Good morning, and welcome to the MoSys Second Quarter 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of today’s conference call instructions will be given for the question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded today, Friday, July 29, 2016. I would like to introduce your host for today’s conference Beverly Twing of Shelton Investor Group. Please, go ahead.

Thank you, Jamie. Good morning, everyone. Joining me today 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, 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 ICs and embedded memory, and interface technology; expectations concerning the Company’s execution and results, product development, achievement of IC design wins, timing of shipments of the company’s IC, predictions concerning the growth of the company’s business and future markets and business prospects, strategies, objectives, expectations, or beliefs. Forward-looking statements made during this call are subject to the 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 report on Form 10-K filed with 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 & 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 Len Perham, CEO of MoSys. Please go ahead, Sir.

Good morning everyone, thank you, Bev. Thank you all for joining us today. On today’s call. During the call I’ll review our second quarter with an emphasis on progress toward ramping revenue in the near term, while expanding our design win pipeline and sales funnel to drive future revenue growth. Following my remarks, Jim will discuss our financial results and then we’ll open the call for your questions. I’m pleased to begin by noting that the second quarter marked us six consecutive quarter of increased product revenue. During the first six months of this year, we’ve already exceeded the total number of ICs shipped in 2015. I would like to see the ramp steeper up into the right, but we’re moving in the direction we forecasted and we’re toward heading in the right directions, like this I can get there faster. Driving this increase, is the continue benefit we accrues from our early Bandwidth Engine 2 design wins as they ramp towards volume production. This ramp is been driven by various early on set design wins, including those with their Tier 1 network infrastructure customer and partner. We also made considerable progress during the quarter with our new products. Including the shipment of the prototype quantities of our new recently announced programmable search engine. It’s a derivative off the family of Bandwidth Engine 3. This customers target is next generation data center systems I think. Additionally, we shipped early production orders to various line speed users, as well as the same time supply and prototypes qualities to multiple other design wins. I expect our revenue and shipment volumes will continue to gain momentum in the second half of this year, as additional design-wins primarily for BW2, that we turn on and ramp in a direction of full production. Further we…

Thank you Len, 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, amortization of reported intangible assets and restructuring charges. 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 was filed with the Securities and Exchange Commission today and can be found at the Investor Relations section of our website. Turning now to our second quarter 2016 results, total revenue was $1.6 million compared with $1.5 million in the first quarter of 2016 and $1 million in the second quarter of 2015. Product revenue from the sale of our integrated circuits with $1.3 million in the second quarter, compared with $1.1 million in the first quarter of 2016 and $0.5 million in the prior year quarter. IC sales increased to 79% of total revenue in the second quarter compared with 77% in the previous quarter. As Len mentioned IC revenues was primarily driven by ramp in production of our Bandwidth Engine 2 design wins to our Tier 1 and other customers. In addition we recorded initial revenue from prototype shipments of our Programmable Search Engine ICs as well as initial LineSpeed production and prototype units. Royalty and other revenue for the second quarter of 2016 was $0.3 million consistent with the previous quarter and compared with $0.5 million in the year ago period. Royalty and other revenue is primarily comprised of royalties received from semiconductor customers whose products include our IP. GAAP gross margin was 41% in the second quarter consistent with the previous quarter and compared with 43% in the year-ago quarter. In terms of…

[Operator Instructions] And our first question comes from Gary Mobley with Benchmark. Your line is open.

Jim as a point of clarification, would you say no-GAAP OpEx will approximate for two remaining quarters of the year?

Approximately $5 million.

That it gets down from $6.5 million just in Q2.

Well in Q2 that’s 6.5 was the GAAP number, the non-GAAP OpEx in Q2 was about 5.8 and we had that shuttled, which was just over 600k so we would been around 5.2 [ph].

Okay, alright I’m going to ask the question I ask every quarter, and that is about gross margin. I know you had some supply chain inefficiencies in particular on the back end and, it was my understanding that you were working through those issues, but it’s not evident in the Q2 gross margins. So if you can just give us some explanation on the front that’ll be helpful?

So basically Gary, when you look at the gross margin we reported it’s a combination of BE1, BE2 and some LineSpeed products, the Bandwidth Engine 2 which is our work horse is moving up into the right recently well. We received the number of new lots in from our foundry this quarter one of them had some problems and we don’t know if they should credit it or not, there has been no change made yet, we can't tell. So that pulls it down a little bit. Jim, I haven’t talked to Jim about this yet, but I talked to our operations guidance that next quarter I’m going to take a look at just breaking out BE2 so that you can see just BE2 and how it's doing because I knew you are going to ask me this question. Some of the BE1 material we bonus back in I think had a negative effect on it for one reason or the other Jim and I have been so busy, we haven’t got together on this yet. We have one loss that I'd would like to think that our foundry might credit to us, but right now it's in the numbers. So that coupled with the fact that we’re still not running very many lots, so I am feeling reasonably good about our gross margin in terms of where the operations are and how smooth the backend works. When we can buy a higher production level mass set for BE2 that we haven’t expanded the resources for yet, and that will give us somewhere between 10 and 13 to 14 points of gross margin. So where I think we may belong somewhere to -- in BE2 with small and medium level volumes that maybe 45% to 50% or 51%, 52%, 53% gross margin. That would give us the opportunity to get somewhere above that -- substantially above that. So it was very clear and I just got to look at it knowing you’d ask me the question. I am going to see if I can’t break it out differently next quarter, I'll have to see if Jim will help me do that.

