Peraso Inc (PRSO) 2006 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. We are now ready to begin the MoSys Third Quarter 2006 Financial Results Conference Call. I will now turn the call over to Beverly Twing of Shelton Group Investor Relations.

Thank you, Shanique. By now, everyone should have received the press release. However, if you haven't, it is available on the MoSys website at www.mosys.com.

Before we begin the discussion of the third quarter's results, I would like to remind you that this conference call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which includes without limitation, statements about the market for the MoSys technologies, benefits and performance expected from use of the 1T-SRAM technologies and embedded memory designs, licensees of 1T-SRAM technologies and their strategy, the development and production of products that use MoSys' licensed technology, license fees and royalties attributable to 1T-SRAM technologies, and the Company's anticipated or prospective financial performance.

Forward-looking statements made during this call are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Additional information concerning the factors that could-- that could cause actual results to differ materially from any forward-looking statements made during this call are contained in the Company's most recent annual report on Form 10-K filed with the Securities and Exchange Commission, in particular, in the section titled "Risk Factors" in the Form 10-K and in other reports that the Company files from time to time with the Securities and Exchange Commission. MoSys undertakes no obligation to publicly update any forward-looking statement for any reason except as required by law, even if new information becomes available or other events occur in the future.

Thank you for your attention. I will now turn the call over to Chet Silvestri, Chief Executive Officer of MoSys. Chet?

Thank you, Beverly. Good afternoon everyone and welcome to MoSys Third Quarter 2006 Financial Results Conference Call. Joining me today is Jim Pekarsky, our Chief Financial Officer. I'll begin today's call with an overview of our recent business highlights as well as provide updates regarding our products and markets. Following my remarks, Jim will provide a detailed overview of our financial performance and afterward we'll open the call for a question-and-answer session.

So to begin, total revenue for the third quarter was $4 million, which represents a 73% sequential increase over the previous quarter. This revenue included license fees from the new 65 nanometer agreement with Fujitsu. The signing of the Fujitsu agreement represents solid progress against our initiative to broaden our technology licensing with IDMs at 65 nanometer.

The IDMs, or integrated device manufacturers, by using our high density 1T-SRAM memory technology, are able to design complex system-on-chips that have a fraction of the die area devoted to embedded memory as compared to other competed embedded memory technology. Since our 1T-SRAM technology has the inherent advantage of being easily scalable to smaller geometries, unlike the standard embedded DRAM, these IDMs can offer their customers the advantage of using the MoSys solution at their most advanced processed geometry. So at MoSys, we continue to prioritize our development efforts on these leading-edge geometries and we'll continue to pursue broad-based licensing based on this technology.

Subsequent to the close of the third quarter, we also signed another significant 65 nanometer technology licensing agreement with a major manufacturer. Revenue for this agreement will be recorded in the fourth quarter of 2006 and we’re currently working toward a joint announcement business agreement in the near future.

Now onto the CLASSIC Macro program. We are continuing to develop and introduce new macros at 90 nanometers and 65 nanometers so that fabless semiconductor companies can also take advantage of the benefits of 1T-SRAMs at these most advanced geometries.

Earlier today, we announced a 90 nanometer CLASSIC Macro license with Pixim who has licensed earlier geometries and now moves forward to adopt the latest implementation. We currently have these 90 nanometer and 65 nanometer designs in process for multiple pure play foundries. We see a lot of demand coming from established chip companies for these advanced implementations. We are confident that our memory solutions are fast becoming the solutions of choice, particularly for next generation consumer electronic devices.

Similarly, we continue to make progress with our 1T Flash technology and during the quarter, we signed our first 1T Flash licensee. We continue to have discussions with other potential licensees and expect to sign additional agreements before the end of the year. We expect the 1T Flash program to an incremental contributor to revenue in 2007 and believe that the market opportunity for embedded Flash is as large as the market for embedded SRAM.

Additionally, as discussed in our previous conference calls, we announced that our 1T-SRAM is being utilized in Nintendo's upcoming Wii game console. We will begin recording royalties in the fourth quarter of 2006 with a continued ramp into the first quarter and throughout 2007. With these shipments as well as those of other licensees, we expect our royalty revenues to increase significantly in the fourth quarter as compared to the third quarter.

Lastly, this morning, we announced a settlement of our outstanding litigation with UniRam. Under the terms of the settlement agreement, UniRam and MoSys have agreed to dismiss all outstanding claims and counterclaims. Under the settlement agreement, MoSys will pay $2.4 million to UniRam to end any further litigation costs and to receive a complete release of all claims and a fully paid-up license to all of the UniRam patents which apply to embedded memory for MoSys and all of our licensees.

