S-1

As filed with the U.S. Securities and Exchange Commission on February 19, 2015.

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box: ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

eASIC Corporation is offering shares of common stock. This is our initial public offering and no public market currently exists for our shares. We anticipate that the initial public offering price will be between $ and $ per share.

We intend to apply to have our common stock listed on the NASDAQ Global Market under the symbol “EASI.”

We are an “emerging growth company” as defined under the federal securities laws and are subject to reduced public company reporting requirements. Investing in our common stock involves risks. See “Risk Factors” beginning on page 12.

We have granted the underwriters the right to purchase up to an additional shares of common stock to cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of common stock to purchasers on , 2015.

Global Megatrends are driving the need for custom hardware
Global Networks
Mobility
Cloud Big Data

Custom ICs are essential to differentiate hardware in the marketplace
eASIC provides breatkthrough solutions for delivering Custom ICs
Time-to-Market
Performance
Power
Cost
Think Custom IC
Think eASIC
Wireless
Storage
Wired

Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations, and prospects may have and are likely to have changed since that date.

Through and including , 2015 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

For investors outside the United States: Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our common stock and the distribution of this prospectus outside of the United States.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. You should read the following summary together with the more detailed information appearing elsewhere in this prospectus, including “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and related notes before deciding whether to purchase shares of our common stock. Unless the context otherwise requires, the terms “eASIC,” “the Company,” “we,” “us,” and “our” in this prospectus refer to eASIC Corporation.

eASIC CORPORATION

Overview

We have pioneered a differentiated solution that enables us to rapidly and cost-effectively deliver custom integrated circuits (ICs), creating value for our customers’ hardware and software systems. Our eASIC solution consists of our eASIC platform which incorporates a versatile, pre-defined and reusable base array and customizable single-mask layer, our ASICs, delivered using either our easicopy or standard ASIC methodologies, and our proprietary design tools. Customers can efficiently migrate to our easicopy ASIC from the eASIC platform using our easicopy methodology. We believe our eASIC solution provides the optimal combination of fast time-to-market, high performance, low power consumption, low development cost and low unit cost for our customers. Our solution has broad applicability across a wide range of customers, applications and end markets including communications infrastructure, storage and data processing and industrial applications. Our solution should position us to address additional end markets in the future. As of December 31, 2014, we have leveraged our eASIC platform to develop four generations of eASIC product families, and we have designed over 200 custom ICs and shipped over 19 million units.

We believe the need for differentiation through custom ICs is driven by several megatrends, including the proliferation of mobile devices driving the deployment of high capacity and high bandwidth wireless infrastructure, the rapid transition to cloud computing and the emergence of big data analytics. We believe the ability to differentiate hardware and software systems through custom ICs is critical to helping our customers grow faster than their competitors and enhance their profit margins. Historical solutions for customized ICs have included Application Specific Integrated Circuits (ASICs), Application Specific Standard Products (ASSPs) and Field Programmable Gate Arrays (FPGAs). We believe our products avoid the painful tradeoffs associated with these historical solutions. For example, based on the data provided by our customers for both performance and power consumption with respect to our customers’ designs using FPGAs, we performed our own internal analysis using the latest generation of our eASIC platform to demonstrate that we can enable our customers to reduce power consumption by 50% to 80% compared to FPGAs at the same process node while increasing performance by 150% to 200%. By using our eASIC platforms, our customers can significantly reduce non-recurring engineering (NRE) charges and lower design and manufacturing time by nine to 12 months or more when compared to traditional ASIC design and manufacturing processes. We believe our competitive advantages will increase over time as the costs and complexity associated with the development and manufacturing of future generations of ICs continue to rise.

We estimate that our addressable market opportunity across ASIC, ASSP and FPGA applications is approximately $78 billion, based on data from Gartner Research (Gartner). During the year ended December 31, 2014, we sold our products and services to over 14 customers, including Ericsson, Fujitsu, Huawei, NEC, Omnivision, Seagate and Toshiba. In 2012, 2013 and 2014, Ericsson and Seagate together accounted for 73%, 87% and 93%, respectively, of our total revenues. For the years ended December 31, 2013 and 2014, our total revenues were $29.8 million and $67.4 million, respectively, representing an annual growth rate of 126%, and our net loss was $7.8 million and $1.1 million, respectively. We do not expect our revenues to

continue to grow at these historical rates in the future. We may not be able to grow or sustain our revenues in the future and expect our expenses to increase substantially in the near term. We design our ICs and use third-party vendors for substantially all of our manufacturing production and operations.

Industry Background

Key technology megatrends driving massive growth in the demand for network bandwidth, computing resources and data storage

The significant and growing demands on networking, compute and storage infrastructure have resulted in service providers, enterprises and datacenter operators requiring OEMs to rapidly introduce next generation networking, server and storage systems which deliver high return on investment with enhanced functionality and performance, while reducing power consumption and physical footprint.

Challenges with historical IC solutions for OEMs

In order to provide semiconductor-based differentiation and customization for their product offerings, OEMs have traditionally had to choose between ASICs, ASSPs and FPGAs. However, these solutions require increasingly painful tradeoffs among time-to-market, performance, power consumption, unit and development costs. As the costs and time required to develop ASICs and ASSPs have increased, we believe that OEMs have become increasingly receptive to finding a better solution to provide the custom ICs they desire. While FPGAs offer a time-to-market advantage, they consume significant amounts of power and are cost prohibitive to high-volume production.

Our Solution

We invented a way to customize ICs while avoiding the painful tradeoffs associated with ASICs, ASSPs and FPGAs. Our eASIC platform utilizes a versatile, pre-defined and reusable base array, which is built using standard mask layers. One custom mask layer is then inserted into the base array, which customizes the IC to meet a specific customer’s requirements. The ability to customize an IC with a single mask layer is achieved using our proprietary architecture and design tools. Once the IC design is completed, the custom mask layer is fabricated and added to the pre-manufactured base array to complete the manufacturing process. Our easicopy ASICs are customized using a full set of masks and are developed using our easicopy methodology. The final packaged and tested IC is then shipped to the customer for implementation into their specific application. We believe this approach provides the optimal combination of benefits including fast time-to-market, high performance, low power consumption, low unit cost and low development cost for our customers.

Benefits to Our Customers

Our customers are continuously developing new products in existing and new application areas as they look to differentiate themselves from their competitors, reduce time-to-market, increase market share and enhance margins. In our view, the key benefits of our solutions, as outlined below, help our customers to achieve their goals:

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Product Differentiation Through Custom ICs. Our custom ICs are designed to meet the specific technical requirements of our customers in their respective end-markets while balancing their time-to-market, performance, power consumption and overall cost needs.

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Fast Time-to-Market. Our eASIC platform offers a time-to-market advantage of up to 12 months or more over traditional ASICs.

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High Performance. Our eASIC platform is designed to meet the high performance requirements that our customers need. We believe that our solution has ASIC-comparable performance that is superior to that offered by FPGAs.

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Low Power Consumption. In most of our end markets, power consumption is a key consideration in system design and operation. Our solution is power-efficient and can considerably lower a system’s overall operating cost and power consumption.

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Low Development Cost. The versatility of our pre-designed base array and the need to customize only one mask layer in our eASIC platform allows us to lower development cost by significantly reducing design and NRE expenses.

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Low Unit Cost. We are able to design and deliver ICs that have a smaller die size when compared with FPGAs. Due to the area efficient die and lower cost IC packaging, our solution offers an attractive cost per unit relative to FPGAs.

Our Growth Strategy

Our objective is to be the leading provider of custom and affordable ICs with fast time-to-market. We believe our solution enables our customers to differentiate their products, become more competitive in their markets and enhance their growth rates, market share and profit margins. Key elements of our strategy include:

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Exploit the Multiple Benefits of our eASIC Platform. We intend to leverage the multiple benefits of our versatile eASIC platform to expand our customer base across a variety of end products.

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Expand Market Share within Our Existing Customers. We intend to increase our market share by applying our differentiated design capabilities to new design programs and by continuing to foster deep customer relationships. We believe this will position us to expand into our customers’ adjacent and next generation products.

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Sell into New Customers in Existing Markets. We have successfully demonstrated a number of key benefits to top customers within certain applications and markets, such as wireless communications infrastructure and storage. We plan to work with other top OEMs in our existing markets to bring the same benefits to them.

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Expand into Adjacent Markets and Enhance Our Product Roadmap to Identify New Use Cases. We intend to leverage the versatility of our eASIC platform to develop new use cases and applications. As we deploy new capabilities including, but not limited to, higher-speed SerDes, increased logic and memory integration and lower power solutions, we plan to use our eASIC platform to expand into adjacent markets.

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Invest in Key Sales and Technical Talent. As we grow, we intend to build upon our top tier customer base by increasing our geographic sales and technical resources to enable us to expand our market share with new and existing customers and in adjacent markets.

Risks Associated With Our Business

Our business is subject to numerous risks, as more fully described in the section entitled “Risk Factors” immediately following this prospectus summary. You should read these risks before you invest in our common stock. We may be unable, for many reasons, including those that are beyond our control, to implement our business strategy. In particular, risks associated with our business include:

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We depend on a limited number of customers for a substantial majority of our revenues. If we fail to retain or expand our customer relationships, our revenues would decline significantly.

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Our success and future revenues depend on our winning designs with our customers, and those customers designing our solutions into their product offerings and successfully selling and marketing

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

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Our customers may replace or substitute our custom IC solutions with different or lower cost solutions.

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The complexity of our custom IC solutions could result in unforeseen delays or expenses from undetected defects, erroneous spins or other bugs which could adversely affect our operating costs, reduce the market adoption of our solutions and damage our reputation with current or prospective customers.

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Our target markets may not grow or develop as we currently expect and if we fail to penetrate new markets and scale successfully within those markets, our revenues and financial condition would be harmed.

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We may experience difficulties demonstrating the value to customers of newer, higher priced and higher margin solutions if they believe existing solutions are adequate to meet end customer expectations, and our business would be harmed.

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Our VMI inventory strategy subjects us to risk of revenue volatility, which could negatively impact our operating results.

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Fluctuations in the mix of our custom IC products that we sell may adversely affect our financial results.

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We depend on third parties for substantially all of our manufacturing production and operations.

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We identified material weaknesses in our internal controls over financial reporting that were a result of the limited internal accounting resources available to us while we were a private company. If not properly remediated, these weaknesses could result in material misstatements in our financial statements in future periods and impair our ability to comply with the accounting and reporting requirements applicable to public companies.

Corporate Information

We were incorporated in Delaware in 1999. Our principal executive offices are located at 2585 Augustine Drive, Suite 100, Santa Clara, California 95054, and our telephone number is (408) 855-9200. Our corporate website address is www.easic.com. Information contained on or accessible through our website is not a part of this prospectus, should not be relied on in determining whether to make an investment decision, and the inclusion of our website address in this prospectus is an inactive textual reference only.

We have obtained registered trademarks for eASIC, easicopy and eASICore, The Configurable Logic Company and eZ-IP based on use of the trademarks in the United States. This prospectus contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork and other visual displays, may appear without the ^® or ^™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

Implications of Being an Emerging Growth Company

As a company with less than $1.0 billion in revenues during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (JOBS Act), enacted in April 2012. An emerging growth company may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

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being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in this prospectus;

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not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended;

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reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and

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exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We may use these provisions until the last day of our fiscal year following the fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.0 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.

We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

THE OFFERING



Common stock offered by us		shares

Common stock to be outstanding after this offering		shares

Over-allotment option offered by us		shares

Use of proceeds		We estimate that we will receive net proceeds of approximately $ million (or approximately $ million if the underwriters exercise their over-allotment option in full) from the sale of the shares of common stock offered by us in this offering, based on an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this offering primarily for general corporate purposes, including working capital, sales and marketing activities, product development, general and administrative matters, and capital expenditures, although we do not currently have any specific or preliminary plans with respect to use of proceeds for such purposes. We also currently intend to use approximately $ million of the net proceeds we receive from this offering to prepay the entirety of the outstanding indebtedness, including applicable prepayment penalties, under our existing debt obligations, though our intentions to prepay our debt obligations may change due to market or other factors. We also may use a portion of the net proceeds to acquire complementary businesses, products, services or technologies; however, we do not have agreements or commitments for any specific acquisitions at this time. See “Use of Proceeds.”

Risk factors		You should read the “Risk Factors” section of this prospectus for a discussion of certain of the factors to consider carefully before deciding to purchase any shares of our common stock.

Proposed NASDAQ trading symbol		EASI

The number of shares of our common stock to be outstanding after this offering is based on 15,014,485 shares of common stock outstanding as of December 31, 2014, and excludes:

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3,400,250 shares of common stock issuable upon the exercise of outstanding stock options as of December 31, 2014, at a weighted-average exercise price of $1.11 per share;

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2,830,500 shares of our common stock reserved for future issuance under our 2015 Equity Incentive Plan (2015 plan), which will become effective as of the date of the effectiveness of the registration

statement of which this prospectus forms a part which includes (i) 180,500 shares of common stock reserved for issuance under our 2010 Equity Incentive Plan, as amended (2010 plan), and (ii) does not reflect stock options granted after December 31, 2014 ;

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530,000 shares of common stock reserved for future issuance under our 2015 employee stock purchase plan (2015 ESPP), which will become effective upon the execution and delivery of the underwriting agreement for this offering;

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111,505 shares of common stock issuable upon the exercise of convertible preferred stock warrants outstanding as of December 31, 2014, at an exercise price of approximately $5.19 per share;

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32,268 shares of common stock issuable upon the exercise of common stock warrants outstanding as of December 31, 2014, at an exercise price of approximately $15.50 per share; and

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75,752 shares of common stock issuable upon the exercise of common stock warrants outstanding as of December 31, 2014, at a weighted-average exercise price of approximately $16.37 per share, that terminate unless exercised immediately prior to the completion of this offering.

Unless otherwise indicated, all information contained in this prospectus assumes or gives effect to:

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the filing of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws immediately prior to the completion of this offering;

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no exercise by the underwriters of their option to purchase up to an additional shares of our common stock to cover over-allotments, if any;

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the conversion of all our convertible preferred stock outstanding as of December 31, 2014 into an aggregate of 5,145,683 shares of our common stock immediately prior to the completion of this offering;

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the 75-for-one reverse split of our common stock and our preferred stock that was effected on August 6, 2014.

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the termination and cancellation of all 533,301 outstanding shares of our Series A-1 non-convertible preferred stock upon the completion of this offering; and

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the automatic conversion of warrants to purchase 98,221 shares of our Series A-2 convertible preferred stock outstanding as of December 31, 2014 into warrants to purchase an aggregate of 111,505 shares of our common stock immediately prior to the completion of this offering.

SUMMARY CONSOLIDATED FINANCIAL DATA

The summary consolidated statements of operations data presented below for the years ended December 31, 2012, 2013 and 2014 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The following summary consolidated financial data should be read with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.


	Year Ended December 31,
	2012			2013			2014
	(In thousands, except share and per share data)
Consolidated statements of operations data:
Revenues:
Product	$	11,843		$	26,111		$	65,086
Service		1,840			3,666			2,294

Total revenues		13,683			29,777			67,380

Cost of revenues⁽¹⁾:
Product		8,707			14,968			37,366
Service		373			748			636

Total cost of revenues		9,080			15,716			38,002

Gross profit		4,603			14,061			29,378

Operating expenses⁽¹⁾:
Research and development		11,898			13,026			13,870
Sales and marketing		4,494			4,834			5,711
General and administrative		2,543			3,076			5,449

Total operating expenses		18,935			20,936			25,030

Income (loss) from operations		(14,332	)		(6,875	)		4,348
Interest expense		(1,042	)		(935	)		(1,443	)
Other income (expense), net		72			12			(836	)

Income (loss) before income taxes		(15,302	)		(7,798	)		2,069
Provision for income taxes		(57	)		(44	)		(3,216	)

Net loss		(15,359	)		(7,842	)		(1,147	)
Add/(Less): Capital contribution from/(deemed dividend to) common stockholders⁽²⁾		83,386			(338	)		—

Net income (loss) attributable to common stockholders	$	68,027		$	(8,180	)	$	(1,147	)

Net income (loss) per share attributable to common stockholders⁽³⁾:
Basic	$	213.75		$	(0.90	)	$	(0.12	)

Diluted	$	(4.06	)	$	(0.90	)	$	(0.12	)

Weighted-average common shares used in computing net income (loss) per share attributable to common stockholders⁽³⁾:
Basic		318,249			9,066,797			9,518,377

Diluted		3,786,303			9,066,797			9,518,377

Pro forma net loss attributable to common stockholders (unaudited)⁽³⁾							$	(364	)

Pro forma net loss per share attributable to common stockholders (unaudited)⁽³⁾:
Basic							$	(0.02	)

Diluted							$	(0.02	)

Pro forma weighted-average common shares used in computing net loss per share attributable to common stockholders (unaudited)⁽³⁾:
Basic								14,664,060
Diluted								14,664,060

(1)	Stock-based compensation included in the consolidated statements of operations data above was as follows:


	Year Ended December 31,
	2012		2013		2014
	(In thousands)
Cost of product revenues	$	1	$	5	$	5
Research and development		75		256		485
Sales and marketing		17		485		286
General and administrative		150		573		558

Total	$	243	$	1,319	$	1,334

(2)	See Note 6 to our consolidated financial statements appearing elsewhere in this prospectus for an explanation of the capital contribution from/(deemed dividend to) common stockholders.

(3)

See Notes 1 and 8 to our consolidated financial statements appearing elsewhere in this prospectus for an explanation of the calculations of our basic and diluted net income (loss) per share attributable to common stockholders and our basic and diluted pro forma net income (loss) per share attributable to common stockholders.

Our consolidated balance sheet as of December 31, 2014 is presented on:

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an actual basis;

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a pro forma basis, giving effect to the automatic conversion of all outstanding shares of our convertible preferred stock into 5,145,683 shares of common stock, the related reclassification of the preferred stock warrant liability to additional paid-in capital and the effectiveness of our amended and restated certificate of incorporation as of immediately prior to the completion of this offering, as if such conversion had occurred and our amended and restated certificate of incorporation had become effective on December 31, 2014; and

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a pro forma as adjusted basis, giving effect to the pro forma adjustments and the sale of shares of common stock by us in this offering, based on an assumed initial public offering price of $ per share (the midpoint of the price range reflected on the cover page of this prospectus) after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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


	As of December 31, 2014
	Actual			Pro Forma		Pro Forma As Adjusted⁽¹⁾
				(In thousands)
Consolidated balance sheet data:
Cash and cash equivalents	$	8,790		$	8,790
Working capital		19,630			19,630
Total assets		43,118			43,118
Total deferred revenues		321			321
Total non-current income taxes payable		3,081			3,081
Total capital lease, non-current portion		255			255
Total long-term debt, non-current portion		15,949			15,949
Vendor financing arrangement		1,280			1,280
Convertible preferred stock warrant liabilities		1,203			—
Total preferred stock		41,286			—
Total stockholders’ equity (deficit)		(35,095	)		7,394

(1)	Each $1.00 increase or decrease in an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as

applicable, our pro forma as adjusted cash and cash equivalents, working capital, total assets and total stockholders’ equity (deficit) by $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each one million increase (decrease) in the number of shares offered by us as set forth on the cover page of this prospectus, would increase (decrease) each of our cash and cash equivalents, working capital (deficit), total asset, additional paid-in capital, and total stockholders’ equity by approximately $ million, assuming that the assumed initial public offering price of $ per share, which is the midpoint of the estimated offering price range reflected on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Non-GAAP financial measures

We use the financial measures set forth below, which are non-GAAP financial measures, to help us analyze our financial results, establish budgets and operational goals for managing our business and to evaluate our performance. We also believe that the presentation of these non-GAAP financial measures in this prospectus provides an additional tool for investors to use in comparing our core business and results of operations over multiple periods with other companies in our industry, many of which present similar non-GAAP financial measures to investors. However, the non-GAAP financial measures presented in this prospectus may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated. The non-GAAP financial measures presented in this prospectus should not be considered as the sole measure of our performance and should not be considered in isolation from, or as a substitute for, comparable financial measures calculated in accordance with GAAP. The financial measures set forth below also contain certain comparable GAAP financial measures.


	Year Ended December 31,
	2012			2013			2014
	(In thousands, except percentages)
GAAP gross profit	$	4,603		$	14,061		$	29,378
GAAP gross margin		34	%		47	%		44	%
Non-GAAP gross profit	$	4,604		$	14,066		$	29,383
Non-GAAP gross margin		34	%		47	%		44	%
GAAP income (loss) from operations	$	(14,332	)	$	(6,875	)	$	4,348
GAAP operating margin (loss)		(105	%)		(23	%)		6	%
Non-GAAP income (loss) from operations	$	(14,089	)	$	(5,556	)	$	5,682
Non-GAAP operating margin (loss)		(103	%)		(19	%)		8	%
Adjusted EBITDA	$	(13,609	)	$	(5,010	)	$	6,589
Adjusted EBITDA margin		(99	%)		(17	%)		10	%
Cash flow provided by (used in) operating activities	$	(10,442	)	$	(13,478	)	$	542
Free cash flow	$	(10,966	)	$	(15,607	)	$	(4,774	)

Non-GAAP gross profit and margin. We define non-GAAP gross profit as gross profit as reported on our consolidated statements of operations, excluding the impact of stock-based compensation, which is a non-cash charge. We define non-GAAP gross margin as non-GAAP gross profit divided by revenues. We have presented non-GAAP gross profit and margin because we believe that the exclusion of stock-based compensation allows for more accurate comparisons of our results of operations to other companies in our industry. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for information regarding the limitations of using non-GAAP gross profit and gross margin as financial measures and for a reconciliation of non-GAAP gross profit to gross profit, the most directly comparable financial measure calculated in accordance with U.S. generally accepted accounting principles (GAAP).

Non-GAAP income (loss) from operations and operating margin (loss). We define non-GAAP income (loss) from operations as income (loss) from operations as reported on our consolidated statements of operations, excluding the impact of the stock-based compensation, which is a non-cash charge. We define non-GAAP operating margin (loss) as non-GAAP income (loss) from operations divided by revenues. We have presented non-GAAP income (loss) from operations and operating margin (loss) because we believe that the exclusion of stock-based compensation gain allows for more accurate comparisons of our results of operations to other companies in our industry. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for information regarding the limitations of using non- GAAP income (loss) from operations and operating margin (loss) as financial measures and for a reconciliation of non-GAAP income (loss) from operations to income (loss) from operations, the most directly comparable financial measure calculated in accordance with GAAP.

Adjusted EBITDA and adjusted EBITDA margin. We define adjusted EBITDA as our net loss excluding: (1) stock-based compensation; (2) interest expense; (3) other income (expense), net, which primarily includes changes in value of preferred stock warrant liabilities and foreign exchange gains and losses; (4) depreciation and amortization; and (5) our provision for income taxes. We define adjusted EBITDA margin as adjusted EBITDA divided by revenues. We have presented adjusted EBITDA and adjusted EBITDA margin because we believe it is an important measure used by industry analysts and investors to compare our performance against our peer group and analyze our cash generation performance. In particular, we believe that the exclusion of the expenses eliminated in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for information regarding the limitations of using adjusted EBITDA and adjusted EBITDA margin as financial measures and for a reconciliation of adjusted EBITDA to net loss, the most directly comparable financial measure calculated in accordance with GAAP.

Free cash flow. We define free cash flow as net cash provided by operating activities less property and equipment purchases, including certain mask sets. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after capital purchases, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening the balance sheet. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for more information and a reconciliation of free cash flow to cash flow provided used in operating activities, the most directly comparable financial measure calculated and presented in accordance with GAAP.

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, including our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before investing in our common stock. If any of the following risks are realized, in whole or in part, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the price of our common stock could decline, and you could lose part or all of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operation.

We depend on a limited number of customers for a substantial majority of our revenues. If we fail to retain or expand our customer relationships, our revenues would decline significantly.

