10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission File Number 0-25996

TRANSWITCH CORPORATION

(Exact name of Registrant as Specified in its Charter)

Delaware	06-1236189
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

Three Enterprise Drive

Shelton, Connecticut 06484

(Address of principal executive offices, including zip code)

Telephone (203) 929-8810

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Title of class	Name of exchange on which registered
Common Stock, par value $.001 per share	Nasdaq Capital Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨   No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ¨   No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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):  

Large Accelerated Filer ¨	Accelerated Filer ¨
Non-Accelerated Filer ¨	Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨   No x

The aggregate market value of the outstanding common stock, other than shares held by persons who may be deemed affiliates of the Registrant, on June 30, 2012 was approximately $31.4 million. At March 18, 2013, as reported on the Nasdaq Capital Market, there were 37,547,935 shares of common stock, par value $.001 per share, of the Registrant outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the Registrant’s Proxy Statement for the 2013 Annual Meeting of Shareholders are incorporated by reference in Part III, Items 10, 11, 12, 13 and 14 of this Annual Report on Form 10-K.

Item 1.    Business

 The following description of our business should be read in conjunction with the information included elsewhere in this document. The description contains certain forward-looking statements that involve risks and uncertainties. When used in this document, the words “intend,” “anticipate,” “believe,” “estimate,” “plan,” “expect” and similar expressions as they relate to us are included to identify forward-looking statements. Our actual results could differ materially from the results discussed in the forward-looking statements as a result of risk factors set forth elsewhere in this document. See also, “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

COMPANY OVERVIEW

TranSwitch Corporation is a Delaware corporation incorporated on April 26, 1988. Our principal executive offices are located at 3 Enterprise Drive, Shelton CT 06484, and our telephone number at that location is (203) 929-8810. Our Internet address is www.transwitch.com. Our common stock trades on the Nasdaq Capital Market under the symbol “TXCC”.

We provide innovative integrated circuit (IC) and intellectual property (IP) solutions that deliver core functionality for video, voice, and data communications equipment for the customer premises and network infrastructure markets.  For the customer premises market, we offer multi-standard, high-speed interconnect solutions enabling the distribution and presentation of high-definition (HD) video and data content for consumer electronics applications.

High-speed interconnect solutions include HDMI, DisplayPort and Ethernet IP cores and our recently introduced product family HDplay, which incorporates our proprietary HDP technology. Our HDP technology combines HDMI 1.4 and DisplayPort 1.1 and supports either standard with a single connector. The applications for this product family include projectors, AVR systems, HDTVs, video distribution systems and monitors. Our interoperable connectivity solutions are sold to original equipment manufacturers (OEMs) and original design manufacturers (ODMs) for use in consumer electronics. In addition, we have licensed this technology to Samsung, Intel, Texas Instruments, IBM, NEC, TSMC and many others to be incorporated in their products.

For the network infrastructure or telecom market we provide integrated multi-core network processor system-on-a-chip solutions for fixed, 3G and 4G mobile, VoIP and multimedia applications. Network infrastructure processing equipment includes multi-media processing engines to address multiple carrier segments such as wireline and wireless gateways, session border controllers, media resource functions, multi-service access nodes, passive optical network multi-dwelling units and translation gateways.  Enterprise applications include VoIP private branch exchanges. Communication network premises equipment includes IP multimedia subsystem and Voice over LTE capable 4G/LTE fixed wireless gateways, residential gateway routers, small office, home office routers and secure VoIP private branch exchanges. We have developed and maintained a broad telecom intellectual property portfolio. We have leveraged this portfolio by licensing our software and, from time to time, selling our patents.

In connection with developments in our industry and our long-term growth strategy, we continually evaluate our portfolio of businesses to ensure that we are investing in those businesses that will contribute to shareholder value over the long term. While we continue to offer our suite of broadband wireline and wireless telecom products, we have strategically refocused our efforts to our interconnect technologies which we believe are differentiated and provide the greatest opportunity of future growth as further described below.

Recent developments:

During the third quarter of 2012, we effectuated a major restructuring which significantly reduced operating expenses. Our operating expenses, excluding restructuring and impairment charges, went from $7.5 million in the second quarter of 2012 to $6.0 million and $6.3 million in third and fourth quarter of 2012 respectively. All product and software development programs related to our telecom product lines were cancelled and we redeployed all of our remaining research and development resources in India and Israel to our interoperable connectivity solutions for consumer electronic and personal computer markets. We also announced our intentions to sell our non-strategic network infrastructure telecom assets. During the third quarter, we announced that we retained a leading patent broker to sell our telecom patent portfolio. Although we will continue to offer our telecom products for the foreseeable future, we will not make any future software enhancements for the software embedded in our communications processor and media system-on-a-chip product lines. Our customers will have the opportunity to license the applicable software if they would like to make further enhancements. To further lower our operating costs, we issued last time buy announcements to a number of our customers of lower volume product lines that have reached their maturity, which afford our customers the opportunity to purchase products to complete their production before our products are discontinued. We also effectuated restructurings in the first and third quarters of 2011 and we continue to assess our cost structure in relationship to our revenue levels, which may necessitate further expense reductions in the future.

Strategy

The company’s primary objective is to become the world leader in video interconnect technology serving the consumer electronic marketplace. Our management undertook a strategic planning process in 2010 and concluded that due to the shrinking telecommunications market and its competitive factors that the best course of action for the company was to deploy its core competencies in high speed communications to the consumer electronics market. Since 2010, management has repositioned the company to leverage its differentiated, high-speed serial communication technology in the video connectivity market in order to grow the top line and reach profitability by gaining share in this large and growing market segment. The company is harvesting its traditional telecommunication business to partially fund the growth of the new video connectivity business. Research and development and selling, general and administrative spending in the telecom segment have been curtailed and the company’s resources are primarily focused on product development, marketing and sales of new video connectivity products.

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Our Products and the Functions They Serve

Broadband CPE

a) Connectivity Solutions- HDMI, DisplayPort, MHL©, HDP™, Ethernet IP Cores and MHDP™ Transceivers

We are a recognized worldwide leader in the licensing of interconnect technologies.  Our intellectual property serves as a key building block for many varied semiconductor applications ranging from consumer electronics to home network equipment to industrial and automotive applications. Our Ethernet technology has been adopted and incorporated by many of the world’s leading semiconductor and equipment manufacturers. Our HDP™ family of products specifically address the HDMI and DisplayPort™ standards for consumer electronics and PC appliances. These technologies have also been licensed by some of the leading semiconductor companies serving the consumer electronics and computer equipment industry.  HDP™ is a patented technology developed for High Definition Television (HDTV) and 3-Dimensional Television (3D-TV) applications.  It combines both HDMI 1.4 and DisplayPort capability in a single circuit enabling HDTV and 3D-TV manufacturers to support either standard with a single connector.  Conceived from our HDP™ technology, our IP cores support aggregate data rates over 10Gbps and are designed to meet all HDMI 1.4 resolution requirements including 3D 1080p at 60Hz, the highest resolution for 3D televisions, and 4K x 2K, the resolution required for digital theatres.  In addition, we developed an IP core that supports Ethernet over HDMI (HEC), and includes the audio return channel (ARC), which eliminates the need for separate audio cables between televisions and home entertainment systems. The result is a technology that elevates the home entertainment experience to new levels of picture quality for consumers while simplifying the overall manufacturing process for HDTV and 3D-TV manufacturers.  In 2011, we introduced HDplay™, our first IC utilizing our HDP™ technology.  HDplay™ enables HDTV and 3D-TV manufacturers to support either standard with a single connector and also incorporates our AnyCable™ technology, which provides superior functionality with any low-cost HDMI™ and DisplayPort cables.  In January 2013, we introduced new HDplay products with the addition of MHL TM capability to support mobile device connectivity for HDTVs and pico projectors

HDwire™ is a video interface solution designed to be used inside flat panel televisions and monitors. Our HDwire™ video interface solution supports current and next-generation HD video displays. The ultra-fast HDwire™ panel interface ensures reliable, crystal-clear video for the high resolution computer and TV displays at low power consumption and low system design cost. We are offering HDwire™ as licensable IP cores and plan to offer an IC line in the future.

Our MystiPHY 110 and MystiPHY 1011 DSP-based Ethernet transceiver cores address 10/100 megabit per second and 10/100/1000 megabit per second Ethernet data-rate specifications. Both cores are fully compliant with IEEE standards, and the DSP-based design approach provides superior performance that exceeds standard requirements for cable length and noise immunity, while providing exceptionally low power consumption and small die size.

b) Multi-Service Communications Processors

Our Atlanta processor family is a multi-service SoC for customer premises equipment that supports toll-quality telephone voice, fax and routing functionality over any broadband access network. System designs based on the Atlanta product family can connect directly to a broadband modem or be added as part of a small office / home office, or SOHO, network. Our A2000 is a multi-core SoC supporting wire-speed Gigabit routing performance, up to eight channels of low-bit rate VoIP processing or four channels of HD voice processing and a rich set of data security features. A2000 fulfills the high performance requirements for next generation residential or small business of gateway appliances. A1000 supports a wide range of applications including voice-enabled gateway routers for home and small office use, as well as IEEE 802.11n WiFi routers.

Products for Converged Network Infrastructure

a) Infrastructure VoIP Processors

Our Entropia series of processors are highly-integrated SoC solutions each incorporating multiple embedded reduced instruction set computing and digital signal processing processors for encoding, decoding and transcoding VoIP traffic according to a multitude of protocols and standards adopted in different networks worldwide. Entropia III and IV can process up to 1,008 voice channels for high-capacity applications while our Entropia II LP product supports medium density applications requiring up to 336 voice channels. Our Entropia series is designed for wire-line and wireless carrier equipment such as Media Gateways, Soft Switches, IMS and MSAN as well as in Enterprise Network applications such as IP-PBX. Because different VoIP coding standards are used by different network operators, a vital attribute of our Entropia processors is their ability to recognize and dynamically adapt to the appropriate coding standard and to trans-code the voice traffic from one standard to another as required. In addition to VoIP processing, our Entropia products provide a complete system-level solution by incorporating a variety of other related functions such as FAX relay, packet processing, circuit emulation, signaling and control required for operation in the carrier’s network.

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b)    Access VoIP Processors

A large percentage of fiber-based broadband access deployments are hybrid fiber-copper architectures such as FTTN or FTTB. This is particularly true in countries such as China where large apartment buildings rather than single family houses are the norm. Even in the United States, AT&T has chosen to deploy Fiber-to-the-Node rather than Fiber-to-the-Home based on its own economic analysis. In these Hybrid architectures, the fiber cable terminates in Optical Network Termination (ONT) equipment designed to serve multiple subscribers, is placed in a neighborhood site or in the basement of the apartment building, and the individual subscriber locations are served over copper wires using VDSL or Ethernet technology.

Voice traffic is carried over the fiber portion of the network in packetized form (VoIP), and is decoded and converted to the analog form at the ONT so it can be transmitted over the copper wires. Our Entropia™ III-C series of processors is designed to serve these applications. This new series of Entropia processors scales the market-proven features and performance advantages of our larger flagship Entropia III and Entropia-IV series into an appropriately-sized, highly-integrated SoC that is ideally matched to the requirements for broadband access ONT equipment.

c)    EoS / EoPDH Mappers and Framers

Our products address the predominant formats and data speeds employed in the access portion of the network. We provide solutions that cover both North American (SONET/Async) as well as International (SDH/PDH) standards. Data rates covered by our products range from 1.5 mb/s to 2.5 Gb/s.

Our EtherMap and EtherPHAST product families address the need of carriers to efficiently transport data traffic over their existing SONET, and SDH/PDH networks. Our VTXP products provide low-level grooming of time-division multiplexing circuits which will continue to be a requirement throughout the transition to IP and will be performed predominantly in smaller edge platforms rather than larger metro platforms. Our products are optimized for these edge platforms, and will continue to be applicable as will our broad line of mappers and framers.

Technology

Our products are multi-million gate devices, which are implemented in 65, 130 and 180 nanometer complementary metal oxide semiconductor (CMOS) silicon technologies. They incorporate high speed mixed signal circuitry. Some of these devices are equipped with embedded processors that provide added functionality through software. 

We have developed substantial expertise in communications algorithms. Communications algorithms are the processes and techniques used to transform a digital data stream into a specially conditioned analog signal suitable for transmission across copper telephone wires. We possess a thorough understanding of, and practical experience in, the process of transmitting and receiving a digital data stream in analog form. We also have significant experience developing algorithms to enable voice compression, echo cancellation and telephony signal processing. This expertise allows us to design highly-efficient algorithms that in turn enable us to create products with high performance, re-programmability and low power consumption.

We are experts in the area of highly-complex, high-speed digital chip development. We design both the logic and the physical layout for our products. This design expertise has enabled us to develop tightly integrated digital chips that have small form factors with low power consumption. We have continued to improve upon our internal chip layout capabilities and our design for test capability, both of which have resulted in significant improvements in silicon efficiency, silicon testability and time-to-market. Our SoC definition, architecture, verification expertise and design methodology ensure that hardware and software architectural trade-offs yield desired performance testing from our VLSI solutions. The SoC performance simulation, emulation, verification and stress testing, using Test Benches and test equipment, ensure that our products meet carrier class quality, performance and reliability requirements.

 We have expertise in developing software embedded in our semiconductor products that addresses the needs of network equipment manufacturers and service providers. In addition, our understanding of various operating systems and personal computer environments allows us to create software embedded on the chip that provides for simple installation and operation.

The expertise of our personnel, our rigorous design methodology and our investment in state-of-the-art electronic design automation tools enable us to develop the complex and innovative products our customers demand.

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Sales and Marketing

 With our recent change in strategic direction, our sales strategy primarily focuses on worldwide suppliers of high-speed communications and communications-oriented equipment. We sell our products using a direct sales support team and marketing field offices located in North America, Taiwan, China, Japan Korea and Europe, and through a network of distributors located throughout North America, Asia and Europe. Our sales strategy for all products is to achieve design wins within key platforms in order to grow the markets in which we participate.

Our marketing strategy focuses on key customer relationships to promote early adoption of our technology in the products of market-leading OEMs. Through our customer sponsorship program, OEMs collaborate on product specifications and applications while participating in product testing in parallel with our own certification process. This approach accelerates our customers’ time-to-market delivery while enabling us to achieve early design wins for our products and volume forecasts for specific products from these sponsors.

Our customers include consumer electronics, telecommunications, data communications, wireless and wire-line equipment, internet access, customer premises, computing, process control, and defense equipment vendors.

Our worldwide direct sales force, technical support personnel and design engineers work together in teams to support our customers. We have technical support capabilities located in key locations throughout the world as well as a technical support team at our headquarters as a backup to the field applications engineers.

Customers

We have licensed HDMI, DisplayPort, Ethernet and other IP Cores to firms such as Intel, Samsung, Texas Instruments, Analog Devices, Philips NXP, IBM and NEC. We have sold our products and services to over 400 customers since shipping our first product in 1990. Our customers include public network systems OEMs that incorporate our products into telecommunications systems, WAN and LAN equipment OEMs, internet-oriented OEMs, communications test and performance measurement equipment OEMs and government, university and private laboratories that use our products in advanced public network, and WAN and LAN developments.

Historically, a small number of our customers have accounted for a substantial portion of our net revenues. In 2012, 33% of our net revenues were from two customers.  Note 9 of the Notes to Consolidated Financial Statements provides data on major customers for the last three years.

Research and Development

During the third quarter of 2012, we deployed all research and development resources in India and Israel to our interoperable connectivity solutions for consumer electronic and personal computer markets. Our research and development focus will be to develop products for the latest connectivity standards, and products featuring higher-bandwidth and lower-power links, efficient algorithms, architectures and feature-rich implementations for consumer electronics, personal computing and mobile applications.

We have extensive experience in the areas of high-speed interconnect architecture, circuit design, logic design/verification, firmware/software, and digital audio/video systems.

Research and development expenditures were $15.9 million in 2012, $18.9 million in 2011 and $16.0 million in 2010.  

All products are developed and delivered using documented design processes (product life cycle) operating under a quality management system certified to meet the ISO 9001:2008 international standard. Our design tools and development environment are continuously reviewed and updated to improve design, verification, fabrication and validation methodology, design flow and processes of our product life cycle.

From time to time, we subcontract design services and acquire products from third parties to enhance our product lines. Our internal research and development organization thoroughly reviews the external development processes and the design of these products as part of our quality assurance process.

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Patents and Licenses

We currently have in excess of 35 United States patents with an additional patents pending in the United States. For some of our United States patents, we have coverage in several foreign countries. Internationally, there are patents pending either in specific countries or in the European Patent Office (EPO) or under the Patent Cooperative Treaty (PCT). In addition, we have lifetime licenses to use more than 20 additional United States patents and their foreign derivatives.

We cannot guarantee that our patents will not be challenged or circumvented by our competitors, and we cannot guarantee that pending patent applications will ultimately be issued as patents. Under current law, patent applications in the United States filed before November 29, 2000 are maintained in secrecy until they are issued, but applications filed after November 29, 2000 (and foreign applications) are generally published 18 months after their priority date, which is generally the filing date. The right to a patent in the United States is attributable to the first to invent, while in most other jurisdictions the right to a patent is obtained by the first to file the patent application. We cannot ensure that our products or technologies do not infringe patents that may be granted in the future based upon currently pending non-published patent applications or that our products do not infringe any patents or proprietary rights of third parties. From time to time, we receive communications from third parties alleging patent infringement. If any relevant claims of third-party patents are upheld as valid and enforceable, we could be prevented from selling our products or could be required to obtain licenses from the owners of such patents or be required to redesign our products to avoid infringement. We cannot be assured that such licenses would be available or, if available, would be on terms acceptable to us or that we would be successful in any attempts to redesign our products or processes to avoid infringement. Our failure to obtain these licenses or to redesign our products could have a material adverse effect on our business.

We presently maintain approximately 15 registered trademarks or service marks in the United States and we have one additional trademark registration awaiting approval. We also presently maintain 4 trademark registrations under the European Community Trademark (ECT) procedure and have two trademarks pending approval in Canada and the ECT.

Our ability to compete depends to some extent upon our ability to protect our proprietary information through various means, including ownership of patents, copyrights, mask work registrations and trademarks. While no intellectual property right of ours has been invalidated or declared unenforceable, we cannot be assured that such rights will be upheld in the future. We believe that, in view of the rapid pace of technological changes in the communication semiconductor industry, the technical experience and creative skills of our engineers and other personnel are the most important factors in determining our future technological success.  

We have entered into various license agreements for products or technology exchange. The purpose of these licenses has, in general, been to obtain second sources for standard products or to convey or receive rights to certain proprietary or patented cores, cells or other technology.

We sell our products for applications in the telecommunications and data communications industries, which require our products to conform to various standards that are agreed upon by recognized industry standards committees. Where applicable, we design our products to be in conformity with these standards. We have received and expect to continue to receive, in the normal course of business, communications from third parties stating that if certain of our products meet a particular standard, these products may infringe one or more patents of that third party. We review the circumstances of each communication, and, in our discretion and upon the advice of legal counsel, have taken or may take in the future one of the following courses of action: we may negotiate payment for a license under the patent or patents that may be infringed, we may use our technology and/or patents to negotiate a cross-license with the third party or we may decline to obtain a license on the basis that we do not infringe the claimant’s patent or patents, or that such patents are not valid, or other bases. We cannot be sure that licenses for any such patents will be available to us on reasonable terms or that we would prevail in any litigation seeking damages or expenses from us or to enjoin us from selling our products on the basis of any of the alleged infringements.

Manufacturing and Design Services

We produce a variety of integrated circuit (IC) devices utilizing the Fabless Semiconductor Model. This means that we do not own or operate any of the foundries used in the production of our devices. Rather, we contract with established independent foundries to manufacture all of our devices including silicon wafer production, package assembly and testing. In most cases, we maintain a fully functional test environment for the purpose of production test development, low volume production testing, and product certification. Once the device reaches production volume, the test is transferred to a high volume, lower cost test facility. In some cases, the test development is done at the subcontractor site.

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This approach permits us to focus on our design strengths, minimize fixed costs and capital expenditures and access the most advanced manufacturing technologies. It also allows us to maintain an effective and flexible supply chain which is managed using a fully-integrated ERP system. Quality assurance and customer service activities are all performed at our Shelton, Connecticut and Fremont, California facilities. Finished goods inventory, packing and shipping are performed either in our Shelton, Connecticut facility or managed at our subcontractors.

Our Shelton, Connecticut facility is registered to ISO 9001:2008 by TUV Rheinland of North America, Inc. We use only ISO certified suppliers in the manufacture of our products.

Our manufacturing objectives and emphasis are focused in the following areas:

• maximizing the reliability and quality of our products utilizing world class foundry partners;

• leveraging the most advanced semiconductor manufacturing technologies available;

• maintaining a flexible supply chain to meet our customers’ demand and delivering on time;

• minimizing capital and other resource requirements by subcontracting capital-intensive manufacturing; and

• achieving a gross margin commensurate with the value of our products.

Our products and services can be categorized as follows:

· IC devices - This category covers the majority of our products. We purchase and own the unique mask sets (tools) required for the production of our silicon wafers. We then purchase the wafers from the foundry as needed which are shipped directly to one of our wafer sort or assembly partners. They are then stored until we issue an assembly or test release based on demand. We use a variety of assembly and test suppliers to complete the production process including Taiwan Semiconductor (TSMC), Global Foundries and IBM for wafers and Amkor and STATS ChipPAC for assembly and test. In 2011, we entered into an agreement with eSilicon Corporation to provide us with turnkey manufacturing services. Such services include, among other things, quality and product cost management, capacity scheduling, wafer procurement, assembly, packaging, test and delivery scheduling.

· Intellectual Property Cores – We have several arrangements with foundries like TSMC and Semiconductor Manufacturing International Corporation (SMIC) for example, where we make our intellectual property cores available to our customers for design in their products. The use of these cores is strictly controlled at the foundry and we receive license fees or royalties when they are used.

Competition 

The fabless semiconductor industry is intensely competitive and is characterized by:

• rapid technological changes in electronic design automation tools, wafer-manufacturing technologies, process tools and alternate networking technologies;

• rapidly changing requirements;

• manufacturing yield problems;

• heightened international competition in many markets; and

• price erosion.

Our principal competitors in the consumer interconnect product line are Silicon Image, Inc., Analog Devices, Inc., and NXP Semiconductors, NV. Other domestic and international vendors have either entered this market or announced plans to do so.

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Our principal competitors in the communications industry are Applied Micro Circuits Corporation, Broadcom Corporation, Exar Corporation, Infineon Technologies, LSI Corporation, Mindspeed Technologies, Inc., PMC-Sierra Inc., Texas Instruments Inc., and Vitesse Semiconductor Corporation. In addition, there are several field programmable gate array (FPGA) providers such as Altera Corporation and Xilinx, Inc. which compete with us by supplying programmable products to OEMs.

 Employees

At December 31, 2012, we had 112 full time employees, including 68 in research and development, 18 in marketing and sales, 4 in operations and quality assurance, and 22 in administration. We have no collective bargaining agreements. We have never experienced any work stoppage, and we believe our employee relations are good.

Executive Officers of the Registrant

Our Executive Officers are as follows:

Dr. M. Ali Khatibzadeh (52)	President, Chief Executive Officer and Director
Mr. Robert A. Bosi (57)	Vice President and Chief Financial Officer
Mr. Amir Bar-Niv (47)	Senior Vice President & General Manager of the High Speed Interconnect Business Unit
Mr. Haim Moshe (54)	Senior Vice President & General Manager of TranSwitch Israel

There are no family relationships as defined in Item 401 of Regulation S-K between any of the officers named above and there is no arrangement or understanding between any of the officers named above and any other person pursuant to which he or she was selected as an officer. Each of the officers named above was elected by the Board of Directors to hold office until the next annual election of officers and until his or her successor is elected and qualified or until his or her earlier resignation or removal. The Board of Directors elects the officers immediately following each annual meeting of the stockholders and may appoint other officers between annual meetings.

Dr. M. Ali Khatibzadeh was named President and Chief Executive Officer of the Company in December 2009. Prior to his appointment, he was Senior Vice President and General Manager of the RF Products Business Unit of Anadigics (NASDAQ: ANAD) from April 2009 to October 2009. He also served Anadigics as Senior Vice President and General Manager of the Wireless Business Unit from August 2005 to April 2009 and as Vice President of the Wireless Business Unit from June 2000 to August 2005.

Mr. Robert A. Bosi was named Vice President and Chief Financial Officer in January 2008. He has been a partner in Tatum LLC since 2003.

Mr. Amir Bar-Niv was named Senior Vice President & General Manager of the High Speed Interconnect Business Unit in October 2011 and held the position of Vice President Systems & Applications since November 2007.

Mr. Haim Moshe was named Senior Vice President & General Manager of TranSwitch Israel in October 2011 and held the position of Vice President & GM since December 2007.

Available Information

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are made available free of charge through the Investor Relations section of our Internet website (http://www.transwitch.com) as soon as practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission. Our executive offices are located at Three Enterprise Drive, Shelton, CT 06484.

You may read and copy any document we file at the SEC’s Public Reference Room located at: Headquarters Office, 100F Street N.E., Room 1580, Washington, D.C. 20549, on official business days during the hours of 10am to 3pm. You can obtain information on the operation of the Public Reference Room and request copies of these documents by writing to the Public Reference Section of the SEC, 100F Street N.E., Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available at the SEC’s website at http://www.sec.gov. This website address is included in this document as an inactive textual reference only.

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Item 1A. Risk Factors

From time to time, information provided by us, statements made by our employees or information included in our filings with the Securities and Exchange Commission (including this Form 10-K) may contain statements that are not historical facts, so-called “forward-looking statements,” which involve risks and uncertainties. Such forward-looking statements are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “will,” “expect,” “intend,” “plans,” “predict,” “anticipate,” “estimate,” “continue,” “believe” or the negative of these terms or other similar words. These statements discuss future expectations, contain projections of results of operations or of financial condition or state other forward-looking information. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this Form 10-K.  

Our actual future results may differ significantly from those stated in any forward-looking statements. Factors that may cause such differences include, but are not limited to, the factors discussed below. Each of these factors, and others, are discussed from time to time in our filings with the Securities and Exchange Commission.

Our telecom product revenue has declined significantly in the last three years and our strategic direction has changed.

As a result, we are suffering through a period of larger losses, including from operations as well as from write-downs of goodwill and other intangibles assets. Our total revenue has decreased 64% from $49.8 million in 2010 to $17.8 million in 2012. Product revenue has decreased 75% from $41.7 million in 2010 to $10.3 million in 2012. Consequently, we have changed our strategic direction. All product and software development programs related to our telecom product lines were cancelled and we redeployed all of our remaining research and development resources in India and Israel to our interoperable connectivity solutions for consumer electronic and personal computer markets.

As our business model changes there can be no assurances that the move to these new product lines will produce acceptable results. Moreover, any other future changes to our business may not prove successful in the short or long term due to a variety of factors, including competition, customer acceptance, demand for our products and other factors. This may cause a material negative impact on our financial results.

We are using our available cash and cash equivalents to fund our operations, investments and financing activities.

We have incurred significant losses in prior periods. Our revenues and operating results have fluctuated in the past and may fluctuate in the future and we may incur losses and negative cash flows in future periods. These fluctuations are due to a number of factors, many of which are beyond our control. These factors include, among others:

• the effects of competitive pricing pressures, including decreases in average selling prices of our products;

• market acceptance of our products and our customers’ products;

• our customers’ product-to-market launch schedules;

• our ability to develop, introduce, market and support new products and technologies on a timely basis;

• availability and cost of products from our suppliers;

• intellectual property disputes;

• the timing of receipt, reduction or cancellation of significant orders by customers;

• the effects of our competitors’ new product and technology introductions;

• fluctuations in the levels of component inventories held by our customers and distributors and changes in our customers’ and distributors’ inventory management practices;

• shifts in our product mix and the effect of maturing products;

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• the timing and extent of product development costs;

• new product and technology introductions by us or our competitors;

• fluctuations in manufacturing yields; and

• significant warranty claims, including those not covered by our suppliers.

The foregoing factors are difficult to forecast, and these, as well as other factors, could materially and adversely affect our quarterly or annual operating results.

Our operating results may fluctuate because of a number of factors, many of which are beyond our control. If our operating results are below the expectations of public market analysts or investors, then the market price of our common stock could decline.

There is substantial doubt about our ability to continue as a going concern.

We have incurred substantial operating losses and have used cash in our operating activities for the past several years. Operating losses have resulted from inadequate sales levels for our cost structure. As of December 31, 2012, we had negative working capital of approximately $6.3 million. In addition, as of March 18, 2013, we had outstanding indebtedness to Bridge Bank under our credit facility of approximately $1.7 million.

Our current forecast projects that, absent an infusion of capital, we will be unable to meet our current obligations through December 31, 2013. These conditions raise substantial doubt about our ability to continue as a going concern. Consequently, the audit report prepared by our independent registered public accounting firm relating to our financial statements for the year ended December 31, 2012 includes an explanatory paragraph expressing the substantial doubt about our ability to continue as a going concern.

In July of 2012, we announced a restructuring which primarily affected the telecom product unit and is expected to save $8.0 million in annual operating costs. We also effectuated restructurings in the first and third quarters of 2011. We continue to assess our cost structure in relationship to our revenue levels, which may necessitate further expense reductions.

As with any operating plan, there are risks associated with our ability to execute it, including the current economic environment in which we operate. Therefore, there can be no assurance that we will be able to satisfy our obligations, or achieve the operating improvements as contemplated by the current operating plan. If we are unable to execute this plan, we will need to find additional sources of cash not contemplated by the current operating plan and/or raise additional capital to sustain continuing operations as currently contemplated. There can be no assurance that the additional funding sources will be available to us at favorable rates or at all. If we cannot maintain compliance with our covenant requirements on our bank financing facility or cannot obtain appropriate waivers and modifications, the lenders may call the debt. If the debt is called, we would need to obtain new financing and there can be no assurance that we will be able to do so. If we are unable to achieve our operating plan and maintain compliance with our loan covenants and our debt is called, we will not be able to continue as a going concern. The condensed consolidated financial statements included herein do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Our net revenues may decrease.

Due to current economic conditions and slowdowns in purchases of VLSI semiconductor devices, it has become increasingly difficult for us to predict the purchasing activities of our telecom customers and we expect that our net revenues may decrease further.

Our business is characterized by short-term orders and shipment schedules, and customer orders typically can be cancelled or rescheduled without significant penalty to our customers. Because we do not have substantial non-cancelable backlog, we typically plan our production and inventory levels based on internal forecasts of customer demand, which are highly unpredictable and can fluctuate substantially. Future fluctuations to our operating results may also be caused by a number of factors, many of which are beyond our control.

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In response to anticipated long lead times to obtain inventory and materials from our foundries, we may order inventory and materials in advance of anticipated customer demand, which might result in excess inventory levels if the expected orders fail to materialize. As a result, we cannot predict the timing and amount of shipments to our customers, and any significant downturn in customer demand for our products would reduce our quarterly and annual operating results.

We may be unable to secure additional financing, and if we do, our stockholders may experience dilution of their ownership interest or we may be subject to covenants that limit our operations.

If we are unable to generate sufficient cash flows from operations to meet our anticipated needs for working capital and capital expenditures, we may need to raise additional funds. Such capital may not be available on terms favorable or acceptable to us, if at all. If we raise additional funds through the issuance of equity securities, our stockholders may experience dilution of their ownership interest, and the newly issued securities may have rights superior to those of our common stock.

We may not be able to pay our debt and other obligations.

If our cash, cash equivalents and operating cash flows are inadequate to meet our obligations, we could face substantial liquidity problems. If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments on the Amended and Restated Business Financing Agreement between us and Bridge Bank, N.A. or our other obligations, we would be in default under their respective terms. Any such default or cross default would have a material adverse effect on our business, prospects, financial condition and operating results.

We may not be able to extend or renew our current credit facility with Bridge Bank on terms reasonably acceptable to us, if at all.

During the third quarter of 2012, we were not in compliance with a financial covenant under the Bridge Bank Agreement and Bridge Bank agreed to waive this event of default and our noncompliance with this covenant. We are currently not in compliance with the asset coverage ratio covenant in the facility and we are discussing with Bridge Bank an agreement pursuant to which Bridge Bank would agree to forbear from exercising its rights in the event of default, which rights include accelerating the repayment of our indebtedness. Although we are in discussions with Bridge Bank about extending the facility, we cannot assure you that we will be able to extend or renew our credit facility on terms reasonably acceptable to us or at all.

In the future, if we are unable to maintain our compliance or obtain a waiver of our noncompliance with this covenant or others, Bridge Bank could accelerate our indebtedness, which could impair our ability to continue to conduct our business. If our indebtedness is accelerated in full or in part, it would be very difficult in the current financing environment for us to refinance our debt or obtain additional financing, which could adversely affect our ability to continue our business.

We may have to further restructure our business.

We may have to make further restructuring changes if we do not sustain the current level of quarterly revenues. Our restructurings could result in management distractions, operational disruptions, and other difficulties. Over the past several years, we have initiated several restructuring activities in an effort to reduce operating costs. Our most recent restructuring was announced in July 2012. Employees whose positions were eliminated in connection with these restructuring activities may seek employment with our customers or competitors. Although each of our employees is required to sign a confidentiality agreement with us at the time of hire, we cannot guarantee that the confidential nature of our proprietary information will be maintained in the course of such future employment. Additionally, we cannot guarantee that we will not undertake additional restructuring activities and that our restructuring efforts will be successful, or that we will be able to realize the cost savings and other anticipated benefits from our previous restructuring plans. Also, if we continue to reduce our workforce, it may adversely impact our ability to respond rapidly to new growth opportunities.

Changes in future business conditions could cause business investments and recorded goodwill and other long-lived assets to become impaired, resulting in substantial losses and write-downs that would reduce our operating income.

We test goodwill amounts for impairment at least annually and consider whether an interim test is required if we believe potential impairment exists. In 2011 and 2010, we recorded goodwill and other intangible impairment charges of $14.3 million and zero, respectively. Of the 2011 impairment charges, $5.4 million related to intangible assets and $8.9 million related to a business acquisition in 2008. In 2012, we recorded goodwill and other intangible impairment charges of approximately $0.6 million. The annual impairment test is based on several factors requiring judgment. We face continued uncertainty in our business environment due to substantial industry, competitive, fiscal and economic challenges. We continue to monitor the recoverability of the carrying value of our goodwill and other long-lived assets which may in the future require us to take substantial write-downs, including with respect to previously written down assets and legacy telecom assets. As part of our overall strategy, we may, from time to time, acquire an interest in a business. Even after careful integration efforts, actual operating results may vary significantly from initial estimates and we may experience unforeseen issues that adversely affect the value of our goodwill or other long-lived assets.

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We are a relatively small company with limited resources compared to some of our current and potential competitors and we may not be able to compete effectively and increase market share.

Some of our current and potential competitors have longer operating histories, significantly greater resources and name recognition and a larger base of customers than we have. As a result, these competitors may have greater credibility with our existing and potential customers. They also may be able to adopt more aggressive pricing policies and devote greater resources to the development, promotion and sale of their products than we can to ours. In addition, some of our current and potential competitors have already established supplier or joint development relationships with the decision makers at our current or potential customers. These competitors may be able to leverage their existing relationships to discourage their customers from purchasing products from us or persuade them to replace our products with their products. Our competitors may also offer bundled solutions offering a more complete product despite the technical merits or advantages of our products. These competitors may elect not to support our products which could complicate our sales efforts. These and other competitive pressures may prevent us from competing successfully against current or future competitors, and may materially harm our business. Competition could decrease our prices, reduce our sales, lower our gross margins and/or decrease our market share.

Our research and development efforts are focused on a limited number of new technologies and products, and any delay in the development, or abandonment, of these technologies or products by industry participants, or their failure to achieve market acceptance, could compromise our competitive position.

Our products are used as components in electronic devices in various markets. As a result, we have devoted and expect to continue to devote a large amount of resources to develop products based on new and emerging technologies and standards that will be commercially introduced in the future. A number of large companies are actively involved in the development of these new technologies and standards. Should any of these companies delay or abandon their efforts to develop commercially available products based on new technologies and standards, our research and development efforts with respect to these technologies and standards likely would have no appreciable value. In addition, if we do not correctly anticipate new technologies and standards, or if the products that we develop based on these new technologies and standards fail to achieve market acceptance, our competitors may be better able to address market demand than we would. Furthermore, if markets for these new technologies and standards develop later than we anticipate, or do not develop at all, demand for our products that are currently in development would suffer, resulting in lower sales of these products than we currently anticipate.

We anticipate that shipments of our products to a relatively limited number of customers will continue to account for a significant portion of our total net revenues.

Historically, a relatively small number of customers have accounted for a significant portion of our total net revenues in any particular period. For the years ended December 31, 2012 and December 31, 2011, shipments to our top five customers, including sales through distributors, accounted for approximately 53% and 39% of our total net revenues, respectively. We expect that a limited number of customers may continue to account for a substantial portion of our total net revenues for the foreseeable future.

Some of the following may reduce our total net revenues or adversely affect our business:

• reduction, delay or cancellation of orders from one or more of our significant customers;

• development by one or more of our significant customers of other sources of supply for current or future products;

• loss of one or more of our current customers or a disruption in our sales and distribution channels; and

• failure of one or more of our significant customers to make timely payment of our invoices.

We cannot be certain that our current customers will continue to place orders with us, that orders by existing customers will return to the levels of previous periods or that we will be able to obtain orders from new customers. We have no long-term volume purchase commitments from any of our significant customers.

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The cyclical nature of the communication semiconductor industry affects our business.

Communication service providers, internet service providers, regional operating companies and inter-exchange carriers continue to closely monitor their capital expenditures. Spending on voice-only equipment remains slow while spending on equipment providing the efficient transport of data services on existing infrastructure appears to be slowly recovering. Demand for new, high-bandwidth applications such as video conferencing, broadband audio and telephone is placing an increased burden on existing public network infrastructure. We cannot be certain that the market for our products will not decline in the future.

Our international business operations expose us to a variety of business risks.

Foreign markets are a significant part of our net product revenues. For each of the years ended December 31, 2012 and December 31, 2011, foreign shipments accounted for approximately 66% and 77%, respectively, of our total net product and services revenues. We expect foreign markets to continue to account for a significant percentage of our total net revenues. A significant portion of our total net revenues will, therefore, be subject to risks associated with foreign markets, including the following:

• unexpected changes in legal and regulatory requirements and policy changes affecting the telecommunications, data communications and consumer electronics markets;

• changes in tariffs;

• exchange rates, currency controls and other barriers;

• political and economic instability;

• risk of terrorism or war;

• difficulties in accounts receivable collection;

• difficulties in managing distributors and representatives;

• difficulties in staffing and managing foreign operations;

• difficulties in protecting our intellectual property overseas;

• natural disasters;

• seasonality of customer buying patterns; and

• potentially adverse tax consequences.

During 2012, a substantial amount of our revenue was from China, Japan, Korea, Taiwan, Italy, Israel and other foreign countries. We expect revenues in 2013 will also be substantially concentrated in foreign markets. While part of our strategy is to diversify the geographic sources of our revenues, failure to further penetrate other markets could harm our business and results of operations and subject us to increased currency risk.

If foreign exchange rates fluctuate significantly, our profitability may decline.

Although substantially all of our total net revenues to date have been denominated in U.S. dollars, the value of the U.S. dollar in relation to foreign currencies also may reduce our total net revenues from foreign customers. A substantial amount of our costs are denominated in Israeli shekels and Indian rupees. To the extent that we further expand our international operations or change our pricing practices to denominate prices in foreign currencies, we will expose our margins to increased risks of currency fluctuations.

Our net product revenues depend on the success of our customers’ products, and our design wins do not necessarily generate revenues in a timely fashion or at all.

Our customers generally incorporate our new products into their products or systems at the design stage. However, a customer’s decision to use our products (a “design win”) often precedes the generation of production revenues, if any, by a year or more. Some customer projects are canceled, and thus will not generate revenues for our products. Nonetheless, the development of our products requires significant expenditures without any assurance of success. In addition, even after we achieve a design win, a customer may require further design changes. Implementing these design changes can also require significant expenditures of time and expense by us in the development and pre-production process. Moreover, the value of any design win will largely depend upon the commercial success of the customer’s product and the extent to which the design of the customer’s systems can accommodates components manufactured by our competitors. We cannot assure you that we will continue to achieve design wins in customer products that ultimately achieve market acceptance. Further, most revenue-generating design wins take several years to translate into meaningful revenues.

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We must successfully transition to new process technologies to remain competitive.

Our future success depends upon our ability to develop products that utilize new process technologies.

Semiconductor design and process methodologies are subject to rapid technological change and require large expenditures for research and development. We currently manufacture our products using 65, 130 and 180 nanometer complementary metal oxide semiconductor (CMOS) processes. We continuously evaluate the benefits, on a product-by-product basis, of migrating to smaller geometry process technologies. Other companies in the industry have experienced difficulty in transitioning to new manufacturing processes and, consequently, have suffered increased costs, reduced yields or delays in product deliveries. We believe that transitioning our products to smaller geometry process technologies will be important for us to remain competitive. We cannot be certain that we can make such a transition successfully, if at all, without delay or inefficiencies.

Our success depends on the timely development of new products, and we face risks of product development delays.

Our success depends upon our ability to develop new devices and software for existing and new markets. The development of these new devices and software is highly complex, and from time to time we have experienced delays in completing the development of new products. Successful product development and introduction depends on a number of factors, including the following:

• accurate new product definition;

• timely completion and introduction of new product designs;

• availability of foundry capacity;

• achievement of manufacturing yields; and

• market acceptance of our products and our customers’ products.

Our success also depends upon our ability to do the following:

• build products to applicable standards or customer specifications;

• develop products that meet customer requirements;

• adjust to changing market conditions as quickly and cost-effectively as necessary to compete successfully;

• introduce new products that achieve market acceptance; and

• develop reliable software to meet our customers’ application needs in a timely fashion.

In addition, we cannot ensure that the systems manufactured by our customers will be introduced in a timely manner or that such systems will achieve market acceptance.

We sell a range of products that each has a different gross profit. Our total gross profits will be adversely affected if most of our shipments are of products with low gross profits.

Some of our products have a high gross profit while others do not. If our customers decide to buy more of our products with low gross profits and fewer of our products with high gross profits, our total gross profits could be adversely affected. We plan our mix of products based on our internal forecasts of customer demand, which are highly unpredictable and can fluctuate substantially.

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The price of our products tends to decrease over the lives of our products.

Historically, average selling prices in our industry have decreased over the life of a product, and, as a result, the average selling prices of our products may decrease in the future. Decreases in the price of our products would adversely affect our operating results. As global competition increases, our customers are increasingly more focused on price. We may have to decrease our prices to remain competitive in some situations, which may negatively impact our gross margins.