The full settlement amount was included in the third quarter results and we believe any future costs related to this matter will be minimal beyond the date of settlement. We're very pleased to have reached this resolution and believe the terms of the settlement to be in the best interest of the Company and our shareholders.

I would now like to turn the call over to Jim Pekarsky who will review our third quarter financial results and after which, we will open the call for questions.

Thank you, Chet. I will begin my review of our financial results by stating -- starting with our statement of operations. During the course of my comments this afternoon, I will make several references to non-GAAP numbers. Unless otherwise indicated, each reference excludes stock-based compensation expense related to FAS 123R. These non-GAAP financial measures and a reconciliation of the differences between them and comparable GAAP measures are presented in our press release and related current report on Form 8-K, which can be found at the Investor Relations section of our website.

Total net revenue in the third quarter was $4 million, compared to $2.3 million in the second quarter of 2006. The third quarter total revenue represents a 72% sequential increase in total revenue.

Licensing revenue was $3.3 million, compared to $1.7 million in the previous quarter. Licensing revenue was recognized from 13 different chip development projects during the quarter compared to 13 development chips-- development projects last quarter.

Royalty revenue in the third quarter was $705,000, compared to $639,000 in the previous quarter. Royalties from NEC that are associated with the Nintendo Wii are expected to be recognized starting in the fourth quarter of 2006, and will [technical difficulty] throughout 2007. As is typical with our royalty revenues, they're recorded with the one quarter lag.

In the third quarter of 2006, royalty revenue was earned from 15 different licensees compared to 18 licensees in the prior quarter.

Under Generally Accepted Accounting Principles, the gross margin percentage was approximately 96% of net revenue in the third quarter of 2006 compared to 84% in the previous quarter.

The sequential increase in total gross margin for the quarter was primarily due to licensing revenue recognized from the high margin contract with Fujitsu. On a non-GAAP basis, the gross margin was also approximately 96% in the third quarter and excluded stock-based compensation charges of $23,000.

On a GAAP basis, operating expenses were $7.8 million in the third quarter compared to $4.9 million in the previous quarter. Total operating expenses included $2.4 million for the litigation settlement as well as approximately $816,000 in legal expenses attributable to the UniRam litigation, up from $574,000 the previous quarter.

On a non-GAAP basis, operating expenses for the third quarter were $7.1 million. This excluded stock-based compensation charges of $703,000.

Non-operating income, including interest income, totaled approximately $1 million for the quarter, up from $926,000 in the previous quarter, due to higher interest rates.

On a GAAP basis, the net loss for the quarter was $2.9 million or a loss of $0.09 per share. This included charges related to one-time non-reoccurring settlement charge of $2.4 million or $0.08 per share. A net loss of $2.1 million or a loss of $0.07 per share was recorded in the previous quarter.

On a non-GAAP basis, which excludes stock-based compensation charges of $703,000, the net loss for the third quarter was $2.2 million, or a loss of $.07 per share. Excluding the one-time non-reoccurring settlement charge of $2.4 million, or $0.08 per share, the EPS was a positive, $0.01 per diluted share for the quarter.

Third quarter loss per share on both a GAAP and a non-GAAP basis was computed using 31,386,000 shares.

Now moving to our balance sheet, as of September 30th, 2006, our cash, cash equivalents and both long and short-term investments, totaled approximately $87.1 million, up from approximately $84.5 million recorded as of June 30, 2006. For the third quarter of 2006, we were cash flow positive as a result of significantly reducing our accounts receivables.

Lastly, in terms of guidance, MoSys expects total revenues for the fourth quarter to be in the range of approximately $5 to $6 million, bringing total revenues for the year in the range of approximately $15 to $16 million. Revenue will be derived from a combination of 65 nanometer technology licensing with IDMs, 90 nanometer and early 65 nanometer CLASSIC Macro licenses, and per unit royalties as we begin to recognize royalties associated with the Nintendo Wii game console.

Forth quarter gross margin is expected to be in the range of 90% to 95% of total net revenue, depending upon the sales mix. Operating expenses will be reduced from prior quarter levels as the legal expenses attributable to the UniRam litigation wind down.

On a GAAP basis, total operating expenses are expected to be approximately $5.1 million and on a non-GAAP basis, excluding stock-based compensation charges, approximately $4.4 million.