We derive a substantial majority of our revenues from a limited number of customers. We believe that our operating results for the foreseeable future will continue to depend on sales to relatively small number of customers. In 2012, 2013 and 2014, Ericsson Inc. (Ericsson) and Seagate Technology plc (Seagate) together accounted for 73%, 87% and 93%, respectively, of our total revenues. In the future, these significant customers may decide not to purchase our custom IC solutions at all, may purchase fewer units than they did in the past or may alter their purchasing patterns by replacing or substituting our IC solutions with different or lower cost solutions. For example, Ericsson has announced their intention to substitute our solution on certain stock-keeping units with alternative solutions. While we expect to win other design awards with Ericsson in the future, we can cannot be assured that this will occur, and failure to achieve design awards in the future would have an adverse impact on our revenues and harm our financial condition and results of operations.

In addition, our relationships with some customers may deter other potential customers that compete with these customers from buying our solutions. The loss of a key customer, such as Ericsson or Seagate, a reduction in sales to any key customer or the cancellation of a substantial order could happen at any time with limited notice, which in turn would negatively impact our revenues and harm our financial condition and results of operations. Further, the primary markets in which we participate including the wireless and wired infrastructure communications and storage markets, are highly concentrated in the number of companies that serve those markets. As a result, we expect that a high percentage of our revenues will be attributable to a small number of customers in these highly concentrated markets for the foreseeable future.

Our success and future revenues depend on us winning designs with our customers, and those customers designing 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 revenues in the following years will deteriorate.

We sell our custom IC solutions to original equipment manufacturer (OEM) customers that include our solutions in their hardware products. Our technology is generally incorporated into products at the design stage, which we refer to as a design win. As a result, our future revenues depend on our OEM customers designing our custom ICs into their products, and on those products being produced in volume and successfully commercialized. If we fail to convince our current or prospective OEM customers to include our custom 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 custom IC solutions to that OEM because changing suppliers involves significant cost, time, effort and risk for the OEM. Even if an OEM customer designs one of our custom 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 revenues from that customer. Because of our extended sales cycle, our revenues in future years are highly dependent on design wins we are awarded today.

For example, we are currently shipping a majority of our revenues from design wins that we were awarded more than 12 months ago, and it is typical that a design win today will not result in meaningful revenues until one year or later, if at all. If we do not continue to win designs in the short term, our revenues in the following years will deteriorate.

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

Achieving a design win is typically a lengthy, expensive and competitive process because our customers generally take a considerable amount of time to evaluate our custom IC solutions. The time from early engagement by our sales force to actual product introduction typically runs from 21 to 24 months for our current end markets, 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, revenues to offset our development expenditures. For example, some of our end customers’ products may have short life cycles which would limit our ability to recoup our upfront expenditures for those customers’ products. In addition, for certain very high production volume ICs, customers have designed a standard ASIC from another supplier to replace our solution. The extent to which our solution is replaced will vary depending on a number of factors, many of which are out of our control. As a result, we will see a decline in our revenue from the designs that are replaced.

Our customers have the option to decide whether or not to put our solutions into production after we have completed our design and prototype work. 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 revenues. 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 revenues. For example, in August 2014, a large customer cancelled a program that included our product for which we had already produced a successful prototype custom IC and were beginning production of our customized IC in anticipation of substantial customer orders. This cancellation resulted in no return on the significant operating expenses we incurred and the write off of certain production assets, which had a negative impact on our gross margins and our quarterly results of operations.

Fluctuations in the mix of our custom IC products that we sell may adversely affect our financial results.

Because of the wide price differences among our custom IC products, the mix of the ICs we sell affects the average selling price of such products and has a substantial impact on our revenues and gross margins. We offer both higher and lower margin products in our eASIC platform and easicopy ASIC product families. If the sales mix shifts towards lower margin products, our overall gross margins will be adversely affected. Fluctuations in the mix and types of our products may also affect the extent to which we are able to recover our fixed costs and investments that are associated with a particular product, and as a result could adversely affect our financial results.

The average selling prices of products in our markets have historically decreased over time and may do so in the future, which could harm our revenues and gross margins.

Average selling prices of semiconductor products in the markets we serve have historically decreased over time. Our revenues come from sales to large customers that have expectations of annual reductions in their purchase price. The average selling prices of our products generally decline as the products mature. In addition, our solutions are designed to address markets requiring high volumes of chips for their products and, at certain high volume levels, our competitors may offer our customers lower cost standard ASICs for their products. Although we can often address these customers’ needs through our easicopy ASICs, our customers may design

other solutions into their products. In addition, in order to compete with these lower-cost chips, we may be forced to lower the average selling prices of our solutions.

We seek to offset the reductions in our average selling prices and increase gross margins by reducing the development cost of our IC solutions, developing new or enhanced lower-cost solutions on a timely basis and increasing unit sales. However, there is no guarantee that our efforts will be successful or that they will keep pace with the decline in selling prices of our products, which could ultimately lead to a decline in our revenues and have a negative effect on our gross margins. We may also not be able to increase our sales volume of these lower-cost solutions or achieve the necessary volume of production that would lead to further per unit cost reductions. We expect that we will have to continue to address pricing pressures in the future, which could require us to reduce the prices of our solutions and harm our operating results. If we are unsuccessful in reducing our costs, developing new or enhanced products on a timely basis with higher selling prices or gross profits or increasing our volumes, our business will be harmed.

Our custom IC solutions are very complex. Given this complexity, our IC solutions have in the past and may in the future contain defects, errors and bugs in production and when they are first introduced or as new versions are released. These defects, errors or bugs could interrupt or delay sale to customers, thus delaying or reducing our revenues. If we incorrectly design a custom IC solution, we may need to modify such solution, which could require significant expenditures and would negatively impact our return on investment. Moreover, if such modifications negatively impact our customers’ product plans, our customers may cancel their program that uses our solution. For example, although the impact to our revenues for this particular case was minimal, in the third quarter of 2014, a customer cancelled a program due to a number of respins that led them to cancel their product plans. If any of our custom IC solutions have reliability, quality or compatibility problems, we may not be able to successfully correct these problems in a timely manner, or at all. If defects, errors or bugs are not found until late in the design cycle or even after we have commenced commercial production of a new product, we may incur significant additional development costs and product recall, repair or replacement costs. These problems may also result in claims against us by our customers or others. Any defects, errors or bugs may damage our reputation and harm our ability to retain existing customers or attract new customers, which in turn would adversely affect our business and financial results.

The success of our custom IC solutions is dependent on our customers’ ability to develop products that achieve market acceptance and are free of design flaws, and our customers’ failure to do so could have a material adverse effect on our business.

The success of our custom IC solutions is heavily dependent on the timely introduction, quality and market acceptance of our customers’ products incorporating our solutions. Our customers’ products are often very complex and subject to design complexities that may result in design flaws, as well as potential defects, errors and bugs. We have in the past been subject to delays and project cancellations as a result of design flaws in the products developed by our customers. In the past we have also been subject to delays and project cancellations as a result of changing market requirements, such as the customer adding a new feature, or because a customer’s product fails their end customer’s evaluation or field trial. Other times customer products are delayed due to incompatible deliverables or shortages in component parts from other vendors. We incur significant design and development costs in connection with designing our custom IC solutions for customers’ products and if our customers discover design flaws, defects, errors or bugs, in their products, or if they experience changing market requirements, failed evaluations or field trials, or incompatible deliverables or shortages in component parts from other vendors, they may delay, change or cancel a project, and we may have incurred significant additional development costs and may not be able to recoup our costs, which in turn would adversely affect our business and financial results.

Our target markets may not grow or develop as we currently expect, and if we fail to penetrate new markets and scale successfully within those markets, our revenues and financial condition would be harmed.

Approximately 87% of our revenues for 2013 and 94% of our revenues for 2014 were derived from customers participating in the wireless communications infrastructure and storage markets. Any deterioration in these markets or reduction in capital spending to support these markets could lead to a reduction in demand for our products, which would adversely affect our revenues and results of operations. Our operating results are increasingly affected by trends in these end markets, including increased demand for customization, faster time-to-market, lower costs and lower power consumption, and increased integration of functions into standard ASICs. We may be unable to predict the timing or development of trends in these end markets with any accuracy. While certain of these trends have been beneficial to us, it may not be the case in the future with other end market trends. A market shift towards a standard that we may not support could significantly decrease the demand for our solutions. If our target markets do not grow or develop in ways that we currently expect, demand for our technology may not materialize as expected and our business and operating results would suffer.

In the past several years, a significant amount of our revenues have been generated from sales of our solutions to customers that develop wireless communication infrastructure and storage products. Our future revenue growth, if any, will depend in part on our ability to expand within our existing markets, but also to enter new markets, such as the wired communication infrastructure, medical, and industrial markets. Each of these markets presents distinct and substantial challenges and risks and, in many cases, requires us to develop new customized solutions to address the particular requirements of that market. Meeting the technical requirements and securing design wins in any of these new markets will require a substantial investment of our time and resources. We cannot assure you that we will secure design wins from these or other new markets, or that we will achieve meaningful revenues from sales with these markets. Some of these markets are primarily served by only a few large, multinational OEMs with substantial negotiating and buying power relative to us and, in some instances, with internally developed silicon solutions that can be competitive to our products. If any of these markets do not develop as we currently anticipate or if we are unable to penetrate them and scale in them successfully, our projected revenues would decline.

As we develop and introduce new solutions, we face the risk that customers may not value or be willing to bear the cost of incorporating these newer solutions into their products, particularly if they believe their customers are satisfied with current solutions. Regardless of the improved features or superior performance of the newer solutions, customers may be unwilling to adopt our new solutions due to design or pricing constraints. Because of the extensive time and resources that we invest in developing new solutions, if we are unable to sell customers new generations of our solutions, our revenues could decline and our business, financial condition, results of operations and cash flows would be negatively affected.

Our business depends substantially on our customers purchasing additional solutions from us. Any decline in our customer retention or expansion could harm our future results of operations.

As a critical component of maintaining or improving our results of operations, it is important that our customers purchase additional solutions from us after their initial orders. This may require increasingly sophisticated and costly sales efforts and may not result in additional sales. In addition, the rate at which our customers purchase additional solutions depends on a number of factors, including the perceived need for additional solutions for their product plans as well as general economic conditions. If our efforts to sell additional solutions to our customers are not successful, our business could suffer.

Our VMI inventory strategy subjects us to risk of revenue volatility, which could negatively impact our operating results.

Substantially all of our sales are made on a Vendor Managed Inventory (VMI) basis in which we maintain our product inventory at a customer specified location, which we refer to as a hub. Title to that inventory transfers to our customer, and revenues are recognized, when our products are “pulled” from our hub locations by, or delivered to, our customers, the timing for which is entirely determined by our customers. We invoice our customer when this pull transaction occurs. This VMI arrangement causes us to carry a significant amount of inventory on our balance sheet and extends our cash collection cycle. Moreover, our customers are generally not required to make any certain level of purchases within any given quarter and our customers typically do not provide us with firm, long-term purchase commitments, however, we do have certain contractual protections for inventory levels mandated by the customer. A substantial majority of our sales are made on a just-in-time basis through the hub. Accordingly, our customers may make frequent changes to their levels of product purchases with little or no notice to us and without penalty, which may include reductions, cancellations or delays in their product purchases. These changes make our revenues and gross margins volatile from period to period, as they will be highly dependent on the production schedules of our customers. Because production lead times often exceed the amount of time required by our customers to place their orders, we often must build our custom IC solutions in advance of the actual placement of orders, relying on an imperfect demand forecast to project volumes and customer mix. In addition, we maintain the risk of loss on such inventory, and though we cover insurance for lost inventory, such insurance may not be sufficient to cover any losses we may incur.

Our customers generally provide us with non-binding six-month rolling forecasts of their supply needs, and these forecasts vary significantly for each customer and for each six-month period. Accordingly, we have limited visibility as to our customers’ supply needs for more than two quarters out and those forecasts can vary widely from period to period and even within any quarterly period or periods, and as a result, are not always reliable indicators of future demand. As a result, our ability to accurately forecast demand is limited and can be adversely affected by a number of factors, including:

Even after a forecast is received, our customers may not place orders or pull inventory from our hub locations. Forecasting our gross margins is difficult because a significant portion of our business is based on multiple pulls by large customers from a hub within the same quarter. If we fail to accurately forecast demand for our solutions or such demand is lower than we expect, then our anticipated sales may not materialize on schedule or at all, and we may experience unanticipated revenue volatility or shortfalls and could possess excess or obsolete inventory or lack sufficient inventory that we may be unable to sell to other customers, any of which could have an adverse impact on our business.

If we or our customers are unable to project customer requirements accurately, we may not build enough units due to the long lead times for our products from our foundries, which could lead to delays in product shipments and lost sales opportunities in the near term, as well as force our customers to identify alternative solutions, including designing us out of their products, which could affect our ongoing relationships with these customers and decrease our revenues. We have in the past had customers significantly increase their requested production quantities with little or no advance notice. If we do not fulfill customer demands in a timely manner, our customers may cancel their orders, decrease their future orders, or not pull from our hub locations. In addition, the rapid pace of innovation in our industry could render portions of our inventory obsolete. Excess or obsolete inventory levels could result in unexpected expenses or increases in our reserves that could adversely affect our business, results of operations and financial condition.

Our gross margins may fluctuate due to a variety of factors, which could negatively impact our gross margins, results of operations and our financial condition.

Our gross margins may fluctuate due to a number of factors, including customer mix, market acceptance of our new products, yield, wafer pricing, competitive pricing dynamics, and geographic and market segment pricing strategies.

Further, because we are so dependent on a few large customers, these customers have significant leverage with respect to negotiating pricing and other terms with us and may put downward pressure on our margins. To attract new customers or retain existing customers, we have in the past and will in the future offer certain customers favorable prices on our solutions, which would decrease our average selling prices and may impact gross margins. To retain our revenues levels, we may also be forced to offer pricing incentives to our customers to incent them to continue current production levels or cancel or delay their cost reduction programs. For example, during the fourth quarter of 2014, we negotiated with one of our largest customers for a reduction in future pricing based on that customer having increased its forecasted purchase volume.

In addition, as we capitalize the cost of certain of our base arrays after we have tested the technological feasibility of the array and estimated market demand for products using the tested array, a subsequent determination that those base arrays will not be successful in the market would result in our expensing those assets to our cost of goods sold, which would hurt our gross margins and harm our financial condition and results of operations in the period we make that determination.

Because we do not operate our own manufacturing, assembly or testing facilities, we may not be able to reduce our costs as rapidly as companies that operate their own facilities, and our costs may even increase, which could further reduce our gross margins. We rely primarily on obtaining yield improvements and volume-based cost reductions to drive cost reductions in the manufacture of existing products, introducing new products that incorporate advanced features and optimize die size, and other price and performance factors that enable us to increase revenues while maintaining consistent margins. To the extent that such cost reductions and new product introductions do not occur in a timely manner, or to the extent that our products do not achieve market acceptance at prices with higher margins, our financial condition and results of operations could be adversely affected.

In addition, we maintain inventory of our products at various stages of production and in finished good inventory. We hold these inventories in anticipation of customer orders. If those customer orders do not materialize we may have excess or obsolete inventory which we would have to reserve or write off. In such case, our gross margins would be adversely affected.

If we are unable to successfully develop and introduce new products which achieve market acceptance, we may fail to maintain or increase our market share, which in turn would harm our competitive position and our business and operating results.

Our success depends in large part on our ability to develop and introduce new products based on our custom IC solutions that address customer requirements and compete effectively on the basis of price, functionality and performance. The success of new product introductions is dependent upon several factors, including:

Our product research and development efforts may not be successful and our new products may not address the needs of our current and prospective customers or achieve market acceptance. Revenues relating to our mature products are expected to decline in the future, which is normal for our product life cycles. As of December 31, 2014, substantially all of our revenues were from 45 nanometer or older process nodes from which we have been selling and shipping products since the third quarter of 2008. We estimate the life of each eASIC platform process technology to be at least eight years. As the process technology matures, we become increasingly dependent on revenues derived from design wins from newer process technologies as well as anticipated cost reductions in the manufacture of our current products. To the extent that such new product introductions do not occur in a timely manner, or to the extent that our products do not achieve market acceptance at prices with acceptable margins, our financial condition and results of operations would be adversely affected. In addition, we have only recently begun selling our 28 nanometer process node generation of our eASIC platform. As a result, revenues from our 28 nanometer process node products are just beginning to ramp. While we have been able to demonstrate to our customers certain levels of reductions in power consumption, increased performance or lower design and manufacturing time, the number of instances where we have had the opportunity to demonstrate such results to date has been limited. We cannot be certain that we will be able to demonstrate to our customers the same level of reductions in power consumption, increased performance or lower design and manufacturing time that we have seen to date or that such relative comparisons will not change over time. Accordingly, this generation of our eASIC platform has not generated significant revenues to date and may not achieve broad market adoption.

Our eASIC platform relies on base arrays which require significant expenditures and may not meet market requirements or be commercially successful.

Our solutions incorporate the architecture of our eASIC platform, which relies on our versatile, pre-defined and reusable base array of standard mask layers and an adaptable single mask layer which is layered into the base array, and customized using our proprietary software tools. This platform requires substantial capital expenditures that we have historically funded with our own working capital. If the custom ICs that we have developed, or which we may develop in the future, based on our eASIC platform do not meet the requirements of our customers or otherwise gain market acceptance, then we will not experience revenue growth and our business and results of operations will be harmed. In addition, as we capitalize the cost of certain of our base arrays after we have tested the technological feasibility of the array and estimated market demand for products using the tested array, a subsequent determination that those base arrays will not be successful in the market would result in our expensing those assets to our cost of goods sold, which would hurt our gross margins and harm our financial condition and results of operations in the period we make that determination. Because we have expended, and expect to continue to expend, a substantial amount of our resources on the development of our eASIC platform and the base arrays utilized in our platform, we may not have sufficient cash to fund base arrays that are commercially viable or that will increase or sustain the market acceptance of our solutions, which could harm our revenues and competitive position.

If we fail to compete effectively, we may lose or fail to gain market share, which could negatively impact our operating results and our business.

The global semiconductor market in general, and the wireless communications infrastructure and storage markets in particular, are highly competitive. We compete in different target markets on the basis of a number of

competitive factors. We expect competition to increase and intensify as additional semiconductor companies enter our markets, and as internal silicon design resources of large OEMs grow. Increased competition could result in price pressure, reduced gross margins and loss of market share, any of which could harm our business, revenues and results of operations.

Our competitors range from large, international companies offering a wide range of semiconductor products to smaller companies specializing in narrow market verticals. In our markets, our primary competitors are Altera, Avago, Broadcom, Marvell, Toshiba and Xilinx. We expect competition in our current markets to increase in the future as existing competitors improve or expand their product offerings and as new competitors enter these markets.

Our ability to compete successfully depends on elements both within and outside of our control, including industry and general economic trends. Many of our competitors are substantially larger, have greater financial, technical, marketing, distribution, customer support and other resources, are more established than we are and have significantly better brand recognition and broader product offerings which may enable them to better withstand adverse economic or market conditions in the future and reducing their pricing so as to compete against us. Our ability to compete successfully will depend on a number of factors, including:

Our competitors may also establish cooperative relationships among themselves or with third parties or acquire companies that provide similar products to ours. As a result, new competitors or alliances may emerge that could acquire significant market share. Any of these factors, alone or in combination with others, could harm our business and result in a loss of market share and an increase in pricing pressure. In addition, a number of our competitors are able to sell their solutions through multiple channels, including through distributors and third-party sales organizations, while we rely primarily on direct sales, which may provide our competitors with a strategic advantage in sales of their solutions and could harm our prospects and business.

Our industry is subject to rapidly changing standards. We may be unable to make the substantial investments that are required to remain competitive in our business.

We design certain of our products to conform to current industry standards. Some industry standards may not be widely adopted or implemented uniformly, and competing standards may emerge that may be preferred by our customers or by our third party suppliers. If our customers or our third-party suppliers adopt new or competing industry standards with which our solutions are not compatible, or if the industry groups fail to adopt standards with which our solutions are compatible, our existing solutions would become less desirable to our current or prospective customers. As a result, our sales would suffer, and we could be required to make significant expenditures to develop new solutions. In addition, existing standards may be challenged as infringing upon the intellectual property rights of other companies or may be superseded by new innovations or standards.

The semiconductor industry requires substantial investment in research and development in order to bring to market new and enhanced solutions. Our research and development expense was $11.9 million, $13.0 million and $13.9 million for the years ended December 31, 2012, 2013 and 2014, respectively. We expect to increase our research and development expenditures as compared to prior periods as part of our strategy to increase demand for our solutions in our current markets and expanding into additional markets. We are a small company with limited resources, and limited experience achieving revenues. We may not have sufficient resources to maintain the level of investment in research and development required to remain competitive. In addition, we cannot assure you that the technologies which are the focus of our research and development expenditures will become commercially successful or generate any revenues.

If we fail to continue to develop internal design tools to differentiate our products, our future growth and revenues could suffer.

We have our own internally developed and maintained software design tools, which we refer to as eTools, that we and our customers use to design the single mask layer that is incorporated into our eASIC Nextreme product family. We depend on eTools to differentiate our custom IC solutions. We must enhance these tools when we advance to each new technology node, and potentially when we add new intellectual property (IP) into our base arrays. If we are unable to continue to develop and support these tools, including maintaining and increasing the usability of the tools by our customers, then our ability to retain existing customers and attract new ones could decline, which would harm our financial results and negatively impact our results of operations.

We rely on third parties to provide software tools and technology necessary for our solutions and on third-party services for the operation of our business. Any failure of one or more of our vendors, suppliers or licensors to provide such tools, technology or services could harm our business.

We rely on third-party software tools to assist us in the design and verification of new solutions, and we incorporate third-party technology into some of our solutions. To bring new solutions and enhancements to market in a timely manner, or at all, we need software and hardware development tools that are sophisticated enough or technologically advanced enough to complete our design and verifications. The design requirements necessary to meet consumer demands for solutions we may develop in the future may exceed the capabilities of the software design tools available today or that we may develop in the future. This, in turn, may result in our missing design cycles or losing design wins, either of which could result in a loss of market share or negatively impact our results of operations.

Our solutions often require that we invest in third-party IP to meet certain market expectations on functionality requirements, which can be expensive to procure and integrate into our products. If we select the wrong IP to integrate into our products, or we cannot obtain such IP on reasonable terms, we may not meet our revenue growth expectations, or we may be forced to write off the value of that IP and our financial results, cash flows and business would be harmed.

The commercial viability of our custom IC solutions could be impaired if errors occur in the third-party technology we use or if we are unable to access third-party software tools. It may be more difficult for us to correct any errors in a timely manner, if at all, because the development and maintenance of the technology is not within our control. We cannot assure you that these third parties will continue to make their technology, or improvements to the technology, available to us, or that they will continue to support and maintain their technology. For example, in 2012, one of our key partners, Magma Design Automation, Inc., which provided us with critical software tools for the production of our 90nm eASIC Nextreme platform, was acquired by Synopsys, Inc. Synopsys notified us of their intent to discontinue support for that product. Subsequently, we moved designs to the 45nm, which eliminated our need for this software. Further, due to the limited number of vendors of some types of technology, it may be difficult to obtain new licenses or replace existing technology. Any impairment of the technology of or our relationship with these third parties could harm our business.

We also rely on third-party vendors to provide critical design services and services for our operations that we cannot or do not create or provide ourselves. Although we believe that adequate substitutes are currently available, we depend on these vendors to consistently meet our business requirements. The ability of these third-party vendors to successfully provide reliable and high-quality services is subject to technical and operational uncertainties that are beyond our control. While we may be entitled to damages if our vendors fail to perform under their agreements with us, our agreements with these vendors may limit the amount of damages we may receive. In addition, we do not know whether we will be able to collect on any damages, and there is no guarantee that any award of damages we do collect would be sufficient to cover the actual costs we would incur or for which we may be liable to our customers as a result of any vendor’s failure to perform under its agreement with us. We may not be able to replace the services provided to us by any third-party vendors in a timely manner or on terms and conditions, including service levels and cost, that are favorable to us, and a transition from one vendor to another vendor could subject us to operational delays and inefficiencies until the transition is complete. Any disruption in critical services provided by these third-party vendors could harm our financial results and negatively impact our results of operations.

We depend on third parties for substantially all of our manufacturing operations, including our wafer fabrication, assembly and testing operations which exposes us to certain risks that may harm our business.