Our success depends on the rate of growth of the global communications infrastructure.

We currently derive most of our net revenues from products for telecommunications, data and video communications applications. These markets are characterized by the following:

• susceptibility to seasonality of customer buying patterns;

• subject to general business cycles;

• intense competition;

• rapid technological change; and

• short product life cycles.

We anticipate that these markets will continue to experience significant volatility and reduced demand in the near future.

Our products must successfully include industry standards to remain competitive.

Products for telecommunications and data communications applications are based on industry standards, which are continually evolving. Our future success will depend, in part, upon our ability to successfully develop and introduce new products based on emerging industry standards, which could render our existing products unmarketable or obsolete. If the telecommunications or data communications markets evolve to new standards, we cannot be certain that we will be able to successfully design and manufacture new products that address the needs of our customers and include the new standards or that such new products will meet with substantial market acceptance.

Our business has been and may continue to be significantly impacted by the deterioration in worldwide economic conditions, and the current uncertainty in the outlook for the global economy makes it more likely that our actual results will differ materially from expectations.

Global credit and financial markets continue to experience disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and continued uncertainty about economic stability. Despite signs of improvement, there can be no assurance that there will not be renewed deterioration in credit and financial markets and confidence in economic conditions. These economic uncertainties affect businesses such as ours in a number of ways, making it difficult to accurately forecast and plan our future business activities. The continued or further tightening of credit in financial markets may lead consumers and businesses to postpone spending, which may cause our customers to cancel, decrease or delay their existing and future orders with us. In addition, financial difficulties experienced by our suppliers or distributors could result in product delays, increased accounts receivable defaults and inventory challenges. The volatility in the credit markets has severely diminished liquidity and capital availability.

The licensing component of our business strategy increases business risk and volatility.

Part of our business strategy is to license IP through agreements with companies whereby companies incorporate our IP into their respective technologies that address certain markets. There can be no assurance that additional companies will be interested in licensing our technology on commercially favorable terms or at all. We also cannot ensure that companies who license our technology will introduce and sell products incorporating our technology, will accurately report royalties owed to us, will pay agreed upon royalties, will honor agreed upon market restrictions, will not infringe upon or misappropriate our intellectual property and will maintain the confidentiality of our proprietary information. The IP agreements are complex and depend upon many factors including completion of milestones, allocation of values to delivered items and customer acceptances. Many of these factors require significant judgments. Licensing revenue could fluctuate significantly from period to period because it is heavily dependent on a few key deals being completed in a particular period, the timing of which is difficult to predict and may not match our expectations. Because of its high margin content, the licensing mix of our revenue can have a disproportionate impact on gross profit and profitability. Also, generating revenue from these arrangements is a lengthy and complex process that may last beyond the period in which efforts begin and once an agreement is in place, the timing of revenue recognition may be dependent on customer acceptance of deliverables, achievement of milestones, our ability to track and report progress on contracts, customer commercialization of the licensed technology and other factors. Licensing agreements that occur as a result of actual or contemplated litigation are subject to the risk that the adversarial nature of the transaction will induce non-compliance or non-payment. The accounting rules associated with recognizing revenue from these transactions are increasingly complex and subject to interpretation. Due to these factors, the amount of license revenue recognized in any period may differ significantly from our expectations.

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Our failure to protect our proprietary rights, or the costs of protecting these rights, may harm our ability to compete.

Our success depends in part on our ability to obtain patents and licenses and to preserve other intellectual property rights covering our products and development and testing tools. To that end, we have obtained certain domestic and foreign patents and intend to continue to seek patents on our inventions when appropriate. The process of seeking patent protection can be time consuming and expensive. We cannot ensure the following:

• that patents will be issued from currently pending or future applications;

• that our existing patents or any new patents will be sufficient in scope or strength to provide meaningful protection or any commercial advantage to us;

• that foreign intellectual property laws will protect our foreign intellectual property rights; and

• that others will not independently develop similar products, duplicate our products or design around any patents issued to us.

Intellectual property rights are uncertain and adjudication of such rights involves complex legal and factual questions. We may be unknowingly infringing on the proprietary rights of others and may be liable for that infringement, which could result in significant liability for us. We occasionally receive correspondence from third parties alleging infringement of their intellectual property rights. If we are found to infringe the proprietary rights of others, we could be forced to either seek a license to the intellectual property rights of others or alter our products so that they no longer infringe the proprietary rights of others. A license could be very expensive to obtain or may not be available at all. Similarly, changing our products or processes to avoid infringing the rights of others may be costly or impractical.

We are responsible for any patent litigation costs. If we were to become involved in a dispute regarding intellectual property, whether ours or that of another company, we may have to participate in legal proceedings in the United States Patent and Trademark Office or in the United States or foreign courts to determine any or all of the following issues: patent validity, patent infringement, patent ownership or inventorship. These types of proceedings may be costly and time consuming for us, even if we eventually prevail. If we do not prevail, we might be forced to pay significant damages, obtain a license, if available, or stop making a certain product. From time to time, we may prosecute patent litigation against others and as part of such litigation, other parties may allege that our patents are not infringed, are invalid and are unenforceable. We also rely on trade secrets, proprietary know-how and confidentiality provisions in agreements with employees and consultants to protect our intellectual property. Such parties may not comply with the terms of their agreements with us, and we may not be able to adequately enforce our rights against these parties.

Our products incorporate technology licensed from third parties

We incorporate technology (including software) licensed from third parties in our products. We could be subjected to claims of infringement regardless of our lack of involvement in the development of the licensed technology. Although a third-party licensor is typically obligated to indemnify us if the licensed technology infringes on another party’s intellectual property rights, such indemnification is typically limited in amount and may be worthless if the licensor becomes insolvent. Furthermore, any failure of third-party technology to perform properly would adversely affect sales of our products incorporating such technology.

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Our intellectual property indemnification practices may adversely impact our business.

We have historically agreed to indemnify our customers for certain costs and damages of intellectual property rights in circumstances where one of our products is the factor creating the customer’s infringement exposure. This practice may subject us to significant indemnification claims by our customers. In some instances, our products are designed for use in devices manufactured by our customers that comply with international standards. These international standards are often covered by patent rights held by third parties, which may include our competitors. The costs of obtaining licenses from holders of patent rights essential to such international standards could be high. The cost of not obtaining such licenses could also be high if a holder of such patent rights brings a claim for patent infringement. We are not aware of any claimed violations on our part. However, we cannot assure you that claims for indemnification will not be made or that if made, such claims would not have a material adverse effect on our business, results of operations or financial condition.

We continue to expense our new product process development costs when incurred.

In the past, we have incurred significant new product and process development costs because our policy is to expense these costs, including tooling, fabrication and pre-production expenses, at the time that they are incurred. We may continue to incur these types of expenses in the future. These additional expenses will have a material and adverse effect on our operating results in future periods.

We face intense competition in the semiconductor market.

Our industry is intensely competitive and is characterized by the following:

• rapid technological change;

• subject to general business cycles;

• price erosion;

• limited access to fabrication capacity;

• unforeseen manufacturing yield problems; and

• heightened international competition in many markets.

These factors are likely to result in pricing pressures on our products, thus potentially affecting our operating results. Our ability to compete successfully in the rapidly evolving area of high-performance integrated circuit technology depends on factors both within and outside our control, including:

• success in designing and subcontracting the manufacture of new products that implement new technologies;

• protection of our products by effective use of intellectual property laws;

• product quality;

• reliability;

• price;

• efficiency of production;

• failure to find alternative manufacturing sources to produce our products with acceptable manufacturing yields;

• the pace at which customers incorporate our products into their products;

• success of competitors’ products; and

• general economic conditions.

The markets that we serve are intensely competitive. A number of our customers have internal semiconductor design or manufacturing capability with which we also compete in addition to our other competitors. Any failure by us to compete successfully in these target markets would have a material adverse effect on our business, financial condition and results of operations.

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We rely on outside fabrication facilities, and our business could be hurt if our relationships with our foundry suppliers are damaged.

We do not own or operate a VLSI circuit fabrication facility. A few foundries currently supply us with all of our semiconductor device requirements. While we have had good relations with these foundries, we cannot be certain that we will be able to renew or maintain contracts with them or negotiate new contracts to replace those that expire. In addition, we cannot be certain that renewed or new contracts will contain terms as favorable as our current terms. There are other significant risks associated with our reliance on outside foundries, including the following:

• the lack of assured semiconductor wafer supply and control over delivery schedules;

• the unavailability of, or delays in obtaining access to, key process technologies; and

• limited control over quality assurance, manufacturing yields and production costs.

Reliance on third-party fabrication facilities limits our ability to control the manufacturing process.

Manufacturing integrated circuits is a highly-complex and technology-intensive process. We work closely with our foundries to minimize the likelihood of reduced manufacturing yields; however, our foundries occasionally experience lower than anticipated manufacturing yields, particularly in connection with the introduction of new products and the installation and start-up of new process technologies. Such reduced manufacturing yields have at times reduced our operating results. A manufacturing disruption at one or more of our outside foundries, including, without limitation, those that may result from natural disasters, accidents, acts of terrorism or political instability or other natural occurrences, could impact production for an extended period of time.

Our dependence on a small number of fabrication facilities exposes us to risks of interruptions in deliveries of semiconductor devices.

We purchase semiconductor devices from outside foundries pursuant to purchase orders, and we do not have a guaranteed level of production capacity at any of our foundries. We provide the foundries with forecasts of our production requirements. However, the ability of each foundry to provide wafers to us is limited by the foundry’s available capacity and the availability of raw materials. Therefore, our foundry suppliers could choose to prioritize capacity and raw materials for other customers or reduce or eliminate deliveries to us on short notice. Accordingly, we cannot be certain that our foundries will allocate sufficient capacity to satisfy our requirements.

We have been, and expect in the future to be, particularly dependent upon a limited number of foundries for our VLSI device requirements. In 2012, one outside wafer foundry supplied a substantial amount of our total semiconductor wafer requirements. The time required to qualify alternative manufacturing sources for existing or new products could be substantial and we might not be able to find alternative manufacturing sources able to produce our VLSI devices with acceptable manufacturing yields. As a result, we expect that we could experience substantial delays or interruptions in the shipment of our products if there was a sudden increase in demand or if our foundry suppliers were to cease operations or limit our capacity.

We are subject to risks arising from our use of subcontractors to assemble our products.

Contract assembly houses in Asia assemble all of our semiconductor products. Raw material shortages, natural disasters, political and social instability, service disruptions, labor disputes, rising wages, currency fluctuations, or other circumstances in the region could force us to seek additional or alternative sources of supply or assembly. This could lead to supply constraints or product delivery delays.

The loss of key management could affect our ability to run our business.

Our success depends largely upon the continued service of our executive officers and technical personnel and on our ability to continue to attract, retain and motivate other qualified personnel. As the source of our technological and product innovations, our key technical personnel represent a significant asset. The competition for such personnel can be intense in the semiconductor industry. We may also have a particularly hard time attracting and retaining key personnel during periods of poor performance and during this period following our most recent restructuring.

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The complexity of our products may lead to errors, defects and/or bugs, any of which could subject us to significant costs or damages and adversely affect market acceptance of our products.

Although we, our customers and our suppliers rigorously test our products, our products are complex and may contain errors, defects or bugs when first introduced or as new versions are released. We have in the past experienced, and may in the future experience, errors, defects and bugs. If any of our products contain production defects or reliability, safety, quality or compatibility problems that are significant to our customers, our reputation may be damaged and customers may be reluctant to buy our products, which could adversely affect our ability to retain existing customers and attract new customers. In addition, these defects or bugs could interrupt or delay sales of affected products to our customers, which could adversely affect our results of operations.

If defects or bugs are discovered after commencement of commercial production of a new product, we may be required to make significant expenditures of capital and other resources to resolve the problems. This could result in significant additional development costs and the diversion of technical and other resources from our other development efforts. We could also incur significant costs to repair or replace defective products, and we could be subject to claims for damages by our customers or others against us. We could also be exposed to product liability claims or indemnification claims by our customers. These costs or damages could have a material adverse effect on our financial condition and results of operations.

We may engage in acquisitions that may harm our operating results, dilute our stockholders and cause us to incur debt or assume contingent liabilities.

We may pursue acquisitions from time to time that could provide new technologies, skills, products or service offerings. Future acquisitions by us may involve the following:

• use of significant amounts of cash and cash equivalents;

• potentially dilutive issuances of equity securities; and

• incurrence of debt or amortization expenses related to intangible assets with definitive lives.

In addition, acquisitions involve numerous other risks, including:

• diversion of management’s attention from other business concerns;

• risks of entering markets in which we have no or limited prior experience; and

• unanticipated expenses and operational disruptions while acquiring and integrating new acquisitions.

From time to time, we have engaged in discussions with third parties concerning potential acquisitions of product lines, technologies and businesses. We currently have no commitments or agreements with respect to any such acquisition. If such an acquisition does occur, we cannot be certain that our business, operating results and financial condition will not be materially adversely affected or that we will realize the anticipated benefits of the acquisition.

Our business could be harmed if we fail to integrate future acquisitions adequately.

During the past six years, we have acquired three companies, one based in the United States and two based in Israel.

Our management must devote time and resources to the integration of the operations of any future acquisitions. The process of integrating research and development initiatives, computer and accounting systems and other aspects of the operations of any future acquisitions presents a significant challenge to our management. This is compounded by the challenge of simultaneously managing a larger and more geographically dispersed entity. Future acquisitions could present a number of additional difficulties of integration, including:

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• difficulties in integrating personnel with disparate business backgrounds and cultures;

• difficulties in defining and executing a comprehensive product strategy; and

• difficulties in minimizing the loss of key employees of the acquired company.

If we delay integrating or fail to integrate operations or experience other unforeseen difficulties, the integration process may require a disproportionate amount of our management’s attention and financial and other resources. Our failure to address these difficulties adequately could harm our business or financial results, and we could fail to realize the anticipated benefits of the transaction.

We have, in the past, as a result of industry conditions, discontinued or abandoned certain product lines acquired through acquisitions. 

Natural disasters or acts of terrorism affecting our locations, or those of our suppliers, in the United States or internationally may negatively impact our business.

We operate our businesses in the United States and internationally, including the operation of a design center in India, and sales, design and engineering operations in Israel. Some of the countries in which we operate or in which our customers are located have in the past been subject to terrorist acts and could continue to be subject to acts of terrorism. In addition, some of these areas may be subject to natural disasters, such as earthquakes or floods. If our facilities, or those of our suppliers or customers, are affected by a natural disaster or terrorist act, our employees could be injured and those facilities damaged, which could lead to loss of skill sets and affect the development or fabrication of our products, which could lead to lower short and long-term revenues. In addition, natural disasters or terrorist acts in the areas in which we operate or in which our customers or suppliers operate could lead to delays or loss of business opportunities, as well as changes in security and operations at those locations, which could increase our operating costs.

Our ability to sublease unoccupied office space may adversely affect our future cash outflows.

We have outstanding operating lease commitments of approximately $13.5 million, payable over the next five years. Some of these commitments are for space that is not being utilized and, for which, we recorded restructuring charges in prior periods. We currently have subleases for the majority of our unoccupied space but our sublease income generated will not offset the entire future commitment. As of December 31, 2012, we had sublease agreements totaling approximately $9.3 million to rent portions of our unoccupied facilities over the next five years. We currently believe that we can fund these lease commitments in the future; however, there can be no assurances that we will not be required to seek additional capital or provide additional guarantees or collateral on these obligations.

Of the office space being leased in our Shelton, Connecticut location, as of December 31, 2012, approximately 92,880 square feet is unoccupied, the majority of which we have taken restructuring charges for in prior years. Substantially all of this space is currently being sublet, but not for the full amount of our lease obligation. If we are unable to collect our sub-lease rents, our future cash outflows would be adversely affected.

We may be subject to information technology failures that could damage our reputation, business operations and financial condition.

We rely on information technology for the effective operation of our business. Our systems are subject to damage or interruption from a number of potential sources, including natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, cyber attacks, sabotage, vandalism, or similar events or disruptions. Our security measures may not detect or prevent such security breaches. Any such compromise of our information security could result in the unauthorized publication of our confidential business or proprietary information, result in the unauthorized release of customer, supplier or employee data, result in a violation of privacy or other laws, expose us to a risk of litigation or damage our reputation. In addition, our inability to use or access these information systems at critical points in time could unfavorably impact the timely and efficient operation of our business, which could negatively affect our business and operating results.

Third parties with which we conduct business have access to certain portions of our sensitive data. In the event that these third parties do not properly safeguard our data that they hold, security breaches could result and negatively impact our business, operations and financial results.

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Customer demands and new regulations related to conflict-free minerals may adversely affect us.

The Dodd-Frank Wall Street Reform and Consumer Protection Act imposes new disclosure requirements regarding the use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries in products, whether or not these products are manufactured by third parties. These new requirements could affect the pricing, sourcing and availability of minerals used in the manufacture of semiconductor devices (including our products). There will be additional costs associated with complying with the disclosure requirements, such as costs related to determining the source of any conflict minerals used in our products. Our supply chain is complex and we may be unable to verify the origins for all metals used in our products. We may also encounter challenges with our customers and stockholders if we are unable to certify that our products are conflict free.

Most of our current manufacturers, assemblers, test service providers, distributors and customers are concentrated in the same geographic region, which increases the risk that a natural disaster, epidemic, labor strike, war or political unrest could disrupt our operations or sales

Many of our current manufacturers, assemblers, test service providers, distributors and customers are located in the Pacific Rim region. The risk of earthquakes in the Pacific Rim region is significant due to the proximity of major earthquake fault lines in the area. Earthquakes, tsunamis, fire, flooding, lack of water or other natural disasters, an epidemic, political unrest, war, labor strikes or work stoppages in countries where our manufacturers, assemblers and test subcontractors are located, likely would result in the disruption of our production capacity. There can be no assurance that alternate capacity could be obtained on favorable terms, if at all.

A natural disaster, epidemic, labor strike, war or political unrest where our customers' facilities are located would likely reduce our sales to such customers. North Korea's geopolitical maneuverings have created unrest. Such unrest could create economic uncertainty or instability, could escalate to war or otherwise adversely affect our customers and reduce our sales to such customers, which would materially and adversely affect our operating results. Any disruption resulting from these events could also cause significant delays in shipments of our products until we are able to shift our manufacturing, assembling or testing from the affected subcontractor to another third-party vendor.

Risks Related to Our Common Stock

We are not currently in compliance with the Nasdaq Capital Market $1.00 minimum bid price requirement or the minimum stockholders’ equity requirement, and failure to regain and maintain compliance with such standards could result in delisting and adversely affect the market price and liquidity of our common stock and our ability to raise additional capital.

Our common stock is currently listed on the Nasdaq Capital Market (“Nasdaq”). Continued listing of a security on Nasdaq is conditioned upon compliance with various continued listing standards.

On December 4, 2012, we received a letter from Nasdaq (the “Minimum Bid Price Notice”) notifying us that the closing bid price of our common stock was below the $1.00 minimum bid price requirement for 30 consecutive business days and, as a result, the Company no longer complied with the minimum bid price requirement under Listing Rule 5550(a)(2) for continued listing on Nasdaq. The Minimum Bid Price Notice also stated that we have been provided an initial compliance period of 180 calendar days, or until June 3, 2013, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days prior to June 3, 2013. If we do not regain compliance by June 3, 2013, Nasdaq will provide notice to us that our securities will be subject to delisting.

On February 26, 2013, we received a letter from Nasdaq (the “Stockholders’ Equity Notice”) notifying us that we were no longer in compliance with the minimum stockholders’ equity requirement of at least $2.5 million for continued listing on Nasdaq. The Stockholders’ Equity Notice does not result in the immediate delisting of our common stock from Nasdaq. Rather, under the Nasdaq Listing Rules, we have 45 calendar days from the date of the Stockholders’ Equity Notice to submit to Nasdaq a plan to regain compliance. If the plan is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the Stockholders’ Equity Notice for us to evidence compliance. If we submit a plan, Nasdaq will determine whether to accept the plan, considering such criteria as the likelihood that the plan will result in compliance with Nasdaq’s continued listing criteria, our past compliance history, the reasons for our current non-compliance, other corporate events that may occur within the review period, our overall financial condition and our public disclosures. If Nasdaq does not accept the plan, we will have the opportunity to appeal that decision to a Hearings Panel.

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If we are delisted and cannot obtain listing on another major market or exchange, our stock’s liquidity would suffer, and we would likely experience reduced investor interest. Such factors may result in a decrease in our stock’s trading price. In addition, the failure to trade on a national securities exchange may hinder our efforts to obtain financing.

Our stock price is volatile.

The market for securities for communication semiconductor companies, including our Company, has been highly volatile. The daily closing price of our common stock has fluctuated between a low of $0.56 and a high of $8.96 during the period from January 1, 2009 to December 31, 2012. It is likely that the price of our common stock will continue to fluctuate widely in the future. Factors affecting the trading price of our common stock include:

• responses to quarter-to-quarter variations in operating results;

• announcements of technological innovations or new products by us or our competitors;

• current market conditions in our served markets; and

• changes in earnings estimates by analysts.

We could be subject to class action litigation due to stock price volatility, which if it occurs, will distract our management and could result in substantial costs or large judgments against us.

In the past, securities and class action litigation has often been brought against companies following periods of volatility in the market prices of their securities. We may be the target of similar litigation in the future. Securities litigation could result in substantial costs and divert our management’s attention and resources, which could cause serious harm to our business, operating results and financial condition or dilution to our stockholders.

Provisions of our certificate of incorporation, by-laws, rights plan and Delaware law may discourage takeover offers and may limit the price investors would be willing to pay for our common stock.

Delaware corporate law contains, and our certificate of incorporation and by-laws and shareholder rights plan contain, certain provisions that could have the effect of delaying, deferring or preventing a change in control of our Company even if a change of control would be beneficial to our stockholders. These provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock. Certain of these provisions:

• authorize the issuance of “blank check” preferred stock (preferred stock which our Board of Directors can create and issue without prior stockholder approval) with rights senior to those of common stock;

• prohibit stockholder action by written consent;

• establish advance notice requirements for submitting nominations for election to the Board of Directors and for proposing matters that can be acted upon by stockholders at a meeting; and

• dilute stockholders who acquire more than 15% of our common stock.

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Item 1B. Unresolved Staff Comments

Not applicable.

Item 2.   Properties

Our headquarters is located in a suburban office park in Shelton, Connecticut. We have additional sales offices and design centers located throughout the world. The following is a summary of our material offices and locations for which we have lease commitments:

Location	Business Use	Square Footage		Lease Expiration Dates
Shelton, Connecticut	Corporation Headquarters, Product Development, Operations, Sales, Marketing and Administration		9,684	November 2017
Herzeliya, Israel	Product Development, Sales & Service		9,688	Less than 1 Year
New Delhi, India	Product Development		16,804	January 2015
Fremont, California	Product Development, Sales, Marketing and Administration		11,222	January 2014
Unoccupied property:
Shelton, Connecticut	Subleased		92,880	April 2017

Internationally, we also lease space in Japan, China, Taiwan, France and South Korea for sales offices. Our current facilities are adequate for our needs.

Refer to Note 16—Commitments and Contingencies of our Consolidated Financial Statements for additional disclosures regarding our commitments under lease obligations. Also, refer to Note 15—Restructuring Charges of our Consolidated Financial Statements regarding our restructuring charges during fiscal years 2010 through 2012 as we have recorded charges for future rent payments relating to excess office space.

Item 3.    Legal Proceedings

We are not party to any material litigation proceedings.

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not currently aware of any such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on the business, financial condition or results of our operations.

Item 4.    Mine Safety Disclosures

Not applicable.

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PART II

Item 5.     Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded under the symbol “TXCC” on The Nasdaq Capital Market. The following table sets forth, for the periods indicated, the range of high and low closing prices for our common stock.

	High		Low
Quarter to date
First Quarter (through March 22, 2013)	$	1.01	$	0.57
Year ended December 31, 2012
First Quarter	$	3.56	$	2.46
Second Quarter	$	2.66	$	1.10
Third Quarter	$	1.28	$	0.79
Fourth Quarter	$	1.09	$	0.56
Year ended December 31, 2011
First Quarter	$	4.61	$	2.00
Second Quarter	$	5.50	$	3.05
Third Quarter	$	3.10	$	2.24
Fourth Quarter	$	3.23	$	2.11

Continued listing of a security on Nasdaq is conditioned upon compliance with various continued listing standards. There can be no assurance that we will continue to satisfy the requirements for maintaining listing on Nasdaq.

On December 4, 2012, we received a letter from Nasdaq (the “Minimum Bid Price Notice”) notifying us that the closing bid price of our common stock was below the $1.00 minimum bid price requirement for 30 consecutive business days and, as a result, the Company no longer complied with the minimum bid price requirement under Listing Rule 5550(a)(2) for continued listing on Nasdaq. The Minimum Bid Price Notice also stated that we have been provided an initial compliance period of 180 calendar days, or until June 3, 2013, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days prior to June 3, 2013. If we do not regain compliance by June 3, 2013, Nasdaq will provide notice to us that our securities will be subject to delisting.

On February 26, 2013, we received a letter from Nasdaq (the “Stockholders’ Equity Notice”) notifying us that we were no longer in compliance with the minimum stockholders’ equity requirement of at least $2.5 million for continued listing on Nasdaq. The Stockholders’ Equity Notice does not result in the immediate delisting of our common stock from Nasdaq. Rather, under the Nasdaq Listing Rules, we have 45 calendar days from the date of the Stockholders’ Equity Notice to submit to Nasdaq a plan to regain compliance. If the plan is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the Stockholders’ Equity Notice for us to evidence compliance. If we submit a plan, Nasdaq will determine whether to accept the plan, considering such criteria as the likelihood that the plan will result in compliance with Nasdaq’s continued listing criteria, our past compliance history, the reasons for our current non-compliance, other corporate events that may occur within the review period, our overall financial condition and our public disclosures. If Nasdaq does not accept the plan, we will have the opportunity to appeal that decision to a Hearings Panel.

If we are delisted and cannot obtain listing on another major market or exchange, our stock’s liquidity would suffer, and we would likely experience reduced investor interest. Such factors may result in a decrease in our stock’s trading price. Delisting may also restrict us from issuing additional securities or securing financing.

As of March 1, 2013, there were approximately 158 holders of record and approximately 16,051 beneficial shareholders of our common stock.

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We have never paid cash dividends on our common stock. We currently do not anticipate paying any cash dividend in the foreseeable future. Any future declaration and payment of dividends will be subject to the discretion of our Board of Directors, will be subject to applicable law and will depend upon our results of operations, earnings, financial condition, contractual limitations, cash requirements, future prospects and any other factors deemed relevant by our Board of Directors.

We also have securities authorized for issuance under equity compensation plans. The following table provides information as of December 31, 2012 with respect to shares of our common stock that may be issued under our existing equity compensation plans, including our 1995 Third Amended and Restated Stock Plan (the “1995 Plan”), 2000 Stock Option Plan (the “2000 Plan”), 2008 Equity Incentive Plan (the “2008 Plan”), and 2005 Employee Stock Purchase Plan (the “Purchase Plan”). No shares are available for future grants under the 1995 Plan or 2000 Plan.

Plan Category	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights			Weighted Average Exercise Price of Outstanding Options, Warrants and Rights			Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding Securities reflected in Column (a))
	(a)			(b)			(c)
Equity Compensation Plans Approved by Stockholders (1)		2,941,338	(3)(4)	$	3.68	(3)		1,955,501
Equity Compensation Plans Not Approved by Stockholders (2)		159,569		$	10.71			-
Total		3,100,907		$	4.04			1,955,501

(1) Consists of the 1995 Plan, the 2008 Plan, and the Purchase Plan.

(2) Consists of the 2000 Plan.

(3) Excludes purchase rights accruing under the Purchase Plan which has a stockholder-approved reserve of 250,000 shares. Under the Purchase Plan, each eligible employee is able to purchase up to 2,000 shares of our common stock at semi-annual intervals each year at a purchase price per share equal to 85% of the lower of the fair market value of our common stock on the first or last trading day of a purchase period.

(4) Includes restricted stock units of 1,701,779. These awards have no strike price and are issued from our 2008 Plan.

Equity Compensation Plans Not Approved by Stockholders

2000 Stock Option Plan. The purpose of the 2000 Plan adopted by our Board of Directors on July 14, 2000 and amended on December 21, 2001, was to promote our long-term success, by providing financial incentives to employees and consultants of the Company who are in positions to make significant contributions toward such success, except that no member of our Board of Directors or officer of the Company appointed by the Board of Directors was eligible for grants of options under the 2000 Plan. The 2000 Plan was designed to attract individuals of outstanding ability to become or to continue as employees or consultants, to enable such individuals to acquire or increase their proprietary interest in the Company through the ownership of shares of our Common Stock, and to incentivize such individuals to render superior performance during their associations with us, by providing opportunities to participate in the ownership of our future growth through the granting of NQSOs. The 2000 Plan was administered by our Board of Directors or, at its option, a committee appointed by our Board of Directors. A total of 1,250,000 shares of common stock were reserved for issuance under the 2000 Plan. In April 2008, our Board of Directors determined that no further awards would be made under this plan and that all remaining 303,379 shares available for issuance under the 2000 Plan that were not subject to outstanding stock option awards would be eligible for issuance under the 2008 Equity Incentive Plan.

Issuer Purchases of Equity Securities

On February 13, 2008, we announced that our Board of Directors authorized a stock repurchase program under which we could repurchase up to $10 million of our outstanding common stock. The share repurchase program authorized the repurchase of shares through February 2010, from time to time, through transactions in the open market or in privately negotiated transactions.

During the years ended December 31, 2010, 2011 and 2012, we did not repurchase any shares.

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Item 6.    Selected Financial Data

The following selected consolidated financial data should be read in conjunction with the consolidated financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing in Item 7 of this Form 10-K. The selected consolidated statements of operations data as well as the selected consolidated balance sheets data presented below are derived from our consolidated financial statements.  

	Years ended December 31,
	2012			2011			2010
	(Amounts presented in thousands, except per share amounts)
Selected Consolidated Statements of Operations Data:
Net revenues	$	17,878		$	28,255		$	49,822
Gross profit		12,011			17,932			27,798
Operating loss		(17,735	)		(22,136	)		(3,439	)
Net loss (1)	$	(18,222	)	$	(22,872	)	$	(4,609	)
Basic and diluted net loss per common share	$	(0.55	)	$	(0.82	)	$	(0.21	)
Shares used in calculation of basic and diluted net loss per common share		33,130			27,911			22,162

	December 31,
	2012			2011		2010
Selected Consolidated Balance Sheets Data:
Cash, cash equivalents, restricted cash and short-term investments	$	2,244		$	7,554	$	7,835
Total current assets		8,639			17,793		20,386
Working capital		(6,266	)		4,866		1,617
Total non-current assets		8,958			9,825		25,432
Total assets		17,597			27,618		45,818
Convertible Notes due within one year		—			—		3,758
Total current liabilities		14,905			12,927		18,769
5.45% Convertible Notes due 2010, long-term		—			—		—
5.45% Convertible Notes due 2011, long-term		—			—		—
Total non-current liabilities		1,463			2,485		10,317
Total stockholders’ equity		1,229			12,206		16,732

(1) The reported net loss for 2012, 2011 and 2010 reflects stock-based compensation expenses of $2.4 million, $2.5 million and $2.4 million, respectively.

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Conditions and Results of Operations (MD&A) is provided to supplement the accompanying consolidated financial statements and notes in Item 8 to help provide an understanding of our financial condition, changes in our financial condition and results of operations. MD&A is organized as follows:

Caution concerning forward-looking statements.    This section discusses how certain forward-looking statements made by us throughout the MD&A are based on management’s present expectations about future events and are inherently susceptible to uncertainty and changes in circumstances.

Overview.    This section provides a general description of our business.

Critical accounting policies and use of estimates.    This section discusses those accounting policies that are both considered important to our financial condition and operating results and require significant judgment and estimates on the part of management in their application.

Results of operations.    This section provides an analysis of our results of operations for the years ended December 31, 2012, 2011 and 2010. In addition, a brief description is provided of transactions and events that impact the comparability of the results.

Liquidity and capital resources.    This section provides an analysis of our cash position and cash flows, as well as a discussion of our financing arrangements. In this section, we also summarize related party transactions and recent accounting pronouncements not yet adopted by us.   

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements that involve risks and uncertainties. When used in this report, the words, “intend,” “anticipate,” “believe,” “estimate,” “plan,” “expect” and similar expressions as they relate to us are included to identify forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of factors, including those set forth under “Item 1A. Risk Factors” and elsewhere in this report. You should read this discussion in conjunction with the consolidated financial statements and the notes thereto included in this report. 

OVERVIEW

TranSwitch Corporation is a Delaware corporation incorporated on April 26, 1988. Our principal executive offices are located at 3 Enterprise Drive, Shelton CT 06484, and our telephone number at that location is (203) 929-8810. Our Internet address is www.transwitch.com. Our common stock trades on the Nasdaq Capital Market under the symbol “TXCC.” 

We provide innovative integrated circuit (IC) and intellectual property (IP) solutions that deliver core functionality for video, voice, and data communications equipment for the customer premises and network infrastructure markets.  For the customer- premises market, we offer multi-standard, high-speed interconnect solutions enabling the distribution and presentation of high-definition (HD) video and data content for consumer electronics applications through our HDplay product family.

High-speed interconnect solutions include HDMI, DisplayPort and Ethernet IP cores and our recently introduced product family HDplay, which incorporates our proprietary HDP technology. Our HDP technology combines HDMI 1.4 and DisplayPort 1.1 and supports either standard with a single connector. The applications for this product family include projectors, AVR systems, HDTVs, video distribution systems and monitors. Our interoperable connectivity solutions are sold to original equipment manufacturers (OEMs) and original design manufacturers (ODMs) for use in consumer electronics. In addition we have licensed this technology to Samsung, Intel, Texas Instruments, IBM, NEC, TSMC and many others to be incorporated in their products.

For the network infrastructure, or telecom market, we provide integrated multi-core network processor system-on-a-chip solutions for fixed, 3G and 4G mobile, VoIP and multimedia applications. Network infrastructure processing equipment includes multi-media processing engines to address multiple carrier segments such as wireline and wireless gateways, session border controllers, media resource functions, multi-service access nodes, passive optical network multi-dwelling units and translation gateways.  Enterprise applications include VoIP private branch exchanges. Communication network premises equipment includes IP multimedia subsystem and Voice over LTE capable 4G/LTE fixed wireless gateways, residential gateway routers, small office, home office routers and secure VoIP private branch exchanges. We have developed and maintained a broad telecom intellectual property portfolio. We have leveraged this portfolio by licensing our software, and from time to time, selling our patents.

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Our revenues were $17.9 million in 2012, $28.3 million in 2011 and $49.8 million in 2010. As a result of decreased revenues over the past few years, we have taken strict cost control measures including the implementation of restructuring plans during 2010, 2011 and 2012.

During the years ended December 31, 2012 and 2011, we raised approximately $5.2 million and $16.1 million, respectively, in net proceeds from sales of shares of our common stock (see Note 14 of the Notes to the Consolidated Financial Statements).

We also entered into an Amended and Restated Business Financing Agreement (the “Amended Financing Agreement”) with Bridge Bank N.A. (“Bridge Bank”) on April 4, 2011 which matures on April 4, 2013 and amended and restated our prior credit facility. The Amended Financing Agreement provides us a credit facility of up to $5.0 million which bears interest at the higher of (i) the prime rate plus 2.0% or (ii) 5.25% percent, plus the payment of certain fees and expenses (the “Facility”). The Facility is secured by substantially all of our personal property, including our accounts receivable and intellectual property. Subject to the terms of the Amended Financing Agreement, availability under the Facility is based on a formula pursuant to which Bridge Bank would advance an amount equal to the lower of $5.0 million or 80% of our eligible accounts receivable($2.4 million at December 31, 2012), with account eligibility and advance rates determined by Bridge Bank in its sole discretion. The term of the Facility is two years and at the expiration of such term, all loan advances under the Facility will become immediately due and payable.

At December 31, 2012 and 2011, we had outstanding borrowings under this Facility of $2.4 million and zero, respectively. We are in discussions with Bridge Bank about extending the Facility. We are currently not in compliance with the asset coverage ratio covenant in the Facility and we are discussing with Bridge Bank an agreement pursuant to which Bridge Bank would agree to forbear from exercising its rights in the event of default, which rights include accelerating the repayment of our indebtedness.

Our current forecast projects that, absent an infusion of capital, we will be unable to meet our current obligations through December 31, 2013. These conditions raise substantial doubt about our ability to continue as a going concern. Consequently, the audit report prepared by our independent registered public accounting firm relating to our financial statements for the year ended December 31, 2012 includes an explanatory paragraph expressing the substantial doubt about our ability to continue as a going concern.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

Our consolidated financial statements and related disclosures, which are prepared to conform with accounting principles generally accepted in the United States of America (U.S. GAAP), require us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the period reported. We are also required to disclose amounts of contingent assets and liabilities at the date of the consolidated financial statements. Our actual results in future periods could differ from those estimates and assumptions. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.

We consider the most critical accounting policies and uses of estimates in our consolidated financial statements to be those relating to:

(1) recognizing net revenues, cost of revenues and gross profit;

(2) estimating allowances for doubtful accounts;

(3) estimating assumptions used in the calculation of stock-based compensation;

(4) estimating values used for the impairment analysis of intangibles and long-lived assets;

(5) estimating values used for the goodwill impairment analysis;

(6) estimating excess and obsolete inventories;

(7) estimating restructuring liabilities; and

(8) estimating values of investments in non-publicly traded companies.

These accounting policies, the bases for these estimates and their potential impact to our consolidated financial statements, should any of these estimates change, are further described as follows:

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Net Revenues, Cost of Revenues and Gross Profit.    Net revenues are primarily comprised of product shipments, principally to domestic and international telecommunications and data communications OEMs and to distributors. Net revenues from product sales to OEMs are recognized at the time of product shipment when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) title and risk of loss transfers to the customer; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured. Revenues from our distributors can be recognized when: (1) the prices are fixed at the date of shipment from our facilities; (2) payment is not contractually or otherwise excused until the product is resold; (3) we do not have any obligations for future performance relating to the resale of the product; and (4) the amount of future returns, allowances, refunds and costs to be incurred can be reasonably estimated and are accrued at the time of shipment. Agreements with certain distributors provide price protection and return and allowance rights. Service revenues are recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) we have performed a service in accordance with our contractual obligations; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured.

At the time of shipment, we record a reduction to revenue (with a related liability) to accrue for future price protection. This liability is established based on historical experience, contractually agreed-to provisions and future shipment forecasts. Such accruals have been insignificant for the last three years.

We also accrue, at the time of shipment, a reduction to revenue (with a related liability) and an inventory asset against product cost of revenues in order to establish a provision for the gross margin related to future returns under our distributor stock rotation program. Such accruals related to reductions of revenue were $0.3 million, $0.4 million and $0.8 million at December 31, 2012, 2011 and 2010, respectively. The accruals related to inventory assets are insignificant to our financial position and results of operations for all periods presented. Should our actual experience differ from our estimated liabilities, there could be adjustments (either favorable or unfavorable) to our net revenues, cost of revenues and gross profits.

We provide a warranty on our products for up to one year from the date of shipment. Warranty expense is insignificant to all periods presented.

We license connectivity solutions, including HDMI, DisplayPort and Ethernet IP Cores. Revenues from licensing arrangements generally consist of multiple elements such as license, implementation and maintenance services. The items (deliverables) included in the arrangements are evaluated to determine whether they represent separate units of accounting. We perform this evaluation at the inception of an arrangement and as we deliver each item in the arrangement.

Generally, we account for a deliverable (or a group of deliverables) separately if (1) the delivered item(s) has standalone value to the customer, (2) there is objective and reliable evidence of the fair value of the undelivered items included in the arrangement, and (3) if we have given the customer a general right of return relative to the delivered items, delivery or performance of the undelivered items or services are probable and substantially in our control.

We also recognize revenue from royalties upon notification of sale by our licensees. The terms of the royalty agreements generally require licensees to give us notification and to pay royalties within 45 days of the end of the quarter during which the sales by the licensees take place.

Estimated Allowances for Doubtful Accounts.  We record allowances for doubtful accounts for estimated losses based upon specifically identified amounts that we believe to be uncollectible along with our assessment of the general financial condition of our customer base. If our actual collections experience changes, revisions to our allowances may be required. We have a limited number of customers with individually large amounts due at any given balance sheet date. Any unanticipated change in the creditworthiness of such a customer or other matters affecting the collectability of amounts due from such customers could have a material effect on our results of operations in the period in which such changes or events occur.

Stock-based Compensation.  Determining the amount of stock-based compensation for awards granted includes selecting an appropriate model to calculate fair value at the grant date. We have used the Black-Scholes option valuation model to value employee stock option awards. Certain inputs to this valuation model require considerable judgment. These inputs include estimating the volatility of our stock, the expected life of the option awarded and the forfeiture rate. We have estimated volatility, the expected life and the forfeiture rate based on historical data. Volatility is estimated over a term that approximates the expected life of the option awarded.

Intangibles and Long-Lived Assets (including Goodwill). We review long-lived and intangible assets (including goodwill) for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

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For intangibles and long-lived assets, when factors indicate that a long-lived asset should be evaluated for possible impairment, an estimate of the related asset’s undiscounted future cash flows over the remaining life of the asset is made to measure whether the carrying value is recoverable. Any impairment is measured based upon the excess of the carrying value of the asset over its estimated fair value which is generally based on an estimate of future discounted cash flows. A significant amount of management judgment is used in estimating future discounted cash flows. During the fourth quarter of 2012 and 2011, impairment testing for certain purchased customer relationships and developed technology was performed and indicated that the undiscounted future cash flows of these intangible assets were less than its corresponding carrying amount. As a result of the discounted cash flow analysis performed, we measured and recorded an impairment of these intangible assets of $0.6 million in 2012 and $5.4 million in 2011. The 2012 and 2011 impairment involved purchased customer relationships and developed technology related to a business acquisition in 2008.

Our impairment review of goodwill was performed using a fair-value method and discounted cash flow models with estimated cash flows based on internal forecasts which included terminal values based on current market valuation metrics. The fair value represents the amount at which a reporting unit could be bought or sold in a current transaction between willing parties on an arms-length basis. In estimating fair value, we used our common stock’s market price to determine fair value and other valuation metrics. In addition, we performed discounted cash flow analysis on the reporting units to determine fair value. There were no goodwill impairment charges in 2012 or 2010. During the fourth quarter of 2011, impairment testing performed by us indicated that the estimated fair value of the reporting unit tested was less than its corresponding carrying amount. As a result of the analyses performed, we recorded goodwill impairment charges of $8.9 million in 2011. The 2011 impairment involved goodwill related to a business acquisition in 2008.