So with interest income and other expense at approximately $1 million, the anticipated EPS, on a non-GAAP basis, is expected to be a positive $.05 per diluted share for the fourth quarter.

Now I would like to turn the call back to Chet for closing remarks.

Thank you, Jim. So in summary, we're very pleased with the continued progress on our strategic and technology initiatives. The interest level from our IDMs, in our current 65 nanometer technology, remains strong and our agreement with Fujitsu is a key milestone in this progress.

We also see strong demand for our CLASSIC Macros and we remain on track to introduce the 65 nanometer implementation. We believe that MoSys is well-positioned to take advantage of the market shift to these smaller geometries and due to the scalability of our technology.

Additionally, our 1T Flash program is making measurable progress as evidence by our first 1T Flash license. Lastly, we also anticipated significant ramping of royalties as the Nintendo Wii game console is introduced into the marketplace.

Looking forward, we exit this quarter with a strong sales pipeline, which we believe will set the stage for additional announcements and a profitable 2007 year for the company.

So with that, this concludes our prepared remarks. Operator, we'll now open the call for the question-and-answer period.

[OPERATOR INSTRUCTIONS]

Our first question comes from the line of Chris Chaney with Stanford Group. Please proceed.

Thank you and guy, it looks like a pretty decent quarter. And I like the guidance going forward. I have some questions about that. So let me get to that in a second. The first question is on the Flash. You signed this deal about a quarter earlier than I thought you would and that's good, but I'm wondering is the revenue going to be booked completely in the fourth quarter or has some been booked in Q3? Or will some also fall into Q1 of next year?

This is Chet. Let me start and then I will turn it over to Jim. But -- as you may recall from last year, when we introduced completely new implementations of our macros, we used you know, a very heavily deferred revenue recognition policy on this.

Right.

So it will stretch over several quarters.

Okay, so maybe beginning in Q1 of next year?

Actually no. It begins immediately.

Okay.

But it stretches over a couple of quarters.

Okay. And then can you give us any hints on what the application is for the Flash? Is it wireless or game systems or --

Let me put it this way. And I think we have said this in the past. Our goal, as we launch this brand new technology for MoSys, are to engage with some early adopters, kind of strategic partners, to cover a couple of the, you know, high volume markets, and mostly mirroring what we do with our 1T-SRAM CLASSIC Macros. We want a partner that we implement a high performance macro with and we want a partner that we implement a very low-cost, low-power macro with.

And so we are well on track in signing both types of those guys. And we don’t want to sign too many initially, either. We want to get this into production with a few licensees that cover the complete spectrum of very high performance which you could look at, are networking -- implementations as well as low power for consumer products and handsets.

Okay. The following questions is on the settlement and I am just wondering what was the rationale that you used to kind of come to this $2+ million settlement and what was the original amount that UniRam was suing you for, how do those compare? And what do you think you might have had to spend going forward to get through the legal expenses you would have had to spend on this thing. And then finally, so that's the settlement question.

The final one is one the guidance; can you break out the revenue guidance between license and royalty, or give us some idea what that might look like. Thanks.

All right. Well, let me take the UniRam first and then Jim can comment additionally on UniRam and talk about the break down in the guidance.

I think you get the point. We -- if you noticed in our comments, we spent in excess of $800,000 in Q3 on ongoing litigation, UniRam litigation expense. And that was going to be a constant until -- as we get ready of trial and/or the successful elimination of this problem, which we believe we could have done.

But that $2.4 million - it's very simple math. It's three quarters and we were not going to have -- we were going to spend four quarters of expense just getting to trial.

Okay.

It just becomes a simple numbers game that -- these suits are always the same problem, right? What's in the best interest of the company and the management distraction and the economics to the shareholders, a settlement at less cost than it would take us to win makes a lot of sense.

And I'm assuming that the settlement also includes some sort of an indemnification of all customers, I guess, present and future that might be using technology which they claimed you had infringed upon?

Correct. All past, present, and future customers along with MoSys are completely indemnified and secured.

Okay, good news.

Yeah, so I think it's just one of these financial trade-offs you make. We did the careful analysis with our lawyers and understanding what it was costing us to proceed and what the alternatives-- Now your question of what they originally wanted us and what they claimed in the suit, you can add some zeroes behind that number.

Yeah, I thought it was a hundred or something like that.

Yeah. It was, that's right. But clearly, we were prevailing so let's just finish it off.

Gotcha. Okay and then finally on the guidance?

