Good morning, ladies and gentlemen, and welcome to be the MoSys Fourth Quarter and 2012 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, Friday, the 1st of February 2013. I would now like to turn the call over to Beverly Twing of Shelton Group, Investor Relations. Beverly, please go ahead.

Thank you, and good morning all, joining me on today's call are Len Perham, MoSys' President and Chief Executive Officer; and Jim Sullivan, Chief Financial Officer. Before we begin today's discussion, I would like to remind everyone that this conference call will contain forward-looking statements based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Such statements are made in reliance upon the Safe Harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which include but are not limited to, benefits and performance expected from use of the company's embedded memory and interface technologies and ICs; expectations concerning the company's execution and results; expected benefits of the Bandwidth Engine ICs; product development; achievement of design wins and timing of shipments of Bandwidth Engine ICs; predictions concerning the growth of the company's business and future markets and business prospects, strategies, objectives and expectations or beliefs. 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 factors 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 reports on Form 10-K and Form 10-Q filed with the Securities and Exchange Commission, in particular, in the section titled Risk Factors, and in other reports that the company files from time to time with the Securities and Exchange Commission. MoSys undertakes no obligations 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 Len Perham, Chief Executive Officer of MoSys. Please go ahead.

Thank you, Bev. Welcome, everyone, and thank you for joining us this morning. I'll begin today's call with a review of our major 2012 accomplishments and then discuss our current sales efforts, the ongoing development of our second-generation Bandwidth Engine and as well, the ongoing efforts being put into our future products roadmap. Jim will then review our fourth quarter and full year 2012 financial results prior to opening the call for further questions. Under the heading of 2012 Major Accomplishments, the fourth quarter of 2012 topped off the year during which we achieved a number of major accomplishments as we transition MoSys to be an IP-rich, fabless semiconductor company. I'd like to spend a few minutes reviewing a few of those accomplishments. First, with respect to our first-generation Bandwidth Engine family of integrated circuits, we met a number of quality and reliability goals. The circuit accomplishments included ISO 9001 certification, freezing and spec’ing out all of our back end test flows, completing our qualification testing and starting our QA&R benchmarking. Towards that end in May 2012, we successfully completed high-performance operating life, or HTOL as its known, reliability testing for 1000 hours on 3 separate wafer fab runs with no failures. 1000 hours is the required benchmark for carrier-grade certification. And each 1000 hours under these test conditions is roughly equivalent of 10 years of standard operating life. To further demonstrate Bandwidth Engine's reliability, we took a portion of each of the 3 lots, and continued the testing up to 3000 hours. This material completed and passed the 2000-hour milestone in September 2012, no additional failures, no failures actually, there've never been a failure. And then passed the 3000-hour milestone in November 2012, again with no failures. Successfully passing these benchmarks was a significant achievement, which attest to the…

Thank you, Len, and good morning, everyone. During the course of my comments, I will make several references to non-GAAP numbers. Unless otherwise indicated, each reference will be to an amount that excludes stock-based compensation expense and intangible asset amortization. These non-GAAP financial measures and the 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 was filed with the Securities and Exchange Commission today and can be found at the Investor Relations section of our website. Prior to discussing our financial results, I'd like to first address our IP business. We continue to record licensing and royalty revenue from ongoing SerDes and 1T-SRAM IP projects. However, as reflected in our 2012 financial results, our IP licensing and royalty revenue continues to decline as we have not been actively pursuing additional new licensing agreements since late 2011. As Len mentioned earlier, we have substantially completed our obligations under these existing projects. In 2012, we sold certain SerDes IP assets to Synopsys for approximately $4 million, and we expect to receive a final $0.6 million payment related to this transaction in the first quarter of 2013. In total, we have raised more than $39 million through the sale of IP assets since December 2011. With regard to the results of the fourth quarter of 2012, total revenue was $1.6 million, compared with $1.3 million for the third quarter of 2012 and $5.2 million for the fourth quarter of 2011. The year-over-year decrease reflects the achievement of certain milestones on memory licensing agreements in the fourth quarter of 2011, which triggered significant revenue recognition, as well as our shift in resources and focus from IP licensing to IC products in late 2011. Licensing and other revenue for the…

[Operator Instructions] We have our first question from the line of Gary Mobley from Benchmark.

I was hoping that you could share with us your confidence in revenue ramping for Bandwidth Engine given your customer's production release in the second half of the year, more specifically, when might we see initial quantity shipments of Bandwidth Engine in 2013?