We rely on third parties for substantially all of our manufacturing production and operations, including wafer fabrication, assembly and testing. Although we use multiple third-party supplier sources, we depend on these third parties to supply us with material of a requested quantity in a timely manner that meets our standards for yield, cost and manufacturing quality. We do not have any long-term supply agreements with any of our manufacturing suppliers. These third-party manufacturers often serve customers that are larger than us or require a greater portion of their services, which may decrease our relative importance and negotiating leverage with these third parties.

If market demand for wafers exceeds foundry capacity, if market demand for wafers or production and assembly materials increases, or if a supplier of our wafers ceases or suspends operations, our supply of wafers and other materials could become limited. Such shortages of wafers and materials as well as increases in wafer or materials prices could adversely affect our gross margins and could adversely affect our ability to meet customer demands in a timely manner, or at all, and lead to reduced revenues. Moreover, wafers constitute a large portion of our product cost. If we are unable to purchase wafers at favorable prices, our gross margins would be adversely affected.

To ensure continued wafer supply, we may be required to establish other wafer supply sources as these arrangements become economically advantageous or technically necessary, which could require significant expenditures and limit our negotiating leverage. In addition, only a few foundry vendors have the capability to manufacture our most advanced solutions. If we engage alternative supply sources, we may encounter start-up difficulties and incur additional costs. In addition, shipments could be significantly delayed while these sources are qualified for volume production.

Certain of our solutions are manufactured or tested in a single location, or a few locations. Certain of these facilities are located internationally, where we are subject to increased risk of political and economic instability, difficulties in managing operations, difficulties in enforcing contracts and our intellectual property rights, and employment and labor difficulties. Any of these factors could result in manufacturing and supply problems, and delays in our ability to provide our solutions to our customers on a timely basis. If we experience manufacturing problems at a particular location, we may be required to transfer manufacturing to a new location or supplier. Converting or transferring manufacturing from a primary location or supplier to a backup fabrication facility could be expensive and could take two or more quarters. During such a transition, we would be required to meet customer demand from our then-existing inventory, as well as any partially finished goods that could be modified to the required product specifications. We do not seek to maintain sufficient inventory to address a lengthy transition period because we believe it is uneconomical to keep more than minimal inventory on hand. As a result, we may not be able to meet customer needs during such a transition, which could delay shipments, cause production delays, result in a decline in our sales and damage our customer relationships.

If one or more of these vendors terminates its relationship with us, or if we encounter any problems with our manufacturing supply chain, our ability to ship our solutions to our customers on time and in the quantity required would be adversely affected, which in turn could cause an unanticipated decline in our sales and damage our customer relationships.

If our foundries do not achieve satisfactory yields or quality, our reputation and customer relationships could be 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 vendors, Fujitsu, Global Foundries (GF) and Taiwan Semiconductor Manufacturing Company (TSMC), collectively our foundries, from time to time, experience 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 or unacceptable performance of our devices. 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 foundries, or defects, integration issues or other performance problems in our solutions, could cause us significant customer relations and business reputation problems, harm our financial 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 our third-party foundries. 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 may face difficulties, delays and increased expense as we transition our products to new processes, and potentially to new foundries. We depend on our foundries as the principal foundries for our solutions, to transition to new processes successfully. We cannot assure you that our foundries will be able to effectively manage such transitions or that we will be able to maintain our relationship with our foundries or develop relationships with new foundries. If we or any of our foundries 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 which could harm our relationships with our customers and our operating results.

We have a limited history of profitability, and we may not achieve or sustain profitability in the future, on a quarterly or annual basis.

We incurred net loss for 2013 and 2014 in the amount of $7.8 million and $1.1 million, respectively. As of December 31, 2014, our accumulated deficit was $46.4 million. We expect to make significant expenditures related to the development of our products and expansion of our business, including research and development and sales and administrative expenses. Additionally, we may encounter unforeseen difficulties, complications, product delays and other unknown factors that may require additional expenditures. As a result of these expenditures, we may not generate sufficient revenues to achieve profitability.

If we do not sustain our growth rate, we may not be able to execute our business plan and our operating results and stock price could suffer.

We have recently experienced significant growth. Our revenues increased from $29.8 million in fiscal year 2013 to $67.4 million in fiscal year 2014, representing an annual growth rate of 126%. We do not expect to continue to grow at these historical percentage rates, and we may not be able to grow or sustain our revenues at all in the future. In addition, we expect expenses to increase substantially in the near term, particularly as we make significant investments in research and development and our sales and marketing organization, and expand our operations and infrastructure both domestically and internationally. In addition, in connection with operating as a public company, we will incur additional significant legal, accounting and other expenses that we did not incur as a private company. If our revenues do not increase to offset these increases in our operating expenses, we may not be profitable in future periods.

Our historical revenue growth should not be considered indicative of our future performance. You should not rely on our revenue growth, gross margins or operating results for any prior quarterly or annual periods as an indication of our future operating performance. If we are unable to maintain adequate revenue growth, our results of operations could suffer and our stock price could decline.

If we are unable to manage our future growth, we may not be able to execute our business plan and our operating results could suffer.

Our business has grown rapidly. Our future operating results depend to a large extent on our ability to successfully manage any expansion and growth, including the challenges of managing a company with headquarters in the United States and a large percentage of our employees and consultants in Malaysia, Romania and Russia. To manage our growth successfully and handle the responsibilities of being a public company, we believe we must, among other things, effectively:

We may not be able to manage our future growth in an efficient or timely manner, or at all. In particular, any failure to successfully implement systems enhancements and improvements will likely have a negative

impact on our ability to manage our expected growth, as well as our ability to ensure uninterrupted operation of key business systems and comply with the rules and regulations that are applicable to public reporting companies. If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities or develop new solutions, and we may fail to satisfy customer product or support requirements, maintain the quality of our solutions, execute our business plan or respond to competitive pressures, which could negatively affect our brand, results of operations and overall business.

A significant portion of our operations are located outside of the United States, which subjects us to additional risks, including increased complexity and costs of managing international operations and geopolitical instability.

We have research and development design centers in Malaysia, Romania and Russia, and we expect to continue to conduct business with companies that are located outside the United States, particularly in Eastern Europe and Asia. Our customers based in the United States often use contract manufacturers based in Eastern Europe or Asia to manufacture their products, and these contract manufacturers typically purchase products directly from us. As a result of our international focus, we face numerous challenges and risks, including:

We depend on our executive officers and other key employees and the loss of one or more of these employees or an inability to attract and retain highly skilled employees could adversely affect our business.

Our success depends largely upon the continued services of our executive officers and other key employees. From time to time, there may be changes in our executive management team, which could disrupt our business.

We do not have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time. The loss of one or more of our executive officers, especially our Chief Executive Officer, Chief Technology Officer, or other key employees could have an adverse effect on our business.

In addition, to execute our growth plan, we must attract and retain highly qualified personnel. Competition for these personnel in the San Francisco Bay Area, where our headquarters is located, and in other locations where we maintain offices, is intense, especially for engineers experienced in designing and developing semiconductor solutions. We have, from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached legal obligations, resulting in a diversion of our time and resources if we respond to them. In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, it may adversely affect our ability to recruit and retain highly skilled employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be adversely affected.

We are an “emerging growth company,” and we cannot be certain whether the reduced reporting requirements applicable to emerging growth companies will make our shares of common stock less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (JOBS Act), enacted in April 2012. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation, and stockholder approval of any golden parachute payments, which we do not currently have. We could be an emerging growth company for up to five years, although we will lose that status sooner if our annual revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our shares of common stock held by non-affiliates exceeds $700 million (measured as of the last business day of our second fiscal quarter each year). We cannot predict if investors will find our shares of common stock less attractive because we may rely on these exemptions. If some investors find our shares of common stock less attractive as a result, there may be a less active trading market for our shares of common stock and our stock price may be more volatile.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Our management has limited public company experience and may not be able to effectively or efficiently manage or transition to a public company.

We have never operated as a public company and will incur significant legal, accounting and other expenses that we did not incur as a private company. The individuals who constitute our management team have limited experience managing a publicly traded company and limited experience complying with the increasingly complex and changing laws pertaining to public companies. Our management team and other personnel will need to devote a substantial amount of time to compliance, and we may not effectively or efficiently manage our transition into a public company.

We have in the past identified material weaknesses in our internal controls over financial reporting that, if not properly remediated, could result in material misstatements in our financial statements in future periods and impair our ability to comply with the accounting and reporting requirements applicable to public companies.

Our independent registered public accounting firm has not conducted an audit of our internal controls over financial reporting. However, in connection with the audit of our consolidated financial statements for 2012 to 2013, and the review of the nine month period ending September 30, 2014, we identified two material weaknesses in our internal control over financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board of the U.S. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The identified material weaknesses related to (1) our lack of sufficient, qualified personnel in accounting and financial reporting functions with sufficient experience and expertise with respect to the application of U.S. GAAP and related financial reporting during the fiscal years 2012 and 2013, and (2) our controls over the preparation of the provision for income taxes, resulting principally from the allocation of certain costs from our U.S. parent to one of our foreign subsidiaries which resulted in an adjustment to our income tax provision for the nine months ended September 30, 2014. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Internal Control Over Financial Reporting” for information regarding our remediation efforts. Our management and independent registered public accounting firm did not and were not required to perform an evaluation of our internal control over financial reporting as of and for the years ended December 31, 2012, 2013 and 2014 in accordance with the provisions of the JOBS Act.

While we believe that we have put in place additional controls over our accounting close procedures, including adding additional staff, adding additional reviews and approvals over monthly provisions, including our income tax provision, our remediation efforts are still in process and have not yet been tested. Therefore, we cannot assure you that the material weaknesses in our internal control over financial reporting have been fully remediated as of December 31, 2014. In addition, we cannot be certain that any such measures we undertake will successfully remediate those two material weaknesses or that other material weaknesses and control deficiencies will not be discovered in the future. If our remediation efforts are not successful or other material weaknesses or control deficiencies occur in the future, we may be unable to report our financial results accurately or on a timely basis, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence or delisting and cause the trading price of our common stock to decline. As a result of such failures, we could also become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation, financial condition or divert financial and management resources from our core business.

As a result of becoming a public company, we are subject to additional regulatory compliance requirements, including Section 404 of the Sarbanes-Oxley Act, and if we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.

Rules and regulations such as the Sarbanes-Oxley Act have increased our legal and finance compliance costs and made some activities more time consuming and costly. For example, Section 404 of the Sarbanes-Oxley Act requires that our management report on, and our independent auditors attest to, the effectiveness of our internal control structure and procedures for financial reporting. Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Section 404 compliance may divert internal resources and will take a significant amount of time and effort to complete. We may not be able to successfully complete the procedures and certification and attestation requirements of Section 404 by the time we will be required to do so. However, our auditors will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company” as defined in the JOBS Act if we take advantage of the JOBS Act exemptions available to us. In addition, these Sarbanes-Oxley Act requirements may be modified, supplemented or amended from time to time. Implementing these changes may take a significant amount of time and may require specific compliance training of our personnel. In the future, we may discover areas of our internal controls that need improvement. If our auditors or

we discover a material weakness or significant deficiency, the disclosure of that fact, even if quickly remedied, could reduce the market’s confidence in our financial statements and harm our stock price. Any inability to provide reliable financial reports or prevent fraud would harm our business. We may not be able to effectively and timely implement necessary control changes and employee training to ensure continued compliance with the Sarbanes-Oxley Act and other regulatory and reporting requirements. If we fail to successfully complete the procedures and certification and attestation requirements of Section 404, or if in the future our Chief Executive Officer, Chief Financial Officer or independent registered public accounting firm determines that our internal controls over financial reporting are not effective as defined under Section 404, we could be subject to investigations or sanctions by the NASDAQ Stock Market (NASDAQ), the Securities and Exchange Commission (SEC) or other regulatory authorities. Furthermore, investor perceptions of our company may suffer, and this could cause a decline in the market price of our shares of common stock. We cannot assure you that we will be able to fully comply with the requirements of the Sarbanes-Oxley Act or that management or our auditors will conclude that our internal controls are effective in future periods. Irrespective of compliance with Section 404, any failure of our internal controls could have a material adverse effect on our stated results of operations and harm our reputation.

If we fail to hire additional finance personnel, strengthen our financial reporting systems and infrastructure, and improve our enterprise resource planning (ERP) system, we may not be able to timely and accurately report our financial results or comply with the requirements of being a public company, including compliance with the Sarbanes-Oxley Act and SEC reporting requirements.

We intend to hire additional accounting and finance personnel with system implementation experience and Sarbanes-Oxley Act compliance expertise. Any inability to recruit and retain such finance personnel would have an adverse impact on our ability to accurately and timely prepare our financial statements. We may be unable to locate and hire qualified professionals with requisite technical and public company experience when and as needed. In addition, new employees will require time and training to learn our business and operating processes and procedures. If our finance and accounting organization is unable for any reason to respond adequately to the increased demands that will result from being a public company, the quality and timeliness of our financial reporting may suffer, which could result in the identification of material weaknesses in our internal controls. Any consequences resulting from inaccuracies or delays in our reported financial statements could cause the trading price of our shares of common stock to decline and could harm our business, operating results and financial condition.

If we fail to strengthen our financial reporting systems, infrastructure and internal control over financial reporting to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, we may be unable to report our financial results timely and accurately and prevent fraud. We expect to incur significant expense and devote substantial management effort toward ensuring compliance with Section 404.

We have to improve our current ERP system and in the future may need to implement a new ERP system. This will require significant investment of capital and human resources, the re-engineering of many processes of our business and the attention of many employees who would otherwise be focused on other aspects of our business. Any disruptions, delays or deficiencies in the design and implementation of the improvements to our current ERP system or a new ERP system, if needed, could result in potentially much higher costs than we had anticipated and could adversely affect our ability to develop and launch solutions, fulfill contractual obligations, file reports with the SEC in a timely manner, otherwise operate our business or otherwise impact our controls environment. Any of these consequences could have an adverse effect on our results of operations and financial condition.

Our failure to adequately protect our intellectual property rights could impair our ability to compete effectively or defend ourselves from litigation, which could harm our business, financial condition and results of operations.

Our success depends, in part, on our ability to protect our intellectual property. We rely primarily on patent, copyright, trademark and trade secret laws, as well as confidentiality and non-disclosure agreements and other contractual protections, to protect our proprietary technologies and know-how, all of which offer only limited

protection. The steps we have taken to protect our intellectual property rights may not be adequate to prevent misappropriation of our proprietary information or infringement of our intellectual property rights, and our ability to prevent such misappropriation or infringement is uncertain, particularly in countries outside of the United States. As of December 31, 2014, we had 34 issued and allowed patents in the United States, 16 issued international patents and five pending and provisional patent applications in the United States. Even if the pending patent applications are granted, the rights granted to us may not be meaningful or provide us with any commercial advantage. For example, these patents could be opposed, contested, circumvented, designed around by our competitors or be declared invalid or unenforceable in judicial or administrative proceedings. The failure of our patents to adequately protect our technology might make it easier for our competitors to offer similar products or technologies. Our foreign patent protection is generally not as comprehensive as our U.S. patent protection and may not protect our intellectual property in some countries where our products are sold or may be sold in the future. Many U.S.-based companies have encountered substantial intellectual property infringement in foreign countries, including countries where we sell products. Even if foreign patents are granted, effective enforcement in foreign countries may not be available. If such an impermissible use of our intellectual property or trade secrets were to occur, our ability to sell our solutions at competitive prices may be adversely affected and our business, financial condition, results of operations and cash flows could be adversely affected.

The legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain and evolving. We cannot assure you that others will not develop or patent similar or superior technologies or solutions, or that our patents, trademarks and other intellectual property will not be challenged, invalidated or circumvented by others.

Unauthorized copying or other misappropriation of our proprietary technologies could enable third parties to benefit from our technologies without paying us for doing so, which could harm our business. Monitoring unauthorized use of our intellectual property is difficult and costly. Although we are not aware of any unauthorized use of our intellectual property in the past, it is possible that unauthorized use of our intellectual property may have occurred or may occur without our knowledge. We cannot assure you that the steps we have taken will prevent unauthorized use of our intellectual property. Our failure to effectively protect our intellectual property could reduce the value of our technology in licensing arrangements or in cross-licensing negotiations.

We may in the future need to initiate infringement claims or litigation in order to try to protect our intellectual property rights. Litigation, whether we are a plaintiff or a defendant, can be expensive, time-consuming and may divert the efforts of our technical staff and management, which could harm our business, whether or not such litigation results in a determination favorable to us. Litigation also puts our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing. Additionally, any enforcement of our patents or other intellectual property may provoke third parties to assert counterclaims against us. If we are unable to protect our proprietary rights or if third parties independently develop or gain access to our or similar technologies, our business, revenue, reputation and competitive position could be harmed.

Third parties’ assertions of infringement of their intellectual property rights could result in our having to incur significant costs and cause our operating results to suffer.

The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights and positions, which has resulted in protracted and expensive litigation for many companies. We expect that in the future, particularly as a public company with an increased profile and visibility, we may receive communications from others alleging our infringement of patents, trade secrets or other intellectual property rights. Lawsuits resulting from such allegations could subject us to significant liability for damages and invalidate our proprietary rights. Any potential intellectual property litigation also could force us to do one or more of the following:

Any significant impairment of our intellectual property rights from any litigation we face could harm our business and our ability to compete.

Any potential dispute involving our patents or other intellectual property could affect our customers, which could trigger our indemnification obligations to them and result in substantial expense to us.

In any potential dispute involving our patents or the intellectual property of others, our customers could also become the target of litigation. Our custom IC solutions are included in our customers’ products. Our agreements with customers and other third parties generally include indemnification or other provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of intellectual property infringement, damages caused by us to property or persons, or other liabilities relating to or arising from our solutions, which include intellectual property from our customers’ designs. For example, in November 2014, we received a letter from counsel to Seagate notifying us that Seagate had been sued for patent infringement with respect to a Seagate product incorporating an eASIC product and asserting Seagate’s right to indemnification and defense costs pursuant to its agreement with us. Seagate subsequently agreed to limit our indemnification obligation for this specific matter to no more than $200,000, but large indemnity payments or damage claims from contractual breach in any such future matters could harm our business, operating results, and financial condition. From time to time, customers require us to indemnify or otherwise be liable to them for breach of confidentiality or failure to implement adequate security measures with respect to their intellectual property and trade secrets. Although we normally contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them. Any litigation against our customers could trigger technical support and indemnification obligations under some of our agreements, which could result in substantial expense to us.

In addition, other customers or end customers with whom we do not have formal agreements requiring us to indemnify them may ask us to indemnify them if a claim is made as a condition to awarding future design wins to us. Because most of our OEM customers are larger than we are and have greater resources than we do, they may be more likely to be the target of an infringement claim by third parties than we would be, which could increase our chances of becoming involved in a future lawsuit. If any such claims were to succeed, we might be forced to pay damages on behalf of our OEM customers that could increase our expenses, disrupt our ability to sell our solutions and reduce our revenues. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other current and prospective customers, reduce demand for our solutions, and harm our business and results of operations. In addition to the time and expense required for us to supply support or indemnification to our customers, any such litigation could severely disrupt or shut down the business of our customers, which in turn could hurt our relations with our customers and cause the sale of our products to decrease.

We may be subject to warranty and product liability claims and to product recalls.

From time to time, we may be subject to warranty claims that may require us to make significant expenditures to replace our solutions, refund payments, defend these claims or pay damage awards. In the future, we may also be subject to product liability claims resulting from failure of our solutions. In the event of a warranty claim, we may also incur costs if we compensate the affected customer. Our product liability insurance is limited in amount and subject to significant deductibles. There is no guarantee that our insurance will be available or adequate to protect against all claims. We also may incur costs and expenses relating to a recall of one of our customers’ products containing one of our devices. The process of identifying a recalled product in

consumer devices that have been widely distributed may be lengthy and require significant resources, and we may incur significant replacement costs, refund costs, contract damage claims from our customers and reputational harm. Costs or payments made in connection with warranty and product liability claims and product recalls could harm our financial condition and results of operations.

A breach of our security systems may damage our reputation and adversely affect our business.

Our security systems are designed to protect our customers’, suppliers’ and employees’ confidential information, as well as maintain the physical security of our facilities. We also rely on a number of third-party “cloud-based” service providers of corporate infrastructure services relating to, among other things, human resources, electronic communication services and some finance functions, and we are, of necessity, dependent on the security systems of these providers. Any security breaches or other unauthorized access by third parties to the systems of our cloud-based service providers or the existence of computer viruses in their data or software could expose us to a risk of information loss and misappropriation of confidential information. Accidental or willful security breaches or other unauthorized access by third parties to our information systems or facilities, or the existence of computer viruses in our data or software, could expose us to a risk of information loss and misappropriation of proprietary and confidential information. Any theft or misuse of this information could result in, among other things, unfavorable publicity, damage to our reputation, difficulty in marketing our products, allegations by our customers that we have not performed our contractual obligations, litigation by affected parties and possible financial obligations for liabilities and damages related to the theft or misuse of this information, any of which could have a material adverse effect on our business, financial condition, our reputation, and our relationships with our customers and partners. Since the techniques used to obtain unauthorized access or to sabotage systems change frequently and are often not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

We may make acquisitions in the future that could disrupt our business, cause dilution to our stockholders, reduce our financial resources and harm our business.

In the future, we may acquire other businesses, products or technologies. We have not made any acquisitions to date and do not have any agreements or commitments for any specific acquisition at this time. Our ability to make and successfully integrate acquisitions is unproven. If we complete acquisitions, we may not achieve the combined revenues, cost synergies or other benefits from the acquisition that we anticipate, strengthen our competitive position or achieve our other goals in a timely manner, or at all, and these acquisitions may be viewed negatively by our customers, financial markets or investors. In addition, any acquisitions we make may not lead to the target revenues or cost synergies expected and could lead to difficulties in integrating personnel, technologies and operations from the acquired businesses and in retaining and motivating key personnel from these businesses. Acquisitions may disrupt our ongoing operations, divert management from their primary responsibilities, subject us to additional liabilities, increase our expenses and adversely impact our business, results of operations, financial condition and cash flows. Acquisitions may also reduce our cash available for operations and other uses, and could also result in an increase in amortization expense related to identifiable assets acquired, potentially dilutive issuances of equity securities or the incurrence of debt, any of which could harm our business.

The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand. The industry experienced a significant downturn during the most recent global recession. These downturns have been characterized by diminished product demand, production overcapacity, high inventory levels and accelerated erosion of average selling prices. Any future downturns in the semiconductor industry could harm our business and operating results. Furthermore, any significant upturn in the semiconductor industry could result in increased competition for access to third-party foundry and assembly

capacity. We are dependent on the availability of this capacity to manufacture and assemble our products. None of our foundries has provided assurances that adequate capacity will be available to us in the future.

Deterioration of the financial conditions of our customers could adversely affect our operating results.

The deterioration of the financial condition of our customers could adversely impact our collection of accounts receivable. We regularly review the collectability and creditworthiness of our customers to determine an appropriate allowance for doubtful accounts. Based on our review of our customers, many of which are very large OEMs, we currently have no reserve for doubtful accounts. If our doubtful accounts, however, were to exceed our current or future allowance for doubtful accounts, our quarterly and long-term results of operations would be negatively impacted.

In preparing our financial statements, we make good faith estimates and judgments that may change or turn out to be erroneous, which could adversely affect our operating results for the periods in which we revise our estimates or judgments.

In preparing our financial statements in conformity with U.S. generally accepted accounting principles (GAAP), we must make estimates and judgments in applying our most critical accounting policies. Those estimates and judgments have a significant impact on the results we report in our consolidated financial statements. The most difficult estimates and subjective judgments that we make relate to revenue recognition, inventories, long-lived assets including manufacturing tooling, deferred tax assets and stock-based compensation. We base our estimates on historical experience, input from outside experts and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We also have other key accounting policies that are not as subjective, and therefore, their application would not require us to make estimates or judgments that are as difficult, but which nevertheless could significantly affect our financial reporting. Actual results may differ materially from these estimates. If these estimates, judgments or their related assumptions change, our operating results for the periods in which we revise our estimates, judgments or assumptions could be adversely and perhaps materially affected.