A considerable amount of management judgment and assumptions are required in performing impairment tests. While we believe that our judgments and assumptions were reasonable, different assumptions could change the estimated fair values and, therefore, additional impairment charges could be required.

Estimated Excess Inventories.     We periodically review our inventory levels to determine if inventory is stated at the lower of cost or net realizable value. The telecommunications and data communications industries have experienced a significant downturn during the past few years and, as a result, we have had to evaluate our inventory position based on known backlog of orders, projected sales and marketing forecasts, shipment activity and inventory held at our significant distributors. We recorded charges for excess and obsolete inventories totaling approximately $0.9 million in 2012, $0.2 million in 2011 and $0.8 million in 2010.

During 2012, 2011 and 2010, we recorded net product revenues of approximately $0.6 million, $0.4 million and $1.2 million, respectively, on shipments of excess and obsolete inventory that had previously been written down to their estimated net realizable value of zero. This resulted in almost 100% gross margin on these product revenues. Had these products been sold at our historical average cost basis, gross margin on these revenues would have been 72%, 51% and 58% in 2012, 2011 and 2010 respectively. We currently do not anticipate that a significant amount of the excess and obsolete inventories subject to the write-downs described above will be used in the future based upon our current demand forecast. Should our actual future demand exceed the estimates that we used in writing down our excess and obsolete inventories, we will recognize a favorable impact to cost of revenues and gross profits. Should demand fall below our current expectations, we may record additional inventory write-downs which will result in a negative impact to cost of revenues and gross profits.

Estimated Restructuring Liabilities.    During 2012, we recorded a net restructuring charge of approximately $1.4 million. We implemented a restructuring plan in the second quarter of 2012 that included a workforce reduction of approximately 64 positions primarily in our Bangalore, India, New Delhi, India, Fremont, California, Shelton, Connecticut, and European locations. We recorded restructuring charges of approximately $1.1 million related to employee termination benefits, approximately $0.2 million related to facilities costs and $0.4 million for other costs. These new restructuring charges were partially offset by approximately $0.3 million of a restructuring benefit that was an adjustment to a prior restructuring charge for a facility lease obligation in Shelton, Connecticut. During 2011, we recorded a net restructuring benefit of $5.6 million. On December 28, 2011, we entered into an amendment (the “Amendment”) to a sublease agreement (the “Sublease”) with an unaffiliated party to sublease 92,880 square feet of our office space in Shelton, Connecticut. As a result of the Sublease, we reversed approximately $7.0 million of previously accrued restructuring liabilities. This amendment extends the sublease through May 2017. This benefit was partially offset by approximately $1.4 million of charges for workforce reductions implemented during 2011. In the third quarter of 2011, we implemented a restructuring plan that included a workforce reduction of approximately 39 positions primarily in our Shelton, Connecticut, Fremont, California, New Delhi, India and Bangalore, India locations. We also implemented a restructuring plan in the first quarter of 2011 that included a workforce reduction of approximately 26 positions primarily in our Fremont, California, New Delhi, India and Bangalore, India locations. The restructuring charges are primarily for employee termination benefits. During 2010, we recorded a net restructuring charge of approximately $0.4 million. We implemented a restructuring plan in the first quarter of 2010 that included a workforce reduction of approximately 17 positions in our Shelton, Connecticut, Fremont, California, New Delhi, India and Bangalore, India locations. The restructuring charges were primarily for employee termination benefits. All of the related cash expenditures were paid during 2010. At December 31, 2012 and 2011, the restructuring liabilities were $3.5 million and $4.5 million, respectively, on our consolidated balance sheets. Restructuring liabilities at December 31, 2012 include approximately $2.5 million of liabilities for facility lease costs and approximately $1.0 million for employee termination benefits and other costs (Refer to Note 15 – Restructuring Charges of the Notes to Consolidated Financial Statements). These facility operating leases expire in 2017. The future cash outlays for all of our operating lease commitments are discussed in Note 16 of the Notes to Consolidated Financial Statements. Certain assumptions are used by us to derive this estimate, including future maintenance costs, price escalation and sublease income derived from these facilities. Should we negotiate additional sublease rental income agreements or reach a settlement with our lessors to be released from our existing obligations, we could realize a favorable benefit to our results of future operations. Should future lease, maintenance or other costs related to these facilities exceed our estimates, we could incur additional expenses in future periods.

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Valuation of Investments in Non-Publicly Traded Companies and Venture Capital Funds.     We have been making strategic equity investments in non-publicly traded companies that develop technologies that are complementary to our product road map. Depending on our level of ownership and whether or not we have the ability to exercise significant influence, we account for these investments on either the cost or equity method, and review such investments periodically for impairment. The appropriate reductions in carrying values are recorded when, and if, necessary. The process of assessing whether a particular investment’s net realizable value is less than its carrying cost requires a significant amount of judgment. In making this judgment, we carefully consider the investee’s cash position, projected cash flows (both short and long-term), financing needs, most recent valuation data, the current investing environment, management / ownership changes, and competition. This evaluation process is based on information that we request from these privately held companies. This information is not subject to the same disclosure and audit requirements as the reports required of United States public companies, and as such, the reliability and accuracy of the data may vary. Based on our evaluations, we had no impairment charges related to our investments in non-publicly traded companies during 2012, 2011 or 2010. Also, during the first quarter of 2010, we sold our investment in Opulan Technologies Corp. (“Opulan”) for $2.7 million.  The carrying value of this investment in Opulan was also $2.7 million and accordingly no gain or loss was recorded on this transaction. The total investment in non-public companies was $0.4 million and $0.3 million as of December 31, 2012 and 2011, respectively. (For further discussion, please refer to Note 4 Investments in Non-Publicly Traded Companies and Venture Capital Funds in our Consolidated Financial Statements). We used the modified equity method of accounting to determine the impairment loss for certain investments, as it was determined that no better current evidence of the value of our cost method investments existed and we believe that this gives us the best basis for our estimate given the historic negative cash flows of these companies. The modified equity method of accounting results in recording an impairment loss on a cost method investment equal to the investor’s proportionate share of the investee’s losses as its contributed capital is consumed to fund operating losses of the investee from the inception of the investor’s investment.

RESULTS OF OPERATIONS

The results of operations that follow should be read in conjunction with our critical accounting policies and estimates summarized above as well as our consolidated financial statements and notes thereto contained in Item 8 of this report. The following table sets forth certain consolidated statements of operations data as a percentage of net revenues for the periods indicated.

	Years ended December 31,
	2012			2011			2010
Net revenues:
Product revenues		58	%		70	%		84	%
Service revenues		42	%		30	%		16	%
Total net revenues		100	%		100	%		100	%
Cost of revenues:
Product cost of revenues		21	%		24	%		36	%
Provision for excess and obsolete inventories		5	%		1	%		2	%
Service cost of revenues		7	%		12	%		6	%
Total cost of revenues		33	%		37	%		44	%
Gross profit		67	%		63	%		56	%
Operating expenses:
Research and development		89	%		67	%		32	%
Marketing and sales		28	%		26	%		16	%
General and administrative		43	%		26	%		15	%
Restructuring charges (credits), net		8	%		(20	)%		1	%
Impairment of goodwill and other intangibles		4	%		50	%		-
Reversal of accrued royalties, net		(6	)%		(8	)%		(1	)%
Total operating expenses		166	%		141	%		63	%
Operating loss		(99	)%		(78	)%		(7	)%

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Comparison of Fiscal Years 2012 and 2011

Net Revenues. We have two product line categories: Customer Premises Equipment (CPE) and Network Infrastructure. Our CPE product line category includes HDMI, DisplayPort and Ethernet IP Cores which have been incorporated into a number of consumer electronics and PC appliances and Multi-Service Communications Processors used in broadband modems or to be added as part of a small office, home office, or SOHO network. Our CPE product line also includes our recently introduced product family HDplay, which incorporates our proprietary HDP technology. Our HDP technology combines HDMI 1.4 and Displayport 1.1 and supports either standard with a single connector. The applications for this product include projectors, AVR systems and monitors. Our interoperable connectivity solutions are sold to original equipment manufacturers (OEMs) for use in consumer electronics.

Our Network Infrastructure product line category includes our Optical Transport, Carrier Ethernet, Media Gateway/VoIP and Broadband Access product lines. The Optical Transport products are incorporated into OEM systems that improve the efficiency of fiber optic networks for packetized data traffic, thereby increasing the overall network capacity. Our Media Gateway/VoIP products provide Voice-over-IP and other packet processing functionality in a variety of equipment types deployed in wireless and wire-line carrier networks as well as in enterprise networks.  These equipment types include large capacity media gateways in the core of the network, small-medium capacity access gateways in the ‘last-mile’ section of the network and customer premise equipment for business and residential subscribers. The Broadband Access product line is incorporated into equipment that provides high speed connections to subscribers using fiber (FTTx) or DSL technology, enabling telecommunications service providers to support next generation voice, data and video services. The Carrier Ethernet product line facilitates the transition of existing networks-based legacy voice oriented technologies to Ethernet technology which is more suitable and efficient for supporting next generation converged video, data and voice services.

Our Network Infrastructure product line and our Multi-Service Communications Processors continue to show a decline year over year. As such, this may affect our goodwill impairment analysis in the future.

The following table summarizes our net revenue mix by product line category:

(Tabular dollars in thousands)	Year Ended December 31, 2012					Year Ended December 31, 2011
	Revenues		Percent of Total Revenues			Revenues		Percent of Total Revenues			Percentage Increase (Decrease) in Revenues
Network Infrastructure	$	14,202		79	%	$	19,368		69	%		(27	)%
Customer Premises Equipment		3,676		21	%		8,887		31	%		(59	)%
Total	$	17,878		100	%	$	28,255		100	%		(37	)%

Total net revenues in 2012 were $17.9 million as compared to $28.3 million in 2011, a decrease of $10.4 million, or 37%. Our Network Infrastructure revenues decrease of approximately 27% was a result of lower sales of Carrier Ethernet and VoIP products due to reduced telecom infrastructure capital expenditures and the maturation of our product lines as well as reduced sales of our Network Infrastructure Application Specific Integrated Circuit products. Our CPE revenues decrease of approximately 59% was attributable to decreased service revenues for IP licensing of our high speed interface technology and reduced sales of CPE Application Specific Integrated Circuit products.

For 2012 and 2011, international net revenues were approximately 66% and 77%, respectively, of net revenues.

As of December 31, 2012, our backlog was $2.4 million, as compared to $4.3 million as of December 31, 2011. Backlog represents firm orders anticipated to be shipped, and service revenue expected to be billed under existing contracts, during the next 12 months. Our business and, to a large extent, that of the entire communication semiconductor industry, is characterized by short-term order and shipment schedules. Since orders constituting our current backlog are subject to changes in delivery schedules or to cancellation at the option of the purchaser without significant penalty, backlog is not necessarily indicative of future revenues.

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Gross Profit. Gross profit was $12.0 million and $17.9 million for the years ended December 31, 2012 and 2011, respectively, a decrease of approximately $5.9 million for 2012 as compared to 2011. The decrease in gross profit was primarily the result of a decrease in net product revenues which was partially offset by higher gross margins on service revenues in 2012.The total gross profit as a percentage of total revenue was 67% and 63% for 2012 and 2011, respectively. Gross profit percentage on service revenues was 83% and 60% for 2012 and 2011, respectively. The changes in gross margin percentage are mostly attributable to changes in product mix, especially a larger portion of royalties and higher margin IP licensing revenues.

During the years ended December 31, 2012 and 2011, gross profit was affected favorably in the amount of $0.2 million and $0.2 million, respectively, from the sales of products that had previously been written down to a cost basis of zero. Also during the years ended December 31, 2012 and 2011, we recorded provisions for excess and obsolete inventories in the amount of $0.9 million and $0.2 million, respectively. These charges had a negative impact on our gross profit.

We anticipate that gross profit will continue to be impacted by fluctuations in the volume and mix of our product shipments as well as material costs, yield and the fixed cost absorption of our production operations.

Research and Development.Research and development expenses consist primarily of salaries and related costs of employees engaged in research, design and development activities, costs related to electronic design automation tools, subcontracting and fabrication costs, depreciation and amortization, and facilities expenses. Research and development expenses for 2012 were $15.9 million which decreased $3.0 million, or 16% as compared to the prior year. These decreases were a result of decreased labor and other cost savings as a result of workforce reductions from restructuring plans that were implemented during the first and third quarters of 2011 and second quarter of 2012. The workforce reductions principally affected our Network Infrastructure product line.

All product and software development programs related to our telecom product lines were cancelled and we redeployed all of our remaining research and development resources in India and Israel to our interoperable connectivity solutions for consumer electronic and personal computer markets. We will continue to closely monitor both our costs and our revenue expectations in future periods. We will continue to concentrate our spending on research and development to meet our customer requirements and respond to market conditions.

Marketing and Sales.    Marketing and sales expenses consist primarily of personnel-related, trade show, travel and facilities expenses. Marketing and sales expenses for the year ended December 31, 2012 decreased by $2.3million or 31% as compared to the year ended December 31, 2011. These decreases were a result of decreased salaries as a result of workforce reductions from restructuring plans that were implemented during the first and third quarters of 2011 and second quarter of 2012, along with reduced expense for amortization of intangible assets as a result of lower intangible asset balances due to intangible asset impairment charges that were recorded in 2012 and 2011.

General and Administrative.   General and administrative expenses consist primarily of personnel-related expenses, professional and legal fees, and insurance and facilities expenses.  General and administrative expenses for 2012 increased $0.3 million or 4% as compared to 2011.  This increase was a result of increased professional and legal fees partially offset by decreased salaries as a result of workforce reductions from restructuring plans that were implemented during second quarter of 2012.

Restructuring Charges (Credits), net.   During the years ended December 31, 2012 and 2011, we recorded net restructuring charges of $1.4 million and net restructuring credits of $5.6 million, respectively. Information on restructuring charges and credits for each of the last two years is located in Note 15 of the Notes to Consolidated Financial Statements.

Impairment of Goodwill and Other Intangibles. For 2012 and 2011, we recorded goodwill and other intangible impairment charges of $0.6 million and $14.3 million, respectively. Information on the impairment of goodwill and other intangibles recorded during 2012 and 2011 is located in Note 1 and Note 7 of the Notes to Consolidated Financial Statements.

Interest Expense net. Interest expense, net was $0.1 million for the years ended December 31, 2012 and 2011.

Interest income may fluctuate in the future as it is affected by our cash and investment balances and the related interest rates. At December 31, 2012 and 2011, the effective interest rate on our interest-bearing securities was approximately 1.0% and 2.5%, respectively.

Other Income (Expense). For the years ended December 31, 2012 and 2011, we had other expense of less than $0.1 million and other income of less than $0.1 million, respectively. In 2011, we determined that our intercompany loan balances with our foreign subsidiaries are classified as long-term.  As such, we recorded exchange gains and losses in the translation of these balances as other comprehensive income or loss for the years ended December 31, 2012 and 2011.

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Income Tax Expense. Our income tax expense of $0.4 million in 2012 and $0.6 million in 2011 is applicable to the operating results of certain of our foreign subsidiaries, principally India. We have incurred significant taxable losses for United States federal and state purposes. We have not recognized any income tax benefits on those losses because their realization is uncertain.

Comparison of Fiscal Years 2011 and 2010

Net Revenues. See introductory paragraphs under the heading “Net Revenues” under “Comparison of Fiscal years 2012 and 2011” above for a description of our product lines.

The following table summarizes our net revenue mix by product line category:

(Tabular dollars in thousands)	Year Ended December 31, 2011					Year Ended December 31, 2010
	Revenues		Percent of Total Revenues			Revenues		Percent of Total Revenues			Percentage Increase (Decrease) in Revenues
Network Infrastructure	$	19,368		69	%	$	32,095		64	%		(40	)%
Customer Premises Equipment		8,887		31	%		17,727		36	%		(50	)%
Total	$	28,255		100	%	$	49,822		100	%		(43	)%

Total net revenues in 2011 were $28.3 million as compared to $49.8 million in 2010, a decrease of $21.5 million or 43%. Our Network Infrastructure revenues decrease of approximately 40% was a result of lower sales of Optical Transport and VoIP products due to reduced telecom infrastructure capital expenditures and reduced sales of our Application Specific Integrated Circuits products. Our CPE revenues decrease of approximately 50% was attributable to the ramping down of our Mustang (gigabit Ethernet passive optical) product line towards the end of 2010 and reduced sales of our Communications Processor products. This reduction was partially offset by increased service revenues which include IP licensing of our high speed interface technology.

For 2011 and 2010, international net revenues were approximately 77% and 75%, respectively, of net revenues.

As of December 31, 2011, our backlog was $4.3 million, as compared to $7.5 million as of December 31, 2010. Backlog represents firm orders anticipated to be shipped, and service revenue expected to be billed under existing contracts, during the next 12 months. Our business and, to a large extent, that of the entire communication semiconductor industry, is characterized by short-term order and shipment schedules. Since orders constituting our current backlog are subject to changes in delivery schedules or to cancellation at the option of the purchaser without significant penalty, backlog is not necessarily indicative of future revenues.

Gross Profit. Gross profit was $17.9 million and $27.8 million for the years ended December 31, 2011 and 2010, respectively, a decrease of approximately $9.9 million for 2011 as compared to 2010. The decrease in gross profit was primarily the result of a decrease in net product revenues which was partially offset by higher gross margins on product revenues in 2011.The product gross profit was 65% as a percentage of product revenue in 2011 as compared to 55% in 2010.The total gross profit as a percentage of total revenue was 63% and 56% for 2011 and 2010, respectively. The changes in gross margin percentage are mostly attributable to changes in product mix, especially a larger portion of royalties and higher margin IP licensing revenues.

During the years ended December 31, 2011 and 2010, gross profit was affected favorably in the amount of $0.2 million and $0.5 million, respectively, from the sales of products that had previously been written down to a cost basis of zero. Also during the years ended December 31, 2011 and 2010, we recorded provisions for excess and obsolete inventories in the amount of $0.2 million and $0.8 million, respectively. These charges had a negative impact on our gross profit.

We anticipate that gross profit will continue to be impacted by fluctuations in the volume and mix of our product shipments as well as material costs, yield and the fixed cost absorption of our production operations.

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Research and Development.Research and development expenses consist primarily of salaries and related costs of employees engaged in research, design and development activities, costs related to electronic design automation tools, subcontracting and fabrication costs, depreciation and amortization and facilities expenses. Research and development expenses for 2011 were $18.9 million which increased $2.9 million, or 18% as compared to the prior year. This was a result of increased spending in labor, subcontracting and fabrication costs for our high-speed interface product line.

Marketing and Sales.    Marketing and sales expenses consist primarily of personnel-related expenses, trade shows, travel expenses and facilities expenses. Marketing and sales expenses for 2011 were $7.3 million which decreased $0.4 million, or 6% as compared to the prior year. This decrease was a result of lower salaries and employee related expenses due to cost cutting measures that were implemented in 2011. These decreases were partially offset by increased sales costs related to our high-speed interface product line

General and Administrative.   General and administrative (G&A) expenses consist primarily of personnel-related expenses, professional and legal fees, and facilities expenses. G&A expenses remained flat at $7.5 million in 2011 as compared to $7.5 million in 2010.

Restructuring (Credits) Charges, net.   During the years ended December 31, 2011 and 2010, we recorded net restructuring credits of $5.6 million and net restructuring charges of $0.4 million, respectively. Information on restructuring credits and charges for each of the last two years is located in Note 15 of the Notes to Consolidated Financial Statements.

Impairment of Goodwill and Other Intangibles. For 2011 and 2010, we recorded goodwill and other intangible impairment charges of $14.3 million and zero, respectively. Information on the impairment of goodwill and other intangibles recorded during 2011 is located in Note 1 and Note 7 of the Notes to Consolidated Financial Statements.

Interest Expense net. Interest expense, net was approximately $0.1 million in 2011, a decrease of $0.5 million as compared to 2010.

Interest expense decreased from $0.7 million in 2010 to $0.2 million in 2011 due to lower debt balances resulting from the principal payments made on our 2011 Notes. The interest payments on our debt balances were $0.1 million and $0.4 million for the years ended December 31, 2011 and 2010, respectively. Our 2011 Notes were paid in full as of September 30, 2011 and as such there will be no interest payments on this debt after that date.

Interest income was $0.1 million in both years ended December 31, 2011 and 2010. Interest income may fluctuate in the future as a result of changes in market yields due to interest rate fluctuations and changes in our cash and investment balances. At December 31, 2011 and 2010, the effective interest rates on our interest-bearing securities were approximately 2.54% and 1.36%, respectively.

Other Income (Expense). For the years ended December 31, 2011 and 2010, we had other income of approximately $0.1 million and $0.4 million, respectively. The other income for 2010 was primarily due to both realized and unrealized exchange rate gains and losses which are recorded for the translation of our intercompany loan balances with our wholly owned subsidiaries. In 2011, we determined that our intercompany loan balances with our foreign subsidiaries are classified as long-term.  As such, we recorded exchange gains and losses in the translation of these balances as other comprehensive income or loss for the year ended December 31, 2011.

Income Tax Expense. Our income tax expense of $0.6 million in 2011 and $1.0 million in 2010 is applicable to the operating results of certain of our foreign subsidiaries, principally India. We have incurred significant taxable losses for United States federal and state purposes. We have not recognized any income tax benefits on those losses because their realization is uncertain.

LIQUIDITY AND CAPITAL RESOURCES

 As of December 31, 2012, we had cash, cash equivalents, restricted cash and short-term investments of approximately $2.2 million compared to $7.6 million as of December 31, 2011. Further, our working capital was negative $6.3 million as of December 31, 2012 compared to a positive $4.9 million as of December 31, 2011. In addition, as of December 31, 2012 we had outstanding indebtedness to Bridge Bank under our credit facility of $2.4 million ($1.7 million at March 18, 2013). The Bridge Bank credit facility matures on April 4, 2013, although we are in discussions with Bridge Bank about extending this facility. We are currently not in compliance with the asset coverage ratio covenant in the facility and we are discussing with Bridge Bank an agreement pursuant to which Bridge Bank would agree to forbear from exercising its rights in the event of default, which rights include the accelerating the repayment of our indebtedness.

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Our current forecast projects that, absent an infusion of capital, we will be unable to meet our current obligations through December 31, 2013. These conditions raise substantial doubt about our ability to continue as a going concern. Consequently, the audit report prepared by our independent registered public accounting firm relating to our financial statements for the year ended December 31, 2012 includes an explanatory paragraph expressing the substantial doubt about our ability to continue as a going concern. If we are unable to generate sufficient cash flows from operations to meet our anticipated needs for working capital and capital expenditures, we may need to raise additional funds. Such capital may not be available on terms favorable or acceptable to us, if at all. If we raise additional funds through the issuance of equity securities, our stockholders may experience dilution of their ownership interest, and the newly issued securities may have rights superior to those of our common stock.

On December 4, 2012, we received a letter from Nasdaq (the “Minimum Bid Price Notice”) notifying us that the closing bid price of our common stock was below the $1.00 minimum bid price requirement for 30 consecutive business days and, as a result, the Company no longer complied with the minimum bid price requirement under Listing Rule 5550(a)(2) for continued listing on Nasdaq. The Minimum Bid Price Notice also stated that we have been provided an initial compliance period of 180 calendar days, or until June 3, 2013, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days prior to June 3, 2013. If we do not regain compliance by June 3, 2013, Nasdaq will provide notice to us that our securities will be subject to delisting.

On February 26, 2013, we received a letter from Nasdaq (the “Stockholders’ Equity Notice”) notifying us that we were no longer in compliance with the minimum stockholders’ equity requirement of at least $2.5 million for continued listing on Nasdaq. The Stockholders’ Equity Notice does not result in the immediate delisting of our common stock from Nasdaq. Rather, under the Nasdaq Listing Rules, we have 45 calendar days from the date of the Stockholders’ Equity Notice to submit to Nasdaq a plan to regain compliance. If the plan is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the Stockholders’ Equity Notice for us to evidence compliance. If we submit a plan, Nasdaq will determine whether to accept the plan, considering such criteria as the likelihood that the plan will result in compliance with Nasdaq’s continued listing criteria, our past compliance history, the reasons for our current non-compliance, other corporate events that may occur within the review period, our overall financial condition and our public disclosures. If Nasdaq does not accept the plan, we will have the opportunity to appeal that decision to a Hearings Panel.

If we are delisted and cannot obtain listing on another major market or exchange, our stock’s liquidity would suffer, and we would likely experience reduced investor interest. Such factors may result in a decrease in our stock’s trading price. In addition, the failure to trade on a national securities exchange may hinder our efforts to obtain financing.

In July of 2012, we announced a restructuring which primarily affected our telecom product unit and is expected to save $8.0 million in annual operating costs (see Note 15, Restructuring Charges). With this restructuring, we cancelled all development programs related to our telecom product lines. We have redeployed all of our remaining research and development resources to focus on our interoperable connectivity solutions for consumer electronic and personal computer markets.  We have also announced our intentions to sell our non-strategic assets. In 2012, we announced that we retained a leading patent broker to sell our telecom related patent portfolio. We also effectuated restructurings in the first and third quarters of 2011 and we continue to assess our cost structure in relationship to our revenue levels, which may necessitate further expense reductions.

As with any operating plan, there are risks associated with our ability to execute it, including the current economic environment in which we operate. Therefore, there can be no assurance that we will be able to satisfy our obligations, or achieve the operating improvements as contemplated by the current operating plan. If we are unable to execute this plan, we will need to find additional sources of cash not contemplated by the current operating plan and/or raise additional capital to sustain continuing operations as currently contemplated. There can be no assurance that the additional funding sources will be available to us at favorable rates or at all. If we cannot maintain compliance with our covenant requirements on our bank financing facility or cannot obtain appropriate waivers and modifications, the lenders may call the debt. If the debt is called, we would need to obtain new financing and there can be no assurance that we will be able to do so. If we are unable to achieve our operating plan and maintain compliance with our loan covenants and our debt is called, we will not be able to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

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Commitments and Significant Contractual Obligations

We have outstanding operating lease commitments of $13.5 million, payable over the next five years. Some of these commitments are for space that is not being utilized and, for which we recorded restructuring charges in prior years for excess facilities. We currently have subleases for all of our unoccupied space but our sublease income generated will not offset the entire future commitment. As of December 31, 2012, we have approximately $9.3 million in anticipated sub-lease income over the next five years relating to portions of our unoccupied facilities. We currently believe that we can fund these lease commitments in the future. However, there can be no assurances that we will not be required to seek additional capital or provide additional guarantees or collateral on these obligations.

A summary of our significant future contractual obligations and their payments follows (in thousands):

	Payments Due by Period
Contractual Obligations	Total		2013		2014		2015		2016		2017		Thereafter
Operating lease obligations	$	13,509	$	3,431	$	3,138	$	2,848	$	2,824	$	1,268		—
Purchase obligations		1,637		1,143		253		251		—		—		—
	$	15,146	$	4,574	$	3,391	$	3,099	$	2,824	$	1,268		—

We also have pledged approximately $0.1 million as collateral for stand-by letters of credit that guarantee certain long-term property lease obligations and to support customer credit requirements. This $0.1 million is in our bank accounts and is included in our restricted cash as of December 31, 2012 and 2011.

Off –Balance Sheet Arrangements

As of December 31, 2012, we had no material off-balance sheet financing arrangements.

Recent Accounting Pronouncements

Newly issued accounting pronouncements that potentially impact our financial statements are disclosed in the Notes to Consolidated Financial Statements of this Form 10-K.

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk 

Interest Rate Risk.  We have investments in money market accounts that earn interest income that is a function of the market rates. As a result, we have exposure to changes in interest rates. For example, if interest rates were to decrease by one half percentage point from their current levels, our potential interest income for 2013, assuming a constant cash balance, would decrease by less than $0.1 million.  

Foreign Currency Exchange Risk.  As substantially all of our net revenues are currently made or denominated in U.S. dollars, a strengthening of the dollar could make our products less competitive in foreign markets. Although we recognize our revenues in U.S. dollars, we incur expenses in currencies other than U.S. dollars. In 2012, operating expenses incurred in foreign currencies, excluding impairment of goodwill and other intangibles, were approximately 54% of our total operating expenses. Although we have not experienced significant foreign exchange rate losses to date, we may in the future, especially to the extent that we do not engage in hedging. We do not enter into derivative financial instruments for trading or speculative purposes. The economic impact of currency exchange rate movements on our operating results is complex because such changes are often linked to variability in real growth, inflation, interest rates, governmental actions and other factors. These changes, if material, may cause us to adjust our financing and operating strategies. Consequently, isolating the effect of changes in currency does not incorporate these other important economic factors.

  Fair Market Value of Financial Instruments.  Our 2011 Notes were paid in full as of September 30, 2011 and as such we have no exposure relating to these notes as of December 31, 2012.

37

Item 8.    Financial Statements and Supplementary Data

TRANSWITCH CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND FINANCIAL STATEMENT SCHEDULE

	Page
Financial Statements:
Report of Independent Registered Public Accounting Firm	39
Consolidated Balance Sheets as of December 31, 2012 and 2011	40
Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010	41
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2012, 2011 and 2010	42
Consolidated Statements of Stockholders’ Equity  for the years ended December 31, 2012, 2011 and 2010	43
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010	44
Notes to Consolidated Financial Statements	45
Financial Statement Schedule:
Schedule II, Valuation and Qualifying Accounts	67

38

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Audit Committee of the

Board of Directors and Shareholders

of TranSwitch Corporation

We have audited the accompanying consolidated balance sheets of TranSwitch Corporation (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, with the exception of the matter described in the following paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of TranSwitch Corporation, as of December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations, continues to experience negative cash flows from operations and has negative working capital at December 31, 2012. These raise significant doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2012, the Company adopted Financial Accounting Standards Board issued ASU No. 2011-05, Comprehensive Income (Topic 220).

/s/ Marcum llp

Hartford, Connecticut
March 25, 2013

39

TRANSWITCH CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Data)

	December 31, 2012			December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	2,156		$	5,453
Restricted cash		88			98
Short-term Investments		-			2,003
Accounts receivable (net of allowance for doubtful accounts of $186 in 2012 and $207 in 2011)		4,238			6,375
Inventories		748			1,988
Prepaid expenses and other current assets		1,409			1,876
Total current assets		8,639			17,793
Property and equipment, net		1,111			1,355
Goodwill		5,271			5,271
Other intangible assets, net		548			1,461
Investments in non-publicly traded companies		356			306
Other assets		1,672			1,432
Total assets	$	17,597		$	27,618
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Credit facility	$	2,432		$	-
Accounts payable		2,210			2,272
Accrued expenses and other current liabilities		10,263			10,655
Total current liabilities		14,905			12,927
Restructuring liabilities		1,463			2,485
Total liabilities		16,368			15,412
Commitments and contingencies
Stockholders’ equity:
Common stock, $.001 par value: 47,500,000 and 37,500,000 shares authorized at December 31, 2012 and 2011, respectively;  36,107,763 and 30,633,302 shares issued at December 31, 2012 and  2011, respectively; 36,086,969 and 30,612,508 shares outstanding at December 31, 2012 and 2011, respectively		36			31
Additional paid-in capital		418,276			410,551
Accumulated other comprehensive loss – currency translation		(549	)		(64	)
Common stock held in treasury (20,794 shares), at cost		(118	)		(118	)
Accumulated deficit		(416,416	)		(398,194	)
Total stockholders’ equity		1,229			12,206
Total liabilities and stockholders’ equity	$	17,597		$	27,618

See accompanying notes to consolidated financial statements.

40

TRANSWITCH CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Data)

	Years ended December 31,
	2012			2011			2010
Net revenues:
Product revenues	$	10,315		$	19,700		$	41,703
Service revenues		7,563			8,555			8,119
Total net revenues		17,878			28,255			49,822
Cost of revenues:
Cost of product revenues		3,724			6,641			17,992
Provision for excess and obsolete inventories		869			228			773
Cost of service revenues		1,274			3,454			3,259
Total cost of revenues		5,867			10,323			22,024
Gross profit		12,011			17,932			27,798
Operating expenses:
Research and development		15,892			18,885			15,994
Marketing and sales		5,031			7,335			7,784
General and administrative		7,751			7,457			7,479
Restructuring charges (credits), net		1,427			(5,558	)		398
Impairment of goodwill and other intangibles		648			14,312			—
Reversal of accrued royalties, net		(1,003	)		(2,363	)		(418	)
Total operating expenses		29,746			40,068			31,237
Operating loss		(17,735	)		(22,136	)		(3,439	)
Other (expense) income:
Other (expense) income		(33	)		18			426
Interest:
Interest income		58			125			84
Interest expense		(124	)		(243	)		(704	)
Interest expense, net		(66	)		(118	)		(620	)
Total other expense, net		(99	)		(100	)		(194	)
Loss before income taxes		(17,834	)		(22,236	)		(3,633	)
Income taxes		388			636			976
Net loss	$	(18,222	)	$	(22,872	)	$	(4,609	)
Basic and diluted loss per common share:
Net loss per common share	$	(0.55	)	$	(0.82	)	$	(0.21	)
Weighted average common shares outstanding		33,130			27,911			22,162

See accompanying notes to consolidated financial statements.

41

TRANSWITCH CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In Thousands)

	Year Ended December 31,
	2012			2011			2010
Net loss	$	(18,222	)	$	(22,872	)	$	(4,609	)
Other comprehensive loss:
Foreign currency translation adjustment		(485	)		(523	)		(92	)
Comprehensive loss	$	(18,707	)	$	(23,395	)	$	(4,701	)

See accompanying notes to consolidated financial statements.

42

TRANSWITCH CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands, Except Share Data)

	Common stock				Common stock held in			Additional paid-in		Accumulated other comprehensive			Accumulated
	Shares		Amount		treasury			capital		income			deficit			Total
Balance at December 31, 2009		20,012,521	$	20	$	(118	)	$	382,935	$	551		$	(370,713	)	$	12,675
Net loss														(4,609	)		(4,609	)
Currency translation adjustment											(92	)		—			(92	)
Stock compensation		48,800		—		—			2,358		—			—			2,358
Shares of common stock issued under stock benefit plans		449,257		1		—			82		—			—			83
Sales of stock, net of issuance cost		3,017,236		3		—			6,314		—			—			6,317
Balance at December 31, 2010		23,527,814		24		(118	)		391,689		459			(375,322	)		16,732
Net loss														(22,872	)		(22,872	)
Currency translation adjustment											(523	)		—			(523	)
Stock compensation		—		—		—			2,474		—			—			2,474
Shares of common stock issued under stock benefit plans		895,488		1		—			321		—			—			322
Sales of stock, net of issuance costs		6,210,000		6		—			16,067		—			—			16,073
Balance at December 31, 2011		30,633,302		31		(118	)		410,551		(64	)		(398,194	)		12,206
Net Loss														(18,222	)		(18,222	)
Currency translation adjustment											(485	)		—			(485	)
Stock compensation		—		—		—			2,367		—			—			2,367
Shares of common stock issued under stock benefit plans		957,378		1		—			126		—			—			127
Sales of stock, net of issuance costs		4,517,083		4		—			5,232		—			—			5,236
Balance at December 31, 2012		36,107,763	$	36	$	(118	)	$	418,276	$	(549	)	$	(416,416	)	$	(1,229	)

See accompanying notes to consolidated financial statements.

43

TRANSWITCH CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands, Except Share Data)

	Years ended December 31,
	2012			2011			2010
Operating activities:
Net loss	$	(18,222	)	$	(22,872	)	$	(4,609	)
Adjustments required to reconcile net loss to net cash flows used by operating activities:
Depreciation and amortization		664			1,918			2,220
Amortization of deferred financing fees		66			77			245
Benefit for doubtful accounts		(21	)		(129	)		(180	)
Provision for excess and obsolete inventories		869			228			773
Non-cash restructuring charges (credits), net		1,197			(5,558	)		409
Non-cash restructuring charges – stock-based compensation		230			—			—
Stock-based compensation expense		2,137			2,474			2,358
Impairment of goodwill and other intangibles		648			14,312			—
Loss on retirement of property and equipment		212			35			—
Accrued royalty reversals, net		(1,003	)		(2,363	)		(418	)
Changes in operating assets and liabilities:
Accounts receivable		2,158			1,661			3,940
Inventories		371			339			855
Prepaid expenses and other assets		161			232			95
Accounts payable		(62	)		379			(3,056	)
Accrued expenses and other current liabilities		590			(1,204	)		(1,557	)
Restructuring liabilities		(2,198	)		(1,170	)		(1,569	)
Net cash used by operating activities		(12,203	)		(11,641	)		(494	)
Investing activities:
Capital expenditures		(293	)		(670	)		(587	)
Investments in non-publicly traded companies		(50	)		(39	)		(24	)
Proceeds from the sale of investments in non-publicly traded companies		—			—			2,746
Change in restricted cash		10			484			2,150
Purchases of short and long-term investments		—			(6,516	)		(1,582	)
Proceeds from sales and maturities of short and long-term investments		2,003			5,486			609
Net cash provided (used) by investing activities		1,670			(1,255	)		3,312
Financing activities:
Issuance of common stock under employee stock plans		127			322			83
Payments for deferred financing costs		—			—			(167	)
Principal payments on 5.45% Convertible Notes due 2011		—			(3,758	)		(5,004	)
Proceeds from issuance of common stock, net of fees		5,236			16,073			6,317
Net borrowing on credit facility		2,432			—			—
Net cash provided by financing activities		7,795			12,637			1,229
Effect of exchange rate changes on cash and cash equivalents		(559	)		(568	)		(110	)
Change in cash and cash equivalents		(3,297	)		(827	)		3,937
Cash and cash equivalents at beginning of year		5,453			6,280			2,343
Cash and cash equivalents at end of year	$	2,156		$	5,453		$	6,280

See accompanying notes to consolidated financial statements.

44

Note 1.    Business and Summary of Significant Accounting Policies

Description of Business

TranSwitch Corporation was incorporated in Delaware on April 26, 1988 and is headquartered in Shelton, Connecticut. TranSwitch Corporation and its subsidiaries (collectively, “TranSwitch” or the “Company”) provides innovative integrated circuit (IC) and intellectual property (IP) solutions that deliver core functionality for video, voice, and data communications equipment for the customer premises and network infrastructure markets. For the customer premises market, the Company offers multi-standard, high-speed interconnect solutions enabling the distribution and presentation of high-definition (HD) video and data content for consumer electronics applications. High-speed interconnect solutions include HDMI, DisplayPort and Ethernet IP cores and our recently introduced product family HDplay, which incorporates our proprietary HDP technology. The Company’s HDP technology combines HDMI 1.4 and DisplayPort 1.1 and supports either standard with a single connector. The applications for this product include projectors, AVR systems, HDTVs, video distribution systems and monitors. The Company’s interoperable connectivity solutions are sold to original equipment manufacturers (OEMs) and original design manufacturers (ODMs) for use in consumer electronics and our licensees have included Samsung, Intel, Texas Instruments, NEC, and many others. For the network infrastructure market, the Company provides integrated multi-core network processor system-on-a-chip solutions for fixed, 3G and 4G mobile, VoIP and multimedia applications. Network infrastructure processing equipment includes multi-media processing engines to address multiple carrier segments such as wireline and wireless gateways, session border controllers, media resource functions, multi-service access nodes, passive optical network multi-dwelling units and translation gateways. Enterprise applications include VoIP private branch exchanges. Communication network premises equipment includes IP multimedia subsystem and Voice over LTE capable 4G/LTE fixed wireless gateways, residential gateway routers, small office, home office routers and secure VoIP private branch exchanges.

Principles of Consolidation

The consolidated financial statements include the accounts of TranSwitch Corporation and its subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the period reported. Actual results could differ from those estimates. Estimates relate to uncollectable accounts receivable, excess or slow-moving or obsolete inventories, impairment of assets, product warranty allowances, depreciation and amortization, income taxes, sales returns and allowances, stock rotation allowances and contingencies. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.

Liquidity

 The Company has incurred significant operating losses and has used cash in its operating activities for the past several years. Operating losses have resulted from inadequate sales levels for the cost structure. As of December 31, 2012, the Company had negative working capital of approximately $6.3 million. Included in negative working capital, the Company has outstanding indebtedness to Bridge Bank under its credit facility of $2.4 million ($1.7 million at March 18, 2013). The Bridge Bank credit facility matures on April 4, 2013, and we are in discussions with them about extending this facility. We are currently not in compliance with the asset coverage ratio covenant in the facility and we are discussing with them an agreement pursuant to which they would agree to forbear from exercising its rights in the event of default, which rights include the accelerating the repayment of our indebtedness. Although we are in discussions with Bridge Bank about extending the facility, we cannot assure you that we will be able to extend or renew our credit facility on terms reasonably acceptable to us or at all. In the future, if we are unable to maintain our compliance or obtain a waiver of our noncompliance with this covenant or others, Bridge Bank could accelerate our indebtedness, which could impair our ability to continue to conduct our business. If our indebtedness is accelerated in full or in part, it would be very difficult in the current financing environment for us to refinance our debt or obtain additional financing, which could adversely affect our ability to continue our business.

45

Our current forecast projects that, absent an infusion of capital, we will be unable to meet our current obligations through December 31, 2013. These conditions raise substantial doubt about our ability to continue as a going concern. Consequently, the audit report prepared by our independent registered public accounting firm relating to our financial statements for the year ended December 31, 2012 includes an explanatory paragraph expressing the substantial doubt about our ability to continue as a going concern. If we are unable to generate sufficient cash flows from operations to meet our anticipated needs for working capital and capital expenditures, we may need to raise additional funds. Such capital may not be available on terms favorable or acceptable to us, if at all. If we raise additional funds through the issuance of equity securities, our stockholders may experience dilution of their ownership interest, and the newly issued securities may have rights superior to those of our common stock.

On December 4, 2012, we received a letter from Nasdaq (the “Minimum Bid Price Notice”) notifying us that the closing bid price of our common stock was below the $1.00 minimum bid price requirement for 30 consecutive business days and, as a result, the Company no longer complied with the minimum bid price requirement under Listing Rule 5550(a)(2) for continued listing on Nasdaq. The Minimum Bid Price Notice also stated that we have been provided an initial compliance period of 180 calendar days, or until June 3, 2013, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days prior to June 3, 2013. If we do not regain compliance by June 3, 2013, Nasdaq will provide notice to us that our securities will be subject to delisting.

On February 26, 2013, we received a letter from Nasdaq (the “Stockholders’ Equity Notice”) notifying us that we were no longer in compliance with the minimum stockholders’ equity requirement of at least $2.5 million for continued listing on Nasdaq. The Stockholders’ Equity Notice does not result in the immediate delisting of our common stock from Nasdaq. Rather, under the Nasdaq Listing Rules, we have 45 calendar days from the date of the Stockholders’ Equity Notice to submit to Nasdaq a plan to regain compliance. If the plan is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the Stockholders’ Equity Notice for us to evidence compliance. If we submit a plan, Nasdaq will determine whether to accept the plan, considering such criteria as the likelihood that the plan will result in compliance with Nasdaq’s continued listing criteria, our past compliance history, the reasons for our current non-compliance, other corporate events that may occur within the review period, our overall financial condition and our public disclosures. If Nasdaq does not accept the plan, we will have the opportunity to appeal that decision to a Hearings Panel.