One thing I didn’t hear you mentioned in your prepared remarks was the status of some type of strategic relationship which make some type of investment and/or revenue capture opportunity, so if you could just give us any update on that fund?

So we are working right now it was a three to five companies on this and couple of them are well down the road, but there is nothing to report yet this morning. It isn’t like that we expanded all of them, I would say it’s operating at a higher levels than at any time before. So that’s coupled with the facts that BE3 and the Programmable Search Engine have some features and capabilities that looks like it’s a very supportive of next generation system. So we are talking to the who’s-who of the market sectors that we serve. We didn’t have anything finished so we didn’t put it into our prepared remarks this morning, but I'd like you to know that Jim and I are spending a good significant percentage of our time on it and it’s come down over a fair way.

Last question from me, obviously you haven’t been working at this for six plus years to generate a million dollars a quarter in public revenue and you have to be somewhat optimistic to coming into work each day and whatnot, but -- so the question I’m leading to is where do we stand with respect to the revenue ramp at your one strategic customer and what’s the potential be in and why you haven’t quite fully tapped into that potential at this point of time?

So basically I think the biggest lesson that I'll probably take for the balance of my life is, I was at a lunching here three months ago with Mark Andreessen and her made the comment that you have really be thoughtful about things now because in the new world anything you want to create takes 10 years. It didn’t take 10 years and we did IDT and it didn’t take -- it took probably seven or eight year, when we did that net logic. I am just amazed that the customer is -- I’ll call it, issues that he deals with or the seeming slowness with which we got to full release. There is no question that’s taking longer and I would say that -- and we don’t say much about this either and we don’t say much about procedure, we really don’t have simply one strategic customer anymore. We really serve network infrastructure and we have one of the top players here and we serve the IP securities appliance business, we have several top players there and we made good progress into the data center and I just mentioned in past this morning that the Programmable Search Engine and it’s applications in the early going seemed to be into the data center where there is a pretty exciting amount of growth projected. And we have major customers in all three of those areas. But I can’t dispute with you that I would have projected that we would ramp faster and I would -- you got to my closing remarks, we are ramping revenue up into the right, and we’ve been talking to our top customers and they’re either back to us and projecting a recently good second half, or they haven’t got back to us yet. But I have to confess that, I would have expected that we could see these products ramp faster than they have, and Andreessen made a good point at lunch when he said, now a days you have to plan for ten years, because that what it takes.

Thank you. And our next question comes from Alex Silverman with Special Situations. Your line is now open.

Actually my question was asked and answered. Thank you.

And I'm showing no further questions at this time and I would like to turn the call back over to Len Perham for closing remarks.

Yes Gary help me to make my first point and that is that as we pointed out, we’ve been ramping both units and revenue the last few quarters. And I mentioned in my remarks earlier that I would like to see it’s steeper. We’re dealing with the top players in the market segments that we serve, but I sure as hell would like to see it be ramping faster, so that’s my first closing remarks. The second is, that most of our applications in customer support right now is going to BE 3 and Programmable Search Engine applications and that’s very, very exciting and the reason I think is because as we’ve said over the years the type of performance and the features sets that our products have are very suitable for advancing and further advancing high performance systems that our customers might want to build. So we seem to have a family that’s in the right place to solve important problems for the next few generations of high performance equipment. Now that said it isn’t that BE 3 and the Programmable Search Engine is going to Bandwidth Engine 2, it’s doing very, very well too and the BE 3 and 2 don’t compete each other, one doesn’t eat the other, if you will. And I would take is the BE 2 will be the main player in our sales flow and the main player are getting released into production well into the future at least through ’17, I think. So BE 3 as a Programmable Search Engines is exciting, because of the level of interest, but BE 2 will still remain the work horse. So we have a good number of products, that is going to be generating revenue. That’s all I had to say for today. We really appreciate you, you guys coming listening to us and we have a lot going on here with extraordinary activities, the questions guy who was Gary’s last question and nothing to report today, but perhaps in the near future. I want to thank you again for listening to us and we look forward to talking to you next quarter. Thank you everyone.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.