Changes to financial accounting standards may affect our results of operations and could cause us to change our business practices.

We prepare our consolidated financial statements to conform to GAAP. These accounting principles are subject to interpretation by the American Institute of Certified Public Accountants, the SEC and various bodies formed to interpret and create accounting rules and regulations. Changes in accounting rules can have a significant effect on our reported financial results and may affect our reporting of transactions completed before a change is announced. Changes to those rules or the questioning of current practices may adversely affect our financial results or the way we conduct our business.

Changes in effective tax rates or adverse outcomes resulting from any future review of our income tax returns could adversely affect our results.

A change in our effective tax rate could have a significant adverse impact on our business, and an adverse outcome resulting from any future review of our income or other tax returns could adversely affect our results. We are subject to income tax in the United States and numerous foreign jurisdictions. Significant judgment is required in evaluating and estimating our provision and accruals for these taxes. During the ordinary course of business, there are many transactions for which the ultimate tax determination is uncertain. Our effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by losses incurred in jurisdictions for which we are not able to realize the related tax benefit, by changes in foreign currency exchange rates, by entry into new businesses and geographies and changes to our existing businesses, by acquisitions

(including integrations) and investments, and by changes in the valuation of our deferred tax assets and liabilities. In addition, our effective tax rate could be impacted by changes in the relevant tax, accounting and other laws, regulations, administrative practices, principles, and interpretations, including fundamental changes to the tax laws applicable to corporate multinationals. The United States, many countries in the European Union, and a number of other countries are actively considering changes in this regard. We may be subject to audits in various jurisdictions, and such jurisdictions may assess additional income tax liabilities against us. Although we believe our tax estimates are reasonable, the final outcome of any such future tax audits, if any, and any related litigation could be materially different from our historical income tax provisions and accruals. Developments in an audit, litigation, or the relevant laws, regulations, administrative practices, principles, and interpretations could have a material effect on our results of operations or cash flows in the period or periods for which that development occurs, as well as for prior and subsequent periods.

Our loan agreements contain certain restrictive and financial covenants that may limit our operating flexibility.

Our Amended and Restated Venture Loan and Security Agreement with Horizon Technology Finance Corporation, Horizon Funding Trust 2013-1, DBD Credit Funding LLC and Fortress Credit Opportunities I, LP, dated September 12, 2014, and our Loan and Security Agreement with Silicon Valley Bank, as amended, dated as of September 29, 2010, both contain certain restrictive covenants that either limit our ability to, or require a mandatory prepayment in the event we, incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, make certain investments, pay dividends, transfer or dispose of assets, amend certain material agreements or enter into various specified transactions. Our loan agreements also contain certain financial covenants, including minimum revenues and maximum cash balance amounts to be held in foreign deposit accounts, and financial reporting requirements. Our obligations under the loan agreements are secured by all of our property, other than our intellectual property, with limited exceptions. We may not be able to generate sufficient cash flow or sales to meet the financial covenants or pay the principal and interest under our outstanding debt obligations. Furthermore, our future working capital, borrowings, or equity financing could be unavailable to repay or refinance the amounts outstanding under our current debt obligations. In the event of a liquidation, our lender would be repaid all outstanding principal and interest prior to distribution of assets to unsecured creditors, and the holders of our common stock would receive a portion of any liquidation proceeds only if all of our creditors, including our lender, were first repaid in full.

We cannot predict our future capital needs, and we may not be able to obtain additional financing to fund our operations.

We may need to raise additional funds in the future. Any required additional financing may not be available on terms acceptable to us, or at all. If we raise additional funds by issuing equity securities or convertible debt, investors may experience significant dilution of their ownership interest, and the newly-issued securities may have rights senior to those of the holders of our common stock. If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our business that could impair our operational flexibility and would also require us to incur interest expense. If additional financing is not available when required or is not available on acceptable terms, we may have to scale back our operations or limit our production activities, and we may not be able to expand our business, develop or enhance our solutions, take advantage of business opportunities or respond to competitive pressures, which could result in lower revenues and reduce the competitiveness of our products.

Fluctuations in exchange rates between and among the currencies of the countries in which we do business could adversely affect our results of operations.

Our sales have been historically denominated in U.S. dollars. An increase in the value of the U.S. dollar relative to the currencies of the countries in which our customers operate could impair the ability of our customers to cost-effectively purchase or integrate our products into their devices, which may materially affect

the demand for our solutions and cause these customers to reduce their orders, which in turn would adversely affect our revenues and business. We may in the future, if we increase operations in other currencies, experience foreign exchange gains or losses due to the volatility of other currencies compared to the U.S. dollar. Certain of our employees are located in Europe and Asia, principally Romania and Malaysia. Accordingly, a portion of our payroll as well as certain other operating expenses are paid in currencies other than the U.S. dollar. Our results of operations are denominated in U.S. dollars, and the difference in exchange rates in one period compared to another may directly impact period-to-period comparisons of our results of operations. Furthermore, currency exchange rates have been especially volatile in the recent past, and these currency fluctuations may make it difficult for us to predict our results of operations.

Failure to comply with the laws associated with our activities outside of the United States could subject us to penalties and other adverse consequences.

We face significant risks if we fail to comply with anti-corruption laws and anti-bribery laws, including, without limitation, the U.S. Foreign Corrupt Practices Act of 1977, as amended (FCPA), the U.S. Travel Act and the UK Bribery Act 2010, that prohibit improper payments or offers of payment to foreign governments and political parties by us for the purpose of obtaining or retaining business. In many foreign countries, particularly in countries with developing economies, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the FCPA or other applicable laws and regulations. We are in the early stages of implementing our FCPA compliance program and cannot assure you that all of our employees and agents, as well as those companies to which we outsource certain of our business operations, will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. Any violation of these laws could result in severe criminal or civil sanctions and, in the case of the FCPA, suspension or debarment from U.S. government contracting, which could have an adverse effect on our reputation, business, financial condition and results of operations.

We, our customers and third-party contractors are subject to increasingly complex environmental regulations, and compliance with these regulations may delay or interrupt our operations and adversely affect our business.

We face increasing complexity in our procurement, design, and research and development operations as a result of requirements relating to the materials composition of our products. Failure to comply with these and similar laws and regulations could subject us to fines, penalties, civil or criminal sanctions, contract damage claims, or take-back of non-compliant products, which could harm our business, reputation and results of operations. The passage of similar requirements in additional jurisdictions or the tightening of these standards in jurisdictions where our products are already subject to such requirements could cause us to incur significant expenditures to make our products compliant with new requirements, or could limit the markets into which we may sell our products.

Some of our operations, as well as the operations of our contract manufacturers and foundries and other suppliers, are also regulated under various other federal, state, local, foreign and international environmental laws and requirements, including those governing, among other matters, the management, disposal, handling, use, labeling of, and exposure to hazardous substances, and the discharge of pollutants into the air and water. Liability under environmental laws can be joint and several and without regard to comparative fault. We cannot assure you that violations of these laws will not occur in the future, as a result of human error, accident, equipment failure or other causes. Environmental laws and regulations have increasingly become more stringent over time. We expect that our products and operations will be affected by new environmental requirements on an ongoing basis, which will likely result in additional costs, which could adversely affect our business.

Our failure to comply with present and future environmental, health and safety laws could cause us to incur substantial costs, result in civil or criminal fines and penalties or result in decreased revenues, any of which could adversely affect our results of operations. Failure by our foundry vendors or other suppliers to comply with applicable

environmental laws and requirements could cause disruptions and delays in our product shipments, which could adversely affect our relations with our customers and adversely affect our business and results of operations.

Regulations related to “conflict minerals” may force us to incur additional expenses, may make our supply chain more complex and may result in damage to our reputation with customers.

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), the SEC has adopted requirements for companies that use certain minerals and metals, known as conflict minerals, in their products, whether or not these products are manufactured by third parties. These requirements require companies to diligence, disclose and report whether or not such minerals originate from the Democratic Republic of Congo and adjoining countries. The implementation of these new requirements could adversely affect the sourcing, availability and pricing of minerals used in the manufacture of semiconductor devices, including our products. In addition, we will continue to incur additional costs to comply with the disclosure requirements, including costs related to determining the source of any of the relevant minerals and metals used in our products. Since our supply chain is complex, we may not be able to sufficiently verify the origins for these minerals and metals used in our products through the due diligence procedures that we implement, which may harm our reputation. In such event, we may also face difficulties in satisfying customers that require that all of the components of our products are certified as conflict mineral free.

Our corporate headquarters are located in Santa Clara, California. The west coast of the United States contains active earthquake zones. In the event of a major earthquake, hurricane, or catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war, terrorist attack or disease outbreak, including Ebola, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our application development, lengthy interruptions in our platform, breaches of data security, or loss of critical data, any of which could have an adverse effect on our future results of operations.

There has been no prior market for our common stock, and an active market may not develop or be sustained and investors may not be able to resell their shares at or above the initial public offering price.

There has been no public market for our common stock prior to this offering. The initial public offering price for our common stock will be determined through negotiations between the underwriters and us and may vary from the market price of our common stock following this offering. If you purchase shares of our common stock in this offering, you may not be able to resell those shares at or above the initial public offering price, if at all. An active or liquid market in our common stock may not develop upon the closing of this offering or, if it does develop, it may not be sustainable.

Our stock price may be volatile or may decline, regardless of our operating performance, resulting in substantial losses for investors purchasing shares in this offering.

The trading price and volume of our common stock is likely to be volatile and could fluctuate significantly regardless of our operating performance, in response to numerous factors, many of which are beyond our control, including those discussed elsewhere in this “Risk Factors” section, as well as:

In addition, the market for technology stocks and the stock markets in general have experienced extreme price and volume fluctuations. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business, results of operations, financial condition and cash flows.

Substantial future sales of shares of our common stock could cause the market price of our common stock to decline.

The market price of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers and significant stockholders, a large number of shares of our common stock becoming available for sale or the perception in the market that holders of a large number of shares intend to sell their shares. Upon the completion of this offering, we will have approximately shares of common stock outstanding, assuming no exercise of the underwriters’ over-allotment option. All of the shares of common stock sold in this offering will be freely transferable without restriction or additional registration under the Securities Act of 1933, as amended (Securities Act). Our directors, officers and other existing security holders will be subject to lock-up agreements described under the caption “Shares Eligible for Future Sale.” Subject to the restrictions under Rule 144 under the Securities Act, approximately 15,014,485 shares of common stock will be eligible for resale 180 days after the date of this prospectus following the expiration of these lockup agreements, subject to extension in certain circumstances. In addition, at any time and without public notice, Morgan Stanley & Co. LLC and Deutsche Bank Securities Inc., as representatives of the underwriters, may in their discretion also release shares subject to the lock-up prior to the expiration of the lock-up period; provided, however, that if the release is granted for one of our officers or directors, (i) Morgan Stanley & Co. LLC and Deutsche Bank Securities Inc., as representatives of the underwriters, agree that at least three business days before the effective date of the release or waiver, Morgan Stanley & Co. LLC and Deutsche Bank Securities Inc., as representatives, will notify us of the impending release or waiver, and (ii) we are obligated to announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver. As resale restrictions end, the market price of our common stock could decline if the holders of those shares sell them or are perceived by the market as intending to sell them.

After this offering, the holders of an aggregate of 14,633,859 shares of our common stock as of December 31, 2014 will have rights, subject to certain conditions, to require us to file registration statements

covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders. We also intend to register shares of common stock that we may issue under our employee equity incentive plans. Once we register these shares, they will be able to be sold freely in the public market upon issuance, subject to existing market stand-off or lock-up agreements.

Our directors, officers, and principal stockholders beneficially own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

Upon the closing of this offering, our directors, officers, greater than 5% stockholders and their respective affiliates will beneficially own in the aggregate approximately % of our outstanding stock. Therefore, after this offering these stockholders will continue to have the ability to influence us through this ownership position. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders will be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.

If securities analysts or industry analysts downgrade our common stock, publish negative research or reports or fail to publish reports about our business, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us, our business and our market. If one or more analysts adversely changes their recommendation regarding our stock or changes their recommendation about our competitors’ stock, our stock price would likely decline. If one or more analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets which in turn could cause our stock price or trading volume to decline.

Our actual operating results may not meet our guidance and investor expectations, which would likely cause our stock price to decline.

From time to time, we may release guidance in our earnings releases, earnings conference calls or otherwise, regarding our future performance that represent our management’s estimates as of the date of release. If given, this guidance, which will include forward-looking statements, will be based on projections prepared by our management. Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. The principal reason that we expect to release guidance is to provide a basis for our management to discuss our business outlook with analysts and investors. With or without our guidance, analysts and other investors may publish expectations regarding our business, financial performance and results of operations. We do not accept any responsibility for any projections or reports published by any such third parties.

Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished by us will not materialize or will vary significantly from actual results. If our actual performance does not meet or exceed our guidance or investor expectations, the trading price of our common stock is likely to decline.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws to be effective in connection with this offering, may have the effect of delaying or preventing a change of control or

changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Any delay or prevention of a change of control transaction or changes in our management could cause the market price of our common stock to decline.

Our charter documents designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain what they believe to be a favorable judicial forum for disputes with us or our directors, officers, or other employees.

Our certificate of incorporation and bylaws, as amended and restated in connection with this offering, provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (A) any derivative action or proceeding brought on our behalf, (B) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (C) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws or (D) any action asserting a claim against us governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the provisions of our certificate of incorporation described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees. Alternatively, if a court were to find these provisions of our certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we

may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations and result in a diversion of the time and resources of our management and board of directors.

We may invest or spend the proceeds of this offering in ways with which you may not agree or in ways which may not yield a return.

Our management will have considerable discretion in the application of the net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. The net proceeds may be used for corporate purposes that do not increase the value of our business, which could cause our stock price to decline.

We do not intend to pay dividends on our common stock so any returns will be limited to changes in the value of our common stock.

We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation, and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, our ability to pay cash dividends on our common stock is restricted by the terms of our debt financing arrangements and may be prohibited or limited by the terms of any future debt financing arrangements. Any return to stockholders will therefore be limited to the increase, if any, in our stock price, which may never occur.

As a new investor, you will experience immediate and substantial dilution in the book value of the shares that you purchase in this offering.

The initial public offering price is substantially higher than the pro forma net tangible book value per share of our common stock immediately following this offering based on the total value of our tangible assets less our total liabilities. Therefore, if you purchase shares of our common stock in this offering, at the assumed initial public offering price of $ per share (the midpoint of the price range reflected on the cover page of this prospectus), you will experience immediate dilution of $ per share, the difference between the price per share you pay for our common stock and our pro forma net tangible book value per share as of December 31, 2014, after giving effect to the issuance of shares of our common stock in this offering. See “Dilution.” To the extent outstanding options or warrants to purchase our common stock are exercised, investors purchasing our common stock in this offering will experience further dilution.

This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements. We may, in some cases, use words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes to identify these forward-looking statements. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements in this prospectus include, but are not limited to, statements about:

These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this prospectus and are subject to risks and uncertainties. We discuss many of these risks in greater detail under “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding

that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus by these cautionary statements. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations, except as required by law.

This prospectus contains statistical data, estimates, and forecasts that are based on independent industry publications, such as those published by Gartner, Inc., or other publicly available information, as well as other information based on our internal sources. Although we believe that the third-party sources referred to in this prospectus are reliable, estimates as they relate to projections involve numerous assumptions, are subject to risks and uncertainties and are subject to change based on various factors, including those discussed under the section titled “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

Certain information in the text of this prospectus is contained in Gartner Forecast: ASIC/ASSP, FPGA/PLD and SLI/SoC Applications, Worldwide, 2012-2018, 4Q14 Update (December 30, 2014) (Summation of consumption values of each relevant segment).

The Gartner Report described herein represents data, research opinion, or viewpoints published as part of a syndicated subscription service by Gartner and are not representations of fact. The Gartner Report speaks as of its original publication date (and not as of the date of this prospectus) and the opinions expressed in the Gartner Report are subject to change without notice.

The following capitalized phrases and their acronyms are used throughout this prospectus and have the meanings set forth below:

Application Specific Integrated Circuit (ASIC): a custom integrated circuit that is designed and manufactured for one customer and can only be used in one specific application.

Application Specific Standard Product (ASSP): an integrated circuit that is designed for a specific application but can be used by multiple customers.

Base Array: an uncommitted eASIC IC that has a specific amount of logic, memory and I/O capacity. The base arrays are versatile and can be used for multiple applications. The final customization is completed by only one mask layer and allows the IC to be used for many types of customers, applications and markets.

Complementary Metal Oxide Semiconductor (CMOS): a transistor technology used for the fabrication of integrated circuits.

Design Tools: a software application that is used to design, simulate, verify and implement the functionality of an integrated circuit. The final output of the design tools is used to create an IC mask layer.

Field Programmable Gate Array (FPGA): an integrated circuit whose functionality can be configured through software after the IC is manufactured.

Integrated Circuit (IC): a semiconductor device on which an electronic circuit is formed. This is also referred to as a “chip” or a microchip.

Input/Output (I/O): the part of an IC that enables electronic signals to either enter or exit the IC.

Mask Layer: a photolithographic mask that contains the circuitry patterns necessary to manufacture an IC. A typical IC requires approximately 50 mask layers. Each mask layer is used to transfer the circuitry pattern onto the wafer.

Moore’s Law: a quotation by Intel’s co-founder Gordon Moore stating that the number of transistors on an IC will double every 18 months. In 1975, Moore extended the 18-month timeframe to 24 months.

Non-Recurring Engineering (NRE) Charge: a one-time cost that is used for the design, development, and manufacture of a new IC.

Original Equipment Manufacturer (OEM): a company that designs, manufactures and sells products.

Process Nodes: the transistor width used to define a semiconductor manufacturing process. Smaller widths allow more transistors to be manufactured in the same silicon area. Process node is measured in nanometers (nm), e.g., 28nm, 20nm, 14nm, etc.

Serializer/Deserializer (SerDes): a device that takes parallel data, such as 8 signals, and converts it into a single high speed serial stream for transmission. At the other end, it converts the serial data back to 8 parallel signals.

Vendor Managed Inventory (VMI): a means of optimizing the supply chain in which the manufacturer is responsible for maintaining inventory levels at a customer specified location under control of the manufacturer, which is usually referred to as a “hub.” The manufacturer owns and has access to the customer’s inventory, until such inventory is “pulled” by the customer, at which time the customer takes title to that inventory and is typically invoiced and revenues are recognized by the manufacturer.

We estimate that we will receive net proceeds of approximately $ million (or approximately $ million if the underwriters exercise their over-allotment option in full) from the sale of the shares of common stock offered by us in this offering, based on an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the net proceeds to us from this offering by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Similarly, a one million share increase (decrease) in the number of shares offered by us, as set forth on the cover of this prospectus, would increase (decrease) the net proceeds to us by $ million, assuming the assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover of this prospectus), remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The principal purposes of this offering are to increase our capitalization and financial flexibility, establish a public market for our common stock and to facilitate future access to the public equity markets by us, our employees and our stockholders, obtain additional capital to support our operations, and increase our visibility in the marketplace.

Our expected use of the net proceeds from this offering represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering or the amounts that we will actually spend on the uses set forth above. However, we currently intend to use the net proceeds to us from this offering primarily for general corporate purposes, including working capital, sales and marketing activities, product development, general and administrative matters, and capital expenditures, although we do not currently have any specific or preliminary plans with respect to the use of proceeds for such purposes. We also intend to use approximately $19.1 million of the net proceeds we receive from this offering to prepay the entirety of the outstanding indebtedness, including applicable prepayment penalties, if any, under (1) our revolving line of credit with Silicon Valley Bank (Line of Credit) and (2) each of our 2013 term loan facility (2013 Loan) and our 2014 term loan facility (2014 Loan) with Horizon Technology Finance Corporation, Horizon Funding Trust 2013-1, DBD Credit Funding LLC and Fortress Credit Opportunities I, LP. The Line of Credit carries a floating interest rate equal to prime plus 1.5% and matures on September 25, 2016. Secured notes issued by us under the 2013 Loan carry a fixed interest rate of 11% and mature on October 1, 2017. Secured notes issued by us under the 2014 Loan carry a fixed interest rate of 10.75% and mature on April 1, 2018. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt Obligations.” Our intentions to prepay our debt obligations may change due to market or other factors. We also may use a portion of the net proceeds to acquire complementary businesses, products, services or technologies, however, we do not have agreements or commitments for any specific acquisitions at this time. We will have broad discretion over the use of the net proceeds of this offering. Pending these uses, we intend to invest the net proceeds from this offering in short-term, interest-bearing securities such as money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S. government. We may also make illiquid minority investments in private companies for strategic reasons, however, we do not have any agreements, commitments or plans for any specific minority investments at this time.

The amounts and timing of our actual use of the net proceeds will vary depending on numerous factors, including our ability to gain access to additional financing, the relative success and cost of our research and development programs and whether we are able to enter into future licensing arrangements. As a result, our

management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the net proceeds of this offering. In addition, we might decide to postpone or not pursue certain development activities if the net proceeds from this offering and any other sources of cash are less than expected.

We have never declared or paid cash dividends on our capital stock. We do not anticipate declaring or paying, in the foreseeable future, any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem relevant. In addition, the terms of our existing Amended and Restated Venture Loan and Security Agreement with Horizon Technology Finance Corporation, Horizon Funding Trust 2013-1, DBD Credit Funding LLC and Fortress Credit Opportunities I, LP, dated September 12, 2014, and our Loan and Security Agreement with Silicon Valley Bank, as amended, dated September 29, 2010 restrict our ability to pay dividends or make distributions.

The following table sets forth our cash and cash equivalents, and our capitalization as of December 31, 2014:

The pro forma information below is illustrative only and our capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes appearing elsewhere in this prospectus.

The number of shares of our common stock to be outstanding after this offering is based on 15,014,485 shares of common stock outstanding as of December 31, 2014, and excludes:

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering.

Our historical net tangible book value as of December 31, 2014, was approximately $(35.2) million, or $(3.57) per share of our common stock. Our historical net tangible book value is the amount of our total tangible assets less our liabilities and convertible preferred stock which is not included within stockholders’ equity. Historical net tangible book value per share is our historical net tangible book value divided by the number of shares of common stock outstanding as of December 31, 2014.

Our pro forma net tangible book value as of December 31, 2014, was $7.3 million, or $0.48 per share of common stock. Pro forma net tangible book value gives effect to (1) the conversion of all of our outstanding convertible preferred stock as of December 31, 2014, into an aggregate of 5,145,683 shares of our common stock and (2) the conversion of all outstanding warrants to purchase shares of our convertible preferred stock into warrants to purchase an aggregate of 111,505 shares of our common stock upon the completion of this offering, and the related reclassification of the preferred stock warrant liability to additional paid-in capital.

Pro forma as adjusted net tangible book value is our pro forma net tangible book value (deficit), plus the effect of the sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share (the midpoint of the range set forth on the cover of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $ per share to our existing stockholders, and an immediate dilution of $ per share to new investors participating in this offering.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by approximately $ per share and the dilution in pro forma per share to investors participating in this offering by approximately $ per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Similarly, a one million share increase (decrease) in the number of shares offered by us, as set forth on the cover of this prospectus, would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by approximately $ and decrease (increase) the dilution in pro forma per share to investors participating in this offering by approximately $ , assuming the assumed initial public offering price of

$ per share (the midpoint of the price range set forth on the cover of this prospectus) remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their over-allotment option in full, the pro forma as adjusted net tangible book value will increase to $ per share, representing an immediate increase in pro forma as adjusted net tangible book value to existing stockholders of $ per share and an immediate decrease of dilution of $ per share to new investors participating in this offering.

