporation and the Registrant dated January 31, 1999 10.11+ License Agreement between NEC Corporation and the Registrant dated December 17, 1999 10.12 Employment Agreement between Registrant and Judson Mitchell dated July 17, 2000 23.1 Consent of PricewaterhouseCoopers, LLP Independent Accountants 23.2* Consent of McCutchen, Doyle, Brown & Enersen, LLP (included in Exhibit 5.1) 24.1 Powers of Attorney (see page II-4) 27.1 Financial Data Schedule 28, 2018

* Daniel O’Neil		Director	September 28, 2018

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Smaller reporting company

Emerging growth company