Reconciliation of GAAP to Non-GAAP Financial Measures

Three Months Ended

Fiscal Year Ended

(In thousands, except per share data)

September 30,

June 30,

September 30,

September 30,

September 30,

2014

2014

2013

2014

2013

Operating income:

    GAAP operating income

$            5,351

$            6,376

$            4,693

$          20,718

$          16,658

Adjustments:

    Chingis intangible asset amortization

347

347

347

1,388

1,352

    Chingis acquisition related inventory write up

-

-

-

-

492

    Stock-based compensation expense

1,507

1,539

1,568

6,092

5,941

       Total adjustments

1,854

1,886

1,915

7,480

7,785

    Non-GAAP operating income

$            7,205

$            8,262

$            6,608

$          28,198

$          24,443

Provision for income taxes:

    On a GAAP basis

$            2,697

$            2,388

$            2,658

$            9,638

$          12,277

Adjustments:

    Non-cash tax expense

1,138

1,204

1,335

2,954

6,691

    Tax impact of gains on sale of investments

-

749

1,052

3,955

4,357

       Total adjustments

1,138

1,953

2,387

6,909

11,048

    Non-GAAP provision for income taxes

$            1,559

$               435

$               271

$            2,729

$            1,229

Net income attributable to ISSI:

    On a GAAP basis

$            2,832

$            6,186

$            4,698

$          23,265

$          17,548

Adjustments:

    Chingis intangible asset amortization

347

347

347

1,388

1,352

    Chingis acquisition related inventory write up

-

-

-

-

492

    Stock-based compensation expense

1,507

1,539

1,568

6,092

5,941

    Gain on sales of investment

-

(2,140)

(2,878)

(11,300)

(12,217)

    Non-cash tax expense

1,138

1,204

1,335

2,954

6,691

    Tax impact of gains on sale of investments

-

749

1,052

3,955

4,357

       Total adjustments

2,992

1,699

1,424

3,089

6,616

    Non-GAAP net income

$            5,824

$            7,885

$            6,122

$          26,354

$          24,164

Shares used in Non-GAAP net income per share:

    Basic

30,699

30,312

28,928

30,037

28,223

    Diluted

32,383

31,963

30,372

31,623

29,694

Non-GAAP net income per share:

    Basic

$              0.19

$              0.26

$              0.21

$              0.88

$              0.86

    Diluted

$              0.18

$              0.25

$              0.20

$              0.83

$              0.81