The following table summarizes, on a pro forma as adjusted basis as of December 31, 2014, the number of shares purchased or to be purchased from us, the total consideration paid or to be paid to us, and the average price per share paid or to be paid to us by existing stockholders and investors participating in this offering at an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover of this prospectus), before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. As the table below shows, investors participating in this offering will pay an average price per share substantially higher than our existing stockholders paid.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the total consideration paid by investors participating in this offering, total consideration paid by all stockholders and the average price per share paid by all stockholders by approximately $ million, $ million and $ , respectively, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

A one million share increase (decrease) in the number of shares offered by us, as set forth on the cover of this prospectus, would increase (decrease) the total consideration paid by investors participating in this offering, total consideration paid by all stockholders and the average price per share paid by all stockholders by approximately $ million, $ million and $ , respectively, assuming the assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover of this prospectus) remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their over-allotment option in full, the number of shares of common stock held by existing stockholders will be reduced to % of the total number of shares of common stock to be outstanding after this offering, and the number of shares of common stock held by investors participating in this offering will be further increased to , or % of the total number of shares of common stock to be outstanding after this offering.

The foregoing discussion and tables are based on 15,014,485 shares of common stock outstanding as of December 31, 2014 and exclude:

We may choose to raise additional capital through the sale of equity or convertible debt securities due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent we issue additional shares of common stock or other equity or convertible debt securities in the future, there will be further dilution to investors participating in this offering.

The selected consolidated statements of operations data for the years ended December 31, 2012, 2013 and 2014 and the consolidated balance sheet data as of December 31, 2013 and 2014 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated financial data below should be read in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. The selected consolidated financial data in this section are not intended to replace our consolidated financial statements and the related notes, and are qualified in their entirety by the consolidated financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this prospectus. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and in other parts of this prospectus.

We believe our competitive advantages should become more pronounced as continued technological advancements increase overall development and manufacturing costs for future generations of ICs. We estimate that our addressable market opportunity across ASIC, ASSP and FPGA applications is approximately $78 billion, based on data from Gartner Research. During the year ended December 31, 2014, we sold our products and services to over 14 customers including Ericsson, Fujitsu, Huawei, NEC, Omnivision, Seagate and Toshiba.

For the years ended December 31, 2012, 2013 and 2014, our revenues were $13.7 million, $29.8 million and $67.4 million, respectively, and our net loss was $15.4 million, $7.8 million and $1.1 million, respectively.

We derive revenues from our eASIC solutions which include our eASIC platform as well as our easicopy and standard ASICs. We primarily generate product revenues from the sale of custom ICs to OEMs. We also generate service revenues from the design and development of ICs for customers and related design services and prototypes.

We shipped our first products in January 2008 and, since the beginning of 2013, our product revenues have grown rapidly. A significant portion of our total revenues to date has been generated from two customers, Ericsson and Seagate, including sales to contract manufacturers or original device manufacturers (ODM) at the direction of such end customers. In 2012, 2013 and 2014, Ericsson and Seagate together accounted for 73%, 87% and 93% of our total revenues, respectively. To continue to grow our revenues, it is important that we both obtain new customers and sell additional products to existing customers. While we intend to expand our customer base over time, the markets we serve tend to be highly concentrated, and we expect that a large portion of our revenues will likely be derived from a relatively small number of customers for the foreseeable future.

We market and sell our products through our sales force and field applications engineers. For certain customers, we use independent sales representatives or non-stocking distributors. We have direct sales personnel covering the United States and Asia focusing primarily on major OEM customers and have sales offices in Santa Clara, California and Hong Kong. We also employ business development teams in China and Japan to work closely with local ODMs that support our broader customer base. During 2014, 2% of our revenues were generated from the Americas, substantially all from the United States, 51% from Europe, the Middle East and Africa and 47% from the Asia-Pacific region.

For select direct customers that represent a significant portion of our revenues, we maintain inventory of our product at a customer specified location (known as Vendor Managed Inventory, or VMI) and are notified when our products are either ordered or “pulled” by our customers to meet their manufacturing needs. We own and have access to the inventory, until such inventory is “pulled” by the customer, at which time the customer takes title to that inventory, we invoice the customer and recognize revenues. This VMI structure allows our customers the flexibility to modify their manufacturing volumes without being affected by the long production lead times typically required of custom ICs and provides us with enhanced insights into our customers’ supply needs. However, this may result in our revenues being more volatile.

We use the financial measures set forth below, which are non-GAAP financial measures, to help us analyze our financial results, establish budgets and operational goals for managing our business and to evaluate our performance. We also believe that the presentation of these non-GAAP financial measures provides an additional tool for investors to use in comparing our core business and results of operations over multiple periods with other companies in our industry, many of which present similar non-GAAP financial measures to investors. However, the non-GAAP financial measures presented in this prospectus may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated. The non-GAAP financial measures presented in this prospectus should not be considered as the sole measure of our performance and should not be considered in isolation from, or as a substitute for, comparable financial measures calculated in accordance with GAAP. The financial measures set forth below also contain certain comparable GAAP financial measures.

Non-GAAP gross profit and margin. We define non-GAAP gross profit as gross profit as reported on our consolidated statements of operations, excluding the impact of stock-based compensation, which is a non-cash charge. We define non-GAAP gross margin as non-GAAP gross profit divided by revenues. We have presented non-GAAP gross profit and margin because we believe that the exclusion of stock-based compensation allows for more accurate comparisons of our results of operations to other companies in our industry. Please see “Reconciliation of Non-GAAP Financial Measures” below for information regarding the limitations of using non-GAAP gross profit and gross margin as financial measures and for a reconciliation of non-GAAP gross profit to gross profit, the most directly comparable financial measure calculated in accordance with U.S. generally accepted accounting principles (GAAP).

Non-GAAP income (loss) from operations and operating margin (loss). We define non-GAAP income (loss) from operations as income (loss) from operations as reported on our consolidated statements of operations, excluding the impact of stock-based compensation, which is a non-cash charge. We define non-GAAP operating margin (loss) as non-GAAP income (loss) from operations divided by revenues. We have presented non-GAAP income (loss) from operations and operating margin (loss) because we believe that the exclusion of stock-based compensation allows for more accurate comparisons of our results of operations to other companies in our industry. Please see “Reconciliation of Non-GAAP Financial Measures” below for information regarding the limitations of using non-GAAP income (loss) from operations and operating margin (loss) as financial measures and for a reconciliation of non-GAAP income (loss) from operations to income (loss) from operations, the most directly comparable financial measure calculated in accordance with GAAP.

foreign exchange gains and losses; (4) depreciation and amortization; and (5) our provision for income taxes. We define adjusted EBITDA margin as adjusted EBITDA divided by revenues. We have presented adjusted EBITDA and adjusted EBITDA margin because we believe it is an important measure used by industry analysts and investors to compare our performance against our peer group and analyze our cash generation performance. In particular, we believe that the exclusion of the expenses eliminated in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance. Please see “Reconciliation of Non-GAAP Financial Measures” below for information regarding the limitations of using adjusted EBITDA and adjusted EBITDA margin as financial measures and for a reconciliation of adjusted EBITDA to net loss, the most directly comparable financial measure calculated in accordance with GAAP.

Free cash flow. We define free cash flow as net cash used in operating activities less property and equipment purchases, including certain mask sets. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after capital purchases, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening the balance sheet. Please see “Reconciliation of Non-GAAP Financial Measures” below for more information and a reconciliation of free cash flow to cash flow used in operating activities, the most directly comparable financial measure calculated and presented in accordance with GAAP.

Our non-GAAP measures have limitations as analytical tools and you should not consider them in isolation or as a substitute for an analysis of our results under GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. First, non-GAAP gross profit and gross margin and income (loss) from operations and operating margin (loss) are not substitutes for gross profit, gross margin, income (loss) from operations and operating margin (loss). Second, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. Finally, adjusted EBITDA, adjusted EBITDA margin and free cash flow exclude some costs, namely, non-cash stock-based compensation, interest expense and provision for income taxes, which are recurring. Therefore, adjusted EBITDA, adjusted EBITDA margin and free cash flow do not reflect the impact of stock-based compensation or working capital needs that will continue for the foreseeable future.

The following tables reconcile the most directly comparable GAAP financial measure to each of these non-GAAP financial measures.

Design Wins with New and Existing Customers. Our solutions enable our customers to differentiate their products in order to drive their future revenue growth and profits. We view our solutions as a crucial aspect of our current and potential customers’ success and we work closely with our customers and targeted prospects to understand their product roadmaps and strategies. Our current customers and prospects tend to be multinational enterprises with large annual purchases of ICs and they continuously develop new products in existing and new application areas. We have programs in place to help our existing customers to utilize our solutions throughout their organizations. Because we expect our revenues relating to our mature products to decline in the future, we also consider design wins critical to our future success and anticipate being increasingly dependent on revenues from newer design wins for our newer products.

Customer Demand and Product Life Cycles. Once customers design our ICs into their products, we closely monitor all aspects of their demand, including the initial design phase, prototype production, volume production and inventories, as well as end market demand, including seasonality, cyclicality and the competitive landscape.

Given our customer relationships and the long-term aspects of our platform, we benefit from visibility into customer demand once we secure a design win, as the combination of the design and product life cycles provide an opportunity for us to monitor and hone our business fundamentals.

Product Adoption within New Markets and Applications. Due to the painful tradeoffs customers are now forced to make in order to utilize custom ICs in their products, we believe that our ICs can be used instead of ASICs, ASSPs or FPGAs. We monitor the overall market to determine where our solutions can have a positive impact and we take a very strategic approach to target customers and applications that can benefit from our solutions in order to increase the breadth of our customer engagements and target end markets.

Pricing, Product Cost and Customer Mix. Our pricing and margins depend on the volumes and the features of the ICs we provide to our customers. We continually monitor and work to improve the cost of our ICs and the potential value of our solution as we target new design win opportunities and manage the product life cycles of our existing customer designs. Since we rely on third-party wafer foundries and assembly and test contractors to manufacture, assemble and test our ICs, we maintain a close relationship with these suppliers to improve quality, increase yields and lower manufacturing costs.

We generate revenues primarily from the sales of our products and secondarily from services. As discussed further in “—Critical Accounting Policies and Estimates—Revenue Recognition” below, revenues are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is reasonably assured.

Cost of product revenues primarily consists of costs paid to our third-party contract manufacturers, and personnel and other costs associated with our manufacturing operations. Our cost of product revenues also includes product testing costs, as well as allocation of overhead costs for facilities, information technology, depreciation and amortization. We expect our cost of product revenues in absolute dollars to increase as our product revenues increase.

Cost of service revenues consists primarily of costs for personnel in our customer engineering group to complete the design work necessary to meet the contractual milestones with our customers, and engineering service and material charges from third-party vendors including our contract manufacturers. We expect our cost of service revenues in absolute dollars to increase as our service revenues increase.

Gross margin, or gross profit as a percentage of revenues, has been and will continue to be affected by a variety of factors, including the average sales price of our products, manufacturing operations costs, the mix of products sold, the mix of revenues among our customers and the costs charged to us by our third-party manufacturers. While we expect our gross margins to fluctuate depending on these and other potential factors described above, we expect our gross margins to improve over time.

Our operating expenses consist of research and development, sales and marketing, and general and administrative expense. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation and, with regard to sales and marketing expense, sales commissions. Operating expenses also include allocation of overhead costs for facilities, finance support, information technology and depreciation. Although our operating expenses may fluctuate, we expect our operating expenses to decline as a percentage of total revenues over time.

Interest expense consists of interest on our outstanding debt. See Note 4 to our consolidated financial statements for more information about our debt.

Other expense, net consists primarily of the change in fair value of our preferred stock warrant liability and foreign exchange gains or losses. Convertible preferred stock warrants are classified as a liability on our consolidated balance sheets and remeasured to fair value at each balance sheet date with the corresponding change recorded as other expense. Upon the earlier of the exercise of the warrants or the completion of a

liquidation event, including the completion of this offering, the liability will be reclassified to stockholders’ deficit, at which time it will no longer be subject to fair value accounting.

Provision for income taxes consists primarily of U.S. federal and state income taxes in the United States and income taxes in certain foreign jurisdictions in which we conduct business. We have a full valuation allowance for deferred tax assets, including net operating loss carryforwards, and tax credits related primarily to research and development. We expect to maintain this full valuation allowance for the foreseeable future.

The following tables summarize our results of operations for the periods presented and as a percentage of our total revenues for those periods. The period-to-period comparison of results is not necessarily indicative of results for future periods.

The following table sets forth our consolidated statements of operations data as a percentage of total revenues for the periods indicated:

Total revenues increased by $37.6 million, or 126%, for 2014 compared to 2013. Product revenues increased by $39.0 million for 2014 compared to 2013, primarily due to an increase in our sales to our two largest customers, due to greater demand from their end customers. Further, service revenues and margin were higher in 2013 compared to 2014, primarily due to eASIC recognizing $0.8 million of revenue (which represented nonrefundable customer payments previously included in deferred revenue) upon cancellation of design services programs by two customers in 2013.

We market and sell our products worldwide. We attribute revenues to the geography based on where customers are billed. Our revenues by geography for the periods indicated were as follows:

See Note 9 to our consolidated financial statements for additional information regarding revenues by geography.

Cost of product revenues increased by $22.4 million for 2014 compared to 2013. The increase was primarily related to costs associated with increased product revenues. Cost of service revenues decreased by $0.1 million for 2014 compared to 2013. The decrease was primarily due to lower service revenues.

Total product gross margin remained relatively flat during 2014 compared to the same period in 2013. The cost reductions due to more favorable pricing from our contract manufacturers as a result of higher production volumes in 2013 were offset by an increase in unit sales of lower margin products. Service revenues margin decreased by 8 percentage points in 2014 compared to 2013 primarily due to recognizing $0.8 million of revenue (which represented nonrefundable customer payments previously included in deferred revenues) upon cancellation of design services programs by two customers in 2013.

Research and development. Research and development expense increased by $0.8 million, or 6%, for 2014 compared to 2013. The increase was due to an increase in personnel costs associated with increases in our headcount to support the development of our future products and internal software development tools. We enter into agreements with customers for shared development, under which research and development costs are eligible for reimbursement. Amounts reimbursed under this arrangement are offset against research and development expenses. In connection with such agreements, we offset against research and development expense by an amount of $1.3 million and $1.5 million, for 2013 and 2014, respectively.

Sales and marketing. Sales and marketing expense increased by $0.9 million, or 18%, for 2014 compared to 2013, due to an increase in personnel costs associated with increases in our headcount in sales and marketing, higher sales commission payments and an increase in marketing programs to support our current revenues and drive future revenue growth.

General and administrative. General and administrative expense increased by $2.4 million, or 77%, for 2014 compared to 2013, as we increased consulting expenses to support revenue growth and improve financial systems and processes.

Interest expense increased by $0.5 million, or 54%, for 2014 compared to 2013, due to higher interest expense resulting from new borrowings and an increase in our revolving line of credit. Other (income) expense, net increased by $0.8 million, or 7,067%, for 2014 compared to 2013 mainly from foreign exchange losses and the change of the fair value of our preferred stock warrants.

Provision for income taxes increased as our profitability increased. The consolidated effective tax rate for 2014 exceeded the US statutory rate primarily due to taxes associated with certain unrecognized tax benefits partially offset by foreign income taxed at lower rates.

In December 2012, under a new Certificate of Incorporation and pursuant to the Series A-2 Stock Purchase Agreement, the holders of the Company’s existing preferred stock (Series A through Series H) were offered the right to participate in the $10.0 million financing, on a pro-rata basis. This recapitalization was considered an extinguishment for accounting purposes. The extinguishment resulted in a contribution of capital to the common stock of $83.4 million, which was recorded within the stockholders’ accumulated deficit. The contribution of capital on the extinguishment was included in the adjustment to the Company’s net loss in arriving at the net loss attributable to common stockholders for the year ended December 31, 2012.

In January 2013, the Company completed the initial round of the Series A-2 financing and issued an additional 0.7 million shares of Series A-2 preferred, 0.2 million shares of Series A-1 preferred, and 2.4 million shares of common stock, in exchange for additional cash invested of $3.7 million and 0.3 million shares of Series A, B, C, D, E, F, F-1, G and H preferred stock. This exchange included the exercise of participation rights that had been reallocated from non-participating preferred holders and resulted in a deemed dividend to the preferred stock of $2.6 million related to holders who received reallocated rights and were not employees or service providers. The deemed dividend was charged to common stock and was included in the adjustment to the Company’s net loss in arriving at the net loss attributable to common stockholders for the year ended December 31, 2013.

Total revenues increased by $16.1 million, or 118%, for 2013 compared to 2012. Product revenues increased by $14.3 million for 2013 compared to 2012, primarily due to an increase in sales to our two largest customers, due to greater demand from their end customers. Service revenues increased by $1.8 million for 2013 compared to 2012, primarily due to increased revenues from a higher number of designs and prototype sales.

See Note 9 to our consolidated financial statements for additional information regarding revenues by geography.

Cost of product revenues increased by $6.3 million for 2013 as compared to 2012. The increase was primarily related to increased product revenues. Cost of service revenues increased by $0.4 million for 2013 compared to 2012. The increase was primarily related due to higher costs associated with higher service revenues.

Product gross margin increased by 17 percentage points in 2013 compared to 2012, resulting mainly from cost reductions due to more favorable pricing from our contract manufacturers as a result of higher production volumes in 2013 and increased unit sales of higher margin products. Service revenues margin remained relatively flat for 2013 compared to 2012.

Research and development. Research and development expense increased by $1.1 million, or 9%, for 2013 compared to 2012, due to an increase in our personnel costs associated with increases in our headcount to support the development of our future products and internal software development tools. We enter into agreements with customers for shared development, under which research and development costs are eligible for reimbursement. Amounts reimbursed under this arrangement are offset against research and development expenses. In connection with such agreements, we offset against research and development expenses an amount of $0.5 million and $1.3 million, for the years ended December 31, 2012 and 2013, respectively.

Sales and marketing. Sales and marketing expense increased by $0.3 million, or 8%, for 2013 compared to 2012, due to an increase in personnel costs associated with increases in our headcount in sales and marketing, higher sales commission payments and an increase in marketing programs to support our current revenues and drive future revenue growth.

General and administrative. General and administrative expense increased by $0.5 million, or 21%, for 2013 compared to 2012, primarily related to stock compensation expense and consulting expenses to support revenue growth and improve financial systems and processes.

Interest expense decreased primarily due to lower interest expense incurred as a result of payments towards term loans. Other (income) expense, net decreased primarily due to the increase in other expense from a change in the fair value of the preferred stock warrants.

Tax expense consists principally of foreign taxes, as taxes in the United States are materially offset by usage of net operating loss carryforwards.

The following tables set forth selected unaudited quarterly consolidated statements of operations data for each of the eight quarters in the period ended December 31, 2014, as well as the percentage that each line item represents of total revenue for each quarter. The information for each of these quarters has been prepared on the same basis as the audited annual consolidated financial statements included elsewhere in this prospectus and, in the opinion of management, includes all adjustments of a normal, recurring nature that are necessary for the fair presentation of the results of operations for these periods in accordance with generally accepted accounting principles in the United States. This data should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this prospectus. These quarterly operating results are not necessarily indicative of our operating results for a full fiscal year or any future period.

Our quarterly revenue increased year-over-year for all periods presented primarily due to increased sales to our two largest customers. These increased sales were principally due to our customers deploying our solutions into more of their product variants, and additional demand from their end user customers. While we believe there may be seasonal trends that impact our revenues, we believe our historical growth may have masked some of the seasonal or cyclical trends that have influenced our business to date and as our growth rate declines, these seasonal and cyclical trends may become more pronounced. Therefore, historical patterns in our business may not be a reliable indicator of our future sales activity or performance.

Total gross profit increased year-over-year for all periods presented. Our total quarterly gross margins ranged from 38% to 50% during the periods presented. Any fluctuations are primarily due to shifts in the mix of the types and volume of the products sold, pricing and yields from our contract manufacturer and the mix of sales between products and services.

Total operating expenses generally increased year-over-year for all periods presented primarily due to the addition of personnel in connection with the expansion of our business. Research and development expense generally increased year-over-year for all periods presented as we increased our headcount to support the development of our future product and internal software development tools. Despite the increase in headcount, the decrease in research and development expense from the quarter ended March 31, 2013 compared to the quarter ended March 31, 2014 was mainly due to lower engineering projects and test. Sales and marketing expense generally increased year-over-year for all periods presented due to an increase in personnel costs associated with increases in our headcount in sales and marketing, higher sales commission payments and an increase in marketing programs to support our current revenues and drive future revenue growth. The decrease in sales and marketing expense from the quarter ended March 31, 2013 compared to the quarter ended March 31, 2014 was mainly due to incremental stock-compensation expense resulting from the first round of Series A-2 financing which was completed during the quarter ended March 31, 2013. General and administrative expense generally increased year-over-year for all periods presented primarily due to an increase in personnel, legal expense and higher professional services fees for preparing to be a public company. The decrease in general and administrative expense from the quarter ended March 31, 2013 compared to the quarter ended March 31, 2014 was mainly due to incremental stock-compensation expense resulting from the first round of Series A-2 financing which was completed during the quarter ended March 31, 2013.

Prior to this offering we were a private company and have had limited accounting and financial reporting personnel and other resources with which to address our internal controls and procedures. In connection with the audit of our consolidated financial statements as of and for the years ended December 31, 2012 and 2013 and the review of financial statements for the nine months ended September 30, 2014, we identified two material weaknesses in our internal control over financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board of the U.S. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. The identified material weaknesses related to (1) our lack of sufficient, qualified personnel in accounting and financial reporting functions with sufficient experience and expertise with respect to the application of U.S. GAAP and related financial reporting, which resulted in a number of post-close adjustments to the consolidated financial statements as of and for the years ended December 31, 2012 and 2013, and (2) our controls for the preparation of the provision for income taxes, resulting principally from the allocation of certain costs from our U.S. parent to one of our foreign subsidiaries which resulted in adjustments to our income tax provision for the nine months ended September 30, 2014.

Our management and independent registered public accounting firm did not and were not required to perform an evaluation of our internal control over financial reporting as of and for the years ended December 31, 2012, 2013 and 2014 in accordance with the provisions of the JOBS Act.

While we believe that we have put in place additional controls over our accounting close procedures, including hiring additional staff, adding additional reviews and approvals over monthly provisions, including our income tax provision, our remediation efforts are still in process and have not yet been tested. Therefore, we cannot assure you that the material weaknesses in our internal control over financial reporting have been fully remediated as of December 31, 2014. In addition, we cannot be certain that any such measures we undertake will successfully remediate those two material weaknesses or that other material weaknesses and control deficiencies will not be discovered in the future. If our remediation efforts are not successful or other material weaknesses or control deficiencies occur in the future, we may be unable to report our financial results accurately or on a timely basis, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence or delisting and cause the trading price of our common stock to decline. As a result of such failures, we could also become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation, financial condition or divert financial and management resources from our core business. See “Risk Factors—We identified two material weaknesses in our internal controls over financial reporting that, if not properly remediated, could result in material misstatements in our financial statements in future periods and impair our ability to comply with the accounting and reporting requirements applicable to public companies.”

Primary sources of liquidity. As of December 31, 2013 and 2014, our primary sources of liquidity consisted of cash and cash equivalents of $7.4 million and $8.8 million, respectively. As of December 31, 2013 and 2014, cash and cash equivalents included $0.5 million and $0.6 million, respectively, held by our foreign subsidiaries, which we do not currently intend to repatriate. Our borrowings under our revolving line of credit as of December 31, 2013 and 2014 was $5.0 million and $8.0 million, respectively. As of December 31, 2013 and 2014, our working capital was $15.3 million and $19.6 million, respectively. We believe we have sufficient cash to meet operational and liquidity needs over the next 12 months.

Historically, our primary sources of liquidity have been from our revolving line of credit and term loans and proceeds from the issuance of preferred and common stock. From inception through December 31, 2014, we issued preferred and common stock with aggregate net proceeds of $129.7 million.

Our primary source of cash from operating activities has been from cash collections from our customers. We expect cash inflows from operating activities to be affected by increases in sales and timing of collections. Our primary uses of cash from operating activities have been for personnel costs and investment in sales and marketing and research and development. We expect cash outflows from operating activities to increase as a result of further investment in sales and marketing and increases in personnel costs as we grow our business.

