UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(AMENDMENT NO. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

PDF SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

000-31311
(Commission File Number)

Delaware		25-1701361
(State or Other Jurisdiction of		(I.R.S. Employer Identification No.)
Incorporation)

333 West San Carlos Street, Suite 700
San Jose, CA 95110
(Address of principal executive offices, with zip code)

(408) 280-7900
(Registrant’s telephone number, including area code)

_________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 1.01 Entry into a Material Definitive Agreement.

     This Current Report on Form 8-K/A is being filed as an amendment No. 1 to the Current Report on Form 8-K filed by PDF Solutions, Inc. (the “Company”) on November 3, 2006 (the “initial 8-K”). The initial 8-K was filed under items 1.01, 2.01, and 3.02 to report the completion of the acquisition of all the capital stock of Si Automation S.A. (“SIA”), a privately held Fault Detection and Classification software and services provider, based in Montpellier, France. This amendment is a supplement to the initial 8-K and includes financial statements and pro forma financial information permitted pursuant to Item 9.01 of Form 8-K to be excluded from the initial 8-K and filed by amendment to the Initial Form 8-K.

     On October 25, 2006, the Registrant entered into a definitive agreement to acquire all of the outstanding capital stock of SIA, a privately held Fault Detection and Classification software and services provider, based in Montpellier, France, pursuant to the terms of a Stock Purchase Agreement (the “Purchase Agreement”) among the Registrant, the Selling Stockholders of SIA, and Société Générale Asset Management Alternative Investments (“SGAM”), as the Stockholders’ Representative. The acquisition was completed on October 31, 2006. As a result of the closing, SIA has become a wholly owned subsidiary of PDF Solutions, Inc. (“PDF”).

     Under terms of the Purchase Agreement, PDF acquired SIA for approximately $25.5 million in cash and 699,298 shares of PDF common stock, resulting in aggregate consideration of approximately $36.5 million and net consideration of approximately $29.6 million, after deducting expected net cash-on-hand at SIA. A portion of the aggregate consideration will be retained in escrow for a specified period of time pursuant to the Purchase Agreement.

     This description of the transaction is not complete and is qualified in its entirety by reference to the Purchase Agreement, which is filed as Exhibit 2.01 to this report and incorporated by reference into this Item 1.01. Terms not defined herein shall have the meanings ascribed thereto in the Purchase Agreement.

Item 2.01 Completion of Acquisition or Disposition of Assets.

     On October 31, 2006, the Registrant completed the acquisition of the capital stock of SIA as contemplated by the Purchase Agreement. Please see the disclosures regarding the Purchase Agreement and the transactions contemplated thereby described in Item 1.01 above, which is hereby incorporated into this Item 2.01 by reference.

ITEM 9.01: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS

     (a) Financial Statements of Business Acquired

     Audited financial statements of SIA for the year ended December 31, 2005 and for the nine months ended September 30, 2006 as required by this Item 9.01 (a) are attached as Exhibit 99.2 hereto and incorporated into this Item 9.01(a) by reference.

     (b) Pro Forma Financial Information

     Unaudited Combined Condensed Pro Forma Financial Statements of PDF and SIA as required by this Item 9.01(b) are attached as Exhibit 99.3 hereto and incorporated into this Item 9.01(b) by reference.

     (c) Exhibits

Exhibit No.		Description
2.01		Stock Purchase Agreement dated October 25, 2006 by and among PDF Solutions, Inc., the Selling Stockholders of Si Automation S.A. and Société Générale Asset Management Alternative Investments, as the Stockholders’ Representative (1) *
23.1		Consent of KPMG SA
99.1		Press release dated October 31, 2006 regarding the Registrant’s completion of its acquisition of Si Automation S.A. (1) *
99.2		Audited financial statements of Si Automation S.A. for the twelve months ended December 31, 2005 and the nine months ended September 30, 2006
99.3		The unaudited pro forma combined condensed balance sheet of PDF Solutions Inc. and Si Automation S. A. as of September 30, 2006. The unaudited pro forma combined condensed statements of operations of PDF Solutions Inc. and Si Automation S.A. for the twelve months ended December 31, 2005 and the nine months ended September 30, 2006.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: January 16, 2007

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements No. 333-102509, 333-66758 and 333-133332 of PDF Solutions, Inc., on Form S-8 of our report dated January 15, 2007, with respect to the consolidated financial statements of Si Automation S.A. for the nine months period ended September 30, 2006 and the year ended December 31, 2005, which report appears in this current report on Form 8-K/A of PDF Solutions, Inc.