Yeah Chris. We indicated that we were going to start to see somewhat of a ramp from the Nintendo Wii we reported in the Q4. However that's -- those will come from royalties in the September time period. It's sort of a partial quarter. And so with that, the guidance royalties would be anticipated to be approximately between $1 million to $2 million.

Okay so clearly, run a doubling from quarter to quarter on royalties?

That's correct.

Okay. And then the incremental amount, the majority of that is going to be the Wii?

Correct. Yes, we have -- we’re tracking some other licensees, some fairly new licensees from the past 12 to 18 months that are moving closer to production but they'll be more significant contributors in 2007. Right now, the most significant will be the Nintendo Wii.

And finally, I just thought of one other. This contract that you had spoken about in the prepared comments, about a contract that you're working on now and hope to announce soon, is this the flavor of sort of an IDM or a foundry and should we expect more of these in the fourth quarter, both IDM and foundry, or one or the other?

Yes. So we're working on a number of them, as we said. This is one of those. I don’t want to get in too far down the path of trying to narrow it down; it would not be fair to the companies until we've come up with our joint public statement. But we did sign it. We signed it in the fourth quarter, already this quarter. So it's part of Q4's revenue and we'll announce it as soon as we can.

Is it fair to say that these kinds of contracts are million-dollar plus types of license arrangements or are they --

Yeah. It's fair to say that. On the 65 nanometer, it's in the category of our 65 nanometer technology licensing, which is multi-million dollars deals.

I see. So it's in the category of maybe a Fujitsu type of deal?

Yeah. The manufacturer where -- they're using the technology in their fabless and in their process.

Okay, very well. Thanks for answering the questions and I will step out.

Thanks a lot, Chris.

Thanks Chris.

[OPERATOR INSTRUCTIONS]

Our next question comes from the line of Nimal Vallipuram with Hapoalim Securities. Please proceed. Mr. Vallipuram, your line is open.

Hi, it is Nimal. Can you hear me?

Yeah, we can hear you.

I'm sorry [inaudible]. Two questions here. First of all, let me congratulate you on this UniRam settlement. Personally, I have been looking forward to for some time now. Typically in these litigation situations, no one wins. It does look like you have not necessarily paid too high a cost at all.

Let me try to reconcile something here. You have increased your cash $3 million last quarter after paying, you said, $2.5 million [inaudible] or is that $3 million?

No, we just announced the settlement.

Oh, okay. I understand.

Yeah, we have not paid them.

Okay.

We’re not in a rush to do that.

Okay. My second question is that going back to -- now after settling with UniRam, is it fair to say that there were probably some contract negotiations with you and other parties which were kind of being held up by these outstanding litigations?

It’s Chet. I don’t think -- it always weighed on licensees. But we, we provide protection and so I can't say it was actually stopping anybody. Now who knows who would not engage with a -- did not pick up the phone to call us, right?

No, let me put it another way. After settling this litigations, would it be fair to say that some of the customers -- you might get more positive response from some of the customers when you start talking to them about using your technology? I guess that was what I was trying get at.

Yeah, I believe this will happen. And I don’t want to get too far down this path but there are certain -- you know, we have a very strong patent position now and even stronger because you have these companies like UniRam out there that are also threatening other people. By becoming most of its licensees, they don’t have to worry about their embedded memory implementation at all.

Okay. Couple of small questions here. Once to go back to Chris's question. I'm sorry, it is being written on the press release; I'm trying to read it like two or three times to figure it out. Fujitsu license, is that 1T-SRAM license, 1T Flash license, or a macro license? What exactly is that license?

It's a 1T-SRAM license.

SRAM license? Okay, now. We have talked about the macro situation a number of times, starting from when you introduced the macro in the fourth quarter of last year. Now can you give us an idea of whether you have started booking any part of revenue related to macro implementation with any of the customers or are you still waiting fir that to happen?

No, we're booking revenue from our macro implementations with a number of customers.

Did that start third quarter or fourth quarter?

Well, it depends on which geometry. We have been booing those implementations since the fourth quarter of last year, of 2005, at the .13 micron geometry level.

Okay. What about that advance one being deferred? Has that already started?

From last year or this one now?

No, you had some deferred sales last year. When was that going to be realized on the net income statement?

Those are all in .13 micron and they have all been recognized in the first three quarters of this year.

Okay, okay. Now for the lower micron, do you still have to defer it? Are your auditors still requesting you to defer part of that or during some time now or in the future, would you be able to recognize those revenues as soon as you sign them, without deferring any component of that?