So we've been projecting, Gary, that the -- that our lead customers, our design wins from earlier last year, would start releasing the built, prototype system build, in the second half of 2013. We're reasonably close to them as they bring up their systems. They work very carefully with all of their key component suppliers as they try to get their various pieces of their system up and into manufacturing. As you know, we don't have absolutely perfect visibility into that process and we do know that in the case of these customers, they aren't going out to try to find business, they both had won very large contracts from the telecommunications or the data communications companies in the markets they serve, so we know the business is real. We know they're pushing very, very hard. We've been projecting that we would start to see those shipments in the second half of 2013 and we continue to believe that's the case this morning. Our visibility is not flawless, we don't know some of the system-level issues they deal with and regulatory issues they deal with, but we know they're pushing very, very hard. And we know that their commitment to the platform is very high. Not a perfect answer but it's the one we have.

No, it's fair enough. I've talked with a number of your competitors who may be the second source suppliers for Bandwidth Engine and they've had discussions with you as being a second source partner, but I think the general feedback that I got was the talks broke down for whatever reason, perhaps, MoSys wanted too much out of the relationship, but I'm just wondering if those barriers have eroded and if you're any closer to having a second source relationship formed?

Actually I think we're in the -- I personally believe we're in the negotiating details of getting this put together and announced. There are no real serious hurdles, in my opinion. The -- we don't multiplex across a dozen companies to see which one will get to the goal line first. We -- and there's only a few people that we think have the capability to support the product at the customers' desks. So the guy that we've been talking to for the last couple of quarters, I had breakfast with the Chairman of the Board of the company, maybe 1.5 months ago with that, and he and I thought that we're in the just negotiating stages, there's issues that we're going to push back and forth on each other, but I didn't see any stumbling blocks and nor did he. So I think from where I sit, we're moving forward and there is no major hurdle to be overcome, Gary.

Okay. You mentioned that most of your design wins are in systems utilizing an FPGA from Xilinx or Altera to handle the packet processing task. Is that indicative of the fact that many of your design wins might be low-volume SKUs at this point? And might you have to be designed into an ASIC-based solution before you get some high-volume SKU design wins?

No, I don't have a reason to think that. I think we're getting the FPGA business first because it's -- the customer uses FPGAs because it shortens its time to market and it cuts his exposure to designing an ASIC chip set that will -- maybe require a spin. I think we're looking at some opportunities that are being breadboarded with FPGAs right now that we haven't called wins, where we believe that the customer will eventually take the FPGA and spin again into -- spin it into an ASIC before he goes to the market to get the cost out and maybe power out of that -- out of his end solution. The -- I think the other reason that we won the early-on designs is you can program any interface you want under the FPGAs, that's why the early adopters of our GCI interface were Xilinx and Altera. It greatly expanded their opportunity to play a role as a packet processing engine so they became big advocates. When we're going to be on an SOC or an NPU, we depend on next generation SOC or NPU because he has to design our interface on to their chip. Now granted it's CEI 11 compliant, and it doesn't require many gates, but it still does require getting designed onto the I/O of the NPU or the SOC. So those are the various things that come into play. I don't know that it has to do with what the volume of the opportunities will be or anything like that.

Okay. The last question is for Jim. Looking into the first quarter, what would you expect in terms of cash burn, and would you expect your royalties to be down significantly on a sequential basis just given the seasonal factors and various other factors?

Certainly, we'll see from our -- well, first off, on the -- to take your royalty question, I expect we'll see a decrease from that one licensee, given we'll be out of the holiday season. Royalties, I think, for the year will be flat to down. We did -- I didn't highlight it in my script, we did have 1 royalty payer -- 2 royalty payers turn on, one through prepaid, but I don't have a lot of visibility as to how to he will ramp or if he will ramp. The other one was someone we had that licensee we chased down for an application in cell phones and got a payment in the fourth quarter in the low-couple of hundred k, but with cell phones it's, who knows, it could be it for the -- given the short cycle of the products. But net-net, I think we will be down. I don't think we will be down too significantly, I've already seen a couple of reports come in. With regard to the burn for the first quarter, certainly, it will be higher, higher than it was in the fourth quarter since we won't have to pay for that -- the tape out of Bandwidth Engine and the initial wafers, which is kind of in the $1.3 million range. But kind of tacking that on the fourth quarter burn, it's probably a reasonable number for you to be thinking.

[Operator Instructions] We have our next question from the line of Krishna Shankar from Roth Capital.

Len, can you give us some sense for this first top tier OEM design win, what is the application for the design wins? Is it in the enterprise data center? Can you give us some sense for the application? And then also the new engagements for Bandwidth Engine 2, what types of end markets are you looking at?