During the year ended December 31, 2014, cash provided by operating activities was $0.6 million, primarily from net loss of $1.1 million, non-cash charges of $3.9 million, primarily related to depreciation and amortization and stock-based compensation, and a net change in our net operating assets and liabilities of $2.2 million. The change in our net operating assets and liabilities was primarily due to a $4.5 million increase in inventory for anticipated growth in our business, a $7.1 million increase in accounts receivable due to an increase in sales, a $3.1 million increase in non-current income taxes payable and a $0.9 million decrease in deferred revenues and other non-current liabilities. These changes were partially offset by a $5.4 million increase in accounts payable primarily attributable to inventory purchases and timing of payments, and a $1.7 million increase in accrued expenses primarily due to timing of payments and increased personnel costs associated with increases in our headcount and consulting expenses to support revenue growth and improve financial systems and processes.

During the year ended December 31, 2013, cash used in operating activities was $13.5 million, primarily from net loss of $7.8 million, non-cash charges of $2.6 million and a net change in our net operating assets and liabilities of $8.3 million. The change in our net operating assets and liabilities was primarily due to a $5.5 million increase in inventory due to inventory purchases, a $3.5 million increase in accounts receivable due to increased sales, a $0.3 million decrease in prepaid expenses and other current assets, a $0.1 million decrease in accrued expenses and other current liabilities and a $0.5 million decrease in deferred revenues due to timing of revenue recognition. This decrease was partially offset by a $1.0 million increase in accounts payable primarily attributable to inventory purchases and timing of payments.

During the year ended December 31, 2012, cash used in operating activities was $10.4 million, primarily from net loss of $15.4 million, non-cash charges of $1.0 million and a net change in our net operating assets and liabilities of $4.0 million. The change in our net operating assets and liabilities was primarily due to a $1.5 million decrease in inventory due to increased sales, a $1.3 million increase in accounts payable due to timing of payments, and a $0.3 million increase in accrued expenses and other current and non-current liabilities due to timing of payments and a $1.0 million increase in deferred revenues due to increased sales. This increase was partially offset by a $0.1 million increase in accounts receivable and prepaid expenses and other current assets.

Our investing activities have consisted primarily of purchases of property and equipment, including mask sets. We expect to continue to purchase property and equipment to support continued growth of our business. During the year ended December 31, 2014, cash used in investing activities was $5.4 million, due to purchases of property and equipment, primarily mask sets. During the year ended December 31, 2013, cash used in investing activities was $2.1 million, all of which was for property and equipment. During the year ended December 31, 2012, cash used in investing activities was $0.5 million, all of which was for property and equipment.

Cash flows from financing activities primarily include net proceeds from issuances of convertible preferred stock, proceeds from the issuance of common stock as a result of the exercise of stock options, and proceeds and payments related to our term loans and revolving line of credit.

During the year ended December 31, 2014, cash provided by financing activities was $6.2 million, mainly from proceeds from our term loans and revolving line of credit.

During the year ended December 31, 2013, cash provided by financing activities was $20.2 million, mainly consisting of $21.7 million in proceeds from our term loans and revolving line of credit, $15.5 million in proceeds from issuance of convertible preferred and common stock, and $1.5 million in proceeds from issuance of bridge notes, offset by $18.1 million in repayments on outstanding term loans and revolving line of credit and $0.4 million in payments on property and equipment acquired through financing arrangement.

During the year ended December 31, 2012, cash provided by financing activities was $3.2 million, mainly consisting of $5.0 million in proceeds from our term loans and revolving line of credit and $6.2 million in proceeds from issuance of convertible preferred and common stock and bridge notes, offset by $7.9 million in repayments on outstanding term loans and revolving line of credit and $0.1 million in payments on property and equipment acquired through financing arrangement.

The following is a summary of our debt obligations as of December 31, 2013 and 2014:

We intend to use approximately $19.1 million of the net proceeds we receive from this offering to prepay the entirety of the outstanding indebtedness, including applicable prepayment penalties, under our debt obligations described in this section titled “—Liquidity and Capital Resources—Debt Obligations.” However, our intentions to prepay our debt may change due to market or other factors.

In September 2010, we entered into a loan and security agreement, as amended at various dates from 2010 to 2014 (collectively, the Amended SVB Agreement), with Silicon Valley Bank (SVB) for a total growth capital loan of $5.0 million and advances under a revolving line of credit up to $8.0 million. The Amended SVB Agreement contains restrictive covenants, including covenants requiring us to meet quarterly gross revenues targets, limiting our ability to sell property, enter into mergers and acquisitions, or raise new debt and containing other restrictions typical of such debt. The Amended SVB Agreement contains usual and customary events of default, such as payment defaults, covenant defaults, investor abandonment, cross-default to material indebtedness and contracts, and insolvency defaults. Our borrowings under the Amended SVB Agreement are secured by a lien granted with respect to substantially all of our assets, excluding intellectual property. The amendment in December 2014 provides for a change in the covenant relating to the maximum amounts that can be held in foreign deposit accounts from $0.25 million to $0.8 million and also for the extension of the maturity date for the revolving line of credit from September 30, 2015 to September 25, 2016.

The $5.0 million growth capital loans were made in two tranches. The first $3.0 million tranche was available immediately upon execution of the Amended SVB Loan Agreement. The second $2.0 million tranche was contingent upon us achieving a certain milestone. Under the terms of the Amended SVB Loan Agreement, we borrowed $3.0 million under the growth capital facility during September 2010 and $2.0 million during January 2011. We paid off all the outstanding balance under the growth capital facility during September 2013.

In April 2011, we entered into a loan and security agreement (GHC Loan Agreement) with Gold Hill Capital 2008 L.P. (GHC) for a total growth capital facility of $3.0 million. Under the terms of the GHC Loan Agreement, we borrowed $3.0 million under the growth capital facility during the year ended December 31, 2011. We paid off all the outstanding balance under the growth capital facility during September 2013.

In September 2013, we entered into a venture loan and security agreement with Horizon Technology Finance Corporation and DBD Credit Funding LLC (Original Horizon Venture Loan Agreement) and immediately borrowed the entire $6.0 million in term loans available under that facility. Our obligations under the Original Horizon Venture Loan Agreement are secured by a lien granted with respect to substantially all of our assets, excluding intellectual property. The Original Horizon Venture Loan Agreement contained usual and customary events of default, such as payment defaults, covenant defaults, material adverse change, investor abandonment, cross-default to material indebtedness, and insolvency defaults. The notes carry a fixed interest rate of 11%, with interest-only payments through and including October 1, 2015 and then equal principal and interest payments for an additional 24 months. In connection with the issuance of the notes, we agreed to make a final payment of $0.15 million upon maturity of the notes, which is being recorded as additional interest expense using the effective interest method over the life of the notes. There are prepayment penalties with respect to the notes. In September 2013, we repaid the outstanding balance of the debts owed to SVB and GHC as discussed above, using the proceeds received from the Original Horizon Venture Loan Agreement.

In September 2014, the Original Horizon Venture Loan Agreement was amended and restated (Amended Horizon Venture Loan Agreement) mainly to make two new term loans available to us, and we immediately borrowed the entire $3.0 million in additional term loans available under the facility. Our borrowings under the Amended Horizon Venture Loan Agreement are secured by a lien granted with respect to substantially all of our assets, excluding intellectual property. The Amended Horizon Venture Loan Agreement prohibits the payment of dividends and contains restrictive covenants, including covenants limiting its ability to sell property, enter into merger and acquisitions, raise new debt, and other restrictions typical of such debt. The Amended Horizon Venture Loan Agreement contains usual and customary events of default, such as payment defaults, covenant defaults, material adverse change, investor abandonment, cross-default to material indebtedness, and insolvency defaults. The notes related to the new term loans carry a fixed interest rate of 10.75%, with interest-only payments through and including October 1, 2015 and then equal principal and interest payments for an additional 30 months. In connection with the issuance of the new term loan notes, we agreed to make a final payment of $0.1 million with respect to such term loans, which is being recorded as additional interest expense using the effective interest method over the life of the notes. There are prepayment penalties for the new term notes. In December 2014, the Horizon Venture Loan Agreement was amended to provide for a change in the covenant relating to the maximum amounts that can be held in foreign deposit accounts from $0.25 million to $0.8 million.

Under the terms of the Amended SVB Loan Agreement, we are able to borrow up to $8.0 million under the revolving line of credit. The line of credit carries a floating interest rate equal to prime plus 1.5% and matures on September 25, 2016. Borrowings under the line of credit were collateralized by all of our assets, excluding intellectual property, and the availability of borrowings under the line of credit is subject to certain borrowing base limitations. Subject to reduction based upon revenue test, the maximum amount available for borrowing under the revolving line of credit is not to exceed the lesser of $8.0 million or 85% of eligible accounts receivable. The revolving line of credit includes both a material adverse change clause and a lock-box arrangement.

We have an existing arrangement, as amended, with DNP America LLC (DNP) which provides for the purchase of mask sets to be paid over a period of time based on the actual purchase of additional mask sets over the remaining term of the agreement. The terms of the agreement initially provided for repayment of any unpaid amounts on the purchase of mask sets by December 2010, which date was later extended to December 2012. The terms of the agreement were modified in December 2012 as follows:

The modification of the aggregate principal balance due to DNP with a net carrying amount of $1.4 million prior to the December 2012 modification resulted in a troubled debt restructuring accounting treatment under ASC Topic 470-60 where no gain or loss was recognized due to fact that the carrying amount of the debt balance was less than total future cash payments specified by the terms of the debt remaining unsettled after the modification. The net carrying amount due to DNP was $1.4 million, and $1.3 million at December 31, 2013 and 2014, respectively.

The extension to January 2016 of the repayment of the $0.2 million discussed in (b) above repayable by us at a pre-determined amount at the time of purchase of subsequent mask sets to the extent any amounts remaining due of the $0.2 million.

The extension to January 2017 for the repayment of any unpaid amounts payable to DNP towards purchase of mask sets by us.

The following is a summary of our contractual obligations as of December 31, 2014:

As of December 31, 2014, we had a $3.1 million liability for uncertain tax positions. This was excluded from the above table due to uncertainty on the timing of payments.

During the periods presented, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates.

Substantially all of our revenues are denominated in U.S. dollars. Our expenses are generally denominated in the currencies in which our operations are located, which is primarily in the United States and to a lesser extent in Europe and Asia. Our results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. The effect of a hypothetical 10% change in foreign currency exchanges rates applicable to our business would not have a material impact on our historical consolidated financial statements.

We had cash and cash equivalents of $7.4 million and $8.8 million as of December 31, 2013 and 2014, respectively, consisting of bank deposits and money market funds. Such interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in interest income have not been significant. We also had total outstanding debt of $12.1 million as of December 31, 2013, none of which was due within 12 months. As of December 31, 2014, we had total outstanding debt of $18.0 million, of which $2.2 million was due within 12 months. The outstanding debt relates to term loans, revolving line of credit and vendor financing arrangement.

We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. Our exposure to interest rates relates to the change in the amounts of interest we must pay on our variable rate borrowings. A hypothetical 10% increase in our borrowing rates would result in an approximately $0.1 million annual increase in interest expense on the existing principal balances.

In 2014, we generated revenues from over 14 customers including Ericsson, Fujitsu, Huawei, NEC, Omnivision, Seagate and Toshiba. In 2012, 2013 and 2014, Ericsson and Seagate together accounted for 73%, 87% and 93%, respectively, of our total revenues. We currently expect that a relatively small number of customers will continue to account for a significant portion of our revenues for the foreseeable future. However, we believe that based on our existing design wins, our customer concentration will decrease over time. In addition, we believe that, given the market share concentration in our target markets, our customers’ ability to use our platform to provide differentiated products will allow us to expand our market share within our existing

customer base and continue to penetrate new customers. We believe this will position us to gain market share within the $78 billion ASIC, ASSP and FPGA markets.

Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

The critical accounting policies requiring estimates, assumptions and judgments that we believe have the most significant impact on our consolidated financial statements are described below.

We earn revenues from the sale of custom ICs, design and development of ICs for customers and related design services and prototypes. When we enter into an arrangement that includes a design and development phase and a production phase, the production revenues are recognized when production ICs are shipped.

We recognize revenues when there is persuasive evidence of an arrangement, delivery has occurred, the price is fixed or determinable and collectability is reasonably assured. The delivery criterion for each type of product and service is discussed below.

Product Revenues. Product revenues are generated from sales of our custom ICs. We recognize product revenues at the time of shipment to our customers. A substantial majority of our sales are made on a VMI basis in which we maintain inventory of our product at a hub. Title to that inventory transfers to our customer, and revenues are recognized, when our products are “pulled” from our hub locations or delivered to our customers, as needed to meet their manufacturing requirements. We invoice our customer when this pull transaction occurs. In addition, we sell to non-stocking distributors that sell directly to end-users for which we do not grant return privileges, except for defective products during the warranty period, nor do we grant pricing credits. Accordingly, we recognize revenues upon transfer of title and risk of loss or damage, generally upon shipment.

Service Revenues. We perform design and development services for ICs to a customer’s specifications and apply the proportional performance method based on the achievement of contractual milestones. We have identified the acceptance of the design and prototype delivery as separate elements in the design and development arrangement. The revenues are allocated between such elements based on relative selling price. The selling price for a deliverable is based on its vendor specific evidence of fair value (VSOE) if available; third-party evidence (TPE), if VSOE is not available, or estimated selling prices (ESP), if neither VSOE nor TPE is available. Revenues and the related costs for each of these elements are recognized upon completion of the substantive milestones. If achievement of milestones is subject to customer acceptance, such milestones are not considered achieved until customer acceptance is received. As we have not been able to establish VSOE or TPE for our products and most of our services, we generally utilize Best Estimated Selling Prices (BESP) for the purposes of allocating revenues to each unit of accounting. We limit the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services or future performance obligations and not subject to customer-specific return or refund privileges.

Deferred revenues consists of amounts that have been invoiced relating to product revenues but that have not been recognized as revenues in accordance with our revenue recognition policy. Deferred revenues that will be realized during the succeeding 12 month period are recorded as current, and the remaining deferred revenues are recorded as non-current.

At the inception of the customer arrangement, and at each reporting date thereafter, we estimate the total cost to complete under its arrangements. If at any point of time during the arrangement, we estimate the total cost to complete is higher than the arrangement price, a provision for the entire loss is recorded in the period in which such estimation is made.

We also derive revenues from sale of third party IP solutions. At the request of our customers, we procure third party IP solutions in order for them to port such third party IP solutions on the design of the ICs, the costs of which are then passed through to our customers. The determination of whether revenues should be reported on a gross or net basis is based on our assessment of whether we are acting as the principal or an agent in the transaction. In determining whether we are the principal or an agent, we follow the accounting guidance for principal-agent considerations. When we determine we are not the primary obligor and (i) are not responsible for any development work on such third party IP (ii) do not have any discretion to select the third party IP provider, and (iii) do not have latitude in price setting, then we conclude that we are the agent in these arrangements, and therefore report revenues and cost of revenues on a net basis.

Compensation expense related to stock-based transactions, including employee, consultants, and non-employee director stock options, is measured and recognized in the financial statements based on the fair value of the awards granted. The fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model and a single option award approach. Stock-based compensation expense is recognized, net of forfeitures, over the requisite service periods of the awards, which is generally four years.

Our use of the Black-Scholes option-pricing model requires the input of highly subjective assumptions, including the fair value of the underlying common stock, the expected term of the option, the expected volatility of the price of our common stock, risk-free interest rates, and the expected dividend yield of our common stock. The assumptions used in our option-pricing model represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.

The following table summarizes the assumptions used in the Black-Scholes option-pricing model to determine the fair value of our stock options as follows:

In addition to the assumptions used in the Black-Scholes option-pricing model, we must also estimate a forfeiture rate to calculate the stock-based compensation expense for our awards. Our forfeiture rate is based on an analysis of our actual forfeitures and was 15%, 13% and 20% for the years ended December 31, 2012, 2013 and 2014, respectively. We will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover, and other factors. Quarterly changes in the estimated forfeiture rate can have a significant impact on our stock-based compensation expense as the cumulative effect of adjusting the rate is recognized in the period the forfeiture estimate is changed. If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a decrease to the stock-based compensation expense recognized in the financial statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that will result in an increase to the stock-based compensation expense recognized in the financial statements.

We will continue to use judgment in evaluating the assumptions related to our stock-based compensation on a prospective basis. As we continue to accumulate additional data related to our common stock, we may have refinements to our estimates, which could materially impact our future stock-based compensation expense.

We are required to estimate the fair value of the common stock underlying our stock-based awards when performing the fair value calculations with the Black-Scholes option-pricing model. The fair values of the common stock underlying our stock-based awards were determined by our board of directors, with input from management and independent contemporaneous valuations. We believe that our board of directors has the relevant experience and expertise to determine the fair value of our common stock.

Given the absence of a public trading market of our common stock, and in accordance with the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, our board of directors exercised reasonable judgment and considered numerous objective and subjective factors to determine the best estimate of the fair value of our common stock, including:

In order to determine the fair value of our common stock underlying option grants, we first determined our business enterprise value (BEV), and then allocated the BEV to each element of our capital structure (preferred stock, common stock, warrants and options). Our BEV was estimated using an income approach.

The income approach estimates the equity value based on the present value of future estimated cash flows. These future cash flows are discounted to their present values using a discount rate, which is derived from an analysis of the cost of capital of comparable publicly traded companies in the same industry or similar lines of business, or guideline companies, as of each valuation date. This weighted-average cost of capital discount rate (WACC), is adjusted to reflect the risks inherent in the business. The WACC used for these valuations was determined to be reasonable and appropriate given our stage of development at the time of each respective valuation. The income approach also assesses the residual value beyond the forecast period utilizing the Gordon Growth Model, capitalizing cash flow in the final year of the projected forecast over the sum of the discount rate less the expected long-term growth rate.

The market approaches were not relied upon for these valuations. However, the Public Company Market Multiple Method (PCMMM) was used as a reasonableness check. In addition, the PCMMM was utilized in our Probability-Weighted Expected Return Method (PWERM) approach discussed further below.

Our indicated BEV at each valuation date was allocated to the shares of preferred stock, common stock, warrants and options, using either an option pricing method (OPM) or PWERM.

The PWERM approach involves the estimation of future potential outcomes for us, as well as values and probabilities associated with each respective potential outcome. The common stock per share value determined using this approach is ultimately based upon probability-weighted per share values resulting from the various future scenarios, which can include an IPO, merger or sale, dissolution, or continued operation as a private company. The PWERM was determined to be the most appropriate methodology due to our expectations related to a potential liquidity event, as well as management’s ability to estimate probabilities related to identified exit scenarios.

Our equity value in an IPO scenario was estimated by evaluating multiples of the guideline companies’ enterprise values (EV), compared to trailing 12 months (TTM) revenues and/or EBITDA and forward 12 months (FTM) revenues and/or EBITDA. Our equity value in a merger, acquisition, or in a situation in which we would remain private was determined based on the equity value from our income approach, considering the probability-weighted equity value(s) attributable to all applicable IPO scenarios.

When considering which companies to include as our guideline companies, we focused on U.S. based companies in the semiconductor technology industry in which we operate. More specifically, we focused on companies with similar operations and geographic presence, financial size and performance, and stock liquidity.

The PWERM calculates all outstanding common equivalents and in-the-money warrants or options in order to determine the fully diluted shares outstanding of each share class. The expected future value per share is then calculated based on a liquidity event at the equity price determined using the market approach. This price is then discounted to its present value per share. Finally, the expected present value per share for each share class is then probability weighted according to the expectations regarding the respective likelihood of each liquidity event. Starting in February 2014, due to greater clarity on potential exit scenarios, we began using PWERM to allocate our equity value among the various outcomes.

For the scenario in which we remain private, there was a wide range of possible future exit events, so forecasting specific potential values associated with any future events would be highly speculative and imprecise.

As such, the equity value determined by the income approach, and adjusted by the probability-weighted equity values of any other exit scenarios, was then allocated to the common stock using the OPM. The OPM treats common stock and convertible preferred stock as call options on a business, with exercise prices based on the liquidation preference of the convertible preferred stock. Therefore, the common stock has value only if the funds available for distribution to the stockholders exceed the value of the liquidation preference at the time of a liquidity event such as a merger, sale or initial public offering, assuming the business has funds available to make a liquidation preference meaningful and collectible by the stockholders. The common stock is modeled to be a call option with a claim on the business at an exercise price equal to the remaining value immediately after the convertible preferred stock is liquidated. The OPM uses the Black-Scholes option-pricing model to price the call option. The OPM is appropriate to use when the range of possible future outcomes is so difficult to predict that forecasts would be highly speculative.

In addition, we also considered an appropriate discount adjustment to recognize the lack of marketability within each valuation due to being a closely held entity.

Between January 1, 2014 and the date of this prospectus, we granted the following stock options:

The fair value per share of common stock presented in the table above has been adjusted to reflect the 75-for-1 reverse stock split in 2014 of shares of common stock.

The following discussion relates primarily to our determination of the fair value per share of our common stock for the purposes of calculating stock-based compensation expenses. No single event caused the valuation of our common stock to increase during each period. Instead, a combination of the factors in each period led to the changes in the fair value of our common stock. Notwithstanding the fair value reassessments described below, we believe we applied a reasonable valuation method to determine the common stock fair values on the respective stock option grant dates.

Our September 30, 2013 valuation considered an independent contemporaneous valuation prepared on a minority, non-marketable basis. This valuation was developed using the income approach, specifically a discounted cash flow analysis, to determine our equity value. The discounted cash flow analysis was developed based on our forecast and utilized a WACC of 40%, which is based upon the expected venture capital rates of return over the life of the company. The OPM was then utilized to allocate value for the scenario in which we remained private and included the following assumptions: a time to a liquidity event of two years, a risk-free rate of 0.35%, a dividend yield of 0%, and a volatility of 46% over the time to a liquidity event. The fair value of our common stock, as determined by the OPM and after applying a non-marketability discount of 19%, was $0.75 per share as of September 30, 2013. Our board of directors set an exercise price of $0.75 per share for the options granted in February 2014, taking into account the valuation, as well as the factors discussed above under “Common Stock Valuations.”

Our March 31, 2014 valuation considered an independent contemporaneous valuation prepared on a minority, non-marketable basis. This valuation was developed using the income approach, specifically a discounted cash flow analysis, to determine our equity value. The discounted cash flow analysis was developed based on our forecast and utilized a WACC of 18.5%, which represents a blended rate over the life of the company, considering both the higher-risk explicit forecast period and the lower-risk terminal period. The income approach also assesses the residual value beyond the forecast period utilizing the Gordon Growth Model, capitalizing cash flow in the final year of the projected forecast over the sum of the discount rate less the expected long-term growth rate.

The resulting equity value was then allocated to the common stock utilizing an OPM and the PWERM with two scenarios: (i) an IPO in September 2015 scenario and (ii) a merger/acquisition/stay private scenario. The OPM was utilized to allocate value for the scenario in which we remained private and included the following assumptions: a time to a liquidity event of two years, a risk-free rate of 0.44%, a dividend yield of 0%, and a volatility of 45% over the time to a liquidity event. The PWERM was utilized to allocate value in an IPO scenario, and we used an equity value for the IPO based on the PCMMM analysis. The multiples used were EV/TTM Revenue; EV/FTM Revenue; EV/TTM EBITDA; and EV/FTM EBITDA. The probabilities used in the PWERM for the IPO and stay private scenarios were 20% and 80%, respectively. The fair value of our common stock, as determined by the PWERM and after applying a marketability discount of 35%, was $1.50 per share as of March 31, 2014. Our board of directors set an exercise price of $1.50 per share for the options granted in June 2014, taking into account the valuation, as well as the factors discussed above under “Common Stock Valuations.”

Our June 30, 2014 valuation considered an independent contemporaneous valuation prepared on a minority, non-marketable basis. This valuation was developed using the income approach, specifically a discounted cash flow analysis, to determine our equity value. The discounted cash flow analysis was developed based on our forecast and utilized a WACC of 17.5%, which represents a blended rate over the life of the company, considering both the higher-risk explicit forecast period and the lower-risk terminal period. The income approach also assesses the residual value beyond the forecast period utilizing the Gordon Growth Model, capitalizing cash flow in the final year of the projected forecast over the sum of the discount rate less the expected long-term growth rate.