/s/     KPMG SA

Paris, France
January 16, 2007

Exhibit 99.2

SI AUTOMATION

Consolidated Financial Statements
Ended September 30, 2006 and December 31, 2005

Table of Contents

		Page
Independent Auditors’ Report			3
Consolidated Balance Sheets			4
Consolidated Statements of Operations			5
Consolidated Statement of Cash Flows			6
Notes to the consolidated financial statements			7

Independent Auditors’ Report

The Board of Directors and Stockholders

SI Automation, S.A.

We have audited the accompanying consolidated balance sheet of SI Automation S.A (“the Company”) as of September 30, 2006 and as of December 31, 2005, and the related consolidated statements of operations and cash flows for the nine month period and the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SI Automation S.A. and subsidiaries as of September 30, 2006 and December 31, 2005 and the results of their operations and their cash flows for the nine month period and the year then ended, in conformity with generally accepted accounting principles in France.

Accounting principles generally accepted in France vary in certain significant respects from U.S. generally accepted accounting principles. Information relating to the nature and effect of such differences is presented in Note 24 to the consolidated financial statements.

/s/ KPMG S.A.

Paris La Défense, France

January 15, 2007

Consolidated Balance Sheets

		September 30,				December 31,
		2006				2005
Assets
Fixed Assets:
Intangible Assets (Note 3)		€	684 546				692 572
Tangible Assets (Note 3)			60 234				43 024
Deposits (Note 3)			43 175				40 866
Total Fixed Assets			787 955				776 462
Other Assets:
Accounts Receivable, Net of allowances (Note 5)			2 172 934				4 976 618
Inventories, Net of inventory reserves (Note 4)			23 926				308 515
Other Receivables (Note 6)			1 630 932				1 130 759
Prepaid Expense			88 744				73 890
Marketable Securities (Note 8)			242 981				433 218
Cash and Cash Equivalents (Note 9)			5 064 881				3 068 134
Total Other Assets			9 224 398				9 991 134
Total Assets		€	10 012 353				10 767 596
Stockholders’ Equity and Liabilities
Stockholders’ Equity (Note 10):
Share Capital		€	1 885 906				1 885 906
Additional Paid-In Capital			5 062 704				5 684 357
Opening Retained Earnings			726 084				(1 644 972	)
Foreign Currency Translation Adjustment			1 612				(8 656	)
Net Profit			(858 958	)			1 744 879
Total Stockholders’ Equity			6 817 348				7 661 514
Provisions for Contingencies & Charges (Note 11)			112 955				197 504
Interest-Free Loans (Note 12)			550 000				430 000
Financial Debt (Note 13)			409 420				401 529
Accounts Payable and Accrued Expenses (Note 14)			1 125 174				595 704
Deferred Revenue			113 697				78 243
Other Liabilities (Note 15)			883 759				1 403 102
Total Liabilities			3 195 005				3 106 082
Total Stockholders’ Equity and Liabilities		€	10 012 353				10 767 596

     See accompanying notes to consolidated financial statements.

Consolidated Statements of Operations

		Nine-month				Twelve-month
		period ended				period ended
		September 30,				December 31,
		2006				2005
Revenues			5 458 794				9 917 392
Other Operating Income			458 285				622 436
Total			5 917 079				10 539 828
Purchase of Merchandise			126 093				536 159
Other External Costs			2 909 596				2 805 329
Personnel and Social Charges (Note 18)			3 270 141				4 110 691
Taxes Other Than Income Tax			200 945				232 280
Depreciation and Amortization			244 683				178 899
Inventory Reserve Allowance			221 536				340 225
Provisions for Contingencies and Charges			17 066				87 089
Total			6 990 060				8 290 672
Operating Income (Loss)			(1 072 981	)			2 249 156
Financial Income			70 734				257 321
Financial Expense			286 586				6 518
Net Financial Income (Loss) (Note 20)			(215 852	)			250 803
Extraordinary Income / Loss			1 837				52 787
Income (Loss) Before Tax			(1 286 996	)			2 552 746
Income Tax Expense (Credit) (Note 7)			(428 038	)			807 867
Net Income (Loss)			(858 958	)			1 744 879
Net earnings (loss) per share			(0,456	)			0,930
Net diluted Earnings per share			(0,456	)			0,930

     See accompanying notes to consolidated financial statements.