For .13 micron, we're recognizing them all now.

No, I'm not talking about .13. I'm talking about advanced [geometries].

So 90, we're going through a similar process although not as heavily back-ended.

Okay.

So for example, we announced that we signed a 90 nanometer license with Pixim today. And so we will continue to sign 90 nanometers and beginning to sign 65 nanometers, there is some deferral associated with them but probably to a lesser degree.

Yeah, the deferral is much more in 65 range because we indicate in our guidance that Q4 will be booking some early 65 nanometer CLASSIC Macro deals. Those are deals that are in development. It'll be more available in driving revenues in 2007.

Let me get that clear, I'm sorry to take some time but let me get it clear. Now, when you started at 130 Classic Macro in 2005, your auditors wanted you to have some track record before you start recognizing all the revenues, that they ask you to defer part of that and you have been deferring it and in the due course of time, recognizing those deferrals into the income statement. Now is it fair to say when you go from 130 to 90 to 65, that deferral percentage of that revenue that you sign with your customers will become lower and lower as you build track record or at every [lithography], would your auditors ask you to start fresh by asking you to defer the higher amount of sales at every [lithography]? Or would they give you the benefit of the track record by saying "Yes, you have done well in one 130. Over time, we will have to cut down the deferral part?" Which one of these is going to happen?

Actually, the deferral goes down.

It goes down?

Yeah and the reason is because when we're migrating, say, like, from .13 to 90 nanometers in the first few implementations with customers, we're building the very first reference macros, is where we are deferring most of the revenue. Once we have "off the shelf" type of reference library, or macro, then the deferral is much less at the new geometry. So we just now -- we're at the point now where, at 90 nanometers, we're able to start taking orders and delivering those orders complete.

At 65 nanometers, we will be on a deferral basis because we do not have those referenced macros off the shelf yet.

Okay.

We will in 2007.

Okay, just last two questions after and I will leave the line. The last question is that, or the penultimate question; you said 1T Flash related revenues will be recognized in 2007. Would you be able to give an idea starting in the first half or second half?

We'll recognize 1T Flash revenues throughout 2007. And we'll start along the same lines as 65 nanometer Classic Macros on those early-adopter licenses that we booked. We will start recognizing some revenue but in a heavily deferral mode because they are new products into the marketplace.

Okay. The last question, and I'm going to put you and Jim on the spot here. The numbers out there for the Nintendo Wii looks likes, first of all, Nintendo Wii is considered to be one of the hottest products coming out for the consumer electronics season. And being introduced somewhere in November in the U.S. and December in Japan. The number out there looks like far higher than what -- I mean, you did not give the number out but what you are willing to talk about basically. Is it fair to say that you yourself are surprised by the upside? So where would you -- what will you say about that? The Nintendo Wii adaptation and response from the customers so far?

So I think it's fair to say we are becoming more optimistic and we're seeing forecasts coming out that appear to be higher than our original assumptions in this program, in terms of the ramp. But at the same time, as Jim mentioned, the revenue that we're recognizing in the fourth quarter really represents only one month of shipment, because it's based on Q3 unit shipments or chip shipments from any Wii Nintendo, which is only one month.

I understand.

So we won’t get any -- even if their ramp is strong and as we speak today, it's going gangbusters, we're -- you're not going to see that until Q1. So we expect -- that's why we said, we expect our royalty revenues to continue to ramp starting in Q4 and continuing through 2007, because you have this build up in the volume and the one quarter in arrear problem.

Thanks a lot, Chet. Thanks a lot, Jim. Again, good luck and congratulations. It was a good quarter.

Thanks.

Okay.

Our next question comes from the line of Philip [Trike] of [Nemopolis] Partners. Please proceed.

Good afternoon, guys. Congratulations on that settlement. It looks like [Melanie] did a good job, so -- My question is pretty simply actually. It appears if you backed out the $800,000 you spent on legal expense and then of course 50.4. You're just about operating at break even at this run rate of revenues.

I guess my question is, on a go-forward basis, the model appears -- it has high, incremental margins and I would like to just get your -- just how much they will drop to the bottom line as you execute across these other customers and other platform and grow your revenue stream. Is it fair to say that earnings growth will be much more rapid than revenue growth?

Absolutely. We have in general, as revenues ramp on these, there will be some incremental expense, things like sales commissions. But in general, from an R&D expense point of view, and total operational point of view in the company, we could support a much high level of revenue with the current staff that we have.