The resulting equity value was then allocated to the common stock utilizing an OPM and the PWERM with two scenarios: (i) an IPO in September 2015 scenario and (ii) a merger/acquisition/stay private scenario. The OPM was utilized to allocate value for the scenario in which we remained private and included the following assumptions: a time to a liquidity event of two years, a risk-free rate of 0.47%, a dividend yield of 0%, and a volatility of 44% over the time to a liquidity event. The PWERM was utilized to allocate value in an IPO scenario, and we used an equity value for the IPO based on the PCMMM analysis. The multiples used were EV/TTM Revenue; EV/ FTM Revenue; EV/TTM EBITDA; and EV/FTM EBITDA. The probabilities used in the PWERM for the IPO and stay private scenarios were 25% and 75%, respectively. The fair value of our common stock, as determined by the PWERM and after applying a marketability discount of 35%, was $2.20 per share as of June 30, 2014. Our board of directors set an exercise price of approximately $2.20 per share for the options granted in August 2014, taking into account the valuation, as well as the factors discussed above under “Common Stock Valuations.”

The primary reasons for the increase in fair value from the March 31, 2014 valuation to the June 30, 2014 valuation were (i) the decrease in the WACC due to positive changes in our risk profile and improved management expectations for the business and (ii) a 5% increase in the probability of an IPO scenario in the PWERM analysis due to management’s increased expectations related to an IPO.

Our August 31, 2014 valuation considered an independent contemporaneous valuation prepared on a minority, non-marketable basis. This valuation was developed using the income approach, specifically a discounted cash flow analysis, to determine our equity value. The discounted cash flow analysis was developed based on our forecast and utilized a WACC of 17.0%, which represents a blended rate over the life of the Company, considering both the higher-risk explicit forecast period and the lower-risk terminal period. The income approach also assesses the residual value beyond the forecast period utilizing the Gordon Growth Model, capitalizing cash flow in the final year of the projected forecast over the sum of the discount rate less the expected long-term growth rate.

The resulting equity value was then allocated to the common stock utilizing an OPM and the PWERM with three scenarios: (i) and IPO in March 2015 scenario; (ii) an IPO in October 2015; and (iii) a stay private scenario. The OPM was utilized to allocate value for the scenario in which the Company remained private and included the following assumptions: a time to a liquidity event of two years, a risk-free rate of 0.48%, a dividend yield of 0%, and a volatility of 44% over the time to a liquidity event. The PWERM was utilized to allocate value in an IPO scenario, and we used an equity value for the IPO based on the PCMMM analysis. The multiples used were EV/TTM Revenue and EV/FTM Revenue. The probabilities used in the PWERM for the March 2015 IPO, the October 2015 IPO, and the stay private scenarios were 15%, 15%, and 70%, respectively. The fair value of our common stock, as determined by the PWERM and after applying a marketability discount of 30%, was $4.06 per share as of August 31, 2014. Our board of directors set an exercise price of $4.06 per share for the options granted in October 2014 and November 2014, taking into account the August valuation as well as the factors discussed above under “Common Stock Valuations.”

The primary reasons for the increase in fair value from the June 30, 2014 valuation to the August 31, 2014 valuation were (i) the increase in the selected market multiples in the market approach due to improved expectations for the market and the business; (ii) the slight decrease in the WACC and improved forecast from management due to improved expectations by management; and (iii) a 5% increase in the probability of an IPO scenario in the PWERM analysis due to management’s increased visibility related to an IPO. In addition, the valuation used a lower marketability discount as we neared the expected liquidity events.

Our November 30, 2014 valuation considered an independent contemporaneous valuation prepared on a minority, non-marketable basis. This valuation was developed using the income approach, specifically a discounted cash flow analysis, to determine our equity value. The discounted cash flow analysis was developed based on our forecast and utilized a WACC of 16.5%, which represents a blended rate over the life of the Company, considering both the higher-risk explicit forecast period and the lower-risk terminal period. The income approach also assesses the residual value beyond the forecast period utilizing the Gordon Growth Model, capitalizing cash flow in the final year of the projected forecast over the sum of the discount rate less the expected long-term growth rate.

The resulting equity value was then allocated to the common stock utilizing an OPM and the PWERM with three scenarios: (i) an IPO in March 2015 scenario; (ii) an IPO in October 2015 scenario; and (iii) a stay private scenario. The OPM was utilized to allocate value for the scenario in which the Company remained private and included the following assumptions: a time to a liquidity event of two years, a risk-free rate of 0.47%, a dividend yield of 0%, and a volatility of 43% over the time to a liquidity event. The PWERM was utilized to allocate value in an IPO scenario, and we used an equity value for the IPO based on the PCMMM analysis. The multiples used were EV/FTM Revenue and EV/TTM Revenue. The probabilities used in the PWERM for the March 2015 IPO, the October 2015 IPO, and the stay private scenarios were 40%, 15%, and 45%, respectively. The fair value of our common stock, as determined by the PWERM and after applying a marketability discount of 12.5%, was $9.09 per share as of November 30, 2014, taking into account the valuation, as well as the factors discussed above under “Common Stock Valuations.”

The primary reasons for the increase in fair value from the August 31, 2014 valuation to the November 30, 2014 valuation were (i) a new forecast provided by management; (ii) an increase in the expected equity values upon an exit event for both of the IPO scenarios; and (iii) a 25% increase in the probability of an IPO scenario in the PWERM analysis due to management’s increased visibility related to an IPO. In addition, the valuation used a lower marketability discount as we neared the expected liquidity events.

Our December 31, 2014 valuation considered an independent contemporaneous valuation prepared on a minority, non-marketable basis. This valuation was developed using the income approach, specifically a discounted cash flow analysis, to determine our equity value. The discounted cash flow analysis was developed based on our forecast and utilized a WACC of 15.0%, which represents a blended rate over the life of the Company, considering both the higher-risk explicit forecast period and the lower-risk terminal period. The income approach also assesses the residual value beyond the forecast period utilizing the Gordon Growth Model, capitalizing cash flow in the final year of the projected forecast over the sum of the discount rate less the expected long-term growth rate.

The resulting equity value was then allocated to the common stock utilizing an OPM and the PWERM with three scenarios: (i) an IPO in March 2015 scenario; (ii) an IPO in October 2015 scenario; and (iii) a stay private scenario. The OPM was utilized to allocate value for the scenario in which the Company remained private and included the following assumptions: a time to a liquidity event of two years, a risk-free rate of 0.67%, a dividend yield of 0%, and a volatility of 43% over the time to a liquidity event. The PWERM was utilized to allocate value in an IPO scenario, and we used an equity value for the IPO based on the PCMMM analysis. The multiples used were EV/FTM Revenue and EV/TTM Revenue. The probabilities used in the PWERM for the March 2015 IPO, the October 2015 IPO, and the stay private scenarios were 50%, 25%, and 25%, respectively. The fair value of our common stock, as determined by the PWERM and after applying a marketability discount of 12.5%, was $11.79 per share as of December 31, 2014, taking into account the valuation, as well as the factors discussed above under “Common Stock Valuations.” Our board of directors set an exercise price of $11.79 per share for the options granted in January 2015 as this was the fair value determined by the most recent valuation prepared at that time.

The primary reasons for the increase in fair value from the November 30, 2014 valuation to the December 31, 2014 valuation were (i) a decrease in the WACC and (ii) a 20% increase in the probability of an IPO scenario in the PWERM analysis due to management’s increased visibility related to an IPO.

During the year ended December 31, 2013, we repriced a total of 581,285 outstanding options by way of canceling existing outstanding option grants at an exercise price of $2.25 in exchange for new option grants at an exercise price of $0.75. Except for the change in exercise price, the new options had the same terms and conditions as the original options including the contractual term, vesting schedule, and the vesting start date. As a result of such modification, we expensed incremental stock compensation on the date of modification of $0.1 million relating to options that were already vested and another $0.04 million relating to the options that were unvested is expensed over the remaining vesting term of the new options.

We incur costs for the fabrication of masks to manufacture our products. Our masks include (a) a proprietary standardized base array optimized for a generic application and (b) a custom layer to address a specific application. If we determine the product technological feasibility has been achieved and estimated market demand for products using the tested array exists when costs are incurred, the costs will be capitalized as manufacturing tooling under property and equipment. If product technological feasibility has not been achieved or the mask is not expected to be utilized in production manufacturing, the related mask costs are expensed to research and development when

incurred. The amount capitalized will be amortized to cost of sales on a straight-line basis over the estimated life, which is estimated to be eight years for the base mask and three years for the custom layer mask commencing with the start of the commercial production. We periodically reassess the estimated useful lives for specific mask sets capitalized. We also periodically assess capitalized mask costs for impairment.

We account for income taxes in accordance with ASC Topic 740, Income Taxes, under which deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

We use a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. A tax position is recognized when it is more likely than not that the tax position will be sustained upon examination, including resolution of any related appeals or litigation processes. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority. The standard also provides guidance on derecognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure and transition.

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09 regarding ASC Topic 606—Revenue from Contracts with Customers. The standard provides principles for recognizing revenues for the transfer of promised goods or services to customers with the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance is effective for us in the first quarter of fiscal 2018 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within the guidance; or (ii) retrospective with the cumulative effect of initially applying the guidance recognized at the date of initial application and providing certain additional disclosures as defined per the guidance. Early adoption is not permitted. We are currently evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.

In July 2013, the FASB issued ASU 2013-11—Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (ASU 2013-11). This standard requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The adoption of ASU 2013-11 did not have a material impact on the consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. In doing so, companies will have reduced diversity in the timing and content of footnote disclosures than under today’s guidance. ASU 2014-15 is effective for the Company in the first quarter of 2016 with early adoption permitted. We do not believe the impact of adopting ASU 2014-15 on its consolidated financial statements will be material.

We estimate that our addressable market opportunity across ASIC, ASSP and FPGA applications is approximately $78 billion, based on data from Gartner Research (Gartner). During the year ended December 31, 2014, we sold our products and services to over 14 customers, including Ericsson, Fujitsu, Huawei, NEC, Omnivision, Seagate and Toshiba. For the years ended December 31, 2013 and 2014, our total revenues were $29.8 million and $67.4 million, respectively, and our net loss was $7.8 million and $1.1 million, respectively.

Key technology megatrends driving massive growth in the demand for network bandwidth, computing resources and data storage

The proliferation of mobile devices and wireless connectivity, as users are seeking faster access to video content and applications, has driven the demand for wireless network infrastructure. Mobile users expect to be able to connect to high-speed wireless networks from virtually anywhere and at any time. According to the Ericsson Mobility Report, global mobile users will grow from 7.1 billion subscriptions in 2014 to 9.5 billion subscriptions in 2020. This growth is largely driven by smartphone adoption, as users increasingly migrate towards faster 3G and 4G (LTE) technologies. According to the same report, mobile data traffic is expected to grow from 3.2 exabytes per month in 2014 to over 25 exabytes per month in 2020, representing a compound annual growth rate (CAGR) of 40% during this period.

The ongoing shift to cloud computing, which allows multiple users to simultaneously execute applications and access data at high speeds, is also creating additional demand for network bandwidth, computing and data storage resources as many enterprise and consumer applications today are delivered as cloud services. The aggregate network bandwidth to support the increased demand for the cloud can be orders of magnitude higher than typical legacy networks. According to International Data Corporation (IDC), storage capacity for cloud deployments (including public and private clouds) is estimated to increase from 68 exabytes in 2014 to 317 exabytes in 2018, representing a CAGR of 47% during this period.

Increasingly, organizations are attempting to capture the value locked in their data to enable more effective application management, IT operations management, security and compliance, and derive intelligence and insight across their organizations. The large and diverse data sets that make up this digital information are often referred to as big data. According to IDC, global data usage is expected to increase from 4.4 trillion gigabytes in 2013 to 44 trillion gigabytes in 2020, a ten-fold increase, representing a CAGR of 39% during this period.

The significant and growing demands on networking, compute and storage infrastructure have resulted in service providers, enterprises and datacenter operators requiring OEMs to rapidly introduce next generation networking, server and storage systems that deliver high return on investment with enhanced functionality and performance, while reducing power consumption and physical footprint.

An ASIC is a custom IC that is designed and manufactured for one OEM customer to be used in one specific application, and it will often include intellectual property from that OEM or a third party that is embedded into the ASIC. In the past, ASICs represented the most ideal solution for custom ICs since they are capable of offering the highest performance, lowest power and lowest unit production costs. ASIC vendors include Avago, Fujitsu, STMicroelectronics and Toshiba.

An ASSP uses the same design and manufacturing methodology as ASICs, however, ASSPs are capable of supporting many customers for the same application. While OEMs often combine their own software with an ASSP to differentiate their products, this approach sacrifices performance. Similar to ASICs, ASSPs also offer high performance as well as silicon area and power efficiency. ASSP vendors include Broadcom, Intel, Marvell, MediaTek and Qualcomm.

ASICs and ASSPs both require customization of every mask layer. The need to customize every mask layer leads to long design and manufacturing cycles (typically 21–24 months) and high development cost for design, test and manufacturing setup. The high development cost required is only justified when the return on investment is high enough or the customer can accept the associated tradeoffs. As the costs associated with more complex designs and advanced process nodes have increased over time, these development costs become prohibitive unless the OEMs’ products are sold in sufficient volume to amortize the costs. Further, ASIC and ASSP vendors are unwilling to design them for OEM customers unless they are compensated for significant up-front development costs typically associated with the design.

Given the challenges in providing ASIC and ASSP solutions, many vendors have either exited the market, consolidated or meaningfully reduced the number of designs they are willing to support. As a result, some of the largest OEMs, such as Amazon, Apple, Cisco, Google and Huawei have created or acquired semiconductor design teams to help them design internal ASICs to add unique value to their products. These in-house design teams, however, face the same financial and technical challenges as the traditional ASIC and ASSP vendors.

Given the cost and time-to-market challenges associated with custom ASICs and ASSPs, FPGAs with software-enabled customization were developed to provide OEMs with a solution that enables them to cost-effectively create a custom IC. FPGAs typically offer low development costs and enable fast time-to-market, but in order to be programmable, they require a significant number of transistors resulting in high unit costs, relatively limited performance and high power consumption. Historically, FPGAs have been the preferred solution for initial market validation, but due to their high unit costs, power consumption and performance limitations, they are not well-suited for high volume production or certain high performance or power efficient applications. Moreover, transitioning from an FPGA to an ASIC design can be time-consuming and expensive. FPGA vendors include Altera, Lattice Semiconductor and Xilinx.

Key technology megatrends are increasing demand for ASICs. However, escalating research, development and design costs associated with the migration to smaller geometry and increasing density of transistors per unit area, are hampering the ability of OEMs to leverage ASICs to address that demand. The following chart shows estimated initial design costs of an IC at various process nodes as reported by International Business Strategies, Inc. (IBS):

Costs per transistor are increasing, creating challenges for historical IC solutions

Historically, advances in manufacturing process technology have enabled engineers to approximately double the number of transistors in the same unit area approximately every 24 months, a trend referred to as Moore’s Law, leading to unit cost benefits. However, as semiconductor process nodes have moved to much smaller geometries, the challenges of patterning and manufacturing semiconductor transistors have reversed the cost reductions associated with Moore’s Law. As a result, semiconductor companies that have traditionally leveraged this unit cost benefit will no longer be able to produce a next generation product where the cost per transistor is lower than their current generation product. Therefore, the justification to use the next generation process node is going to be driven by either performance, power or integration.

The following chart shows estimated manufacturing cost per 100 million gates at various process nodes, as reported by IBS:

In our view, this point of inflection combined with the escalating design cost is further increasing the need for a new, reliable solution that combines innovation in the design process and IC architecture to cost-effectively deliver customized and differentiated ICs, while minimizing painful tradeoffs in time-to-market, performance, power consumption, development cost and unit cost.

We invented a way to customize ICs while avoiding the painful tradeoffs associated with ASICs, ASSPs and FPGAs. Our eASIC platform incorporates a versatile, pre-defined and reusable base array, which is built using standard mask layers. One custom mask layer is then inserted into the base array, which customizes the IC to meet a specific customer’s requirements. The ability to customize an IC with a single mask layer is achieved using our proprietary architecture and design tools. Once the IC design is completed, the custom mask layer is fabricated and added to the pre-manufactured base array to complete the manufacturing process. The final packaged and tested IC is then shipped to the customer for implementation into their specific application. We believe this approach provides the optimal combination of benefits including fast time-to-market, high performance, low power consumption, low unit cost and low development cost for our customers.

ASICs, ASSPs and FPGAs consist of approximately 50 individual mask layers in the manufacturing process. In an ASIC or ASSP, the multiple mask layers are fixed, but are customized for the specific customer design or application. The embedded logic, memory and other functions defined by these layers within the IC are fixed once the IC is designed and manufactured. The multiple mask layers of an FPGA are also fixed but are generic and not specific to a customer or application, and the logic, memory and metal interconnect that are defined by these layers are programmable through memory.

Our base arrays have been designed for maximum flexibility, which allows the same base array to be used for multiple applications and by a variety of customers. For example, the same base array has been used for solid-state drives in enterprise storage and for remote radio heads in wireless infrastructure, with the only difference between these two ICs being the single custom mask layer. This flexibility has been created in the base array by designing for versatility, including the layout of the logic and memory blocks and the input/output (I/O) circuitry in the IC. Many elements, such as test logic, clocking structures and power distribution layers that would normally be designed as part of the custom IC flow have been embedded into our base arrays. Because of the high relative performance of the base array, we do not need to pre-layout and “harden” high-speed interface protocol functions in the base array. This ability to use our high speed interfaces to support any industry standard or proprietary high-speed protocol significantly adds to the versatility of our base array.

In addition, we are able to manufacture our base arrays up to the point of the single mask inclusion, which can save up to ten weeks of manufacturing time.

Our highly differentiated technology enables us to use a single mask to customize the entire IC for a unique customer or application, while the rest of the approximately 50 mask layers are common among multiple customers or applications. Our OEM customers are able to express their own IP with a single mask generated by our proprietary design tools. This single custom mask is used to connect the embedded logic and memory in the correct sequence within the base array. We believe that using this single mask approach enables our product platform to provide customers with the optimal combination of fast time-to-market, high performance, low power consumption, low development cost and low unit cost for our customers.

The ability to customize an IC using a single mask and a versatile base array is enabled by our unique and proprietary physical place and route algorithms. These algorithms are the engine of our design tools, which we refer to as eTools, that creates the single mask to customize the base array. We have developed these algorithms and implemented them into our design tools enabling us to deliver a disruptive combination of time-to-market, performance, power and cost. We believe our proprietary eTools, developed and optimized over a number of years across four generations of products, are easy to use, address the various complexities associated with supporting advanced wafer manufacturing process nodes and create significant barriers to entry. The output of the design tools is a data file that is sent to the wafer fabrication facility to manufacture the custom single mask. We offer use of these tools to our customers at no charge. Consequently, the use of expensive electronic design automation (EDA) tools required by ASICs and ASSPs has been greatly minimized using our approach.

When customers design ICs with our eASIC platform, we are able to offer lower unit prices as their production volumes increase. If, at a later point, a customer needs even lower unit pricing, we offer the customer an efficient migration path from the eASIC platform product to an easicopy ASIC, thereby enabling customers to further reduce device cost and power consumption and increase performance. We also have the ability to directly design standard ASICs for our customers without use of our easicopy methodology. We believe we are unique in being able to offer this continuum of custom IC products that can be tailored to a customer’s market requirements.

We offer our customers an efficient migration path using our easicopy methodology to produce a standard ASIC for very high-volume, cost sensitive use cases. This easicopy ASIC is manufactured using the most appropriate process technology from our foundry partners. easicopy can reuse portions of the eASIC platform design, timing and I/O files. In addition, I/O timing and electrical information can be duplicated when migrating from one product to another. When required, eASIC is also able to supply a pin compatible product to reduce the need for system requalification and board redesign. easicopy therefore mitigates the risks normally associated with the design and manufacture of a standard ASIC, often accelerating the time-to-market. Customer supply chain management is made easier by working with a single supplier throughout the migration. For example, one of our customers, Seagate Technology, has leveraged this approach successfully to achieve a leadership position in the hybrid drive market for notebooks and PCs. In an easicopy migration, we charge a NRE and a unit price per IC.

One example of a customer for whom we successfully created a custom IC solution using our eASIC platform, and later migrated to our easicopy ASIC, is Seagate.

We were initially approached by Seagate in 2009, as they had a revolutionary idea of combining NAND FLASH (Solid State Memory) and conventional spinning disks on a drive for PC’s and notebooks. The drive had to meet high performance requirements and be priced effectively to sell into consumer applications. At the same time, the market for these products did not yet exist, so Seagate wanted to avoid the high NRE associated with an ASIC. Seagate also did not want to take the nearly two years typically required to develop an ASIC.

We worked with Seagate on their product requirements and were awarded a design in 2009. Seagate viewed our unique eASIC platform as the only solution to their issue. Therefore, we did not have a direct competitor during this process. We created a custom IC utilizing this platform. Seagate chose our custom IC solution because of our ability to reduce time-to-market while maintaining high performance, low power consumption and low per unit costs. We began a volume ramp in 2010. For a subsequent Seagate product release, we then used our easicopy methodology to efficiently migrate to an easicopy ASIC. This enabled us to deliver a continuum of solutions for very high volume production at a lower unit price in a market where achieving low cost is critical. We have since deepened our customer relationship to support multiple additional Seagate products, which are shipping in mass volume today. For the year ended December 31, 2014, Seagate accounted for approximately 31% of our revenues.

Huawei is an example of a customer that required a combination of high performance, low power and low unit cost, for whom we were able to showcase the multiple benefits of our eASIC platform. Additionally, Huawei is an example of how we benefit from the long product life cycle of our customers in the wireless communications infrastructure market.

Huawei faced a very typical customer challenge that required them to develop a new custom IC to overcome the data throughput bottlenecks in the backhaul transport network. These bottlenecks were driven by the increased demand for data throughput and required Huawei to develop a custom IC that required high performance but also meet the total cost of ownership targets set by the global operators. FPGAs were not able to meet the performance, power and cost targets, while the time-to-market requirements could not be met using an ASIC.

Huawei provided us with the key parts of their design that required high performance. We were able to demonstrate the performance advantages and power benefits of our 28nm eASIC Nextreme-3 platform versus equivalent process node FPGAs while meeting Huawei’s requirements. We also presented a schedule that met Huawei’s time-to-market requirements. Huawei awarded the design to us in the second quarter of 2013, we delivered prototypes in the first quarter of 2014. This design is currently in production and is estimated to have a minimum of five years of production life.

We offer highly integrated ICs that can be customized for a wide variety of customers, applications and end markets. The eASIC solution consists of the following:

Our proprietary design tools, which we refer to as eTools, are used by us and our customers to design a single mask layer for our eASIC Nextreme product family. Our custom ICs are available in 28nm, 45nm and 90nm CMOS processes nodes. The following table shows the key product lines and features:

We also have the ability to directly design standard ASICs for our customers without use of our easicopy methodology.

Our eASIC Nextreme family enables our customers to reduce power consumption by 50% to 80% and increase performance by 150% to 200% as compared to FPGAs on the same process node. These products are significantly smaller in device size relative to a FPGA, which often results in substantial unit cost savings.

Our eASIC Nextreme family enables our customers to significantly reduce design time against traditional ASIC, resulting in up to more than a year of time saved in the design cycle. This family requires only one mask for customization which reduces the NRE cost from multiple millions of dollars to low hundreds of thousand of dollars.

We use our easicopy methodology to provide our customers with an efficient migration path from the eASIC Nextreme product to an easicopy ASIC, as well as to directly design such ASICs, thereby enabling customers to further reduce device cost and power consumption and increase performance.

Some of our customers begin their design using an FPGA and switch to us to reduce power consumption, enhance performance and reduce costs. We then validate our customer’s product design and provide a device that is a “drop-in-replacement” of the FPGA. This allows our customers to replace an FPGA from any vendor without the need to create a new printed circuit board. We also offer our customers related design services.

Partnering with us helps ensure that our customers have low risk cost reduction solutions along the spectrum from pre-production to very high volume production. easicopy provides OEMs with a low risk, vital addition to their existing value engineering programs. OEMs can be confident that as their product succeeds in the market, they have a clear path to cost reduction.