Consolidated Statement of Cash Flows

		Nine-month				Twelve-month
		period ended				period ended
		September 30, 2006				December 31, 2005
Cash flow – operating activities:
Net Income (loss)		€	(858 958	)			1 744 879
Adjustments to reconcile Net loss to Net cash provided by operating activities:
Depreciation of fixed assets			244 683				178 899
Changes in provisions			(9 549	)			(91 372	)
Income from disposals of other assets			0				(175 458	)
Deferred tax expense (credit)			(376 208	)			849 564
Changes in working capital:
Inventories			284 589				192 717
Accounts receivable			2 803 684				(2 329 328	)
Other receivables			(198 965	)			371 809
Prepaid expenses			(14 854	)			(14 144	)
Accounts payable			529 470				148 227
Other liabilities			(519 343	)			134 646
Deferred revenue			35 454				78 243
Net cash provided by operating activities			1 920 003				1 088 682
Cash flow – investing activities:
Capital expenditures – intangible assets			(216 704	)			(741 663	)
Capital expenditures –tangible assets			(37 546	)			(26 644	)
Capital expenditures – financial assets			(2 720	)			(42 036	)
Proceeds from disposals of investments			0				25 253
Net cash used for investing activities			(256 970	)			(785 090	)
Cash flow – financing activities:
Exercise of warrants			0				30 400
Decrease of marketable securities			190 237				552 411
Increase in financial debt			127 891				580 000
Payment on financial debt			0				(243 252	)
Net cash provided by financing activities			318 128				919 559
Foreign currency translation adjustment			15 586				14 687
Change in Cash and cash equivalents		€	1 996 747				1 237 838
Cash and cash equivalents
Beginning		€	3 068 134				1 830 296
Ending		€	5 064 881				3 068 134

     See accompanying notes to consolidated financial statements

Notes to the consolidated financial statements

1)

Organization and Nature of Business and Significant Events of the Period

S.I. AUTOMATION is a French Société Anonyme with a Board of Directors subject to the provisions of the French Code of Commercial Law and to the Decree n°67-236 dated June 23, 1967 regarding commercial companies.

The company provides a set of services and appropriate Materials and Software to optimize manufacturing control and equipment communication mainly for the semiconductor industry. These financial statements have been prepared in the context of the acquisition of SI AUTOMATION and subsidiaries (individually or collectively referred to as the “Company”).

2)

Summary of Significant Accounting Policies and Practices

	(a)		Principles of Consolidation and Consolidation Scope
			The consolidated financial statements of SI AUTOMATION as of and for the 9-month period ended September 30, 2006 and as of and for the year ended December 31, 2005 have been prepared in accordance with generally accepted accounting principles in France, including Rule 99-02 of the French Accounting Standards Board (CRC).
			Each subsidiary, in which the company holds voting rights of more than 50% has been fully consolidated.

COMPANIES		LOCATION		Control %		Method
SI AUTOMATION		MONTPELLIER		N/A		Parent Company
SIA INCORPORATION		SAN FRANCISCO		100%		Fully Consolidated

	(b)		Use of Estimates
			The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the period. Actual results could differ from those estimates.
	(c)		Translation of Foreign Subsidiaries’ Financial Statements
			The balance sheet, statements of operations and cash flows of SI AUTOMATION Inc. whose functional currency is the US dollar, are translated into the reporting currency of SI AUTOMATION S.A (Euro) at the applicable exchange rate (i.e., the closing period-end rate for balance sheet, and the average annual rate for statement of operations and cash flow statement). Resulting translation gains and losses are recorded in foreign currency translation adjustment in stockholders’ equity.

	(d)		Tangible and Intangible Fixed Assets
			Tangible and intangible fixed assets are valued at their acquisition cost. Depreciation is computed using the straight line method based on the estimated useful lives of the related assets.

Estimated useful lives used are as follows:

		Estimated useful
		lives
Intangible Fixed Assets
Patents		5 years
Software		1 year
Tangible Fixed Assets
Transportation equipment		5 years
Fixtures, fittings and improvements of buildings		3 to 10 years
Office equipment		2 to 3 years
Furniture		3 to 10 years

	(e)		Inventories
			Materials and goods have been recorded at purchase cost.
			Inventories and works in progress are recorded at their production cost.
	(f)		Accounts Receivable
			Accounts receivables are recorded at their carrying value. A provision is recorded when the recoverability is not probable.
	(g)		Marketable Securities
			Marketable securities are stated at their historical cost. If, at closing date, market value is lower than historical cost, a depreciation corresponding to the difference is booked. In the case of quoted securities, the market value corresponds to the quoted market price as of the balance sheet date.
	(h)		Cash and Cash Equivalents
			Cash and cash equivalents include cash balances and short-term highly liquid investments with original maturities of three months or less at the time of purchase and are stated at cost.