If we are delisted and cannot obtain listing on another major market or exchange, our stock’s liquidity would suffer, and we would likely experience reduced investor interest. Such factors may result in a decrease in our stock’s trading price. In addition, the failure to trade on a national securities exchange may hinder our efforts to obtain financing.

In July of 2012, the Company announced a restructuring which primarily affected the telecom product unit and is expected to save $8.0 million in annual operating costs (see Note 15, Restructuring Charges). With this restructuring, the Company has cancelled all development programs related to its telecom product lines. The Company has redeployed all of its remaining research and development resources to focus on its interoperable connectivity solutions for consumer electronic and personal computer markets.  The Company has also announced its intentions to sell its non-strategic assets. In 2012, the Company announced that it retained a leading patent broker to sell its telecom related patent portfolio. The Company also effectuated restructurings in the first and third quarters of 2011. The Company continues to assess its cost structure in relationship to its revenue levels, which may necessitate further expense reductions.

As with any operating plan, there are risks associated with the Company’s ability to execute it, including the current economic environment in which it operates. Therefore, there can be no assurance that the Company will be able to satisfy its obligations, or achieve the operating improvements as contemplated by the current operating plan. If the Company is unable to execute this plan, it will need to find additional sources of cash not contemplated by the current operating plan and/or raise additional capital to sustain continuing operations as currently contemplated. There can be no assurance that the additional funding sources will be available to the Company at favorable rates or at all. If the Company cannot maintain compliance with its covenant requirements on its bank financing facility or cannot obtain appropriate waivers and modifications, the lenders may call the debt. If the debt is called, the Company would need to obtain new financing and there can be no assurance that the Company will be able to do so. If the Company is unable to achieve its operating plan and maintain compliance with its loan covenants and its debt is called, the Company will not be able to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

46

Cash, Cash Equivalents and Investments

All highly liquid investments with an original maturity of three months or less when purchased are considered cash equivalents. Cash equivalents consist of money market funds as of December 31, 2012 and 2011. The majority of the Company’s cash and cash equivalents balances are maintained with a limited number of major financial institutions. Cash and cash equivalents balances at institutions may, at times, be above the Federal Deposit Insurance Corporation insured limit of $0.25 million per account.

Short-term investments as of December 31, 2011 consisted of government bonds and corporate debt securities which were all due within one year. Such investments were classified as held-to-maturity. Held-to-maturity securities are those securities which the Company has both the ability and intent to hold to maturity. Held-to-maturity securities are stated at amortized cost. Amortized cost and accrued interest as of December 31, 2011 approximate market value.

Fair Value of Financial Instruments

The carrying amounts for cash and cash equivalents, short-term investments, accounts receivable, and accounts payable approximate fair value. The fair value of investments in non-publicly traded companies is not readily determinable. 

Accounts Receivables and Allowance for Doubtful Accounts

The Company records allowances for doubtful accounts for estimated losses based upon specifically identified amounts that it believes to be uncollectible along with the Company’s assessment of the general financial condition of its customer base. If the Company’s actual collections experience changes, revisions to its allowances may be required. The Company has a limited number of customers with individually large amounts due at any given balance sheet date. Any unanticipated change in the creditworthiness of such customers or other matters affecting the collectability of amounts due from such customers could have a material effect on the Company’s results of operations in the period in which such changes or events occur.

Inventories

Inventories are carried at the lower of cost (determined on a weighted-average cost basis) or estimated net realizable value. The Company provides inventory allowances on obsolete inventories and inventories in excess of expected demand for each specific part. The valuation of inventories requires the use of estimates as to the amounts of current inventories that will be sold. These estimates are dependent on the Company’s assessment of current and expected orders from its customers, and orders generally are subject to cancellation with limited advance notice prior to shipment.

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation and amortization. Any gain or loss resulting from sale or retirement is included in the consolidated statement of operations. Repairs and maintenance are expensed as incurred while renewals and betterments are capitalized.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of the business acquired. The Company reviews goodwill for potential impairment at least annually.

Other Intangible Assets

Other intangible assets consist of purchased customer relationships and developed technology and are stated at cost, less accumulated amortization. Customer relationships and developed technology are being amortized by the straight line method over their estimated economic useful lives ranging from five to ten years.

Deferred Financing Costs

Deferred financing costs are being amortized using the interest method over the term of the related debt. Unamortized deferred financing fees were less than $0.1 million as of December 31, 2012 and 2011, respectively. Amortization, included in the consolidated statement of operations as a component of interest expense, was less than $0.1 million, $0.1 million, and $0.2 million for 2012, 2011 and 2010, respectively.

47

Impairment of Intangibles and Long-Lived Assets

The Company reviews long-lived and intangible assets (including goodwill) for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. When factors indicate that a long-lived asset should be evaluated for possible impairment, an estimate of the related asset’s undiscounted future cash flows over the remaining life of the asset is made to measure whether the carrying value is recoverable. Any impairment is measured based upon the excess of the carrying value of the asset over its estimated fair value which is generally based on an estimate of future discounted cash flows. A significant amount of management judgment is used in estimating future discounted cash flows. During the fourth quarter of 2012 and 2011, impairment testing for certain purchased customer relationships and developed technology was performed by the Company and indicated that the undiscounted future cash flows of the mentioned intangible assets were less than its corresponding carrying amount. As a result of the analyses performed, the Company measured and recorded an impairment of these intangible assets of $0.6 million and $5.4 million in 2012 and 2011, respectively. The 2012 and 2011 impairments involved purchased customer relationships and developed technology related to a business acquisition in 2008. There were no impairment charges in 2010.

The Company’s impairment review of goodwill was performed using a fair-value method and discounted cash flow models with estimated cash flows based on internal forecasts which included terminal values based on current market valuation metrics. The fair value represents the amount at which a reporting unit could be bought or sold in a current transaction between willing parties on an arms-length basis. In estimating fair value, the Company used its common stock’s market price to determine fair value and other valuation metrics. In addition, the Company performed discounted cash flow analysis on the reporting units to determine fair value. There were no impairment charges in 2012 or 2010. During the fourth quarter of 2011, impairment testing performed by the Company indicated that the estimated fair value of the reporting unit tested was less than its corresponding carrying amount. As a result of the analyses performed, the Company recorded goodwill impairment charges of $8.9 million in 2011. The 2011 impairment involved goodwill related to a business acquisition in 2008.

Investments in Non-Publicly Traded Companies

The Company has minority investments in certain non-publicly traded companies. Depending on the Company’s level of ownership and whether or not the Company has the ability to exercise significant influence, these investments are accounted for by either the cost or equity method. All such investments as of December 31, 2012 and 2011 are accounted for by the cost method. These investments are reviewed periodically for impairment.

Revenue Recognition

Net revenues from product sales are recognized at the time of product shipment when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) ownership and risk of loss transfers to the customer; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured.

Revenues from distributors can be recognized when: (1) the prices are fixed at the date of shipment from the Company’s facilities; (2) payment is not contractually or otherwise excused until the product is resold; (3) the Company does not have any obligations for future performance relating to the resale of the product; and (4) the amount of future returns, allowances, refunds and costs to be incurred can be reasonably estimated and are accrued at the time of shipment. Agreements with certain distributors provide price protection and return and allowance rights.

At the time of shipment to distributors, the Company records a reduction to revenue (with a related liability) to accrue for future price protection. This liability is established based on historical experience, contractually agreed-to provisions and future shipment forecasts. Such accruals have been insignificant for the last three years.

The Company also accrues, at the time of shipment, a reduction to revenue (with a related liability) and an inventory asset against product cost of revenues in order to establish a provision for the gross margin related to future returns under the Company’s distributor stock rotation program. Such accruals related to reductions of revenue were $0.3 million, $0.4 million and $0.8 million at December 31, 2012, 2011 and 2010, respectively. The accruals related to inventory assets are insignificant to the Company’s financial position and results of operations for all periods presented. Should actual experience differ from estimated liabilities, there could be adjustments (either favorable or unfavorable) to the Company’s net revenues, cost of revenues and gross profits.

Service revenues are recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) services have been performed in accordance with the contractual obligations; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured.

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The Company licenses connectivity solutions, including HDMI, DisplayPort and Ethernet IP Cores. Revenues from licensing arrangements generally consist of multiple elements such as license, implementation and maintenance services. The items (deliverables) included in the arrangement are evaluated to determine whether they represent separate units of accounting. The Company performs this evaluation at the inception of an arrangement and as the Company delivers each item in the arrangement.

Generally, the Company accounts for a deliverable (or a group of deliverables) separately if (1) the delivered item(s) has standalone value to the customer, (2) there is objective and reliable evidence of the fair value of the undelivered items included in the arrangement, and (3) if the Company has given the customer a general right of return relative to the delivered items, delivery or performance of the undelivered items or services are probable and substantially in the Company’s control.

The Company recognizes revenue from royalties upon notification of sale by its licensees. The terms of the royalty agreements generally require licensees to give notification to the Company and to pay royalties within 45 days of the end of the quarter during which the sales by its licensees take place.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, and accounts receivable.

Cash and cash equivalents are held by high-quality financial institutions, thereby reducing credit risk concentrations. In addition, the Company limits the amount of credit exposure to any one financial institution.

At December 31, 2012 and 2011, approximately 71% and 59% of accounts receivable were due from five customers. The majority of the Company’s sales are to customers in the telecommunications and data communications industries. The Company performs ongoing credit evaluations of its customers and generally does not require collateral.

Customers that accounted for more than 10% of total accounts receivable at each period end are as follows:

49

	December 31,  2012			December 31,  2011
Customer A		29	%		*
Customer B		26	%		17	%
Customer C		*			15	%
Customer D		*			10	%

* Accounts receivable due were less than 10% of the Company’s total accounts receivable.

Supplier Concentrations

The Company relies on a limited number of suppliers for wafer fabrication capacity. One outside wafer foundry supplied a substantial amount of our total semiconductor wafer requirements. Although the Company would likely be able to find alternative manufacturing sources, the Company would experience substantial delays or interruptions in the shipment of products if this supplier were to cease operations.

Operating Leases

The Company recognizes rent expense on a straight-line basis over the term of the lease. The difference between rent expense and rent paid is recorded as deferred rent and is included in accrued expenses in our consolidated balance sheets.

Product Warranties

The Company provides warranties on its products for up to one year from the date of shipment. A liability is recorded for estimated costs to be incurred under product warranties, which is based on various inputs including historical experience. Estimated warranty expense is recorded as cost of revenues as products are shipped. Product warranty costs are nominal for all periods presented.

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Research and Development Costs

Research and development costs are expensed as incurred.

Income Taxes

Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carry forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to the extent that it is more likely than not that the Company will not be able to utilize deferred income tax assets in the future.

The Company is required to make a determination of any of its tax positions (federal and state) for which the sustainability of the position, based upon the technical merits, is uncertain. The Company regularly evaluates all tax positions taken and the likelihood of those positions being sustained. If management is highly confident that the position will be allowed and there is a greater than 50% likelihood that the full amount of the tax position will be ultimately realized, the company recognizes the full benefit associated with the tax position. Additionally, interest and penalties related to uncertain tax positions are included as a component of income tax expense.

Stock-Based Compensation

The Company recognizes share-based compensation expense for the fair value of the awards on the date granted on a straight-line basis over their vesting term.

Compensation expense is recognized only for share-based payments expected to vest. The Company estimates forfeitures at the date of grant based on the Company’s historical experience and future expectations.

As of December 31, 2012, the unrecognized stock-based compensation cost related to non-vested option awards was $0.02 million and such amount will be recognized in operations over a weighted average period of 1.18 years. As of December 31, 2012, the unrecognized stock-based compensation cost related to non-vested stock awards was $1.8 million and such amount will be recognized in operations over a weighted average period of 2.17 years.

Stock compensation charged to operations was $2.4 million in 2012, $2.5 million in 2011and $2.4 million in 2010.

Loss Per Common Share

The basic and diluted loss per common share amount is based upon the weighted average common shares outstanding during the periods presented. All “in-the-money” stock options and shares issuable upon the conversion of the 5.45% Convertible Notes due 2010 and the 5.45% Convertible Notes due 2011 were anti-dilutive. 

Foreign Currency Translation

Substantially all foreign subsidiaries use their local currency as their functional currency. Therefore, assets and liabilities of foreign subsidiaries are translated at exchange rates in effect at the balance sheet date and revenue and expense accounts are translated at average exchange rates during the year. The resulting translation adjustments are recorded in accumulated other comprehensive (loss) income. Translation gains and losses related to monetary assets and liabilities denominated in a currency different from a subsidiary’s functional currency are included in the consolidated statements of operations.

Subsequent Events

Subsequent events have been evaluated through the date the accompanying consolidated financial statements were issued.

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Recent Accounting Pronouncements

The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. In the case where it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial reporting, and assures that there are proper controls in place to ascertain that the Company’s financials properly reflect the change. New pronouncements assessed by the Company are discussed below:

The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its consolidated financial statements.

Note 2. Fair Value Measurements

The Company applies fair value standards for recurring financial assets and liabilities only. The accounting framework for determining fair value includes a hierarchy for ranking the quality and reliability of the information used to measure fair value, which enables the reader of the financial statements to assess the inputs used to develop those measurements. The fair value hierarchy consists of three tiers as follows:

Level 1 – Quoted prices in active markets are available for identical assets and liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

As of December 31, 2012 and 2011, the Company’s financial assets included investments in non-publicly traded companies. The Company considers net realizable value for its investments in non-publicly traded companies for purposes of determining asset impairment losses. For the year ended December 31, 2012 and 2011, the Company had no impairment losses on investments in non-publicly traded companies.

The carrying amounts for cash equivalents, accounts receivable and accounts payable approximate fair value due to their immediate or short-term nature of the maturity. The fair value of short term investments was zero and $2.0 million as of December 31, 2012 and 2011, respectively. The short-term investment values are based on a Level 2 valuation technique.

Note 3. Restricted Cash

The Company’s liquidity was affected by restricted cash balances, which are included in current assets and are not available for general corporate use, of approximately $0.1 million at both December 31, 2012 and 2011. The Company has pledged these amounts as collateral for stand-by letters of credit that guarantee certain long-term property lease obligations and to support customer credit requirements.

Note 4.   Investments in Non-Publicly Traded Companies and Venture Capital Funds

During the first quarter of 2010, the Company sold its investment in Opulan Technologies Corp. (“Opulan”) for $2.7 million.  The carrying value of this investment in Opulan was also $2.7 million and accordingly no gain or loss was recorded on this transaction.

The Company owns a 3% limited partnership interest in Neurone II, a venture capital fund organized as a limited partnership and a 0.42% limited partnership interest in Munich Venture Partners Fund (“MVP”). The Company accounts for these investments at cost. The financial condition of these companies is subject to significant changes resulting from their operating performance and their ability to obtain financing. The Company continually evaluates its investments in these companies for impairment. In making this judgment, the Company considers the investee’s cash position, projected cash flows (both short and long-term), financing needs, most recent valuation data, the current investing environment, management/ownership changes, and competition. This evaluation process is based on information that the Company requests from these privately held companies. This information is not subject to the same disclosure and audit requirements as the reports required of United States public companies, and as such, the reliability and accuracy of the data may vary.

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During 2010, the Company had sales of investments of $2.7 million in Opulan and less than $0.1 million in Neurone II. Also during 2010, the Company made additional investments of less than $0.1 million in both Neurone II and MVP.

During 2011, the Company made additional investments of less than $0.1 million in MVP.

During 2012, the Company made additional investments of less than $0.1 million in both Neurone II and MVP.

The Company’s cost method investments were approximately $0.4 million and $0.3 million as of December 31, 2012 and 2011, respectively.

Note 5.    Inventories

The components of inventories follow:

	December 31,
	2012		2011
Work-in-process and raw materials	$	346	$	488
Finished goods		402		1,500
Total inventories	$	748	$	1,988

Note 6.    Property and Equipment, Net

The components of property and equipment follow:

	Estimated	December 31,
	Useful Lives	2012			2011
Purchased computer software	1-3 years	$	8,087		$	8,107
Computers and equipment	3-7 years		8,009			7,808
Furniture	3-7 years		701			696
Leasehold improvements	Lease term*		559			679
Gross property and equipment			17,356			17,290
Accumulated depreciation and amortization			(16,245	)		(15,935	)
Property and equipment, net		$	1,111		$	1,355

* Estimated useful life of improvement if shorter.

Depreciation expense was $0.4 million in 2012, $0.6 million in 2011 and $0.6 million in 2010.

Note 7.    Goodwill and Other Intangible Assets

Changes in the carrying amounts of goodwill and information about intangible assets follow:

	Goodwill
Balance at December 31, 2010	$	14,144
Impairment of goodwill (1)		(8,873	)
Balance at December 31, 2011		5,271
Impairment of goodwill		-
Balance at December 31, 2012	$	5,271

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(1) During the fourth quarter of 2011, impairment testing performed by the Company indicated that the estimated fair value of the reporting unit tested was less than its corresponding carrying amount. As a result, the Company recorded a goodwill impairment charge of $8.9 million.

				Other Intangible Assets
	Developed Technology			Customer Relationships			Total
Balances at December 31, 2012
Cost  (1)	$	1,755		$	4,729		$	6,484
Accumulated amortization		(1,707	)		(4,229	)		(5,936	)
	$	48		$	500		$	548
Balances at December 31, 2011
Cost  (2)	$	1,974		$	5,158		$	7,132
Accumulated amortization		(1,585	)		(4,086	)		(5,671	)
	$	389		$	1,072		$	1,461

(1) During the fourth quarter of 2012, impairment testing for certain purchased customer relationships and developed technology was performed by the Company and indicated that the undiscounted future cash flows of the mentioned intangible assets were less than their corresponding carrying amounts. As a result, the Company recorded an impairment charge of $0.6 million.

(2) During the fourth quarter of 2011, impairment testing for certain purchased customer relationships and developed technology was performed by the Company and indicated that the undiscounted future cash flows of the mentioned intangible assets were less than their corresponding carrying amounts. As a result, the Company recorded an impairment charge of $5.4 million.

Amortization expense related to “Other intangible assets” was $0.3 million in 2012, $1.4 million in 2011 and $1.6 million in 2010. Future estimated aggregate amortization expense for such assets for each of the five years succeeding December 31, 2012 are as follows: 2013 - $0.1 million; 2014 - $0.1 million; 2015 - $0.1 million; 2016 - $0.1 million and 2017 - $0.1 million.

Note 8.    Accrued Expenses and Other Current Liabilities

The components of accrued expenses and other current liabilities follow:

	December 31,
	2012		2011
Accrued and other current liabilities	$	3,310	$	3,162
Accrued royalties		1,453		2,536
Accrued compensation and benefits		3,059		2,813
Restructuring liabilities		2,016		1,995
Deferred revenue		425		149
Total accrued expenses and other current liabilities	$	10,263	$	10,655

The Company periodically evaluates any contingent liabilities in connection with any payments to be made for any potential intellectual property infringements, asserted or unasserted. The Company’s accrued royalties as of December 31, 2012 and 2011, represent the contingent payments for asserted or unasserted claims that are probable as of the respective balance sheet dates based on the applicable patent law.

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Note 9.    Segment and Major Customer Information

The Company has one business segment: communication solutions. Its semiconductor and IP solutions provide core functionality for the transmission of voice, video and data. The integration of various technologies and standards in these devices result in a homogeneous product line for management and measurement purposes.

Enterprise-wide Information

Enterprise-wide information provided on geographic net revenues is based on billing locations. Long-lived asset information is based on the physical location of the assets. The following tables present net revenues and long-lived assets information for geographic areas:

	Years Ended December 31,
	2012			2011		2010
Net revenues:
United States	$	6,030		$	6,439	$	12,258
Italy		2,362			3,836		3,832
Japan		2,206			659		9,465
Hong Kong		2,192			3,190		6,550
United Kingdom		1,197			1,904		168
Israel		940			4,732		8,220
Republic of Korea		887			2,915		3,753
China		456			724		1,907
Singapore		260			757		668
Taiwan		(104	)		1,637		1,541
Other countries		1,452			1,462		1,460
Total	$	17,878		$	28,255	$	49,822

	As of December 31,
	2012		2011
Long-lived tangible assets:
United States	$	344	$	502
Other countries		2,417		2,246
Total	$	2,761	$	2,748

Information about Major Customers

The Company ships its products to distributors and directly to end customers. The following table sets forth the percentage of net revenues attributable to the Company’s significant end customers:

	Years ended December 31,
	2012			2011			2010
Significant Customers:
Customer A		21	%		13	%		20	%
Customer B		12	%*					*
Customer C		*			*			18	%
Customer D		*			*			13	%

* Revenues were less than 10% of the Company’s net revenues in these years.

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Note 10.    Income Taxes

Changes in unrecognized income tax benefits follow:

Balance at January 1, 2011		6,303
Increases related to prior year tax positions		42
Decreases related to prior year tax positions		(48	)
Increases related to current year tax positions		125
Settlements		(139	)
Balance at December 31, 2011	$	6,283
Increases related to prior year tax positions		23
Decreases related to prior year tax positions		(22	)
Increases related to current year tax positions		214
Settlements		(130	)
Balance at December 31, 2012	$	6,368

Included in the balance of unrecognized tax benefits at December 31, 2012 are potential benefits of $0.5 million that, if recognized, would impact the Company’s effective tax rate. The Company does not reasonably expect any significant changes in the amount of unrecognized tax benefits to occur within the next twelve months.

Historically, the Company has not accrued or paid significant interest and penalties for underpayments of income taxes due to its net operating loss position. Interest and penalties related to underpayment of income taxes is classified as a component of income tax expense in the consolidated statement of operations. For the year ended December 31, 2012, $0.1 million of interest and penalties were recognized in the consolidated statement of operations compared with less than $0.1 million for the year ended December 31, 2011.

The Company files income tax returns in the United States and several foreign countries and has not extended the statute of limitations to assess additional taxes for any of these jurisdictions. The Company has effectively settled United States Federal tax positions taken through 2002. However, the Company is subject to adjustment in each of these periods, to the extent of its net operating loss carry forwards. The open tax years for foreign jurisdictions are 2003 through 2012 and for United States state and local jurisdictions are 1997 through 2012.

The components of the loss before income taxes follow:

	Years Ended December 31,
	2012			2011			2010
U.S. loss	$	(17,064	)	$	(23,082	)	$	(3,700	)
Foreign income		(770	)		846			67
Loss before income taxes	$	(17,834	)	$	(22,236	)	$	(3,633	)

The provision for income taxes consists exclusively of current foreign income taxes.

A reconciliation of the United States federal statutory rate to the effective income tax rate follows:

	Years Ended December 31,
	2012			2011			2010
U.S. federal statutory tax rate		(35.0	)%		(35.0	)%		(35.0	)%
State taxes		(2.9	)		(1.2	)		(33.2	)
Deemed repatriation of foreign income		0.0			10.1			6.7
Excess foreign tax expense		2.4			0.5			18.1
Goodwill write down		0.0			14.0			-
Tax attributes		(4.3	)		(20.1	)		(116.3	)
Uncertain tax positions		1.3			0.8			9.4
Change in valuation allowance		40.8			(5.6	)		171.9
Permanent differences, tax credits and other adjustments		(0.0	)		(0.8	)		5.3
Effective income tax rate		2.2	%		2.9	%		26.9	%

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The tax effects of temporary differences that give rise to deferred income taxes follow:

	2012			2011
Deferred income tax assets:
Property and equipment	$	243		$	290
Other nondeductible accruals		1,331			1,194
Restructuring accrual		1,320			1,706
Capitalized research and development for tax purposes		7,715			8,368
Net operating loss carry-forwards		195,105			188,147
Research and development and other credits		20,807			20,962
Inventories		381			749
Stock compensation		4,301			3,502
Other		3,436			2,452
Total gross deferred income tax assets		234,639			227,370
Valuation allowance		(233,526	)		(226,254	)
Net deferred income tax assets		1,113			1,116
Deferred income tax liabilities:
Other		(1,113	)		(1,116	)
Net deferred income tax liabilities		(1,113	)		(1,116	)
Net deferred income taxes	$	—		$	—

The Company continually evaluates its deferred income tax assets to determine whether it is more likely than not that such assets will be realized. In assessing the realizability, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. Based on this assessment, management believes that significant uncertainty exists concerning the recoverability of the deferred income tax assets. As such, a valuation allowance has been provided for deferred income tax assets as of December 31, 2012 and 2011. Of the $233.5 million valuation allowance at December 31, 2012, subsequently recognized income tax benefits, if any, in the amount of $4.7 million will be applied directly to additional paid-in capital.

At December 31, 2012, the Company had available, for federal income tax purposes, net operating loss (“NOL”) carry-forwards of approximately $513.7 million and research and development tax credit carry-forwards of approximately $20.8 million expiring in varying amounts from 2012 through 2032. For state income tax purposes, the Company had available NOL carry-forwards of approximately $197.3 million and state tax credit carry-forwards of $7.8 million expiring in varying amounts from 2012 to 2032. Additionally, the Company has generated $39.3 million of NOL’s in foreign jurisdictions which can be carried forward indefinitely.

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Certain transactions involving the Company’s beneficial ownership have occurred in prior years, which resulted in a stock ownership change for purposes of Section 382 of the Internal Revenue Code of 1986, as amended. Consequently, approximately $186.6 million of the NOL carry-forwards and $11.0 million of research and development tax credit carry-forwards are subject to these limitations.

Note 11.    Stockholder Rights Plan

On September 30, 2011, the Board of Directors enacted a stockholder rights plan and declared a dividend of one preferred share purchase right for each outstanding share of the Company’s common stock outstanding at the close of business on October 3, 2011 to the stockholders of record on that date. Each preferred share purchase right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series B Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “Preferred Shares”), at a price of $20.00 per one one-thousandth of a Preferred Share, subject to adjustment, upon the occurrence of certain triggering events, including, without limitation, the acquisition of 15% or more of the Company’s outstanding common stock by a third party. Until a triggering event occurs, the common stockholders have no right to purchase shares under the stockholder rights plan. If the right to purchase the preferred stock is triggered, the common stockholders will have the ability to purchase sufficient stock to significantly dilute the 15% or greater holder. The Rights will expire on the earlier of (i) May 15, 2015 and (ii) the first anniversary of the adoption of the Rights Agreement if shareholder approval of the Rights Agreement has not been received by or on such date, unless that date is extended or unless the Rights are earlier redeemed by the Company. Each stockholder of record as of October 3, 2011 received a summary of the rights and any new stock certificates issued after the record date contain a legend describing the rights.

Note 12.    Employee Benefit Plans

Employee Stock Purchase Plans

Under the Company’s employee stock purchase plans, eligible employees may purchase a limited number of shares of common stock at 85% of the fair market value at either the date of enrollment or the date of purchase, whichever is less. The 1995 Employee Stock Purchase Plan was closed effective December 31, 2004. On May 19, 2005, the Company’s shareholders approved the 2005 Employee Stock Purchase Plan (the “2005 ESPP”). Under the 2005 ESPP, the Company is authorized to issue 250,000 shares of common stock. Shares issued under the 2005 ESPP in 2012, 2011, and 2010 were 54,171, 58,230, and 30,249, respectively.

 Stock Option and Award Plans

As of December 31, 2012, the Company has one stock option plan which is the 2008 Equity Incentive Plan (the “2008 Plan”). Also, the 1995 Stock Plan, as amended (the “1995 Plan”), expired on March 15, 2010 and the 2000 Stock Option Plan as amended (the “2000 Plan”), expired on July 14, 2010.

Under the 1995 Plan, 3,925,000 shares of the Company’s common stock were available to grant to employees in the form of incentive stock options. The 1995 Plan, as amended, expired on March 15, 2010 and as such shares are no longer available for grant. The terms of the options granted are subject to the provisions of the 1995 Plan, as determined by the Compensation Committee of the Board of Directors. The exercise price of options under the 1995 Plan is equal to the fair market value of the common stock on the date of grant. Options granted under the 1995 Plan are generally nontransferable. As of December 31, 2012, 165,199 options were outstanding.

The 2000 Plan provided for the granting of non-qualified options to employees and consultants to purchase up to an aggregate of 1,250,000 shares of common stock and was terminated on July 14, 2010. No member of the Board of Directors or executive officers appointed by the Board of Directors was eligible for grants of options under the 2000 Plan. The terms of the options granted are subject to the provisions of the 2000 Plan, as determined by the Compensation Committee of the Board of Directors. Each non-qualified stock option shall either be fully exercisable on the date of grant or shall become exercisable thereafter in such installments as the Board of Directors may specify. No option granted under the 2000 Plan may be exercised after the expiration of seven years from the date of grant. The exercise price of options under the 2000 Plan is equal to the fair market value of the common stock on the date of grant. Options granted under the 2000 Plan are generally nontransferable. In connection with the adoption of the 2008 Plan on May 22, 2008, shares are no longer available for grant under the 2000 Plan. As of December 31, 2012, 159,569 options were outstanding.

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The 2008 Plan was approved by shareholders at the shareholder meeting held on May 22, 2008. The purpose of this plan is to provide stock options, stock issuances, and other equity interests in the Company to employees, officers, directors, consultants, and advisors to the Company and its subsidiaries or any future parent corporation. The 2008 Plan is administered by the Board of Directors of the Company who will have sole discretion and authority to interpret and correct the provisions of the Plan and any Award. The Board will also have sole authority to determine the terms and provisions of the respective Stock Option Agreements and Awards, which need not be identical. The aggregate number of shares of Common Stock of the Company that may be issued pursuant to the 2008 Plan is 7,196,250. As of December 31, 2012, there were 1,916,556 shares available for grant under the 2008 Plan. As of December 31, 2012, 2,776,139 options and awards were outstanding.

Information regarding stock options follows:

	Number of options outstanding			Weighted average exercise price per share
Outstanding at December 31, 2009		2,485,134		$	10.02
Granted		113,167			2.18
Exercised		(13,264	)		2.32
Canceled, forfeited or expired		(425,204	)		10.93
Outstanding at December 31, 2010		2,159,833			9.47
Granted		10,000			2.77
Exercised		(88,188	)		2.42
Canceled, forfeited or expired		(311,091	)		12.85
Outstanding at December 31, 2011		1,770,554			9.19
Granted		0			0.00
Exercised		(14,684	)		2.34
Canceled, forfeited or expired		(356,742	)		10.35
Outstanding at December 31, 2012 1		1,399,128		$	8.96

Information regarding restricted stock awards follows:

	Number  of restricted stock units outstanding
Outstanding at December 31, 2009		571,182
Granted		1,398,250
Released		(405,838	)
Canceled, forfeited or expired		(66,726	)
Outstanding at December 31, 2010		1,496,868
Granted		1,045,251
Released		(749,070	)
Canceled, forfeited or expired		(163,097	)
Outstanding at December 31, 2011		1,629,952
Granted		1,160,207
Released		(971,015	)
Canceled, forfeited or expired		(117,365	)
Outstanding at December 31, 2012		1,701,779

The Company has, in connection with the acquisitions of various companies, assumed the stock option plans of each acquired company. The related options are included in the preceding table.

Options outstanding and exercisable at December 31, 2012 follow:

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				Options Outstanding				Options Exercisable
Range of   Exercise prices		Number Outstanding		Weighted Average Remaining Contractual  Life		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$	2.00 to 2.20		140,202		4.39	$	2.13		118,640	$	2.13
	2.32 to 2.32		69,901		2.93		2.32		69,901		2.32
	2.43 to 2.43		214,961		3.94		2.43		168,086		2.43
	2.48 to 5.12		166,409		2.96		3.93		160,332		3.98
	5.52 to 8.16		146,498		3.11		6.42		145,248		6.42
	8.40 to 12.40		177,342		2.73		10.98		177,342		10.98
	12.64 to 13.20		167,010		1.80		13.10		167,010		13.10
	13.28 to 16.88		191,514		1.29		15.10		191,514		15.10
	17.52 to 24.00		32,562		1.53		19.54		32,562		19.54
	24.80		92,729		1.13		24.80		92,729		24.80
$	2.00 to 24.80		1,399,128		2.72	$	8.96		1,323,364	$	9.34

Stock options generally expire five, seven or ten years from the date of grant and generally vest ratably over periods ranging from immediately to four years.

Stock compensation charged to operations was $2.4 million in 2012, $2.5 million in 2011and $2.4 million in 2010. Further, no compensation cost was capitalized as part of inventory, and no income tax benefit was recognized in those years. Lastly, no equity awards were settled in cash.

 Stock-Based Compensation Fair Value Disclosures

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	2012		2011		2010
Risk-free interest rate		N/A		N/A		1.61	%
Expected life in years		N/A		N/A		3.80
Expected volatility		N/A		N/A		94.84	%
Expected dividend yield		—		—		—

There were no stock options granted during 2012. The weighted average fair value of stock options granted, calculated using the Black-Scholes option-pricing model is $0.00 for 2011 and $1.41 for 2010. In 2011 the company granted stock options to a consultant. The fair value of these options was calculated using the stock price on the date of grant. The cost of this grant was $0.02 million. The weighted average fair value of restricted stock units granted is $1.36 for 2012, $3.09 for 2011 and $2.37 for 2010. The total intrinsic value of the options exercised was $0.01 million for 2012, $0.08 million for 2011 and $0.01 million for 2010. Restricted stock units released had an intrinsic value of $1.3 million in 2012, $2.2 million in 2011 and $0.9 million in 2010.

The Company recognized compensation expense related to stock options granted to non-employees of zero in 2012, $0.02 million in 2011 and zero in 2010.

 Employee 401(k) Plan

The TranSwitch Corporation 401(k) Retirement Plan (the “Plan”) provides tax-deferred salary deductions for eligible employees. Employees may contribute an annual maximum amount as set periodically by the Internal Revenue Service. The Company had provided matching contributions equal to 50% of the employees’ contributions, up to a maximum of 6% of the employee’s annual compensation. On July 1, 2009, the Company indefinitely suspended its matching contributions. Company contributions begin vesting after two years and are fully vested after three years. Contribution expense related to the Plan was zero in 2012, 2011, and 2010.

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Note 13.    Credit Facility

On April 4, 2011, the Company entered into an Amended and Restated Business Financing Agreement (the “Amended Financing Agreement”) with Bridge Bank N.A. (“Bridge Bank”) which amended and restated its existing credit facility. The Amended Financing Agreement provides a credit facility to the Company of up to $5.0 million which bears interest at the higher of (i) the prime rate plus 2.0% or (ii) 5.25% percent, plus the payment of certain fees and expenses (the “Facility”). The Facility is secured by substantially all the personal property of the Company, including its accounts receivable and intellectual property. Subject to the terms of the Amended Financing Agreement, availability under the Facility is based on a formula pursuant to which Bridge Bank would advance an amount equal to the lower of $5.0 million or 80% of the Company’s eligible accounts receivable, ($2.4 million at December 31, 2012) with account eligibility and advance rates determined by Bridge Bank in its sole discretion. The term of the Facility is two years and at the expiration of such term, all loan advances under the Facility will become immediately due and payable. At December 31, 2012 and 2011, the Company had outstanding borrowings under this facility of $2.4 million and zero, respectively. We are in discussions with Bridge Bank about extending the Facility. We are currently not in compliance with the asset coverage ratio covenant in the Facility and we are discussing with Bridge Bank an agreement pursuant to which Bridge Bank would agree to forbear from exercising its rights to in the event of default, which rights include accelerating the repayment of our indebtedness. Although we are in discussions with Bridge Bank about extending the Facility which is set to expire in April 2013, we cannot assure you that we will be able to extend or renew the Facility on terms reasonably acceptable to us or at all. In the future, if we are unable to maintain our compliance or obtain a waiver of our noncompliance with this covenant or others, Bridge Bank could accelerate our indebtedness, which could impair our ability to continue to conduct our business. If our indebtedness is accelerated in full or in part, it would be very difficult in the current financing environment for us to refinance our debt or obtain additional financing, which could adversely affect our ability to continue our business.

Note 14. Issuance of Common Stock

Common Stock Purchase Agreement with Aspire Capital:

On July 16, 2012, the Company entered into a Common Stock Purchase Agreement (the “Aspire Purchase Agreement”) with Aspire Capital Fund, LLC (“Aspire”) to purchase up to an aggregate of $11.0 million of shares of the Company’s common stock, par value $0.001 per share (“Common Stock”) over the two-year term of the Aspire Purchase Agreement. Under the Aspire Purchase Agreement, Aspire made an initial purchase of 990,099 shares for the purchase price of $1,000,000.  During the term of the Aspire Purchase Agreement, the Company can direct Aspire to purchase up to 50,000 shares per business day at a price equal to the lower of (i) the lowest sale price for the Common Stock on the date of sale or (ii) the arithmetic average of the three lowest closing sale prices for the Common Stock during the 12 consecutive business days ending on the business day immediately preceding the date of sale.

In addition, on any business date that the Company directs Aspire to purchase 50,000 shares, the Company also has the right to direct Aspire to purchase an amount of Common Stock equal to a percentage (not to exceed 15%, which limitation may be increased to 30% by mutual agreement of the parties) of the aggregate shares of Common Stock traded on the next business day, subject to a maximum number of shares determined by the Company. Subject to certain limitations, the purchase price for these shares shall be the lower of (i) the closing sale price on the date of sale or (ii) ninety-five percent (95%) of the next business day’s volume weighted average price.  The Company has the right to determine a maximum number of shares and set a minimum market price threshold for each purchase.

In connection with the Aspire Purchase Agreement, the Company also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with Aspire dated July 16, 2012.  The Registration Rights Agreement provides, among other things, that the Company will register the sale of the shares sold to Aspire.  In accordance with the Registration Rights Agreement, the sale of certain shares to Aspire was made pursuant to a prospectus supplement dated July 17, 2012 and an accompanying prospectus dated October 21, 2009, under the Company’s Registration Statement on Form S-3 (File No. 333-162609), filed with the Securities and Exchange Commission on October 21, 2009, as amended and supplemented from time to time (the “Prior Registration Statement” File No. 333-162609), which Prior Registration Statement expired in October 2012. The Company subsequently filed a Registration Statement on Form S-3 (the “Prior Registration Statement” File No. 333-184591), initially filed with the Securities and Exchange Commission on October 25, 2012, and subsequently declared effective on January 25, 2013 (the “Current Registration Statement”). Beginning on January 29, 2013, all sales of shares to Aspire were made pursuant to a prospectus supplement dated January 29, 2013 and the accompanying prospectus dated January 25, 2013, under the Current Registration Statement.   The Company further agreed to keep the applicable Registration Statement effective and to indemnify Aspire for certain liabilities in connection with the sale of the shares under the terms of the Registration Rights Agreement.

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During the year ended December 31, 2012, Aspire purchased a total of 2,380,560 shares under the Aspire Purchase Agreement for net proceeds to the Company of $2.2 million. The Company’s issuance costs were $0.4 million which includes 297,030 shares issued to Aspire as a commitment fee per the Aspire Purchase Agreement.

Registered Direct Offering:

On May 8, 2012, the Company entered into a Securities Purchase Agreement dated May 8, 2012 (the “Investor Purchase Agreement”) with certain purchasers to sell 1,315,000 shares of Common Stock for gross proceeds of approximately $2,445,900 (the “Investor Offering”). The purchase price for each share of Common Stock in the Investor Offering was $1.86.

On May 8, 2012, the Company also entered into a Securities Purchase Agreement dated May 8, 2012 (the “Director and Officer Purchase Agreement”) with certain of the Company’s directors and officers to sell up to 161,150 shares of Common Stock for gross proceeds of approximately $333,580 (the “Director and Officer Offering” and together with the Investor Offering, the “Registered Direct Offering”). The purchase price for each share of Common Stock in the Director and Officer Offering was $2.07.

The shares sold in the Registered Direct Offering were registered pursuant to a prospectus supplement dated May 8, 2012 and an accompanying prospectus dated October 21, 2009, pursuant to the Registration Statement.

The net proceeds to the Company from the Registered Direct Offering, after deducting the Company’s offering expenses, were approximately $2.7 million.

At Market Offering with MLV & Co. LLC:

On February 10, 2012, the Company entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with MLV & Co. LLC (“MLV”), pursuant to which the Company could issue and sell shares of Common Stock having an aggregate offering price of up to $10,000,000 (the “Shares”) from time to time through MLV (the “Offering”). Also on February 10, 2012, the Company filed a prospectus supplement with the Securities and Exchange Commission in connection with the Offering (the “Prospectus Supplement”). The shares of Common Stock to be sold under the ATM Agreement were registered pursuant to the Registration Statement and the Prospectus Supplement.

Upon delivery of a placement notice and subject to the terms and conditions of the ATM Agreement, MLV could sell Common Stock by methods deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on The NASDAQ Capital Market, on any other existing trading market for the common stock or to or through a market maker.

The Company agreed to pay MLV a commission equal to 3.0% of the gross sales price per share sold and provide indemnification and contribution to MLV against certain civil liabilities, including liabilities under the Securities Act.

On July 13, 2012, the Company delivered to MLV notice of termination of the ATM Agreement, which termination became effective July 23, 2012.

From July 1, 2012, through the termination of the ATM Agreement on July 23, 2012, the Company issued and sold 363,343 shares under the ATM Agreement for net proceeds of $0.4 million. No shares were sold under the ATM Agreement in the first six months of 2012.

2011 Underwritten Public Offering

On May 20, 2011, the Company completed an offering of 6,210,000 shares of common stock that resulted in proceeds to the Company of $16.1 million after deducting the underwriting discounts and commissions and estimated expenses payable by the Company of $1.3 million. The shares were offered pursuant to a prospectus supplement dated May 17, 2011 and an accompanying prospectus dated October 21, 2009, pursuant to the Company's existing effective shelf registration statement on Form S-3 (File No. 333-162609), which was declared effective by the Securities and Exchange Commission on October 28, 2009.

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Rights Offering

The Company filed a Registration Statement on Form S-1 on April 13, 2010 and as amended on April 20, 2010 and declared effective by the Securities and Exchange Commission on May 3, 2010 (File No. 333-166022), pursuant to which the Company conducted a rights offering by issuing a dividend of subscription rights (the “Rights”) to all of the Company’s stockholders as of April 29, 2010 (the “Record Date”), to exercise the Rights at a price of $2.40 per share, for shares of the Company’s common stock, par value $0.001 per share (the “Rights Offering”). 

Pursuant to the terms of the Rights Offering, the Company distributed to its stockholders transferable rights to subscribe for and purchase up to an aggregate of 4,153,883 shares of its common stock.  Each stockholder of record as of the Record Date received one transferable right for every one share of common stock owned on the Record Date.  Each right entitled the holder thereof to purchase 0.20 shares of common stock at a price of $2.40 per share (fractional shares were rounded up to the nearest whole share).