We sell our products primarily to top-tier OEMs in our target markets. In 2014, we generated revenues from over 14 customers including Ericsson, Fujitsu, Huawei, NEC, Omnivision, Seagate and Toshiba. In 2012, 2013 and 2014, Ericsson and Seagate, our two largest customers, together accounted for 73%, 87% and 93%, respectively, of our total revenues. We currently expect that a relatively small number of customers will continue to account for a significant portion of our revenues for the foreseeable future. However, we believe that based on our existing design wins, our customer concentration will decrease over time. In addition, we believe that, given the market share concentration in our target markets, our customers’ ability to use our platform to provide differentiated products will allow us to expand our market share within our existing customer base and penetrate new customers. We believe this will position us to gain market share within the $78 billion ASIC, ASSP and FPGA markets.

We use a three stage engagement process with our top tier OEM customers. This consists of the following:

We work directly with our customers’ system designers to create demand for our products by providing them with application-specific product information for their system design, engineering and procurement groups. Our technical marketing, sales and field application engineers actively engage with customers during their vendor selection and design processes and provide them with our product capabilities and target applications. We design products to meet the increasingly complex and specific design requirements of our customers. Our typical sales engagement cycle is several months. If successful, this process culminates in a customer decision to use our product in their system, which we refer to as a design award. Typically, volume production begins from nine months to 18 months after the design award. Once one of our products is incorporated into a customer’s design, it is likely to be used for the life cycle of the customer’s product, because a redesign would be time consuming and expensive. We benefit from our deep engagement with our customers by being well-positioned to replace their maturing products and expand into adjacent products.

We use third-party foundries, assembly and test contractors to manufacture, assemble and test our ICs. This outsourced manufacturing approach is a capital efficient model that allows us to focus our resources on the design, sales and marketing of our platform solutions. Our engineers work closely with our foundries and other contractors to increase yields, lower manufacturing costs and improve quality.

Integrated Circuit Fabrication. Our ICs are fabricated using CMOS processes, which provide greater flexibility to engage independent foundries to manufacture our ICs. By outsourcing manufacturing, we are able to avoid the cost associated with owning and operating our own manufacturing facility. We currently outsource our IC manufacturing to Fujitsu, Global Foundries and Taiwan Semiconductor Manufacturing Company. We work closely with these foundries by forecasting our manufacturing capacity requirements on a monthly basis. Our ICs are currently fabricated in several advanced, sub-micron manufacturing processes. Because advanced manufacturing processes lead to enhanced performance, smaller size and lower power requirements, we continually evaluate the benefits and feasibility of migrating to smaller geometry process technology in order to reduce cost and improve performance.

Assembly and Test. Our products are shipped from our third-party foundries to third-party assembly and test facilities where they are assembled, packaged and tested. We outsource all product packaging and substantially all testing requirements for these products to several assembly and test subcontractors, including ASE Electronics in Taiwan and Malaysia, as well as Amkor in the United States. Our products are designed to use standard packages and to be tested with widely available test equipment.

Quality Assurance. We have implemented significant quality assurance and test procedures to assure high levels of product quality for our customers. Our designs are subjected to extensive circuit simulation under extreme conditions of temperature, voltage and processing before being committed to manufacture. We have

completed and have been awarded ISO 9001:2008 certification. In addition, all of our independent foundries and assembly and test subcontractors have been awarded certifications including ISO 9001, TS16949 and ISO 14001.

Our research and development efforts are directed largely to the development of our fifth generation product focused on further increasing performance, lowering unit cost and lowering power consumption. We are also focused on integrating more system functions such as high performance single and multi-core processors and greater SerDes capabilities.

We have assembled a core team of experienced engineers and systems designers, including consultants, in four design centers located in the United States, Malaysia, Romania and Russia. As of December 31, 2014, we had 67 employees in our research and development group. Our technical team typically has, on average, more than 20 years of industry experience with more than 34% having advanced degrees and more than 7% having PhDs. These engineers and designers are involved in advancing our core technologies, as well as applying these core technologies to our product development activities across a number of areas. In 2012, 2013 and 2014, our research and development expenses were $11.9 million, $13.0 million and $13.9 million, respectively.

To protect our core technology and intellectual property, we rely on a combination of intellectual property rights, including patents, trade secrets, copyrights and trademarks and contractual protections. As of December 31, 2014, we had 34 issued and five pending patent applications in the United States. We also have a number of foreign counterparts of these patents and patent applications, consisting of 16 granted patents and six pending applications under the Patent Cooperation Treaty, and no pending applications in the European Office. Our issued patents expire between March 11, 2019 and January 12, 2033. As of December 31, 2014, we also had registered trademarks in the United States for eASIC, easicopy, eASICore, The Configurable Logic Company and eZ-IP.

Our patent applications may not result in the issuance of any patents, and our issued patents may not provide us with any competitive advantages. In addition, any future patent may be opposed, contested, circumvented, designed around by a third party or found to be unenforceable or invalidated. Others may develop technologies that are similar or superior to our proprietary technologies, duplicate our proprietary technologies or design around patents owned or licensed by us.

In addition, we generally control access to and use of our proprietary software and other confidential information through the use of internal and external controls, including contractual protections with employees, contractors, customers and partners. We rely in part on U.S. and international copyright laws to protect our software. All employees and consultants are required to execute confidentiality agreements in connection with their employment and consulting relationships with us. We also require them to agree to disclose and assign to us all inventions conceived or made in connection with the employment or consulting relationship.

Despite our efforts to protect our intellectual property, unauthorized parties may still copy or otherwise obtain and use our software, technology or other information that we regard as proprietary intellectual property.

While we currently possess perpetual licenses on the intellectual property that we build into our products, we may be required in the future to seek additional licenses under patents or intellectual property rights owned by third parties. However, we cannot be certain that third parties will offer licenses to us or that the terms of any licenses offered to us will be acceptable. In addition, any intellectual property litigation could cause us to incur substantial expenses, materially and adversely affect our sales and divert the efforts of our technical and management personnel, regardless of the outcome of any such litigation. In the event we receive an adverse

result in any litigation, we could be required to pay substantial damages, cease sale of products, expend significant resources to develop alternative technology and discontinue the use of processes requiring the relevant technology.

We compete with numerous domestic and international semiconductor companies. We consider our primary competitors to be other companies that can provide custom semiconductor solutions, including Altera, Avago, Broadcom, Marvell, Toshiba and Xilinx. Most of these competitors offer products that differ in the semiconductor device customization method.

We believe we compete favorably with our competitors on the basis of these factors. However, many of our competitors have greater financial and other resources with which to pursue marketing, technology development, product design, manufacturing, quality, sales and distribution of their products.

As of December 31, 2014, we had 106 full-time employees located in the United States, Malaysia, Japan and Romania, which was comprised of 67 employees in engineering, research and development, 12 in sales and marketing, 18 in general and administrative and nine in operations. None of our employees is represented by a labor union and we consider our employee relations to be good.

Our principal executive offices are located in a leased facility in Santa Clara, California, consisting of approximately 18,526 square feet of office space under a lease that expires at the end of October 2016. This facility accommodates product design and our principal software engineering, sales, marketing, operations and finance and administrative activities. Our offices in Malaysia are located in a leased facility in Penang, consisting of approximately 8,585 square feet total of office space under two leases that expire at the end of July 2017, and end of September 2017. This facility accommodates engineering, operations, customer engineering and administrative teams. Our offices in Romania are located at a leased facility in Brasov, consisting of approximately 2,950 square feet of office space under a lease that expires at the beginning of March 1, 2017. This facility accommodates customer engineering, engineering and administrative teams. We do not own any real property. We believe that our leased facilities are adequate to meet our current needs and that additional facilities are available for lease to meet future needs.

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not currently a party to any legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, operating results, financial condition or cash flows.

The following table sets forth information regarding our executive officers and directors as of February 10, 2015:

Ronnie Vasishta has served as our Chief Executive Officer since May 2009 and as a member of our board of directors since May 2005. From December 2004 to May 2009, Mr. Vasishta served in a number of positions at the Company, including Vice President of Marketing, Chief Executive Officer, President and Chief Operating Officer. From February 2001 to November 2004, Mr. Vasishta served as Vice President of Technology Marketing at LSI Corporation, an electronics company. Mr. Vasishta holds a B.S. in Electrical and Electronic Engineering from Trent University. Our board of directors believes that Mr. Vasishta’s extensive experience in marketing, manufacturing, design and operational management in the semiconductor field and his long-standing services in various management positions at the Company qualify him to serve on our board of directors.

Richard J. Deranleau has served as our Chief Financial Officer and Senior Vice President, Finance since June 2014. From January 2012 to June 2014, Mr. Deranleau served as Senior Vice President, Finance and Chief Financial Officer at Fujitsu America Inc., an information technology products and services company. From January 2006 to May 2011, Mr. Deranleau served as Vice President Finance and Chief Financial Officer at Brocade Communications Systems, Inc., an information technology company. Mr. Deranleau holds a B.S. in Economics from Iowa State University and an M.B.A. from San Jose State University.

Ranko Scepanovic, Ph.D. has served as our Chief Technology Officer and Senior Vice President, Engineering since February 2011. From May 2008 to January 2011, Dr. Scepanovic served as our Senior Vice President of Advanced Technology. From October 1997 to May 2008, Dr. Scepanovic served as Vice President of the Advanced Development Group at LSI Corporation, an electronics company. Dr. Scepanovic holds a Ph.D. in Mathematical Sciences from the University of Belgrade.

Jasbinder Bhoot has served as our Vice President, Worldwide Marketing since April 2009. From October 2005 to April 2009, Mr. Bhoot served as our Senior Director of Intellectual Property Marketing. From November 1999 to October 2005, Mr. Bhoot served as Senior Manager of Vertical Marketing at Xilinx Inc., a technology company. Mr. Bhoot holds a B.S.Eng in Electronic Engineering from the University of Westminster and an M.B.A. from the University of Nottingham.

Michael Stacy Fender has served as our Vice President, Worldwide Sales since May 2014. From November 2012 to April 2014, Mr. Fender served as a consultant for several different companies in the electronics industry. From November 2008 to October 2012, Mr. Fender served as Corporate Vice President of Worldwide Sales at Lattice Semiconductor, a semiconductor company. Mr. Fender holds a B.S. in Computer Engineering from Auburn University.

Matthew Ng has served as our Vice President, Legal, General Counsel and Corporate Secretary since January 2015. From April 2012 until January 2015, Mr. Ng served as Senior Director, Legal at Brocade Communications, and as its acting Senior Director, Legal from October 2011 until April 2012. From July 2007 until October 2011, Mr. Ng served as an Axiom Attorney at Axiom Global, a legal services company. Mr. Ng previously held Associate General Counsel positions at Oracle Corporation and Knight-Ridder, Inc. Mr. Ng holds a B.S. in Business Administration and a J.D. from the University of California, Berkeley.

Wayne Cantwell has served as a member of our board of directors since July 2005. Since 2003, Mr. Cantwell has served as a General Partner at Crescendo Ventures, a venture capital firm, where he works with companies in the semiconductor, SIP and technical software arenas. From 1999 to January 2001, Mr. Cantwell served as President and Chief Executive Officer of inSilicon Corporation, a semiconductor intellectual property company. Mr. Cantwell holds a B.S. in Electronics Engineering from Devry Institute of Technology. We believe Mr. Cantwell’s extensive experience in the semiconductor and software industries qualifies him to serve on our board of directors.

Edward H. Frank, Ph.D. has served as a member of our board of directors since October 2013. From January 2014 to present, Dr. Frank has served as Chief Executive Officer of Cloud Parity, a mobile application company. From May 2009 to October 2013, Dr. Frank served as Vice President of Macintosh Hardware Systems Engineering at Apple, Inc., an electronics and software company. From May 1999 to March 2008, Dr. Frank served as Vice President of Research and Development at Broadcom Corporation, a broadband communications company, and in a consultant capacity from April 2008 to April 2009. Since June 1996, Dr. Frank has served as a Technology Partner at Advanced Technology Ventures, a venture capital firm. Dr. Frank holds an M.S. and B.S. in Electrical Engineering from Stanford University and a Ph.D. in Computer Science from Carnegie Mellon University where he has served as a Trustee since July 2000. Dr. Frank currently serves on the board of directors of Analog Devices, Inc. We believe Dr. Frank’s technical and design expertise in the semiconductor industry qualifies him to serve on our board of directors.

Ronald S. Jankov has served as a member of our board of directors since August 2014. From February 2012 to May 2014, Mr. Jankov served as Senior Vice President and General Manager, Processors and Wireless Infrastructure of Broadcom Corporation, a semiconductor company. From 2000 to 2012, Mr. Jankov served as President, Chief Executive Officer and Director of NetLogic Microsystems, Inc., a semiconductor company. Mr. Jankov also serves on the board of directors of Knowles Electronics Corp., a technology company. Mr. Jankov holds a B.S. in Physics from Arizona State University. We believe Mr. Jankov’s leadership experience and background in facilitating the growth of technical companies qualify him to serve on our board of directors.

Michael R. Kourey has served as a member of our board of directors since June 2013. Since May 2013, Mr. Kourey has served as a Partner at Khosla Ventures, a venture capital firm, where he previously served as an Operating Partner from April 2012 to May 2013. From July 1991 to February 2012, Mr. Kourey served in a

variety of roles at Polycom, Inc., a communications solutions company, most recently as Chief Financial Officer. Mr. Kourey also served as a director of Polycom from January 1999 to May 2011. Mr. Kourey holds a B.S. from the University of California, Davis and an M.B.A. from Santa Clara University. Mr. Kourey currently serves on the board of directors of Aruba Networks, Inc. and various private companies. We believe Mr. Kourey’s experience in financial and accounting leadership positions and other board and audit committee experience qualifies him to serve on our board of directors.

Tara Long has served as a member of our board of directors since June 2013. Since February 2006, Ms. Long has served as Vice President of Strategy and Corporate Development at Seagate, a data storage company. From September 2001 to December 2005, Ms. Long served as Managing Director at MCG Capital Corporation, a commercial finance company. Ms. Long also previously served as Managing Director at C.E. Unterberg Towbin, an investment banking firm. Ms. Long holds a B.A. in Economics from Marquette University and an M.B.A from the University of Maryland. We believe Ms. Long’s experience in corporate strategy, together with her historical perspective on the company, qualify her to serve on our board of directors.

Our business and affairs are organized under the direction of our board of directors, which currently consists of six members. The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. Our board of directors meets on a regul


Non-accelerated filer		x (Do not check if a smaller reporting company)		Smaller reporting company		¨



Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price⁽¹⁾⁽²⁾	Amount of Registration Fee
Common Stock, $0.001 par value per share	$75,000,000	$8,715


MORGAN STANLEY	DEUTSCHE BANK SECURITIES

RAYMOND JAMES	BAIRD	WILLIAM BLAIR


	Page
Management		100
Executive and Director Compensation		107
Certain Relationships and Related Party Transactions		121
Principal Stockholders		126
Description of Capital Stock		130
Shares Eligible for Future Sale		135
Material U.S. Federal Income and Estate Tax Consequences to Non-U.S. Holders of Our Common Stock		137
Underwriting		140
Legal Matters		146
Experts		146
Where You Can Find Additional Information		146
Index to Consolidated Financial Statements		F-1


	As of December 31, 2014
	Actual			Pro Forma			Pro Forma As Adjusted⁽¹⁾
	(in thousands, except share and per share data)
Cash and cash equivalents	$	8,790		$	8,790


Long-term debt, including current portion	$	18,423		$	18,423
Preferred stock warrant liability		1,203			—
Non-convertible Series A-1 preferred stock, $0.001 par value: 40,000,000 shares authorized and 533,301 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted		17,783			—
Convertible Series A-2 preferred stock, $0.001 par value: 450,000,000 shares authorized and 4,532,662 issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted		23,503			—
Preferred stock, $0.001 par value: no shares authorized, issued or outstanding, actual; and 10,000,000 shares authorized and no shares issued or outstanding, pro forma and pro forma as adjusted		—			—
Common stock, $0.001 par value: 1,575,000,000 shares authorized and 9,868,802 shares issued and outstanding, actual; 100,000,000 shares authorized and 15,014,485 shares issued and outstanding, pro forma; and shares issued and outstanding, pro forma as adjusted		11,325			53,814
Accumulated deficit		(46,420	)		(46,420	)

Total stockholders’ equity (deficit)		(35,095	)		7,394

Total capitalization	$	25,817		$	25,817


	Page
Prospectus Summary		1
The Offering		6
Risk Factors		12
Special Note Regarding Forward-Looking Statements		39
Industry and Market Data		41
Glossary		42
Use of Proceeds		43
Dividend Policy		45
Capitalization		46
Dilution		48
Selected Consolidated Financial Data		51
Management’s Discussion and Analysis of Financial Condition and Results of Operations		53
Business		85


Assumed initial public offering price per share, the midpoint of the price range set forth on the cover page of this prospectus			$
Historical net tangible book value per share as of December 31, 2014	$(3.57	)
Pro forma increase in net tangible book value per share as of December 31, 2014 attributable to this offering
Pro forma net tangible book value per share as of December 31, 2014
Increase in pro forma net tangible book value per share attributable to investors participating in this offering

Pro forma as adjusted net tangible book value per share after this offering

Pro forma as adjusted dilution per share to investors participating in this offering			$


	Shares Purchased					Total Consideration					Average Price Per Share
	Number		Percent			Amount		Percent			Average Price Per Share
	(In thousands)
Existing stockholders before this offering		15,014,485			%	$	135,764			%	$	9.04
Investors participating in this offering

Total				100	%	$			100	%


	As of December 31,
	2013			2014
Consolidated balance sheet data:
Cash and cash equivalents	$	7,423		$	8,790
Working capital		15,343			19,630
Total assets		24,912			43,118
Total deferred revenues		1,152			321
Total non-current income taxes payable		—			3,081
Total capital lease, non-current portion		—			255
Total long-term debt, non-current portion		10,748			15,949
Vendor financing arrangement		1,381			1,280
Convertible preferred stock warrant liabilities		271			1,203
Total preferred stock		41,286			41,286
Total stockholders’ deficit		(35,508	)		(35,095	)


	Year Ended December 31,										Change
	2013		% of Total Revenues			2014		% of Total Revenues			$			%
	(Dollars in thousands)
Revenues:
Product	$	26,111		88	%	$	65,086		97	%	$	38,975			149	%
Service		3,666		12			2,294		3			(1,372	)		(37	)

Total revenues	$	29,777		100	%	$	67,380		100	%	$	37,603			126	%


	Three Months Ended
	March 31, 2013			June 30, 2013			September 30, 2013			December 31, 2013			March 31, 2014			June 30, 2014			September 30, 2014			December 31, 2014
	(In thousands)
Quarterly results of operations:
Revenues:
Product	$	4,202		$	5,295		$	7,364		$	9,250		$	12,265		$	14,411		$	18,946		$	19,464
Service		502			1,035			1,280			849			1,312			184			150			648

Total revenues		4,704			6,330			8,644			10,099			13,577			14,595			19,096			20,112

Cost of revenues:
Product		2,465			2,856			4,408			5,239			7,040			8,857			10,697			10,772
Service		224			291			105			128			420			93			53			70

Total cost of revenues		2,689			3,147			4,513			5,367			7,460			8,950			10,750			10,842

Gross profit		2,015			3,183			4,131			4,732			6,117			5,645			8,346			9,270

Operating expenses:
Research and development		3,300			3,164			3,235			3,327			3,038			3,270			3,531			4,031
Sales and marketing		1,448			1,173			1,064			1,149			1,183			1,447			1,372			1,709
General and administrative		1,060			664			809			543			746			870			1,598			2,235

Total operating expenses		5,808			5,001			5,108			5,019			4,967			5,587			6,501			7,975

Income (loss) from operations		(3,793	)		(1,818	)		(977	)		(287	)		1,150			58			1,845			1,295
Interest expense		(207	)		(207	)		(230	)		(291	)		(301	)		(301	)		(372	)		(469	)
Other income (expense), net		(9	)		(1	)		68			(46	)		(88	)		(40	)		(149	)		(559	)

Income (loss) before income taxes		(4,009	)		(2,026	)		(1,139	)		(624	)		761			(283	)		1,324			267
Provision for income taxes		(11	)		(11	)		(16	)		(6	)		(360	)		(179	)		(934	)		(1,743	)

Net income (loss)	$	(4,020	)	$	(2,037	)	$	(1,155	)	$	(630	)	$	401		$	(462	)	$	390		$	(1,476	)


	Three Months Ended
	March 31, 2013			June 30, 2013			September 30, 2013			December 31, 2013			March 31, 2014			June 30, 2014			September 30, 2014			December 31, 2014
	(As a percentage of total revenues)
Revenues:
Product		89	%		84	%		85	%		92	%		90	%		99	%		99	%		97	%
Service		11			16			15			8			10			1			1			3

Total revenues		100			100			100			100			100			100			100			100

Cost of revenues:
Product		52			45			51			52			52			61			56			54
Service		5			5			1			1			3			1			—			—

Total cost of revenues		57			50			52			53			55			62			56			54

Gross profit		43			50			48			47			45			38			44			46

Operating expenses:
Research and development		70			50			37			33			22			22			18			20
Sales and marketing		31			19			12			11			9			10			7			8
General and administrative		23			10			9			5			5			6			8			11

Total operating expenses		124			79			58			49			36			38			33			39

Income (loss) from operations		(81	)		(29	)		(10	)		(2	)		9			—			11			7
Interest expense		(4	)		(3	)		(3	)		(3	)		(2	)		(2	)		(2	)		(2	)
Other income (expense), net		—			—			1			—			(1	)		—			(1	)		(3	)

Income (loss) before income taxes		(85	)		(32	)		(12	)		(5	)		6			(2	)		8			2
Provision for income taxes		—			—			—			—			(3	)		(1	)		(5	)		(9	)

Net income (loss)		(85	)%		(32	)%		(12	)%		(5	)%		3	%		(3	)%		3	%		(7	)%


	Total		Less than 1 year		1 to 3 years		3 to 5 years		Over 5 years
	(In thousands)
Operating lease obligations⁽¹⁾	$	888	$	433	$	455	$	—	$	—
Capital lease obligations⁽²⁾		376		121		255		—		—
Time-based software license commitments⁽³⁾		4,484		2,521		1,963		—		—
Non-cancellable open purchase orders		3,774		3,774		—		—		—
Vendor financing arrangement⁽⁴⁾		1,280		—		1,280		—		—
Debt maturities⁽⁵⁾		16,767		818		15,949		—		—

Total	$	27,569	$	7,667	$	19,902	$	—	$	—


	Years Ended December 31,
	2012	2013	2014
Fair value per share of common	$0.75	$0.75	$1.28 – $8.83
Expected volatility	54%	46%	46% – 49%
Expected life in years	6.08	5.77 – 6.08	6.08
Risk-free interest rate	1.01% – 1.17%	1.08% – 1.35%	1.78% – 1.93%
Dividend yield	—	—	—


Option grant date	Number of shares underlying options		Exercise price per share		Common stock fair value per share*
February 2014		148,807	$	0.75	$	1.28
June 2014		331,909		1.50		1.99
August 2014		417,437		2.20		3.28
October 2014		165,931		4.06		6.21 – 7.61
November 2014		27,000		4.06		8.83


Name	Age		Position(s)
*Executive Officers*

Ronnie Vasishta		52	President, Chief Executive Officer and Director

Richard J. Deranleau		56	Chief Financial Officer and Senior Vice President, Finance

Ranko Scepanovic, Ph.D.		60	Chief Technology Officer and Senior Vice President, Engineering

Jasbinder Bhoot		50	Vice President, Worldwide Marketing

Michael Stacy Fender		54	Vice President, Worldwide Sales

Matthew Ng		46	Vice President, Legal, General Counsel and Corporate Secretary

*Non-Employee Directors*

Wayne Cantwell⁽¹⁾⁽²⁾		50	Director

Edward H. Frank, Ph.D.⁽²⁾⁽³⁾		58	Director

Ronald S. Jankov⁽¹⁾⁽³⁾		56	Director

Michael R. Kourey⁽¹⁾⁽³⁾		55	Director

Tara Long⁽²⁾		47	Director



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