	(i)		Provisions for Contingencies and Charges
			Contingencies and charges arising from claims, litigations, fines, etc. are provided for when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
	(j)		Revenues

	o		Revenue from sales of software licences is fully recognized at delivery of software license.
	o		Composite contracts include other elements than sole software license such as maintenance, installation and training. Revenue allocated to those elements is recognized as the services are performed.
	o		Sales of software licenses to distributors are recognized on a sell-through basis, when the software license is delivered by the distributor to the end-user.
	o		Revenue linked to hardware and software leasing arrangements is recognized over the term of the contract on a straight line basis.

	(k)		Research & Development Costs
			In the past, the company used to capitalize research & development costs with a depreciation over a 5 years period.
			Since 2003 research & development costs are no longer capitalized. It has been assumed that the technical feasibility of the projects was only reached at the very end of the development, therefore the amount to be capitalized is considered as not significant. Former research & development capitalized costs corresponding to cancelled projects have been written-off.
	(l)		Employee benefits
			Employee benefits consist only in retirement indemnities paid to employees, in accordance with French Law, on the basis of the length of service. The benefit is a lump sum paid at retirement and expressed as a multiple of the monthly salary.
			Main assumptions used in the determination of such benefits are described below:

	-		Prospective method based on legal compensation obligation for the employer;
	-		Salary growth rate by 1%;
	-		Turnover : 1% to 2% depending on staff category;
	-		Employee leave age : 65 years;
	-		Discount rate : 2,5%;
	-		Mortality table : French national analysis statistical institute (INSEE) mortality table.

	(m)		Income Tax, Current and Deferred
			Deferred taxes are recorded in the statement of operations and the balance sheet according to the liability method of tax allocation to account for temporary differences between the book value and taxable value of certain assets and liabilities.
			Tax assets resulting from loss carry-forwards are recognized if it is more likely than not that they will be recovered within a foreseeable future.
	(n)		Stock-based Awards
			The company issued pre-emptive subscription rights (“BSA”) and warrants (“BSPCE”)
			According to French rules:

	-		The amount received by the company upon issuance of the pre-emptive subscription rights (“BSA”) is accounted for in net equity ;
	-		No entry is recorded in the accounts as long as the pre-emptive subscription rights (“BSA”) or the warrants (“BSPCE”) have not been exercised.

(o)		Extraordinary items
		Extraordinary items may :

	-		Either be ordinary items with abnormal amount and incidence;
	-		Or items with the following characteristics :
	-		Non-recurring;
	-		Unusual compared with the economic activity of the concern;

	(p)		Differences in exchange
			At period-end foreign currencies assets and liabilities are converted to closing exchange rate. Resulting gains or losses are recorded in the consolidated statement of operations.

	(q)		Earning per share
			Earnings per share corresponds to the net profit or loss divided by the weighted-average number of shares existing during the financial period (see note 10).
			Diluted earnings per share is the division of the net profit or loss by the sum of the weighted-average number of shares outstanding and maximal number of shares that may be issued by exercise of stock-options (see section related to stock-options).

Weighted

average

Number of

number of

outstanding

Conversion

Total potential

Period-end

shares

stock options

parity

shares

December 31, 2005

1 883 006

1 000

1 to 1

1 884 006

September 30, 2006

1 885 906

1 000

1 to 1

1 886 906

Average

1 884 456

1 885 756

3)		Fixed Assets
		Tangible and intangible fixed assets are as follows at September 30, 2006 and December 31, 2005:

						Depreciation
						and				Net book
September 30, 2006 (€’000s)		Gross value				Amortization				value
Intangible Fixed Assets
RD&E costs			2 453				2 453				0
Licence, Patents & Software			716				331				385
Goodwill			300				0				300
Other			3				3				0
Total Intangible Fixed Assets			3 472				2 787				685
Tangible fixed assets
Building improvements			38				11				27
Computer & office equipment			126				93				33
Total Tangible Fixed Assets			164				104				60

Depreciation expense for the 9-month period ended September 30, 2006 was € 244 683.