On June 3, 2010, as a result of the rights offering, the Company issued 2,117,236 shares of its common stock, par value $0.001 per share, to the holders who exercised their rights pursuant to the basic and over-subscription privileges and pursuant to the terms of the rights offering as described in the prospectus included in the Registration Statement.  Such shares of common stock were issued at a subscription price of $2.40 per share. The gross proceeds to the Company were approximately $5.1 million. In addition, the Company incurred $0.5 million in costs associated with this offering.

Note 15.    Restructuring Charges

During 2012, the Company recorded net restructuring charges and adjustments of approximately $1.4 million. The Company implemented a restructuring plan in the second quarter of 2012 that included a workforce reduction of approximately 64 positions primarily in the Company’s Bangalore, India, New Delhi, India, Fremont, California, Shelton, Connecticut, and European locations. The Company recorded restructuring charges of approximately $1.1 million related to employee termination benefits, approximately $0.2 million related to facilities costs and $0.4 million for other costs. These new restructuring charges were partially offset by approximately $0.3 million of a restructuring benefit that was an adjustment to a prior restructuring charge for a facility lease obligation in Shelton, Connecticut.

During 2011, the Company recorded a net restructuring benefit of $5.6 million. On December 28, 2011, the Company entered into an amendment (the “Amendment”) to a sublease agreement (the “Sublease”) with an unaffiliated party to sublease 92,880 square feet of the Company’s office space in Shelton, Connecticut. As a result of the Sublease, the Company reversed approximately $7.0 million of previously accrued restructuring liabilities. This amendment extends the sublease through May 2017. This benefit was partially offset by approximately $1.4 million of charges for workforce reductions implemented during 2011. In the third quarter of 2011, the Company implemented a restructuring plan that included a workforce reduction of approximately 39 positions primarily in the Company’s Shelton, Connecticut, Fremont, California, and New Delhi and Bangalore, India locations. The Company also implemented a restructuring plan in the first quarter of 2011 that included a workforce reduction of approximately 26 positions primarily in the Company’s Fremont, California, New Delhi, India and Bangalore, India locations. The restructuring charges are primarily for employee termination benefits.

A summary of the restructuring liabilities and activity follows:

	2012 Activity
	Restructuring Liabilities December 31, 2011		Restructuring Charges		Cash Payments			Non-cash asset write-offs			Adjustments and Changes to Estimates			Restructuring Liabilities December 31, 2012
Employee Termination Benefits	$	753	$	1,143	$	(1,133	)	$	(230	)	$	179		$	712
Facility lease costs		3,727		183		(905	)		—			(504	)		2,501
Other		—		—		(160	)		—			426			266
Totals	$	4,480	$	1,326	$	(2,198	)	$	(230	)	$	101		$	3,479

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	2011 Activity
	Restructuring Liabilities December 31, 2010		Restructuring Charges		Cash Payments			Non-cash asset write-offs		Adjustments and Changes to Estimates			Restructuring Liabilities December 31, 2011
Employee Termination Benefits	$	3	$	1,391	$	(641	)	$	—	$	—		$	753
Facility lease costs		11,205		—		(529	)		—		(6,949	)		3,727
Totals	$	11,208	$	1,391	$	(1,170	)	$	—	$	(6,949	)	$	4,480

 Note 16.    Commitments and Contingencies

Lease Agreements

The Company leases buildings and equipment at its headquarters in Shelton, Connecticut as well as at its subsidiaries’ locations worldwide. Rental expense under all operating lease agreements was $0.9 million in 2012, $1.1 million in 2011 and $1.4 million in 2010.

The following table summarizes as of December 31, 2012 future minimum operating lease commitments, including contractually obligated building operating commitments that have remaining, non-cancelable lease terms in excess of one year and future anticipated sublease income:

	Operating Commitments		Less: Sublease Agreements		Net Commitments
2013	$	3,431	$	1,910	$	1,521
2014		3,138		2,122		1,016
2015		2,848		2,176		672
2016		2,824		2,176		648
2017		1,268		907		361
Thereafter		-		-		-
	$	13,509	$	9,291	$	4,218

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Patent Indemnity

Under the terms of substantially all of its sales agreements, the Company has agreed to indemnify its customers for costs and damages arising from claims against such customer based on, among other things, allegations that the Company’s products infringed upon the intellectual property rights of a third party. In the event of an infringement claim, the Company retains the right to (i) procure for the customer the right to continue using the product; (ii) replace the product with a non-infringing item which shall give equally good service; (iii) modify the product so that it becomes non-infringing; or (iv) remove the product and, on return of the product to the Company, the Company shall refund the buyer’s purchase price. Due to the nature of these indemnification agreements, the maximum potential future payments the Company could be required to make under these guarantees, when and if such claims may arise, cannot be reliably determined. No amounts have been accrued for any estimated losses with respect to these guarantees for customer indemnifications since it is not probable that a loss will be incurred. No claims have been made under these indemnity provisions.

Purchase Commitments

In the normal course of business, the Company makes various commitments to purchase goods or services from specific suppliers, including those related to capital expenditures. As of December 31, 2012, the Company had purchase commitments totaling $1.6 million related to R&D software licenses for tooling and inventory.

Contingencies

In the normal course of business, we may be confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits, claims, environmental actions or the action of various regulatory agencies. If necessary, management consults with counsel and other appropriate experts to assess any matters that arise. If, in management’s opinion, we have incurred a probable loss as set forth by accounting principles generally accepted in the United States, an estimate is made of the loss and the appropriate accounting entries are reflected in our financial statements. Except as discussed below, there are no currently pending, threatened lawsuits or claims against the Company that could have a material adverse effect on our financial position, results of operations or cash flows. On July 29, 2010, the Company was served with a complaint in connection with civil action number 10-295 in U.S. District Court for the District of Delaware, entitled Sumitomo Electric Industries, Ltd. v. TranSwitch Corporation, in which Sumitomo Electric Industries, Ltd. (‘SEI’) was claiming breach of contract by the Company and damages in an amount of at least $2.6 million plus interest, costs and attorneys fees. On December 29, 2010, the Company entered into a settlement agreement with SEI which resulted in SEI filing a dismissal of its claim. As a result of the settlement agreement, the Company will pay an aggregate of approximately $0.7 million, in a combination of cash and future purchase credits. This amount was offset against the reversal of accrued royalties in the statement of operations.

Note 17.    Supplemental Cash Flow Information

Supplemental cash flow information follows:	Years Ended December 31,
	2012		2011		2010
Cash paid for interest	$	68	$	124	$	460
Cash paid for income taxes	$	237	$	234	$	218

Note 18. Subsequent Events

The Company’s Registration Statement on Form S-3 (File No. 333-162609), filed with the Securities and Exchange Commission on October 21, 2009, as amended and supplemented from time to time (the “Prior Registration Statement”), expired in October 2012. The Company initially filed a new Registration Statement on Form S-3 (File No. 333-184591) with the Securities and Exchange Commission on October 25, 2012, which was subsequently declared effective on January 25, 2013 (the “Current Registration Statement”).

On December 4, 2012, we received a letter from Nasdaq (the “Minimum Bid Price Notice”) notifying us that the closing bid price of our common stock was below the $1.00 minimum bid price requirement for 30 consecutive business days and, as a result, the Company no longer complied with the minimum bid price requirement under Listing Rule 5550(a)(2) for continued listing on Nasdaq. The Minimum Bid Price Notice also stated that we have been provided an initial compliance period of 180 calendar days, or until June 3, 2013, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days prior to June 3, 2013. If we do not regain compliance by June 3, 2013, Nasdaq will provide notice to us that our securities will be subject to delisting.

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On February 26, 2013, we received a letter from Nasdaq (the “Stockholders’ Equity Notice”) notifying us that we were no longer in compliance with the minimum stockholders’ equity requirement of at least $2.5 million for continued listing on Nasdaq. The Stockholders’ Equity Notice does not result in the immediate delisting of our common stock from Nasdaq. Rather, under the Nasdaq Listing Rules, we have 45 calendar days from the date of the Stockholders’ Equity Notice to submit to Nasdaq a plan to regain compliance. If the plan is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the Stockholders’ Equity Notice for us to evidence compliance. If we submit a plan, Nasdaq will determine whether to accept the plan, considering such criteria as the likelihood that the plan will result in compliance with Nasdaq’s continued listing criteria, our past compliance history, the reasons for our current non-compliance, other corporate events that may occur within the review period, our overall financial condition and our public disclosures. If Nasdaq does not accept the plan, we will have the opportunity to appeal that decision to a Hearings Panel.

Note 19.    Quarterly Information (Unaudited)

The table below shows selected unaudited quarterly information of operating results. The Company believes that this information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. Interim operating results are not necessarily indicative of future period results.

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Full Year
Year ended December 31, 2012
Net revenues	$	3,681		$	3,825		$	4,752		$	5,620		$	17,878
Cost of revenues		1,511			1,261			1,692			1,403			5,867
Gross profit		2,170			2,564			3,060			4,217			12,011
Net loss (2)		(6,083	)		(5,997	)		(3,000	)		(3,142	)		(18,222	)
Net loss per common share (1):
Basic	$	(0.20	)	$	(0.19	)	$	(0.09	)	$	(0.09	)	$	(0.55	)
Diluted	$	(0.20	)	$	(0.19	)	$	(0.09	)	$	(0.09	)	$	(0.55	)
Year ended December 31, 2011
Net revenues	$	8,227		$	7,053		$	6,665		$	6,310		$	28,255
Cost of revenues		2,944			2,339			2,368			2,672			10,323
Gross profit		5,283			4,714			4,297			3,638			17,932,
Net (loss) income (2)		(3,149	)		(2,999	)		(4,787	)		(11,937	)		(22,872	)
Net (loss) income per common share (1):
Basic	$	(0.13	)	$	0.11		$	(0.16	)	$	(0.39	)	$	(0.82	)
Diluted	$	(0.13	)	$	0.11		$	(0.16	)	$	(0.39	)	$	(0.82	)

(1) The sum of quarterly per share amounts may not equal per share amounts reported for year-to-date periods due to changes in the number of weighted average shares outstanding and the effects of rounding.

(2) The reported net loss for 2012 and 2011 reflects stock-based compensation expense of 2.1 million (first quarter of $0.5 million, second quarter of $0.4 million, third quarter of 0.5 million, and fourth quarter of $0.7 million) and 2.5 million (first quarter of $0.5 million, second quarter of $0.6 million, third quarter of 0.7 million, and fourth quarter of $0.7 million), respectively.

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SCHEDULE II

TRANSWITCH CORPORATION

VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

			Additions
Description	Balance at Beginning of Year		Charges to Costs and Expenses			Charges to Other Accounts			Deductions			Balance at End of Year
Year Ended December 31, 2012:
Allowance for losses on:
Accounts receivable	$	207	$	—		$	(21	)	$	—		$	186
Sales returns and allowances		175		—			(37	)		(43	)		95
Stock rotation		438		—			—			(144	)		294
Deferred income tax assets valuation allowance		226,254		7,272			—			—			233,526
	$	227,074	$	7,272		$	(58	)	$	(187	)	$	234,101
Year ended December 31, 2011:
Allowance for losses on:
Accounts receivable	$	336	$	(129	)	$	—		$	—		$	207
Sales returns and allowances		281		(39	)		(16	)		(51	)		175
Stock rotation		771		—			—			(333	)		438
Deferred income tax assets valuation allowance		227,498		(1,244	)		—			—			226,254
	$	228,886	$	(1,412	)	$	(16	)	$	(384	)	$	227,074
Year ended December 31, 2010:
Allowance for losses on:
Accounts receivable	$	516	$	(20	)	$	—		$	(160	)	$	336
Sales returns and allowances		149		82			50			—			281
Stock rotation		611		585			—			(425	)		771
Deferred income tax assets valuation allowance		221,207		6,291			—			—			227,498
	$	222,483	$	6,938		$	50		$	(585	)	$	228,886

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There have been no disagreements with accountants related to accounting and financial disclosures in 2012.

Item 9A. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the evaluation date, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control — Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2012.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm, pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during the year ended December 31, 2012, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations Inherent in all Controls

Our management, including the President and Chief Executive Officer, and Chief Financial Officer, recognize that our disclosure controls and our internal controls (discussed above) cannot prevent all errors or all attempts at fraud. Any controls system, no matter how well crafted and operated, can only provide reasonable, and not absolute, assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in any control system, no evaluation or implementation of a control system can provide complete assurance that all control issues and all possible instances of fraud have been or will be detected.

Item 9B. Other Information

On March 22, 2013, we entered into a separation agreement with Theodore Chung, our former Vice President - Business Development, pursuant to which his employment with us will end on March 29, 2013.

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PART III

Item 10.    Directors, Executive Officers and Corporate Governance

Information with respect to directors, the Audit Committee of the Board of Directors Audit Committee financial experts and named executive officers is incorporated herein by reference to the sections entitled “Election of Directors”, “Audit Committee Report” and “Compensation and Other Information Concerning Named Executive Officers”, respectively, contained in our definitive proxy statement for the annual meeting of shareholders of the Company to be held on May 23, 2013, which is to be filed with the Securities and Exchange Commission not later than 120 days after the close of the year ended December 31, 2012 (the “2013 Proxy Statement”). Information with respect to executive officers is included in the section entitled “Executive Officers of the Registrant” in Item 1 of this Form 10-K. Information concerning Section 16(a) compliance is incorporated by reference to the section of the 2013 Proxy Statement entitled “Section 16(a) Beneficial Ownership Reporting Compliance.”

Code of Ethics

The Company has a code of ethics that applies to all its directors, officers, employees and representatives. This code is publicly available at the investor relations section of the Company’s website located at http://www.transwitch.com. Amendments to the code of ethics and any grant of a waiver from a provision of the code requiring disclosure under applicable SEC rules will be disclosed within the investor relations section of the Company’s website located at http://www.transwitch.com. These materials may also be requested in print by writing to the Company’s Investor Relations Department at TranSwitch Corporation, Attention: Investor Relations, Three Enterprise Drive, Shelton, CT 06484.

Corporate Governance Principles and Charters

The Company’s corporate governance principles and the charters of Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee are available at the investor relations section of the Company’s website at http://www.transwitch.com. These materials may also be requested in print by writing to the Company’s Investor Relations Department at TranSwitch Corporation, Attention: Investor Relations, Three Enterprise Drive, Shelton, CT 06484.

Item 11.    Executive Compensation

Information with respect to executive compensation is incorporated herein by reference to the section entitled “Compensation and Other Information Concerning Named Executive Officers” contained in the 2013 Proxy Statement.

Information with respect to the Compensation Committee and its report is incorporated herein by reference to the sections entitled “Compensation Committee Interlocks and Insider Participation”, “Compensation Committee”, “Role of Executives in Establishing Compensation” under the heading “Compensation Discussion and Analysis” and “Compensation Committee Report” contained in the 2013 Proxy Statement.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information regarding equity compensation plans is included in Item 5 of this Form 10-K. Information regarding security ownership of certain beneficial owners, directors and executive officers is incorporated herein by reference to the information in the section entitled “Security Ownership of Certain Beneficial Owners and Management”, “Related Party Transactions” and “Indemnification Matters” contained in the 2013 Proxy Statement.

Item 13.    Certain Relationships and Related Transactions, and Director Independence

Information regarding certain relationships, related transactions, and the Company’s policies and procedures with respect to related party transactions is incorporated herein by reference to the sections entitled “Compensation Committee Interlocks and Insider Participation”, “Related Party Transactions” and “Review, Approval or Ratification of Transactions with Related Persons” contained in the 2013 Proxy Statement.

Information regarding director independence is incorporated herein by reference to the section entitled “Independence of Members of the Board of Directors” contained in the 2013 Proxy Statement.

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Item 14.    Principal Accountant Fees and Services

Information regarding principal accountant fees and services is incorporated herein by reference to the section entitled “Principal Accountant Fees and Services” contained in the 2013 Proxy Statement.

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PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a)(1) The following financial statements of TranSwitch Corporation are filed as part of this Form 10-K under Item 8 “Financial Statements and Supplementary Data.”

FINANCIAL STATEMENTS	PAGE
Consolidated Balance Sheets – December 31, 2012 and 2011	43
Consolidated Statements of Operations – Years ended December 31, 2012, 2011 and 2010	44
Consolidated Statements of Comprehensive Loss – Years ended December 31, 2012, 2011 and 2010	45
Consolidated Statements of Stockholders’ Equity – Years ended December 31, 2012, 2011 and 2010	46
Consolidated Statements of Cash Flows – Years ended December 31, 2012, 2011 and 2010	47
Notes to Consolidated Financial Statements	48
Schedule II	69

(a)(2) All other schedules are omitted because they are either not applicable, not required or because the information is presented in the Consolidated Financial Statements and Financial Statement Schedule or the notes thereto.

(a)(3) Exhibits

3.1	Amended and Restated Certificate of Incorporation, as amended to date (previously filed as Exhibit 3.1 to TranSwitch Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 and incorporated herein by reference).
3.2	Certificate of Amendment of Amended and Restated Certificate of Incorporation (previously filed as Exhibit 3.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on November 23, 2009 and incorporated herein by reference).
3.3	Certificate of Amendment of Amended and Restated Certificate of Incorporation (previously filed as Exhibit 3.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on May 21, 2010 and incorporated herein by reference).
3.4	Certificate of Amendment of Amended and Restated Certificate of Incorporation (previously filed as Exhibit 3.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on May 22, 2012 and incorporated herein by reference).
3.5	Certificate of Designation of Series B Junior Participating Preferred Stock of TranSwitch Corporation (previously filed as Exhibit 3.1(b) to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on October 3, 2011 and incorporated herein by reference).
3.6	Second Amended and Restated By-Laws, (previously filed as Exhibit 3.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on October 17, 2007 and incorporated herein by reference).
4.1	Specimen certificate representing the common stock of TranSwitch Corporation (previously filed as Exhibit 4.1 to TranSwitch Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 and incorporated herein by reference).
4.2	Rights Agreement, dated as of October 3, 2011, between TranSwitch Corporation and Computershare Trust Company , N.A., which includes the form of Rights Certificate and the Summary of Rights to Purchase Preferred Shares (previously filed as Exhibit 4.1 to TranSwitch Corporation’s Current report on Form 8-K as filed with the SEC on October 3, 2011 and incorporated by reference herein).
4.3	2005 Employee Stock Purchase Plan, as amended (previously filed as Exhibit 4.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on May 21, 2010 and incorporated herein by reference). *
4.4	Form of Employee Stock Purchase Plan Enrollment Authorization Form (previously filed as Exhibit 4.3 to TranSwitch Corporation’s Registration Statement on Form S-8 (File No. 333-126129) and incorporated herein by reference).

71

4.5	Form of Employee Stock Purchase Plan Change / Withdrawal Authorization Form (previously filed as Exhibit 4.4 to TranSwitch Corporation’s Registration Statement on Form S-8 (File No. 333-126129) and incorporated herein by reference).
4.6	2008 Equity Incentive Plan, as amended (previously filed as Exhibit 4.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on May 22, 2012 and incorporated herein by reference).*
4.7	Form of 2008 Equity Incentive Plan Stock Option Award Agreement (previously filed as Exhibit 4.3 to TranSwitch Corporation’s Registration Statement on Form S-8 (File No. 333-151113) and incorporated herein by reference).
4.8	Form of 2008 Equity Incentive Plan 102 Stock Option Award Agreement (previously filed as Exhibit 4.4 to TranSwitch Corporation’s Registration Statement on Form S-8 (File No. 333-151113) and incorporated herein by reference).
4.9	Form of Restricted Stock Award Agreement under the 2008 Equity Incentive Plan (previously filed as Exhibit 4.5 to TranSwitch Corporation’s Registration Statement on Form S-8 (File No. 333-151113) and incorporated herein by reference).
4.10	Form of Restricted Stock 102 Award Agreement under the 2008 Equity Incentive Plan (previously filed as Exhibit 4.6 to TranSwitch Corporation’s Registration Statement on Form S-8 (File No. 333-151113) and incorporated herein by reference).
4.11	Form of Non-Qualified Stock Option Award to Director Agreement under the 2008 Equity Incentive Plan (previously filed as Exhibit 4.7 to TranSwitch Corporation’s Registration Statement on Form S-8 (File No. 333-151113) and incorporated herein by reference).*
4.12	Form of 2008 Equity Incentive Plan 102 Stock Award Agreement (previously filed as Exhibit 4.8 to TranSwitch Corporation’s Registration Statement on Form S-8 (File No. 333-151113) and incorporated herein by reference).
10.1	Third Amended and Restated 1995 Stock Option Plan, as amended (previously filed as an exhibit to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on May 23, 2005 and incorporated herein by reference).*
10.2	Form of Incentive Stock Option Agreement under the 1995 Stock Plan (previously filed as an exhibit to the TranSwitch Corporation’s Registration Statement on Form S-8 (File No. 333-94234) and incorporated herein by reference).
10.3	Form of Non-Qualified Stock Option Agreement under the 1995 Stock Plan (previously filed as an exhibit to the TranSwitch Corporation’s Registration Statement on Form S-8 (File No. 333-94234) and incorporated herein by reference).
10.4	Lease Agreement, as amended, with Robert D. Scinto (previously filed as Exhibit 10.14 to the TranSwitch Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference).
10.5	2000 Stock Option Plan (previously filed as Exhibit 4.2 to TranSwitch Corporation’s Registration Statement on Form S-8 (File No. 333-75800) and incorporated herein by reference).
10.6	Form of Non-Qualified Stock Option Agreement under the 2000 Stock Option Plan (previously filed as Exhibit 4.3 to TranSwitch Corporation’s Registration Statement on Form S-8 (File No. 333-75800) and incorporated herein by reference).
10.7	Form of Director Non-Qualified Stock Option Agreement under the Third Amended and Restated 1995 Stock Option Plan, as amended (previously filed as Exhibit 10.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on May 25, 2007 and incorporated herein by reference).*
10.8	Employment Agreement dated November 5, 2009 between Dr. M. Ali Khatibzadeh and TranSwitch Corporation (previously filed as Exhibit 10.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on November 12, 2009 and incorporated herein by reference).*
10.9	Form of Director Indemnification Agreement as executed with each director of TranSwitch Corporation (previously filed as Exhibit 10.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on April 9, 2009 and incorporated herein by reference).*

72

10.10	Form of Director Restricted Stock Unit Award Agreement under the 2008 Equity Incentive Plan (previously filed as Exhibit 10.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on May 27, 2009 and incorporated herein by reference).*
10.11	Letter Agreement by and between TranSwitch Corporation and Robert Bosi, dated as of February 13, 2009 (previously filed as Exhibit 10.1 to TranSwitch Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 and incorporated herein by reference).*
10.12	Sublease Agreement by and between TranSwitch Corporation and Sikorsky Aircraft Corporation, dated as of March 3, 2009 (previously filed as Exhibit 10.2 to TranSwitch Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 and incorporated herein by reference).
10.13	Amendment to Sublease Agreement by and between TranSwitch Corporation and Sikorsky Aircraft Corporation, dated December 28, 2011 (filed herewith).
10.14	Amended and Restated Business Financing Agreement by and between TranSwitch Corporation and Bridge Bank, National Association, dated as of April 4, 2011 (previously filed as Exhibit 10.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on April 8, 2011 and incorporated herein by reference).
10.15	Form of TranSwitch Corporation Change of Control Agreement (previously filed as Exhibit 10.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on January 6, 2012).*
10.16	Securities Purchase Agreement dated May 8, 2012 by and among TranSwitch Corporation and the purchasers named therein (filed as Exhibit 10.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on May 8, 2012).
10.17	Securities Purchase Agreement dated May 8, 2012 by and among TranSwitch Corporation and the purchasers named therein (filed as Exhibit 10.2 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on May 8, 2012).
10.18	Form of Employment Agreement for Mr. Bar-Niv and Mr. Chung (filed as Exhibit 10.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on May 22, 2012).*
10.19	Amendment to Employment Agreement for M. Ali Khatibzadeh dated June 27, 2012 (filed as Exhibit 10.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on July 2, 2012).*
10.20	Registration Rights Agreement dated as of July 16, 2012 by and between TranSwitch Corporation and Aspire Capital Fund , LLC (filed as Exhibit 4.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on July 17, 2012).
10.21	Common Stock Purchase Agreement dated as of July 16, 2012 by and between TranSwitch Corporation and Aspire Capital Fund, LLC (filed as Exhibit 10.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on July 17, 2012).
10.22	At Market Issuance Sales Agreement by and between TranSwitch Corporation and MLV & Co. (filed as Exhibit 1.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on February 10, 2012).
11.1	Computation of Loss Per Share (filed herewith).
12.1	Computation of Ratio of Earnings to Fixed Charges (filed herewith).
16.1	Letter of UHY LLP dated April 22, 2010 (previously filed as Exhibit 16.1 to TranSwitch Corporation’s Current Report on Form 8-K as filed with the SEC on April 22, 2010 and incorporated herein by reference).
21.1	Subsidiaries of the Company (filed herewith).
23.1	Consent of Independent Registered Public Accounting Firm (filed herewith).
31.1	CEO Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

73

31.2	CFO Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1	CEO Certification pursuant to Rule 13a-14(b) and Rule 15d-14(b) of the Securities Exchange Act of 1934, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.2	CFO Certification pursuant to Rule 13a-14(b) and Rule 15d-14(b) of the Securities Exchange Act of 1934, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

* Indicates management contract or compensatory plan, contract or arrangement identified as required in Item 15(a)(3) of Form 10-K

(b) Exhibits

We hereby file as exhibits to this Form 10-K those exhibits listed in Item 15 (a)(3) above.

(c) Financial Statement Schedule

TranSwitch files as a financial statement schedule to this Form 10-K, the financial statement schedule listed in Item 8 and 15(a) (2) above.

74

SIGNATURES

 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TRANSWITCH CORPORATION
By:	/s/    Dr. M. Ali Khatibzadeh
	Dr. M. Ali Khatibzadeh President and Chief Executive Officer

March 25, 2013

POWER OF ATTORNEY AND SIGNATURES

We, the undersigned named executive officers and directors of TranSwitch Corporation, hereby severally constitute and appoint Dr. M. Ali Khatibzadeh and Mr. Robert A. Bosi, and each of them singly, our true and lawful attorneys, with full power to them and each of them singly, to sign for us in our names in the capacities indicated below, all amendments to this report, and generally to do all things in our names and on our behalf in such capacities to enable TranSwitch Corporation to comply with the provisions of the Securities Exchange Act of 1934, as amended and all requirements of the Securities and Exchange Commission.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

R G

Name and Signature	Title(s)	Date
/s/ Dr. M. Ali Khatibzadeh	President, Chief Executive Officer and Director  (principal	March 25, 2013
Dr. M. Ali Khatibzadeh	executive officer)
/s/ Mr. Robert A. Bosi	Vice President and Chief Financial Officer (principal financial and	March 25, 2013
Mr. Robert A. Bosi	accounting officer)
/s/ Mr. Richard J. Lynch	Director and Chairman of the Board	March 25, 2013
Mr. Richard J. Lynch
/s/ Mr. Faraj Aalaei	Director	March 25, 2013
Mr. Faraj Aalaei
/s/ Mr. Thomas Baer	Director	March 25, 2013
Mr. Thomas Baer
/s/ Mr. Herbert Chen	Director	March 25, 2013
Mr. Herbert Chen
/s/ Mr. Gerald F. Montry	Director	March 25, 2013
Mr. Gerald F. Montry
/s/ Mr. Sam Srinivasan	Director	March 25, 2013
Mr. Sam Srinivasan

75

EX-11.1

Exhibit 11.1

Computation of Loss Per Share

(Amounts in thousands except per share amounts)

Basic loss per common share for the fiscal years ended December 31, 2012, 2011 and 2010 are as follows:

	Years ended December 31,
	2012			2011			2010
Net loss	$	(18,222	)	$	(22,872	)	$	(4,609	)
Weighted average common shares outstanding		33,130			27,911			22,162
Basic loss per common share	$	(0.55	)	$	(0.82	)	$	(0.21	)

Diluted loss per common share for the fiscal years ended December 31, 2012, 2011 and 2010 are as follows:

	Years ended December 31,
	2012			2011			2010
Net loss	$	(18,222	)	$	(22,872	)	$	(4,609	)
Weighted average common shares outstanding		33,130			27,911			22,162
Dilutive securities (1)(2)(3)		—			—			—
Diluted average common shares outstanding		33,130			22,911			22,162
Diluted loss per common share (1)(2)(3)	$	(0.55	)	$	(0.82	)	$	(0.21	)

(1) For purposes of calculating the dilutive loss per common share for the years ended December 31, 2012, 2011 and 2010, the assumed exercise of dilutive securities (in-the-money stock options) is not taken into consideration, as its effect is anti-dilutive. Had these been exercised zero, 0.5 million, and 0.1 million additional shares of common stock would have been assumed outstanding for each of the years in the years ended December 31, 2012, 2011 and 2010, respectively.

(2) For purposes of calculating the dilutive loss per common share for the years ended December 31, 2012, 2011 and 2010, the assumed conversion of the 5.45% Convertible Notes due 2011 and the 5.45% Convertible Notes due 2010 is not taken into consideration as their effect is anti-dilutive. Had the 5.45% Convertible Notes due 2011 and the 5.45% Convertible Notes due 2010 been converted, zero, zero, and 0.5 million additional shares of common stock would have been assumed outstanding for each of the years in the years ended December 31, 2012, 2011 and 2010, respectively.

(3) For purposes of calculating the dilutive loss per common share for the years ended December 31, 2012, 2011 and 2010, the assumed release or dilutive restricted stock units is not taken into consideration as their effect is anti-dilutive. Had the restricted stock units been released, 1.7 million, 1.6 million, and 1.5 million additional shares of common stock would have been assumed outstanding for each of the years in the years ended December 31, 2012, 2011 and 2010, respectively.

EX-12.1

Exhibit 12.1

Computation of

Ratio of Earnings to Fixed Charges

	Year Ended December 31,
(amounts in thousands)	2012			2011			2010
Loss before income taxes	$	(17,834	)	$	(22,236	)	$	(3,633	)
Plus fixed charges:
Interest expense		71			124			460
Amortization of costs related to indebtedness		53			119			244
Estimated interest factor in rent expense (1)		291			360			450
Total Fixed Charges		415			603			1,154
Adjusted loss		(17,419	)		(21,633	)		(2,479	)
Fixed charges		415			603			1,154
Deficiency in earnings to cover fixed charges	$	(17,834	)	$	(22,236	)	$	(3,633	)
Ratio of earnings to fixed charges		*			*			*

* Calculation not meaningful as ratio is less than 1.

(1) The interest factor in rent expense is estimated as one-third of rental expense.

EX-21.1

Exhibit 21.1

Subsidiaries of the Company

Entity Name	State/Country of Incorporation
TranSwitch Asia PTE Ltd.	Singapore
TranSwitch Asia Ltd.	Hong Kong
TranSwitch Europe N.V./S.A.	Belgium
TranSwitch India Private Limited	India
TranSwitch International Corp.	Delaware
TranSwitch Silicon Valley, Inc.	California
TranSwitch (Israel) Ltd	Israel
TX Holdings Inc.	Delaware
Mysticom, Inc.	Delaware
Centillium Communications, Inc.	Delaware
VEngines, Inc.	Delaware
Centillium Communications International, Inc.	Delaware
Centillium Communications Limited	United Kingdom
Centillium Communications SARL	France
TranSwitch Japan KK	Japan
Centillium Communications, Shanghai	China

EX-23.1

 Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the registration statements of TranSwitch Corporation and subsidiaries on Form S-3 (Nos. 333-184591) and on Form S-8 (Nos. 333-75800, 333-83187, 33-94234, 333-126129, 333-151113, 333-161231, 333-167324, 333-175060 and 333-183596) of our report, which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, dated March 25, 2013, with respect to our audits of the consolidated financial statements and related consolidated financial schedule of TranSwitch Corporation and subsidiaries as of December 31, 2012 and 2011, and for each of the years in the three-year periods ended December 31, 2012, which report is included in the annual report on Form 10-K of TranSwitch Corporation and subsidiaries for the year ended December 31, 2012.

Our report on the consolidated financial statements refers to a change in the method of acocunting related to adoption of Financial Accounting Standards Board issued ASU No. 2011-05, Comprehensive Income (Topic 220), effective January 1, 2012.

/s/ Marcum LLP

Hartford, Connecticut

March 25, 2013

EX-31.1

Exhibit 31.1  

RULE 13a-14(a) CERTIFICATION IN

ACCORDANCE WITH SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Dr. M. Ali Khatibzadeh, Chief Executive Officer and President of TranSwitch Corporation (the “Company”), certify that:

1. I have reviewed this annual report on Form 10-K of the Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 25, 2013

By:	/s/ Dr. M. Ali Khatibzadeh
Dr. M. Ali Khatibzadeh
Chief Executive Officer and President

EX-31.2

Exhibit 31.2

RULE 13a-14(a) CERTIFICATION IN

ACCORDANCE WITH SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Robert A. Bosi, Vice President and Chief Financial Officer of TranSwitch Corporation (the “Company”), certify that:

1. I have reviewed this annual report on Form 10-K of the Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 25, 2013

By:	/s/ Robert A. Bosi
Robert A. Bosi
Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

In connection with the Annual Report of TranSwitch Corporation (the “Company”) on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dr. M. Ali Khatibzadeh, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

By:	/s/ Dr. M. Ali Khatibzadeh
Dr. M. Ali Khatibzadeh
Chief Executive Officer and President
March 25, 2013

* A signed original of this written statement required by Section 906 has been provided to TranSwitch Corporation and will be retained by TranSwitch Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

In connection with the Annual Report of TranSwitch Corporation (the “Company”) on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert A. Bosi, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

By:	/s/ Robert A. Bosi
Robert A. Bosi
Vice President and Chief
Financial Officer
March 25, 2013

* A signed original of this written statement required by Section 906 has been provided to TranSwitch Corporation and will be retained by TranSwitch Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

The following table summarizes as of December 31, 2012 future minimum operating lease commitments, including contractually obligated building operating commitments that have remaining, non-cancelable lease terms in excess of one year and future anticipated sublease income:

	Operating Commitments		Less: Sublease Agreements		Net Commitments
2013	$	3,431	$	1,910	$	1,521
2014		3,138		2,122		1,016
2015		2,848		2,176		672
2016		2,824		2,176		648
2017		1,268		907		361
Thereafter		-		-		-
	$	13,509	$	9,291	$	4,218

XML

Segment and Major Customer Information (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Total	$ 17,878	$ 28,255	$ 49,822
Long-lived tangible assets:
Total	1,111	1,355
United States [Member]
Total	6,030	6,439	12,258
Long-lived tangible assets:
Total	344	502
Italy [Member]
Total	2,362	3,836	3,832
Japan [Member]
Total	2,206	659	9,465
Hong Kong [Member]
Total	2,192	3,190	6,550
United Kingdom [Member]
Total	1,197	1,904	168
Israel [Member]
Total	940	4,732	8,220
Republic Of Korea [Member]
Total	887	2,915	3,753
China [Member]
Total	456	724	1,907
Singapore [Member]
Total	260	757	668
Taiwan [Member]
Total	(104)	1,637	1,541
Other Countries [Member]
Total	1,452	1,462	1,460
Long-lived tangible assets:
Total	$ 2,417	$ 2,246

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Property and Equipment, Net (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011
Gross property and equipment	17,356		17,290
Accumulated depreciation and amortization	(16,245)		(15,935)
Property and equipment, net	1,111		1,355
Software [Member]
Gross property and equipment	8,087		8,107
Software [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life	1 year		1 year
Software [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life	3 years		3 years
Computer Equipment [Member]
Gross property and equipment	8,009		7,808
Computer Equipment [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life	3 years		3 years
Computer Equipment [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life	7 years		7 years
Furniture and Fixtures [Member]
Gross property and equipment	701		696
Furniture and Fixtures [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life	3 years		3 years
Furniture and Fixtures [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life	7 years		7 years
Leasehold Improvements [Member]
Gross property and equipment	559		679
Property, Plant and Equipment, Estimated Useful Lives	Lease term	[1]	Lease term	[1]

[1] Estimated useful life of improvement if shorter.

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Restructuring Charges (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Restructuring Liabilities, Beginning balance	$ 4,480	$ 11,208
Restructuring Charges	1,326	1,391
Cash Payments	(2,198)	(1,170)
Non-cash asset write-offs	(230)	0
Adjustments and Changes in Estimates	101	(6,949)
Restructuring Liabilities, Ending balance	3,479	4,480
One-Time Termination Benefits [Member]
Restructuring Liabilities, Beginning balance	753	3
Restructuring Charges	1,143	1,391
Cash Payments	(1,133)	(641)
Non-cash asset write-offs	(230)	0
Adjustments and Changes in Estimates	179	0
Restructuring Liabilities, Ending balance	712	753
Facility Closing [Member]
Restructuring Liabilities, Beginning balance	3,727	11,205
Restructuring Charges	183	0
Cash Payments	(905)	(529)
Non-cash asset write-offs	0	0
Adjustments and Changes in Estimates	(504)	(6,949)
Restructuring Liabilities, Ending balance	2,501	3,727
Other Restructuring [Member]
Restructuring Liabilities, Beginning balance	0
Restructuring Charges	400
Cash Payments	(160)
Non-cash asset write-offs	0
Adjustments and Changes in Estimates	426
Restructuring Liabilities, Ending balance	$ 266

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Segment and Major Customer Information (Details 1)	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Significant Customers:
Sales Revenue, Goods, Net, Percentage	10.00%
Customer A [Member]
Significant Customers:
Sales Revenue, Goods, Net, Percentage	21.00%		13.00%		20.00%
Customer B [Member]
Significant Customers:
Sales Revenue, Goods, Net, Percentage	12.00%				0.00%	[1]
Customer C [Member]
Significant Customers:
Sales Revenue, Goods, Net, Percentage	0.00%	[1]	0.00%	[1]	18.00%
Customer D [Member]
Significant Customers:
Sales Revenue, Goods, Net, Percentage	0.00%	[1]	0.00%	[1]	13.00%

[1] Revenues were less than 10% of the Company's net revenues in these years.

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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Balance at Beginning of Year	$ 227,074	$ 228,886	$ 222,483
Additions,Charges to Costs and Expenses	7,272	(1,412)	6,938
Additions,Charges to Other Accounts	(58)	(16)	50
Deductions	187	(384)	(585)
Balance at End of Year	234,101	227,074	228,886
Allowance For Accounts Receivable [Member]
Balance at Beginning of Year	207	336	516
Additions,Charges to Costs and Expenses	0	(129)	(20)
Additions,Charges to Other Accounts	(21)	0	0
Deductions	0	0	(160)
Balance at End of Year	186	207	336
Allowance For Sales Returns [Member]
Balance at Beginning of Year	175	281	149
Additions,Charges to Costs and Expenses	0	(39)	82
Additions,Charges to Other Accounts	(37)	(16)	50
Deductions	43	(51)	0
Balance at End of Year	95	175	281
Stock Rotation [Member]
Balance at Beginning of Year	438	771	611
Additions,Charges to Costs and Expenses	0	0	585
Additions,Charges to Other Accounts	0	0	0
Deductions	(144)	(333)	(425)
Balance at End of Year	294	438	771
Valuation Allowance Of Deferred Tax Assets [Member]
Balance at Beginning of Year	226,254	227,498	221,207
Additions,Charges to Costs and Expenses	7,272	(1,244)	6,291
Additions,Charges to Other Accounts	0	0	0
Deductions	0	0	0
Balance at End of Year	$ 233,526	$ 226,254	$ 227,498

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Investments in Non-Publicly Traded Companies and Venture Capital Funds (Details Textual) (USD $)			12 Months Ended					3 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Neurone II [Member]	Dec. 31, 2010 Neurone II [Member]	Dec. 31, 2012 Munich Venture Partners Fund [Member]	Dec. 31, 2011 Munich Venture Partners Fund [Member]	Dec. 31, 2010 Munich Venture Partners Fund [Member]	Mar. 31, 2010 Opulan Technologies Corp [Member]	Dec. 31, 2010 Opulan Technologies Corp [Member]	Dec. 31, 2012 Neurone Ii and Mvp [Member]
Proceeds From Sale Of Investment				$ 100,000				$ 2,700,000	$ 2,700,000
Carryling Value Of Investment								2,700,000
Subsidiary of Limited Liability Company or Limited Partnership, Ownership Interest			3.00%		0.42%
Additional Investments				100,000		100,000	100,000			100,000
Investments in non-publicly traded companies	$ 356,000	$ 306,000

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Goodwill and Other Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets and Goodwill [Table Text Block]

Changes in the carrying amounts of goodwill and information about intangible assets follow:

	Goodwill
Balance at December 31, 2010	$	14,144
Impairment of goodwill (1)		(8,873	)
Balance at December 31, 2011		5,271
Impairment of goodwill		-
Balance at December 31, 2012	$	5,271

(1) During the fourth quarter of 2011, impairment testing performed by the Company indicated that the estimated fair value of the reporting unit tested was less than its corresponding carrying amount. As a result, the Company recorded a goodwill impairment charge of $8.9 million.

Schedule of Finite-Lived Intangible Assets by Major Class [Table Text Block]

				Other Intangible Assets
	Developed Technology			Customer Relationships			Total
Balances at December 31, 2012
Cost  (1)	$	1,755		$	4,729		$	6,484
Accumulated amortization		(1,707	)		(4,229	)		(5,936	)
	$	48		$	500		$	548
Balances at December 31, 2011
Cost  (2)	$	1,974		$	5,158		$	7,132
Accumulated amortization		(1,585	)		(4,086	)		(5,671	)
	$	389		$	1,072		$	1,461

(1) During the fourth quarter of 2012, impairment testing for certain purchased customer relationships and developed technology was performed by the Company and indicated that the undiscounted future cash flows of the mentioned intangible assets were less than their corresponding carrying amounts. As a result, the Company recorded an impairment charge of $0.6 million.

(2) During the fourth quarter of 2011, impairment testing for certain purchased customer relationships and developed technology was performed by the Company and indicated that the undiscounted future cash flows of the mentioned intangible assets were less than their corresponding carrying amounts. As a result, the Company recorded an impairment charge of $5.4 million.