So basically, the original design wins, remembering that we're not in the access area as much, we're not in the mobility area as much, we're out with the handheld appliances. We're really in the core or at the edges where aggregation is going on. I think these original designs are core routers and they're reasonably -- they should be reasonably good volume opportunities for us. And we have it from the biggest of the 2 customers that the platform will be expanded across other applications as well. You don't find us in the cloud, you really find us exiting the cloud, coming into the EDGE, where you might be aggregating. And then getting through the core, you'd find us and then again, out in the EDGE. So those are the places where you'd find us, Krishna.

Okay, great. And again, on Bandwidth Engine 2, you expect design wins, can you give us again timelines for [indiscernible] engagement?

I missed your question, Krishna. Could you ask again? Krishna, we lost you momentarily. Could you re-ask your question, please?

Yes, I was just asking, I missed the part where you talked about the schedule for Bandwidth Engine 2 in terms of getting prototypes, getting chips back and then shipping prototypes and the announcement of your customers there?

Basically, BE2 is a substantial performance upgrade over BE1 so it's looking at the -- looking down the road to higher end systems. Many of the applications that product is being considered for are where the packet processing engine is going to be either an NPU or an SOC, an in-house designed SOC. And again, I think it's into the higher performing systems that the customer might be bringing to market, if not its highest performance systems. If I understood your question, I would think that we would -- we would like to think that we're going to win and be able to announce design wins in the first half of this year for sure. And that would be my hope. We oftentimes don't meet my criteria, even though work is going on and all is well and we haven't lost it or the customer hasn't decided to do anything yet, anything else, so we're very satisfied with the progress to date. There's a considerable amount of pressure on us to get these first samples out. And it's worth noting that some of these samples, probably half of them will go to companies in the United States as opposed to in Asia, so they're differently going to different places than when our first design wins occurred.

Okay. And you mentioned in the previous question that the GigaChip Interface will actually be on the NPU or multi-core processor, can you talk about any strategic alliances you have with any of the NPU or multi-core companies targeting core routers and other set of high-speed networking equipment, whether it's Broadcom or Freescale or Cavium, what kind of dialogue and strategic partnerships do you have with some of those guys?

Well, we aren't in a position to identify any customers, but we've been talking with various of the people that you mentioned for some length of time. And as well, the internal SOC architecture and execution groups inside of the data com, telecom companies themselves, in several cases, we're working directly with the -- with who would be our end customer because he's doing his own SOC. So I would say that we are probably tracking 3, 4 of those guys now, and those conversations have been going on for a -- in excess of a quarter, that's for sure.

Terrific. And Jim, can you talk about the balance sheet going forward in 2013 and the prospects for more IP licenses, royalty or any other sort of infusion into the balance sheet through IP sales?

Sure, we continue to explore opportunities on that front. Obviously, to further monetize our IP portfolio, it's yet to yield any fruit, but we haven't given up yet. And I think another area to highlight, as Len mentioned on the call, we did demonstrate leading edge SerDes technology at the DesignCon conference earlier this week, which we expect to incorporate into future Bandwidth Engine and there's a potential even some technology like that and other technology we're developing for use in future products, we could even license that on some basis. But right now, I don't project a lot of that in my numbers, my estimates, going forward. On the revenue front, we'll see licensing revenues continue to decline. At this point, it's just a matter of recognizing revenue in our backlog as the great deal of which relates to maintenance and support, not all of which is obviously cash generating since we've collected cash from prior periods. As I said, royalties will be flat to down. When I look at the burn in 2012, it was just over $17 million, including the benefit of some asset sales. I think -- although we're not giving guidance, I think in response to a question from you last quarter, I said kind of a burn in the $15 million to $20 million range, and assuming no upsides, et cetera, and obviously, assuming that decline in IP and some ramp in Bandwidth Engine, which you know I really can't comment on as Len indicated earlier, we'll be managing the cash closely and do what we can to minimize that burn.

I would now like to hand the call over to Mr. Perham for any closing remarks.

I'd like to thank you for coming online this morning and letting us tell you our story and give you an update on where we are. I have no particular closing remarks other than to say that 2012 was a satisfying year. Until we make money, there's going to be no great years, but nonetheless, I think I feel satisfied with the progress we made. There's lots to be done. The fourth quarter was a good quarter, a reasonable quarter. 2013, as I said, should be a breakout year and we should have measurable revenue of integrated circuit sales in this calendar year. So with that said, I want to thank you again for dialing in this morning and I look forward to seeing all of you in the near future, and thank you very much for your continuing support. Thank you, operator, we'll close now.

You're welcome. Thank you. Thank you, all, for joining, ladies and gentlemen. That concludes your call for today. You may now disconnect. Have a good day.