						Depreciation
						and				Net book
December 31, 2005 (€’000s)		Gross value				Amortization				value
Intangible Fixed Assets
RD&E costs			2 453				2 453				—
Licence, patents & software			501				108				393
Goodwill			300				—				300
Other			3				3				—
Total Intangible Fixed Assets			3 257				2 564				693
Tangible fixed assets
Building improvements			14				9				5
Computer & office equipment			114				77				37
Total Tangible Fixed Assets			128				86				42

Depreciation expense for the year ended December 31, 2005 was € 178 899.

Movements on fixed assets were as follows:

		At
		December				Capital								At Sept.
30 September, 2006 (€)		31, 2005				addition				Disposal				30, 2006
RD&E Expenditures			2 453 114				0				0				2 453 114
Licenses, patents and software			500 898				216 704				1 750				715 852
Other intangibles			303 049				0				0				303 049
Intangible assets			3 257 061				216 704				1 750				3 472 015
		At
		December				Capital								At Sept. 30,
		31, 2005				addition				Disposal				2006
Building improvements			14 327				25 547				2 455				37 419
Computer and office equipment			114 327				11 999				0				126 326
Tangible assets			128 654				37 546				2 455				163 745

		At
		December				Capital								At Sept. 30,
		31, 2005				addition				Disposal				2006
Deposits			40 866				2 720				411				43 175
GRAND-TOTAL			3 426 581				256 970				4 233				3 678 935

		At												At
		January 1,				Capital								December
31 December 2005 (€)		2005				addition				Disposal				31, 2005
Start-up Costs			4 544				0				4 544				0
RD&E Expenditures			3 537 633				0				1 084 519				2 453 114
Licenses, patents and software			513 245				441 663				454 010				500 898
Other intangibles			3 049				300 000				0				303 049
Intangible assets			4 058 471				741 663				1 543 073				3 257 061
Building improvements			26 032				0				11 705				14 327
Computer and office equipment			102 707				26 644				15 024				114 327
Tangible assets			128 739				26 644				26 729				128 654
Deposits			20 090				42 036				21 260				40 866
GRAND-TOTAL			4 207 300				810 343				1 591 062				3 426 581

Main disposals in 2005 relate to:

	-		Research & development costs, amounting to K€. 1 085, capitalized in the past, and linked notably to silver box development project, that has been abandoned ;
	-		The termination during 2005 of a K€. 450 GPC license concession agreement concluded in August 2001 and almost totally depreciated.

Capital addition for ‘other intangibles’ amounting to K€.300 relates to the purchase, in June 2005, of an activity and related customer relationship which is expected to generate earnings in the future.

Changes in accumulated depreciation were as follows:

		At December				Depreciation								At Sept. 30,
September 30, 2006 (€)		31, 2005				expense				Disposal				2006
RD&E Expenditures			2 453 114				0				0				2 453 114
Licenses, patents and software			108 326				224 730				1 750				331 306
Other intangibles			3 049				0				0				3 049
Intangible assets			2 564 489				224 730				1 750				2 787 469

		At December				Depreciation								At Sept. 30,
		31, 2005				expense				Disposal				2006
Building improvements			8 914				4 060				2 072				10 902
Computer and office equipment			76 716				15 893				0				92 609
Tangible assets			85 630				19 953				2 072				103 511
GRAND TOTAL			2 650 119				244 683				3 822				2 890 980

																		At
		At January				Depreciation												December
December 31, 2005		1, 2005				Expense				Disposal				Other				31, 2005
Start-up Costs			4 544				0				4 544				0				0
RD&E Expenditures			3 537 633				0				1 084 519				0				2 453 114
Licenses, patents and software			357 074				150 012				398 760				0				108 326
Other intangibles			3 049				0				0				0				3 049
Intangible assets			3 902 300				150 012				1 487 823				0				2 564 489
Building improvements			7 109				8 688				6 883				0				8 914
Computer and office equipment			64 071				20 199				9 104				1 550				76 716
Tangible assets			71 180				28 887				15 987				1 550				85 630
GRAND TOTAL			3 973 480				178 899				1 503 810				1 550				2 650 119

4)

Inventories

Inventories are as follows at September 30, 2006 and December 31, 2005:

		Gross				Inventory
September 30, 2006 (€’000s)		Value				reserve				Net Value
Raw materials, consumables			232				232				0
Work in progress — Services			24				0				24
Finished goods inventory			330				330				0
TOTAL			586				562				24