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Commitments and Contingencies (Details Textual) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Jul. 29, 2010
Operating Leases, Rent Expense	$ 0.9	$ 1.1	$ 1.4
Amount Payable Towards Breach Of Contract				2.6
Contingency Settlement			0.7
Research and Development Software Licenses [Member]
Purchase Obligation	$ 1.6

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Balance	$ 6,283	$ 6,303
Increases related to prior year tax positions	23	42
Decreases related to prior year tax positions	(22)	(48)
Increases related to current year tax positions	214	125
Settlements	(130)	(139)
Balance	$ 6,368	$ 6,283

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Quarterly Information (Unaudited) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended																12 Months Ended
	Dec. 31, 2012		Sep. 30, 2012		Jun. 30, 2012		Mar. 31, 2012		Dec. 31, 2011		Sep. 30, 2011		Jun. 30, 2011		Mar. 31, 2011		Dec. 31, 2012		Dec. 31, 2011	Dec. 31, 2010
Net revenues	$ 5,620		$ 4,752		$ 3,825		$ 3,681		$ 6,310		$ 6,665		$ 7,053		$ 8,227		$ 17,878		$ 28,255	$ 49,822
Cost of revenues	1,403		1,692		1,261		1,511		2,672		2,368		2,339		2,944		5,867		10,323	22,024
Gross profit	4,217		3,060		2,564		2,170		3,638		4,297		4,714		5,283		12,011		17,932	27,798
Net loss (2)	$ (3,142)	[1]	$ (3,000)	[1]	$ (5,997)	[1]	$ (6,083)	[1]	$ (11,937)	[1]	$ (4,787)	[1]	$ (2,999)	[1]	$ (3,149)	[1]	$ (18,222)		$ (22,872)	$ (4,609)
Net loss per common share (1):
Basic (in dollars per share)	$ (0.09)	[2]	$ (0.09)	[2]	$ (0.19)	[2]	$ (0.20)	[2]	$ (0.39)	[2]	$ (0.16)	[2]	$ 0.11	[2]	$ (0.13)	[2]	$ (0.55)	[2]	$ (0.82)
Diluted (in dollars per share)	$ (0.09)	[2]	$ (0.09)	[2]	$ (0.19)	[2]	$ (0.20)	[2]	$ (0.39)	[2]	$ (0.16)	[2]	$ 0.11	[2]	$ (0.13)	[2]	$ (0.55)	[2]	$ (0.82)

[1] The reported net loss for 2012 and 2011 reflects stock-based compensation expense of 2.1 million (first quarter of $0.5 million, second quarter of $0.4 million, third quarter of 0.5 million, and fourth quarter of $0.7 million) and 2.5 million (first quarter of $0.5 million, second quarter of $0.6 million, third quarter of 0.7 million, and fourth quarter of $0.7 million), respectively.

[2] The sum of quarterly per share amounts may not equal per share amounts reported for year-to-date periods due to changes in the number of weighted average shares outstanding and the effects of rounding.

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Quarterly Information (Unaudited) (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Stock-based compensation expense	$ 700	$ 500	$ 400	$ 500	$ 700	$ 700	$ 600	$ 500	$ 2,137	$ 2,474	$ 2,358

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Restructuring Charges (Details Textual) (USD $)	3 Months Ended				12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 28, 2011 sqft
Other Restructuring Costs					$ 1,400,000	$ 5,600,000
Restructuring and Related Activities, Description	The Company implemented a restructuring plan in the second quarter of 2012 that included a workforce reduction of approximately 64 positions primarily in the Company's Bangalore, India, New Delhi, India, Fremont, California, Shelton, Connecticut, and European locations.		In the third quarter of 2011, the Company implemented a restructuring plan that included a workforce reduction of approximately 39 positions primarily in the Company''s Shelton, Connecticut, Fremont, California, and New Delhi and Bangalore, India locations.	The Company also implemented a restructuring plan in the first quarter of 2011 that included a workforce reduction of approximately 26 positions primarily in the Company's Fremont, California, New Delhi, India and Bangalore, India locations.
Restructuring Charges					1,326,000	1,391,000
Restructuring Charges Offset	300,000	1,400,000
Area of Land							92,880
Accrued Restructuring Liabilities							7,000,000
Facility Closing [Member]
Restructuring Charges					183,000	0
One-Time Termination Benefits [Member]
Restructuring Charges					1,143,000	1,391,000
Other Restructuring [Member]
Restructuring Charges					$ 400,000

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Supplemental Cash Flow Information

12 Months Ended

Dec. 31, 2012

Supplemental Cash Flow Information [Abstract]

Cash Flow, Supplemental Disclosures [Text Block]

Note 17.    Supplemental Cash Flow Information

Supplemental cash flow information follows:	Years Ended December 31,
	2012		2011		2010
Cash paid for interest	$	68	$	124	$	460
Cash paid for income taxes	$	237	$	234	$	218

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Goodwill and Other Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Balance	$ 5,271	$ 14,144
Impairment of goodwill(1)	0	(8,873)	[1]
Balance	$ 5,271	$ 5,271

[1] During the fourth quarter of 2011, impairment testing performed by the Company indicated that the estimated fair value of the reporting unit tested was less than its corresponding carrying amount. As a result, the Company recorded a goodwill impairment charge of $8.9 million.

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Business and Summary of Significant Accounting Policies (Details)	Dec. 31, 2012		Dec. 31, 2011
Customer A [Member]
Percentage Of Accounts Receivable	29.00%		0.00%	[1]
Customer B [Member]
Percentage Of Accounts Receivable	26.00%		17.00%
Customer C [Member]
Percentage Of Accounts Receivable	0.00%	[1]	15.00%
Customer D [Member]
Percentage Of Accounts Receivable	0.00%	[1]	10.00%

[1] Accounts receivable due were less than 10% of the Company's total accounts receivable.

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Subsequent Events (Details Textual) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Feb. 26, 2013
Common Stock Bid Price	we received a letter from Nasdaq (the "Minimum Bid Price Notice") notifying us that the closing bid price of our common stock was below the $1.00 minimum bid price requirement for 30 consecutive business days and, as a result, the Company no longer complied with the minimum bid price requirement under Listing Rule 5550(a)(2) for continued listing on Nasdaq. The Minimum Bid Price Notice also stated that we have been provided an initial compliance period of 180 calendar days, or until June 3, 2013, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days prior to June 3, 2013.
Minimum Net Capital Required		$ 2.5

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2012

Compensation and Retirement Disclosure [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

Information regarding stock options follows:

	Number of options outstanding			Weighted average exercise price per share
Outstanding at December 31, 2009		2,485,134		$	10.02
Granted		113,167			2.18
Exercised		(13,264	)		2.32
Canceled, forfeited or expired		(425,204	)		10.93
Outstanding at December 31, 2010		2,159,833			9.47
Granted		10,000			2.77
Exercised		(88,188	)		2.42
Canceled, forfeited or expired		(311,091	)		12.85
Outstanding at December 31, 2011		1,770,554			9.19
Granted		0			0.00
Exercised		(14,684	)		2.34
Canceled, forfeited or expired		(356,742	)		10.35
Outstanding at December 31, 2012 1		1,399,128		$	8.96

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

Information regarding restricted stock awards follows:

	Number  of restricted stock units outstanding
Outstanding at December 31, 2009		571,182
Granted		1,398,250
Released		(405,838	)
Canceled, forfeited or expired		(66,726	)
Outstanding at December 31, 2010		1,496,868
Granted		1,045,251
Released		(749,070	)
Canceled, forfeited or expired		(163,097	)
Outstanding at December 31, 2011		1,629,952
Granted		1,160,207
Released		(971,015	)
Canceled, forfeited or expired		(117,365	)
Outstanding at December 31, 2012		1,701,779

Schedule of Share-based Compensation, Activity [Table Text Block]

Options outstanding and exercisable at December 31, 2012 follow:

				Options Outstanding				Options Exercisable
Range of   Exercise prices		Number Outstanding		Weighted Average Remaining Contractual  Life		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$	2.00 to 2.20		140,202		4.39	$	2.13		118,640	$	2.13
	2.32 to 2.32		69,901		2.93		2.32		69,901		2.32
	2.43 to 2.43		214,961		3.94		2.43		168,086		2.43
	2.48 to 5.12		166,409		2.96		3.93		160,332		3.98
	5.52 to 8.16		146,498		3.11		6.42		145,248		6.42
	8.40 to 12.40		177,342		2.73		10.98		177,342		10.98
	12.64 to 13.20		167,010		1.80		13.10		167,010		13.10
	13.28 to 16.88		191,514		1.29		15.10		191,514		15.10
	17.52 to 24.00		32,562		1.53		19.54		32,562		19.54
	24.80		92,729		1.13		24.80		92,729		24.80
$	2.00 to 24.80		1,399,128		2.72	$	8.96		1,323,364	$	9.34

Schedule Of Fair Value Assumptions Of Option Grant [Table Text Block]

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	2012		2011		2010
Risk-free interest rate		N/A		N/A		1.61	%
Expected life in years		N/A		N/A		3.80
Expected volatility		N/A		N/A		94.84	%
Expected dividend yield		—		—		—

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Goodwill and Other Intangible Assets (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended		12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Amortization of Intangible Assets			$ 0.3	$ 1.4	$ 1.6
Future Amortization Expense, Remainder of Fiscal Year	0.1		0.1
Future Amortization Expense, Year One	0.1		0.1
Future Amortization Expense, Year Two	0.1		0.1
Future Amortization Expense, Year Three	0.1		0.1
Future Amortization Expense, Year Four	0.1		0.1
Goodwill Impairment Of Charge		8.9
Impairment Of Charge	$ 0.6	$ 5.4

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Employee Benefit Plans (Details Textual) (USD $)	1 Months Ended				3 Months Ended								12 Months Ended
	Jul. 23, 2012	May 31, 2012	May 31, 2011	Jun. 30, 2010	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Common Stock Price Based On Percentage Of Fair Market Value													85.00%
Number Of Options Outstanding, Granted													0	10,000	113,167
Number Of Options Outstanding					1,399,128				1,770,554				1,399,128	1,770,554	2,159,833	2,485,134
Sales of stock, net of issuance cost (in shares)	363,343	1,315,000	6,210,000	2,117,236									2,380,560
Stock-based compensation expense					$ 700,000	$ 500,000	$ 400,000	$ 500,000	$ 700,000	$ 700,000	$ 600,000	$ 500,000	$ 2,137,000	$ 2,474,000	$ 2,358,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value														$ 0	$ 1.41
Share Based Compensation Arrangement By Share Based Paymentaward Options Grants In Period Fair Value													20,000
Share Based Compensation Arrangement By Share Based Payment Award Options Grants In Period Weighted Average Fair Value Of Restricted Stock Units Granted													$ 1.36	$ 3.09	$ 2.37
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value					10,000				80,000				10,000	80,000	10,000
Share Based Compensation Arrangementb Y Share Based Payment Award Options Restricted Stock Units Intrinsic Value1					1,300,000				2,200,000				1,300,000	2,200,000	900,000
Employee Stock Ownership Plan (ESOP), Plan Description													The Company had provided matching contributions equal to 50% of the employees'' contributions
Percentage Of Employees Annual Compensation													6.00%
Defined Contribution Plan, Maximum Annual Contribution Per Employee, Amount													0	0	0	100,000
Non Employees Stock Option [Member]
Stock-based compensation expense													$ 0	$ 20,000	$ 0
Plan 2000 [Member]
Stock Option Plan Expiration Date													Jul. 14, 2010
Number Of Options Outstanding					159,569								159,569
Nonqualified Stock Options Issued					1,250,000								1,250,000
Stock Option Plans Termination													Jul. 14, 2010
Plan 1995 [Member]
Stock Option Plan Expiration Date													Mar. 15, 2010
Number Of Options Outstanding, Granted													3,925,000
Number Of Options Outstanding					165,199								165,199
Plan 2008 [Member]
Number Of Options Outstanding, Granted													1,916,556
Number Of Options Outstanding					2,776,139								2,776,139
Sales of stock, net of issuance cost (in shares)													7,196,250
Employee Stock Purchase Plans 2005 [Member]
Stock Issued During Period, Shares, Employee Stock Purchase Plans													54,171	58,230	30,249
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized					250,000								250,000

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Income Taxes (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Unrecognized Tax Benefits	$ 6,368,000	$ 6,283,000	$ 6,303,000
Unrecognized Tax Benefits, Income Tax Penalties Expense	100,000	100,000	100,000
Valuation Allowance, Amount	233,500,000
Additional Paid in Capital	4,700,000
Deferred Tax Assets, Operating Loss Carryforwards, Foreign	513,700,000
Research and development and other credits	20,807,000	20,962,000
Net operating loss carry-forwards	195,105,000	188,147,000
Potential Tax Benefits	500,000
Federal Income Tax [Member]
Research and development and other credits	20,800,000
Operating Loss Carryforwards, Expiration Dates	expiring in varying amounts from 2012 through 2032.
State Income Tax [Member]
Research and development and other credits	7,800,000
Operating Loss Carryforwards, Expiration Dates	expiring in varying amounts from 2012 to 2032.
Deferred Tax Assets, Operating Loss Carryforwards, Domestic	197,300,000
Federal Juridiction [Member]
Net operating loss carry-forwards	$ 39,300,000

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Work-in-process and raw materials	$ 346	$ 488
Finished goods	402	1,500
Total inventories	$ 748	$ 1,988

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Business and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2012

Accounting Policies [Abstract]

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]

Note 1.    Business and Summary of Significant Accounting Policies

Description of Business

TranSwitch Corporation was incorporated in Delaware on April 26, 1988 and is headquartered in Shelton, Connecticut. TranSwitch Corporation and its subsidiaries (collectively, “TranSwitch” or the “Company”) provides innovative integrated circuit (IC) and intellectual property (IP) solutions that deliver core functionality for video, voice, and data communications equipment for the customer premises and network infrastructure markets. For the customer premises market, the Company offers multi-standard, high-speed interconnect solutions enabling the distribution and presentation of high-definition (HD) video and data content for consumer electronics applications. High-speed interconnect solutions include HDMI, DisplayPort and Ethernet IP cores and our recently introduced product family HDplay, which incorporates our proprietary HDP technology. The Company’s HDP technology combines HDMI 1.4 and DisplayPort 1.1 and supports either standard with a single connector. The applications for this product include projectors, AVR systems, HDTVs, video distribution systems and monitors. The Company’s interoperable connectivity solutions are sold to original equipment manufacturers (OEMs) and original design manufacturers (ODMs) for use in consumer electronics and our licensees have included Samsung, Intel, Texas Instruments, NEC, and many others. For the network infrastructure market, the Company provides integrated multi-core network processor system-on-a-chip solutions for fixed, 3G and 4G mobile, VoIP and multimedia applications. Network infrastructure processing equipment includes multi-media processing engines to address multiple carrier segments such as wireline and wireless gateways, session border controllers, media resource functions, multi-service access nodes, passive optical network multi-dwelling units and translation gateways. Enterprise applications include VoIP private branch exchanges. Communication network premises equipment includes IP multimedia subsystem and Voice over LTE capable 4G/LTE fixed wireless gateways, residential gateway routers, small office, home office routers and secure VoIP private branch exchanges.

Principles of Consolidation

The consolidated financial statements include the accounts of TranSwitch Corporation and its subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the period reported. Actual results could differ from those estimates. Estimates relate to uncollectable accounts receivable, excess or slow-moving or obsolete inventories, impairment of assets, product warranty allowances, depreciation and amortization, income taxes, sales returns and allowances, stock rotation allowances and contingencies. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.

Liquidity

 The Company has incurred significant operating losses and has used cash in its operating activities for the past several years. Operating losses have resulted from inadequate sales levels for the cost structure. As of December 31, 2012, the Company had negative working capital of approximately $6.3 million. Included in negative working capital, the Company has outstanding indebtedness to Bridge Bank under its credit facility of $2.4 million ($1.7 million at March 18, 2013). The Bridge Bank credit facility matures on April 4, 2013, and we are in discussions with them about extending this facility. We are currently not in compliance with the asset coverage ratio covenant in the facility and we are discussing with them an agreement pursuant to which they would agree to forbear from exercising its rights in the event of default, which rights include the accelerating the repayment of our indebtedness. Although we are in discussions with Bridge Bank about extending the facility, we cannot assure you that we will be able to extend or renew our credit facility on terms reasonably acceptable to us or at all. In the future, if we are unable to maintain our compliance or obtain a waiver of our noncompliance with this covenant or others, Bridge Bank could accelerate our indebtedness, which could impair our ability to continue to conduct our business. If our indebtedness is accelerated in full or in part, it would be very difficult in the current financing environment for us to refinance our debt or obtain additional financing, which could adversely affect our ability to continue our business.

Our current forecast projects that, absent an infusion of capital, we will be unable to meet our current obligations through December 31, 2013. These conditions raise substantial doubt about our ability to continue as a going concern. Consequently, the audit report prepared by our independent registered public accounting firm relating to our financial statements for the year ended December 31, 2012 includes an explanatory paragraph expressing the substantial doubt about our ability to continue as a going concern. If we are unable to generate sufficient cash flows from operations to meet our anticipated needs for working capital and capital expenditures, we may need to raise additional funds. Such capital may not be available on terms favorable or acceptable to us, if at all. If we raise additional funds through the issuance of equity securities, our stockholders may experience dilution of their ownership interest, and the newly issued securities may have rights superior to those of our common stock.

On December 4, 2012, we received a letter from Nasdaq (the “Minimum Bid Price Notice”) notifying us that the closing bid price of our common stock was below the $1.00 minimum bid price requirement for 30 consecutive business days and, as a result, the Company no longer complied with the minimum bid price requirement under Listing Rule 5550(a)(2) for continued listing on Nasdaq. The Minimum Bid Price Notice also stated that we have been provided an initial compliance period of 180 calendar days, or until June 3, 2013, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days prior to June 3, 2013. If we do not regain compliance by June 3, 2013, Nasdaq will provide notice to us that our securities will be subject to delisting.

On February 26, 2013, we received a letter from Nasdaq (the “Stockholders’ Equity Notice”) notifying us that we were no longer in compliance with the minimum stockholders’ equity requirement of at least $2.5 million for continued listing on Nasdaq. The Stockholders’ Equity Notice does not result in the immediate delisting of our common stock from Nasdaq. Rather, under the Nasdaq Listing Rules, we have 45 calendar days from the date of the Stockholders’ Equity Notice to submit to Nasdaq a plan to regain compliance. If the plan is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the Stockholders’ Equity Notice for us to evidence compliance. If we submit a plan, Nasdaq will determine whether to accept the plan, considering such criteria as the likelihood that the plan will result in compliance with Nasdaq’s continued listing criteria, our past compliance history, the reasons for our current non-compliance, other corporate events that may occur within the review period, our overall financial condition and our public disclosures. If Nasdaq does not accept the plan, we will have the opportunity to appeal that decision to a Hearings Panel.

If we are delisted and cannot obtain listing on another major market or exchange, our stock’s liquidity would suffer, and we would likely experience reduced investor interest. Such factors may result in a decrease in our stock’s trading price. In addition, the failure to trade on a national securities exchange may hinder our efforts to obtain financing.

In July of 2012, the Company announced a restructuring which primarily affected the telecom product unit and is expected to save $8.0 million in annual operating costs (see Note 15, Restructuring Charges). With this restructuring, the Company has cancelled all development programs related to its telecom product lines. The Company has redeployed all of its remaining research and development resources to focus on its interoperable connectivity solutions for consumer electronic and personal computer markets.  The Company has also announced its intentions to sell its non-strategic assets. In 2012, the Company announced that it retained a leading patent broker to sell its telecom related patent portfolio. The Company also effectuated restructurings in the first and third quarters of 2011. The Company continues to assess its cost structure in relationship to its revenue levels, which may necessitate further expense reductions.

As with any operating plan, there are risks associated with the Company’s ability to execute it, including the current economic environment in which it operates. Therefore, there can be no assurance that the Company will be able to satisfy its obligations, or achieve the operating improvements as contemplated by the current operating plan. If the Company is unable to execute this plan, it will need to find additional sources of cash not contemplated by the current operating plan and/or raise additional capital to sustain continuing operations as currently contemplated. There can be no assurance that the additional funding sources will be available to the Company at favorable rates or at all. If the Company cannot maintain compliance with its covenant requirements on its bank financing facility or cannot obtain appropriate waivers and modifications, the lenders may call the debt. If the debt is called, the Company would need to obtain new financing and there can be no assurance that the Company will be able to do so. If the Company is unable to achieve its operating plan and maintain compliance with its loan covenants and its debt is called, the Company will not be able to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Cash, Cash Equivalents and Investments

All highly liquid investments with an original maturity of three months or less when purchased are considered cash equivalents. Cash equivalents consist of money market funds as of December 31, 2012 and 2011. The majority of the Company’s cash and cash equivalents balances are maintained with a limited number of major financial institutions. Cash and cash equivalents balances at institutions may, at times, be above the Federal Deposit Insurance Corporation insured limit of $0.25 million per account.

Short-term investments as of December 31, 2011 consisted of government bonds and corporate debt securities which were all due within one year. Such investments were classified as held-to-maturity. Held-to-maturity securities are those securities which the Company has both the ability and intent to hold to maturity. Held-to-maturity securities are stated at amortized cost. Amortized cost and accrued interest as of December 31, 2011 approximate market value.

Fair Value of Financial Instruments

The carrying amounts for cash and cash equivalents, short-term investments, accounts receivable, and accounts payable approximate fair value. The fair value of investments in non-publicly traded companies is not readily determinable. 

Accounts Receivables and Allowance for Doubtful Accounts

The Company records allowances for doubtful accounts for estimated losses based upon specifically identified amounts that it believes to be uncollectible along with the Company’s assessment of the general financial condition of its customer base. If the Company’s actual collections experience changes, revisions to its allowances may be required. The Company has a limited number of customers with individually large amounts due at any given balance sheet date. Any unanticipated change in the creditworthiness of such customers or other matters affecting the collectability of amounts due from such customers could have a material effect on the Company’s results of operations in the period in which such changes or events occur.

Inventories

Inventories are carried at the lower of cost (determined on a weighted-average cost basis) or estimated net realizable value. The Company provides inventory allowances on obsolete inventories and inventories in excess of expected demand for each specific part. The valuation of inventories requires the use of estimates as to the amounts of current inventories that will be sold. These estimates are dependent on the Company’s assessment of current and expected orders from its customers, and orders generally are subject to cancellation with limited advance notice prior to shipment.

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation and amortization. Any gain or loss resulting from sale or retirement is included in the consolidated statement of operations. Repairs and maintenance are expensed as incurred while renewals and betterments are capitalized.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of the business acquired. The Company reviews goodwill for potential impairment at least annually.

Other Intangible Assets

Other intangible assets consist of purchased customer relationships and developed technology and are stated at cost, less accumulated amortization. Customer relationships and developed technology are being amortized by the straight line method over their estimated economic useful lives ranging from five to ten years.

Deferred Financing Costs

Deferred financing costs are being amortized using the interest method over the term of the related debt. Unamortized deferred financing fees were less than $0.1 million as of December 31, 2012 and 2011, respectively. Amortization, included in the consolidated statement of operations as a component of interest expense, was less than $0.1 million, $0.1 million, and $0.2 million for 2012, 2011 and 2010, respectively.

Impairment of Intangibles and Long-Lived Assets

The Company reviews long-lived and intangible assets (including goodwill) for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. When factors indicate that a long-lived asset should be evaluated for possible impairment, an estimate of the related asset’s undiscounted future cash flows over the remaining life of the asset is made to measure whether the carrying value is recoverable. Any impairment is measured based upon the excess of the carrying value of the asset over its estimated fair value which is generally based on an estimate of future discounted cash flows. A significant amount of management judgment is used in estimating future discounted cash flows. During the fourth quarter of 2012 and 2011, impairment testing for certain purchased customer relationships and developed technology was performed by the Company and indicated that the undiscounted future cash flows of the mentioned intangible assets were less than its corresponding carrying amount. As a result of the analyses performed, the Company measured and recorded an impairment of these intangible assets of $0.6 million and $5.4 million in 2012 and 2011, respectively. The 2012 and 2011 impairments involved purchased customer relationships and developed technology related to a business acquisition in 2008. There were no impairment charges in 2010.

The Company’s impairment review of goodwill was performed using a fair-value method and discounted cash flow models with estimated cash flows based on internal forecasts which included terminal values based on current market valuation metrics. The fair value represents the amount at which a reporting unit could be bought or sold in a current transaction between willing parties on an arms-length basis. In estimating fair value, the Company used its common stock’s market price to determine fair value and other valuation metrics. In addition, the Company performed discounted cash flow analysis on the reporting units to determine fair value. There were no impairment charges in 2012 or 2010. During the fourth quarter of 2011, impairment testing performed by the Company indicated that the estimated fair value of the reporting unit tested was less than its corresponding carrying amount. As a result of the analyses performed, the Company recorded goodwill impairment charges of $8.9 million in 2011. The 2011 impairment involved goodwill related to a business acquisition in 2008.

Investments in Non-Publicly Traded Companies

The Company has minority investments in certain non-publicly traded companies. Depending on the Company’s level of ownership and whether or not the Company has the ability to exercise significant influence, these investments are accounted for by either the cost or equity method. All such investments as of December 31, 2012 and 2011 are accounted for by the cost method. These investments are reviewed periodically for impairment.

Revenue Recognition

Net revenues from product sales are recognized at the time of product shipment when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) ownership and risk of loss transfers to the customer; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured.

Revenues from distributors can be recognized when: (1) the prices are fixed at the date of shipment from the Company’s facilities; (2) payment is not contractually or otherwise excused until the product is resold; (3) the Company does not have any obligations for future performance relating to the resale of the product; and (4) the amount of future returns, allowances, refunds and costs to be incurred can be reasonably estimated and are accrued at the time of shipment. Agreements with certain distributors provide price protection and return and allowance rights.

At the time of shipment to distributors, the Company records a reduction to revenue (with a related liability) to accrue for future price protection. This liability is established based on historical experience, contractually agreed-to provisions and future shipment forecasts. Such accruals have been insignificant for the last three years.

The Company also accrues, at the time of shipment, a reduction to revenue (with a related liability) and an inventory asset against product cost of revenues in order to establish a provision for the gross margin related to future returns under the Company’s distributor stock rotation program. Such accruals related to reductions of revenue were $0.3 million, $0.4 million and $0.8 million at December 31, 2012, 2011 and 2010, respectively. The accruals related to inventory assets are insignificant to the Company’s financial position and results of operations for all periods presented. Should actual experience differ from estimated liabilities, there could be adjustments (either favorable or unfavorable) to the Company’s net revenues, cost of revenues and gross profits.

Service revenues are recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) services have been performed in accordance with the contractual obligations; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured.

The Company licenses connectivity solutions, including HDMI, DisplayPort and Ethernet IP Cores. Revenues from licensing arrangements generally consist of multiple elements such as license, implementation and maintenance services. The items (deliverables) included in the arrangement are evaluated to determine whether they represent separate units of accounting. The Company performs this evaluation at the inception of an arrangement and as the Company delivers each item in the arrangement.

Generally, the Company accounts for a deliverable (or a group of deliverables) separately if (1) the delivered item(s) has standalone value to the customer, (2) there is objective and reliable evidence of the fair value of the undelivered items included in the arrangement, and (3) if the Company has given the customer a general right of return relative to the delivered items, delivery or performance of the undelivered items or services are probable and substantially in the Company’s control.

The Company recognizes revenue from royalties upon notification of sale by its licensees. The terms of the royalty agreements generally require licensees to give notification to the Company and to pay royalties within 45 days of the end of the quarter during which the sales by its licensees take place.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, and accounts receivable.

Cash and cash equivalents are held by high-quality financial institutions, thereby reducing credit risk concentrations. In addition, the Company limits the amount of credit exposure to any one financial institution.

At December 31, 2012 and 2011, approximately 71% and 59% of accounts receivable were due from five customers. The majority of the Company’s sales are to customers in the telecommunications and data communications industries. The Company performs ongoing credit evaluations of its customers and generally does not require collateral.

Customers that accounted for more than 10% of total accounts receivable at each period end are as follows:

	December 31,  2012			December 31,  2011
Customer A		29	%		*
Customer B		26	%		17	%
Customer C		*			15	%
Customer D		*			10	%

* Accounts receivable due were less than 10% of the Company’s total accounts receivable.

Supplier Concentrations

The Company relies on a limited number of suppliers for wafer fabrication capacity. One outside wafer foundry supplied a substantial amount of our total semiconductor wafer requirements. Although the Company would likely be able to find alternative manufacturing sources, the Company would experience substantial delays or interruptions in the shipment of products if this supplier were to cease operations.

Operating Leases

The Company recognizes rent expense on a straight-line basis over the term of the lease. The difference between rent expense and rent paid is recorded as deferred rent and is included in accrued expenses in our consolidated balance sheets.

Product Warranties

The Company provides warranties on its products for up to one year from the date of shipment. A liability is recorded for estimated costs to be incurred under product warranties, which is based on various inputs including historical experience. Estimated warranty expense is recorded as cost of revenues as products are shipped. Product warranty costs are nominal for all periods presented.

Research and Development Costs

Research and development costs are expensed as incurred.

Income Taxes

Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carry forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to the extent that it is more likely than not that the Company will not be able to utilize deferred income tax assets in the future.

The Company is required to make a determination of any of its tax positions (federal and state) for which the sustainability of the position, based upon the technical merits, is uncertain. The Company regularly evaluates all tax positions taken and the likelihood of those positions being sustained. If management is highly confident that the position will be allowed and there is a greater than 50% likelihood that the full amount of the tax position will be ultimately realized, the company recognizes the full benefit associated with the tax position. Additionally, interest and penalties related to uncertain tax positions are included as a component of income tax expense.

Stock-Based Compensation

The Company recognizes share-based compensation expense for the fair value of the awards on the date granted on a straight-line basis over their vesting term.

Compensation expense is recognized only for share-based payments expected to vest. The Company estimates forfeitures at the date of grant based on the Company’s historical experience and future expectations.

As of December 31, 2012, the unrecognized stock-based compensation cost related to non-vested option awards was $0.02 million and such amount will be recognized in operations over a weighted average period of 1.18 years. As of December 31, 2012, the unrecognized stock-based compensation cost related to non-vested stock awards was $1.8 million and such amount will be recognized in operations over a weighted average period of 2.17 years.

Stock compensation charged to operations was $2.4 million in 2012, $2.5 million in 2011and $2.4 million in 2010.

Loss Per Common Share

The basic and diluted loss per common share amount is based upon the weighted average common shares outstanding during the periods presented. All “in-the-money” stock options and shares issuable upon the conversion of the 5.45% Convertible Notes due 2010 and the 5.45% Convertible Notes due 2011 were anti-dilutive. 

Foreign Currency Translation

Substantially all foreign subsidiaries use their local currency as their functional currency. Therefore, assets and liabilities of foreign subsidiaries are translated at exchange rates in effect at the balance sheet date and revenue and expense accounts are translated at average exchange rates during the year. The resulting translation adjustments are recorded in accumulated other comprehensive (loss) income. Translation gains and losses related to monetary assets and liabilities denominated in a currency different from a subsidiary’s functional currency are included in the consolidated statements of operations.

Subsequent Events

Subsequent events have been evaluated through the date the accompanying consolidated financial statements were issued.

Recent Accounting Pronouncements

The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. In the case where it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial reporting, and assures that there are proper controls in place to ascertain that the Company’s financials properly reflect the change. New pronouncements assessed by the Company are discussed below:

The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its consolidated financial statements.

XML

Stockholder Rights Plan (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2011
Preferred Stock, Par or Stated Value Per Share	$ 0.001
Sale Price Of Preferred Stock	$ 20.00
Percentage Of Common Stock Acquisition	15.00%
Stockholders Right Expiration Date	May 15, 2015

XML

Business and Summary of Significant Accounting Policies (Details Textual) (USD $)	1 Months Ended	3 Months Ended								12 Months Ended
	Jul. 31, 2012	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011		Dec. 31, 2010	Mar. 18, 2013	Feb. 26, 2013
Working Capital Deficit		$ 6,300,000								$ 6,300,000
Aggregate Indebtedness		2,400,000								2,400,000				1,700,000
Line of Credit Facility, Expiration Date										Apr. 04, 2013
Savings In Operating Costs Due To Restructuring	8,000,000
Federal Deposit Insurance Corporation Insurance Limit										250,000
Unamortized Deferred Financing Fees										100,000	100,000
Interest expense										100,000	100,000		200,000
Impairment Of Intangible Assets and Long Lived Assets										600,000	5,400,000		0
Impairment of goodwill(1)										0	8,873,000	[1]
Accruals Of Reduction In Revenue										300,000	400,000		800,000
Percentage Of Accounts Receivable Due From Customers		71.00%				59.00%				71.00%	59.00%
Percentage Of Accounts Receivable Due Total						10.00%					10.00%
Income Tax Examination, Description										If management is highly confident that the position will be allowed and there is a greater than 50% likelihood that the full amount of the tax position will be ultimately realized, the company recognizes the full benefit associated with the tax position.
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Stock Options		20,000				1,800,000				20,000	1,800,000
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition										1 year 2 months 5 days	2 years 2 months 1 day
Stock-based compensation expense		700,000	500,000	400,000	500,000	700,000	700,000	600,000	500,000	2,137,000	2,474,000		2,358,000
Convertible Notes Interest Percentage						5.45%					5.45%		5.45%
Finite-Lived Intangible Assets, Amortization Method										straight line method
Common Stock Bid Price Description										we received a letter from Nasdaq (the Minimum Bid Price Notice) notifying us that the closing bid price of our common stock was below the $1.00 minimum bid price requirement for 30 consecutive business days and, as a result, the Company no longer complied with the minimum bid price requirement under Listing Rule 5550(a)(2) for continued listing on Nasdaq. The Minimum Bid Price Notice also stated that we have been provided an initial compliance period of 180 calendar days, or until June 3, 2013, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days prior to June 3, 2013
Minimum Net Capital Required															$ 2,500,000
Royalty Agreements [Member]
Royalty Payment Term										45 days
Maximum [Member]
Finite-Lived Intangible Asset, Useful Life										10 years
Minimum [Member]
Finite-Lived Intangible Asset, Useful Life										5 years

[1] During the fourth quarter of 2011, impairment testing performed by the Company indicated that the estimated fair value of the reporting unit tested was less than its corresponding carrying amount. As a result, the Company recorded a goodwill impairment charge of $8.9 million.

XML

Business and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2012

Accounting Policies [Abstract]

Business Description and Basis of Presentation [Text Block]

Description of Business

TranSwitch Corporation was incorporated in Delaware on April 26, 1988 and is headquartered in Shelton, Connecticut. TranSwitch Corporation and its subsidiaries (collectively, “TranSwitch” or the “Company”) provides innovative integrated circuit (IC) and intellectual property (IP) solutions that deliver core functionality for video, voice, and data communications equipment for the customer premises and network infrastructure markets. For the customer premises market, the Company offers multi-standard, high-speed interconnect solutions enabling the distribution and presentation of high-definition (HD) video and data content for consumer electronics applications. High-speed interconnect solutions include HDMI, DisplayPort and Ethernet IP cores and our recently introduced product family HDplay, which incorporates our proprietary HDP technology. The Company’s HDP technology combines HDMI 1.4 and DisplayPort 1.1 and supports either standard with a single connector. The applications for this product include projectors, AVR systems, HDTVs, video distribution systems and monitors. The Company’s interoperable connectivity solutions are sold to original equipment manufacturers (OEMs) and original design manufacturers (ODMs) for use in consumer electronics and our licensees have included Samsung, Intel, Texas Instruments, NEC, and many others. For the network infrastructure market, the Company provides integrated multi-core network processor system-on-a-chip solutions for fixed, 3G and 4G mobile, VoIP and multimedia applications. Network infrastructure processing equipment includes multi-media processing engines to address multiple carrier segments such as wireline and wireless gateways, session border controllers, media resource functions, multi-service access nodes, passive optical network multi-dwelling units and translation gateways. Enterprise applications include VoIP private branch exchanges. Communication network premises equipment includes IP multimedia subsystem and Voice over LTE capable 4G/LTE fixed wireless gateways, residential gateway routers, small office, home office routers and secure VoIP private branch exchanges.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The consolidated financial statements include the accounts of TranSwitch Corporation and its subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the period reported. Actual results could differ from those estimates. Estimates relate to uncollectable accounts receivable, excess or slow-moving or obsolete inventories, impairment of assets, product warranty allowances, depreciation and amortization, income taxes, sales returns and allowances, stock rotation allowances and contingencies. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.

Liquidity Disclosure [Policy Text Block]

Liquidity

 The Company has incurred significant operating losses and has used cash in its operating activities for the past several years. Operating losses have resulted from inadequate sales levels for the cost structure. As of December 31, 2012, the Company had negative working capital of approximately $6.3 million. Included in negative working capital, the Company has outstanding indebtedness to Bridge Bank under its credit facility of $2.4 million ($1.7 million at March 18, 2013). The Bridge Bank credit facility matures on April 4, 2013, and we are in discussions with them about extending this facility. We are currently not in compliance with the asset coverage ratio covenant in the facility and we are discussing with them an agreement pursuant to which they would agree to forbear from exercising its rights in the event of default, which rights include the accelerating the repayment of our indebtedness. Although we are in discussions with Bridge Bank about extending the facility, we cannot assure you that we will be able to extend or renew our credit facility on terms reasonably acceptable to us or at all. In the future, if we are unable to maintain our compliance or obtain a waiver of our noncompliance with this covenant or others, Bridge Bank could accelerate our indebtedness, which could impair our ability to continue to conduct our business. If our indebtedness is accelerated in full or in part, it would be very difficult in the current financing environment for us to refinance our debt or obtain additional financing, which could adversely affect our ability to continue our business.

Our current forecast projects that, absent an infusion of capital, we will be unable to meet our current obligations through December 31, 2013. These conditions raise substantial doubt about our ability to continue as a going concern. Consequently, the audit report prepared by our independent registered public accounting firm relating to our financial statements for the year ended December 31, 2012 includes an explanatory paragraph expressing the substantial doubt about our ability to continue as a going concern. If we are unable to generate sufficient cash flows from operations to meet our anticipated needs for working capital and capital expenditures, we may need to raise additional funds. Such capital may not be available on terms favorable or acceptable to us, if at all. If we raise additional funds through the issuance of equity securities, our stockholders may experience dilution of their ownership interest, and the newly issued securities may have rights superior to those of our common stock.

On December 4, 2012, we received a letter from Nasdaq (the “Minimum Bid Price Notice”) notifying us that the closing bid price of our common stock was below the $1.00 minimum bid price requirement for 30 consecutive business days and, as a result, the Company no longer complied with the minimum bid price requirement under Listing Rule 5550(a)(2) for continued listing on Nasdaq. The Minimum Bid Price Notice also stated that we have been provided an initial compliance period of 180 calendar days, or until June 3, 2013, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days prior to June 3, 2013. If we do not regain compliance by June 3, 2013, Nasdaq will provide notice to us that our securities will be subject to delisting.

On February 26, 2013, we received a letter from Nasdaq (the “Stockholders’ Equity Notice”) notifying us that we were no longer in compliance with the minimum stockholders’ equity requirement of at least $2.5 million for continued listing on Nasdaq. The Stockholders’ Equity Notice does not result in the immediate delisting of our common stock from Nasdaq. Rather, under the Nasdaq Listing Rules, we have 45 calendar days from the date of the Stockholders’ Equity Notice to submit to Nasdaq a plan to regain compliance. If the plan is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the Stockholders’ Equity Notice for us to evidence compliance. If we submit a plan, Nasdaq will determine whether to accept the plan, considering such criteria as the likelihood that the plan will result in compliance with Nasdaq’s continued listing criteria, our past compliance history, the reasons for our current non-compliance, other corporate events that may occur within the review period, our overall financial condition and our public disclosures. If Nasdaq does not accept the plan, we will have the opportunity to appeal that decision to a Hearings Panel.

If we are delisted and cannot obtain listing on another major market or exchange, our stock’s liquidity would suffer, and we would likely experience reduced investor interest. Such factors may result in a decrease in our stock’s trading price. In addition, the failure to trade on a national securities exchange may hinder our efforts to obtain financing.

In July of 2012, the Company announced a restructuring which primarily affected the telecom product unit and is expected to save $8.0 million in annual operating costs (see Note 15, Restructuring Charges). With this restructuring, the Company has cancelled all development programs related to its telecom product lines. The Company has redeployed all of its remaining research and development resources to focus on its interoperable connectivity solutions for consumer electronic and personal computer markets.  The Company has also announced its intentions to sell its non-strategic assets. In 2012, the Company announced that it retained a leading patent broker to sell its telecom related patent portfolio. The Company also effectuated restructurings in the first and third quarters of 2011. The Company continues to assess its cost structure in relationship to its revenue levels, which may necessitate further expense reductions.

As with any operating plan, there are risks associated with the Company’s ability to execute it, including the current economic environment in which it operates. Therefore, there can be no assurance that the Company will be able to satisfy its obligations, or achieve the operating improvements as contemplated by the current operating plan. If the Company is unable to execute this plan, it will need to find additional sources of cash not contemplated by the current operating plan and/or raise additional capital to sustain continuing operations as currently contemplated. There can be no assurance that the additional funding sources will be available to the Company at favorable rates or at all. If the Company cannot maintain compliance with its covenant requirements on its bank financing facility or cannot obtain appropriate waivers and modifications, the lenders may call the debt. If the debt is called, the Company would need to obtain new financing and there can be no assurance that the Company will be able to do so. If the Company is unable to achieve its operating plan and maintain compliance with its loan covenants and its debt is called, the Company will not be able to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Cash, Cash Equivalents and Investments [Policy Text Block]

Cash, Cash Equivalents and Investments

All highly liquid investments with an original maturity of three months or less when purchased are considered cash equivalents. Cash equivalents consist of money market funds as of December 31, 2012 and 2011. The majority of the Company’s cash and cash equivalents balances are maintained with a limited number of major financial institutions. Cash and cash equivalents balances at institutions may, at times, be above the Federal Deposit Insurance Corporation insured limit of $0.25 million per account.

Short-term investments as of December 31, 2011 consisted of government bonds and corporate debt securities which were all due within one year. Such investments were classified as held-to-maturity. Held-to-maturity securities are those securities which the Company has both the ability and intent to hold to maturity. Held-to-maturity securities are stated at amortized cost. Amortized cost and accrued interest as of December 31, 2011 approximate market value.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

The carrying amounts for cash and cash equivalents, short-term investments, accounts receivable, and accounts payable approximate fair value. The fair value of investments in non-publicly traded companies is not readily determinable.

Receivables, Trade and Other Accounts Receivable, Allowance for Doubtful Accounts, [Policy Text Block]

Accounts Receivables and Allowance for Doubtful Accounts

The Company records allowances for doubtful accounts for estimated losses based upon specifically identified amounts that it believes to be uncollectible along with the Company’s assessment of the general financial condition of its customer base. If the Company’s actual collections experience changes, revisions to its allowances may be required. The Company has a limited number of customers with individually large amounts due at any given balance sheet date. Any unanticipated change in the creditworthiness of such customers or other matters affecting the collectability of amounts due from such customers could have a material effect on the Company’s results of operations in the period in which such changes or events occur.