So if you look forward, for every dollar of revenue that comes in, assuming 90-plus percent, 90%, 95% gross margins, you can imagine 80% of those dropping to the bottom line.

Excellent.

Now that being said, we will be investing in the business. If you look cumulatively, of the litigation, legal expenses related to that litigation over the course of 2006, and that was approximately $2.5 million. And that $2.5 million that hit our G&A line this year, will go away starting Q1 of `07.

So it does put us in the position to keep our total expense, as you know, flat or even down next year. And it still gives us some room for some growth in operating expense. If we need to have some key people, engineering or sales areas, which we'll probably look at doing. But overall, Chet is correct. With our current staff levels and the type of business model that we implement, our deals are very high gross margins because we expense a lot of the R&D upfront, as we build out our products for new generations. But once the products are available, generally push through our sales channel the incremental COGS is very on these products, 'cause the deliverables -- even when we are doing a custom deliverable, our deliverables are usually within a few months.

And so we tend to not only obviously carry a very high gross margin on our royalties, 'cause there is no cost associated with them, but even on our licensing, we do not sign up for large custom type of work, or large non-reoccurring engineering expenses for our internal engineering group. In the case of Fujitsu, it's a very high margin contract because Fujitsu, being a customer for three generations now, is already experienced with our technology and they have the ability to go off and build derivatives of our product on their own.

Right. I don't see any capitalized development expense in your balance sheet, so --

No.

So not only in -- your cash flow margins would be really big, too; as big as your net income margins almost, right?

Correct.

Excellent, thanks a lot guys.

Okay, thank you.

Our next question comes from the line of [Faleem Kabosh] of [Kabosh] Advisors. Please proceed.

Hey guys, congratulations on the UniRam settlement as well as the 1T Flash first licensee. I wanted to ask you about your 2006 royalty base and how stable that is or how it grows into 2007. So what I'm saying is, excluding basically the Nintendo Wii, whatever you guys have been collecting on a royalty basis so far this year, how can expect that to grow or be replaced just going forward?

Sure, it's Chet. So when we announced and introduced last year out CLASSIC Macro program, the foundation behind this program was to really get our technology in the hands of a lot more users, to spread the royalty base out. Because prior to that, we had been really focusing on the big deal that the IDMs, so to speak-- but there are only a few of those.

So it's just been getting over a year now and what we're beginning to see is the first CLASSIC Macro licensee beginning to go into production. So that's where we see the royalty base expanding. This is beyond Nintendo Wii. With all of these designs that we have accomplished over the last year using our CLASSIC Macros with the fabless semiconductor company. And that's what's going to drive our royalties in addition in 2007.

Okay, those guys have not been royalties really in 2006 so far?

Correct.

So what about the 2006 royalties? Obviously these products go through design cycles and there will be the newer versions out which, presumably, are going to have Moysy inside. But can you kind of give us a feel for that basically, in terms of just how stable the current royalty revenue base is and how it grows?

It's been pretty stable. I mean, what's gone down is some of the NEC royalties as they switched over from the old generation products to the new coming up, and there was a couple of quarters of gap there, if you will. Because, you know, Nintendo stops production of the old consoles and begins to build up for the new ones.

The rest are pretty stable but here again, what we want to -- but its been 12, 13, 14 licensees paying us every quarter. What we're looking to do with all of the work we've done over the last year or so is to make that, take that number from 13 licensees paying us royalties, to 20 licensees paying us royalties.

Do you guys also have any guidance, this is now on license revenue, do you have any guidance for, say, licensees that you think you may be able to sign next year or, well, hope it's this year?

We have not done that yet. We hope to, in our January call when we give the outlook for 2007, to put more color into what kind of licensing programs we expect to accomplish, how many target licensees want the SRAM Flash, what the royalty picture looks like for the year.

We typically give the breakdown then. We're in our planning process right now, building these things up to plan, bottoms up, top down and so we're not really in a good position to talk about it yet.

That's fine. Well very good, thank you.

Okay, thank you

There are no additional questions. I would now like to turn the call over to Mr. Silvestri.

Thank you and thank you all for your participation in our call. I encourage you to visit our website and frequently stay abreast of our activities. In addition, we will be presenting at the 2006 AEA Classic Financial Conference in Monterey, California, on November 7th and 8th in room 391. And we'll also be at the UBS Global Communications and Technology Conference on November 15th in New York City. Additional details are on our web site.

So we look forward to visiting with you at these conferences, but should you have any immediate further questions, please feel free to contact us directly. Thank you again. Operator, you may now disconnect the call.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.