						Inventory
December 31, 2005 (€’000s)		Gross Value				reserve				Net Value
Raw materials, consumables			229				57				172
Work in progress – Services			49				0				49
Finished goods inventory			370				283				87
TOTAL			648				340				308

5)		Accounts Receivable
		Accounts receivable are as follows at September 30, 2006 and December 31, 2005:

		Sept. 30,				December
(€’000s)		2006				31, 2005
Billed accounts receivable			1 758				1 553
Unbilled accounts receivable			445				3 455
Allowance for doubtful accounts			(31	)			(31	)
			2 172				4 977

As at 31 December 2005, unbilled accounts receivable mainly consist in the remaining balance of the invoice linked to the sale of the Maestria Corporate License (to ST Microelectronics) amounting to K€. 2,864, as well as related maintenance covering the 2^nd half of 2005, amounting to K€. 301. These two items have been invoiced in the course of January 2006.

6)		Other Receivables
		Other receivables were as follows at Sept. 30, 2006 and December 31, 2005:

		September				December
(€’000s)		30, 2006				31, 2005
Deferred tax			864				488
Advances to suppliers			105				21
Sundry debtors			662				622
			1 631				1 131

Sundry debtors were as follows at September 30, 2006 and December 31, 2005:

		September 30,				December 31,
(€’000s)		2006				2005
Income tax credit			150				98
VAT debtor			286				50
Other advances to suppliers			0				185
Other Income to receive			226				289
Total sundry debtors			662				622

In France, companies can benefit from a tax credit based on the research and development costs. SI AUTOMATION has applied for such credits. The tax credit can be deducted from income tax liability for a period of three years, or be reimbursed by the Tax Authorities if not utilized after the three-year period. As of September 30, 2006, the R&D tax credit to be received, amounting to K€.144, is for year 2004 (K€.47) , 2005 (K€.42), and 2006 (K€.55).

7)		Income Taxes
		The income tax expense (credit) consists of the following:

		Nine months				Year ended
(€’000s)		September 30, 2006				December 31, 2005
Current income tax			(52	)			(41	)
Deferred income tax			(376	)			849
Total			(428	)			808

		September				December
(€’000s)		30, 2006				31, 2005
Tax losses carried forward			930				582
Other temporary differences			(66	)			(94	)
Net deferred tax asset			864				488

The Company believes it is more likely than not that the results of future operations will generate sufficient taxable income to allow the utilization of deferred tax assets in the short term.

As at September 30, 2006, the Company had €.2.790.733 of accumulated net operating loss carry forwards that are available to offset future taxable income which can be carried forward indefinitely.

Income tax expense for the nine-month period ended September 30, 2006 and the year ended December 31, 2005 differed from the amounts computed by applying the statutory income tax rate in France of 33.33% to the pre-tax income, as a result of the following:

In France, companies can benefit from tax credit based on the research and development costs of the year (Note 6).

(€’000s)		Sept. 30,				December
		2006				31, 2005
Earnings before income tax:			(1 287	)			2 553
Expected tax expense (benefit) at French statutory tax rate			(429	)			864
Research & development tax credit			0				(42	)
Permanent Differences			1				6
Effect of change in tax rate			0				9
Other			0				(29	)
Income tax expense (profit)			(428	)			808

8)		Marketable Securities
		Marketable securities consist of shares in mutual funds. Their historical value as at September 30, 2006 , and December 31, 2005 amounts to K€.243 and K€ 433, respectively. Fair value of marketable securities amounts to K€.252 and K€. 459 respectively.
9)		Cash & Cash Equivalents
		Cash & Cash Equivalents as at September 30, 2006 are composed of a K€.3 705 SIA France and a K€.100 SIA Inc. bank balances and short term marketable securities held by SIA France for an historical value of K€.1 260 considered as cash equivalents.
		Cash & Cash Equivalents as at December 31, 2005 are composed of a K€. 622 SIA France and a K€. 55 SIA Inc. bank balances and short term marketable securities held by SIA France for an historical value of K€.2 391 considered as cash equivalents.
10)		Stockholders’ Equity
		Changes in stockholders’ equity over the 9-month period ended September 30, 2006 and the year ended December 31, 2005 are as follows:

																		Foreign
										Additional								Currency				Total
										Paid-In				Retained				Translation				Stockholders
		Common Stock								Capital				Earnings				Adjustment				’ Equity
		Shares				€				€				€				€				€
Balance at December 31, 2004			1 875 906				1 875 906				5 663 957				(1 634 170	)			13 149				5 918 842
Exercise of warrants			10 000				10 000				20 400												30 400
Impact of foreign exchange																			(21 805	)			(21 805	)
Impact of consolidation re-statements															(10 802	)							(10 802	)
Net loss/profit															1 744 879								1 744 879
Balance at December 31, 2005			1 885 906				1 885 906				5 684 357				99 907				(8 656	)			7 661 514
Additional paid-in capital changes (*)											(621 653	)			621 653								0
Impact of foreign exchange																			10 268				10 268
Impact of consolidation re-statements															4 524								4 524
Net loss/profit															(858 958	)							(858 958	)
Balance at Sept. 30, 2006			1 885 906				1 885 906				5 062 704				(132 874	)			1 612				6 817 348

General

The company was incorporated in 1987. Additional shares were issued for cash in subsequent financing rounds and through exercise of warrants. At September 30, 2006 and December 31, 2005, the issued and outstanding shares consisted of 1,885,906 ordinary shares with a par value of €.1.

Pre-emptive subscription rights

Stockholders and certain directors have pre-emptive rights to subscribe for additional shares issued by the company for cash on a pro rata basis. Stockholders may waive such pre-emptive subscription rights at an extraordinary general meeting of stockholders under certain circumstances. Pre-emptive subscription rights, if not previously waived, are transferable during the subscription period relating to a particular offer of shares.

Warrants

The stockholders of SIAUTOMATION authorized the board of directors to grant warrants (Bons de souscription d’actions or BSA) to employees and members of the board of the French parent company. Each BSA enables the holders to subscribe one share of SIA.

September 30, 2006		BSA 03 n°1
General assembly			03/19/2003
Issue price			0,01 €
Strike price			4,35 €
Maturity date			03/18/2008
Condition			None
Total number of options granted			1 000
Outstanding options at December 31, 2005			1 000
Exercised options through the period			0
Void or cancelled options through the period			0
Outstanding options at Sept. 30, 2006			1 000
Outstanding exercisable options at Sept. 30, 2006			1 000

December 31, 2005		BSA				BSPCE 2				BSA 03 n°1				Total
Date of the extraordinary general meeting			04/14/2000				03/28/2001				03/19/2003
Total number of options granted			10 000				69 600				1 000				80 600
End of contract life			03/31/2005				03/28/2006				03/18/2008
Issue price		€	0.01				—			€	0.01
Exercise price		€	3.04			€	22.71			€	4.35
Conditions		None				None				None
Void or cancelled options before December 31, 2004			—				-68 800				0				-68 800
Exercised options before December 31, 2004			—				—				—				—
Outstanding options at December 31, 2004			10 000				800				1 000				11 800
Void or cancelled options through the period			—				-200				—				-200
Exercised options through the period			-10 000				—				—				-10 000
Outstanding options at December 31, 2005			—				600				1 000				1 600
Outstanding exercisable options at December 31, 2005			—				600				1 000				1 600

11)		Provisions for Contingencies and Charges
		Provisions for contingencies and charges amount to €.112.955 as at September 30, 2006 and €.197 504 as at December 31, 2005 and pertain to the following:

		September				December
(€’ 000s)		30, 2006				31, 2005
Provision for guarantee commitments			64				87
Provisions for litigations			5				75
Provision for pension indemnities			44				36
Total			113				198

The provision for guarantee is linked to the twelve months period related to hardware and six months period related to software, resulting from commercial terms included in most contracts. Changes in provisions and reserves are as follows:

		At
		December								Utilizations				At Sept. 30,
		31, 2005				Additions				and reclass				2006
Inventory reserve			340 225				221 537				0				561 762

		At
		December												At Sept. 30,
		31, 2005				Additions				Utilizations				2006
Bad debt reserve			30 572				0				0				30 572

		At
		December								Utilizations				At Sept. 30,
		31, 2005				Additions				and reclass				2006
Provision for guarantee and litigation (*)			162 089				8 886				101 919				69 056
Provision for retirement indemnities			35 415				8 484				0				43 899
Provisions			197 504				17 370				101 919				112 955

12) Interest-Free Loans

Are classified in this caption advances received from a governmental agency (ANVAR) to contribute to the financing of research and development expenses linked to the Maestria software. According to the legal agreement, reimbursement will start in 2007.

13) Financial Debt

Financial debt is composed of a loan granted by BDPME in October 2005, as part of a research & development project. The first redemption date is scheduled in the end of 2006. Variable interest rate is indexed to Euribor 3 months plus a margin of 1.6 pts. Financial debt as September 30, 2006 amounts to K€.405 and interest not yet due have been accrued for K€.5.

14) Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses amount to €.1.125.173 as at September 30, 2006 and are broken down as follows:

		Sept. 30,				December
(€’000s)		2006				31, 2005
Trade accounts payable			471				373
Trade accruals			654				222
Total			1 125				595

15) Other Liabilities

Other liabilities amount to €.883.759 as at September 30, 2006 and €. 1 403 102 as at December 31, 2005 and can be broken down as follows:

		Sept. 30,				December
(€’000s)		2006				31, 2005
Employee and tax related payable			846				1 291
Other			38				112
Total			884				1 403

Employee related payable include amounts due to employees (accrued vacation and bonuses) and payroll charge accrual.

16) Assets and Liability Maturity Date

The breakdown by maturity is as follows:

						Maturity
		Balance at
		September				Less than 1								More than
(€’000s)		30, 2006				year				1 to 5 years				5 years
Deposits			43				0				43				0
Inventories			24				24				0				0
Accounts receivable			2 172				2 172				0				0
Other receivable			1 631				1 631				0				0
Prepaid expense			89				89				0				0
Total			3 959				3 916				43				0
Financial debt			409				9				360				40
Interest Free Loans			550				0				550				0
Account payable			1 125				1 125				0				0
Other liabilities			884				884				0				0
Deferred revenue			114				114				0				0
Total			3 082				2 132				910				40

						Maturity
		Balance at
		December				Less than				1 to 5				More than
(€’000s)		31, 2005				1 year				years				5 years
Deposits			41				0				41				0
Inventories			309				309				0				0
Accounts receivables			4 976				4 976				0				0
Other receivable			1 130				1 130				0				0
Prepaid expense			74				74				0				0
Total			6 530				6 489				41				0
Financial debt			402				2				260				140
Account payable			596				596				0				0
Other liabilities			1 403				1 403				0				0
Deferred revenue			78				78				0				0
Total			2 479				2 079				260				140

17) Commitments

The Company does not lease any significant facility or equipment under operating or capital lease.

18) Personnel and Social Charges

Personnel and social charges amount to €.2.289.753 and €.980.388, respectively, for the 9-month period ended September 30, 2006.

Personnel and social charges amount to €.2.859.608 and €.1.251.083, respectively, for the year ended December 31, 2005.

Average headcount is as follows:

		Headcount				Headcount
		(9 months) 2006				(12 months) 2005
Company Managers and Engineers			50				41
Technical Staff			10				7
Other staff			0				0
Total			60				48

19) Research and Development Costs

Research and development costs incurred by the Company for the 9-month period ended September 30, 2006 were K€.994.

Research and development costs incurred by the Company for the year ended December 31, 2005 were €.884.873.

20) Financial Income/Expense

Financial expense mainly consists of exchange losses in the amount of K€.287 as at September 30, 2006 and €.195 941 as at December 2005, 31.

21) Segment Information

Revenues by country are as follows for the 9-month period ended September 30, 2006 and the year ended December 31, 2005:

		2006				2005
(€’000s)		(9 months)				(12 months)
France			911				2 281
Other countries			4 548				7 636
Total			5 459				9 917

22)		Tax verification
		The tax administration has verified the company’s income tax returns for the past three years. At the moment, the impact on the financial statements amounts to 4 K€ and is not material.
23)		Subsequent events
		PDF Solutions, Inc. (PDFS) has completed the acquisition of SI Automation S.A. (“SIA”) as at October 31, 2006.
24)		Summary of differences between French GAAP and U.S. GAAP

The consolidated financial statements have been prepared in accordance with French GAAP which, as applied by the Company, differ in certain significant respects from accounting principles generally accepted in the United States of America (“US GAAP”). The effects of the application of US GAAP to stockholders’ equity and net income are set forth in the tables below:

(a)

Reconciliation of Net Income to US GAAP (in €)

		Nine-month period
		ended September				Year period ended
		30, 2006				December 31, 2005
French GAAP Net Income (Loss) as reported in the Consolidated Statement of Operations			(858 958	)			1 744 879
Adjustments to conform to US GAAP
Revenue recognition adjustments			(1 639 000	)			(3 589 000	)
Research & development costs capitalised			—				(300 000	)
Tax effect			510 274				1 214 159
			(1 128 726	)			(2 674 841	)
US GAAP Net Income			(1 987 684	)			(929 962	)