Inventory, Policy [Policy Text Block]

Inventories

Inventories are carried at the lower of cost (determined on a weighted-average cost basis) or estimated net realizable value. The Company provides inventory allowances on obsolete inventories and inventories in excess of expected demand for each specific part. The valuation of inventories requires the use of estimates as to the amounts of current inventories that will be sold. These estimates are dependent on the Company’s assessment of current and expected orders from its customers, and orders generally are subject to cancellation with limited advance notice prior to shipment.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation and amortization. Any gain or loss resulting from sale or retirement is included in the consolidated statement of operations. Repairs and maintenance are expensed as incurred while renewals and betterments are capitalized.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of the business acquired. The Company reviews goodwill for potential impairment at least annually.

Other Intangible Assets [Policy Text Block]

Other Intangible Assets

Other intangible assets consist of purchased customer relationships and developed technology and are stated at cost, less accumulated amortization. Customer relationships and developed technology are being amortized by the straight line method over their estimated economic useful lives ranging from five to ten years.

Deferred Financing Costs [Policy Text Block]

Deferred Financing Costs

Deferred financing costs are being amortized using the interest method over the term of the related debt. Unamortized deferred financing fees were less than $0.1 million as of December 31, 2012 and 2011, respectively. Amortization, included in the consolidated statement of operations as a component of interest expense, was less than $0.1 million, $0.1 million, and $0.2 million for 2012, 2011 and 2010, respectively.

Impairment or Disposal of Long-Lived Assets, Including Intangible Assets, Policy [Policy Text Block]

Impairment of Intangibles and Long-Lived Assets

The Company reviews long-lived and intangible assets (including goodwill) for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. When factors indicate that a long-lived asset should be evaluated for possible impairment, an estimate of the related asset’s undiscounted future cash flows over the remaining life of the asset is made to measure whether the carrying value is recoverable. Any impairment is measured based upon the excess of the carrying value of the asset over its estimated fair value which is generally based on an estimate of future discounted cash flows. A significant amount of management judgment is used in estimating future discounted cash flows. During the fourth quarter of 2012 and 2011, impairment testing for certain purchased customer relationships and developed technology was performed by the Company and indicated that the undiscounted future cash flows of the mentioned intangible assets were less than its corresponding carrying amount. As a result of the analyses performed, the Company measured and recorded an impairment of these intangible assets of $0.6 million and $5.4 million in 2012 and 2011, respectively. The 2012 and 2011 impaired purchased customer relationships and developed technology related to a business acquisition in 2008.

The Company’s impairment review of goodwill was performed using a fair-value method and discounted cash flow models with estimated cash flows based on internal forecasts which included terminal values based on current market valuation metrics. The fair value represents the amount at which a reporting unit could be bought or sold in a current transaction between willing parties on an arms-length basis. In estimating fair value, the Company used its common stock’s market price to determine fair value and other valuation metrics. In addition, the Company performed discounted cash flow analysis on the reporting units to determine fair value. There were no impairment charges in 2012 or 2010. During the fourth quarter of 2011, impairment testing performed by the Company indicated that the estimated fair value of the reporting unit tested was less than its corresponding carrying amount. As a result of the analyses performed, the Company recorded goodwill impairment charges of $8.9 million in 2011. The 2011 impaired goodwill related to a business acquisition in 2008.

Cost Method Investments, Policy [Policy Text Block]

Investments in Non-Publicly Traded Companies

The Company has minority investments in certain non-publicly traded companies. Depending on the Company’s level of ownership and whether or not the Company has the ability to exercise significant influence, these investments are accounted for by either the cost or equity method. All such investments as of December 31, 2012 and 2011 are accounted for by the cost method. These investments are reviewed periodically for impairment.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

Net revenues from product sales are recognized at the time of product shipment when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) ownership and risk of loss transfers to the customer; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured.

Revenues from distributors can be recognized when: (1) the prices are fixed at the date of shipment from the Company’s facilities; (2) payment is not contractually or otherwise excused until the product is resold; (3) the Company does not have any obligations for future performance relating to the resale of the product; and (4) the amount of future returns, allowances, refunds and costs to be incurred can be reasonably estimated and are accrued at the time of shipment. Agreements with certain distributors provide price protection and return and allowance rights.

At the time of shipment to distributors, the Company records a reduction to revenue (with a related liability) to accrue for future price protection. This liability is established based on historical experience, contractually agreed-to provisions and future shipment forecasts. Such accruals have been insignificant for the last three years.

The Company also accrues, at the time of shipment, a reduction to revenue (with a related liability) and an inventory asset against product cost of revenues in order to establish a provision for the gross margin related to future returns under the Company’s distributor stock rotation program. Such accruals related to reductions of revenue were $0.3 million, $0.4 million and $0.8 million at December 31, 2012, 2011 and 2010, respectively. The accruals related to inventory assets are insignificant to the Company’s financial position and results of operations for all periods presented. Should actual experience differ from estimated liabilities, there could be adjustments (either favorable or unfavorable) to the Company’s net revenues, cost of revenues and gross profits.

Service revenues are recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) services have been performed in accordance with the contractual obligations; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured.

The Company licenses connectivity solutions, including HDMI, DisplayPort and Ethernet IP Cores. Revenues from licensing arrangements generally consist of multiple elements such as license, implementation and maintenance services. The items (deliverables) included in the arrangement are evaluated to determine whether they represent separate units of accounting. The Company performs this evaluation at the inception of an arrangement and as the Company delivers each item in the arrangement.

Generally, the Company accounts for a deliverable (or a group of deliverables) separately if (1) the delivered item(s) has standalone value to the customer, (2) there is objective and reliable evidence of the fair value of the undelivered items included in the arrangement, and (3) if the Company has given the customer a general right of return relative to the delivered items, delivery or performance of the undelivered items or services are probable and substantially in the Company’s control.

The Company recognizes revenue from royalties upon notification of sale by its licensees. The terms of the royalty agreements generally require licensees to give notification to the Company and to pay royalties within 45 days of the end of the quarter during which the sales by its licensees take place.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, and accounts receivable.

Cash and cash equivalents are held by high-quality financial institutions, thereby reducing credit risk concentrations. In addition, the Company limits the amount of credit exposure to any one financial institution.

At December 31, 2012 and 2011, approximately 71% and 59% of accounts receivable were due from five customers. The majority of the Company’s sales are to customers in the telecommunications and data communications industries. The Company performs ongoing credit evaluations of its customers and generally does not require collateral.

Customers that accounted for more than 10% of total accounts receivable at each period end are as follows:

	December 31,  2012			December 31,  2011
Customer A		29	%		*
Customer B		26	%		17	%
Customer C		*			15	%
Customer D		*			10	%

* Accounts receivable due were less than 10% of the Company’s total accounts receivable.

Supplier Concentrations [Policy Text Block]

Supplier Concentrations

The Company relies on a limited number of suppliers for wafer fabrication capacity. One outside wafer foundry supplied a substantial amount of our total semiconductor wafer requirements. Although the Company would likely be able to find alternative manufacturing sources, the Company would experience substantial delays or interruptions in the shipment of products if this supplier were to cease operations.

Operating Lease [Policy Text Block]

Operating Leases

The Company recognizes rent expense on a straight-line basis over the term of the lease. The difference between rent expense and rent paid is recorded as deferred rent and is included in accrued expenses in our consolidated balance sheets.

Standard Product Warranty, Policy [Policy Text Block]

Product Warranties

The Company provides warranties on its products for up to one year from the date of shipment. A liability is recorded for estimated costs to be incurred under product warranties, which is based on various inputs including historical experience. Estimated warranty expense is recorded as cost of revenues as products are shipped. Product warranty costs are nominal for all periods presented.

Research and Development Expense, Policy [Policy Text Block]

Research and Development Costs

Research and development costs are expensed as incurred.

Income Tax, Policy [Policy Text Block]

Income Taxes

Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carry forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to the extent that it is more likely than not that the Company will not be able to utilize deferred income tax assets in the future.

The Company is required to make a determination of any of its tax positions (federal and state) for which the sustainability of the position, based upon the technical merits, is uncertain. The Company regularly evaluates all tax positions taken and the likelihood of those positions being sustained. If management is highly confident that the position will be allowed and there is a greater than 50% likelihood that the full amount of the tax position will be ultimately realized, the company recognizes the full benefit associated with the tax position. Additionally, interest and penalties related to uncertain tax positions are included as a component of income tax expense.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation

The Company recognizes share-based compensation expense for the fair value of the awards on the date granted on a straight-line basis over their vesting term.

Compensation expense is recognized only for share-based payments expected to vest. The Company estimates forfeitures at the date of grant based on the Company’s historical experience and future expectations.

As of December 31, 2012, the unrecognized stock-based compensation cost related to non-vested option awards was $0.02 million and such amount will be recognized in operations over a weighted average period of 1.18 years. As of December 31, 2012, the unrecognized stock-based compensation cost related to non-vested stock awards was $1.8 million and such amount will be recognized in operations over a weighted average period of 2.17 years.

Stock compensation charged to operations was $2.4 million in 2012, $2.5 million in 2011and $2.4 million in 2010.

Earnings Per Share, Policy [Policy Text Block]

Loss Per Common Share

The basic and diluted loss per common share amount is based upon the weighted average common shares outstanding during the periods presented. All “in-the-money” stock options and shares issuable upon the conversion of the 5.45% Convertible Notes due 2010 and the 5.45% Convertible Notes due 2011 were anti-dilutive. 

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency Translation

Substantially all foreign subsidiaries use their local currency as their functional currency. Therefore, assets and liabilities of foreign subsidiaries are translated at exchange rates in effect at the balance sheet date and revenue and expense accounts are translated at average exchange rates during the year. The resulting translation adjustments are recorded in accumulated other comprehensive (loss) income. Translation gains and losses related to monetary assets and liabilities denominated in a currency different from a subsidiary’s functional currency are included in the consolidated statements of operations.

Subsequent Events, Policy [Policy Text Block]

Subsequent Events

Subsequent events have been evaluated through the date the accompanying consolidated financial statements were issued.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. In the case where it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial reporting, and assures that there are proper controls in place to ascertain that the Company’s financials properly reflect the change. New pronouncements assessed by the Company are discussed below:

The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its consolidated financial statements.

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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

12 Months Ended

Dec. 31, 2012

Valuation and Qualifying Accounts [Abstract]

Schedule of Valuation and Qualifying Accounts Disclosure [Text Block]

SCHEDULE II

TRANSWITCH CORPORATION

VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

			Additions
Description	Balance at Beginning of Year		Charges to Costs and Expenses			Charges to Other Accounts			Deductions			Balance at End of Year
Year Ended December 31, 2012:
Allowance for losses on:
Accounts receivable	$	207	$	—		$	(21	)	$	—		$	186
Sales returns and allowances		175		—			(37	)		(43	)		95
Stock rotation		438		—			—			(144	)		294
Deferred income tax assets valuation allowance		226,254		7,272			—			—			233,526
	$	227,074	$	7,272		$	(58	)	$	(187	)	$	234,101
Year ended December 31, 2011:
Allowance for losses on:
Accounts receivable	$	336	$	(129	)	$	—		$	—		$	207
Sales returns and allowances		281		(39	)		(16	)		(51	)		175
Stock rotation		771		—			—			(333	)		438
Deferred income tax assets valuation allowance		227,498		(1,244	)		—			—			226,254
	$	228,886	$	(1,412	)	$	(16	)	$	(384	)	$	227,074
Year ended December 31, 2010:
Allowance for losses on:
Accounts receivable	$	516	$	(20	)	$	—		$	(160	)	$	336
Sales returns and allowances		149		82			50			—			281
Stock rotation		611		585			—			(425	)		771
Deferred income tax assets valuation allowance		221,207		6,291			—			—			227,498
	$	222,483	$	6,938		$	50		$	(585	)	$	228,886

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Segment and Major Customer Information (Details Textual)	Dec. 31, 2012
Sales Revenue, Goods, Net, Percentage	10.00%

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Fair Value Measurements (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Short Term Investments Fair Value	$ 0	$ 2,000,000
Fair Value Measurements Valuation Techniques	Level 2 valuation technique

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Business and Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2012

Accounting Policies [Abstract]

Schedules of Concentration of Risk, by Risk Factor [Table Text Block]

Customers that accounted for more than 10% of total accounts receivable at each period end are as follows:

	December 31,  2012			December 31,  2011
Customer A		29	%		*
Customer B		26	%		17	%
Customer C		*			15	%
Customer D		*			10	%

* Accounts receivable due were less than 10% of the Company’s total accounts receivable.

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Inventories (Tables)

12 Months Ended

Dec. 31, 2012

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

The components of inventories follow:

	December 31,
	2012		2011
Work-in-process and raw materials	$	346	$	488
Finished goods		402		1,500
Total inventories	$	748	$	1,988

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CONSOLIDATED STATEMENTS OF CASH FLOWS [Parenthetical]	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Interest rate on convertible notes, current portion	5.45%	5.45%

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Property and Equipment, Net (Tables)

12 Months Ended

Dec. 31, 2012

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

The components of property and equipment follow:

	Estimated	December 31,
	Useful Lives	2012			2011
Purchased computer software	1-3 years	$	8,087		$	8,107
Computers and equipment	3-7 years		8,009			7,808
Furniture	3-7 years		701			696
Leasehold improvements	Lease term*		559			679
Gross property and equipment			17,356			17,290
Accumulated depreciation and amortization			(16,245	)		(15,935	)
Property and equipment, net		$	1,111		$	1,355

* Estimated useful life of improvement if shorter.

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Supplemental Cash Flow Information (Tables)

12 Months Ended

Dec. 31, 2012

Supplemental Cash Flow Information [Abstract]

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

Supplemental cash flow information follows:	Years Ended December 31,
	2012		2011		2010
Cash paid for interest	$	68	$	124	$	460
Cash paid for income taxes	$	237	$	234	$	218

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Accrued Expenses and Other Current Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Accrued and other current liabilities	$ 3,310	$ 3,162
Accrued royalties	1,453	2,536
Accrued compensation and benefits	3,059	2,813
Restructuring liabilities	2,016	1,995
Deferred revenue	425	149
Total accrued expenses and other current liabilities	$ 10,263	$ 10,655

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Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Operating Commitments [Member]
2013	$ 3,431
2014	3,138
2015	2,848
2016	2,824
2017	1,268
Thereafter	0
Operating Leases, Future Minimum Payments Due	13,509
Sub Lease Agreements [Member]
2013	1,910
2014	2,122
2015	2,176
2016	2,176
2017	907
Thereafter	0
Operating Leases, Future Minimum Payments Due	9,291
Net Commitments [Member]
2013	1,521
2014	1,016
2015	672
2016	648
2017	361
Thereafter	0
Operating Leases, Future Minimum Payments Due	$ 4,218

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
ASSETS
Cash and cash equivalents	$ 2,156	$ 5,453
Restricted cash	88	98
Short-term Investments	0	2,003
Accounts receivable (net of allowance for doubtful accounts of $186 in 2012 and $207 in 2011)	4,238	6,375
Inventories	748	1,988
Prepaid expenses and other current assets	1,409	1,876
Total current assets	8,639	17,793
Property and equipment, net	1,111	1,355
Goodwill	5,271	5,271
Other intangible assets, net	548	1,461
Investments in non-publicly traded companies	356	306
Other assets	1,672	1,432
Total assets	17,597	27,618
LIABILITIES AND STOCKHOLDERS' EQUITY
Credit facility	2,432	0
Accounts payable	2,210	2,272
Accrued expenses and other current liabilities	10,263	10,655
Total current liabilities	14,905	12,927
Restructuring liabilities	1,463	2,485
Total liabilities	16,368	15,412
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value: 47,500,000 and 37,500,000 shares authorized; 36,107,763 and 30,633,302 shares issued at December 31, 2012 and 2011, respectively; 36,086,969 and 30,612,508 shares outstanding at December 31, 2012 and 2011, respectively	36	31
Additional paid-in capital	418,276	410,551
Accumulated other comprehensive loss - currency translation	(549)	(64)
Common stock held in treasury (20,794 shares), at cost	(118)	(118)
Accumulated deficit	(416,416)	(398,194)
Total stockholders' equity	1,229	12,206
Total liabilities and stockholders' equity	$ 17,597	$ 27,618

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Restricted Cash (Details Textual) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Restricted cash	$ 88	$ 98

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $) In Thousands, except Share data	Common Stock [Member]	Treasury Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Retained Earnings [Member]	Total
Balance at Dec. 31, 2009	$ 20	$ (118)	$ 382,935	$ 551	$ (370,713)	$ 12,675
Balance (in shares) at Dec. 31, 2009	20,012,521
Net loss					(4,609)	(4,609)
Currency translation adjustment				(92)	0	(92)
Stock compensation	0	0	2,358	0	0	2,358
Stock compensation (in shares)	48,800
Shares of common stock issued under stock benefit plans	1	0	82	0	0	83
Shares of common stock issued under stock benefit plans (in shares)	449,257
Sales of stock, net of issuance cost	3	0	6,314	0	0	6,317
Sales of stock, net of issuance cost (in shares)	3,017,236
Balance at Dec. 31, 2010	24	(118)	391,689	459	(375,322)	16,732
Balance (in shares) at Dec. 31, 2010	23,527,814
Net loss					(22,872)	(22,872)
Currency translation adjustment				(523)	0	(523)
Stock compensation	0	0	2,474	0	0	2,474
Stock compensation (in shares)	0
Shares of common stock issued under stock benefit plans	1	0	321	0	0	322
Shares of common stock issued under stock benefit plans (in shares)	895,488
Sales of stock, net of issuance cost	6	0	16,067	0	0	16,073
Sales of stock, net of issuance cost (in shares)	6,210,000
Balance at Dec. 31, 2011	31	(118)	410,551	(64)	(398,194)	12,206
Balance (in shares) at Dec. 31, 2011	30,633,302
Net loss					(18,222)	(18,222)
Currency translation adjustment				(485)	0	(485)
Stock compensation	0	0	2,367	0	0	2,367
Stock compensation (in shares)	0
Shares of common stock issued under stock benefit plans	1	0	126	0	0	127
Shares of common stock issued under stock benefit plans (in shares)	957,378
Sales of stock, net of issuance cost	4	0	5,232	0	0	5,236
Sales of stock, net of issuance cost (in shares)	4,517,083					2,380,560
Balance at Dec. 31, 2012	$ 36	$ (118)	$ 418,276	$ (549)	$ (416,416)	$ 1,229
Balance (in shares) at Dec. 31, 2012	36,107,763

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Income Taxes (Details 2)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
U.S. federal statutory tax rate	(35.00%)	(35.00%)	(35.00%)
State taxes	(2.90%)	(1.20%)	(33.20%)
Deemed repatriation of foreign income	0.00%	10.10%	6.70%
Excess foreign tax expense	2.40%	0.50%	18.10%
Goodwill write down	0.00%	14.00%	0.00%
Tax attributes	(4.30%)	20.10%	(116.30%)
Uncertain tax positions	1.30%	0.80%	9.40%
Change in valuation allowance	40.80%	(5.60%)	171.90%
Permanent differences, tax credits and other adjustments	0.00%	(0.80%)	5.30%
Effective income tax rate	2.20%	2.90%	26.90%

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Segment and Major Customer Information (Tables)

12 Months Ended

Dec. 31, 2012

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

The following tables present net revenues and long-lived assets information for geographic areas:

	Years Ended December 31,
	2012			2011		2010
Net revenues:
United States	$	6,030		$	6,439	$	12,258
Italy		2,362			3,836		3,832
Japan		2,206			659		9,465
Hong Kong		2,192			3,190		6,550
United Kingdom		1,197			1,904		168
Israel		940			4,732		8,220
Republic of Korea		887			2,915		3,753
China		456			724		1,907
Singapore		260			757		668
Taiwan		(104	)		1,637		1,541
Other countries		1,452			1,462		1,460
Total	$	17,878		$	28,255	$	49,822

	As of December 31,
	2012		2011
Long-lived tangible assets:
United States	$	344	$	502
Other countries		2,417		2,246
Total	$	2,761	$	2,748

Schedule of Revenue by Major Customers by Reporting Segments [Table Text Block]

The following table sets forth the percentage of net revenues attributable to the Company’s significant end customers:

	Years ended December 31,
	2012			2011			2010
Significant Customers:
Customer A		21	%		13	%		20	%
Customer B		12	%*					*
Customer C		*			*			18	%
Customer D		*			*			13	%

* Revenues were less than 10% of the Company’s net revenues in these years.

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Employee Benefit Plans (Details 2) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Exercise Price, Minimum (in dollars per share)	$ 2.00
Exercise Price, Maximum (in dollars per share)	$ 24.80
Number Of Options Outstanding	1,399,128	1,770,554	2,159,833	2,485,134
Weighted Average Remaining Contractual Life, Options Outstanding	2 years 8 months 19 days
Weighted Average Exercise Price, Options Outstanding	$ 8.96	$ 9.19	$ 9.47	$ 10.02
Options Exercisable, Number	1,323,364
Weighted Average Exercise Price, Options Exercisable (in dollars per share)	$ 9.34
Stock Options One [Member]
Exercise Price, Minimum (in dollars per share)	$ 2.00
Exercise Price, Maximum (in dollars per share)	$ 2.20
Number Of Options Outstanding	140,202
Weighted Average Remaining Contractual Life, Options Outstanding	4 years 4 months 20 days
Weighted Average Exercise Price, Options Outstanding	$ 2.13
Options Exercisable, Number	118,640
Weighted Average Exercise Price, Options Exercisable (in dollars per share)	$ 2.13
Stock Options Two [Member]
Exercise Price, Minimum (in dollars per share)	$ 2.32
Exercise Price, Maximum (in dollars per share)	$ 2.32
Number Of Options Outstanding	69,901
Weighted Average Remaining Contractual Life, Options Outstanding	2 years 11 months 5 days
Weighted Average Exercise Price, Options Outstanding	$ 2.32
Options Exercisable, Number	69,901
Weighted Average Exercise Price, Options Exercisable (in dollars per share)	$ 2.32
Stock Options Three [Member]
Exercise Price, Minimum (in dollars per share)	$ 2.43
Exercise Price, Maximum (in dollars per share)	$ 2.43
Number Of Options Outstanding	214,961
Weighted Average Remaining Contractual Life, Options Outstanding	3 years 11 months 8 days
Weighted Average Exercise Price, Options Outstanding	$ 2.43
Options Exercisable, Number	168,086
Weighted Average Exercise Price, Options Exercisable (in dollars per share)	$ 2.43
Stock Options Four [Member]
Exercise Price, Minimum (in dollars per share)	$ 2.48
Exercise Price, Maximum (in dollars per share)	$ 5.12
Number Of Options Outstanding	166,409
Weighted Average Remaining Contractual Life, Options Outstanding	2 years 11 months 16 days
Weighted Average Exercise Price, Options Outstanding	$ 3.93
Options Exercisable, Number	160,332
Weighted Average Exercise Price, Options Exercisable (in dollars per share)	$ 3.98
Stock Options Five [Member]
Exercise Price, Minimum (in dollars per share)	$ 5.52
Exercise Price, Maximum (in dollars per share)	$ 8.16
Number Of Options Outstanding	146,498
Weighted Average Remaining Contractual Life, Options Outstanding	3 years 1 month 10 days
Weighted Average Exercise Price, Options Outstanding	$ 6.42
Options Exercisable, Number	145,248
Weighted Average Exercise Price, Options Exercisable (in dollars per share)	$ 6.42
Stock Options Six [Member]
Exercise Price, Minimum (in dollars per share)	$ 8.40
Exercise Price, Maximum (in dollars per share)	$ 12.40
Number Of Options Outstanding	177,342
Weighted Average Remaining Contractual Life, Options Outstanding	2 years 8 months 23 days
Weighted Average Exercise Price, Options Outstanding	$ 10.98
Options Exercisable, Number	177,342
Weighted Average Exercise Price, Options Exercisable (in dollars per share)	$ 10.98
Stock Options Seven [Member]
Exercise Price, Minimum (in dollars per share)	$ 12.64
Exercise Price, Maximum (in dollars per share)	$ 13.20
Number Of Options Outstanding	167,010
Weighted Average Remaining Contractual Life, Options Outstanding	1 year 9 months 18 days
Weighted Average Exercise Price, Options Outstanding	$ 13.10
Options Exercisable, Number	167,010
Weighted Average Exercise Price, Options Exercisable (in dollars per share)	$ 13.10
Stock Options Eight [Member]
Exercise Price, Minimum (in dollars per share)	$ 13.28
Exercise Price, Maximum (in dollars per share)	$ 16.88
Number Of Options Outstanding	191,514
Weighted Average Remaining Contractual Life, Options Outstanding	1 year 3 months 14 days
Weighted Average Exercise Price, Options Outstanding	$ 15.10
Options Exercisable, Number	191,514
Weighted Average Exercise Price, Options Exercisable (in dollars per share)	$ 15.10
Stock Options Nine [Member]
Exercise Price, Minimum (in dollars per share)	$ 17.52
Exercise Price, Maximum (in dollars per share)	$ 24.00
Number Of Options Outstanding	32,562
Weighted Average Remaining Contractual Life, Options Outstanding	1 year 6 months 11 days
Weighted Average Exercise Price, Options Outstanding	$ 19.54
Options Exercisable, Number	32,562
Weighted Average Exercise Price, Options Exercisable (in dollars per share)	$ 19.54
Stock Options Ten [Member]
Exercise Price, Maximum (in dollars per share)	$ 24.80
Number Of Options Outstanding	92,729
Weighted Average Remaining Contractual Life, Options Outstanding	1 year 1 month 17 days
Weighted Average Exercise Price, Options Outstanding	$ 24.80
Options Exercisable, Number	92,729
Weighted Average Exercise Price, Options Exercisable (in dollars per share)	$ 24.80

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Issuance of Common Stock

12 Months Ended

Dec. 31, 2012

Stockholders Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 14. Issuance of Common Stock

Common Stock Purchase Agreement with Aspire Capital:

On July 16, 2012, the Company entered into a Common Stock Purchase Agreement (the “Aspire Purchase Agreement”) with Aspire Capital Fund, LLC (“Aspire”) to purchase up to an aggregate of $11.0 million of shares of the Company’s common stock, par value $0.001 per share (“Common Stock”) over the two-year term of the Aspire Purchase Agreement. Under the Aspire Purchase Agreement, Aspire made an initial purchase of 990,099 shares for the purchase price of $1,000,000.  During the term of the Aspire Purchase Agreement, the Company can direct Aspire to purchase up to 50,000 shares per business day at a price equal to the lower of (i) the lowest sale price for the Common Stock on the date of sale or (ii) the arithmetic average of the three lowest closing sale prices for the Common Stock during the 12 consecutive business days ending on the business day immediately preceding the date of sale.

In addition, on any business date that the Company directs Aspire to purchase 50,000 shares, the Company also has the right to direct Aspire to purchase an amount of Common Stock equal to a percentage (not to exceed 15%, which limitation may be increased to 30% by mutual agreement of the parties) of the aggregate shares of Common Stock traded on the next business day, subject to a maximum number of shares determined by the Company. Subject to certain limitations, the purchase price for these shares shall be the lower of (i) the closing sale price on the date of sale or (ii) ninety-five percent (95%) of the next business day’s volume weighted average price.  The Company has the right to determine a maximum number of shares and set a minimum market price threshold for each purchase.

In connection with the Aspire Purchase Agreement, the Company also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with Aspire dated July 16, 2012.  The Registration Rights Agreement provides, among other things, that the Company will register the sale of the shares sold to Aspire.  In accordance with the Registration Rights Agreement, the sale of certain shares to Aspire was made pursuant to a prospectus supplement dated July 17, 2012 and an accompanying prospectus dated October 21, 2009, under the Company’s Registration Statement on Form S-3 (File No. 333-162609), filed with the Securities and Exchange Commission on October 21, 2009, as amended and supplemented from time to time (the “Prior Registration Statement” File No. 333-162609), which Prior Registration Statement expired in October 2012. The Company subsequently filed a Registration Statement on Form S-3 (the “Prior Registration Statement” File No. 333-184591), initially filed with the Securities and Exchange Commission on October 25, 2012, and subsequently declared effective on January 25, 2013 (the “Current Registration Statement”). Beginning on January 29, 2013, all sales of shares to Aspire were made pursuant to a prospectus supplement dated January 29, 2013 and the accompanying prospectus dated January 25, 2013, under the Current Registration Statement.   The Company further agreed to keep the applicable Registration Statement effective and to indemnify Aspire for certain liabilities in connection with the sale of the shares under the terms of the Registration Rights Agreement.

During the year ended December 31, 2012, Aspire purchased a total of 2,380,560 shares under the Aspire Purchase Agreement for net proceeds to the Company of $2.2 million. The Company’s issuance costs were $0.4 million which includes 297,030 shares issued to Aspire as a commitment fee per the Aspire Purchase Agreement.

Registered Direct Offering:

On May 8, 2012, the Company entered into a Securities Purchase Agreement dated May 8, 2012 (the “Investor Purchase Agreement”) with certain purchasers to sell 1,315,000 shares of Common Stock for gross proceeds of approximately $2,445,900 (the “Investor Offering”). The purchase price for each share of Common Stock in the Investor Offering was $1.86.

On May 8, 2012, the Company also entered into a Securities Purchase Agreement dated May 8, 2012 (the “Director and Officer Purchase Agreement”) with certain of the Company’s directors and officers to sell up to 161,150 shares of Common Stock for gross proceeds of approximately $333,580 (the “Director and Officer Offering” and together with the Investor Offering, the “Registered Direct Offering”). The purchase price for each share of Common Stock in the Director and Officer Offering was $2.07.

The shares sold in the Registered Direct Offering were registered pursuant to a prospectus supplement dated May 8, 2012 and an accompanying prospectus dated October 21, 2009, pursuant to the Registration Statement.

The net proceeds to the Company from the Registered Direct Offering, after deducting the Company’s offering expenses, were approximately $2.7 million.

At Market Offering with MLV & Co. LLC:

On February 10, 2012, the Company entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with MLV & Co. LLC (“MLV”), pursuant to which the Company could issue and sell shares of Common Stock having an aggregate offering price of up to $10,000,000 (the “Shares”) from time to time through MLV (the “Offering”). Also on February 10, 2012, the Company filed a prospectus supplement with the Securities and Exchange Commission in connection with the Offering (the “Prospectus Supplement”). The shares of Common Stock to be sold under the ATM Agreement were registered pursuant to the Registration Statement and the Prospectus Supplement.

Upon delivery of a placement notice and subject to the terms and conditions of the ATM Agreement, MLV could sell Common Stock by methods deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on The NASDAQ Capital Market, on any other existing trading market for the common stock or to or through a market maker.

The Company agreed to pay MLV a commission equal to 3.0% of the gross sales price per share sold and provide indemnification and contribution to MLV against certain civil liabilities, including liabilities under the Securities Act.

On July 13, 2012, the Company delivered to MLV notice of termination of the ATM Agreement, which termination became effective July 23, 2012.

From July 1, 2012, through the termination of the ATM Agreement on July 23, 2012, the Company issued and sold 363,343 shares under the ATM Agreement for net proceeds of $0.4 million. No shares were sold under the ATM Agreement in the first six months of 2012.

2011 Underwritten Public Offering

On May 20, 2011, the Company completed an offering of 6,210,000 shares of common stock that resulted in proceeds to the Company of $16.1 million after deducting the underwriting discounts and commissions and estimated expenses payable by the Company of $1.3 million. The shares were offered pursuant to a prospectus supplement dated May 17, 2011 and an accompanying prospectus dated October 21, 2009, pursuant to the Company's existing effective shelf registration statement on Form S-3 (File No. 333-162609), which was declared effective by the Securities and Exchange Commission on October 28, 2009.

Rights Offering

The Company filed a Registration Statement on Form S-1 on April 13, 2010 and as amended on April 20, 2010 and declared effective by the Securities and Exchange Commission on May 3, 2010 (File No. 333-166022), pursuant to which the Company conducted a rights offering by issuing a dividend of subscription rights (the “Rights”) to all of the Company’s stockholders as of April 29, 2010 (the “Record Date”), to exercise the Rights at a price of $2.40 per share, for shares of the Company’s common stock, par value $0.001 per share (the “Rights Offering”). 

Pursuant to the terms of the Rights Offering, the Company distributed to its stockholders transferable rights to subscribe for and purchase up to an aggregate of 4,153,883 shares of its common stock.  Each stockholder of record as of the Record Date received one transferable right for every one share of common stock owned on the Record Date.  Each right entitled the holder thereof to purchase 0.20 shares of common stock at a price of $2.40 per share (fractional shares were rounded up to the nearest whole share).

On June 3, 2010, as a result of the rights offering, the Company issued 2,117,236 shares of its common stock, par value $0.001 per share, to the holders who exercised their rights pursuant to the basic and over-subscription privileges and pursuant to the terms of the rights offering as described in the prospectus included in the Registration Statement.  Such shares of common stock were issued at a subscription price of $2.40 per share. The gross proceeds to the Company were approximately $5.1 million. In addition, the Company incurred $0.5 million in costs associated with this offering.

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Schedule Of Changes In Unrecognized Income Tax Benefits [Table Text Block]

Changes in unrecognized income tax benefits follow:

Balance at January 1, 2011		6,303
Increases related to prior year tax positions		42
Decreases related to prior year tax positions		(48	)
Increases related to current year tax positions		125
Settlements		(139	)
Balance at December 31, 2011	$	6,283
Increases related to prior year tax positions		23
Decreases related to prior year tax positions		(22	)
Increases related to current year tax positions		214
Settlements		(130	)
Balance at December 31, 2012	$	6,368

Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block]

The components of the loss before income taxes follow:

	Years Ended December 31,
	2012			2011			2010
U.S. loss	$	(17,064	)	$	(23,082	)	$	(3,700	)
Foreign income		(770	)		846			67
Loss before income taxes	$	(17,834	)	$	(22,236	)	$	(3,633	)

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

A reconciliation of the United States federal statutory rate to the effective income tax rate follows:

	Years Ended December 31,
	2012			2011			2010
U.S. federal statutory tax rate		(35.0	)%		(35.0	)%		(35.0	)%
State taxes		(2.9	)		(1.2	)		(33.2	)
Deemed repatriation of foreign income		0.0			10.1			6.7
Excess foreign tax expense		2.4			0.5			18.1
Goodwill write down		0.0			14.0			-
Tax attributes		(4.3	)		(20.1	)		(116.3	)
Uncertain tax positions		1.3			0.8			9.4
Change in valuation allowance		40.8			(5.6	)		171.9
Permanent differences, tax credits and other adjustments		(0.0	)		(0.8	)		5.3
Effective income tax rate		2.2	%		2.9	%		26.9	%

Schedule Of Deferred Income Taxes [Table Text Block]

The tax effects of temporary differences that give rise to deferred income taxes follow:

	2012			2011
Deferred income tax assets:
Property and equipment	$	243		$	290
Other nondeductible accruals		1,331			1,194
Restructuring accrual		1,320			1,706
Capitalized research and development for tax purposes		7,715			8,368
Net operating loss carry-forwards		195,105			188,147
Research and development and other credits		20,807			20,962
Inventories		381			749
Stock compensation		4,301			3,502
Other		3,436			2,452
Total gross deferred income tax assets		234,639			227,370
Valuation allowance		(233,526	)		(226,254	)
Net deferred income tax assets		1,113			1,116
Deferred income tax liabilities:
Other		(1,113	)		(1,116	)
Net deferred income tax liabilities		(1,113	)		(1,116	)
Net deferred income taxes	$	—		$	—

XML

Commitments and Contingencies

12 Months Ended

Dec. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 16.    Commitments and Contingencies

Lease Agreements

The Company leases buildings and equipment at its headquarters in Shelton, Connecticut as well as at its subsidiaries’ locations worldwide. Rental expense under all operating lease agreements was $0.9 million in 2012, $1.1 million in 2011 and $1.4 million in 2010.

The following table summarizes as of December 31, 2012 future minimum operating lease commitments, including contractually obligated building operating commitments that have remaining, non-cancelable lease terms in excess of one year and future anticipated sublease income:

	Operating Commitments		Less: Sublease Agreements		Net Commitments
2013	$	3,431	$	1,910	$	1,521
2014		3,138		2,122		1,016
2015		2,848		2,176		672
2016		2,824		2,176		648
2017		1,268		907		361
Thereafter		-		-		-
	$	13,509	$	9,291	$	4,218

Patent Indemnity

Under the terms of substantially all of its sales agreements, the Company has agreed to indemnify its customers for costs and damages arising from claims against such customer based on, among other things, allegations that the Company’s products infringed upon the intellectual property rights of a third party. In the event of an infringement claim, the Company retains the right to (i) procure for the customer the right to continue using the product; (ii) replace the product with a non-infringing item which shall give equally good service; (iii) modify the product so that it becomes non-infringing; or (iv) remove the product and, on return of the product to the Company, the Company shall refund the buyer’s purchase price. Due to the nature of these indemnification agreements, the maximum potential future payments the Company could be required to make under these guarantees, when and if such claims may arise, cannot be reliably determined. No amounts have been accrued for any estimated losses with respect to these guarantees for customer indemnifications since it is not probable that a loss will be incurred. No claims have been made under these indemnity provisions.

Purchase Commitments

In the normal course of business, the Company makes various commitments to purchase goods or services from specific suppliers, including those related to capital expenditures. As of December 31, 2012, the Company had purchase commitments totaling $1.6 million related to R&D software licenses for tooling and inventory.

Contingencies

In the normal course of business, we may be confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits, claims, environmental actions or the action of various regulatory agencies. If necessary, management consults with counsel and other appropriate experts to assess any matters that arise. If, in management’s opinion, we have incurred a probable loss as set forth by accounting principles generally accepted in the United States, an estimate is made of the loss and the appropriate accounting entries are reflected in our financial statements. Except as discussed below, there are no currently pending, threatened lawsuits or claims against the Company that could have a material adverse effect on our financial position, results of operations or cash flows. On July 29, 2010, the Company was served with a complaint in connection with civil action number 10-295 in U.S. District Court for the District of Delaware, entitled Sumitomo Electric Industries, Ltd. v. TranSwitch Corporation, in which Sumitomo Electric Industries, Ltd. (‘SEI’) was claiming breach of contract by the Company and damages in an amount of at least $2.6 million plus interest, costs and attorneys fees. On December 29, 2010, the Company entered into a settlement agreement with SEI which resulted in SEI filing a dismissal of its claim. As a result of the settlement agreement, the Company will pay an aggregate of approximately $0.7 million, in a combination of cash and future purchase credits. This amount was offset against the reversal of accrued royalties in the statement of operations.

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Credit Facility (Details Textual) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Apr. 04, 2011
Line of Credit Facility, Initiation Date		Apr. 04, 2011
Line of Credit Facility, Maximum Borrowing Capacity			$ 5.0
Line of Credit Facility, Interest Rate Description		The Amended Financing Agreement provides a credit facility to the Company of up to $5.0 million which bears interest at the higher of (i) the prime rate plus 2.0% or (ii) 5.25% percent, plus the payment of certain fees and expenses (the "Facility").
Line of Credit Facility, Current Borrowing Capacity	2.4		5.0
Line Of Credit Facility Eligible, Accounts Receivable Percentage			80.00%
Line Of Credit Facility Term	2 years
Line of Credit Facility, Amount Outstanding	$ 2.4	$ 0

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Operating activities:
Net loss	$ (18,222)	$ (22,872)	$ (4,609)
Adjustments required to reconcile net loss to net cash flows used by operating activities:
Depreciation and amortization	664	1,918	2,220
Amortization of deferred financing fees	66	77	245
Benefit for doubtful accounts	(21)	(129)	(180)
Provision for excess and obsolete inventories	869	228	773
Non-cash restructuring charges (credits), net	1,197	(5,558)	409
Non-cash restructuring charges - stock-based compensation	230	0	0
Stock-based compensation expense	2,137	2,474	2,358
Impairment of goodwill and other intangibles	648	14,312	0
Loss on retirement of property and equipment	212	35	0
Accrued royalty reversals, net	(1,003)	(2,363)	(418)
Changes in operating assets and liabilities:
Accounts receivable	2,158	1,661	3,940
Inventories	371	339	855
Prepaid expenses and other assets	161	232	95
Accounts payable	(62)	379	(3,056)
Accrued expenses and other current liabilities	590	(1,204)	(1,557)
Restructuring liabilities	(2,198)	(1,170)	(1,569)
Net cash used by operating activities	(12,203)	(11,641)	(494)
Investing activities:
Capital expenditures	(293)	(670)	(587)
Investments in non-publicly traded companies	(50)	(39)	(24)
Proceeds from the sale of investments in non-publicly traded companies	0	0	2,746
Change in restricted cash	10	484	2,150
Purchases of short and long-term investments	0	(6,516)	(1,582)
Proceeds from sales and maturities of short and long-term investments	2,003	5,486	609
Net cash provided (used) by investing activities	1,670	(1,255)	3,312
Financing activities:
Issuance of common stock under employee stock plans	127	322	83
Payments for deferred financing costs	0	0	(167)
Principal payments on 5.45% Convertible Notes due 2011	0	(3,758)	(5,004)
Proceeds from issuance of common stock, net of fees	5,236	16,073	6,317
Net borrowing on credit facility	2,432	0	0
Net cash provided by financing activities	7,795	12,637	1,229
Effect of exchange rate changes on cash and cash equivalents	(559)	(568)	(110)
Change in cash and cash equivalents	(3,297)	(827)	3,937
Cash and cash equivalents at beginning of year	5,453	6,280	2,343
Cash and cash equivalents at end of year	$ 2,156	$ 5,453	$ 6,280

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CONSOLIDATED BALANCE SHEETS [Parenthetical] (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Allowance for doubtful accounts (in dollars)	$ 186	$ 207
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	47,500,000	37,500,000
Common stock, shares issued	36,107,763	30,633,302
Common stock, shares outstanding	36,086,969	30,612,508
Common shares held in Treasury Stock	20,794	20,794

XML

Segment and Major Customer Information

12 Months Ended

Dec. 31, 2012

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 9.    Segment and Major Customer Information

The Company has one business segment: communication solutions. Its semiconductor and IP solutions provide core functionality for the transmission of voice, video and data. The integration of various technologies and standards in these devices result in a homogeneous product line for management and measurement purposes.

Enterprise-wide Information

Enterprise-wide information provided on geographic net revenues is based on billing locations. Long-lived asset information is based on the physical location of the assets. The following tables present net revenues and long-lived assets information for geographic areas:

	Years Ended December 31,
	2012			2011		2010
Net revenues:
United States	$	6,030		$	6,439	$	12,258
Italy		2,362			3,836		3,832
Japan		2,206			659		9,465
Hong Kong		2,192			3,190		6,550
United Kingdom		1,197			1,904		168
Israel		940			4,732		8,220
Republic of Korea		887			2,915		3,753
China		456			724		1,907
Singapore		260			757		668
Taiwan		(104	)		1,637		1,541
Other countries		1,452			1,462		1,460
Total	$	17,878		$	28,255	$	49,822

	As of December 31,
	2012		2011
Long-lived tangible assets:
United States	$	344	$	502
Other countries		2,417		2,246
Total	$	2,761	$	2,748

Information about Major Customers

The Company ships its products to distributors and directly to end customers. The following table sets forth the percentage of net revenues attributable to the Company’s significant end customers:

	Years ended December 31,
	2012			2011			2010
Significant Customers:
Customer A		21	%		13	%		20	%
Customer B		12	%*					*
Customer C		*			*			18	%
Customer D		*			*			13	%

* Revenues were less than 10% of the Company’s net revenues in these years.

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DOCUMENT AND ENTITY INFORMATION (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Mar. 18, 2013	Jun. 30, 2012
Entity Registrant Name	TRANSWITCH CORP /DE
Entity Central Index Key	0000944739
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	txcc
Entity Common Stock, Shares Outstanding		37,547,935
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2012
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2012
Entity Well-Known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 31.4

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Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 10.    Income Taxes

Changes in unrecognized income tax benefits follow:

Balance at January 1, 2011		6,303
Increases related to prior year tax positions		42
Decreases related to prior year tax positions		(48	)
Increases related to current year tax positions		125
Settlements		(139	)
Balance at December 31, 2011	$	6,283
Increases related to prior year tax positions		23
Decreases related to prior year tax positions		(22	)
Increases related to current year tax positions		214
Settlements		(130	)
Balance at December 31, 2012	$	6,368

Included in the balance of unrecognized tax benefits at December 31, 2012 are potential benefits of $0.5 million that, if recognized, would impact the Company’s effective tax rate. The Company does not reasonably expect any significant changes in the amount of unrecognized tax benefits to occur within the next twelve months.

Historically, the Company has not accrued or paid significant interest and penalties for underpayments of income taxes due to its net operating loss position. Interest and penalties related to underpayment of income taxes is classified as a component of income tax expense in the consolidated statement of operations. For the year ended December 31, 2012, $0.1 million of interest and penalties were recognized in the consolidated statement of operations compared with less than $0.1 million for the year ended December 31, 2011.

The Company files income tax returns in the United States and several foreign countries and has not extended the statute of limitations to assess additional taxes for any of these jurisdictions. The Company has effectively settled United States Federal tax positions taken through 2002. However, the Company is subject to adjustment in each of these periods, to the extent of its net operating loss carry forwards. The open tax years for foreign jurisdictions are 2003 through 2012 and for United States state and local jurisdictions are 1997 through 2012.

The components of the loss before income taxes follow:

	Years Ended December 31,
	2012			2011			2010
U.S. loss	$	(17,064	)	$	(23,082	)	$	(3,700	)
Foreign income		(770	)		846			67
Loss before income taxes	$	(17,834	)	$	(22,236	)	$	(3,633	)

The provision for income taxes consists exclusively of current foreign income taxes.

A reconciliation of the United States federal statutory rate to the effective income tax rate follows:

	Years Ended December 31,
	2012			2011			2010
U.S. federal statutory tax rate		(35.0	)%		(35.0	)%		(35.0	)%
State taxes		(2.9	)		(1.2	)		(33.2	)
Deemed repatriation of foreign income		0.0			10.1			6.7
Excess foreign tax expense		2.4			0.5			18.1
Goodwill write down		0.0			14.0			-
Tax attributes		(4.3	)		(20.1	)		(116.3	)
Uncertain tax positions		1.3			0.8			9.4
Change in valuation allowance		40.8			(5.6	)		171.9
Permanent differences, tax credits and other adjustments		(0.0	)		(0.8	)		5.3
Effective income tax rate		2.2	%		2.9	%		26.9	%

The tax effects of temporary differences that give rise to deferred income taxes follow:

	2012			2011
Deferred income tax assets:
Property and equipment	$	243		$	290
Other nondeductible accruals		1,331			1,194
Restructuring accrual		1,320			1,706
Capitalized research and development for tax purposes		7,715			8,368
Net operating loss carry-forwards		195,105			188,147
Research and development and other credits		20,807			20,962
Inventories		381			749
Stock compensation		4,301			3,502
Other		3,436			2,452
Total gross deferred income tax assets		234,639			227,370
Valuation allowance		(233,526	)		(226,254	)
Net deferred income tax assets		1,113			1,116
Deferred income tax liabilities:
Other		(1,113	)		(1,116	)
Net deferred income tax liabilities		(1,113	)		(1,116	)
Net deferred income taxes	$	—		$	—

The Company continually evaluates its deferred income tax assets to determine whether it is more likely than not that such assets will be realized. In assessing the realizability, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. Based on this assessment, management believes that significant uncertainty exists concerning the recoverability of the deferred income tax assets. As such, a valuation allowance has been provided for deferred income tax assets as of December 31, 2012 and 2011. Of the $233.5 million valuation allowance at December 31, 2012, subsequently recognized income tax benefits, if any, in the amount of $4.7 million will be applied directly to additional paid-in capital.

At December 31, 2012, the Company had available, for federal income tax purposes, net operating loss (“NOL”) carry-forwards of approximately $513.7 million and research and development tax credit carry-forwards of approximately $20.8 million expiring in varying amounts from 2012 through 2032. For state income tax purposes, the Company had available NOL carry-forwards of approximately $197.3 million and state tax credit carry-forwards of $7.8 million expiring in varying amounts from 2012 to 2032. Additionally, the Company has generated $39.3 million of NOL’s in foreign jurisdictions which can be carried forward indefinitely.

Certain transactions involving the Company’s beneficial ownership have occurred in prior years, which resulted in a stock ownership change for purposes of Section 382 of the Internal Revenue Code of 1986, as amended. Consequently, approximately $186.6 million of the NOL carry-forwards and $11.0 million of research and development tax credit carry-forwards are subject to these limitations.

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Net revenues:
Product revenues	$ 10,315	$ 19,700	$ 41,703
Service revenues	7,563	8,555	8,119
Total net revenues	17,878	28,255	49,822
Cost of revenues:
Cost of product revenues	3,724	6,641	17,992
Provision for excess and obsolete inventories	869	228	773
Cost of service revenues	1,274	3,454	3,259
Total cost of revenues	5,867	10,323	22,024
Gross profit	12,011	17,932	27,798
Operating expenses:
Research and development	15,892	18,885	15,994
Marketing and sales	5,031	7,335	7,784
General and administrative	7,751	7,457	7,479
Restructuring charges (credits), net	1,427	(5,558)	398
Impairment of goodwill and other intangibles	648	14,312	0
Reversal of accrued royalties, net	(1,003)	(2,363)	(418)
Total operating expenses	29,746	40,068	31,237
Operating loss	(17,735)	(22,136)	(3,439)
Other (expense) income:
Other (expense) income	(33)	18	426
Interest:
Interest income	58	125	84
Interest expense	(124)	(243)	(704)
Interest expense, net	(66)	(118)	(620)
Total other expense, net	(99)	(100)	(194)
Loss before income taxes	(17,834)	(22,236)	(3,633)
Income taxes	388	636	976
Net loss	$ (18,222)	$ (22,872)	$ (4,609)
Basic and diluted loss per common share:
Net loss per common share (in dollars per share)	$ (0.55)	$ (0.82)	$ (0.21)
Weighted average common shares outstanding (in shares)	33,130	27,911	22,162

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Investments in Non-Publicly Traded Companies and Venture Capital Funds

12 Months Ended

Dec. 31, 2012

Investments, All Other Investments [Abstract]

Cost-method Investments, Description [Text Block]

Note 4.   Investments in Non-Publicly Traded Companies and Venture Capital Funds

During the first quarter of 2010, the Company sold its investment in Opulan Technologies Corp. (“Opulan”) for $2.7 million.  The carrying value of this investment in Opulan was also $2.7 million and accordingly no gain or loss was recorded on this transaction.

The Company owns a 3% limited partnership interest in Neurone II, a venture capital fund organized as a limited partnership and a 0.42% limited partnership interest in Munich Venture Partners Fund (“MVP”). The Company accounts for these investments at cost. The financial condition of these companies is subject to significant changes resulting from their operating performance and their ability to obtain financing. The Company continually evaluates its investments in these companies for impairment. In making this judgment, the Company considers the investee’s cash position, projected cash flows (both short and long-term), financing needs, most recent valuation data, the current investing environment, management/ownership changes, and competition. This evaluation process is based on information that the Company requests from these privately held companies. This information is not subject to the same disclosure and audit requirements as the reports required of United States public companies, and as such, the reliability and accuracy of the data may vary.

During 2010, the Company had sales of investments of $2.7 million in Opulan and less than $0.1 million in Neurone II. Also during 2010, the Company made additional investments of less than $0.1 million in both Neurone II and MVP.

During 2011, the Company made additional investments of less than $0.1 million in MVP.

During 2012, the Company made additional investments of less than $0.1 million in both Neurone II and MVP.

The Company’s cost method investments were approximately $0.4 million and $0.3 million as of December 31, 2012 and 2011, respectively.

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Restricted Cash

12 Months Ended

Dec. 31, 2012

Receivables [Abstract]

Restricted Assets Disclosure [Text Block]

Note 3. Restricted Cash

The Company’s liquidity was affected by restricted cash balances, which are included in current assets and are not available for general corporate use, of approximately $0.1 million at both December 31, 2012 and 2011. The Company has pledged these amounts as collateral for stand-by letters of credit that guarantee certain long-term property lease obligations and to support customer credit requirements.

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Restructuring Charges

12 Months Ended

Dec. 31, 2012

Restructuring and Related Activities [Abstract]

Restructuring and Related Activities Disclosure [Text Block]

Note 15.    Restructuring Charges

During 2012, the Company recorded net restructuring charges and adjustments of approximately $1.4 million. The Company implemented a restructuring plan in the second quarter of 2012 that included a workforce reduction of approximately 64 positions primarily in the Company’s Bangalore, India, New Delhi, India, Fremont, California, Shelton, Connecticut, and European locations. The Company recorded restructuring charges of approximately $1.1 million related to employee termination benefits, approximately $0.2 million related to facilities costs and $0.4 million for other costs. These new restructuring charges were partially offset by approximately $0.3 million of a restructuring benefit that was an adjustment to a prior restructuring charge for a facility lease obligation in Shelton, Connecticut.

During 2011, the Company recorded a net restructuring benefit of $5.6 million. On December 28, 2011, the Company entered into an amendment (the “Amendment”) to a sublease agreement (the “Sublease”) with an unaffiliated party to sublease 92,880 square feet of the Company’s office space in Shelton, Connecticut. As a result of the Sublease, the Company reversed approximately $7.0 million of previously accrued restructuring liabilities. This amendment extends the sublease through May 2017. This benefit was partially offset by approximately $1.4 million of charges for workforce reductions implemented during 2011. In the third quarter of 2011, the Company implemented a restructuring plan that included a workforce reduction of approximately 39 positions primarily in the Company’s Shelton, Connecticut, Fremont, California, and New Delhi and Bangalore, India locations. The Company also implemented a restructuring plan in the first quarter of 2011 that included a workforce reduction of approximately 26 positions primarily in the Company’s Fremont, California, New Delhi, India and Bangalore, India locations. The restructuring charges are primarily for employee termination benefits.

A summary of the restructuring liabilities and activity follows:

	2012 Activity
	Restructuring Liabilities December 31, 2011		Restructuring Charges		Cash Payments			Non-cash asset write-offs			Adjustments and Changes to Estimates			Restructuring Liabilities December 31, 2012
Employee Termination Benefits	$	753	$	1,143	$	(1,133	)	$	(230	)	$	179		$	712
Facility lease costs		3,727		183		(905	)		—			(504	)		2,501
Other		—		—		(160	)		—			426			266
Totals	$	4,480	$	1,326	$	(2,198	)	$	(230	)	$	101		$	3,479

	2011 Activity
	Restructuring Liabilities December 31, 2010		Restructuring Charges		Cash Payments			Non-cash asset write-offs		Adjustments and Changes to Estimates			Restructuring Liabilities December 31, 2011
Employee Termination Benefits	$	3	$	1,391	$	(641	)	$	—	$	—		$	753
Facility lease costs		11,205		—		(529	)		—		(6,949	)		3,727
Totals	$	11,208	$	1,391	$	(1,170	)	$	—	$	(6,949	)	$	4,480

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Stockholder Rights Plan

12 Months Ended

Dec. 31, 2012

Stockholder Rights Plan [Abstract]

Stockholder Rights Plan Disclosure [Text Block]

Note 11.    Stockholder Rights Plan

On September 30, 2011, the Board of Directors enacted a stockholder rights plan and declared a dividend of one preferred share purchase right for each outstanding share of the Company’s common stock outstanding at the close of business on October 3, 2011 to the stockholders of record on that date. Each preferred share purchase right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series B Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “Preferred Shares”), at a price of $20.00 per one one-thousandth of a Preferred Share, subject to adjustment, upon the occurrence of certain triggering events, including, without limitation, the acquisition of 15% or more of the Company’s outstanding common stock by a third party. Until a triggering event occurs, the common stockholders have no right to purchase shares under the stockholder rights plan. If the right to purchase the preferred stock is triggered, the common stockholders will have the ability to purchase sufficient stock to significantly dilute the 15% or greater holder. The Rights will expire on the earlier of (i) May 15, 2015 and (ii) the first anniversary of the adoption of the Rights Agreement if shareholder approval of the Rights Agreement has not been received by or on such date, unless that date is extended or unless the Rights are earlier redeemed by the Company. Each stockholder of record as of October 3, 2011 received a summary of the rights and any new stock certificates issued after the record date contain a legend describing the rights.

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Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets Disclosure [Text Block]

Note 7.    Goodwill and Other Intangible Assets

Changes in the carrying amounts of goodwill and information about intangible assets follow:

	Goodwill
Balance at December 31, 2010	$	14,144
Impairment of goodwill (1)		(8,873	)
Balance at December 31, 2011		5,271
Impairment of goodwill		-
Balance at December 31, 2012	$	5,271

(1) During the fourth quarter of 2011, impairment testing performed by the Company indicated that the estimated fair value of the reporting unit tested was less than its corresponding carrying amount. As a result, the Company recorded a goodwill impairment charge of $8.9 million.

				Other Intangible Assets
	Developed Technology			Customer Relationships			Total
Balances at December 31, 2012
Cost  (1)	$	1,755		$	4,729		$	6,484
Accumulated amortization		(1,707	)		(4,229	)		(5,936	)
	$	48		$	500		$	548
Balances at December 31, 2011
Cost  (2)	$	1,974		$	5,158		$	7,132
Accumulated amortization		(1,585	)		(4,086	)		(5,671	)
	$	389		$	1,072		$	1,461

(1) During the fourth quarter of 2012, impairment testing for certain purchased customer relationships and developed technology was performed by the Company and indicated that the undiscounted future cash flows of the mentioned intangible assets were less than their corresponding carrying amounts. As a result, the Company recorded an impairment charge of $0.6 million.

(2) During the fourth quarter of 2011, impairment testing for certain purchased customer relationships and developed technology was performed by the Company and indicated that the undiscounted future cash flows of the mentioned intangible assets were less than their corresponding carrying amounts. As a result, the Company recorded an impairment charge of $5.4 million.

Amortization expense related to “Other intangible assets” was $0.3 million in 2012, $1.4 million in 2011 and $1.6 million in 2010. Future estimated aggregate amortization expense for such assets for each of the five years succeeding December 31, 2012 are as follows: 2013 - $0.1 million; 2014 - $0.1 million; 2015 - $0.1 million; 2016 - $0.1 million and 2017 - $0.1 million.

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Income Taxes (Details 3) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Deferred income tax assets:
Property and equipment	$ 243	$ 290
Other nondeductible accruals	1,331	1,194
Restructuring accrual	1,320	1,706
Capitalized research and development for tax purposes	7,715	8,368
Net operating loss carry-forwards	195,105	188,147
Research and development and other credits	20,807	20,962
Inventories	381	749
Stock compensation	4,301	3,502
Other	3,436	2,452
Total gross deferred income tax assets	234,639	227,370
Valuation allowance	(233,526)	(226,254)
Net deferred income tax assets	1,113	1,116
Deferred income tax liabilities:
Other	(1,113)	(1,116)
Net deferred income tax liabilities	(1,113)	(1,116)
Net deferred income taxes	$ 0	$ 0

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Inventories

12 Months Ended

Dec. 31, 2012

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

Note 5.    Inventories

The components of inventories follow:

	December 31,
	2012		2011
Work-in-process and raw materials	$	346	$	488
Finished goods		402		1,500
Total inventories	$	748	$	1,988

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Property and Equipment, Net

12 Months Ended

Dec. 31, 2012

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

Note 6.    Property and Equipment, Net

The components of property and equipment follow:

	Estimated	December 31,
	Useful Lives	2012			2011
Purchased computer software	1-3 years	$	8,087		$	8,107
Computers and equipment	3-7 years		8,009			7,808
Furniture	3-7 years		701			696
Leasehold improvements	Lease term*		559			679
Gross property and equipment			17,356			17,290
Accumulated depreciation and amortization			(16,245	)		(15,935	)
Property and equipment, net		$	1,111		$	1,355

* Estimated useful life of improvement if shorter.

Depreciation expense was $0.4 million in 2012, $0.6 million in 2011 and $0.6 million in 2010.

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Accrued Expenses and Other Current Liabilities

12 Months Ended

Dec. 31, 2012

Payables and Accruals [Abstract]

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

Note 8.    Accrued Expenses and Other Current Liabilities

The components of accrued expenses and other current liabilities follow:

	December 31,
	2012		2011
Accrued and other current liabilities	$	3,310	$	3,162
Accrued royalties		1,453		2,536
Accrued compensation and benefits		3,059		2,813
Restructuring liabilities		2,016		1,995
Deferred revenue		425		149
Total accrued expenses and other current liabilities	$	10,263	$	10,655

The Company periodically evaluates any contingent liabilities in connection with any payments to be made for any potential intellectual property infringements, asserted or unasserted. The Company’s accrued royalties as of December 31, 2012 and 2011, represent the contingent payments for asserted or unasserted claims that are probable as of the respective balance sheet dates based on the applicable patent law.

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Employee Benefit Plans (Details 1)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Number of restricted stock units outstanding	1,629,952	1,496,868	571,182
Number of restricted stock units, Granted	1,160,207	1,045,251	1,398,250
Number of restricted stock units, Released	(971,015)	(749,070)	(405,838)
Number of restricted stock units, Canceled, forfeited or expired	(117,365)	(163,097)	(66,726)
Number of restricted stock units outstanding	1,701,779	1,629,952	1,496,868

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Employee Benefit Plans (Details 3)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Risk-free interest rate			1.61%
Expected life in years			3 years 9 months 18 days
Expected volatility			94.84%
Expected dividend yield	0.00%	0.00%	0.00%

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Employee Benefit Plans (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Number Of Options Outstanding	1,770,554	2,159,833	2,485,134
Number Of Options Outstanding, Granted	0	10,000	113,167
Number Of Options Outstanding, Exercised	(14,684)	(88,188)	(13,264)
Number Of Options Outstanding, Canceled, forfeited or expired	(356,742)	(311,091)	(425,204)
Number Of Options Outstanding	1,399,128	1,770,554	2,159,833
Weighted Average Exercise Price Per share, Outstanding	$ 9.19	$ 9.47	$ 10.02
Weighted Average Exercise Price Per share, Granted	$ 0.00	$ 2.77	$ 2.18
Weighted Average Exercise Price Per share, Exercised	$ 2.34	$ 2.42	$ 2.32
Weighted Average Exercise Price Per share, Canceled, forfeited or expired	$ 10.35	$ 12.85	$ 10.93
Weighted Average Exercise Price Per share, Outstanding	$ 8.96	$ 9.19	$ 9.47

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Accrued Expenses and Other Current Liabilities (Tables)

12 Months Ended

Dec. 31, 2012

Payables and Accruals [Abstract]

Accrued Expenses and Other Current Liabilities Disclosure [Table Text Block]

The components of accrued expenses and other current liabilities follow:

	December 31,
	2012		2011
Accrued and other current liabilities	$	3,310	$	3,162
Accrued royalties		1,453		2,536
Accrued compensation and benefits		3,059		2,813
Restructuring liabilities		2,016		1,995
Deferred revenue		425		149
Total accrued expenses and other current liabilities	$	10,263	$	10,655

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Goodwill and Other Intangible Assets (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012		Dec. 31, 2011
Cost	$ 6,484	[1]	$ 7,132	[2]
Accumulated amortization	(5,936)		(5,671)
Total	548		1,461
Developed Technology Rights [Member]
Cost	1,755	[1]	1,974	[2]
Accumulated amortization	(1,707)		(1,585)
Total	48		389
Customer Relationships [Member]
Cost	4,729	[1]	5,158	[2]
Accumulated amortization	(4,229)		(4,086)
Total	$ 500		$ 1,072

[1] During the fourth quarter of 2012, impairment testing for certain purchased customer relationships and developed technology was performed by the Company and indicated that the undiscounted future cash flows of the mentioned intangible assets were less than their corresponding carrying amounts. As a result, the Company recorded an impairment charge of $0.6 million.

[2] During the fourth quarter of 2011, impairment testing for certain purchased customer relationships and developed technology was performed by the Company and indicated that the undiscounted future cash flows of the mentioned intangible assets were less than their corresponding carrying amounts. As a result, the Company recorded an impairment charge of $5.4 million.

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Credit Facility

12 Months Ended

Dec. 31, 2012

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

Note 13.    Credit Facility

On April 4, 2011, the Company entered into an Amended and Restated Business Financing Agreement (the “Amended Financing Agreement”) with Bridge Bank N.A. (“Bridge Bank”) which amended and restated its existing credit facility. The Amended Financing Agreement provides a credit facility to the Company of up to $5.0 million which bears interest at the higher of (i) the prime rate plus 2.0% or (ii) 5.25% percent, plus the payment of certain fees and expenses (the “Facility”). The Facility is secured by substantially all the personal property of the Company, including its accounts receivable and intellectual property. Subject to the terms of the Amended Financing Agreement, availability under the Facility is based on a formula pursuant to which Bridge Bank would advance an amount equal to the lower of $5.0 million or 80% of the Company’s eligible accounts receivable, ($2.4 million at December 31, 2012) with account eligibility and advance rates determined by Bridge Bank in its sole discretion. The term of the Facility is two years and at the expiration of such term, all loan advances under the Facility will become immediately due and payable. At December 31, 2012 and 2011, the Company had outstanding borrowings under this facility of $2.4 million and zero, respectively. We are in discussions with Bridge Bank about extending the Facility. We are currently not in compliance with the asset coverage ratio covenant in the Facility and we are discussing with Bridge Bank an agreement pursuant to which Bridge Bank would agree to forbear from exercising its rights to in the event of default, which rights include accelerating the repayment of our indebtedness. Although we are in discussions with Bridge Bank about extending the Facility which is set to expire in April 2013, we cannot assure you that we will be able to extend or renew the Facility on terms reasonably acceptable to us or at all. In the future, if we are unable to maintain our compliance or obtain a waiver of our noncompliance with this covenant or others, Bridge Bank could accelerate our indebtedness, which could impair our ability to continue to conduct our business. If our indebtedness is accelerated in full or in part, it would be very difficult in the current financing environment for us to refinance our debt or obtain additional financing, which could adversely affect our ability to continue our business.

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Subsequent Events

12 Months Ended

Dec. 31, 2012

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 18. Subsequent Events

The Company’s Registration Statement on Form S-3 (File No. 333-162609), filed with the Securities and Exchange Commission on October 21, 2009, as amended and supplemented from time to time (the “Prior Registration Statement”), expired in October 2012. The Company initially filed a new Registration Statement on Form S-3 (File No. 333-184591) with the Securities and Exchange Commission on October 25, 2012, which was subsequently declared effective on January 25, 2013 (the “Current Registration Statement”).

On December 4, 2012, we received a letter from Nasdaq (the “Minimum Bid Price Notice”) notifying us that the closing bid price of our common stock was below the $1.00 minimum bid price requirement for 30 consecutive business days and, as a result, the Company no longer complied with the minimum bid price requirement under Listing Rule 5550(a)(2) for continued listing on Nasdaq. The Minimum Bid Price Notice also stated that we have been provided an initial compliance period of 180 calendar days, or until June 3, 2013, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days prior to June 3, 2013. If we do not regain compliance by June 3, 2013, Nasdaq will provide notice to us that our securities will be subject to delisting.

On February 26, 2013, we received a letter from Nasdaq (the “Stockholders’ Equity Notice”) notifying us that we were no longer in compliance with the minimum stockholders’ equity requirement of at least $2.5 million for continued listing on Nasdaq. The Stockholders’ Equity Notice does not result in the immediate delisting of our common stock from Nasdaq. Rather, under the Nasdaq Listing Rules, we have 45 calendar days from the date of the Stockholders’ Equity Notice to submit to Nasdaq a plan to regain compliance. If the plan is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the Stockholders’ Equity Notice for us to evidence compliance. If we submit a plan, Nasdaq will determine whether to accept the plan, considering such criteria as the likelihood that the plan will result in compliance with Nasdaq’s continued listing criteria, our past compliance history, the reasons for our current non-compliance, other corporate events that may occur within the review period, our overall financial condition and our public disclosures. If Nasdaq does not accept the plan, we will have the opportunity to appeal that decision to a Hearings Panel.

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Property and Equipment, Net (Details Textual) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Depreciation	$ 0.4	$ 0.6	$ 0.6

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Quarterly Information (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2012

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information [Table Text Block]

The table below shows selected unaudited quarterly information of operating results. The Company believes that this information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. Interim operating results are not necessarily indicative of future period results.

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Full Year
Year ended December 31, 2012
Net revenues	$	3,681		$	3,825		$	4,752		$	5,620		$	17,878
Cost of revenues		1,511			1,261			1,692			1,403			5,867
Gross profit		2,170			2,564			3,060			4,217			12,011
Net loss (2)		(6,083	)		(5,997	)		(3,000	)		(3,142	)		(18,222	)
Net loss per common share (1):
Basic	$	(0.20	)	$	(0.19	)	$	(0.09	)	$	(0.09	)	$	(0.55	)
Diluted	$	(0.20	)	$	(0.19	)	$	(0.09	)	$	(0.09	)	$	(0.55	)
Year ended December 31, 2011
Net revenues	$	8,227		$	7,053		$	6,665		$	6,310		$	28,255
Cost of revenues		2,944			2,339			2,368			2,672			10,323
Gross profit		5,283			4,714			4,297			3,638			17,932,
Net (loss) income (2)		(3,149	)		(2,999	)		(4,787	)		(11,937	)		(22,872	)
Net (loss) income per common share (1):
Basic	$	(0.13	)	$	0.11		$	(0.16	)	$	(0.39	)	$	(0.82	)
Diluted	$	(0.13	)	$	0.11		$	(0.16	)	$	(0.39	)	$	(0.82	)

(1) The sum of quarterly per share amounts may not equal per share amounts reported for year-to-date periods due to changes in the number of weighted average shares outstanding and the effects of rounding.

(2) The reported net loss for 2012 and 2011 reflects stock-based compensation expense of 2.1 million (first quarter of $0.5 million, second quarter of $0.4 million, third quarter of 0.5 million, and fourth quarter of $0.7 million) and 2.5 million (first quarter of $0.5 million, second quarter of $0.6 million, third quarter of 0.7 million, and fourth quarter of $0.7 million), respectively.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Net loss	$ (18,222)	$ (22,872)	$ (4,609)
Other comprehensive loss:
Foreign currency translation adjustment	(485)	(523)	(92)
Comprehensive loss	$ (18,707)	$ (23,395)	$ (4,701)

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Fair Value Measurements

12 Months Ended

Dec. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Note 2. Fair Value Measurements

The Company applies fair value standards for recurring financial assets and liabilities only. The accounting framework for determining fair value includes a hierarchy for ranking the quality and reliability of the information used to measure fair value, which enables the reader of the financial statements to assess the inputs used to develop those measurements. The fair value hierarchy consists of three tiers as follows:

Level 1 – Quoted prices in active markets are available for identical assets and liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

As of December 31, 2012 and 2011, the Company’s financial assets included investments in non-publicly traded companies. The Company considers net realizable value for its investments in non-publicly traded companies for purposes of determining asset impairment losses. For the year ended December 31, 2012 and 2011, the Company had no impairment losses on investments in non-publicly traded companies.

The carrying amounts for cash equivalents, accounts receivable and accounts payable approximate fair value due to their immediate or short-term nature of the maturity. The fair value of short term investments was zero and $2.0 million as of December 31, 2012 and 2011, respectively. The short-term investment values are based on a Level 2 valuation technique.

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Income Taxes (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
U.S. loss	$ (17,064)	$ (23,082)	$ (3,700)
Foreign income	(770)	846	67
Loss before income taxes	$ (17,834)	$ (22,236)	$ (3,633)

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Issuance of Common Stock (Details Textual) (USD $)	1 Months Ended					12 Months Ended							1 Months Ended	0 Months Ended		1 Months Ended
	Jul. 23, 2012	Jul. 31, 2012	May 31, 2012	May 31, 2011	Jun. 30, 2010	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Jul. 16, 2012	Feb. 10, 2012	Apr. 29, 2010	Dec. 31, 2009	May 31, 2012 Director [Member]	Jul. 16, 2012 Common Stock Purchase Agreement [Member]	Jul. 16, 2012 Aspire [Member]	Apr. 30, 2010 Rights Offering [Member]	Apr. 29, 2010 Rights Offering [Member]
Stock Issued During Period, Shares, New Issues	363,343		1,315,000	6,210,000	2,117,236	2,380,560							161,150		990,099	4,153,883
Proceeds from issuance of common stock, net of fees				$ 16,100,000	$ 5,100,000	$ 5,236,000	$ 16,073,000	$ 6,317,000
Estimated Expenses Payable				1,300,000
Common stock, shares issued						36,107,763	30,633,302
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Lower Range Limit						$ 2.00
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Upper Range Limit						$ 24.80
Cost Incurred Towards Issue Of Shares					500,000	400,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price						$ 8.96	$ 9.19	$ 9.47				$ 10.02					$ 2.4
Common stock, par value (in dollars per share)					$ 0.001	$ 0.001	$ 0.001		$ 0.001								$ 0.001
Share Price					$ 2.4						$ 2.4
Stock Issued During Period Par Or Stated Value Per Share New Issues						$ 0.001
Stock Issued During Period Share Price			$ 1.86										$ 2.07
Proceeds from Issuance Initial Public Offering	400,000		2,445,900			2,200,000							333,580
Securities Purchase Agreement Initiation Date			May 08, 2012
Aggregate Offering Price										10,000,000
Percentage Commission Payment Upon Gross Sale Price Per Share										3.00%
Proceeds From Registered Direct Offering						2,700,000
Common Stock Price Description		During the term of the Aspire Purchase Agreement, the Company can direct Aspire to purchase up to 50,000 shares per business day at a price equal to the lower of (i) the lowest sale price for the Common Stock on the date of sale or (ii) the arithmetic average of the three lowest closing sale prices for the Common Stock during the 12 consecutive business days ending on the business day immediately preceding the date of sale.
Additional Purchase Of Common Stock Shares Description		In addition, on any business date that the Company directs Aspire to purchase 50,000 shares, the Company also has the right to direct Aspire to purchase an amount of Common Stock equal to a percentage (not to exceed 15%, which limitation may be increased to 30% by mutual agreement of the parties) of the aggregate shares of Common Stock traded on the next business day, subject to a maximum number of shares determined by the Company. Subject to certain limitations, the purchase price for these shares shall be the lower of (i) the closing sale price on the date of sale or (ii) ninety-five percent (95%) of the next business day''s volume weighted average price. The Company has the right to determine a maximum number of shares and set a minimum market price threshold for each purchase.
Stock Issued During Period, Value, New Issues						$ 5,236,000	$ 16,073,000	$ 6,317,000						$ 11,000,000	$ 1,000,000
Shares Issued As Commitment Fee						297,030

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Quarterly Information (Unaudited)

12 Months Ended

Dec. 31, 2012

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Information [Text Block]

Note 19.    Quarterly Information (Unaudited)

The table below shows selected unaudited quarterly information of operating results. The Company believes that this information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. Interim operating results are not necessarily indicative of future period results.

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Full Year
Year ended December 31, 2012
Net revenues	$	3,681		$	3,825		$	4,752		$	5,620		$	17,878
Cost of revenues		1,511			1,261			1,692			1,403			5,867
Gross profit		2,170			2,564			3,060			4,217			12,011
Net loss (2)		(6,083	)		(5,997	)		(3,000	)		(3,142	)		(18,222	)
Net loss per common share (1):
Basic	$	(0.20	)	$	(0.19	)	$	(0.09	)	$	(0.09	)	$	(0.55	)
Diluted	$	(0.20	)	$	(0.19	)	$	(0.09	)	$	(0.09	)	$	(0.55	)
Year ended December 31, 2011
Net revenues	$	8,227		$	7,053		$	6,665		$	6,310		$	28,255
Cost of revenues		2,944			2,339			2,368			2,672			10,323
Gross profit		5,283			4,714			4,297			3,638			17,932,
Net (loss) income (2)		(3,149	)		(2,999	)		(4,787	)		(11,937	)		(22,872	)
Net (loss) income per common share (1):
Basic	$	(0.13	)	$	0.11		$	(0.16	)	$	(0.39	)	$	(0.82	)
Diluted	$	(0.13	)	$	0.11		$	(0.16	)	$	(0.39	)	$	(0.82	)

(1) The sum of quarterly per share amounts may not equal per share amounts reported for year-to-date periods due to changes in the number of weighted average shares outstanding and the effects of rounding.

(2) The reported net loss for 2012 and 2011 reflects stock-based compensation expense of 2.1 million (first quarter of $0.5 million, second quarter of $0.4 million, third quarter of 0.5 million, and fourth quarter of $0.7 million) and 2.5 million (first quarter of $0.5 million, second quarter of $0.6 million, third quarter of 0.7 million, and fourth quarter of $0.7 million), respectively.

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Supplemental Cash Flow Information (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Cash paid for interest	$ 68	$ 124	$ 460
Cash paid for income taxes	$ 237	$ 234	$ 218

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Restructuring Charges (Tables)

12 Months Ended

Dec. 31, 2012

Restructuring and Related Activities [Abstract]

Schedule of Restructuring and Related Costs [Table Text Block]

A summary of the restructuring liabilities and activity follows:

	2012 Activity
	Restructuring Liabilities December 31, 2011		Restructuring Charges		Cash Payments			Non-cash asset write-offs			Adjustments and Changes to Estimates			Restructuring Liabilities December 31, 2012
Employee Termination Benefits	$	753	$	1,143	$	(1,133	)	$	(230	)	$	179		$	712
Facility lease costs		3,727		183		(905	)		—			(504	)		2,501
Other		—		—		(160	)		—			426			266
Totals	$	4,480	$	1,326	$	(2,198	)	$	(230	)	$	101		$	3,479

	2011 Activity
	Restructuring Liabilities December 31, 2010		Restructuring Charges		Cash Payments			Non-cash asset write-offs		Adjustments and Changes to Estimates			Restructuring Liabilities December 31, 2011
Employee Termination Benefits	$	3	$	1,391	$	(641	)	$	—	$	—		$	753
Facility lease costs		11,205		—		(529	)		—		(6,949	)		3,727
Totals	$	11,208	$	1,391	$	(1,170	)	$	—	$	(6,949	)	$	4,480

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2012

Compensation and Retirement Disclosure [Abstract]

Compensation and Employee Benefit Plans [Text Block]

Note 12.    Employee Benefit Plans

Employee Stock Purchase Plans

Under the Company’s employee stock purchase plans, eligible employees may purchase a limited number of shares of common stock at 85% of the fair market value at either the date of enrollment or the date of purchase, whichever is less. The 1995 Employee Stock Purchase Plan was closed effective December 31, 2004. On May 19, 2005, the Company’s shareholders approved the 2005 Employee Stock Purchase Plan (the “2005 ESPP”). Under the 2005 ESPP, the Company is authorized to issue 250,000 shares of common stock. Shares issued under the 2005 ESPP in 2012, 2011, and 2010 were 54,171, 58,230, and 30,249, respectively.

 Stock Option and Award Plans

As of December 31, 2012, the Company has one stock option plan which is the 2008 Equity Incentive Plan (the “2008 Plan”). Also, the 1995 Stock Plan, as amended (the “1995 Plan”), expired on March 15, 2010 and the 2000 Stock Option Plan as amended (the “2000 Plan”), expired on July 14, 2010.

Under the 1995 Plan, 3,925,000 shares of the Company’s common stock were available to grant to employees in the form of incentive stock options. The 1995 Plan, as amended, expired on March 15, 2010 and as such shares are no longer available for grant. The terms of the options granted are subject to the provisions of the 1995 Plan, as determined by the Compensation Committee of the Board of Directors. The exercise price of options under the 1995 Plan is equal to the fair market value of the common stock on the date of grant. Options granted under the 1995 Plan are generally nontransferable. As of December 31, 2012, 165,199 options were outstanding.

The 2000 Plan provided for the granting of non-qualified options to employees and consultants to purchase up to an aggregate of 1,250,000 shares of common stock and was terminated on July 14, 2010. No member of the Board of Directors or executive officers appointed by the Board of Directors was eligible for grants of options under the 2000 Plan. The terms of the options granted are subject to the provisions of the 2000 Plan, as determined by the Compensation Committee of the Board of Directors. Each non-qualified stock option shall either be fully exercisable on the date of grant or shall become exercisable thereafter in such installments as the Board of Directors may specify. No option granted under the 2000 Plan may be exercised after the expiration of seven years from the date of grant. The exercise price of options under the 2000 Plan is equal to the fair market value of the common stock on the date of grant. Options granted under the 2000 Plan are generally nontransferable. In connection with the adoption of the 2008 Plan on May 22, 2008, shares are no longer available for grant under the 2000 Plan. As of December 31, 2012, 159,569 options were outstanding.

The 2008 Plan was approved by shareholders at the shareholder meeting held on May 22, 2008. The purpose of this plan is to provide stock options, stock issuances, and other equity interests in the Company to employees, officers, directors, consultants, and advisors to the Company and its subsidiaries or any future parent corporation. The 2008 Plan is administered by the Board of Directors of the Company who will have sole discretion and authority to interpret and correct the provisions of the Plan and any Award. The Board will also have sole authority to determine the terms and provisions of the respective Stock Option Agreements and Awards, which need not be identical. The aggregate number of shares of Common Stock of the Company that may be issued pursuant to the 2008 Plan is 7,196,250. As of December 31, 2012, there were 1,916,556 shares available for grant under the 2008 Plan. As of December 31, 2012, 2,776,139 options and awards were outstanding.

Information regarding stock options follows:

	Number of options outstanding			Weighted average exercise price per share
Outstanding at December 31, 2009		2,485,134		$	10.02
Granted		113,167			2.18
Exercised		(13,264	)		2.32
Canceled, forfeited or expired		(425,204	)		10.93
Outstanding at December 31, 2010		2,159,833			9.47
Granted		10,000			2.77
Exercised		(88,188	)		2.42
Canceled, forfeited or expired		(311,091	)		12.85
Outstanding at December 31, 2011		1,770,554			9.19
Granted		0			0.00
Exercised		(14,684	)		2.34
Canceled, forfeited or expired		(356,742	)		10.35
Outstanding at December 31, 2012 1		1,399,128		$	8.96

Information regarding restricted stock awards follows:

	Number  of restricted stock units outstanding
Outstanding at December 31, 2009		571,182
Granted		1,398,250
Released		(405,838	)
Canceled, forfeited or expired		(66,726	)
Outstanding at December 31, 2010		1,496,868
Granted		1,045,251
Released		(749,070	)
Canceled, forfeited or expired		(163,097	)
Outstanding at December 31, 2011		1,629,952
Granted		1,160,207
Released		(971,015	)
Canceled, forfeited or expired		(117,365	)
Outstanding at December 31, 2012		1,701,779

The Company has, in connection with the acquisitions of various companies, assumed the stock option plans of each acquired company. The related options are included in the preceding table.

Options outstanding and exercisable at December 31, 2012 follow:

				Options Outstanding				Options Exercisable
Range of   Exercise prices		Number Outstanding		Weighted Average Remaining Contractual  Life		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$	2.00 to 2.20		140,202		4.39	$	2.13		118,640	$	2.13
	2.32 to 2.32		69,901		2.93		2.32		69,901		2.32
	2.43 to 2.43		214,961		3.94		2.43		168,086		2.43
	2.48 to 5.12		166,409		2.96		3.93		160,332		3.98
	5.52 to 8.16		146,498		3.11		6.42		145,248		6.42
	8.40 to 12.40		177,342		2.73		10.98		177,342		10.98
	12.64 to 13.20		167,010		1.80		13.10		167,010		13.10
	13.28 to 16.88		191,514		1.29		15.10		191,514		15.10
	17.52 to 24.00		32,562		1.53		19.54		32,562		19.54
	24.80		92,729		1.13		24.80		92,729		24.80
$	2.00 to 24.80		1,399,128		2.72	$	8.96		1,323,364	$	9.34

Stock options generally expire five, seven or ten years from the date of grant and generally vest ratably over periods ranging from immediately to four years.

Stock compensation charged to operations was $2.4 million in 2012, $2.5 million in 2011and $2.4 million in 2010. Further, no compensation cost was capitalized as part of inventory, and no income tax benefit was recognized in those years. Lastly, no equity awards were settled in cash.

 Stock-Based Compensation Fair Value Disclosures

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	2012		2011		2010
Risk-free interest rate		N/A		N/A		1.61	%
Expected life in years		N/A		N/A		3.80
Expected volatility		N/A		N/A		94.84	%
Expected dividend yield		—		—		—

There were no stock options granted during 2012. The weighted average fair value of stock options granted, calculated using the Black-Scholes option-pricing model is $0.00 for 2011 and $1.41 for 2010. In 2011 the company granted stock options to a consultant. The fair value of these options was calculated using the stock price on the date of grant. The cost of this grant was $0.02 million. The weighted average fair value of restricted stock units granted is $1.36 for 2012, $3.09 for 2011 and $2.37 for 2010. The total intrinsic value of the options exercised was $0.01 million for 2012, $0.08 million for 2011 and $0.01 million for 2010. Restricted stock units released had an intrinsic value of $1.3 million in 2012, $2.2 million in 2011 and $0.9 million in 2010.

The Company recognized compensation expense related to stock options granted to non-employees of zero in 2012, $0.02 million in 2011 and zero in 2010.

 Employee 401(k) Plan

The TranSwitch Corporation 401(k) Retirement Plan (the “Plan”) provides tax-deferred salary deductions for eligible employees. Employees may contribute an annual maximum amount as set periodically by the Internal Revenue Service. The Company had provided matching contributions equal to 50% of the employees’ contributions, up to a maximum of 6% of the employee’s annual compensation. On July 1, 2009, the Company indefinitely suspended its matching contributions. Company contributions begin vesting after two years and are fully vested after three years. Contribution expense related to the Plan was zero in 2012, 2011, and 2010.